Good morning, everybody. My name is Gianandrea Roberti. I'm Head of Investor Relations at Tryg. We published our Q1 results earlier this morning, and I have here with me Morten Hübbe, Group CEO, Barbara Plucnar Jensen, Group CFO, and Johan Kirstein Brammer, Group CCO. With these few words, over to you, Morten.
Thank you, Gianandrea. We start on slide three, where we see that Q1 is a little bit the tale of two stories. On one hand, we have very strong progress and very strong insurance results, both in Trygg-Hansa and in the classic Tryg business and in the new Trygg-Hansa business. On the other hand, we also have investment losses driven by very difficult markets and indeed a very different risk approach in RSA that doesn't have the same matching strategy that we have in Tryg. If we look at the insurance result first, we're very pleased to have the highest ever Q1 insurance technical result of DKK 754 million in the Tryg classic business.
We're very pleased indeed to see Trygg-Hansa delivering extremely strong combined ratio of 73.3% in Q1 and a technical result of DKK 621 million. Actually taking the new family, what if scenario, technical result to almost DKK 1.4 billion. We also see that RSA Scandinavia has delivered a negative investment result for Sweden and Norway of DKK 599 million, which is really the big swing factor of the quarter. We see that RSA has not worked with a matching strategy which results in more volatility, and Barbara will talk about the fact that we're now restructuring investments. We now have full operational control after first of April and will restructure the portfolio to match and mirror Tryg's matching strategy. Tryg classic has a combined ratio of 88%, technical result of DKK 754 million.
Very strong growth, particularly in small Commercial, but also in Private lines, while we have negative as expected growth in Corporate. Improved underlying claims and RSA synergies of DKK 50 million impacting Trygg-Hansa positively. We improve underlying claims by 100 basis points for the group while being flat in Private, which is in line with recent trends, and we're happy to see improvement driven by Corporate and Commercial in particular. As mentioned, total negative investment of DKK 284 million, actually only DKK 124 million negative investment from Tryg classic. I think that's actually satisfactory and well done in a difficult quarter, and it shows that the matching strategy works. As I mentioned, minus DKK 599 million administered out of RSA Scandinavia in investment result for Sweden and Norway.
Happy that we are paying a dividend per share of DKK 155 for the first quarter, which is an increase of 45% year-over-year, starting an attractive dividend journey. Solvency of 184%, maintaining our first half Solvency guidance of 195%-205%. Now if we turn to slide four, we show the customer highlights. We continue to see improvements in customer satisfaction with a score of 85 versus 84 in the first quarter last year. We are working continuously to improve customer experience, and this quarter we're pleased to see new digital solutions. For instance, track and trace for claims handling in Norway and simplified digital solutions for customer in Commercial. Improving the customer satisfaction score again this quarter from a very high level.
Q1 this year was also a quarter where we saw more than 12,000 customers that we helped with claims related to storms in Denmark and Norway. Also in Denmark we helped more than 50 families with a big fire in apartment building in Copenhagen. We didn't insure the building, but we insured the content and the rehousing of these 50 families. Of course, in a dire situation, happy to help them out. On slide five, we elaborate on the highest technical result ever. As I mentioned, Tryg classic of DKK 754 million, highest ever compared to DKK 751 million year on year. We see strong growth in Private and Commercial, improved underlying claims, and generally improved performance that mitigates higher level of weather claims and large claims. You see in Private much lower result at DKK 273 million technical.
Impacted of course by the storms in Denmark and Norway, but also this large fire claim in Copenhagen. Commercial improved technical result, improved underlying profitability, and had higher level of large claims, but also a higher level of positive run-off gains. Corporate improved the technical result significantly, continuing to improve underlying claims, that's very positive, but also helped much by a higher level of run-off gains in this quarter. Sweden continued to improve underlying claims, but lower run-off gains resulted in lower technical result. As I mentioned, this is the last quarter where Trygg-Hansa Sweden and Codan Norway is not fully integrated in the P&L. Had they been fully integrated this quarter, the new enlarged family's total technical result would have been almost DKK 1.4 billion, showing indeed the very strong earnings capacity of the new group. Passing it on to you, Johan.
Thank you, Morten. I think we are going to slide 6, where we are opening up the Q1 financial performance of Codan Norway and Trygg-Hansa. Trygg-Hansa reported a premiums growth of around 3% in local currency in Q1, while Codan Norway reported a reduction in premiums impacted by the transfer of brokered business to Tryg from the start of the year. Adjusting for this transfer, the growth was, as expected, slightly negative for Codan Norway. The growth in Trygg-Hansa continued, but was with 3% in local currency, slightly lower than what was reported in the previous quarter, primarily impacted by a drop in the sales of car insurance as a consequence of new car sales in Sweden, dropping 26% in this quarter compared to Q1 last year.
Trygg-Hansa's technical result was DKK 621 million, driven by an excellent combined ratio of 73.3%, while Codan Norway's technical result was DKK 6 million, driven by a combined ratio of 97.5%. On page seven, we are opening up the Q1 for Trygg-Hansa even further. Trygg-Hansa's financial performance was impacted by a drop in run-off gains compared to Q1 last year, which was the last quarter of reporting as part of the RSA Group. Furthermore, there was no positive COVID impact in this particular quarter, but the increased interest rates in Sweden of approximately 100 basis points had a significant positive impact on the technical result due to discounting of claims reserves.
We're pleased to see that even in a period with slightly higher growth for Trygg-Hansa than the previous years, we see a slight improvement in the underlying claims ratio, and also that the combined ratio in the usually most challenging quarter was at 73.3%. It is important, however, to note that both Q1 this year and Q1 last year are somewhat extraordinary. The five-year average combined ratio for Q1s for Trygg-Hansa is approximately hovering around the 76% mark. Moving to slide 8, looking at the RSA synergies for the first quarter. For the first quarter this year, we report synergies of DKK 50 million, and these are unsurprisingly mainly cost-related in line with experience from the Alka transaction. In general, there's a positive impact from natural attrition, but we also utilize the new group's bigger procurement power to improve procurement agreements.
After the demerger first of April, we are in full control of Trygg-Hansa and Codan Norway and can therefore realize a higher level of synergies moving forward. Moving to slide nine on shareholders remuneration, let me just iterate what you mentioned, Morten, that we are paying a dividend of 1.55 per share in Q1 this quarter, an increase of 45% compared to the first quarter last year. A couple of months ago, at our Capital Markets Day, we published a relatively precise guidance in terms of shareholders' returns for the next three years. We aim to pay between DKK 12 billion and DKK 14 billion in ordinary dividends between 2022 and 2024, and adding to that a buyback of approximately DKK 5 billion planned to start in H1 this year following the DCCA approval of the sale of Codan Denmark to Alm. Brand.
We aim very clearly to remain a dividend stock and the full consolidation of RSA figures, the synergies development, and the booking of nearly all transaction and restructuring costs in 2022 will drive our earnings substantially higher and boost our dividend capacity in the coming years. 2021 and also 2022 are obviously seeing some turbulence in the P&L, driven by the equity accounting and the transaction and integration costs. Things will stabilize towards the end of this year, and our commitment to a strong dividend development is as firm as always. With that, we're slowly moving into premiums and portfolio, the next section, and we're turning to page 11. Top-line growth was reported 5.1% for the quarter and 5.9% adjusted for bonus premium rebates, driven by growth in all Private and Commercial segments.
Private being the most profitable area, and therefore we are very satisfied with the growth in this segment of reported 5.7% and even 7.2% adjusted for bonus premium rebates. Commercial had a growth of 8.6%, which was a combination of organic growth in Denmark with a particularly strong growth in the small Commercial segment in line with our communication at the Capital Markets Day in November last year. In Norway, the growth of Commercial was driven by price increases for especially larger Commercial customers. Corporate, on the other hand, showed a negative growth of -0.8% and was impacted by profitability initiatives in all countries. Also, the growth was positively impacted by the transfer of Codan Norway brokered customers, and adjusted for this, the negative growth would have been approximately -3%.
The development in the Corporate area follows the targets for this area presented at the CMD in November last year. Sweden showed a growth of just over 2% impacted by price adjustments and improvement in the retention rates. Turning to page 12 on pricing. Adjusting prices in accordance with inflation is very important, and therefore we monitor the development very closely. In periods with high inflation in the prices of material, Tryg has been able to mitigate this through strong procurement agreements. We have seen some inflation impact, especially for house and building, and therefore we, especially in Norway, see an increase in average prices in this quarter. On page 13, we are laying out the customer retention development, and customer focus is extremely important, and customers' view of Tryg is best monitored through exactly the retention rate.
In this quarter, we are very pleased to see an improvement in the retention rates for all business areas. For Private Denmark, we are pleased to see a very strong development in the retention rate to 90.8% against 89.9%, and excluding Nordea churn a level of 91.4%. We're satisfied that we continue to have a net positive impact when looking at the Nordea and Danske Bank portfolios in total, due to very strong sales through Danske Bank. In Norway, we are very satisfied that we continue to see a continued high retention even with very high growth in the last two years.
For Commercial, we saw an improvement for Denmark with 0.2 percentage point and a similar improvement for Norway also with 0.2 percentage point, even in a period where we've been working very much with price adjustments across the portfolios. With that, I'll pass it over to you, Barbara, on claims and expenses.
Thank you, Johan. Well, on slide 15, we provide more details exactly on the underlying claims ratio. Tryg reported an improvement in the underlying claims ratio of 100 basis points for the group while the Private segment was flat. This is in line with the past quarters. The improvement in the group underlying claims ratio was primarily driven by profitability initiatives in the Commercial and the Corporate segment. As mentioned previously, strong growth in the Private segment is impacting the underlying claims ratio as new business initially is not as profitable as old business. The claims ratio for new business is approximately 3% higher, primarily because new customers tend to make more frequent claims under their insurance policies during the first couple of years. Inflation is unusually high at the moment and a very important area to monitor for Tryg.
In general, Tryg is helped by strong procurement agreements, as Johan just described, and in a rate environment like the one we experience at the moment, increased interest rates will have a positive impact on claims reserves through the discounting. If the procurement agreement and the higher interest rates do not fully mitigate inflation, Tryg will adjust prices in the different markets, as we have just shown. From Q2 2022, we will report the claims ratio and the underlying claims ratio for the enlarged group and for the Private segment. Furthermore, please note that we do a small adjustment in the segments that we will report from Q2 and onwards, and those will be Private, Commercial, and Corporate across Denmark, Sweden and Norway. Please turn to slide 16.
In this slide, we show the large and weather claims experienced in the quarter, the discounted rate of Tryg's liabilities, as well as the run-off result. As Morten briefly mentioned, both large claims and weather claims were significantly higher in Q1 this year compared to the same period last year, respectively 39% and 66% up. However, bear in mind that Q1 2021 was at an unusually low level. This year, the large claims level was somewhat higher than the expected level, while the weather claims were at slightly lower level than expected for a typical first quarter of the year with winter in the Nordics. The discounting rate of our liabilities move upwards to 1% compared to 0.2% last year following an increase in the market-based interest rates, and this, as mentioned, has a positive impact on the claims reserving. Please turn to slide 17.
The expense ratio for Q1 2022 was 14.1% in line with the same period last year. It's important for us to have a good cost control and generally believe that an expense ratio around the 14% mark is an important competitive advantage. In the first quarter, the number of employees was slightly higher, driven among other things by the higher business volumes requiring, for example, more claims handlers as well as investments in IT. Now let's have a closer look at the investments in the quarter, so please turn to slide 19. It's very important for us to ensure the understanding of our investments.
In Tryg standalone, we have approximately DKK 43 billion of invested assets, which are split in a match portfolio of around DKK 29 billion, which is backing our insurance reserves, and the free portfolio of approximately DKK 14 billion, which is the capital of the company. The asset allocation of the free portfolio is diverse and has been broadly unchanged in the quarter. On slide 22, you can see the impact of the volatile markets that we have seen following the highest geopolitical tensions in recent times. Tryg standalone for Q1 reported a negative investment result of DKK 124 million, and the free portfolio had a return of DKK 27 million, benefiting from strong return from properties, while all other asset classes were negatively impacted by the turmoil. The match portfolio generated an unusual negative result, primarily due to widening Nordic covered bond spreads.
We have inserted a new slide on slide 21. Here we're showing the asset mix of RSA Scandinavia, which is a total of DKK 24 billion of invested assets. As it is visible from the pie chart, the asset mix has limited risk, especially after the sale of the rates portfolio. The main issue causing the investment loss of DKK 599 million is the fact that RSA Scandinavia has a very different investment policy and have not specifically targeted an ALM matching in the same way that we do in Tryg. In this quarter, interest rates in Sweden went up by approximately 100 basis points across the entire interest rate curve, resulting in large negative value adjustments, only partly offset by a gain in the liabilities.
Furthermore, the discounting curve in Sweden does not have proper durations past the ten-year point and is artificially constructed using the Last Liquid Point observable only at the year ten of duration, which makes the matching somewhat more complicated. Furthermore, the RSA Group has also been using different reporting and accounting principles, and hence, the Scandinavian business was run differently than would be the case in Tryg. Please turn to slide 22. As we've talked about, we strongly believe that the investment policy that we have in Tryg today is right for a company like us, and therefore look to adjust the investments in the acquired business. Following demerger, we now have full control of the assets, and it is therefore possible to fully align the investments in previously RSA to the Tryg setup, as shown in this slide.
In general, we will continue to have a strong focus on the matching of the assets and the liabilities. This reduce volatility at times with interest rate changes and thereby reduce the capital requirement. The overall asset mix will remain broadly the same as you know from Tryg today, and by now, a majority of the new assets have already been adjusted to resemble the Tryg profile. The remaining part will be done in the following quarters, and we expect to be fully in place by autumn. On slide 23, we look at our Solvency ratio, where Tryg is reporting a Solvency ratio at the end of the quarter of 184%, down from 188% at the end of Q4. The downward move is primarily caused by the spread between the reported net profit, which is unusually low, and the dividend cost.
Looking at the SCR, you will see that Codan's SCR is down due to some technicalities in Codan's model. We have guided a range for the Solvency ratio between 195% and 205% at the end of the first half year this year, and the change in Codan standalone SCR only has limited impact on this. We confirm the guidance we have given for the first half year and would like to remind that it includes the impact of the closing of the sale of Codan Denmark and hence the expected launch of the DKK 5 billion buybacks that we have announced previously. We see this as a strong starting point for the enlarged group to drive further shareholder returns. On slide 24, we have the usual overview of the current tier 1 and tier 2 capacity.
It's important to remember that Q1 2022 SCR of DKK 9.6 billion will be approximately DKK 1 billion lower when Codan Denmark is spun off, which means that the current tier 2 capacity appears extraordinarily high. The tier 1 capacity is linked to the overall level of the common equity tier 1, which is ultimately driven by profits and dividends. Tryg has no plans to issue further debt. On slide 25, the updated buildup of our Solvency capital requirement is shown split into the different relevant categories. Please remember that we only use our internal model for the insurance risk. All else is on the standard formula. Additionally, we're showing the split of the market risk charge between the different assets, asset classes, and as expected, equities continue to attract the highest capital charge. Slide 26 then shows the historical development of our Solvency ratio.
It's quite clear that adjusting for the transaction at events like the acquisition of Alka and RSA Scandinavia, you can see that the development of the Solvency ratio is very stable. In a normal year, our own funds primarily move given by net profits and dividends, while Solvency capital requirement moves very little driven by the growth of the business. We're ending the quarter with a comfortable Solvency ratio of 184%, and as mentioned, confirm the guidance for the first half year of a Solvency ratio between 195%-205%. On slide 27, we provide an overview of the Solvency ratio sensitivities, and not a lot has changed in this quarter.
As always, the biggest sensitivity is to spread risk, which is a direct consequence of the fact that covered bonds by far are the largest asset class. On that note, I will now hand over to Morten to remind me, to remind us of the important things to remember in an eventful year.
Thank you, Barbara. Important things to remember in 2022 on slide 28, we look forward to starting full consolidation in Q2. We have, of course, no changes to the guidance for Solvency in H1 this year. Integration costs will follow the previous communication, and we expect the majority of the DKK 1.1 billion to be booked this year. During Q2, preparing for the second quarter results, we will publish additional info on the new group, the structure of the group going forward, Private, Commercial, Corporate, the new levels of expected large claims and weather claims in order for you to build your models and calibrate. We will give you information on historical underlying claims for the enlarged group. On slide 29, we just reiterate our financial targets for 2024 that we communicated at the CMD in London.
Of course, most importantly, repeat the ambitious technical result target of DKK 7 billion-DKK 7.4 billion. Very pleased to see the enlarged group having a technical result of almost DKK 1.4 billion in this Q1. Of course, looking forward to harvest the synergies of DKK 900 million. Then we also on this slide reiterate that we will return DKK 17 billion-DKK 19 billion to our shareholders between ordinary dividend and buybacks in the period 2022-2024. Indeed, a very attractive dividend journey ahead of us. Of course, on slide three, we conclude the presentation with our favorite quote from John D. Rockefeller. With that, I think we are ready to take your questions.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero one to cancel. Once again, it's zero one on your telephone keypad to register for any questions. Our first question comes from the line of Jakob Brink from Nordea. Please go ahead, your line is open.
Thank you, and thanks for taking my questions. I have three questions, please. The first one is on the asset-liability matching in Tryg . Just to understand, what is it exactly that you need to do? I guess I'm also wondering why didn't you do it already? Are you fixing the matching between assets and liabilities? That was the first one. The second question is about the long-term guidance of DKK 7 billion-DKK 7.4 billion. I understand it's early days, but you do have a comment saying that due to discounting of claims reserves, increased interest rates will have a positive impact on claims going forward, which will help mitigate claims inflation.
I think also, Barbara, you just said that claims inflation was dealt with through hedging and price initiatives. Here it sounds like high interest rates will be part of the solution to inflation. Just some clarification there would be nice. Then lastly, on the Codan SCR reduction, why is that? Is it some model changes or is it some technical in the Tryg books or is it the actual SCR in Codan that has been reduced? Thank you.
Good. Thank you very much for your questions, Jakob. I think I will start on your questions on the investments. There is a number of things, as mentioned, that we need to do. I think it's important to start with why haven't we done it earlier. If you go back to the structuring of the transaction, we were able to close the deal 1st of June last year. Not only not until 1st of April this year have we achieved full control of Sweden and Norway that we fundamentally have acquired. That means that from closing 1st of June last year until demerger, the asset allocation and the management of the investments has been out of our hands, so to speak.
That has been taken care of by the old investment team in the RSA Group, also applying the investment principles and policies that they have been using. Like many other international companies, they don't apply, you can say, the matching approach that we have in Tryg. You can say we also on the free portfolio have less of a risk appetite. There are some features in terms of the asset allocation that we will need to adjust for. Some of that has already happened. We gained the operational control now 1st of April, and already during the month of April to where we are now.
We currently have a risk profile which is similar to Tryg's on approximately 80% on the matched portfolio and 80% on the free portfolio. We are well progressed on you can say the adjustment of the investment assets. We still have some things we need to deal with. As we also explained, that is something that we expect will take some months from here before we are fully done. It's important.
Just one question if I
Yeah.
You mentioned also there were some problems about the discounting after year 10. Is that a Swedish thing? It's like doing the old sort of accounting regime, or will that still be an issue going forward?
You can say it's down to the methodology in terms of how you apply the matching principles. Without going into too many technical details, it's a question of whether you apply using outright purchase of bonds or whether you actually use the swap curve. There are some technicalities that you can work with in that respect. You can say again, being very mindful that that is what we want to achieve, it will also have an impact on the instruments used on the investment portfolio.
On your second question, Jakob, you're right. Increased interest rates help the discounting, which helps the combined ratio, which helps the technical result. On the other hand, we have more inflation on our hands. We will attack this from more angles. I think when we see inflation, we work with both our procurement and procurement programs to reduce the inflation. We're seeing that having quite a strong success. Of course, we work with price increases in the areas where we see the most inflation, like in property. We will try our best to make sure that procurement and price increases cater for and offset the increased inflation. On the other hand, fully predicting inflation at the moment is really difficult, like predicting the outcome of the current war.
All other things equal, increased interest rates will improve the technical result. We will not adjust the target of 7%-7.4%, but we're very pleased that we potentially have some tailwind from interest rates. You may recall that when we did the targets for 2017-2020, subsequently interest rates fell, and we then had headwind instead. We're not in the habit of changing our financial targets, but of course we prefer tailwind to headwind.
Okay.
Last question was around the SCR in Codan. Bear in mind that currently they have an internal model that they have been using as part of the old group. Again, following the full operational control, they will be included in our internal model. So you can say that is where you will see things being aligned further. What we have experienced in Q1 is down to some technicalities in the model that I don't think we should probably spend that much time on the call here.
Okay. Fair enough. Many thanks.
Thank you. Our next question comes from the line of Asbjørn Mørk from Danske Bank. Please go ahead. Your line is open.
Good morning, and thank you. If I may just come back to the question on the discounting and sort of the midterm targets. If we're looking at discounting, it's up 80 basis points year-over-year. It's actually 20 basis points higher than you communicated a month ago. I guess there is a clear benefit here. I acknowledge the uncertainty on the claims inflation side that you also mentioned. If we just look at the 100 basis point better claims ratio in Q1, it's a bit better than you expected in November. If we look at slide 12 on your sort of price development, especially for Denmark, it doesn't look too aggressive.
I guess this should be sort of a tailwind, repricing tailwind for the next couple of years from that as well. I guess all things equal, you are seeing some rather tailwinds than headwinds versus your expectations back in November, leaving aside the rate environment, but just the repricing effect. Is that fair to say?
Yeah. I think when it comes to the inflation part, Asbjørn Mørk, I think it's super important that you really focus on the various areas. There is a lot of differences whether you look at some of the areas that are most hard hit at the moment, that would be housing and content, and then you have motor, which is also impacted, and then you have other areas that are less impacted. There is actually a huge difference depending on which parts of our business we're looking at, and therefore we really need to pay attention to what needs to be done given the development that we see. It's not just a one size fits all, but we really need to work with this. That also applies to needed price adjustments.
For instance, in housing as we have seen it in the quarter, for instance in Norway, is something that we find is needed.
We are conservative, cautious people, so of course we try our best to be ahead of the curve and not behind the curve, both working with the procurement agreements in house, property, motor, working with the price adjustments in those areas. Beware when you see the average price adjustment, there's quite a lot of difference in the price adjustments depending on customer segments and portfolio mix. Of course, getting tailwind from the higher interest rates and the higher discount rates. All in all, I think on a good journey to be on the right side of the curve here, but also fair to say that probably discount rates haven't stabilized at a higher level yet.
Let's hope for that because then it is more permanent tailwind. The reality is probably it's more volatile movements in the interest rate curves, as we're seeing so far.
No, I fully understand it's more that if I look at slide 12, the repricing on your house insurance 4.9%, I guess that's not enough to offset inflation in the current environment. I guess we should expect that with the price initiatives you're carrying through now to trend somewhat upwards the next couple of quarters, and especially going into next year. I guess there will be a tailwind there which is not reflected in the 100 basis points improvement that we already reported in Q1.
Whether we look at the earned price increases or the written price increases, there is a time gap between the two. I think all players will be looking at, including us, higher prices in the house and property segments. That will lead over the next couple of years to higher levels of also reported and earned price increases. That's correct.
All right. Fair enough. If I may on Trygg-Hansa and Codan Norway. We'll start with Trygg-Hansa. It seems like you're more or less saying that the combined ratio should deteriorate in a normal Q1 almost 3 percentage points. I guess that's only related to weather? My second question is that the discounting effect of 100 basis points, I guess that's roughly DKK 25 million in the quarter. Is it fair that you, in your investment case on Trygg-Hansa would have expected roughly DKK 100 million lower technical profits for Q1 versus what you're delivering today?
Yeah. I think the discounting is super important and gives the unusually low combined ratio that we see this quarter. Like, first quarter last year was also unusually low due to the positive impact from COVID. Those are, you could say, one-offs.
I guess it's fair to.
Yeah.
No, go on.
No, just, go ahead with the Trygg-Hansa.
No, I was just thinking that it's clear that in Denmark we're used to sort of fairly equal seasonality with claims around the four quarters. In Norway, we've been used to significantly worse Q4 and Q1, and very strong Q2 and Q3. Sweden, if you will, is somewhere in between with more seasonality typically than what we see in Denmark, but less than what we would see in Norway. That's where I think when you model it doesn't really have any impact on the full year numbers, but when you model your quarterly expectations going forward, I would model more negative split with Q4 and Q1 being the worst quarters in Sweden, and typically also Q2 and Q3 being stronger. I think we will share more details with the expected weather claims going forward.
You'd get that during Q2 so that you're ready for the Q2 reporting in July.
Just to follow up on the Codan Norway business, the transfer of clients to Tryg in the beginning of the quarter, did that have any impact on the combined ratio for Q1, the 97.5%?
No, not really. I think it's fair to say that there were good market decisions being made on transferring renewals directly to Tryg Norway a little bit ahead of time, and a little bit ahead of plan, if you will. The claims have followed that. I guess if you look at the historical combined ratio of Codan Norway, it has been around and above 100% combined ratio historically, but with an extremely high cost ratio of around 30%. The way we see it, we see the Norwegian Codan journey as one of repricing and improving claims ratio, a journey that they've already started quite well themselves.
In particularly taking the Codan Norway business down to our cost ratio, which is what will pull the combined ratio of Codan Norway to sort of mid-80s level rather than a 100% level. It is not a one quarter that is close to a 100%, it's more the history of that company being small scale and having too large a cost level.
Okay. That's helpful. The final question from my side on the Codan Denmark deal. How long are you in the process with the FSA when it comes to buyback approval? Hence if the deal closes, how long will it take before you can initiate the buyback?
When it comes to the FSA approval, we have a conditional approval in place, so we are ready. Obviously there is a process going on with the DCCA and Alm. Brand that we await the results of.
We're very positive that we have the conditional approval with the FSA in place because it means effectively that we will not need to wait. Once the competition approval is there, then we can start our buyback program.
Okay. That's very clear. Thanks a lot.
Thank you. Our next question comes from the line of Faizan Lakhani from HSBC. Please go ahead. Your line is open.
Morning. I have three questions. Coming back to the asset mix change in the RSA business, what is the sort of level of P&L headroom we can expect wanting to sort of de-risk and change that sort of asset mix towards a pretty classic business? Conversely, what does that mean for your Solvency II ratio? The second question is on the Swedish regulator looking into sort of price walking within the Swedish business. I understand, you know, you've just got hold of Trygg-Hansa business, but I want to understand how much of the renewal to adjust for claims inflation versus sort of improvement in margin and what the implication of that regulation or review be. The final question is on Tryg Garanti. Under the current sort of macro backdrop, how is that performing relative year-on-year?
Thank you.
Good. I'll start with the asset mix. As I heard it, sorry, I didn't get the full details, but you were asking about how the adjustment to the asset mix would affect the Solvency II ratio. Is that correct?
P&L, sorry, as well.
P&L. We don't give any guidance on that. I can say that if you look at the proportions of the portfolio, they have DKK 24 billion of assets under management as is, of which approximately DKK 6 billion will be what we would call free portfolio and the remaining part match portfolio. So the ratio is somewhat like the one we have in Tryg. But there will obviously be some longer durations in the Swedish assets given the features of their liabilities. But in terms of guidance as such, we don't give that for the year.
Second question. It's very early days for the regulator's project. I think as I understand it, they're looking into the differences in pricing in new customers versus portfolio pricing. I think for us the most important part of pricing is understanding the risk and the micro tariffing of pricing to get the right risk selection and the right pricing for the right segments to continuously allow us to improve our underlying claims ratio. As far as I can see, that focus is undisturbed by any such project. Of course, if there's new guidelines on the difference in pricing between new customers and existing customers, then we will deal with that.
It will not change the most important part, which is intelligence on risk selection, pricing, and selecting the right customers, which is an area where actually Trygg-Hansa is very, very skilled and an area where we are increasing focus and headcount and emphasis, and investments across the Tryg Group.
Okay. Thank you.
Your question on the Tryg Garanti business. Obviously like the rest of our insurance business they are very mindful of the impact of inflation and what else is impacting the performance of the businesses they have as customers. That is very much business as usual. When it comes to whether they have any exposures related to Ukraine or Russia, the answer to that is no.
Okay. Thank you very much.
Thank you. Our next question comes from the line of Youdish Chicooree from Autonomous Research. Please go ahead. Your line is open.
Good morning, everyone. I have three questions, please. The first one is going back on the topic of inflation. I mean, can you give us a sense of where claims inflation is running at in property and motor in both Denmark and Norway? Secondly, I think in your report you talk about procurement and reserve discounting mitigating the impact of high inflation and that you would adjust prices if it's not mitigated. Does that mean that, you know, the competitive backdrop is actually quite benign or basically you're ready to lose maybe some volumes or see some churn by making sure, you know, you price for inflation?
Finally, just on the sale of Codan Denmark, can you remind us of the expected timeline for securing the antitrust approval and whether, you know, the recent press reports around a potential investigation on how Alm. Brand approach this transaction might delay the whole process? Thank you.
I think when we look at the inflation question, Youdish, and good morning to you as well. I think the challenge is probably that historically we focused on an average, and then that average was a meaningful number. I think the challenge at the moment is that the average is becoming less meaningful because you have these strange situations where some building materials are almost impossible to get hold of, and if you need them in a repair, the price increase could be 30%, 35%, 40%. Other materials have almost no inflation. There are sort of public statistics showing that in property, you see inflation getting up to 4%, 5%, but there's an enormous variation underneath that. We see actually with our procurement agreements, we can pull down the inflation.
On the other hand, we also know that we cannot have 100% compliance with our procurement agreements, so we also see inflation. I guess in the various countries we see motor inflation also increasing, but being lower than the property inflation. I would be a little bit careful overemphasizing on the average inflation, because at the moment the world is a little bit crazy, so the average is not as homogeneous as it usually is. That gives you some indication. I think in terms of pricing and churn, as Johan showed, actually our churn of customers is very low. We see that our retention rates increase across Private, Commercial, Denmark, and Norway. We could have added Trygg-Hansa Private and Trygg-Hansa Commercial.
That is not in the numbers yet, but the reality is the retention rates is increasing in both of those two areas as well. As Johan mentioned, that's despite the fact that we are carrying out price adjustments to capture inflation. I think market acceptance of that and market understanding of the fact that there is inflation in society at the moment is high. You cannot really open a paper without it talking about inflation. Society and customers are well aware of that.
Just to add to that, Morten, I guess it also goes to show that our competitors in our markets are also going through price regulation. That means that it actually doesn't necessarily mean that retention rates are impacted negatively.
Mm.
Maybe I can just come back to your third question on the sale of Codan Denmark, just reminding us all about the process. I think as Barbara alluded to, everything has been going according to plan on this process. Everything is approved regarding the sale of Codan Denmark except for the DCCA, who needs to approve Alm. Brand's purchase. We are not a part and privy to details in this dialogue with the DCCA. But what we do know is that Alm. Brand has been very clearly stating that they expect this deal to close in Q2. Since we're approaching May, it means that it could be very soon, and we are optimistic and remain optimistic that this will happen in Q2, allowing us to very swiftly after that approval to initiate our share buyback. We don't see any real issues.
We don't see any antitrust topics that should hinder this approval from the DCCA. It's a matter of the authorities going through the motions and getting things done, and we are staying optimistic that this will happen in this particular quarter. You also mentioned-
Right. Thank you.
Oh, sorry, you also mentioned the last point around the investigation, the police investigations. We have read the same news as you have. We don't see any link to the antitrust authorities approving the transaction, so we don't see any link whatsoever.
All right. Got it. Thank you. Thank you very much for your answers.
Thank you. Our next question comes from the line of Tryfonas Spyrou from Berenberg. Please go ahead, your line is open.
Oh, hi. Morning, everyone. Just on inflation more broadly, I was wondering if your view of risk regarding potentially how unexpected wages and medical care costs have changed since the last quarter? My first question. My second one is, I was wondering if you have any comments on the situation with the Ombudsman and the lawsuit coming from, I think, FSA. Would you be able to disclose sort of a range of scenarios when it comes to worst and best cases with regards to the outcome of this investigation? Thank you.
Good. Well, on the first question on inflation, just to be clear, are you alluding to the wages related to the claims that we have to carry out or the wages related to our own employees? I was a little uncertain there.
No, in terms of the claims, the workers' comp claims that could be affected as the result. Yeah.
Yeah. When it comes to the wage increases, I mean, we clearly follow that, and it is very much a part of what Morten and Johan have already been talking to. When we look at the inflation, we are very mindful of not only which product areas we are looking at, but when we are talking about raw materials or supplies that are needed in order to carry out the claims handling. Obviously the wages for craftsmen and others is a big part of that as well. Again, going down to the details and the nuances of what we track and stay very close to at the moment, wages is obviously a big proportion of that as well.
There again, like you've seen across areas, and products, you will also see just within the small region of Scandinavia, large geographical differences in terms of access to and the wages paid to, as mentioned, for instance, the craftsmen.
On your question with the Ombudsman, the way we see it, we have zero doubt that we have complied with the FSA guidelines on price adjustments. In our view, there's no doubt that the FSA is the governing authority on that question. We have noticed that the Ombudsman disagrees with the FSA guidelines, and of course that is the prerogative of the Ombudsman. In our view, we have no doubt that we've complied with the FSA guidelines, which means that if two governing bodies disagree, we'll have to take that to court. In our view, there should not be a financial consequence of this agreement, and we will need to test that in court.
Let's see what the process is, but it could take several years to get that question clarified, and we'll just have to take that process.
Just to follow up, have you ever were in discussion with FSA post the complaint? Have you had any sort of reassurances made from them on this topic since that was brought to surface or?
You can actually find, and I'm sorry that it's in Danish, I believe, but in Danish newspapers you can find quotes where the Danish FSA has confirmed that that has indeed been their guidelines. That it is some time ago because the case is getting a little bit old. That has actually been confirmed with quotes in the press.
Okay. Very clear. Sounds like it's a bit of a storm in a teacup for you guys.
Yeah.
Thank you.
Thank you. Our next question comes from the line of Jan Erik Gjerland from ABG. Please go ahead. Your line is open.
Thank you for taking my questions as well. I have a couple of one. The first one is around volume and retention and affordability over clients for price increases these days. Have you seen in the past that your price increases have made clients bring down the volumes? We saw some sign in the Baltics when people left their car in the garage rather than run it during the pandemic. Have you seen anything there of the affordability to have an insurance or to change the tariff so that you can get better off in such a way and then have lower volumes in the past?
Yeah, maybe I should answer that question. I think in general, when we actually do see that we have an ability to price when there is inflation in the market without actually impacting volume significantly. We do believe that with high customer satisfaction and good levels of communication in a market situation where it's quite clear that there is inflation in the market, we don't see our retention rates or volumes being impacted through by going through the price motions we are at the moment. I think we're even displaying that in some of our charts here, where we see retention rates going up for all Private and Commercial areas at the moment. At the moment, we're navigating through that quite nicely without volume impact.
I take a historical view on this. People in the Nordic region tend to keep on insuring their things regardless of price changes. People insure their house, they insure their family, they insure their cars, and they don't really change that because of price changes. I think the only area where we've seen customers for a period potentially not insuring themselves was we saw during COVID that there were more people not taking out a new travel insurance. Which I think was a pretty special example because everything was closed down for a very long period. But for the more fundamental traditional insurance product, there's no historical examples of Nordic customers significantly changing their insurance because of pricing.
No sign of that at all. Do you fear that at all in the future?
No, I don't think so. I think our new product development shows that there's an interest with Nordic customers to defend and protect and secure the values they have, so that when we create new products, there's a very high interest for customers to buy those new products. If anything, I think the past two, three years have showed a tendency for customers to buy more products, not less. We see it also in this Q1, that for instance, number of products in Private lines is up a further 0.1 percentage point. It might not sound like a lot, but when you're already at a high level with a big stock, then increasing 0.1% is actually quite significant. Generally, Jan Erik, I'd say no.
The tendency is for people to buy more insurance and for people to hold on to securing their valuables.
Perfect. On the wage inflation part, the Trygg-Hansa has a lot of children insurance. How would that be treated when interest rates are increased, and of course, the base amount which the children insurance is calculated on in Sweden is moving probably upwards with higher inflation. How should we look at that product when it comes to profitability going forward and the moving parts, if you could shed some light into that?
I think it's if you look at this more broadly, the longer tail lines in Sweden are sensitive to salary changes and mortality changes. I think you get pretty good public data from authorities in Sweden on when to adjust this. Typically, the adjustments come quite seldomly, and they try to hit a long-term stable environment. I guess what we're seeing at the moment is more volatile inflation and salary movements. Deciding how that will impact salary longer term, I think is really a second question. I don't think we have information yet on changes to neither mortality nor salary in the longer tail lines. Typically, the adjustments would be more stable and longer term focused and not sort of short-term volatility focused.
If there are changes, then of course that would have to be reflected in pricing.
Finally, one technical question then on the move out of Codan Norway into Tryg Norway, the portfolio. How large was it? Could you shed some light into how much that was in premiums actually?
I think we're not disclosing all the details of that, but I think what you can see is that you should expect that the majority of the decline in Codan Norway is due to move of brokered business into Tryg's business in Norway. You can also see that if you adjust for that in our Corporate book, the growth that was reported as -0.8% would actually have been -3% if we hadn't moved the brokered business in from Codan Norway. It's in that ballpark.
Thank you. Thanks, Hübbe.
Thank you. Our last question comes from the line of Jimmy Pan from UBS. Please go ahead. Your line is open.
Oh, hi. I have three questions, please. The first is on run-off. You mentioned that there's been prior-year policy run-off gains in Corporate and Commercial versus perhaps other segments. Just wondering, could you give a bit more color on that, please? Whether it's driven by certain types of lines of business and if there's any change in assumptions you made. My second question around the SCR. You gave this, you know, kind of timeframe of how the investment assets in the RSA parts will be kind of de-risked. I guess is this already well factored in terms of the SCR impact in your 195-205 guidance at half year?
There should be more kind of impact on the SCR from what you are showing in terms of the de-risking. Third question is like, given, I mean, the Solvency is at this point still expected to fall into that, you know, guided range, and it feels like, you know, it's much more than what you need to run the business given the risk profile. Should we now, you know, think about a special dividend for this year? Thank you.
Yes. If I start with the latter part, on the Solvency ratio, where we, of course, have guided the 195-205. I think what we have been saying also at the Capital Markets Day is that basically, this is a new level. You can say the 195-205 to embark on our journey. It is, something where, obviously there is a lot of changes taking place throughout 2022. Our P&L and so forth is impacted by a lot of one-offs, and so forth. You shouldn't see this as a permanent new level. At some point we will be looking at, you can say the overall capital repatriation.
I think it's also fair to say that we just want to stabilize and make sure that we have the right start on the combined business going forward.
I think on your run-off question, as we show the total run-off is somewhat higher than in Q1 last year. Q1 last year was DKK 255 million. Q1 this year is DKK 314 million. And then on the other hand, we saw larger weather claims and large claims. You can see that run-off gains is actually down year-over-year in Private lines and in Sweden, and the upwards trend comes from Commercial, and it comes from Corporate. Typically it is lines like property and workers' comp where we see the majority of the run-off gains.
I guess also working with our claims and claims procurements program, we've seen over time not only helps the current year, but also helps the run-off gains as it helps claims that have not been settled yet. That is roughly the mix.
I think the last question related to the SCR and whether or not you should expect any further impact from the de-risking of the asset mix in the RSA investment portfolio. That is not the case. It's already included in the guidance we have provided, because you can say what we expect obviously is to adjust it to our profile. It is already taken into account in the guidance that we have provided.
Got it. Thank you very much.
Thank you. We have one last question registered from the line of Ashik Musaddi from Morgan Stanley. Please go ahead. Your line is open.
Yeah, thank you and good morning. I'm really sorry if these questions have been asked. I just joined the call a bit late. My first question is basically with respect to the asset changes that you're doing in RSA's portfolio. Would you say that all those changes have happened and there is no risk of any further losses because of such asset changes? Or would you say that some uncertainty might still be there as you might still be in the process of reducing the duration gap, et cetera, between the asset and liabilities of RSA's portfolio? That's the first question I have. Second question is, the growth in the quarter was pretty strong.
Would you say that there is any one-off thing driving that growth, or would you say that the market remains very buoyant at the moment and you expect similar sort of top line growth in the coming quarters as well? Thank you.
Good. No, thank you for your questions. We have had a lot of questions on the assets in RSA, but not in terms of you can say the areas that you highlight here. What we have obtained by now is that the risk profile on both what we call the free and the match portfolio stands at around 80% by now. We still have some allocation to be done over the coming quarters. Some of it is in more illiquid assets, so it's not something that you just do overnight. I would say it's too early to say that we are fully done.
We expect that to be the case during the autumn. Also obviously in times where you have such high turbulence as you have seen in Q1, we cannot rule out obviously that we will have further losses in the future. What we are focused on is obviously to limit the volatility in the assets that we hold, and in particular also that it matches the underlying liabilities of the business significantly better going forward.
Quite pleased to be honest that the Tryg classic matching strategy works so well.
Mm.
In normal quarters where you may forget that, I think the majority of insurance companies around the world do not have a matching strategy. We do, and that is why the loss on the Tryg classic investment was so rather small in the quarter. We're quite anxious to make sure that is the portfolio strategy that we use also for the acquired portfolios. I think on your second question for growth, yes, it is quite high. We're very pleased to see that what pulls up the growth is the most profitable areas. It's Private lines at 5.7% and even before bonus premium rebates, 7.2%. Increasing this quarter we see the smaller Commercial segment at 8.6% growth.
That is really high, reflecting a strong development in both number of customers, number of products, and pricing, as well. I think Private and Commercial will continue to deliver strong growth. I think maybe the Commercial SME growth was a little bit on the high side, but generally will continue to be high. Then the dark horse is, of course, what happens in Corporate. As Johan explained, Corporate is reported at -0.8% growth, but if you adjust it for the transfer from Codan Norway, the real number is more like -3% top line growth. There we will be willing to let portfolio go if we need that.
Quite interesting to see this quarter that we are reducing the exotic non-profitable exposure in property and liability in the larger global programs. Actually we're growing slightly in the smaller, less exotic, more domestic exposures in the Corporate segment. Generally we believe that high growth will continue, but also that there is a dark horse called Corporate.
Morten, if I could just add, you're talking very much around Tryg classic. If we just skew towards our acquired businesses at Trygg-Hansa, we are seeing this particular quarter a growth just around the 3% mark in Trygg-Hansa. Going forward, and I'm not necessarily talking 1 or 2 quarters, but 1 or 2 years, going forward as the integration progresses, we do expect to see more growth coming out of Trygg-Hansa. They have been somewhat punching below their weight in their growth levels in the last 3-5 years, hovering between 1%-2%. We would expect them to grow up even further from the 3% mark we're seeing this quarter. There should be some growth to come from Trygg-Hansa going forward.
Of course, a little bit tricky to see what new car sales does.
Yes.
I mean, it's new car sales is down 26% in Q1 Sweden. New car sales is down 28.5% in the Danish market. Really the sales force is working quite hard to make cross sales and sales to existing customers compensate for the lower sale of new cars. That was just a few caveats at the end.
That's very clear. Thank you. Thanks a lot.
Thank you. We have another question registered from the line of Jan Erik Gjerland from ABG. Please go ahead your, line's open.
Thank you. Just one follow-up. This will be short. How would you then characterize the premium growth? Is it sort of 50/50 price volume or is it sort of a different split? If you could shed some light into how this premium growth has come along?
Ever published that split. I don't think we will either. What you may say, if you go back four or five years, the reality was that almost all growth was 100% price. Even the development in product and customers was a little bit on the negative side. What we see now is that a very meaningful size of the total growth is now product growth with existing customers. We also see the fact that when retention rates is increasing, so existing customers stay for longer. Particular in our SME segment, there is new sales growth, but also in Private, it means that the number of customers is also growing slightly, which again has a meaningful size of the total growth. Of course pricing.
It is a very good mix between pricing, customer growth, and very importantly, product growth for existing customers. Probably the healthiest combination we've had historically.
Yes, that's nice.
Thank you, Jan Erik. This is Gianandrea again. I just want to thank you all for all the very good question. As always, Peder and I in investor relations remain at your disposal during the day, but we look forward to speak to you during the next hours and days. Thank you.