In the first quarter, Tryg A/S (TRYG), a leading Nordic insurance company, delivered a robust insurance service result of DKK 1.275 billion, despite facing adverse weather conditions and an increase in large claims. The company's insurance revenues rose by 4.8%, primarily due to price hikes in the Private and Commercial segments.
While the Corporate segment experienced a decline in revenue, this was attributed to a strategic emphasis on profitability. Tryg also announced a first-quarter dividend per share of DKK 1.95, marking a 5% increase from the previous year.
The solvency ratio stood strong at 191%, indicating a healthy capacity for future capital returns, although customer satisfaction saw a slight decrease due to the price adjustments and complex claims processes.
Key Takeaways
- Tryg reported a combined ratio of 86.6% and a return on own funds of 21%.
- A dividend per share of DKK 1.95 was paid, up 5% from the previous year.
- The solvency ratio was robust at 191%, despite higher large and weather-related claims.
- Customer satisfaction dipped slightly, influenced by price adjustments and claims processes.
- Motor claims frequency rose, largely due to harsh winter conditions and changes in the risk mix.
- The investment result for Q1 stood at DKK 117 million, buoyed by equities and covered bond spreads.
Company Outlook
- Tryg anticipates an insurance service result between DKK 7.2 billion and DKK 7.6 billion for the full year 2024, with a combined ratio at or below 82%.
- A Capital Market Day is scheduled for December 4 to outline strategic and financial targets up to 2027.
Bearish Highlights
- The Norwegian business faced a combined ratio of 102 due to weather impact and inflation, but improvement plans are underway.
- Travel sector remains a headwind, with the company taking steps to enhance this area.
Bullish Highlights
- The Swedish business is performing strongly, despite a minor uptick in the combined ratio excluding runoff.
- Price increases and a focus on profitability are expected to bolster the Commercial and Corporate segments.
Misses
- There was a slight decrease in customer satisfaction, attributed to price adjustments and claims handling.
- The Norwegian business's profitability was below expectations due to weather and inflationary pressures.
Q&A Highlights
- CEO Johan Brammer discussed efforts to improve profitability in Norway, expecting positive outcomes within 6 to 12 months.
- CFO Mikael Karrsten highlighted higher rate increases in Norway compared to other markets, pricing for inflation.
- The company will update on solvency and future capital repatriation in the latter half of the year.
Tryg's Q1 performance demonstrates resilience in the face of challenging conditions, with a strong focus on maintaining profitability and shareholder returns. The company's strategic adjustments and emphasis on the efficiency of operations are expected to contribute to its long-term financial goals. The upcoming Capital Market Day will provide further insights into Tryg's strategic direction and financial aspirations.
Full transcript - Tryg (TRYG) Q1 2024:
Gianandrea Roberti: Good morning, everybody. My name is Gianandrea Roberti. I'm Head of Investor Relations at Tryg. We published our Q1 results earlier this morning and I have here with me Johan Brammer, Group CEO; Allan Thaysen, Group CFO; Mikael Karrsten, Group CTO to present the figures. Before that, I just would like to remind everybody to ask one question at a time to allow the highest number of question from participants. With these words, over to you, Johan.
Johan Brammer: Thanks a lot, Gianandrea. And I will go straight to Slide 3 with the financial highlights. Tryg is today reporting a solid insurance service result of DKK 1.275 billion in Q1 despite a harsh Scandinavian winter and adverse large claims experience weighing negatively on the result. The sum of weather and large claims was more than DKK 180 million higher than a normalized Q1. And as for comparison, the sum of weather and large claims was very favorable in Q1 last year being more than DKK 200 million below a normalized level for the first quarter of the year. Insurance revenues grew 4.8% in Q1 with the entire growth coming from the Private and Commercial segment and driven fully by price increases to continue to offset the inflationary pressures. The Corporate segment saw a drop in top line driven by an intense focus on profitability. Tryg is reporting a combined ratio of 86.6% with the group underlying claims ratio improving by 50 bps while the Private underlying claims ratio deteriorates by 50 bps primarily driven by increased motor frequencies. It is evident that profitability improvements in Commercial and Corporate have been noteworthy considering the private developments. The investment result was DKK 117 million driven primarily by good equities performance and narrowing covered bond spreads in the quarter. Asset mix has remained virtually unchanged for the quarter. We report a return on own fund, the so-called ROOF, of 21% in the most seasonally challenging quarter. And I'm very pleased that Tryg pays a Q1 dividend per share of DKK 1.95, which is an increase of more than 5% compared to last year. The solvency ratio was 191% at the end of the quarter supportive of future capital returns. Turning to the next page on customer highlights. We continue to have a strong focus on customer satisfaction as we do see a clear link to retention and thereby our distribution cost and overall profitability. In Q1 2024 we reported a customer satisfaction score of 85 against 86 in the same quarter last year. Price adjustments and a more challenging claims mix with many motor damages to assess had dragged down the customer satisfaction slightly. This is not exactly unexpected as firstly, price adjustments for natural reasons have some impact and secondly, also because claims related to water and buildings have a much more complicated claims process, which inevitably has a negative impact on the customer satisfaction for the group. We continue to be very focused on customer satisfaction and I'm confident it will improve going forward. Turning to the next slide on the insurance service result, we unfold the performance for each of our 3 segments. In the Private segment, we report an insurance service result almost DKK 100 million lower than last year due to a higher level of weather claims in combination with an increase in motor claims frequency, which was also observed in the quarter. In the Commercial segment, performance for Q1 was flat against last year with a higher level of large and weather claims virtually offset by higher runoffs. An underlying improvement was clearly visible and driven by price adjustments. Finally, in the Corporate segment, we report an insurance service result almost DKK 100 million lower than last year driven by a higher level of large claims. An underlying improvement was clearly visible and driven by both pricing and rebalancing of the portfolios. Turning to the next slide, we have split the insurance service result by geography. From this chart, it is very evident that the headline figures show a very strong result in Sweden, a fairly weak result in Norway with Denmark being somewhere in the middle. Runoff results especially on a quarterly basis can complicate the headline reading slightly and in general I would like to flag that the Norwegian results while unsatisfactory are not very far from an average Q1 looking at the last 6 to 7 years. Additionally, we would flag that our Swedish book is somewhat different from most of our peers with the PA segment clearly not sensitive to weather events. Taking a step back, I started this presentation highlighting the very different large and weather claims experience in Q1 2024 versus Q1 last year. If you take a look at the chart in the upper right corner, it is shown how we report an ISR, which is approximately DKK 200 million lower than reported same quarter last year. But if we exclude all large and weather claims for both quarters, our Q1 this year would have been some DKK 200 million higher than Q1 last year. That gives me comfort. The ISR walk shows the different building blocks as usual and for Q1 2024, the main moving parts are the higher large and weather claims experience partly offset by the higher runoff result. It should also be noted that currency impact in this quarter was not material compared to same quarter last year. Turning to the next slide. We illustrate the progress on the RSA synergies as we always do and in general most of the initiatives are not new, but still producing ongoing synergies and hence I'll only comment on a few of the more relevant ones. Procurement in this quarter contributes with DKK 16 million and is primarily driven by our strong consolidated purchasing power, which allows us to get improved rates and conditions. We also saw benefits from repairing wooden floors instead of changing these entirely, which both creates savings and supports our focus on ESG as a group. Claim synergies were DKK 12 million and were primarily driven by optimization for fraud and recourse in Norway. And Commercial synergies were DKK 10 million and was driven by the cross-selling of niche products in both Private and Commercial. In Private, we saw strong traction for pet an3d boat insurance and additionally, it's worth mentioning our large scale and full Scandinavian presence gave us the benefit of being able to win 3 new car partnerships. And with that, I turn to the next section on insurance revenue and portfolio and I go to Slide 9. Tryg is reporting a premiums growth of 4.8% in Q1, which is clearly driven by the Private and Commercial segments while the Corporate segment is reporting a declining revenue due to profitability actions and rebalancing of the portfolios. The growth in Private and Commercial is clearly driven by price increases to continue to offset the general inflationary pressures and some increase in claims frequencies in motor. We'll get back to that topic quite soon. The Corporate segment is reporting a noticeable revenue decline driven by profitability measures and the rebalancing initiative to achieve a smaller more local and more controllable book of business. Longer term of course we prefer to see a more balanced growth, but currently we remain very firm to fight off inflationary pressures and we are satisfied and content with our measures to protect margins. Turning to the next slide. We are today showing a new slide with an updated view on price development compared to what we have traditionally used in these calls. In the past we have shown average prices based on earned premiums. This method has an inbuilt blind spot for potential mix changes as for instance the move from fuel to electrical cars was not captured. We are therefore today showing the portfolio rate increases for the quarter and we repeat that we are pricing according to inflation for both property and motor across all countries. In Norway, we're actually pricing slightly higher than inflation as we are not satisfied with the performance of our Norwegian Private business. On the next slide on customer retention, we are pleased to continue to report broadly stable customer retention levels even in a period with elevated price increases following the stubbornly high inflation levels. The subsegments in which we do notice a slight drop in retention remain the customers with short tender in the Private segments, which typically display the lowest profitability levels. In general looking at longer time series, it's evident how our business continues to show a relatively low price sensitivity across different economic conditions. And with that, I turn it over to you, Mikael.
Mikael Karrsten: Thank you, Johan. And we now turn to Slide 13. The group underlying claims ratio continued to improve by 50 basis points also in Q1 2024. We continued to see significant improvements in the Commercial and Corporate segments following rate and other profitability actions while personal lines experienced a 50 basis points deterioration. The Private segment was affected by an adverse development primarily driven by increased motor frequencies across Scandinavia. The underlying claims ratio is expected to improve for the full year 2024 in line with previous communication. Over time we expect the improvement composition to change and be more driven by personal lines. Turning to Slide 14. In the Q4 reporting, we stated motor frequencies to be in the high end of our expectations and, as mentioned, we continue to see this development in Q1. In this slide, we try to give some more insight to the development we experience. Starting on the left hand side. During Q1, motor frequencies increased by 4 percentage points to 10 percentage points most notably in Denmark compared to Q1 2023. And if we move to the right hand side, we decompose this frequency increase. Roughly half of the increase is attributable to extraordinary harsh winter weather during January and February. Approximately 1/3 is driven by changes in risk mix, for instance mix changes over time from older cars to more modern vehicles. These are changes that we expect and that are part of our tariff pricing. Finally, the remaining 15% is driven by frequencies being at the higher end of our expectations. We are actively taking actions towards this development through pricing and deductibles mainly. As a result of the observed frequency increase in the second half of 2023 and now in the beginning of 2024, we are recalibrating our frequency expectations. Turning to Slide 15. In this slide we show as always the volatile items of our income statement; large and weather claims, the runoff result and the discount rate levels. We mentioned previously in this presentation that large and weather claims were significantly above normal levels in Q1, weather claims some DKK 58 million above normal and large claims DKK 124 million above normal. Our normalized guidance on large and weather claims remain unchanged at DKK 800 million, but we obviously continue to monitor and analyze the development closely. The runoff result in the quarter was 3.9% virtually in the middle of our 3% to 5% guided range. The Q1 level was a bit higher than recent experience also helped by favorable Swedish development in this specific quarter. Finally, the discount rate at the end of the quarter was 2.7% reflecting a generally lower level of interest rates. And with that, I hand over to you, Gian.
Gianandrea Roberti: Thanks, Mikael. We are in the investment section. On the first slides we show that Tryg had total invested assets of DKK 61 billion at the end of Q1 split between a match portfolio of DKK 44 billion and a free portfolio of DKK 17 billion. The match portfolio is constructed to match insurance liabilities and is primarily made up of Scandinavian covered bonds. The free portfolio represent Tryg's own funds and is invested in different asset classes. The asset mix is virtually unchanged from recent quarters. In the second slide, we are showing a total investment result of DKK 117 million in Q1 with good contribution from the free and match portfolio partly offset by a slightly worse than normal other financial income and expenses line. The free portfolio benefit primarily by good returns from equities and fixed income asset classes while properties returns remain challenging in the quarter and in the current environment. The match portfolio benefit both from narrowing covered bond spreads and the recurrent component of the interest on insurance provision now booked under this line in the IFRS 17. Other financial income and expenses included a negative DKK 97 million item on exchange rates adjustments on balance sheet items. This comes primarily from the value change and related hedge cost of the subordinated loans issued in NOK and SEK, but also other balance sheet items. Normalized expectation on this line remain around minus DKK 90 million per quarter. As I mentioned previously, the asset mix in the free portfolio is virtually unchanged from last quarter and remains fairly conservative. Over to you, Allan.
Allan Thaysen: Thanks, Gian. Please turn to first slide in the solvency and expenses section for details on the solvency position. Tryg reports a solvency ratio of 191% at the end of Q1. The movement in the solvency ratio from year-end to end of Q1 is primarily driven by lower own funds as the dividend was higher than operating earnings this quarter. The solvency capital requirement was virtually flat. Leaving aside operating earnings and dividends, we highlight that currencies had a minor impact on the solvency ratio this quarter. A lower value of the subordinated loans was included in the own funds while a lower capital charge for the insurance business was included in the SCR. It is important to remember that Q1 is typically our weakest earnings quarter and therefore also the quarter where it's more likely to see a minor drop in the solvency ratio. Now please turn to the next slide. In this slide we show the long-term development of the solvency ratio. The current level of solvency remains elevated even after Q1 burdened by higher than normal large and weather claims. As mentioned in our Q4 call, we will come back in the second half of this year with an updated view and message on our solvency position. Please turn to the next slide. The sensitivities of our solvency ratio remains completely unchanged as we did not change the asset mix. The biggest single sensitivity remains to spread risk. This should not come as a surprise considering the covered bonds are our single biggest asset class representing more than 80% of our total invested assets. Shocks to all other asset classes have a relatively small impact on the solvency ratio. Now please turn to the next slide for details on the expense ratio. The expense ratio was reported at 13.5% in Q1 helped by a good top line growth and synergies from the RSA Scandinavia acquisition. As mentioned before, a significant amount of the cost synergies are being reinvested in business developments especially in Sweden and in digitalization across all geographies. The number of employees has fallen as a consequence of the efficiency initiatives launched in the autumn. We maintain a strong focus on the expense level and we maintain our guidance for an expense ratio of around 13.5% for the full year 2024. With this, I would like to hand it back to you, Johan, for some concluding remarks.
Johan Brammer: Thanks a lot, Allan. And I'll turn to the first slide in the next section on the financial targets and this is a slide we've shown multiple times before and it is completely unchanged from last time. So despite a difficult start to the year, we continue to firmly target an insurance service result in the range between DKK 7.2 billion and DKK 7.6 billion for the full year 2024 driven by a combined ratio at or below 82. As repeated multiple times, different items such as interest rates and currencies will impact the overall ISR, short-term inflation spikes in general may also assert some pressure on earnings. Leaving aside 2024 earnings, I would like to remind you all that we will be hosting a Capital Market Day in London on December 4 to discuss further the strategic outlook and financial targets towards 2027. On the next slide, we display our financial targets for 2024 updated for the IFRS 17. Nothing has changed in this chart and all 2024 targets are repeated as is. And on the last slide, as usual we conclude the presentation with our favorite quote from John D. Rockefeller. And with that, I will hand it over to the operator so that we can open up for questions.
Operator: [Operator Instructions] The first question will be from the line of Asbjorn Mork from Danske Bank.
Asbjørn Mork: It's going to be 2 questions in 1 because it's quite interlinked and it relates basically to the Slide 10 and Slide 14 on your repricing versus motor frequencies. It seems like you're repricing more or less in line with sort of underlying frequencies when we adjust for weather and then you mentioned that you will be looking also at sort of increasing the deductibles on your insurance policies. If I look at the average comprehensive motor claim last year was DKK 8,000, to what extent do you think you can actually raise the deductibles? Is there sort of a limit on how much you can do here before the insurance becomes almost irrelevant for the client looking at the average claim? Also looking in terms of frequencies, what can you actually do? Do you need to do more on prices if you can't do enough on the deductibles to sort of offset the inflation we're seeing here? And that basically feeds into the second part of the question being the 50 basis point improvement to the underlying group claims ratio. Considering that 2/3 of your premiums come from your Private segment, is it fair to sort of assume that the Commercial and Corporate had 100 basis point roughly in underlying improvement and how long do you think you can continue that? So how dependent are you on fixing the motor issue in order to deliver the 50 basis point group improvement going forward as well?
Mikael Karrsten: So I'll try to answer the 2 questions sort of starting with deductibles and rates on motor. And I think first of all, yes, we think we can increase deductibles and that's pretty natural also given that many of them are in fixed number of kroner either Swedish, Danish or Norwegian. So a small increase is in line with market and also in line with inflation. And then there will be, as you alluded to as well, a combination of rate increases and deductible increases that will form the total of our profitability actions. So it's those 2 in combination that will affect us. And if I go to the second one with the improvement in the underlying, it's actually the improvement in Commercial and Corporate without giving an exact number, it's higher than what you mentioned in your question. But it's true that going forward, and that's also what we noted in the presentation, that the composition of the improvement going forward will be more driven by personal lines. So i.e. that means improvements across the board, but less so in Commercial, Corporate and improvements in the personal segment.
Asbjørn Mork: Okay. So just maybe follow up and maybe I'm not reading the slides correctly and I know that Slide 10 is only on the Private segment. But if you look at the -- let's take Denmark as an example the price hikes seem to be something like 8%. And then if I look at the claims frequencies on Slide 14, it's 10% and you say 50% of that is weather so let's strip that out and say that's a oneoff so it's 5%. And then we have claims frequency in addition to frequency or higher inflation on the actual claims. I guess you're not really repricing above the underlying claims inflation if we take frequencies and actual headline inflation in combination. So I'm just thinking you need to do much more on deductibles to get the improvement in the motor segment coming through. So that was basically the first. And then the second being that the things you have done to trim your Corporate portfolio, I guess most of that is behind us so at some point within a not so distant future, I guess it's fair to assume that the underlying improvement in Corporate and Commercial will be coming down significantly year-over-year.
Mikael Karrsten: And I'll try to dig a little bit deeper into those questions. If I start with the first one on motor and the claims frequency. I mean first of all, you're correct that Denmark in particular had a high increase in Q1, but again remember that a lot of this is weather driven especially for Denmark. So I think if we will go Denmark standalone, those 50% would actually be a little bit higher. So I think that's number one. Number two is to please remember as well the risk mix effect here and just to elaborate a little bit on the risk mix. So this is what we capture when 1 vehicle is changed between from one to the other. So that means there is a new price for that vehicle and that's taken into account. And what we're looking at here is the repricing and what we're looking at for the Slide #10 is the repricing for the same vehicles, the same portfolio. So that needs to be taken into account as well. So our repricing, we're comfortable that is taking into account both the severity inflation and the frequency inflation. And then on the second one, I mean again you're correct. We think the composition of our underlying improvement will be different going forward. So it will be less dependent on Commercial and Corporate, but there will also be an improvement from the personal lines.
Operator: The next question will be from the line of Tryfonas Spyrou from Berenberg.
Tryfonas Spyrou: I have to limit myself to the 1. On Norway, I understand that the business there is much smaller than the other 2 countries. But actually looking at the numbers, the expense ratio is in line with the group. I'm just trying to square why the loss ratio is actually higher. I appreciate there was weather and frequency in there, but actually the frequency pickup in Q1, as you showed on Slide 14, is actually lower than Denmark so it can't be just that. So just choose to get your thoughts on this and whether this relates to specific customer cohort or anything else just to understand what's the scope for improvement to come from Norway going forward?
Johan Brammer: Thanks for that question. And maybe I'll start high level on answering and then maybe we'll deep dive into some of the frequency components. I think in general Norway is structurally in Q1 more exposed to weather. That's why we normally see the combined ratios for the Norwegian business being slightly elevated. It's 102 for the Q1. We normally see it high. If you look at the last 6 to 7 years, it's always been high for Q1. This is especially high and I think there are a few components playing into Norway on a sort of fundamental basis. One is that inflation is clinging on slightly longer in Norway and Sweden than we've seen in Denmark. Second of all, the weak currencies in Norway is also sort of forcing more imported inflation into the market. So I think that's sort of the structural components. And as we alluded to, getting Norway back to a more profitable level is on schedule. We have plans, we are executing those plans. We expect those to have impact. Over the next 6 to 12 months, we should expect to have a different conversation. But I mean these things takes time. And I think for your specific discussion on the motor frequency, I don't know, Mikael, if you want to elaborate a bit.
Mikael Karrsten: Yeah, let's elaborate. And I think we're moving back to Slide #10 again if I start with the rate increases. So I think it's important to note that rate increases are higher in Norway relative to what they are in the rest of our Scandinavian portfolio. And I would also like to remind everyone that these are the portfolio rate increases. When we look at the earned impact of this, this is something that will increase going forward. So we're clearly pricing for inflation, but more in Norway in order to improve the profitability in Norway going forward.
Johan Brammer: I think if you take a step back from Norway and look at our group numbers, we're delivering DKK 1.275 billion in a quarter with massive headwinds from large and weather with the Norwegian business that we are seeing is very unsatisfactory. So I think we feel fairly comfortable that we've got enough levers to pull to actually bring us home for 2024, but also going into the next strategy period with guns blazing.
Operator: The next question will be from the line of Johan Strom from Carnegie.
Johan Strom: I'll continue on the same topic and really appreciate the comments that you made on claims frequency in that Slide #14. But can I just ask you on the Danish motor claims frequency because there was some data out showing a very bad trend in I think January and February. But this Slide 14 kind of indicates that the frequency numbers came down quite a bit in March. Is that true and what are you seeing now in terms of Danish motor claims frequency?
Mikael Karrsten: Yes. Thanks for that question. I mean first of all, yes, I'll confirm that. I think going on a total Scandinavian level, we definitely saw more extraordinary weather in January and February relative to what we did in March. So March was a good number in that perspective. And then for Denmark specifically, I think it's also fair to say that Denmark had a relatively benign weather situation in Q1 2023 and we have more of what we call weather days and days that are going from plus to minus and so on in Q1 2024. So definitely Denmark was more affected than the other countries and we also saw a positive outcome when it came to March.
Johan Brammer: And just to put it in perspective from a claims experience level, we saw the biggest snowstorm in Denmark we've had for 10 years with more than 5,000 road assistance claims with people even not able to start their cars or being stuck somewhere. So I mean Denmark is not used to these snowstorms. We had a massive one in Q1. But as Mikael says, we saw a drop in March, which is what we would have expected, but it's still nice to see.
Johan Strom: That's great to hear. And just to squeeze in, everyone's asking about it. How are you involved in the big fire in Copenhagen yesterday?
Johan Brammer: I understand where that question is coming from. Nothing appears to be on our books in this matter. So from our perspective, we are more preoccupied with the fact that Copenhagen had lost a very historical building. So I think that's probably what's taking up our mind. We don't have anything on the books as it appears now.
Operator: The next question will be from the line of Vinit from Mediobanca (OTC:MDIBY).
Vinit Malhotra: So I think for me, 1 question remains that you have your technical result or insurance services target. You have kind of reiterated it, but qualified with lot of risks. So in the past last year we heard about FX and now we're also reading in the report about litigation in your post balance sheet date and then this whole motor frequency and plans. I'm just curious when you look at this target, how much more or less comfortable you are with that DKK 7.2 billion to DKK 7.6 billion with consensus sitting bang in the middle at the moment? I'm just curious to hear your thoughts from an overall perspective on that.
Johan Brammer: And I understand where you're coming from. There are a lot of moving parts at the moment so let me just remove any doubt from your mind. I am fully confident we'll hit in the range between DKK 7.2 billion to DKK 7.6 billion. It's our job to sort of maneuver through all these moving parts and we'll land in that range.
Operator: The next question will be from the line of Faizan Lakhani from HSBC.
Faizan Lakhani: The first question is just coming back to the underlying development and in particular in sort of Corporate. I know you're not specifying how much is coming from there, but I just wanted to sort of get an understanding of what is sort of the earned pattern in Corporate. Does that come across in 12 months or is there sort of longer period that that will come through, feed through? And second, I just wanted to re-go back to the math in terms of the improvement in Private. So it appears what you're saying is claims frequency is up sort of 8%, but only 15% is what you need to reprice for. The rest is either risk mix or weather, which would suggest sort of 1 point from claims frequency, sort of 3% to 4% for claims severity. So would that suggest sort of the overall claims inflation is sort of 4% to 5% for motor?
Mikael Karrsten: Thanks for those questions. If I start with the question on the Corporate book. Yes, you're correct that the earned impact of that is over 12 months. There is a small part of our portfolio, which is more construction based that has a longer earning pattern, but the vast majority is definitely over 12 months. And then the question on motor rates, risk mix, et cetera, et cetera; yes, broadly speaking I confirm your calculation. I think the only thing I would like to add to that is again what I alluded to before on the risk mix. The risk mix is something that we take into account in the new business pricing so not the renewal pricing, but I think that goes without saying. So it's something we feel fully on top of the development. We understand the development and we're not backing away from the actions that we're taking; quite the other way around, sort of increasing the actions in order to make sure that we are pricing minimum for the development that we're seeing.
Operator: The next question will be from the line of Alexander Evans from Citi.
Alexander Evans: I just wanted to follow up on Faizan's question on the underlying and maybe if you could help me a little bit here. But just looking at sort of the motor frequency up maybe 7% across markets, about a 1/3 of your book is motor and only about 15% repricing. It looks like that's sort of a 30 basis point headwind on the underlying there. Can you just help me how that's changed relative to the 4Q when sort of the Private lines was only deteriorating by 30 basis points? Are we saying that that was more weather driven and there's actually a little bit more sort of structural underlying there? And then just added to that, obviously travel was a headwind in the past. My understanding was the combined ratio there was 95% in 2023 and normalized probably be looking at 80%, which again is about a 30 basis points tailwind for 2024. Could you just unpack some of those moving parts and kind of why you're seeing sort of a greater deterioration there?
Mikael Karrsten: Yes. So if I start again on the underlying and if I relate back to Q4 and this quarter again sort of taking a step back, there is a 20 basis points difference in 1 quarter so I don't think it should be overplayed, but again it's motor frequencies. And as mentioned before as well, we also have a development in Norway which is not only related to motor so I think that calls for the difference. And again we are taking the actions in order to mitigate the development.
Johan Brammer: I think probably just taking a step back, also listening to the questions on this call which I think are all clearly relevant. I think if we take a step back from Page 14, I think the purpose of this slide was essentially to show that we've got our arms around motor frequencies, it's also to show you that we know where it's coming from. We are saying that 85% are pretty much catered for already in the sense that it's weather and risk mix and the remaining bit, as Mika has alluded to, not significant, not something we cannot take care of through pricing and adjustments of terms. So I think generally speaking, I think we feel comfortable with motor frequencies development and we have that under control. That's essentially the purpose of the slide.
Alexander Evans: I guess just sort of looking forward, it seems like frequency increased it from sort of Q3 onwards in 2023. Obviously you've got some of the pricing that you put through going forward so hopefully as well travel is a tailwind. How do you view that into the second half of the year in Private lines?
Mikael Karrsten: I think going forward, I mean if I start with travel and then I'll come back to motor. I mean as we said before, travel is something which is not a factor for the worsening anymore, but still we are actively taking actions in order for it to improve to better levels. I mean obviously now Q1 is relatively sort of shouldn't say tough, but seasonally tough quarter also for travel and that's not changed this quarter. But overall, I mean we're taking the necessary actions in order to get the travel to where we want it to be. Sorry. Please can you remind me of the second question as well?
Alexander Evans: Yeah. Just on the motor frequency. So I think it sort of mainly stepped up around sort of the end of Q2 last year. What do you think sort of the 50 basis points looks like to the end of the year 2024?
Mikael Karrsten: I mean going forward we are -- as we said before, we're actively repricing and also taking actions on the deductibles. So the earned impact of the actions that we are taking will increase going forward. So we are very comfortable that the worsening that we're seeing is something that will turn around as the impact of the earnings pattern will gradually increase going forward. So we're very comfortable that we're taking the right actions.
Operator: The next question will be from the line of Jan Gjerland from ABG.
Jan Gjerland: The first one I have is on the solvency situation. Did I read you correctly then when you said that you would come back with your sort of solvency targets before the 4th of December Capital Markets Day so we will have those in the second half of this year or is that so we should expect them to come rather at the CMD to be precise so we understand what kind of level of solvency you wish to have going forward below the 191%.
Mikael Karrsten: Thank you very much for your question here. I mean we have never guided for any particular solvency targets and we have not promised to get back to do that. What we have said is that we will get back to you in the second half of this year with an updated position on our solvency and what it means in terms of future capital repatriation. That is what we've said and that was what we will reconfirm today.
Jan Gjerland: Okay. And that will happen then on the Capital Markets Day, is that what you intend?
Mikael Karrsten: I mean it's right that our Capital Market Day is actually in the second half of this year, but I mean we stick to the second half of this year for the moment.
Operator: The next question will be from the line of Martin Gregers Birk from SEB.
Martin Birk: I guess we talked a lot about the underlying. But when improvements in the underlying combined ratio in Commercial -- underlying claims ratio in Commercial and Corporate, they start to come down, what is going to happen to the reported underlying claims ratio? Will that still be within the 50 bps, 60 bps year-on-year improvement range or would that also deteriorate?
Mikael Karrsten: Martin, thanks for your question. I mean what we are guiding for is that we are guiding for improved underlying claims ratio in order to support our financial targets going forward. And the composition of that improvement will come both from the Commercial and Corporate segment, but less so than it has done over the past quarters and in this quarter, but it will also come from the personal lines market. So it will come across the board.
Martin Birk: Okay. But what's going to happen to the net effect of those 2? That's basically my question.
Johan Brammer: I think to be honest, Martin, I see where you're coming from. I think we'll get back to that when we announce our new strategy. We'll have new set of KPIs and we'll get back to that. I think for this strategy period, I think the current development seems to be a good trajectory and a good path for us. So I think we'll get back to that at the CMD.
Martin Birk: Okay. And then just maybe just 1 final quick question here. The ombudsman case, you don't really say a lot about that today. What kind of financial implications is that going to have?
Johan Brammer: Well, it's an important topic of course and we believe at Tryg that we have followed all the applicable regulation. We followed all the guidelines stated by the Danish FSA. On the 5th of April, as you know, the Danish Maritime and Commercial Court ruled in favor of the Danish consumer ombudsman against Tryg. We have appealed the decision and I think we should leave the case with the courts. And until then, we have not disclosed any amounts as the case is deemed to have immaterial financial consequences for Tryg's equity and solvency position.
Martin Birk: But I guess you have lost the first round now, isn't it time to sort of quantify this contingent liability?
Johan Brammer: No, we believe we have followed all regulation. We followed the guidelines stated by the Danish FSA. So the answer is no.
Operator: [Operator Instructions] The next question will be a follow-up from the line of Johan from ABG.
Johan Strom: If you look back to the Slide 11 where you see a Swedish retention rate deteriorating looks like maybe is it Trygg-Hansa or is it the old Moderna (NASDAQ:MRNA) brand or how should we think about it? Is it because you are pruning also on the Corporate and Commercial in Sweden or how should we read that number? Second question is also on the Corporate side. You had minus 12% in the Corporate earned premiums this quarter. When should we expect sort of the underlying deterioration there on the premiums to come to an end so to speak? When have you done all of your pruning internationally?
Johan Brammer: Thanks for those questions. If I just start off on the customer retention level on Page 11. I think what you're seeing on there for the Swedish numbers, that's a blended Swedish number so that's the combined entity of Trygg-Hansa and Moderna. And I think what you're seeing here is on the markets -- on the decimals that things are moving. So I think overall our sentiment is fairly positive that our customer base seems fairly resilient to the price increases that we're going through at the moment. So you shouldn't read anything into this. This is a matter of roundings on the decimals.
Mikael Karrsten: If we go over to the development on Corporate top line, I think first of all it's important to note that there are a few Danish customers that went out of the books during the first quarter of this year that affected this and they were primarily fronting customers. So it's affected top line fairly much, but less so on the bottom line. I think that's number one. And number two, maybe I'm repeating myself, but I mean we expect underlying improvement across the board going forward including Corporate. But again it will be less of an improvement for the Corporate and Commercial side relative to what we have seen. And in terms of the execution of risk mix changes for the international business, that's something that is done and concluded. But it doesn't change the fact that we're fully committed to profitability actions where necessary across the board and that includes the Corporate book as well, which for Corporate has a little bit more of a volatile impact given the fact that it's larger customers.
Johan Strom: Okay. So it means that your improvement underlying or let's say around 1 percentage points for Commercial and Corporate will then sort of start to diminish, but still be a positive number while the personal line which has been negative 50 basis points will sort of start to become more positive and you will meet somewhere in the middle there between 0 and potentially 50 basis points improvement before you're sort of happy and competition start to work again.
Mikael Karrsten: I think I understand your back of the envelope excel calculation there. But I think if I just sort of reiterate a couple of points. I mean it's true that the improvement in Commercial and Corporate has been relatively big, actually bigger than the 1 percentage point that you're mentioning here. And it's also true that we think that that number will come down, but it will still be a contributing factor to an improved underlying going forward. But that improvement will also come from personal lines.
Operator: The next question will be follow-up from the line of Tryfonas.
Tryfonas Spyrou: I just have 1 question on Corporate top line outlook. Can you share more color on whether we should expect a similar premium sort of decrease for the remainder of the year or whether Q1 was more heavily influenced given that it's a renewal quarter? And I guess how close are you to achieving the portfolio you want to have going forward? I'm just trying to understand when the group level both should converge to the Private Commercial level and when will the headwind from Corporate go away?
Mikael Karrsten: Thanks for the question. I mean first of all, correct that the Corporate book is more tilted to renew 1st of January so there will be less of sort of actions up or down other parts of the year. I think that's number one. And then number two, Corporate will always be a little bit more volatile when it comes to top line development relative to the SME and the personal lines market because it can more be affected by individual customers. So that volatility will still be there up or down going forward. And then I think just to reiterate what I said before, I mean, our commitment is to the profitability of that book and to continuously improve it and that will not change going forward. But I mean we're comfortable with the book that we're having, but we still see opportunities to improve also with the actions that we have driven so far.
Operator: The next line will be for a follow-up from the line of Vinit.
Vinit Malhotra: Just looking at the regional mix then the underlying, let's say, ex runoff which we have with that. It seems like Sweden has had most of the runoff maybe from the health business and the underlying loss ratio in Sweden or let's not call it underlying, combined ratio ex runoff has worsened a bit, but still very good with the level 87.6 I can see in 1Q '24, was 80.8 last year. Could you just talk a little bit about Sweden here because is it that last year was very good and so this year is just normalizing or is there anything to point out there because also when I see 11% runoff in Sweden, I'm just curious is there anything to note here, please?
Johan Brammer: Thanks for that question. I think maybe I'll start off by just saying there's nothing to be worried about in our Swedish business, it's performing very well also in Q1 being of course a challenging weather quarter as it always has been. That being said, you shouldn't read too much into how the runoff falls in a particular quarter. You need to take a longer time series for that to be meaningful. It is the most long tail part of our business. It is where most of the reserves will be, also where most of the reserve releases will drop. But don't read anything into a particular quarter. Take a longer stance on that and be assured that our Swedish business is still delivering very strongly and we believe that it will continue to do so for the full year also. So don't read too much into that.
Operator: The next question [Audio Gap]. As we cannot hear Asbjorn and no one else has lined up for questions, I'll then hand it back to the speakers for any closing remarks
Gianandrea Roberti: Thanks a lot to all of you for the good dialog and the very good question. As always, Investor Relations will be around at your disposal today and the next few days and we're also on the road in different roadshows. So looking forward to see you and thanks a lot.
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