Hello, welcome to the Alm. Brand Interim Report forQ1 of 2023. My name is Alex. I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star one on your telephone keypad. If you'd like to withdraw your question, you may press star two. I'll now hand over to your host, Rasmus Nielsen, CEO, to begin. Please go ahead.
Good morning and welcome to Alm. Brand Group's Q1 of 2023 contract conference call. I'm Rasmus Nielsen, as usual, I have with me today our CFO, Andreas Madsen, and our IR team with Mads Tinggaard and Michael Larsen. Before we go into the details of the quarter, I would like to comment on some of the trends that we see in the markets. One of the motivations for our acquisition of Codan was to achieve larger scale. As we push forward, it has become even more clear that it was the right step for Alm. Brand. The alternative would have been challenging, surely in a year like 2022, it has become very clear that there has been winners and losers in our industry.
Size matters, and we have seen clear evidence that large insurers have been better to navigate in a challenging market with high inflation and changed customer behavior while the financial markets have been extraordinarily negative. Scale is crucial and allows us to allocate resources to increase productivity and increase customer focus. I'm certainly happy about this, and I believe that this has been instrumental in putting Alm. Brand Group in a sweet spot where we are today with an attractive upside for the years to come. Let's now look at the highlights. Please turn to slide two and some of the headlines for our business in the first month of the year. I'm pleased with the overall financial performance. We have made some strategic decisions on how we want to grow and expand our presence in the market.
I've stated on several occasions that we are very disciplined in growing our top line only if we can achieve it in a profitable way. Thus, I'm very satisfied with the organic growth of 6% that we have made in Alm. Brand. We appeal to a great many customers, and the influx of new customers has been very strong. At the same time, we are making steady progress on the integration of Codan. Some of this refers to realization of hard cost synergies, but we are also putting a lot of resources into securing that we succeed in creating optimal common structures for governance, that our workflows are streamlined across the group. On a separate note, we have welcomed yet another bank to our bancassurance setup.
Which now has more than 30 members banks, with a total reach of around 40% of the banking customers in Denmark. This is an impressive distribution channel with an enormous upside. Lastly, we have now initiated the process of combining Alm. Brand and Codan into one legal entity. The merger of our two legal entities is expected to be finalized in the first half of next year. It will improve the possibility for servicing customers across Codan and Alm. Brand. It will also simplify the legal structure and thereby, in some function, make it easier for us to realize the synergies. Now I turn to slide three with our financial highlights. Insurance revenue totaled DKK 2.9 billion in the quarter. Organic growth had continued to be very satisfying.
Now thus, Alm. Brand added 6% in premise to a total of DKK 1.4 billion. On top of this, Codan contributed with a similar amount. The technical result was DKK 205 million against a loss of DKK 82 million last year. All in all, a positive start to the year, in all fairness, also a result that, as expected, is front-loaded with more cost compared to what you should expect for the next quarters of the year. I'll come back to that. Investment income in Q1 was a satisfactory profit of DKK 149 million, coming from both the free portfolio and the interest hedging of our technical provision. On January first this year, IFRS 17 replaced IFRS 4 as the International Financial Reporting Standard for Insurance Contracts.
The intention is to achieve uniform valuation of insurance contracts at an international level, as well as to further align the financial statements of insurers with those of other industries to enable easier comparison of results. The effect of the financial statements of Danish insurance companies is generally minimal, as many of the underlying concept of IFRS 17 has already been incorporated in Danish GAAP, such as market value, cash flow approach, and discounting. Apart from a very few technical calculation changes, the effect is mostly limited to renaming of key figures and a few changes to the presentation of financial statements in general. Thus, for Alm. Brand Group, there will be no effect on our bottom line guidance for this year, nor our financial targets for 2025. Now let us continue on slide five.
The group made a technical result of DKK 205 million in the quarter. The result from Alm. Brand was DKK 138 million against a loss of DKK 82 last year, as claims benefited from tailwind due to higher interest rates, which compensates for claims inflation. We saw a higher number of claims in general, as the weather both led to more slippery road accidents and an increased awareness of claims reporting. Taking this aside, both large claims and weather-related claims were lower compared to last year, which of course also adds to the profit. Further, Alm. Brand was able to reduce the expense ratio following both synergy gains and other cost initiatives. Finally, the run-offs in the quarter were at a normalized level of 2.2 percentage points versus last year's loss following the reclassification of the result from an inflation swap related to workers' compensation.
Codan's technical result amounted to DKK 67 million. Included herein is a positive effect from the ongoing synergy program, as well as the continuing pruning of the business that step by step adds to the profitability of the total portfolio. Please turn to slide six. Insurance revenue grew organically in Alm. Brand by 6% in the quarter, thus keeping the highest pace from the last quarter of 2022. I'm very pleased with the continued strong development. Again, we see a positive contribution from both personal lines and commercial lines with a very satisfactory influx of new customers.
Codan is not included in this chart, but it should be noted that the Codan business is more or less the same size as Alm. Brand, and that we see a strong growth in the private sector franchise and a more balanced, a subdued growth in the industry as we add in some segments and reduce in others. Also, it should be highlighted that individual pricing initiatives add to the overall profitability. Now please turn to slide seven. The development in claims expenses reflects a quarter with an increase in the underlying claims ratio. We believe this is a one-off increase in claims caused by the stormy and rainy weather, but not as such classified as weather-related claims. On the other hand, those claims that we classify as weather-related claims as well as large claims has been lower than last year.
Adding it together, the claims ratio, excluding runoffs in Alm. Brand, is down to 75.5% against 81.8% last year. Further, the positive trajectory on reducing insurance operating expenses has improved the expense ratio to 17.1% against 18.0% last year. In Codan, the claims ratio amounted to 72.6%, and the expense ratio was 22.7%. The expense ratio includes the front-end loaded fees in Privatsikring and is notably down against last year's pro forma ratio of 27.7%. Moving on to slide eight and the combined ratio. Alm. Brand had a combined ratio of 90.4% in the quarter, and including this number is both positives and negatives as already mentioned. Our key thinking around the number is that we are making progress on all the various components that affect the number, i.e. we're successfully adding to the pricing whilst growing our volume.
We are implementing initiatives to reduce expenses, we are gradually offsetting the price inflation as we progress in the year. Income in Codan, the combined ratio was 95.3%. Adding Alm. Brand and Codan together, we get to a group combined ratio of 92.8%. We take that to be acknowledged that the claims ratio in the quarter is higher than we would have expected, but we are confident that this is a one-off issue, thus we would expect to be back at a lower level already next year. Next quarter, sorry. Now I turn to slide nine. As of 1st of January, we have aligned the amount limit for classifying major claims across the group.
This means that we now have a limit of DKK 3 million in both Alm. Brand and Codan against previously DKK 1 million and DKK 5 million respectively. If we had applied the same amount limit in Alm. Brand last year, then the claims between DKK 1 million and DKK 3 million would instead been included in the underlying claims ratio, and the underlying combined ratio would then have been 85.2, i.e. this is the base we use. When looking at this year's number of 85.7, we then get an increase of 50 basis points. Again, we had a number of positives working in our favor, but also as mentioned, an elevated number of claims caused by slippery road accidents as motorists were surprised by the late frost in the end of March.
In addition, the weather led to an increased attention to claims reporting as a result of our customers just expecting their house an extra time. Further, we also, as expected, saw an increase in the reinsurance cost as a consequence of general market tightening. This we will expect to pass on to our customers in the same way as general cost inflation. All in all, we see the increase in Q1 underlying as temporary. Now please turn to slide 10. Personal lines had a quarter with very strong growth, and at the same time, claims ratio for Alm. Brand has been reduced to 83.1% against 94.4% in the same quarter last year, reflecting lower weather-related claims and a higher level of run-off gains. On the other hand, average claims cost has increased due to the inflation in especially materials and energy.
As previously mentioned, we have had a quarter with an elevated number of claims due to the weather. The expense ratio improved with a healthy 200 basis points to 18.3%, and included in this is of course the effect of the synergy initiatives implemented throughout the last quarters. In Codan, business had a combined ratio of 100.7%. Included herein, as expected, commission expenses reflecting the insurance policies payment must, i.e. seasonality, in net profits is huge. Adding Alm. Brand and Codan together, the group combined ratio was 94.1%. Please turn to slide 11 and the commercial lines. The combined ratio in Alm. Brand was 96.9%, i.e. down significantly relative to last year that under IFRS 17 has been restated to 116.3%.
Improvement is based on tailwind from high interest rates that reduces the amount of long tail provisions that we do for claims in commercial line, as well as lower claims expenses relative to last year, which were at a very high level. You should note that the implementation of new limits for large claims, it affects the large claims ratio for commercial lines with around 6 percentage points. The combined ratio in Codan was 91.5%, despite a somewhat higher than expected level of large claims that came in at 23.5%. On a separate note, it should be noted that highlighting that and highlighting that energy had a good quarter with a combined ratio of 17.6%.
Combined ratio for the group was 94.1. We expect to reduce both the claims and the expense ratio in the time to come. The latter with the synergies as well as continuous focus on cost in general. Please turn to slide 13 for an update on our synergies. The initiatives already implemented in 2022 have been supplemented in the Q1 of 2023 with initiatives that will lead to efficiencies in the purchasing and claims processing process. Also, we are adding to our fraud detection capability by expanding the scope of our systems. For the quarter, the synergy gains have had a positive P&L effect of DKK 57 million, and we will remain confident that the synergies for the full year will add to at least DKK 240 million that we have saved.
Now I'll move on to slide 14 and the investment result. We made a net investment result of DKK 149 million, split almost evenly between the free portfolio and the hedge portfolio. Financial markets were in general positive, although still volatile, and we profited from both higher share prices and higher bond prices. Also some of the normal maladies we that affected our hedge portfolio last year have reversed and given us a profit. Now finally, please turn to slide 16 for the outlook of 2023. Our guidance for the year is an Insurance service result, excluding run-offs for the remaining quarters of DKK 1.2 billion-DKK 1.4 billion, including expected synergies of a total of DKK 240 million.
The expectation is based on continued growth in the group's insurance revenue across the various customer segments, supported by the annual indexation of the premium level and individual premium adjustments. The cost ratio is expected to be in the range of 80%-80.5%, and the combined ratio, excluding the run-off result, is expected to be between 88% and 90%. We guide for an investment result of around DKK 300 million, and for other activities, we guide a deficit of around DKK 125 million. Our guidance reflects more changes for each of the reporting lines due to the transition to IFRS 17, but bottom line remains unchanged. Consequently, group profit, excluding special costs, is expected to be between DKK 1.375 and DKK 1.575 before tax.
In addition, we guide for special costs in the range of DKK 300 million-DKK 350 million for the integration of Codan and realization of synergies. Lastly, depreciation on intangible assets is expected to affect the income statement by approximately DKK 360 million. With this, I conclude my presentation and hand over the word to our moderator. Thank you.
Thank you. As a reminder, if you'd like to ask a question, you can press star followed by one on your telephone keypad. If you'd like to withdraw your question, you may press star followed by two. Please ensure you're unmuted locally when asking your question. Our first question for today comes from Jakob Brink of Nordea. Jakob, your line is now open. Please go ahead.
Thank you, and good morning. Just trying to sort of understand exactly what is happening underlying if we try to adjust for your change or definition change of large claims. firstly, I guess one question would be if we look at the large claims ratio on a group level, adjusted for this roughly 3.8% move, it's up to around 13.5% in the quarter. I think before you have stated that it should come down towards 9%. In a way, it looks like it's going in the wrong direction. As you said, Rasmus, the energy segment is actually looking fairly good this quarter, while Codan the rest of Codan Commercial looks fairly weak.
Some details on the large claims level and the rest of Codan Commercial would be appreciated. The second question is, you don't split the 3.8 percentage points down to the different segments. If I look at the personal lines business in Codan and Alm. Brand, I would assume that large claims is a relatively small part of claims there. There's been a fairly big increase year-over-year. Could you try and maybe give a few more details on that? That would be my first two questions, please.
Yeah, I think... It's Mads from Investor Relations here just with a bit of clarification on the effect on the large claims. It is true what you say about the. I mean, it's that we state in the presentation that we have removed 3.8% from the large claims to small claims. That is from Alm. Brand standalone. The thing here is that we are aligning across our group the threshold for large claims to DKK 3 million. We had DKK 1 million in the Alm. Brand path before, but DKK 5 million in Codan. Codan actually moves in the opposite direction, but with a smaller effect. What we have on the group-wide, large claims, we have moved 1.4 percentage points to underlying claims from large claims or corresponding to DKK 38 million. When you look at our large claims of DKK 270 million, they would have been DKK 38 million larger without this adjustment of the threshold.
1.4 is Q1 2023 impact?
Yeah.
Just, yeah. Okay.
They go in the opposite direction and y eah, it will, I mean it's also stochastic how we, it's the path you point to on Alm. Brand is a much higher level than we would normally expect. We would expect something like a 2.5% change for Alm. Brand going from large claims to smaller claims. Then we would expect around 2% for Codan moving into the large claims. With a very small net effect group wide for an average year. It's stochastic for each quarter.
Okay. That's clear. I guess my second question is, I guess that's even more valid then because if there's relatively small changes, I guess that would be that in any case on the personal line, since large claims is a small part. Could you explain the increase in the underlying claims ratio here year-on-year?
Yeah. For personal lines, Jakob-
Yeah.
Yeah. Let me, let me, I think it's mostly in line with the overall story because most of what's happening is personal lines in the underlying claims pickup we're seeing both for the group and in Privatsikring for securing. In rough sort of numbers, if we adjust for the tailwind we had from interest rates, we're looking at something like a 3% pickup in the underlying loss ratios for Privatsikring and a slightly higher than that for Codan. More or less 3% for the group.
What we've seen to put some clarity on that is that, as we also mentioned in the call, we've seen two, let's say unexpected effects. One being the amount of weather we've had with both very rainy weather and then the windstorm also has, we've seen the effect that as we've also seen historically, there is spillover into the other small claims, that effect being very much obviously in the housing segment where the awareness on sort of, yeah, you go out, you check your house, and there's a high awareness amongst the customers. So that is something like a third of the pickup in underlying claims ratio coming from that.
We have another third coming from the very icy weather we had in the end of the quarter. That's a lot of that is in the auto lines. We also do see some effects on personal accidents. We see a higher pickup in frequency, and we see also a pickup in the average claim, especially in also stemming from that effect. The last part is as expected more or less, and that comes from at least when we look Q-on-Q towards last year, we see the increase in reinsurance coming in with approximately also a deterioration of 1%. Summing it up, we do see 2% that we weren't expecting in our claims this quarter, and we see that as a temporary effect.
Okay. Just, just to understand then the, sort of the no change to your guidance for this year despite of the DKK 73 million run-off gains, what is that related to or the fact that you don't upgrade?
Well, you can say more or less, putting it roughly, we would have expected to have a 2 percentage points better underlying. We guide without our prior year gains, as you're aware. We had a more or less a bit above expected in prior year gains. If you sum those two effects, we end up at the same guidance for the overall year. To sum it up, we get a normalized prior year experience more or less, but that isn't part of the guidance. We do see the deterioration, which we see as temporary coming from the effects I just mentioned. We expect an unchanged claims and cost pattern for the rest of the year.
Okay. That was my question. Thanks a lot.
Thank you. Our next question comes from Asbjørn Mørk of Danske Bank. Your line is now open. Please go ahead.
Yes. Hi, good morning. actually, a lot of my questions were already answered, but just maybe a little bit of detail. Basically what, if I heard you correctly, you would have had around DKK 38 million of higher large claims in Q1 if you hadn't made that change to the definition of large claims. Then maybe in weather claims, just to make sure I understood. You have 200 basis points, let's call that around DKK 60 million, that I guess you could have classified as weather claims, if you sort of wanted to. That I guess is related to the weather we saw in March and to the storm also. Was that correctly understood?
The first one is correctly understood, and the second is also correct. Maybe just a point to clarify. The point is that we are not able to in actuality classify the spillover as weather, and we aren't able to do that because we, among other things, use that classification for our reinsurance coverage and other things. The effect that I mentioned from spillover and icy weather is not in that sense something that we can categorize as weather, but it is caused by weather.
Okay. Fair enough. Maybe another thing that impacts your underlying in Q1, the cost ratio in Codan, you mentioned the Privatsikring payments. The cost ratio is 32% in Q1. It has been around 25%. Is that how to look at this? It's 7% on your private premiums in Codan that would be in sort of the one-off effect here or the Q1 effect or DKK 40 million?
I think, that is about the on the mark. Yes, Jakob. Sorry, Asbjørn.
No worries. All right. Then just a final question from my side would be on the reinsurance which goes from DKK 45 million positive in Q1 to minus DKK 144 in Q1 this quarter. I guess also a bit negative versus the recent trends. I'm just wondering how should we see this develop during 2023 on a quarterly basis, given the reinsurance contract you have made? How sort of is this progressing relative to your expectations?
I think I can hopefully put some clarity on that. We have, I think what you're seeing especially in the quarter last year is that what we sometimes see is that if we have a large claims, a larger claims experience, we also receive reinsurance coverage. Sometimes it's not even related to actual one-offs, actual specific claims. It might also be from some of the aggregate programs or other things kicking in. The net reinsurance ratio can fluctuate across the quarters with the overall claims pattern. On average, we see beneath there and a pickup as we've communicated earlier in the price of reinsurance was approximately 1%. I hope that answers your question. On average, we should see 1% higher reinsurance ratio than we saw last year.
All right. That's very clear. Oh, actually, a final question from me on large claims, which are obviously very high in Codan, around DKK 200 million in Q1. You also write that you continue on the prevention work. Could you just give a little bit of flavor? Maybe you did already in the beginning, I missed it, but just a little bit of flavor on when should we expect to see the benefits of the prevention work here?
Yeah. That's a fair question. It's very hard to, because there is the natural volatility on a quarterly basis to predict exactly when. We as a general observation, we would expect some of the improvements we've been pushing in the overall risk management, the inspection, also the appetite for what type of underwriting we're doing to start to materialize in the quarters going forward. It's very hard. This quarter we had in the industrial segment, a few single large claims. Once you have that, you, we, you know, then you have a tough quarter. On average, we should begin to see a more normalized and improved claims experience in the large claims.
All right. Thanks a lot.
Thank you. Our next question comes from Gustav Hoegh from Carnegie. Gustav, your line is now open. Please go ahead.
Thank you. My first question at least will be on your synergies and your synergy target for 2023. Looking at Q1 and the target for 2023, when you split it out on administration claims, processing and IT infrastructure, it looks like administration is doing quite all right, which was also slightly ahead of plan for 2022, I guess. For IT and for procurement as well, could you just give a bit more flavor or elaborate a bit on how you're seeing? I mean, I know these synergy targets are smaller than for administration, but are you still on schedule with your plan? Have you seen any your kind of hurdles or anything with the integration of Codan and especially the also, I guess, [Codan} yeah... The entire IT system with the yeah, what you acquired from RSA and then Codan Norway and such.
Andreas here again. I'm happy to put some flavor on that. What we see in the quarter we just came through is fully as expected, and as you may recall, more or less on in line with what we actually had in the quarter before that. That is expected because it comes to a high degree from the run rate we created last year. Most of it coming from the first organizational and cost out programs we did. That being a lot of the administrative costs we have in the quarter now and in the run rate. We had, let's say, the quick wins in the claims area, which also came through and are now starting to materialize as planned.
We provided actually a new, we provided a new slide we can see in the back of the deck on some of the timings of the synergies in terms of run rate as we go forward, because what we expect to see now is only a marginal pickup in the coming quarters because the timing of the initiatives we now have, which are very much in the claims area, we need to build the solutions, some of it being around fraud, and some of it being around especially procurement activities both across our also and building networks. We expect those to begin to kick in sometime in the end of the year, primarily in Q4.
We might be able to surprise positively on some of them, but for now we are saying, Q4 is at least the realistic deadline for when that will start to kick in. We're seeing, and as expected, not a lot coming in this quarter, and we're building the solutions. You'll see especially claims pick up at the end of this year in run rate. We'll be further optimizing our organization. We're expecting, as we also have gone through some times to see an overall decrease in administrative costs and FTEs as we work forward.
IT is still only kicking in relatively, in a relatively marginal sense because, the roadmap we are on, a lot of it has to do. We need to be able to decommission the legacy systems for us to achieve that. We'll only be getting a marginal pickup in run rate from that at the end of the year. I hope that added some clarity to our thinking around synergies.
Yep, definitely. Thank you. My second question is obviously you state that you have a higher average claims repair costs, which is I guess no surprise to anyone. Is it just how should I interpret this? Is this higher than you expected as well? Feeding into your claims ratio or is it just high and then you're a bit, yeah, have a bit of a lag and you'll try to make up for that in the rest of the year?
Yeah. Let me try to put some clarity on that. The comment I had was specifically related to the development in the end of the quarter, and especially in the autos segment, from IT roads. We see people when they have accidents, they have more severe accidents than we normally see in an average month. That's not a structural thing, just to be clear on that point. There is the general tendency, as we've also communicated earlier, we're in a sensible place in terms of the indexation we're getting and the selected price increases we've done last year.
We would fully, we expect, and what we are seeing is that those will start to pick up as we go into the year. You can say we are a bit behind the claims inflation coming in the books in Q1. So there is a slight drag there, but we will start to pick that up as the full portfolio turns onto the new pricing and indexation we have had. So we will get more than the average in the end of the year, so to say, in terms of premium pickup. On overall, that is also why we are very firm in our conviction that we are where we need to be, and in... For the full year, we'll be able to pick up the claims inflation from the, from our premiums. Yeah.
All right. Thanks a lot. That's all from my side.
Thank you. Our next question comes from Martin Birk of SEB Group. Martin, your line is now open. Please go ahead.
Thank you. I have three auxiliary questions. I guess the first one is when you listen to what your peers are saying, their reasoning over Q1 is mainly travel and accidents, and your reasoning is somewhat different. Why do you think your experience is different, or are you also seeing similar trends within travel and accidents, as we have heard from two insurance companies out in? That'd be my first question.
The second question, your tax rate seems pretty high in the quarter. Any comments on that? Finally, my last question, coming back to your guidance and especially your guidance on net investment income. I understand that you move DKK 50 million in premium discounting into your net investment income. You also report a result of DKK 149 million, which basically implies a run rate of only DKK 50 million for the remaining three quarters. Which is basically guiding down the run rate from your previous guidance on net investment income, and I thought that should be higher. Those are my three questions.
Let me try to go through those. I think I'm gonna have to get back to tax if that's okay, Martin. I'll focus on the other two. We'll check that out for you and get back with a specific answer for tax. The first question, which I heard was regarding to what we see with our peers. I think it is as a general rule, it's hard to speculate specifically. We have noticed that to some extent, you can see... You mentioned travel accident being some of the lines which they have mentioned. At least travel is also a minor effect in our books.
It's not something which is significant for us that I chose to mention, but we do see a slight pickup, but it's not something that's a major impact compared to what I went through. Accident, personal accident is a part of our story. It's main... The one that comes from our, from the slippery roads, especially in the end of the quarter. We saw that it's a lot of auto, but it's also personal accidents, so we did have that effect. Then I-as a general speculation, and Mindeparken does have quite a lot of insurance in Northern Jutland, where a lot of the snowy and slippery roads were.
I think that's what I could at least contribute from my end on possible explanations. There's the investment guidance. Roughly when we came out, when we came out in the beginning of the year, guiding DKK 250, we were in February. We already had a quite positive January in there when we guided the DKK 250. Most of the positive development we've seen for this quarter was already in the numbers. That's why we're basically only hiking with the DKK 50 for the full year we're getting from the reclassification of IFRS 17.
Perhaps I could add, Martin, if you want to really to scrutinize the numbers, you could say that, ahead of knowing anything about realized numbers in 2023, we had a horizontal investment or an expectation of a horizontal investment return of DKK 200 million per year. We actually got a quite good start, and thus in February, we started guiding for DKK 250 million. Now it's DKK 300 with the IFRS 17 move from premiums. We would then actually expect a DKK 62.5 million per quarter going ahead with the DKK 50 million split out on quarters. It is a bit higher run rate with the IFRS 17 move, but not enough to, for us to adjust the guidance any more than we did.
Okay. 62.5, that's the run rate that we should assume. Coming back to the DKK 200 million, which you are still implicitly saying that is valid. I mean, in current interest market, that seems like a long time ago.
I don't. Well, I think it's more or less, it corresponds to approximately 3 percentage points of average return on our free portfolio. You might argue that, okay, should it be slightly higher? You might be right, Martin, but I mean, more or less, I think it's not completely off.
Okay. All right. Fair enough. Thanks so much.
Thank you. Our next question is a follow-up question from Jakob Brink of Nordea. Jakob, your line is now open. Please go ahead.
Thanks a lot. Just one follow-up. Codan Commercial top line growth was actually relatively strong, at least compared to what I understood when we talked last time. I think you said that insured risk in the energy segment would be relatively low in the beginning of this year and hence low growth. Now it starts with 4%. Of course, that's the whole Codan Commercial, but could you just give any sort of guidance on what we should expect for the next few quarters?
Yeah, I think that's fair. We said that it would be, we would have a drag on earnings, especially in the beginning of the year. I mean, we would expect to be clear that we would begin to see a quite noticeable drag, especially in Q2, which we're coming into in the energy segment. We haven't seen it impact really now in this quarter, but it will impact next quarter. That stems from the earnings patterns we actually had last year. As I think we've gone through some times, it follows the patterns of when these projects are either entered into or exited. So I- [crosstalk].
Okay.
We expect a drag in the lower commercial lines, the top line for Codan next quarter.
Okay. That's clear. Thanks a lot.
Thank you. As a reminder, if you'd like to ask a question, that's star followed by one on your telephone keypad. Our next question comes from Jan Erik Gjerland of ABG. Your line is now open. Please go ahead.
Thank you for taking my questions as well. When it comes to competition, I just wondered how you review the competition in Denmark these days. As you seem to be a little bit behind on your pricing, is it so that you're just following in the indexation or are you also hiking prices more than the claims inflation, as we have heard some other players, reporting before you are doing? Any light today to that in both the industrial side, the commercial side, and the private side will be great. Thank you.
Yeah. If we just take the market situation, I also tried to say something about that in the beginning, it is pretty tough markets out there. We saw that the large players in Denmark, they have done pretty well in 2022 and also in Q1. We saw some of the medium player and smaller players, they have had actually quite a tough year also in terms of growth. My point here was to say that the now scale is starting to be a theme in Denmark, I would say as expected. I that's at least a really important point right now.
I can maybe talk a bit about where we are on pricing. We are exactly where we need to be. We did have a favorable indexation as we've gone through some times, especially in Alm. Brand, in the housing related products where we have an indexation of around 10 percentage points going into this year. As the portfolio renews in Alm. Brand, we will start seeing that kicking in with a nice effect going forward. Then on top of that, we did selective price increases where we needed to do that. That was to a much larger extent in the Codan brand because Codan didn't have that advantage in terms of indexation.
To sum it up, shortly, with the selective pricing instance we've done and the indexation we have, we expect we are where we need to be now and where we expect it to be. We, and that means that as the year progresses, we expect on a net to the indexation and the price increases we've done to fully mitigate the claims inflation.
Okay. I understand. It seems like the private side has a little bit more competition than the commercial or industrial part of the book. Could you just give some more comments to those two areas as well, please?
Yeah. We see that in the private market, competition somehow are picking up. It's done. I actually talked about it for, I think three years now. It is picking up. I think it's really important that of course you take care of your customers and service them, but also that you somehow are in the market of partnerships. That is just so important. I think that's why I also highlighted the important partnership we have with the banks and the smaller banks and the whole segment of 40% of the total market. That is just important to be in that area. It's about scale. That is just coming up now.
Scale means that you are able to service customers with new products, with changed products and all that, new digital initiatives and all that. It's simply being a much more important part of managing an insurance company in the private part, but also in the SMB part of the commercials. The last thing as a is that we just see on a total basis in Denmark, more customers are changing companies than in prior years. It's just a fact that we need to cater for.
On that side, I think also that the size will matters in the end, providing interesting products, interesting services to the customers, so they really see that they get some benefit for their money and not just being part of a, you can say, more union-based company. I think that is more or less. Then on the, you can say on, you also ask about the commercial part. The, in the top segments of the commercials, we see Tryg is not really active there anymore. We see some foreign players be there, but the competition is a little bit lower than in the past. We are managing. We're dealing with professional counterparties. They know how to set prices. Yeah. Also there are a quite good competition, I would say.
Perhaps I can add, Jan Erik. I mean, if you look at our actually quite a satisfactory growth here in Q1, it's actually the personal lines are actually standing out, shining quite a bit. That is without us lowering the prices or offering any discounts. We have a very good tailwind from our bank insurance partnerships, and it seems actually that this bank insurance franchise is playing very well into the churn that we are seeing in the retail market. It's not like it's for now hurting our growth performance as we speak.
That's perfect. Just to follow up on the, on the [inaudible] Do you know who you're taking the customers from in the sort of... Scope where you have more access to clients or is it just a... [inaudible].
we have no further questions, I'll hand back to Rasmus Nielsen for any further remarks.
Yeah. Thank you very much for your detailed questions. You're always welcome to get back to us. Have a nice day.
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