Good morning, thank you for joining us today on our capital markets update. As Head of Investor Relations, I have been very much looking forward to welcoming you all today. Of course, also a very warm welcome to all of you following us on the live webcast. I'm sure that we will have a good time the next couple of hours. We have put together an interesting program that will first take you to the status of our Group, what we have already accomplished, and what we are set to do in the next couple of years. We will present our business plan and look into what we are calling our financial performance battle. This will lead to the presentation of our new financial targets for 2025.
After a short summary, we will be ready to take your questions one and a half hour from now. To cover all this, we have our speakers, Rasmus, who will present both the big overview, but also the concluding remarks. We have Andreas, who will do all the technical stuff. Technical financial stuff. We have Henrik, who will take you to our business plans. Please, Rasmus, the floor is yours.
Thank you, Mads, and also welcome from me to all of you, especially all of you sitting here on ninth floor, also you following on the screen. We have very much been looking forward to this day. It's the first time we can actually do a capital market update for Alm. Brand Group. Therefore, we are very happy to see all of you in the room, also all of you following the screen. Just a small comment, when I came on, three years ago, we had one one-to-one meeting at a quarter. Now it's a complete different story. With me today, I have Andreas, our CFO. I think many of you know Andreas already and been in touch with Andreas many times. New on the team, you can say, presenting today is Henrik Hviid.
Henrik has been with Alm. Brand Group for now 20 months. Henrik came in in the middle of the process when we were about to take over Codan and has been together with Andreas and the rest of the management team, instrumental in taking Codan over, and now also transforming Codan into the Alm. Brand Group. We are now a little bit more than six months down the road since we took over Codan. When we got the regulatory approvals in place in May, we start acting fast. We had some time to prepare ourselves. Now we are ready with this new group. We have doubled our size. We are in a very, very sweet spot providing good services to our large customer space, but also providing quite good results.
I think today we have some key points that we want you to take away. The one, and I think most important, is that we are now creating a very ambitious multi-brand company. You will also see that we have business plans in place that will double our technical result. It will reduce our volatility, and it will also show that we are on top of the integration, and we are already now delivering on the synergies. If you take all this together, then, when we are delivering on this, I think you, as shareholders and investors, you will receive a very good dividend in the end. As said, we embarked on this as a new management team, three years ago. Ever since then, we have done, I think, quite a lot to improve, the status of Alm. Brand as such.
We started changing the organization to be much more customer-centric than it was at that time. We also sold the bank business, and we sold the life business, so now we are 100% non-life company. We now have a clear second position in the Danish market, and we're servicing more than 700,000 customers with a small bias in our portfolios towards corporates and with a total market share of 17%. I think at the same time, when doing all this, change this to a fundamental new group, we have delivered on the underlying operation, and we have delivered profit, which I think is core when changing organization. You know, we are operating only in the Danish market. As such, we have focus in the Danish market. We do our business in this very attractive market.
Now this market is very consolidated with three main players and a long range of midsize and small players. As you know, for other industries, it is key to be part of the top three players. Our portfolio is covering everything, all kind of customers in Denmark, all the private customers, medium, small size businesses, and large corporates. Having an openly company as the one we have in Denmark, we are of course following the large corporates outside out in the world. Meaning that when they have needs and we think it's a good opportunity, then we help them ensure their businesses. It could be production facilities, it could be wind turbines, and it could be premises.
You should, however, know that at the moment, I think this portfolio we have outside Europe is pretty small compared to the overall company. A few words about the association. I think it's key to say that the association has been important. For the group, it's been important for the journey we have been on throughout the last three years, ensuring that Alm. Brand Group is where it is today. We have a shareholder structure where the association owns 47% of the company, and it's important here to say that they only have one purpose, that is to support actively the Alm. Brand Group. We see this ownership structure in other places in Danish-listed companies. I can mention Tryg, Novo Nordisk, and Carlsberg.
Also there, the main shareholder has one thing, and that is to influence the company at the same, you can say as other shareholders would do. It's therefore key to state that our association has this purpose and the same agenda as other shareholders. They want, of course, to see their investment increase, and they want a nice stable cash flow from their investment also. Talking a bit about our brand position in the market. When we took over Codan, we created actually a house of brands. We had in the past, of course, the brand, Brand. Now we also have Codan. These two brands are old. They are going back more than 100 years, even 200 years for Alm. Brand. And that means they have visibility.
The two brands are among the five best-known top brands in the market. Looking at brand awareness, both of them have more than 80% awareness, which is a very, very high number for all kinds of businesses. Why is brand awareness important? It's important because when you have customers and they want to have a new insurance policy or update their insurance policy, they normally only visit one or two brands. Brand awareness in this area is simply just important. We also have new in the family is the Privatsikring and Erhvervssikring. Both of these brands are covering all kinds of Danish customers now, and it's important in the new bank insurance area we have that we also can fulfill that with some important and very well-known brands.
All in all, four good brands that will take up, and I'm sure we will gain market shares also in the future. How can we then act with the four brands? Is it possible? There I can only say we already doing it today. We have IT systems in place that can deliver customer experience in the different segments. We are doing it already today. We have smaller brands like Audi Insurance and Volkswagen Insurance. We can definitely do that. It's possible, it's doable, and we are already doing it. Looking a bit into our portfolio. Some of you have seen this before, but otherwise I'll spend a few minutes on this slide.
On the right, you have the portfolios that Codan and Alm. Brand has entered into the Alm. Brand Group with. On the left, you see that Codan is the brand we are going to use in the large corporates in the energy and marine sector. In the bottom, you see that in the agriculture sector, we'll definitely use the Alm. Brand because it's there already. We have the important midsize and smaller commercials and the private sector. There we have this very nice opportunity to have two very well-established brands, Codan and Alm. Brand, and we will definitely use them wherever is needed and suited for the customers and the partnerships we are creating in the future.
Just to mention again, in the very important bank insurance market where we will definitely see growth, and we are already having growth, Erhvervssikring and Privatsikring are playing an important part, and they are doing that, of course, together with the staff, the people, the processes and all that we have in the Alm. Brand Group. Moving a bit more into the important private segment, we have put in a little bit about the consume segment and all the differences in demographies. If you just take a small glance here, then you see the differences in the two portfolio and why this merger is so nice, because we actually have two portfolio that helps each other instead of, you know, putting having the same kind of customers.
Codan is very well based and dominated in the urban diversity and the wealthy people, whereas Alm. Brand is much more into the life in the countryside and well-founded homeowners. Here you see two different segments of customers that supports each other very, very good. That means when we look at the important private market, which this highlights, then we cover all customers from east to west, north to south, the wealthy one, the less wealthy one, the one in the big cities and the one on the countryside. Moving into the financial targets, and here, just before I go into the new updated targets for 2025, I would just like to spend a little bit of time summarizing on the targets we set out three years ago for 2022.
Starting on the right, just to say we changed the company fundamentally. We sold the bank, we sold our life company. Just to say we were actually improving the bank, and it ended up having a nice profit. To be honest, and in all fairness, the potential of the bank only unlocked when we sold it, and then the shareholders got a, I think a very nice extraordinary dividend. Now we are a non-life company, and I will focus on the four targets we set out there. We set a target of 3% growth. At that time, we had negative growth in the group. Now we have a growth both in private and in commercial of more than 5%, so we'll definitely meet that target we set out.
We also had a target of below 90% in the combined ratio. We will get there by end of this year for Alm. Brand definitely. We set an expense ratio for Alm. Brand of 16%. We will get there just around there, of course, somehow helped by synergies already realized this year. Just have in mind, we started out with an expense ratio of 90%, so we've definitely come quite a long way since that. All this, I think is, it just shows that we are steadily improving our business. We try to do what we say, and we have done all this at the same time as changing the whole group. Let me look into and move into the financial targets for 2025, and that's actually why we are here today.
I will start just taking a quick overview, and Andreas will take you much more into the details and also explain how we got to these targets as such. Just to start with, we are doubling our technical results. It's important: DKK 2.1 billion in 2021. With doing that, we will end up having a combined ratio of below 84%, which is 800 basis points lower than we have today, if you take the pro forma figures including Codan for the full 2022. Further, we will reduce our expense ratio to under 16%.
You can say we are almost already there with the Alm. Brand, we need to be there for the whole group, you know Codan has come in a bit higher than 16, we still have a job to do there. We have reiterated our, the realization of synergies of around DKK 600 million. We are well underway, Andreas will come more into that in details. We have a new measurement, that is return on tangible equity. We'll also come back to that. We think it's a very good measurement for the kind of business we are driving. At the moment we have around 20%, we definitely intend to end up with more than 50% in 2025.
Finally, a change, and that's actually already from now. As of today, we will increase our guidance on the payout ratio from a minimum of 70 to a minimum of 80. That's of course because we're looking into the profits we are making and the forecast as such, and it reveals that we can definitely increase that and still have an SCR coverage of more than 170%. With these targets, I think we set a clear direction with an ambitious goal for the company. When meeting these targets in 2025, we have once again taken a fundamental step change in the Alm. Brand history. With these introduction remarks, I will hand over the work to Henrik.
Thank you, Rasmus. Thanks for the introduction. What I will do now is that I will walk through the plans that we made in order to achieve our targets for 2025. These plans has been made around three key areas.
These targets.
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First of all, cost efficiency, meaning that at all time we need to be relevant in the market, meaning having a cost, an expense ratio that is on peer, on level with our peers to stay competitive. It is to have full focus on profitable growth, meaning loss ratio in our business at all time needs to be at the right level, meaning that the price risk mix in our portfolio also need to be taken seriously. Finally, we of course need to deliver on integration all the promises we already made today. The reason for us splitting it up in these three buckets, so to speak, and objectives, is that we, at the same time as integrating our two businesses, we need to constantly keep focus on the core of our business. Meaning delivering a profitable business that also is growing.
It's a balance between integration and the core business. What I will present briefly is our plans for the customer-focused areas of our business. That is, as you can see up here, personal line, including bank insurance, where I have a walk into. It is commercial line with the corporate segment included. That is energy, large corporation, and also marine. We'd had previously some volatility in these areas. Today we will give you a bit of insight into this specific business unit to give you comfort in regards to what action we take in order to get full grip on this portfolio.
Finally, I will also touch on claims, which is, of course, the moment of truth for all insurance companies where you actually service the customer with payouts in regards to the claims they have. We also briefly present the plans there, but also come into the details of our integration synergies in claims. We also have operational units like finance, staff function, IT, and so on. We will not touch on them today, but they're of course there. Again, a high-level introduction into this to give you a flavor of we as a management team are focusing on and constantly will seek to improve. Again, linking up to the financial targets that was just presented by Rasmus. The plans has been constructed around these, this strategic framework, as we call it.
It is a framework that is quite simple, but beneath quite complex to achieve. It's first of all, setting out the strategic ambition that we have for our business as such. Again, this focusing on the financial side of our business, it is to fully unlock the potential of our two companies. Rasmus alluded into the brands that we have today, the how we can use them going forward in order to get a better coverage in the market. It is also to utilize the strength and the competencies that we have in both companies, taking the best of both worlds to really get this business to ignite and deliver. As I said on the previous slides, the strategic objectives are clear.
It is cost efficiency, it's profitable growth at all time, core business, at the same time as integrating. We, of course, also know that everything we do has to do with customers, serving customers in the right way, making sure that we are relevant where they want us to be, et cetera. The levers that we'll use and that we strongly believe in and that we need in order to win is, as you can see, that we must be relevant in the market. Customer relevance is one of the key levers in everything we do plan-wise. That is to make sure that we have the right value proposition, that we do not stand still. It's that we, as I said, have a strong distribution, but also our service levels are kept high at all time. Customer relevance, key.
Partnership is also key. Rasmus also mentioned a few of them. We need to continue to develop our partnerships. We think that the partnership is a way of growing. Yes, but it's also a way of actually improving our service offerings, value offerings. I'll come a bit, that back to what that can be. Then finally, as we speak, we are developing our strategy for ESG, meaning prevention and sustainability, where we'll next year launch our strategy in this area. Again, very much focusing on what is important, prevention, which is both beneficial for our customers and also from a financial perspective. We will launch that later on, and again, give you some more insights to that.
The strategic enablers, as they are called here, is basically the foundation of everything we do. When we merged the two companies, we were very fast out making sure that we combined the two organizational units into one, having a so-called target operating model that was efficient from day one. We need to constantly monitor that, constantly focusing on rightsizing, making sure that it's efficient at all time. Therefore, the focus on efficient processes, organizational units, et cetera, is key. It's also key for us to be able to, as it says up here, attract the best people in the market, because the journey we are set out to do here is not easy. It's doable, it's ambitious, for that, we need the best people at all.
We need to be able to attract the talent in the market. That was a framework. This is the way we both internally and now also externally are presenting the way we structure our work towards delivering on our targets. Let me give you a little bit more detail on some of the plans and how they are structured. Personal line. Personal line is an area for us that is key to maintain our market share, but also to grow and to stay profitable. As I said, we will continue to do that via our utilization of our brands and make sure that we are relevant at customers. We've set out four, you can say must-win battles in this area. First one being sales channel strategy.
Today, we have one organization across the two brands and legal entities. What we will do going forward is continue to optimize the sales activities within there. Our sales strategy now, as we again also speak, focusing on getting the right balance between the different distribution channels. That is outbound. Naturally, it's tied agents, it's online sales, and there's also different features in that remote sales, et cetera. What we need to do there, and what we will do, is to get the most efficient set up to support our brands and to be able to have the distribution cost at the right level. That includes, of course, also lead management. As it says up here, lead management is key.
It's very costly for an insurance company to acquire leads. Those leads needs to be kept warm, as we say, and channeled into the right part of the sales function. Full focus on the way we distribute, full focus on keeping momentum of our business again, while integrating. Another area that we must have a full grip on is of course customer retention. Normally, when you think about customer retention, it's these teams, rescue teams that you basically have when you see intention in our customers leaving. We need to be there, be present, and see if we can get them back if they show a shift intention when they want a new car, when they go into or move into a new house, get children, et cetera.
We need to be there. The good old-fashioned retention team, yes, that's something that we must focus on. Here in our view, customer retention is also about having the right value proposition. Be relevant in the market, customer relevance. We'll continue to seek to be that, and I know we will, because already now with the merged entities, we during the last couple of quarters have been able to, for instance, partner up with Hejd oktor, giving an additional services to our policy holders on remote doctor advice. We also have launched a new product, cyber product for personal line that we also again have kind of can sell out of both brands today. Do I want to say with that?
Basically that we will need to continually, continuously, deliver extra value to our customer via the new service offerings, and this is what retention is about. Operational excellence, I don't have to mention it again maybe, but I'll do it anyway. It is key that we get our business up and running in a way that is efficient. Today it's actually structured across two legal entities, many brands, and et cetera. What we'll seek to do is constantly drive efficiency in everything we do. Personal line is the first part of our business where we will actually roll in our new common platform.
A platform, when I say new, it's basically built on our existing platform here in. Then you, we can really utilize some of the features that we, for instance, developed with. As you can see in the middle column here, again, I talk about efficiency and this is something that is key to us. We have actually a scalable setup. What I want to say with that is that we will try to attract even further, or more banks into this setup, and after utilizing the setup and the structures that we have already making it even more efficient. Today it's one business unit.
We have one senior executive taking care of bancassurance as a business unit, and that means that we have full focus on this area. Lastly, what we will also do and have done is that we will expand further in bancassurance, not only having personal line customers, but actually also commercial line customers. We already started doing that. We launched also during the last couple of quarters a new brand called Erhvervssikring, basically a brand covering commercial. Erhvervssikring will, going forward, be a way, a place where the local provincial banks now also can provide insurances for their commercial customers, including agriculture.
There we have a perfect match because in Alm. Brand as As was also mentioned, we are actually able to deliver that to service agriculture products into our value segment. Now you can really see how the dynamics of our brands and of our operation works. We will expand further in the commercial area by selling through bancassurance. Just here. What you now think of is, of course, but what about the rest of the commercial business? Of course, we sell via bancassurance now or can do that, but we can also, of course, sell direct and via our brokers. The must-win battles in our target areas for commercial I will now walk through. Commercial line is actually in our business twofold.
It's a tariff-based volume business, small and medium-sized enterprises, but also agriculture, as just referred to. It's also the more case-based underwriting business, large corporate businesses, where you have specific underwriting being done in order to, for instance, insure wind farms, et cetera. It's not just a tariff and a standard price that you put on that one. You need to go deep into the mechanics of that policy in order to underwrite it. It's two businesses, very complex businesses, you can call it, and more volume-based. We want to grow, of course, and we want to keep profitability in the volume business as always, but we also need stability in the large corporate segments. In that area, it's more like a stabilize and improve the profitability rather than growing.
We will keep the top line, yes, but we will improve our underlying result. We'll come back to that later. It is a twofold strategy that we have on, or a plan that we have on commercial. First column, small and medium-sized enterprise and agriculture, it's a volume business. What we have to do there is not the same, but similar to what we do in personal line business, volume business. We need to stay relevant. We need to have good and relevant service offerings for them. It can be everything from small companies, hairdressers, crafters, up to larger, you can say, productions lines and so on. We need to be attractive to all of these customers.
We need to create service offering that make them stay and basically are giving them the customer satisfaction they need. It also to use, of course, our brands in this area. We can by having different brands and different way of approaching our customers actually come with good solid service offerings, and we'll continue to develop that. As I said, column two, as I said, underwriting is also key in commercial and especially on the larger corporation. One of the must-win battles here is as well to make sure that we maintain the solid grip on underwriting.
Codan came in with a lot of technical underwriting, and we cannot lose that because you need technical underwriting in order to go both internationally, but also to insure big corporate institutions. Again, I can just point at wind farms. It's something that you really need to know how to do. Securing the underwriting community, securing that you have the right data, the right history, the right people, the right claims handle, the right insurance, reinsurance, et cetera, is important. Underwriting will also be key. We also have to face the fact that a lot of the business that we take in today comes via brokers. Many customers simply go to brokers to ask for a quote.
In commercial line, we of course also need to be stay ready for meeting the brokers. We want to be the preferred broker. It's easier said than done, I know. We also want to win the brokers, meaning that we will do what we can in order to be preferred. That is by, first of all, making sure that they have one point of contact when they come to us. As I said, it's two very different portfolio types that we have run in Alm. Brand and Codan. They need to be channeled into the right community or right competency area.
What we will do is, as we have done, merge the organization and have one point of contact, but we will also split up the broker channel so that we have kind of a case-based underwriting channel and a more volume-based channel so that our customers, the brokers, get the right service. Finally, in the fourth column, we have done an updated strategy for what we call corporates, large commercial customers. Again, if you remember one of the first slides, it's to do with energy, large corporations and also marine. For that area of our book, we have done some specific activities because this is where the volatility of our business is. Volatility, in order to reach DKK 2.1 billion in 2025, we need to stabilize a bit.
We'll do that by making sure that we have full grip and focus on the corporate side of our business. We'll come back to it in more detail. Andreas will go into the numbers and the figures and so on. What I just want to go through with you is the overview of actions that we have taken. In our updated corporate strategy, we have the aim of reducing volatility, and we'll do that by making sure that we are fixing capacity for the portfolios. We do not take bigger chunks than we can handle, so to speak. We have one example later where it's in offshore construction, where we have decided to reduce the volumes, the premium volumes from 30% to 20%.
That's one way of limiting also the risk and the frequency of these risks. Even more efficient is to reduce line sizes. That is when you go in and ensure a bigger property portfolio or wind farm or something like that, you can take shares. Instead of having the full exposure, you can go together with other insurers, co-insure, and we have also decided there to take smaller chunks. Still to be lead, still to be the one that actually is on top of underwriting and claims, but to limit again risk exposure to our policies. It's also our clauses and the policies themselves. We can do a lot also with volatility of limiting the risk that we underwrite, basically, the claims that we cover.
Make sure that you are, you're not too wide in your policy and wordings in the policies. All in all, having bigger grip on the volatility, that's key for us. I forgot to mention, but also coinsurance, reinsurances or et cetera, is also some levers that we will use in order to, of course, get less volatility. Here we've tried to, a little bit simplistically, show you the graph over there that we have seen some volatility and what you should and will see later in the years is that we will limit that through our actions. Another important thing is that investors and stakeholders have often asked us, "Yeah, but how is it actually possible for you as a local Danish company to go abroad, follow your Danish customers into international space?
You don't have licenses outside of EU and et cetera. We can do that because we have strong partnerships. We have one that I will mention here, which is RSA Global Network. It's actually a network that has been close to Codan for many, many years as for natural reasons. We've maintained that network. We are still a strategic partner with RSA. That means that we can now Not distribute, we can now cover outside of Denmark. That means that we can follow CIP, Copenhagen Infrastructure Partners in Copenhagen, in U.S.
We can basically follow our customers into the world because they have a network of insurance companies locally that they can use, and we can thereby link into that and make sure that our Danish customers can get a policy issued, for instance, in U.S. or elsewhere. We maintain that. We managed to, of course, given our rating, given everything else, to maintain a strong and solid partnership with them. The last thing is what you will hear me say again and again and again, sorry about that, but that's operational excellence, that making sure that you know what you're doing. That is again making sure that we have one organization taking care of these very special high-risk portfolios, get them into the volatility we want.
It's also to secure that, as I also mentioned briefly, making sure that our underwriting teams are kept stable. It's competency that you still need, that we have claims, knowing how to prevent claims, knowing how to go in with risk engineering and limit claims, and that we have strong pipeline management. Again, this is about limiting risk, only taking the right risk. Then, as I said, reinsurance treaties, et cetera. Strong risk management and making sure that basically we get profitable in this area as well, and that we can take the volatility, that you will see the blue line in this portfolio, but at a level where we think it's acceptable. Acceptable, we also need to be, we actually need to be the best in claims.
Claims is, as it says, crucial for achieving our synergies. It's very much maybe a financial view on this. Claims is important for customer service. Claims is important for us to be able to deliver in the, as I said, moment of truth when customers actually get a claim. We need to be there at all time. We need to make sure that we constantly seek to be better and perform better, which we'll do by coming or integrating into one platform. Towards 2025, we will, of course, have one combined organization, which we have today, and further develop that. All in all, make sure that we deliver good KPIs and that basically good customer service at all times, at the same time taking out the costs.
Andreas will very much come into some of these later, these savings that we see integration-wise, but remember, customer is always in the forefront of our decision. Procurement come too, also important. We've come from a, if we look at Alm. Brand standalone, a spend base of, or claims base of, DKK 3 billion-DKK 3.5 billion, and we're now up to DKK 7.5 billion of total claims spend a year. That we must utilize to a maximum degree. We have some cases again later that we'll present, but full focus on that at all time. Again, it's an area of interest for us and also a focus going forward. Fraud detection, we just took up here as well. We think there's a lot to gain from that as well.
We have taken also an example later. The reason for taking it up here is that it's an area where we can actually utilize the strength of both companies to become better together. It is so that Alm. Brand has been actually using some tools and some ways of doing things early on that we can now replicate into Codan, that we'll show you how we actually can get benefit from that. As a last thing, not least, the prevention and sustainability. Prevention and sustainability agenda. We will drive that in claims focusing very much on prevention, and that will be together with a broader ESG action and strategy that we will come forward with next year.
All in all, claims need to participate in making sure that we realize the synergies, but at all times need to stay close to customers and give good customer service. With that said, I think I've said enough, and I will now just briefly sum up what you should take as takeaways from what I just said. First of all, we have plans in place. You saw just a highlight of the business areas, equally so we have for operational units, et cetera. We will relentlessly focus on these areas: cost efficiency, profitable growth, and also integration, having the right balance between core business and making sure that we also integrate and get the synergies. We also strongly believe in order for us to succeed, we have to stay relevant at all times.
We need to continue to develop our customer value propositions as we've done the last quarters. Make sure we have the right distribution, utilize the brands, service, et cetera. We need the partnership to support our growth ambition, but also to support us in delivering new value proposition. Finally, as I said three times now, we will also develop a ESG strategy focusing very much on prevention with the benefit for both our customers, but also for us. With that said, I think it's time for me to hand over to you, Andreas, who will go into a little bit more specifics on the financials for these three objectives that we set up.
Thank you, Henrik. Yeah. As Henrik already has said, I'll be starting out today by taking you through how we will use the three strategic objectives we just went through to win the financial performance battle, so to say. We have chosen some topics we feel are highly relevant for all three, and we'll be starting with cost efficiency as the first, looking into how we are thinking about a very important part of our cost base being around wages and driven by FTEs. I'll start on that note in a minute. Then we'll move to a case around profitable growth. Those of us, those of you who know us, know that we have said a number of times. I need to, yeah, remember this.
We've said a number of times that profitability comes before growth and to achieve a sound profitability with an overall combined of 84 behind that also means that we need to improve certain parts of the business and especially certain parts of commercial lines which have the highest volatility and also the highest capital expenditure. That's where we need to demand the most in terms of combines. We'll be diving into the energy segment specifically in a minute to give you some transparency on that and give you our thoughts around that segment.
For now, I'd like to start by saying that what we are signaling today is that we need to get that business down to a combined of 83 for it to be at the levels we consider sound to be justified as a part of the portfolio given the nature of that business. We'll be diving into that in a minute, and then we'll be closing off with a talk around synergies and integration, hopefully adding some specific flavor to both some examples of the levers we'll be using and also adding some further details on how we'll be facing that part, that very important part of our financial performance. Let's start, as mentioned, with the first strategic objective being around costs and FTEs.
What we're showing here is, where we are, at present in both Admin & Finance and Codan, also compared to what we saw last year, and this is on pro forma basis, so to say. As we've also alluded to, after especially coming the Q3 numbers, we see that Codan has come in a bit higher than we expected. The story around it is that we saw the indications of this when we took over in May, but we needed some time to gain full transparency on how the business was running.
It's no secret that Codan had been investing heavily in certain lines, especially around the bank insurance model, both in IT, but also to a high degree in staff. We needed to become, we needed the insights to determine exactly what would we be able to run in terms of the sound levels of top line in that business, getting to the right efficiency, and what would that mean of staff before we took any quick decisions. What we did instead was that we put into effect a full hiring freeze from May 2nd.
There was a hiring freeze also up to taking over Codan. We maintained that, and that means that luckily, we were able to at least limit the amount of actual severances. We took out reduced by a total of 110 FTEs, most of that being tilted towards bank insurance and most of it being handled through natural attrition of the base. We have around 200-300 people leaving us as a part of the natural flow each year, and that's also what helped us out in Q3 so that it was limited to a quite low number of actual severances.
We don't consider this a part of the synergies. This is a part of, let's say, housekeeping and ensuring that we are on the right and sound levels with the business we need, we're running. Just to give you a bit more detail on how this stacks up. We came in with around 2,400 in total. We could see there was about 100 more people and 100 more, also approximately DKK 1 million in costs. We needed the transparency I just talked into to be able to decide what the right number was. After having done that, you remember we took out 130 people upon just after takeover.
Then we took a further 110, which were mostly handled through, yeah, natural attrition. We also need to. That means that we get to around 2,300 people as we stand today. Included in that, we've also boxed in the 80 people or so which are temporarily needed to handle the quite sizable and complex integration project which is running full speed now. Simply to sum up, we are just above 2,300 now. We expect to be around 300 less when the integration is over, and we've done the further optimization of our...
and streamlining of our business, and we'll arrive at something between 2,000 and 2,100 people in 2025. now, in a minute, I'll dive into the energy segment. I think it's fair to say that this has been a topic that has interested a number of you in this room. I hope with the, with the things we have, brought today, at least you'll get some, you'll get some transparency on some numbers. you'll see some get some feel for what the business is in a more detailed manner than we have, been able to provide before. you will, last but not least, get an idea of how we're thinking this specifically. that's the objective, and let's try that.
Start out with this first slide, which is a quite busy slide, so I think I'll take some time just going through it, so everybody gets a minute to understand what's going on here. There's quite a lot. If we start with on the left-hand side of the slide, you see how the portfolio here shown by the gross written premiums, how that has evolved over time, both in terms of size. You see the increase in written premiums picking up from 18 to the highest level in this period being 20. You see how the different parts of this energy business have, how the bit...
how much the different segments have, and how they have shifted over time, in terms of relative composition. What you see, I think I'll just also take you through the different segments. I think that might be helpful. We have, if we go to the middle, you see we start with Offshore and Onshore Operational. That's what the OAR, operational, always stands for. We're starting with the wind part of the business, just to be clear, and wind is roughly two-thirds of the energy business we have. We divide that now into first the Offshore Operational part, and the Onshore Operational part of wind. You can see, yeah, we have around 30% being the largest single segment from the Offshore Operational segment.
Moving down, you get the construction part, also split in offshore and onshore wind. We have a bundling of the rest of the construction, which we do on other types of single risks. We have power and utilities as a segment, and in the end, we have grid-to-grid interconnectors singled out. This is and some small other things, but that's the main part of that segment. The reason we do that, we would normally often bundle that with offshore construction, but it's helpful, and you'll see that in a minute when we, when we dive into how the performance has been in single quarters. That's why we've split it here.
What we see is apart from what the different parts are, you can see also how the different parts are doing. We've tried signaling that through some loss ratios from the last seven quarters. If you start in the top, you can see that the largest part is quite lucrative with average loss ratios of around 30%. We get into some zones where loss ratios are less than satisfactory. Onshore operational has in this period not been good. I think it's just worth mentioning that we see this business in the portfolio we have today being at a much better expected loss ratio than the one you see here.
Still, in the period we show you here, it has performed below par. We move on to the more risky parts, which is the construction parts. Also here you have above, also below par performance and loss ratios on average above 100. That all sums up in the bottom to average loss ratio in these terms, in these metrics of 71. On top of those sort of direct loss ratios, we need to add to arrive at the loss ratios you know from when we do our financial statements. We need 8%, approximately that to cover our claims handling. We need some reinsurance.
That means that in terms of net loss ratios, the one you're used to seeing, this actually is at a 91 loss ratio. That's, that's where it is, and it's not good enough. Where it needs to be, we've signaled in the box on the right side. We need to get that loss ratio to a level of 68, and that corresponds with the overall combined guidance I also gave earlier. We have approximately 15% in administrative costs in this line of business, and that's where we need to go. I'll be diving into in a few slides how that's how we're working with that, but we recognize that there is some work to be done in this segment. What are we doing here?
I think what I hope to be doing here is adding some clarity to how has this overall business been performing on a quarterly basis. That's there's a couple of points here. I'll also try to go through them one by one. A very important point is that we try to give you an idea of what is the volatility in this business and what has caused the historical volatility we see. Just to start with what's going on in an overall sense, this is net results. It's not the... It's, yeah, you may, just to be clear here, it's not the metric we use most in other parts, but we've decided to filter out the difference between our earned premiums and our direct claims.
It's sort of the profits that are left for handling other types of costs, reinsurance, claims handling, et cetera. It's a simple metric to see where is this business running in terms of are we getting the right premiums to cover the raw direct risk we have in the business. What you see is the blue line is the entire energy segment net result for the current, for the specific quarters. We've singled out as the black line, the interconnector grid to grid, yeah, part of net results. Before I get into that, what you can see on an average sense here is we're showing by the lines.
The dotted lines being the historical averages. We have a historical average of around DKK 55 for the total net result on a quarterly basis. The grid to grid specific over time is roughly a zero, slightly positive. Not as positive as it needs to be, but slightly positive. Then you can see that where we need to drive this business, where it needs to be, is to be actually at DKK 125 million. There's still a way to go. That's the important point, and I acknowledge that.
I think the other very important point we're trying to communicate here is that if you look at it on a quarterly basis, there is by far only one quarter, and that's historically related to the grid interconnectors in the end of 2018. That is, in terms of volatility, at least when you're talking about something that's substantial in terms of both this segment and the group, that is the only quarter where we really see that. Interconnectors as a segment, we have Codan, before we came along, decided after seeing this to put a full stop on new construction interconnector risk, and which has been maintained in the years following this.
Given the nature of these projects, all of those projects are now out of the construction phase and into the operational part, the maintenance part, sorry. They'll soon completely out of the maintenance part, but it is the construction part, which is the risky part. What we're doing, and I'll be getting into that in a bit also, that we have decided to maintain that full stop. We'll not be doing any new interconnector construction risk on the books. Summing it up with that in mind, I think the point is we acknowledge that it needs to get a lot better. I'll be getting into how we're working with that. Henrik already touched on some of the themes. I'll do that in a bit.
The other part is that given where we are today with the portfolio we have today, I feel safe to say that volatility is not the same as you have seen historically, and we shouldn't expect anything like the results we had in the end of 2018. How can I be so sure on that? Let's go through it. Here we've chosen to segment the overall four parts of our energy business. Starting with offshore construction, the most risky part, we see that as a segment we need to limit and transform. Henrik alluded to the 30%-20%. That was talking into this segment specifically.
As you saw before, it's just below 20% as we stand today. We're limiting the growth remaining premiums coming from construction, and that's on all wind, to a maximum of 20%. It won't be allowed to get to the numbers that were there. Also, when you see the big losses, that's an interconnected risk, but it also reflects previously that Codan had a history of going into single line shares close to 50% on big single risks. We don't do that anymore. We're limiting the overall part, and we're also bringing down line size within that. It's a more diversified segment and it needs to get even more diversified, but that's how we're thinking about it.
That means we're gonna be very selective on what cuts in. We wanna be willing to write the most lucrative part of the construction segment, and we'll always be keeping in mind that the trick is, with the construction, to get the pipeline to get to the operational part of offshore, which is a lucrative segment also today and has been so for Codan. It's about being selective and also demanding, so to say, that if we sort of, we will mainly only do construction if we can see the operational part coming in the end and helping profitability that way around. That's an important focus there. Then we'll try to retain the long-term profitable clients we have and expand this as far as possible.
I don't think that's the trick here. The trick is, getting sort of the right balance between the construction and the operational part of offshore. Then we'll move to the onshore part of construction. Also a segment which has not performed the way it needs to be. We've seen and already gone through significant rate hikes in this, in this segment, which are also in the, in itself improving our forward-looking expectations on the segment. We need also to be even more vigilant around increasing deductibles, transferring more risk to the customers going forward. In this specific area of claim prevention is also highly important and what we...
To name some examples, we have lightning protection on wind turbines, and there also have been for some years, so-called pin locks, which keep the wind turbines from being damaged if you have severe windstorms. Sort of demanding that and pushing that into the books will also help to reduce exposures and risks on this going forward. Then to sum up the last segment, it's a lot like the last two in some sense, but here we also have a lot of profitable, long-term clients we wish to maintain in the power and utilities part. There is a history of going in on two large single risks, and the last pruning is probably not done in this segment.
We will to a large degree keep what we've seen in recent years with demanding very high rate increases where it's needed, and also being willing to walk away if if we don't get the clients that way around. High focus on profitability and also risk management in this segment going forward. That was something around the energy segment. I hope that at least added some clarity and transparency. Now we'll be moving on to integration and a lot about synergies. Let's start out with where we are. This is not new. A lot of it isn't. We came in with a with DKK 110 million, is what we're gonna land in this year.
That's above the DKK 90 million we set out to do. What you can see here is that that means that we are, and this has also been communicated earlier, but if we stop there, we already created DKK 200 million in full run rate synergies from the work we did, mostly related to the severances that were made and the optimizations just following the takeover of Codan in the summer. We're already at DKK 200 at that point in time, and we'll be moving to a target of DKK 240 realized. We're very well and comfortable on track with the DKK 240 we'll be delivering for next year. You can see, but the run rate is increasing continuously.
When we move into 2024 at the end of 2023, we actually have a run rate of over DKK 300 million in total, which we'll continue to see in the books. Here we have our targets in the single years. The overall targets, you know, but we have this time provided the specific target for how we see the phasing of the different types of synergies. What you can see is that if you start with the administrative costs, we had a good chunk come in already in 2022 and 2023, and it's quite evenly distributed from there as we go along and optimize and streamline the operations on the administrative costs.
Claims is more forward tilted than that, or back tilted, sorry. The point is that claims take some work. It's a lot of sharing back best practice, getting the systems in play, and actually there's some work to be done before we see the effect. When the effects come, you can see it pick up quite well from 2023 into 2024, as we move along the synergy plan on that area. The last, the, being the IT synergies, these are the most backloaded synergies we have.
I think that's fully in line with what we have been expecting and hopefully also what maybe a lot of you have been expecting, because IT synergies are difficult and a lot of the IT synergies are bound to the roadmap we see for IT and related to the full decommissioning of legacy systems and the transfer to one IT stack, which I'll be talking more into in a bit. There is a natural sort of explanation for IT being backloaded in terms of synergy phasing. That's the point there. I'll be going through some specific examples of some large chunks of synergies we have in the catalog now. We're moving, we are continuously validating and populating the catalog we have.
This stacks up to DKK 165 million in total. It's not all the synergies, but it is, they are some of the most important contributors we have at this point in time. I'll be going through the examples case by case and hopefully giving you a flavor for what type of more specifically synergies we have in the plans. Starting with our fraud initiative in the claims area.
What we see in the first example, this is a very sort of tangible example we have, Alm. Brand had a system in place where as a part of the overall fraud initiatives, we had a specific system in place which enabled us to filter in an automatic and intelligent way, also using AI for certain parts of the process, filter out specific claims which are high, which have a high, has a high probability of being fraudulent claims. Alm. Brand, we have historically using this tool had around 300 claims coming in which deliver sort of, yeah, savings because they are in fact fraudulent when they go through the full process.
Taking this system further optimizing it, but most importantly, just applying it on the Codan part of claims, we are able to bring up the amount of cases by DKK 550 million going forward to 2025. That comes to those 550 cases become DKK 25 million a year, and that corresponds to just around, just below, yeah, DKK 45,000 per in average. That you should think this as this is a sort of a wide range of different sizes. You have some of the simple housing claims, and the such which are not fully up there. You also have workers' compensation as an example, where a single claim can easily be in the millions of kroner.
It's a, it's a mix of different sizes. But on average, we see something like DKK 45,000 per claim. We've gone through the Codan business and with sort of the nature of that business also being very much like Alm. Brand in a lot of the areas we are here in personal lines, we feel very confident that this will produce DKK 25 million going forward in this single initiative. We have a couple of examples around process excellence. And I'll start with the first being live streaming of claims.
The point here is, and I think that's a point in a lot of the cases, but I think it's a good, it'll be a positive for the customer experience also, and it will mean that we will be able to actually on the scene do some of the claims evaluations. Very importantly, in terms of economics and financials, it means that a lot of the physical sort of, we need to actually send someone physically to inspect the claims site that can be reduced and be handled in an automatic and digital fashion. That stacks up as a single example to DKK 17 million from that.
On the other side, we have what's coming in from being more digital in the claims processing, actually getting the claims digitally. We already have a lot of claims being handled and coming in digitally, but improving on that and getting even more claims in the doors digitally and also being able to, for the most simple claims, using simple rules, actually having some of the most simple claims go through the business without ever being touched by a claims handler.
That's the way of automating and bringing down costs, but also a win for the customer who gets in many examples a faster and easier and transparent process when they have the need for our help. There's procurement, and this has all along been a very important lever behind the synergies in general, but specifically also in claims. I think the simple fact here, and I restating that, is that we have the twice the size in terms of our claims expenses. It makes perfect sense that we should be able to leverage that to get better deals and getting with our partners. That's the overall thought around that.
We have specifically chosen here to have some examples on the building side to begin with. We'll be working with the same model. We had different models in Alm. Brand and Codan, but using Codan's model, building a network of craftsmen and actually leveraging those partnerships to get rates, attractive rates, for our claims handling, that will, as a single initiative, bring in DKK 30 million. On the other side, we have an example from the auto lines, where again, using a preferred network, using the preferred partners, we're able to bring down the price for us of handling the claims.
Also, for the customer, this is a win-win because it will give them a simpler and easier approach around handling the specific claims. Those are some of the specific examples. In general, I would just say that procurement is something we have also many small bits and bytes around where we are able to already now see the benefit of having, yeah, the same partner on both sides and being able to leverage that to get some attractive rates going forward. As the last part of the synergy journey, I'll be talking a bit about IT. Before I get into the IT synergies as such, I think it would be helpful just to spend some time on how we're thinking around the IT roadmap.
There's a big part of this journey has to do with moving to one IT stack on the Alm. Brand side. That's what we've decided to do. Both Alm. Brand and Codan have used Tia Technology as the core platform. That means we have a very good starting point, but it doesn't mean it's a simple, a simple journey. It means that we have a good starting point. The aim is, just to be clear, is to use the Alm. Brand Tia stack as the platform both companies will be on in 2025. That's the long part of the journey, I would say, working with the core system and before being able to get the final legacies shut down.
On top of that, we're working continuously with our sales and service systems, and a lot of that is much closer to the customer, and a lot of that will be delivered through the IT roadmap much sooner than in the end. It's not, it's only, it's mainly the core part, which is the one that takes a long time. We will be delivering new solutions. I'll be get some, to an example, there in a bit in the customer and service area. Just to round it off, we are also a big part of driving value here also and being able to run intelligent underwriting, run intelligent claims is getting the right insights into a consolidated data platform.
That is, of course also something we have in mind as we go along. To the specific IT examples, I'll start with what we're getting from implementing the new solution on the commercial side of our sales and servicing systems, stacked to DKK 25 million. The reason we're actually able to deliver such a sound number from that initiative alone is that both Alm. Brand and Codan have sales systems today which are very customized, very old, and which need a lot of external consultants to maintain and develop those solutions.
What we're doing as part of the IT roadmap is we are moving to a standardized sales platform and likewise for the service part using standard software, a lot of it coming out of the box in Tia, which is there today as a solution we can implement. That'll mean that we'll be able to bring the maintenance costs and the licensing for decommissioning also, but especially the maintenance cost of these customized legacy systems down. That's DKK 25 million from that initiative alone, and we have comparable numbers on the personal line side also.
if we take the last part, I've already went through this, I think this is sort of one of the hard ones to get. It's one that takes the longest. this is the savings we get when we're able to fully shut down the license in Tia on the Codan side, but also very importantly, shut down the cost related to maintaining and servicing that. That'll be handled in the end of our IT roadmap. synergies are not for free, and it comes with a price. and for now, we've chosen to restate just give you an update on where we are on this.
We've all along have had transparency in the case that we needed, we needed some capital to fund also the integration we saw. These numbers are roughly, the total numbers are in fully in line with we have communicated earlier. Now we've we have provided some clarity to the phasing of it, and you can see that we have a tilt in the beginning, spending DKK 350 million in year one. The reason for that being quite high is the amount of a significant contribution from severance costs in 2022.
As we've touched upon a couple of times today, we expect that to be reduced going forward because we'll be able to handle a lot more of the optimization and transition of our employee base through natural attrition. That's the explanation for that. Then you can say the program is most expensive in the beginning. That is where you have most simultaneous tracks running full speed. That's why you can see costs coming down year for year. When you in the end, we have a small chunk of around DKK 100 million, which is the cost related to also getting all in phase and sizing down this sizable program we have running.
That was how we're gonna win the financial performance battle. We'll get back to financial targets. Rasmus already alluded to these earlier, but I'll be doing a few deep dives in some of the targets to further explain what our thinking is around this. This is where we start. I'll spend most time on the parts we haven't really covered yet, and where I think it's most helpful to get the guidance for the specifics. That means, in a minute, I'll start around explaining our implied guidance.
We have the technical result here. I'll also show how it stacks up with other parts of the business and what you can expect in terms of profits before tax going forward. Then I would like to spend some time in the end on specifically the new target we have for return on equity and tangible equity, sorry, and our thinking around that. Then we'll end up with the specifics around our payout ratio. Starting with investments, we have, this is not our core business. We had to as non-life insurance, so underwriting is the core part also of our, of our financials and our guidance.
I think it's still worth remembering that even with a quite conservative investment profile, we are able to deliver value for shareholders on an expected basis. Given the size of the investments we now have, we see a free portfolio just below DKK 7 billion. That's where we expect, that's where we take the risks we want as a group, mainly coming from us placing the capital we need to run this business given the targets we have. That's where we place that in the right balance between risks and returns, which we are comfortable with.
Just adding up where we are today with the quite conservative profile we have now, looking at where yields have moved recently, we are expecting something along the lines of DKK 200 million a year in average expected returns from investments as we go forward. A few words around the targets we have and how they compare to what we have previously communicated. If we start on the right we have, we've done a sort of a simulation of what we said before, with our targets when we came out after acquiring Codan in the middle of 2021.
What we said back then, if you remember that, is that we would triple the group's profits before tax, and that corresponded at that time to being, to get to a number of around DKK 1.7 to DKK 1.8, so that's DKK 1.75 on average. That, that was the guidance we had in the, let me see if I can find it, in the bottom of the profit line here, the total profits before tax. What we're doing now, just to be clear here, is that we are looking at our technical result, including prior year gains. The previous amended guidance was without prior year gains.
We have that included in the numbers, so coming in at something around DKK 250 million, roughly 2% of premiums in 2025. If we implicitly you can say our guidance corresponded to approximately DKK 2 billion, both in technical results, when you factor out the what comes from investments and group costs, and in profits before tax in total. What we're doing now is that just the number which was just below DKK 2 billion, we are now increasing the technical result to DKK 2.1 billion a year. Then you can see the effect below that of our investments coming in with DKK 200 million and an unchanged expectation for group costs.
That means that in 2025, with the plans we now have, we are expecting to deliver year-on-year DDK 2.24 billion in the bottom, which will become net earnings and hopefully also payouts, which I'll be coming back to now. That's how it stacks in terms of what we have previously communicated. I'd like to just have the opportunity to talk a bit about the new KPI we have, return on tangible equity. We have quite a bit of intangible equity on the balance sheet, a lot of it coming from the goodwill which came from the acquisition of Codan. We feel that it's more meaningful for us, where we stand now, to filter out the intangibles.
We can't use them for anything. They are not part of the dividend capacity, not part of the capital we can hold against our own funds requirements. We feel that it is more meaningful for us to look now at the tangible equity and then also thereby also filtering out the depreciations from these from the parts of the intangibles which are in the profits. That's how we arrive at this target. You can see, as Rasmus already mentioned, we are around 20% with the guidance this year.
Because they are coming very, very tangible results in terms of profits, and we're able to keep our capital in a very modest growth given the plans and the regime we have, this will transform into these very impressive tangible returns in the future. I also think it's worth mentioning that this is also a way on top of the targets we have on bottom line profits, technical results and combines, this is also a way of for us to be disciplined around capital expenditure and not just getting there by growing higher sort of expected profit lines, but with high volatility and high capital expenditure. That would not help this number out.
I think it's a good way to sort of ensure we are on the plans we are also and the ambitions we are communicating today. As a final part of my presentation, we would we'll go through the change in payout policy and what the thinking is around that. To start out, you can see that the Nykredit Group has historically been able to pay out above 70% in all recent years.
We have, we feel, and I'll be getting that into the specifics now, that given the nature of the business we run, given the capital regime we have, we are able to commit to increasing that payout ratio now to 80%, thereby also signaling that we will not accumulate any surplus capital that we do not need to run the business. We'll get that back to our investors and our shareholders. We have a more specific example to illustrate this, and what's going on. I think to start in the bottom, in the middle part, I think a very important point here, which I will state clearly now, is that solvency always comes first, and that target is unchanged.
We need 170% solvency coverage to run the business we have. Payout ratios are about that's what you get to when you can say yes to the first question, do we have the right amount of capital? If we can say that we have the right amount of capital, then the techniques around this is that we will only need a very limited amount of capital to deliver the very tangible returns we presented earlier. What are the specifics around that?
rofit before tax guidance we've already done, if we apply our tax rate of 26% in 2025, and we use a minimum payout of 80, that corresponds to DKK 0.84 billion per share in 2025. Then you can see the effects simulated by either increasing our payout or increasing the profits from DKK 100 million. So we arrive at DKK 0.84 in dividend. What does that mean?
In terms of returns, if you look at the total capital we need, in this example, shown by the own funds we need to run at 170, given the composition of own funds we have between the different types of capital. If you take that, we expect from the total returns I just talked into earlier, our guidance for 2025, we end at a return on capital, on a yearly basis of 30%. If you go beneath that and say, how much do we need year by year to actually keep to finance the growth we have in terms of capital?
With the regime we run, if we go in a balanced, and profitable way in non-life insurance, as we do, then using as for the example, an average growth rate of 4.5%, that only adds up to spending 2% in terms of SCR increase per year. That's how we're able to say that actually, potentially the 30 on top of the two, we actually have above 90% in dividend or, yeah, payout potential. That's how hopefully this will have a very clear and tangible effect going forward, in terms of either share buybacks or dividends. Maybe a word around that before we close.
Alm. Brand Group has also historically chosen to have a share buyback program as a part of the overall payouts. What we have now, just to be clear, we already have an approval from the board on the payout ratio we're increasing, and we are now having a dialogue with the board about how this will exactly be, how it'll be, how much will come from either part going forward. I think it's safe to say that you should still expect that the bulk of payouts will come from dividends, but we still have that exact discussion to be had, and we'll be adding more clarity on that. I would expect at least when we come out with our annual statements next year.
Just to say it can be both, and we are trying to have that discussion now. That was quite a lot for me. I think at this point I'm also very happy to hand over to Rasmus for the final remarks today.
Thank you, Andreas. To sum up, managing people, managing a company is all about people. We are trying to combine two entities, Codan and Alm. Brand into one. It's very much about culture. What is driving culture is about values, and it's about a purpose. We'll not come into that today, but just to tell you it's very, very important to have success going forward. It's also important to have a good management team. I think we have a very good management team in Alm. Brand. We've seen Andreas today, we've seen Henrik today, and I forget to mention that Henrik has a background of 15 years in Codan, being a Chief CEO in Nordic and Chief CFO in the Nordics.
We also lately got Anne Mette Toftegaard in, who has a very strong background in customer, in partnerships, in prevention and all that. All in all, I'm very happy with the management team we have. To sum up today, just to say we visited the target we set out three years ago. I think what we say is actually what we do. We have delivered on that. I'm happy for that. We are also now have a very interesting brand house with two very well-known brands that have a very high brand awareness, and that is important when the customers have to find their new company for insurances.
Henrik went into business plans for both the personal and commercial lines, with special focus on growth in bank insurance and, but also managing risk in energy. Finally, Andreas put even more flavor into how we will reduce volatility in the energy area, but also how we will harvest synergies in the future. That bring us up to the financial targets we have set out for today. All in all, this, with this, I think we have a very clear path in how we will unlock our value potential in 2025. That was all for us today. I think we are ready to take some questions if there should be one or two.
Ladies and gentlemen, we are, as Rasmus said, ready to take your questions. Also please remember, on the webcast you have the opportunity to put in a question, and I can read it out loud here from my iPad. Who has the first question? I think we have Patterson, yep.
Thanks. Daniel Patterson from SEB. A question on the corporate or really the energy business. Clearly you want to reduce volatility and take out some risk, and it sounds like a lot of different things you need to do. Why have you ended up making that decision? Are you really the best owner of that business if you have to make so many changes to it rather than simply selling it?
First of all, it's not that many changes. It's changes that are obvious. We here have a business that is, it's, we are on the top in the world with servicing these customers, having giving them insurance products. It's a very interesting industry. It's a industry that will boom in the coming years.
It's a industry that is just simply very interesting to be part of. With the people we have in place, with the claims handling we have that are top-notch in the world, we are entering and we are part of this in, at a level you can just buy or develop from the bottom. It's simply too interesting to get to just to sell. We will definitely stay there. We have to work with it, as Andreas and Henrik revealed, but we know what to do, and it is actually not that many tasks. Also, as you saw in this overview, many of the areas are actually very, very profitable. That's of course, why many people are interesting in our business, but that's also why it is interesting business.
Yes. Next, question from, Jakob Brink. Front row.
Thank you. Maybe just coming back to Daniel's question about about the volatility also in the in the tech lines. You showed this graph that it was high volatility now and then it would be lower over time. How long time do you think it will take before we reach the target level of volatility?
It's difficult to say very precisely, but we are expecting volatility to come down also in the near term. We think some of the decisions that have been made logically are also fully about to materialize. We expect volatility coming down. It's not something that we see as coming as a hockey stick in 2025, and it's something that we will be evaluating very closely to see that they are delivering on that.
Just if I can take one more. Staying on the same business, what kind of SCR relative to premiums, or what kind of profitability do you have in that segment when you get to an 83% combined ratio?
Without giving exact numbers, I think you can say that's also the reason why 83% is a maximum combined for that business, because it's a high volatile and also in terms of capital, typically quite expensive business. It should be performing quite a bit better than where it is today.
Yes. Martin?
Martin from SEB. Perhaps I will follow up on Jakob's questions on capital consumption. There's no way that you can come a little bit closer to this. I mean, is this 5% return allocated capital? Is this 10% return on allocated capital? I assume even on 83% combined ratio, still gonna be return on allocated capital diluted for the group as such.
I think it's very, it's very hard to come with specifics today. We have a lot of moving parts here. That one of them also being that we are developing, as we speak, an internal model which will be handling the group SCR also covering these parts of our business. I mean, it's simply too early for me to come with specifics on what the SCR demands will be behind the 25 targets for that segment or any other segments for that matter.
That was, my next question. The partial internal model that you just referred to, when will that come into effect?
Yeah. It's we are looking into that as we speak, planning it out. We, I would say it's not as a prerequisite to get to what we're communicating today. I would think it's something out there in 2024, 2025. That is probably the realistic scenario. It takes six months time with the FSA from the point in time where you have these thousands of pages of model documentation done. We've done it a couple of times on the Minibank side. On top of that, there is a complexity also relating to our legal structure in the group. You need to sort of plan that out.
It needs to be, yeah, it needs to be handled in accordance with also our plans for changing the legal group at some point, or at least expecting to do so.
As far as I recall, last time you implemented a partial internal model, you got DKK 300 million in SCR relief.
Mm-hmm.
It's fair to assume that this time around, you're gonna get a number that is quite a lot higher, right?
Yeah. In absolutes?
Yes.
That would probably be fair to assume.
Okay.
But again, very hard to be specific here because there are a lot of moving parts.
Okay. Then a final question from my side. The DKK 2.1 billion in technical results, which is up from DKK 1,985 on the slide, what's the pure discounting impact in that?
Yeah, that's a good question. There are a lot of moving parts, Martin, since middle of 2021, taking this over now, gaining full transparency and coming to this. I would say that maybe something we've communicated earlier, that as a group, we have something along the lines of 100 basis points combined improvement from interest rates hikes of 100 basis points. You can do the numbers, but DKK 100 million per 100 basis points, and it's probably, let's say DKK 200 million in rough numbers, coming from the effect on the underwriting result.
Okay. Thank you.
Yeah. The next question from Asbjørn.
Yes. Hi. Asbjørn from Danske Bank. A couple of questions from me as well. One, fortunately going back to the renewables business, but the 83%, how did that number come up? Was that basically a calculation saying, "This is where we need to go to be profitable over time, and then hence, what do we need to do to go to 83?" Or was it sort of the other way around? I think that would be quite interesting to hear. Whether 83 is sort of a hard target. If you cannot meet that, then it's not gonna be part of the business going forward.
I think it's always. Should never, ever talk about hard targets. It's not a hard target, but it's of course we need to be able to manage business in that area. Otherwise, it's not profitable enough for us in taking capital and all that into consideration as well. That's why we said today that we are aiming for at least 83% in the combined ratio for that area, so yeah.
Is it 83, sort of that's the profitability angle, then the other measures that you're introducing today is basically the way to go to 83? Or did the sort of the process start the other way around, you said, "What can we do to the business?" And magically you ended up at 83, which is also?
I think it's difficult to say if it's the one or the other. We looked at the portfolio, we opened the books. We have, as you see, we have different segments in energy. Some of them are very, very profitable, much more profitable than the rest of our book, and some are not. If you want to stay with the books, which we do, because we think it's the right thing to do also in the future. It is the future. You can just look out the windows here. There are a lot of windmills, it is the future. We definitely want to stay in this area. Of course, as in all other cases, we need to see where do we have risks and where does the premium not match the risk, and it's the same here.
That's fair. Of course, today you're talking a lot about what you wanna do in the future. Maybe some comments on what you do not want to do or what you have sort of looked in this process. Had everything been up for grabs, sort of, everything you looked at need to make some sort of a profitability hurdle or it's not gonna be part of the business? Just a little bit of comment on that would be interesting.
It's a very open question. What do we not want to do? I think we want to aim at what do we have in our books today with Codan and Brand. How do we see the world in the very near future. There we need to concentrate on the transition. We need to combine these two entities. We need to ensure that we can get the right prices for the risk we have in our books. When we have showed that, then we can start thinking about other things, and I don't think we should do that before that.
Okay. Final question from my side is on your distribution going forward. You have the bancassurance, you have the brokers, and now you also have this partnership with the RSA, the global partnership. I guess you've become a little bit reliant on things that are a little bit out of your hand going forward. What can you do to ensure, obviously legal contract, that's one thing, but it seems there is a risk here that a big part of your distribution will be out of your hands at some point.
Then there I think that's actually a misunderstanding. I think when you have partnerships, you enter into partnerships, of course, partnerships always have two sides, otherwise it's not a partnership. The idea here is that each side of the partnership should be happy and should be, you know, should require something from the other side. We are very happy to enter into these partnerships. We also think it is the future for insurance as such. We also see other companies doing this. What we need to do with all our customers, also partnerships, is we need to be relevant also for the partnerships, then they will definitely continue also in the future.
It is the idea with partnership is of course to get the customer, have a broader action with the partnership, stay longer with us and stay longer with the bank in this instance, or it could be a car dealer and so forth. So it's come up and it will definitely stay.
The partnership on the global part.
Yeah.
Just a little bit of comment on how that contractually is set up. How long security do you have?
It's an ongoing relationship where you basically, of course, extends the partnerships in a given timeframe. I will not come into detail on. I will just mention that the RSA network is not the only one out there. There is other networks that you can dig into. You recently also saw some of the other actors in the market, they're changing their network, so to speak, into also RSA because it's one of the best. That said, we are also seeking other partners, funding partners, and I will not mention them here, but there are more out there.
Thanks a lot.
Yes, the next question from Jan Eri k, row number four.
Thank you. Jan Erik Gjerland from ABG. A couple of questions from my side as well. The first one is on the good energy portfolio. What could go wrong with a very good one versus what you have sort of have strived to get the better deals on those who aren't that good now? Have you been lucky or very good at the underwriting side so far on the 30 combined ratio or 30 claims ratio? What could go wrong in those areas which sort of haven't gone wrong the last seven quarters?
I think it reveals that we are a big company in this area. We have very good underwriters, and we have very good claims handling. When you have that in place, then you have good knowledge in an area like this. That will hopefully, of course, continue. It is also an area where there will come more insurance companies into play because this is just interesting for many purposes. Then of course, as you just saw with the leak in the pipeline from Russia, everything can happen in the energy sector. Of course, we have to take that into account as well. There's just a bigger risk.
That being said, there will be so much money in the world going into new energy, and we definitely want to be part of that. We have very good underwriting, and we have very good claims handling. We look, we see more positive things than negative things.
Okay. Thank you. That brings me into the next question, and that is, your KPIs towards these employees. How could you keep them since it's so profitable? When you sort of shrink your business, what should keep them going so that it actually stays with you? So what's their incentive, so to speak, when you sort of have more insurance take down the overall profits? Because if profits are so good in such a high part, it's also very risky, of course. So how could you sort of share that profit with those employees and keep them?
Yeah. Yeah, time will actually show. What we work with at the moment is to keep a very, you can say, high performing, competitive environment. What we see now is it is attractive place to be when you work with wind turbines and stuff like that. We still get very good people in from outside also in claims handling, in underwriting, and stuff like that. At the moment, it's not a problem, and I'm not sure I completely buy that we will shrink the business. We will concentrate on the business being the most profitable one, and that is actually what Andreas tries to show you. It's not an idea that it will be half size or anything like that. It will just be much more focused.
What's the KPI of these guys? Is it, the overall profits that you rather run on your bottom line, or is it sort of the margin they look at when they write the business?
I don't think we can come into the details. I would say it's, it is and will be a mix of everything.
Final question from my side then. On the synergy side from Codan and Alm. Brand on the general brand, so to speak, you have to take out a lot of underwriting synergies. How easy is it to sort of get these two organizations together and keep the focus on each of the old, distribution parts, so to speak? If you have Alm. Brand people looking off over the Alm. Brand and the Codan business line, would they pay most attention to the Alm. Brand line and less to the Codan line, and vice versa? Is that a risk that you since you have multiple brands, and maybe not the right people or probably the right people, but in that sense?
Let me try to answer that. We are not expecting huge synergies as a part of the catalog from the underwriting part, and specifically the underwriting part relating to the more complex business, the larger corporates which are focused entirely on Codan. Where the synergies will be made mostly in this in this part of the equation will be from the volume business, for instance, servicing personal alliance customers across brands, moving that to one stack, one system in sales and support. That's where the synergies are coming. It's not a part of the catalog as such that we'll be getting synergies from these very specialized parts of the business.
Okay, thank you.
Yes, we have a question from Asbjørn.
Just to follow up on sales synergies. Obviously now you've had the keys for half a year. It's been one and a half years since you acquired the asset. You have the Privatsikring that you have introduced, a little bit of comments on, also on the consume segment that you had today. Just wondering on the sales synergy part, obviously you don't want to guide and quantify-
Right.
Any news there would be interesting. Any flavor there?
Yeah, put a bit of flavor. It's on purpose that we have not put in sales synergies. We have not done that at all, and we will not do it. Now, you can say it's included in the total guidance. We are very happy with the brands we have. We're also very happy with the new established brand, Privatsikring , which you mentioned. That will now, you can say, where we will work together with these 30 local banks that have a market share of more than 1/3 of the total banking market. There we can use the ideas we have had. We're working with Sydbank, working with our own banks, together with all the other banks, getting more commercial customers in which all these banks have a lot of.
They also have a lot of agricultural customers which we will get in. We definitely have business opportunities here to go. There are potentials in our business. Also, as you say, the demographics and the areas that Codan brings in, you know, larger cities, whereas Alm. Brand is strong in the countryside. It's just very nice balance between two portfolios coming in, joining together. As Henrik said, we are already now launching new products which we can do on a broad level. Hejd oktor was used in Codan. We can just directly implement it in Alm. Brand. We're taking this cyber insurance, which are now a thing for all our customers, private customers. We'll definitely have good opportunities in the futures. This is exactly where size matters.
Now we need to have one product in a large portfolio instead of one product in a small portfolio. It brings down cost as well.
If I look at your new target for 2025, including sales synergies and the discounting effects, and you said there's moving parts, obviously that's the case, but what are some of the major negative parts that have pulled it down towards 2.1 again?
I think, as I said, I think there are a lot of moving parts. And in the big numbers, we're, I mean, it's still within, let's say, minor adjustments. I think, to put one fact, we are very conscious of where the business is trading in commercial lines right now and what we experienced. We just went through energy. I think we need to have some sort of conservatism built in around that to name something.
All right, thanks.
Yes. Yep. Follow-up question from Jakob.
Coming to the top line growth, if I just do the implicit premiums in 2025, given your technical profit and combined ratio target, I get around 6% higher than consensus for 2025. It's a bit higher growth. Also looking at your page 19, it seems like. It should come from, you mentioned, new structure for handling lead management and also your partnerships. Could you maybe talk a bit more about this and maybe also what have Codan done wrong, because they've had the partnership for quite a while? Is it more taking customers out of Gjensidige, or where should the growth come from?
Yeah, I can start.
No, no.
Just to say that you're right, that we see a growth also on the top line. We now have very broad range of company. We're not guiding growth either, as you most likely have noticed. We are guiding for profitable growth, and we're guiding for top line. I think Codan has worked very well with their partnership. I think the history we have working with bank insurance as a partnership is completely different. We had our own bank. We know how a bank thinks. We have management that knows about how a bank think, and we have done a lot of work already with Sydbank that is coming very, very good. All this knowledge in combination, I'm sure will take this to another level that it is today.
That is for sure, we'll definitely deliver on that. The other areas, as Andreas mentioned, commercial, we are a little bit more cautious about growth in that we would rather work on the profitability, delivering on the right sectors, on the right customers instead of just delivering everything. I think we have a very interesting future in front of us on all the different markets we are.
I don't know, I could perhaps add, I mean, it's been built. I mean, I think your math is about right with what the, I mean, the implicit growth, if you assume 84, equal to 84. I mean, it's a bit flexible in the sense that it would be totally okay with us if the growth were less and the combined ratio were less as well. It's simply built a bit flexible, the guidance. Just as a comment.
Fair enough. Thank you.
Martin?
Just another topic that you guys have touched upon today, following Danish names out into the world. I mean, I see here on the slide, there are, of course, number of wind names, I guess, that goes in your energy niche. There are also a bunch of other names which you guys follow out in the world. What's the appetite on that? Are we afraid of U.S. third-party liability?
Sure.
How about insuring a factory somewhere in Brazil? Does that sound too exotic? What should we make out of this?
Should I take that one?
Mm-hmm.
Yes. It sounds exotic, both in U.S. and Mexico and other places that you potentially could mention here. No, we will be as was said before, very selective in both in regards to the risk we take and also where we take it. That's part of the underwriting process as such. We'll make sure also to have limitation and clauses and what is needed in order to safeguard ourselves from whatever liabilities that could be potentially in U.S., limiting the risk and so forth. We will, yeah, be selective and make sure that we can do. Following the customers into the world is important for many of our clients, also some of them you saw on the slide.
We will be able to do so, also with the good and solid underwriting capabilities and insight that we have taken from Codan and now how in-house here and locally.
How big projects are you guys willing to engage into? Is there.
Is there a kind of a total maximum size? Yes, there is a total maximum size. What we do when we underwrite is basically we have something is called estimated maximum loss that we underwrite from. Those I will not reveal here what it is, but it's basically to make sure that we can absorb the volatility that a potential claim will give. Wind farm, again, we can, if you estimate the maximum loss of that, we need to be able to actually cover and be able to absorb that potential volatility that will come from a collision with the windmill or whatever it could be. That's part of the way you underwrite to limit the risk.
Just to add on, as with the energy part, I think, you will see that we will take part of more lines, but smaller lines. That means the risk are getting broader, but it will be, smaller, so to say, than we have seen in the past.
If, for example, a big Danish C-25 company came to you and asked them to take your global insurance program, that would be too much?
I think first of all, we already do business with 16 out of 25 C-25 companies. If one come and say, do want the global one as a 100%, I'm sure we will most likely step back. It's too big for us, far too big. If it's about a line, 10% or something like that, we'll definitely discuss it.
Maybe just a further comment from, on, from both Rasmus and on top of both Rasmus and Henrik's comments. Remember also, we always have reinsurance.
Mm.
Very important, factor on every, any single risk. In reality, the typical effect on the bottom line will be the same because we always have full coverage, on whatever we take and have a program that can handle the risks we do.
If we look at this chart, or slide seven, I believe.
Mm.
How will that chart be in three years from now? Has the international exposures, is that growing or would it be the same or?
It could very easily be the same.
Okay.
Very easily.
All right. Thanks.
Yes, Jan Erik, follow up?
Thank you. Jan Erik from ABG once more. You have plenty of must win battles going forward. If it's so that it's all coming in at your desk at the same time, what kind of priorities do you have, and what would you like to do first, so to speak? What kind of organization do you have behind you that actually could help you to achieve the goals you put forward today on a much better basis? When you are overloaded, so to speak, where do you prioritize your work for example?
Yeah. I will be happy to answer that. Yeah, we showed a lot of at least some must-win battles. Some of them we are already working on, of course. We also had a lot of must-win battles the last three years, which I think more or less we have delivered all on, at the same time transforming the company. We have a management team, which is quite broad, but that means that each single manager has an in-depth knowledge and in-depth responsibility of delivering, and that is how we cater to maneuver with these priorities going forward. I think definitely we can do that. It will be tricky of course, but that's the name of the game. We need to be very...
act very intensive in each single market we're in, otherwise, the others, they will take our business. That's also how it is. Definitely, I think you should be more happy to see that we have the must-win battles and we know where to act. With a company of our size, we should definitely be able to act on the different areas at the same time.
Asbjørn?
Rasmus, on one of the first slides you mentioned your majority shareholder, and obviously wants to go above 50%. Given the capital distribution changes you've done today, opening up potentially for buybacks, I guess they will be above 50 at some point. What kind of discussion do you have with them on a sort of longer term basis on how they can support your business and your 2025, and perhaps even beyond 2025 targets? Maybe customer bonuses, obviously there's been a lot of discussion on the tax treatment of those, et cetera, et cetera. But do you have any longer term discussions with your majority shareholder?
It's actually a question for the board and also for the owner. We definitely have discussions, and we very much look forward to the fact that the association gets some dividend. They only have one purpose, as I said, that is to bring back knowledge and you can say knowledge and capital and support to us, nothing else. As soon as they get a little bit more dividend and pay a little bit of their debt, for sure, we will get good discussions on how they will help us in the future. They had quite a lot of money before we entered into the Codan deal. They have gathered together since years.
Now, I think that was the right idea to support us in taking Codan over. They even went down in ownership to 47%. I'm not sure they are in a hurry to get back to 50%. It doesn't really matter. You're still a majority owner if you have 47 or 53 or what. Definitely we will have a discussion about how they can bring value back into the company on benefit for them, but also for all the other shareholders.
Since you say that they don't have the priority necessarily to go above 50%, could you see them actually starting to have an impact already from now until 2025? Or do you think it's gonna be beyond that?
Seen from my chair, in Brand, I really hope so. It would be very good for us, but also for other shareholders. Of course it's up for discussion up in the, in the foundation of what they will do.
Thanks.
Yes. I think in the interest of time, we have to draw this presentation to a conclusion. Thank you very much for coming here at our capital market update. Of course, also thank you for you guys following us on the webcast. For you here locally, I would like to invite you to a light lunch buffet outside. Thank you.