Hello everyone, and thank you for joining the Alm. Brand Q3 2025 call. My name is Sammy, and I'll be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two on your telephone keypad to remove yourself from a question queue. I would now like to hand over to our host, Rasmus Nielsen, CEO, to begin. Please go ahead, Rasmus.
Thank you. Good morning, and thank you for joining us on our conference call. I'm Rasmus Werner Nielsen. As usual, I have with me today our CFO, Andreas Ruben Madsen, and the Head of our IR team, Mads Thinggaard. This morning, we published our interim report for the third quarter, and as usual, I will walk you through the operating highlights, and then Andreas will comment on the financials. Please turn to slide two. I'm quite pleased with the overall financial performance in Q3, which had strong organic growth and good cost control at the same time as the underlying loss ratio was improving, helped by synergies and price adjustments. We reached an insurance revenue growth of 10% in Personal Lines Insurance, which implies we're taking quite a bit of market share with our strong bank partnerships as a driver, while price adjustments are still kicking in as well.
Synergies are materializing better than planned. In Q3, we have reached a run rate that exceeds the DKK 600 million synergies per year originally communicated. Adjusted for a lower discounting effect on claims, we reached an improvement in the underlying loss ratio of about 3 percentage points year on year. Lower costs and lower underlying losses were the main drivers behind an improvement in the combined ratio to 82.2% from 85.7% in Q3 last year. I now turn to slide three with our financial highlights. Insurance revenue grew to about DKK 3 billion for the first time ever, while the insurance service result of DKK 535 million was our highest technical result to date in the quarter. As mentioned on the previous slide, the quarter was characterized by strong growth and cost control, combined with a healthy improvement in the undiscounted underlying claims of about 300 basis points.
We therefore see a clear path towards reaching our strategic target of a technical result in 2025 of DKK 1.85 billion. Investment income in Q3 was a satisfactory profit of DKK 66 million, which was primarily driven by a positive result in the fleet portfolio. Now let us continue on slide five. The group made a technical result of DKK 535 million in the quarter, up from DKK 400 million in Q3 last year due to synergies, premium growth, and profitability improvements. The insurance service result from Commercial Lines Insurance was DKK 265 million against DKK 197 million last year, primarily driven by lower underlying claims. In Personal Lines, we also had a sizable increase in the insurance service result to DKK 270 million from DKK 203 million last year, driven by higher premiums and lower underlying claims, as well as strong cost control. Please turn to slide six.
Insurance revenue grew strongly by 7.5% in the quarter, just a bit lower than 8.3% in the last quarter. I would say overall premium growth is very satisfactory with continuing strong momentum. In Personal Lines, we are clearly taking market shares on top of indexations and the price increases we have implemented. We do consider the 10% growth in Personal Lines as a very bright spot in our report. In Commercial Lines, we see a continuation of the rebound last quarter to a premium growth of around 5%. Moving on to slide seven and the claims ratio. The Q3 claims ratio was down 220 basis points year on year in a quarter with a bit higher weather and large claims, but also with help from gain in the risk adjustments related to the approval of our PIM Model to cover the Codan business.
Runoff gains were 1 percentage point lower than in Q3 last year. The underlying claims ratio was 260 basis points better year on year, especially driven by repricing in Personal and Commercial Lines. Moving to an undiscounted basis, we see a 320 basis point improvement in the underlying claims ratio year on year. Commercial Lines stand out with an improvement of about 400 basis points year on year, while Personal Lines improved by more than 200 basis points. Now please turn to slide eight. Combined ratio in Personal Lines improved to 83 from 86 due to a 1.3 percentage point lower cost ratio and 200 basis points lower underlying claims ratio. We are seeing motor frequency starting to drop, but still a continued increase in the average motor repair cost.
In total, we therefore see a bit of stabilization in the overall motor claims expenses, while executed repricing and synergies are helping the underlying claims ratio down. Please turn to slide nine and the Commercial Lines. In Commercial Lines, we see a significant decrease in the combined ratio to 81.3 from 85.5 last year. The massive drop is driven by lower underlying claims, as well as lower cost ratio. The same picture as in Personal Lines, just with a more massive drop in the underlying claims. With these comments, I will now hand over the word to Andreas, who will give an update on expectations for weather and large claims. Andreas will also walk us through the synergies, investments, and guidance.
Thank you, Rasmus. Now please turn to slide 11. The slide illustrates the level of major claims in the last 11 quarters compared to our indication of a normal level. We've decided to reduce the normal level indicated to 6% from 7% before. This change assessment follows the recent approval of our Partial Internal Model (PIM), while it's also backed by quite low actual levels since Q1 2023 and ongoing portfolio changes. The 6.3% level of major claims in Q3 2025 is thus slightly above the new normal level for the group. On slide 12, we show Commercial Lines Insurance being relatively high with 11.3 percentage points of major claims compared to the new normal indicated of 10 percentage points. The normal level for major claims in Commercial Lines Insurance was 12 percentage points before the change.
Now turn to slide 13 regarding the weather-related claims, where we also introduced a new normal level as well as an indication for the seasonal pattern of claims. As you may have noted, weather claims have climbed a bit up in recent years, and the average for the last 11 quarters of 3.3 percentage points is above our old expectation of 2 percentage points- 3 percentage points. We have reassessed the structural level after the recent PIM approval, and we now see 3- 4 percentage points as a better indication of the yearly normal level. We're also providing an indication of seasonality for the weather claims. We point to 35% for Q1, 10% for Q2, 25% for Q3, and finally 30% for Q4 as a normal distribution over the year.
Overall, our change assessments of structural large claims and weather claims do not change our structural expectations for the insurance service result going forward. Now I turn to slide 15 for an update on synergies. With the DKK 158 million in synergies harvested in Q3 2025, we have actually passed the promised run rate of DKK 600 million per year back from the acquisition of Cordan. As flagged previously, we expect to end the year with a run rate of around DKK 650 million. This will be the ending of our synergy accounting. We had a nice jump up in harvested synergies in Q3 of DKK 40 million from DKK 180 million in Q3 2024. This implies an improvement in an underlying claims ratio of 0.5 percentage points and in our cost ratio of 0.7 percentage points year on year. Now move to slide 16 and the investment result.
The investment result was a satisfactory profit of DKK 66 million, primarily driven by a positive return from our free portfolio in combination with a small profit from our match portfolio. Returns on bond and equity were the key drivers for the strong results. I should also mention that we expect our tier two costs to drop looking ahead, as we have now bought back DKK 400 million of tier two bonds out of the previous DKK 1.3 billion issued. The buyback of tier two bonds was driven by our lower capacity for tier two capital following the PIM Model approval. Now move to slide 18 and the outlook. We upgraded our guidance for the insurance service result in 2025 by DKK 100 million to DKK 1.75 billion-DKK 1.85 billion. This is due to realized runoff gains in Q3, as well as a strong underlying result.
At the same time, we narrowed the guidance range to DKK 100 million due to being close to the year end. The cost ratio guidance is unchanged at 17% for 2025, while the combined ratio excluding runoff result in Q4 is expected to be 84.5% - 85.5%. The combined ratio guidance range is narrowed as well. The guidance includes synergies of DKK 600 million and the effect of implemented pricing efforts in Commercial Lines Insurance as well as Personal Lines Insurance. We upgraded the guidance for the investment result in 2025 by a new DKK 50 million to a guidance of DKK 300 million, while the guidance for other income and expenses of -DKK 125 million remains unchanged. Consequently, the group profit excluding special costs is expected to be DKK 1.93 billion- 2.03 billion before tax, excluding runoff gains for Q4 2025.
In addition, we guide for costs of DKK 175 million, of which DKK 25 million relates to the separation of our Energy and Marine business, while we expect depreciation of intangible assets to affect the income statement by around DKK 335 million in 2025. Please recall that we are hosting a CMD here at our headquarters on November 18, and we hope to see as many of you as possible. With this, I conclude our presentation and hand over the word to our moderator. Thank you.
Thank you very much. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Mathias Nielsen from Nordea. Your line is open, Mathias. Please go ahead.
Thank you very much, and thank you for taking my questions as well. My primary question on the first thing is if you could remind us a bit on what we should think about the pricing tailwinds into the Q4 top-line growth. If I remember right, I think it was around November 1 last year you started to implement the price hikes a bit more broadly. How much do you think about the top-line growth year on year when we look at Q4 numbers and into 2026 as well?
Thank you, Mikael. Andreas, I'll try to give some flavor to that. You're right to remember that we did actually start the current price repricing in Q4 of last year. As such, we would expect to see the effects coming from the extraordinary price initiatives slow down a bit as we go into Q4, and further as we obviously migrate into next year. It'll be coming down a bit from what we've seen in this quarter. Maybe I could just give you those numbers also to help you out because, if we look now, it's more or less what we also communicated the last time around. Looking at Personal Lines Insurance where we have a 10% growth year on year, pricing would come to around 4% of that.
In Commercial Lines Insurance, we see, of the total of 5% growth, we would approximate something like 2% coming from repricing on a net basis.
Thank you. Thank you very much. That was very clear. If we then move into the next year and think about that, what is the expectation on claims inflation when we look into 2026? What do we think about that? Does it bump up or bump down when you ask some of the Nordic P&C insurers at the moment? What are you looking into?
I think our overall read is that we still, our main focus or our main, our main sort of, the area where we are most affected by claims inflation remains motor. We still see some quite significant price hikes in motor coming, especially from higher spare parts. What we're also communicating around what we're seeing this year is that motor claims in total is more or less where we expect it to be, given that frequency has come down a bit. On the other hand, we've seen this uptick in claims inflation. For now, I would expect that to more or less, let's say, flatten out at these levels. That would be our overall expectation. We don't have evidence yet that this has softened. In the longer run, at some point, we would expect market dynamics to help us to push down again to a more normal level for motor.
For now, we're expecting more flat movements. I don't see any very big themes for the rest of our book as it stands right now.
If you try to put some numbers on that, on claims inflation, is that around 3% to 4% claims inflation next year? Is that what you're trying to allude to, or how do you think about that?
That's not all. I would say something around the vicinity of 3% also maybe, you know, roughly corresponding to what you would expect to see from wages on an overall basis.
Sure. My last question on the capital side, in terms of expectations of buybacks into next year, if my memory serves me right, the ongoing buyback is ending in March, and that's where we should expect a new one if there's going to come a new big one, if that's correct. That was the first part of that question. The second part of that, is there any, do you see any limitations on how much you can buy back and then need to go to the foundation again, or is that something that you think you would be able to handle in the market at the current situation?
Yeah. As a general comment, I think I'll start by saying that before we dive into specifics on the whole strategy around capital and buybacks, I think we'd like to leave some use effect also for the CMD. What I can do is I could restate that, you know, we, we, and you're right to assume that we are sort of at full capacity until sometime in the spring next year. We do have a surplus capital, and in an overall sense, we would like to prioritize also a share buyback, in all likelihood when we handle most of that surplus capital. We don't see any news in terms of liquidity. The amount of buybacks which we are able to do at this point within a year would be within the safe harbor regime and would more or less stand also in the next year.
Thank you very much.
As a reminder, to ask a question, please press star followed by one on your telephone keypad. Our next question comes from Martin Parkhøi from SEB. Your line is open, Martin. Please go ahead.
Thanks. Andreas, maybe we could just continue along the lines of capital. You have a solvency ratio target of at least 170%. How is that impacted by this PIM Model improvement? I assume that it's also going to be, you know, can we also need to address sort of the total absolute capital base, which will be strictly lower following the payout, which is due in March?
Thank you, Martin. In overall terms, the 170 is our capital ratio. That's what we have been aiming for. We've had that for some time now. You're right that we also, naturally, have a lower surplus in absolute numbers. All else equal, the 170 stands. I think, as I also adhere to before, we'd like to give the full update and transparency, both in terms of overall capital, how we strategize around the surplus, and also how the different parts of the capital base, we see the targets for tier two, RT1, and so forth. We see that as natural to give an update for when we get back to our CMD on the 18th of November.
Okay, a bit of a cliffhanger here, Andreas, but will you also provide an update on when you actually expect to reach the 170 or just above the 170?
I think we would at least give you the guidance needed in the toolbox to sort of make right assumptions about that. The exact timing and others, I think, is a very specific sort of exercise, but we could maybe do that. I don't see that as a core part of the CMD presentation as such. We hope to give guidance that will give you the qualified assumptions needed to get to the right timing.
All right. Much appreciated. Thanks.
We currently have no further questions. At this time, I'd like to hand back to Rasmus for some closing remarks.
Thank you for listening in again, and we look forward to seeing you, hopefully, all of you on the 18th of November here at our headquarter meeting room. Thank you.
This concludes today's call. We thank everyone for joining. You may now disconnect your lines.