Hello, everyone, and welcome to the Alm. Brand Interim Report for the third quarter of 2023. My name is Seb, and I will be the operator for your call today. If you would like to ask a question on today's call, you may do so by pressing star one on your telephone keypad. If you would like to withdraw your question, please press star two. I will now hand the floor over to Rasmus Werner Nielsen to begin the call. Please go ahead.
Good morning, and thank you for joining. I'm Rasmus, and as usual, I have with me today our CFO, Andreas Ruben Madsen, and our IR team with Mads Thinggaard and Mikael Bo Larsen. This morning, we published our interim report for the third quarter, and as usual, I will walk you through the operating highlights, and then Andreas will comment on the financials. Let us move to slide two. Overall, the claims were at a satisfactory level, but surely we also had somewhat high weather-related claims due to an unusual wet quarter with heavy rainfalls and cloud bursts. On the positive side, large claims as well as minor claims in commercial lines improved as we continued to work with our customer portfolio and to make progress of prevention, of accidents.
Underlying claims in personal lines were high relative to last year, as motor accidents continued to be at an elevated level. The synergies continued to take in as planned, with the run rate increasing steadily quarter by quarter. All in all, the positives outnumbered the negatives in the quarter, thus, I'm pleased with the set of results that we published today. Based on this, and despite relatively high weather-related claims expenses also in October, we reiterate our guidance, i.e., maintaining our positive view for the last couple of months and further towards 2025. And now I turn to slide three with our financial highlights. The profit before special items amounted to DKK 395 million, i.e., significantly up relative to last year.
The result is made up by the sum of insurance results slightly higher than last year, despite the high amount of weather-related claims, a positive investment result against a loss last year and other income and cost in line with last year. Special costs related to the integration of Codan and realization of synergies is somewhat higher than last year, reflecting the progress we are making in implementing the planned changes to our operations. And now let's continue on slide five. The insurance result, the insurance service result amounts to DKK 367 million, i.e., slightly up against DKK 358 million we made last year, and combined ratio was 87.8, more or less in line with last year. The quarter was affected by a high level of weather-related claims, which more than tripled against last year.
Again, this quarter, the result in personal lines was affected by continued high frequency of motor claims. As we believe this will somewhat be the level, new normal level, we are addressing this with various initiatives to restore profitability. Similarly to what we saw in Q2, commercial lines continued in this quarter with more than 60% of the group's insurance service result, partly driven by pricing initiatives, but also positively affected by changes to our overall exposure. In this respect, I'm particularly pleased to see that the underlying claims ratio in commercial lines, including energy, has improved alongside with fewer large claims, thus enabling us to absorb the quarterly fluctuation in claims that this kind of business brings us. Now, please turn to slide six.
Insurance revenue grew by 4.1% in the quarter, slightly higher in personal lines and slightly lower in commercial lines, including higher premiums in industry, reflecting the timing of single construction projects. We continue to see a positive development across our business, partly driven by pricing initiatives, but also by influx of new customers, including a very positive contribution from our partnerships. In line with expectations, the ordinary indexation, of the premium level, supplemented by selected premium increases, have fully compensated for the inflation in claims repair cost this quarter. Moving on to slide seven and the claims ratio. The claims ratio was a satisfactory 71.1, i.e., down 50 basis points relative to last year, driven by lower large claims, which balanced the higher level of weather-related claims and the changes in run-off gains and risk margin relative to last year.
Thus, underlying claims ratio is also down 50 basis points to a very satisfactory level of 59.7 basis points, and included herein is a positive contribution of a still higher interest rate level compared to the same time last year, and a small positive effect from a change in the threshold for large claims that was implemented in the beginning of the year. We then get to a like-for-like increase in the undiscounted underlying claims ratio of 70 basis points, following both the effects from the high frequency of motor accidents and higher cost for reinsurance. However, I'm pleased to note that the headwind from inflation, which we have been discussing for some quarters, is now fully compensated for by our pricing initiatives. And now please turn to slide eight and the personal lines....
The combined ratio increased to 89.7, i.e., up 6.8 percentage points. The unusual rainy weather alone accounted for 4.5 percentage points, fewer runoff gains for 1.9 percentage points. And as already mentioned, on top of this, we continue with a higher frequency of motor claims. We are, of course, implementing various initiatives to mitigate this, but surely there will be the usual backlog before profitability is fully restored. On the positive side, we continue to see the expected improvement in the expense ratio. This quarter, down 110 basis points relative to last year, which gets us to 18.7 basis points. And then please turn to slide nine in the commercial lines. The combined ratio was a satisfactory 86.3, i.e., an improvement of 5.2 percentage points against last year.
Again, this quarter, we have maintained a favorable claims experience, following initiative to improve profitability. We have been spared high cost for large claims in this quarter, which more than offset the additional weather-related claims in commercial lines. The expense ratio was a satisfactory 15.1%, however, up two percentage points against last year, mainly due to higher fees on progress. Again, on a separate note, it should be highlighted that energy had another, fine quarter with good profitability and a combined ratio of 82.5%. Last quarter, I also mentioned this, the tailwind from high, high interest rates that it reduces the amount of long tail. Provisions supports the number, this quarter. However, as you move into the next quarters, this effect will fade as the interest rate comparisons includes increases.
With these comments, I will now hand over the word to Andreas, who will walk us through the synergies, the investments, and our guidance.
Thank you, Rasmus. Please turn to Slide 11. We continue to move forward on our various synergy initiatives according to our plans. In this quarter, we have realized DKK 68 million on top of the DKK 57 million in Q1 and the DKK 62 million in Q2, thus gradually improving the amount quarter by quarter. Last quarter, we made a comment about us having an increasing visibility on the timing of the synergies, and now we are seeing the effects just as projected. Thus, we can reconfirm that we expect synergies this year to amount to a total of DKK 260 million, based on gains coming from faster than originally expected fraud detection, as well as optimization of claims processes.
This means that the expected run rate going into next year is DKK 340 million-DKK 350 million, thus providing us with a solid starting point towards the DKK 450 million of synergies we will harvest next year. Now I move to Slide 12 and the investment results. The investment result was a profit of DKK 56 million, driven by a positive return from bonds and illiquid credit. The result comprises a positive return from both the free portfolio and the hedge portfolio. This time, we have decided to specify the interest rate expenses linked to the Tier 2 capital. This amounts to DKK 19 million in the quarter, which is somewhat higher than last year, reflecting a sharp increase in the three-month CIBOR rates. But surely, we also get a number of positive effects from higher interest rates.
And now, finally, please turn to Slide 14 for the outlook for 2023. With less than two months to go, we maintain our guidance for the year, meaning an insurance service result, excluding runoffs for the last quarter of the year of DKK 1.35 billion-DKK 1.45 billion. The cost ratio is expected to be in the range of 18%-18.5%, and combined ratio is expected to be 87.5%-88.5%. We also reiterate our guidance for an investment result of around DKK 300 million, and for other activities, we guide a deficit of around DKK 125 million. Consequently, group profit, excluding special costs, is expected to be DKK 1.525 billion-DKK 1.625 billion before tax.
In addition, we guide for special costs in the range DKK 300 million-DKK 350 million for the integration of Codan and the realization of synergies. Lastly, depreciation on intangible assets is expected to affect the income statement by around DKK 360 million. Now with this, I conclude my presentation and hand over the word to our moderator. Thank you.
Thank you. If you would like to ask a question, please press star one on your telephone keypad now. If you would like to withdraw your question, please press star two. Our first question comes from Asbjørn Mørk, from Danske Bank. Please go ahead.
Yes, hi, good morning, and thanks for taking my questions. I have four questions. I'll take them one at a time. If I may start on the premium side. Obviously been fluctuating quite a bit throughout the year, and I fully understand the IFRS 17 changes that you made last year. But, but, but, still, it's 5% in Q1, 2% in Q2, 4% in Q3. And if I look at your different business lines, it seems like private has stabilized around 4%, 4.5%, while your commercial seems to jump from 3% to 0% to 4%.
So maybe a little bit of guidance on your side in terms of what should we expect for Q4 on the premium side and in going into next year, what do you actually see in terms of repricing and other measures that we should be aware of on the premium side? Thanks.
... Yeah, thank you, Asbjørn . Last year, I'll try to walk us through that. I agree that we have seen some volatility in the reported premiums for the group. As you mentioned, I think what we see in private is more a question of a trend where we now see, let's say, a sensible stabilization at still what we consider satisfactory levels of well above 4%. And then for especially commercial, that's what's been contributing to the volatility as such. We saw a sharp decline last quarter.
And now we see, on the other hand, a pick up again to what we could say is more normal within the normal range, what we would of what we consider in a quarter. And again, this has most to do with the energy business. Energy has a somewhat, you know, volatile earnings pattern, and that has to do with the fact that the amount of premium we earn can be sharply impacted by the timing of projects, either maturing or entering into earnings and under construction phases, particularly. So, what we would expect in a normal quarter is something like the one we see now for the full commercial area.
And I think the best thing we can do is probably to help you guys a bit, as much as we can in advance, with the part of the energy that we can more or less determine, as we go ahead. But going into next year, we would expect still some, let's say, overall sensible levels coming from indexation. Probably, we would expect wages to be around 4.5%, or the like. A lot of our lines would be driven somewhat by that. And we also have still, at least in terms of indexation, we still see sensible figures for material prices also going into next year.
So overall, we expect to maintain what we see in this quarter, which is roughly us delivering at maybe around or slightly above what is the indexation and keeping our market shares. But maybe I would also mention now that we are on the topic that we need to maintain the flexibility to walk away from top line, especially in commercial, if we are not able to get the rates we need to match the risks in the specific lines.
So basically, just to make sure I understood you correctly for next year. So basically, you would expect your premiums to grow in line with indexation, plus a little bit of repricing in addition to that, or should we also have some sort of churn in that number, so the net number would be 4.5-ish?
Probably around indexation is what I would say. Not any sort of extra. I would say around indexation, that would be the overall level.
Okay, fair enough. On your underlying claims ratio in private, if I look at the Excel sheet, it's 2.8% higher year-over-year. I understand that the real figure is somewhat lower than that, around 2.3%, if I understood correctly. But you seem to mention motor frequencies as one big driver. How big a driver is that of the 2.3%? And what do you actually see, maybe not for Q4, because I guess you still have some headwinds there, but going into next year, would you expect that pattern to turn around, and maybe be neutral to slight positive? Or what kind of repricing measures versus claims prevention measures should we expect on the private lines going into next year?
Yeah, well, I'll also answer that. In rough, sort of, in a rough numbers, I would say that roughly 2/3 of the increase we see in underlying loss ratios when we adjust to the true levels is driven by higher motor frequencies. And that is the main issue we are having now within both personal lines and for the group in terms of our overall underlying loss ratios. So, quite naturally, we don't see any effects from the initiatives we are starting out to materialize in this quarter. But, especially as we move into next year, we'll start seeing the effects from the initiatives we put into play.
And we hope to be, let's say, at least very close to fully there when we get to the end of next year, with the overall profitability initiatives we are putting into play now.
Is that taking into consideration also future motor frequency deterioration, or is it just based on the numbers that we've seen or you've seen, today?
I don't have any reason to. We don't see any reason to expect this to worsen from the point we're seeing now. We see that we are on a different level, which has materialized, especially, starting in Q2, and now also in Q3. We see we do have a higher level. We don't expect that to further sort of worsen.
Okay, fair enough. If I may, on the group side, the 70 basis points of deterioration in the underlying undiscounted claims ratio year-over-year, if I understand, you have 100 basis points of headwinds from reinsurance repricing or price hikes, going into this year. So I guess I have two questions. One being, what do you expect in terms of reinsurance price hikes going into next year? I guess you haven't tapped into your reinsurance program, so you should be better than most of your peers on that measure, and then how much of the repricing to mitigate reinsurance now we are 11 months into this year, how much do you actually expect to get through in terms of repricing towards clients?
How much of the 100 basis points should we expect you to mitigate over time? I guess there's very little impact so far, from this.
Yeah. Maybe first starting with the general sentiment around reinsurance going into next year. As you correctly mentioned, we are in the favorable position compared to many peers that we have actually no impacts for our programs with claims relating to this year. But what we see around us is that especially property per risk programs there is a pressure for that line, for that type of program, specifically driven by a number of our peers, also in the Nordics, having seen very severe claims this year. That being said, that is the only line, and keep in mind, this is early days, so there are no guarantees there.
In an overall sense, we expect, with the current information we have now, to be more or less flat on everything except property per risk, where we do see a price pressure, at least at this point in time. In an overall sense, we would expect and again, no guarantees, but because of our favorable position, among other things, we are expecting something to be more or less flat-ish on overall reinsurance expenses going into next year. And then we have the headwind from the program coming into this year. Most of that expense needs to be passed through commercial and commercial clients, both industrial clients and also agriculture, to name some of the segments driving some of the reinsurance costs.
Not a lot of that is actually to be borne by the personal lines area. So given the timing of our commercial lines, the most of the business actually is repriced, either now, going into this quarter, or for January first. That's where most of the, the large commercial is, repriced. So, it would be based on expectations now, which is, which is, you know, we're early in that phase, but I'm, let's say, I'm still optimistic around getting most of the 1%, from, back from, from price increases, passing that on to, to clients.
But does, doesn't that also mean, since it's commercial clients, that you have already seen quite a big impact of those 100 basis points by now?
Yeah, we, we have a full impact of the 100 basis points in the numbers today, but we have not seen-
Nothing-
the effect of us repricing that, because most, especially the large commercial clients, are either turning October first or January first. So what I'm saying, it's a bit early to conclude on that part of the exercise. Does that make sense?
Okay. Yeah, yeah, yeah. So basically, then 100 basis points is a net number, and close to the growth number-
Right now it—
As well, I guess.
Yeah, yeah. Right now it is.
Okay, fair enough. And just on the repricing going into next year, if I look at the 100 basis points for this year, considering what you just said in terms of property being the only area where you saw something, what would that 100 basis point be in terms of repricing in your expected impact for 2024, all else equal?
Well, I would expect just, if we look compared to what we have in the numbers to, in 2023, I would expect to be- there would be zero additional effect, meaning a flat-ish reinsurance premium going into next year. So not, so we will not see a further deterioration coming from higher reinsurance prices. I will, on the other hand, expect to get most of the 100 basis points we now, already now have as headwind, we will get that back with the pricing initiatives we're doing. But it's hard to-
Okay.
I mean, we're still early in the phase, so it's too soon to conclude on exact numbers.
Of course, of course. Okay, final question from my side. If I look at your guidance for this year, we had DKK 44 million of run-off gains in Q3. So all is equal, of course, that should have helped you in your guidance. On the other hand, we had DKK 60 million or so of higher weather claims, a little bit lower large claims. So lastly, that would offset each other, or offset the run-off gains, explaining why we didn't get a guidance upgrade. But then if I look at your communication relating to weather claims in October, if I understand you correctly, it's around 2% extra claims on the weather side in Q4 quarter to date, which is DKK 60 million. So I guess you could have lowered your guidance today by around DKK 60 million, and you don't.
So, what is delivering better on the underlying, that is mitigating this impact of... or since you don't lower your guidance, so it's just that large claims have been favorable in October?
Yeah, hi, Asbjørn , and I think you are quite right in your deductions that since we are not lowering the guidance, we can implicitly conclude that something else has been better. And I think we are not really putting any specific comments on that, apart from that normally, it's large claims are the volatile component there that moves from quarter to quarter. And then, of course, we have also, I mean, we have probably also been holding a bit back on our guidance in general, us also considering the normal fluctuations in the energy segment. So it may also be that we have also been a bit conservative ahead of the Q3 numbers.
I guess there's a mix there of different components that explains why we are actually able to maintain our guidance here at the Q3.
All right. That's very helpful. Thanks a lot.
Our next question is from Jakob Brink at Nordea. Please go ahead.
Thank you. I will do my questions once, one at a time as well. Just coming back to the initial question from Asbjørn on indexation and premiums. Could you just remind me, when is it? What index is it you're using for your house insurance? I guess it's still the construction index, but is it right now, or is it later in the year, or what ratio should we look at? What is the indexation in house insurance?
Yeah, hi. As in housing insurance, but only for the Alm. Brand, to be specific here, because it's,
Mm-hmm
... it's only for Alm. Brand, the old Alm. Brand. In housing insurance, we have an index consisting of the material price index. And this, it's a bit different between commercial and private lines when that index fixes. But it, as I recall, and we'll, we can get back with specifics if I recall wrong, but I think they fix, so to say, either in Q2 or Q3 this year. So ahead of the renewal, let's say. So, and given the information, and I think, Mads, maybe you can get back with more specifics, but we're still expecting a sort of a, yeah, a sensible tailwind for those lines specifically. But keep in mind, it's only for Alm. Brand. Do you have something?
Yeah. Yeah. I mean, we have, it's BYG 42, as I think, the one we have been looking at the whole time. And we have, I mean, what I have here is a Q2 number, where it's weighted at around 5.5%. I would expect that to come down for Q3. And as Andreas said, I mean, we have, I think, a bit of discretion in when we actually do the indexation. So, but sometime in Q3, I think is the normal time.
Thank you. Just to make sure I understood correctly from previous question. So based on answer that we should expect premiums to follow indexation, so you're not planning on doing anything in addition to indexation?
No, I think we are in that statement. We are also trying to sort of factor in the comment I had around the need to be to have the flexibility to walk away from business that is not profitable enough. So for now, in the overall sense, we are happy to keep the market share, so to say, growing with indexation. And we also need, so in some segments, we would expect to walk away from certain customers and lines in the coming renewal. So that's also included in that.
Okay. Thank you. You write in the text somewhere that the impact on the underlying claims ratio was 40 basis points related to this technical change, so definition change you did in Q1 for the definition of large claims. Could you split that out on the retail or personal lines and the commercial lines, if you have those numbers?
Yes, it's entirely affecting our commercial lines. So it's around 8% for commercial lines, and then 4% for the group, as we mentioned on slide seven.
Fair enough. And then on the energy segment, so three quarters in a row now with very strong combined ratios. I think I asked you last time, Andreas, but could you give us some kind of actuarial level of if we adjust for repricing, risk reduction and, and luck and unluck? Could you maybe give us what sort of the actual run weight and rate at the current time?
Yeah. I mean, it is hard to answer, you know, very firmly, because there are uncertainties also in that sort of in that estimate. But we are very happy just to restate that we now have three sound quarters of underwriting in that segment. We consider still the underwriting result we've done to be better than what we would consider the structural level. I would say something that we are probably around a combined 90, would be my very rough estimate for the structural level of the energy business. And so maybe following up also on that, we are, as I mentioned, happy that we have seen some good quarters now.
We are obviously mainly focused, as we have been all along, on delivering further on the plan and securing that the structural levels improve even further. But also, we are now, as we see, a number of quarters come into the bank, so to say, with sound numbers. We are at least getting closer to the timing of, and let's say, an overall strategic review. That would also definitely depend on us being, having a more firm grip of exactly what we consider the structural level of the book.
... Okay, fair enough. And my, my last question is on, on solvency, please. Just remind me, what is the, what is the guide or the, the not yet incurred special cost impact on the, on the solvency ratio?
Yeah, it's just below 10%. I think it's, let me see, it's 8%. If you factor in our, you know, the remaining integration budget, you get to 8% of solvency, of the solvency requirement.
Okay. So 208 would have been the number, roughly?
Mm-hmm. Yeah.
The dividend deduction you make, can you just remind me how you calculate that one?
Yeah. I mean, if we said that we—with following our minimum payout policy of 80%, if you look at the guidance we are now reiterating, we get to, with the 80% number, we get to, you know, we have a profit, a full earnings estimate of DKK 1,203 million, if we take the midpoint of our guidance. If you then factor in us paying out 80% of earnings and tax on top of that, you get to, let's say that we have in our numbers now, a 24% of solvency relating to payouts we have not yet made. Does that make sense, Jacob?
Yeah. Yeah, I get that. Okay. So, so 80%, but, but I guess you take only three quarters of the expected profit as we own in Q3, or do you take the whole 80% times the guidance?
Oh, that, that's for the profits. That's the profits. Yeah, from Q1 to Q3. Yeah.
Yeah. Okay. Yeah. Okay. And then,
Oh, and then-
And then I guess-
Jacob?
Yeah.
I think we had a discussion on this last quarter, where I think we stated that we probably had some DKK 200 million-DKK 300 million in excess equity as we stood by Q2. So if you do the math on those numbers, and I just gave you, I mean, we are a bit north of DKK 400 million today.
Yeah. So, I guess if you're 208, and you have already subtracted the dividend, so, I guess-
Yeah
... the difference would be 170-208.
Yep, correct.
Okay. And should we expect you to-
So, I mean, you have, you have, we have 216, right? Then you deduct 8 for integration costs, not yet incurred. 24-
Mm-hmm
... for, I mean, for what we kind of owe our shareholders with 80% minimum payout, and then we have to have 170% as our target. So we have 14 percentage points in excess coverage.
Yeah. And that's what you plan to pay out now, or is that over the period?
That's just a simulation of what the theoretical surplus is right now. We have no plans for this point in time of paying out. That would be a decision we make when we decide on the payout for this earnings year.
Thank you.
Our next question comes from Jan Erik at ABG. Please go ahead.
Thank you for taking my questions as well. I have a couple of ones. The first one is on the competition. Could you shed some light to how you feel the competition is in the different line of business you work into? Maybe except for the energy, which is sort of international, but if you take the Danish one, on the commercial side, on the private line side, where is your price hike, so to speak? Could you-
Yeah
... give us some more insight?
Yeah, we can do that. If we start with the private part, the personal lines, somehow, somewhat competition is fierce. We all competing on prices and keeping the customers. But that being said, I think the three top players are really benefiting from having scale opportunities, and that's also why it was so important for us to get Codan last year. So there are definitely competition out there, especially in the personal lines. Moving then further into the commercial lines, if you take the small commercial SMB, somewhat also competition there. Some of the players are moving a bit down in the sectors, in the sizes of the sectors.
Historically, Alm. Brand has been very good in the very small parts of the commercial lines. And then you have the more upper lines, which is managed by brokers. I would say, which if you take the very top line, you see Tryg and Topdanmark somewhat moving out of these areas, meaning that it gives us some opportunities to increase the prices, which we have seen, and that is now coming into our figures. And then you have the real top-notch players, and there, I think the competition is more towards the foreign insurance companies and not so much domestic in that part.
Okay. How is the sort of the two-thirds or so one-third, the mutual, so the 20%, which are sort of having a different kind of ownership structure. How do you feel those are competing towards your personal lines today?
I think, they are there, and somewhat we are happy they are there, but they will definitely, I said—I think I said it before, they will definitely have trouble going forward. Moving into when we start working really on prevention, we all the digitalization scale is definitely coming in, and then we have the whole, you say, regulatory area coming into sight as well. I think they will have, they will be challenged. They are also challenged when we have these storms and rains and all that to a further extent coming in. And, just as a small notice, we haven't seen any accounts this half year, which we saw in the past. So let's see how it works for them.
But as such, and then there's maybe one more comment that is, I think, partnerships in the future, partners, they... We see that they, the bigger ones, we are somewhat more attractive as we have more scale in working with digitalization, working with systems. You know, when you have one partner, you can definitely have more partners, and they can work together, and you can benefit from that as well. So it will be interesting moving on, how they will manage.
Okay. Just finally on the volume side, then, it sounds from your sort of wording that there seems to be quite steep competition on the personal private lines. So should we not expect you to win the volume there, but more maybe win volume in the SME side? But you were also sort of repricing quite sharply in some segments. And you said you were expecting some churn from that portfolio. So how should we think about the volume effect on your price hikes going into 2024, versus what you have seen so far in 2023, and your repricing efforts or indexations?
Should we then expect the premiums to be above the inflation, or should we expect on churn and volume in on pricing to be sort of a little bit less than the inflation?
So I think we address, pick up a little bit about this. We will definitely try, and we do expect to keep around 4% indexation in the private side next year. And that's, of course, a mix of many things, but especially indexation will lead us to that going forward. And then there will be some parts that needs some pricing, and other parts we need maybe to go down in pricing due to competition. But on an overall level, we will definitely stick to the indexation moving into next year.
Do you expect to win any volume?
No, the volume will be done with the, you can say, with the indexation. I think in terms of market shares and all that, it will be maybe a little bit up, but nothing major.
Okay. Thank you.
Our next question is from Martin Birk at SEB. Please go ahead.
Thank you so much. Three questions from my side. Actually, the first one is, Andreas, I did not really get your comments on motor in the beginning to Asbjørn's questions. Could you please repeat that?
Yeah, sure. I think as I recall Asbjørn's question, he was asking how much of the deterioration in underlying loss ratios in personal lines was due to the motor effect. And I answered that around two-thirds of the 2.5 percentage points is related to the motor frequency issue.
Okay. All right. Very clear. Thank you. And then just sort of a couple of broad questions here. The first one, one-off gains at 1.5% in the quarter. How should we view one-off gains going forward, given the high interest environment?
Yeah, well, I think, as we've mentioned before, and that's also why we don't have it in our guidance for either the year or the individual quarters. We will expect to see some fluctuation around the normal level, but on average, we've still in a longer run, a longer-term viewpoint, we still expect an average of a run-off gain of around 2.5%. But I don't see any structural elements in the fact that we, for one quarter, in one quarter have... Oh, did I? Sorry, I think I'm being corrected here. I meant 2%. I don't know why I said 2% run-off gains. Sorry.
which has been our estimate all along for what a long run benefit will be. I don't see any structural effects from the fact that we now have 1.5% instead of 2%. There are no major stories in that, but just normal fluctuations, as you would see from quarter to quarter.
Okay, I totally get your points on the quarter and quarter fluctuations, but interest rates going from 0%-4%, shouldn't that also mean lower run-off gains in theory?
... No, I wouldn't say that, because I think now we might get it into a bit of a theoretical and a bit somewhat technical discussion. But the effect we have from combined ratios increasing is a current year effect when interest rates are higher. That's due to the fact that new business and new premium reservations are done at higher discounting. The effect you get from what do you call that in English? Our, you know, our historical claims provisions, which are prior year to a very large degree, those are hedged one-to-one in our investments in the match portfolio. So you don't see an effect from higher interest rates in the run-off result, in the insurance service result.
Okay. All right. Very clear. And then finally, now we have been attending road shows for all of the Danish banks, and they have collectively said that payouts are going to be lower than we expect, and they all cite a very harsh stance to Danish FSA. When I look at your reported payout ratio, and I'm well aware that there are restructuring costs in there, as well as a high level of sustainable amortizations, your reported payout ratio is said to be well above 100%. Does that dialogue have any spillover to your dialogue with FSA regarding your payout ratio?
No, Martin, I would say we have not had any dialogue with the Danish FSA around that, and I wouldn't actually expect that the insurance business would have dialogues like that, as the banks may have at the moment. It's two different kinds of business, but I can just say we haven't had that dialogue.
Okay, I understand. I just figured maybe that they, if they have one idea in one sector, they also might have some spill on another sector. But, but good to hear that that isn't, isn't the case. Thank you so much. That was, all the questions that I had.
Thank you.