Alm. Brand A/S (ALMB) Earnings Call Transcript

Hello, everyone. Thank you for joining us, and welcome to the Alm Brand Third Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Andreas Ruben Madsen, CEO at Alm Brands. Please go ahead.

Good morning, and thank you for joining us on our conference call. I'm Andreas Ruben Madsen, the CEO of Alm Brand. 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'll now walk you through the presentation of the results. Please turn to Slide 2. 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 by 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. A growth rate of almost 5% for private lines does, however, still indicate that we continue to gain market shares from the 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 and 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 an 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. The ending sales 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 not lower than in H1 is due to the fateffects, assist 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 9 months of '26, supported by favorable forcastic effects -- we should expect a bit lower improvement for the full year, assuming a structural improvement in Q4 of 50 to 100 basis points. Turning now to Slide 3. Let me take you through the financial highlights. Insurance revenue grew slightly, leading to an overall growth of 1.6% year-on-year, while service result amounted to DKK 755 million, which is our highest result to date. Insurance services was almost entirely driven by very low levels of weather and major claims as well as high one-off gains. Investments amounted to a loss of DKK 76 million in the quarter, primarily driven by rising interest rates. Finally, other income expenses are significantly lower than last year as we have as we no longer have integration costs related to Codan following the completion of the integration. And now please turn to Slide 5. As I mentioned before, the group delivered the highest insurance service results. 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 results increased DKK 90 million year-on-year to DKK 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 service results increased by DKK 130 million year-on-year to DKK 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. This was partly offset by an adverse comparison for the risk adjustment as Q3 '25 benefited from the one-off positive effect related to the expansion of the partial internal model to include Coland 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 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 reprices 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. During the quarter, we're also pleased that ALS bank renewed its partnership with Minibar Group reaffirming the strength of our bancassurance proposition. In commercial clients, 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. In Q3 claims rate 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 1.9 percentage point variation in the risk adjustment at Q3 '25 benefited from no effect related to the performance expansion of the partial internal martinclude coal and insurance activities. The underlying change 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 the fanatic headwinds and the workers' compensation drilling for which the implication of the current year have now become clearer. Metro lines improved by 50 basis points year-on-year while preselling 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. 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 points improvement in the underlying claims ratio year-on-year, driven by the strategic initiatives kicking in, but also impacted Bataan Q3 last year. On the other hand, the cost ratio increased slightly to 17.0% in Q3. Premium growth was 4.7% despite the gradual phasing 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. 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 to 5.1% and compared with 11.3% in Q3 last year. Despite the impact of the workers' compensation ruling has statically denied Q3 last year. The underlying claims ratio improved by 50 basis points year reflecting the positive effects of our profitability, enhancing measures, but take effect as well as lower reinsurance costs. The cost ratio increased slightly compared to last year, mainly reflect the normal quarterly fluctuations. And now let's move to Slide 11 for the investment results. In Q3, the overall investment was a loss of DKK 76 million primarily driven by the free portfolio advanced led to a loss of DKK 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 5, we upgraded our '26 outlook and raised our guidance for the insurance services of DKK 250 million to DKK 1.5 billion to DKK 1.6 billion, excluding runoff gains in Q4 '26 in from the previous range of DKK 1.2 billion to DKK 1.4 billion. The upgrade reflects the roles of major claims and weather-related claims than previously expected as well as one-off gains. We continue to expect a cost ratio of around 17% for 2026. 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 DKK 100 million to DKK 150 million for 26 million, reflecting the increase in interest rates. As a result, our guidance for profit before other income and expenses was increased by DKK 150 million to DKK 1.65 billion to DKK 1.75 billion. Guidance for other income and expenses is down by DKK 50 million to an expense of DKK 0.55 billion for 2026. The increase is due through one-off costs related to the FTE reduction announced today. We expect to book the DKK 40 million one-off front in Q4. With that, I conclude the presentation and hand over to our moderator. Thank you.

[Operator Instructions] Your first question comes from the line of Vash Gosalia with Goldman Sachs.

I have 2. 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 1 clarification on that. Like why has it come through underlying and not included in the DKK 700 million charge that you have taken. But more importantly, just wanted to understand next year as the business gets replaced, should we expect a similar sort of amount of tailwind in your underlying claims ratio in 2027? That's my first question. The second 1 is just on your capital. Could you remind us of the seasonality within Solvency II numbers? And essentially, how should we think about the exit Solvency II ratio for 2026? And can we expect the statically better year to lead to a higher capital return? Or would you hold back some of the good news for the Guard arbitration?

Yes. Thank you. I can start on the first question. And then think Mats will do some of the capital or we can help each other at least 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 of small -- effect in the small claim, the underlying loss ratio coming from the Supreme Court ruling. And how does that sort of work against how is that connected to the DKK 700 million strengthening. The DKK 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 all -- this is what you're seeing in the underlying loss ratio is the effect from -- on an onward-looking basis, we expect to get more claims simply because the threshold now is lower. And the effect in our books is estimated to around 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 in a sort of -- a lot of the book would renew in the large segment on January 1. 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 fourth quarters, so to say, but we've already started repricing the new business coming in. So I hope -- so we would have a slight headwind next year, but we should get fully back the profits from this effect. And maybe, Mads, you can talk a bit into capital.

Yes. I mean, I can give some input on how -- I mean how you should see the capital evolving in -- by year-end and -- and it's -- I mean, 1 thing is that we have a very clear pattern through here where we see the profit margin that is part of our capital base tick up quite a bit in Q4 and then a decline in the rest of the core -- so when you mark in Q4, you should put in a healthy uptick in the profit margin. And that is also reflecting the -- that is quite heavy in at the start of Q1. So that is a kind of an addition to do there. And just to give a kind of structural number, then we are talking about effects of DKK 20 million to DKK 400 million uptick in Q4 structure due to the seasonality here. So I think that's 1 thing to look for -- and then another item is 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 muted into the Q4 solvency coverage. So think that's some of the elements. And then I think players will mention whether you should expect something from gas in Q4. Yes.

The short answer is that we find the card claim completely unfounded, also have to have interviewed 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.

Can I just clarify on your first reply -- so you mentioned that you still expect some headwind next year. But if I understood correctly, you repriced most of the business on first Jan. 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 the case. So you should almost see like probably 70 basis points statement, if that's a fair number.

Well, 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 actually reprice the portfolio for us to get fully there. So I think the -- what I said is that we haven't hit some headwinds 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. Train actual tailwind. I don't think that would be the white gray to sort of view that in terms of underlying loss ratio.

Your next question comes from the line of Des Sukari with Autonomous Research. Please go ahead.

I've got 3 quick questions, actually. The first 1 is on the head count 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 at your targets? That's my first question. And my second question is actually on Gord. -- and whether you have any side of the likely time line 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 2 lines, whether these are complete and therefore in 2027, the growth rate will look differently. .

Yes. Thank you. Well, the head count adjustments we did today I think the short answer is that we're working on a -- while we work on a number of initiatives. We also have data centers being what you call it, merged. So we deconsolidated that 1 shutdown one, also a meaningful impact of around DKK 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 follows the line we set to become more efficient over the years. 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 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 adoption. Then going to the GA time line. We expect the guard 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 have received a reply from Guard in the middle of July, as I also recall, we mentioned back then -- 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 were we have the 2.7% highlighted. And what does that mean for expectations going into next year. Well, I think we'll have -- we think we are in a good place in terms of profitability. If you adjust for some of the headwinds 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 sort of 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 1 thing and especially in the large segment when we get to the 1/1 renewal.

Your next question comes from the line of Anders Hornbach with Danske.

Aman Wanda from Danske Marcus. 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 there's no reason to believe that one-off losses would stay at a level versus previous guidance.

Yes, starting with premiums I can do that in rough numbers. Private top line grew 4.7%, indexation, around 2%. The rest or at least the major rest -- part of the rest is to be considered market share growth, a lot of that coming from our bank partnerships. So that would be the main drivers of the main competition of private lines. Going to commercial lines. Total -- 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 2% and then a 4% effect from the profitability or the derisking of the book, walking away from some of the larger, especially workers' compensation and larger segment. So if we haven't had that sort of development in 11, we would be closer to normal indexation for commercial lines also. So I hope that helps with that competition. And you asked about one-off runoff gains -- sorry, as a follow-up on that I'll go to runoff gains and we go and take an extra question if you need more on premiums. For run-off gains, I heard the question being -- now we've had a favorable development in -- also in Q3 and been a bit above normal for some of the quarters. The short answer is that this has not changed our structural expectation. we continue to expect in the long term setting around plus 2% in runoff gains. But as we have 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 1-year time frame. So yes.