Good morning, everyone, and welcome to Tryg Capital Markets Day. My name is Gianandrea Roberti. I'm the Head of Investor Relations here at Tryg. I would like to share with you today's agenda. We'll start today with our Group CEO, Johan Brammer. He will take us through the first two points and also our first strategic pillar: Scale and Simplicity. We're going to have a coffee break, 10 minutes at 11:20 A.M., very sharp. After Johan, we're going to move on with Mikael Kärrsten, our Group CTO, or Chief Underwriting Officer, to use English terminology. He will take us through Technical Excellence, and he will be followed by Alexandra Winther, Group Chief Commercial Officer, on a presentation on Customer and Commercial Excellence. We are going to move on to sustainability and ESG with our Group COO, Lars Bonde. A coffee break after that, 10 minutes at 12:20 P.M.
Allan Thaysen, our Group CFO, will take us through financial and capital management. And importantly, we're going to have a full Q&A session of 40 minutes at that point with all our Executive Board. So I will ask you to keep questions for that session. After that, Johan will have the concluding remarks, and there will be a live lunch served out here. And with this, over to you, Johan. Thanks.
Thanks a lot, Gianandrea, and by the way, I think the Q&A started over coffee, to be very honest. I would like to also extend a big, warm welcome on behalf of 7,000 employees, on behalf of Tryg's management team, and on behalf of myself. Welcome to everybody who made it to the room here today in London. Also, a big, warm welcome to those of you who are following the live transmission today. This is an exciting day for us at Tryg. We are coming out with a three-year strategy. We are coming out with what we believe is a very ambitious financial scorecard that we're going to spend the next three hours presenting and discussing, so a big, warm welcome to an exciting three-hour session now. I think before I kick it off here today, there were a few things I wanted to just highlight.
One is taking a more holistic view on who we are at Tryg. So we're operating in Denmark, Sweden, and Norway in the Scandinavian markets. And as a matter of fact, Tryg has a meaning in the Scandinavian languages. It means feeling safe. It means peace of mind. And why is that important? Well, it's important because it's an ingrained part of the culture at Tryg. It's an ingrained part of how we conduct our business to our customers and to the societies of which we are part of. It's a very important part of our overarching purpose at Tryg. So I'd like to just kick off today's session with a small video showing you the purpose of Tryg.
Life occasionally takes an unexpected turn, and you can't go through it without suffering a few knocks along the way. Change is a fact of life, perhaps even more so today than ever before. Both out in the big, wide world and much closer to home, but sometimes change takes us by surprise and can seem immense, unreasonable, and harsh. And when you're right in the thick of it, it's difficult to see things clearly because even though we can prepare for and sidestep many of the challenges that come our way, sometimes everything is turned on its head. In those situations, you need someone who is ready to step in, take care, see through the confusion, and help you make the right choices.
Knowing that help is available should the need arise brings us peace of mind and makes us feel, "Tryg..." but what's better than knowing that help will be on hand in case of damage or injury, preventing it from happening in the first place?
As you can see, where we operate, Tryg is not just a brand. It's actually a feeling, and it's important for us going forward. I think you'll see in the presentations today how customer satisfaction and taking responsibility for the societies in which we operate is very important for us. With that being said, I want to move into something that I think is also quite important to highlight today before we start the formal agenda. That is actually our financial scorecard for the next three years. It is the most ambitious financial scorecard we've ever come out with at Tryg. I'll just take you through the highlights before we start the formal agenda. We are strengthening our profitability to a combined around 81%. We're also growing our ISR to 8.2% in 2027. We've given ourselves a little bit of a cushion here.
The target is 8-8.4. Please bear in mind, as always, for these two financial metrics, as always, we are assuming the current interest rate levels. We are assuming the current currency levels, and we are assuming the guided large and weather claims. We also have a target for our return on own funds of around 35-40%. We have set an ambitious target also for our shareholder remuneration of somewhere between DKK 17 billion and DKK 18 billion, including the ordinary and growing dividends, as well as the extraordinary buyback that was announced as of today. This number is not including any future extraordinary buybacks. I want to just speak a few minutes on the extraordinary buyback that was announced this morning of DKK 2 billion. This buyback came on the back of a very strong solvency for a while.
We reported the Q3 solvency level at 202. Since we reported Q3, we have actually de-risked our free portfolio. Allan will get back to that later on. We've sold off most of the risky assets in the free portfolio. That has actually bumped up our solvency with 23 percentage points, bringing us to 225. And as you can see here, with a few adjustments that we expect for Q4 and taking into full account the DKK 2 billion buyback, we expect to deliver a solvency for Q4 around 195. Still a very robust position. I want to mention two important things here. One is when we announced the RSA Scandinavia transaction, we came out very clearly stipulating that we would take a conservative approach to our solvency position. And I think it's fair to say that after three years of turbulent macroeconomics around us, this conservatism has served us very well.
I also want to state that we maintain our annual year-end assessment of our solvency position, also driven by our very ambitious ROOF targets. I also want to state that long-term, we expect to gravitate towards a less conservative solvency position. With that out of the way, I think we're ready to start the more formal part of the agenda. I'll start by taking stock of the 2024 strategy. I think we need to see how we are traveling right now before we start looking into 2027. I think, again, I want to take a step back before we dive into the scorecard for the 2024 strategy. It's an ingrained part of Tryg to deliver on our promises. It's part of our culture. It's part of the management team's culture.
If you look back at least the last few strategy periods where I've been part of the Tryg journey, back in 2017, we delivered on all financial targets. Back in the strategy ending in 2020, we delivered on all our financial targets. We are on track to deliver on all the financial targets for 2024, both the combined ratio, the Insurance Service Result, also the ROOF, but also the Expense Ratio. For those of you who look puzzled with all the ticks on the right-hand side, this is an indicator with which comfort we are delivering the financial targets, but we will be delivering on all the financial targets. This is important as we look forward into 2027. In addition to the financial KPIs, we also have a set of strategic KPIs. The first one is our customer satisfaction.
We set out, when we started this strategy period, we were at 84. We set out to achieve 88 in customer satisfaction. We alluded to in the last few quarters that it appeared that we would be falling just short of that number. It appears now we'll be closing the books by the end of December around 87. So the bad news is we're not quite hitting that 88. I think the good news is that we've actually elevated our customer satisfaction from 84 to 87 in a very inflationary period where the need for pricing and repricing has been very imminent. This has had an impact and some headwind in our customer satisfaction. So we got close. We didn't quite hit that customer satisfaction mark. As for the other strategic KPIs around our CO2 emissions and for our digitalization, we are happy to also hit those particular targets.
So it's a pretty strong scorecard altogether for 2024. But I think it needs to be seen in context also. It needs to be seen in context of what we've been through in the last three years. I want to just take you through some of the macroeconomic headwinds we have experienced. One of them is the inflationary environment. As you see on the left-hand side here, you see the three lines there, the inflation levels for Denmark, Sweden, and Norway. You can see how it's been very benign, stable, zero. And then overnight, it went double digits. For any insurance operator, inflation is the worst enemy, especially when it comes suddenly and it comes abrupt as it's come in this strategy period. This is something we've had to tackle in the last three years. We've also had to tackle the fact that currencies have devalued.
The SEK and NOK have gone down since we announced our targets by somewhere between 10%-15%. It appears to be stabilizing now at a lower level, but nevertheless, a significant headwind for our targets. In addition to macroeconomic headwinds, we've also seen geopolitical uncertainties going through the markets. One of them is the post-COVID frequency normalization impacting especially motor throughout the last few years. We've had a few dialogues around that, I remember. We've also seen how the extreme weather situation globally also hit Scandinavia. That put a lot of operational pressure on us and also hurt our customers. In addition to that, we are seeing war in Ukraine, and besides the humane elements to that, it's also impacted the value chains globally. We've seen it impacting the flow of new cars into Scandinavia. We've seen it impact value chains for spare parts, etc.
So there's been a lot of uncertainty around us. And I think on this backdrop, we're quite pleased and proud that we're actually delivering on the 2024 financial targets. That brings me to something else we've been doing. We haven't just delivered on the financial scorecard in the last three years. We haven't just dealt with ongoing turbulence. We've also integrated the biggest acquisition in Tryg's history. We have changed who we are at Tryg over the last three years. And we are coming out of this strategy period in 2024 with a scale we've never had before. So we are entering into a strategy phase with capabilities we never had before. Short term, of course, we had to deliver on the DKK 900 million of synergies we promised to the market when we announced the RSA Scandinavia deal. As per Q3, we were at DKK 864 million.
We'll, of course, deliver the DKK 900 million. If we hadn't seen the currency devaluations, as I mentioned before, we would have probably overshot this target. Now we'll meet this target, and I'm pleased to announce that, but I think the important part is if you look at the right-hand side, we're here showing the insurance service result from 2017 to 2023, and you see it's gone up with more than 129%, so we're coming into 2025 with a completely changed position, and we'll get back to that in a minute because the overarching theme of this strategy period is going to be scale. In addition, we have actually worked very strategically on changing the composition of our book upon which we built the strategy. We have deliberately retracted from parts of the corporate segment to improve our profitability and to reduce our volatility.
We have deliberately focused our organic and inorganic growth in the retail part of town, being the private lines and commercial lines. If you look at this chart, you can see back in 2018, we had 78% of our book was in retail, private lines, and commercial. We have now grown that to 93%. Why is that important? It’s important for a number of factors. The retail space, private lines and commercial, is where we see the highest profitability. It’s also where we see the least capital consumption. By retracting from parts of corporate, we are also seeing reduced volatility and hence more stability, which is what we're all about in Tryg. That brings me to something else that we're all about. We are a dividend-yielding stock. We're proud of being that.
I think on this chart, you can see how we have remained focused on providing returns to our shareholders in the last 10 years or so. The dark red pillars you see here are our ordinary and growing dividend. You can see how that's been growing since 2014 up until today. You also see a small blip in 2021 and 2022. That was due to the RSA acquisition and the equity raise. We announced this to the market. We also announced to the market that in 2023, we would be back at pre-RSA levels, which I'm pleased to also say that we were. On top of the dark red colors, you see the lighter red colors. Those are the situations where we've had the annual year-end assessments, and we've felt disciplined to pay back either in special dividends or extraordinary dividends.
You see that that's been the case for many years in the last 10 years. And you're also seeing how the extraordinary dividend announced this morning will flow into 2025. So we have remained disciplined, not just on the ordinary, but also on the extraordinary capital repatriation. I think with that starting point, a strong track record for 2024 strategy, I think I'm ready to open up for the 2027 strategy. Before I dive into the actual content, I think it's worthwhile just spending a minute on discussing who we are at Tryg and where we operate. I know there are some here who are very familiar with the Tryg story. Some are less familiar. So let me just spend a few minutes explaining exactly who we are. So we operate in Denmark, Sweden, and Norway.
You can see on the map here, it's the dark spot on top of the continent. Why is that important? Well, it's important because that particular region has a set of characteristics that makes it very attractive to run an insurance business in. Some of those characteristics is, for instance, the business environment. We see that the trust in the government in Denmark, Sweden, and Norway stands out compared to the rest of Europe. So does the ease of doing business. Why is this important? Well, these factors actually are indicators of stability and predictability. So we are in a very stable region. We're also operating in a region with high productivity levels. On this chart, you see the GDP per capita, and we have a very productive region in which we operate, which is also an indicator of stability going forward.
All this translates into expense ratios for Tryg, as you can see here for the last two years, an average expense ratio of 13.5%. You see other scaled Scandinavian operators also having a strong expense ratio. But when you come less scaled or when you move out of Europe, you see the expense ratios going all the way up to 28%. That is a function of the stability in the region and the productivity in the region. It's also a function about the level of digitalization in our region, as well as the level of customer satisfaction, which is very high in Scandinavia, and hence also the retention levels, of course. All this translates into the combined ratio for the region. We at Tryg have an average for the last two years, a combined ratio average of 83%. Our scaled Scandinavian peers are close to that.
The less scaled peers, and when you go into Europe, you see combined jumping up 5-10 percentage points. So this is a very attractive region in which to operate, which is also why I'm fairly pleased to say that this is the only place we operate. So if you look at this chart next to Try, 100% of our insurance premiums are coming out of this very attractive region. In addition to that, if you look on the color split next to the Tryg logo here, you see that we have a well-diversified split across the three countries. In addition to that, we are very skewed towards the private line segment. You can see here that almost two-thirds of our insurance premiums are coming from the private line segment. That sets us apart from the rest of the market, and we're very pleased with this exposure.
Because having a similar operational setup and having a skew towards the retail and the private line segment gives us some advantages. It allows for further cross-border scaling. It allows for efficiencies having a similar operational setup. And in addition to that, it actually provides very low risk and high predictability. So that was just what I wanted to give an insight into where we operate and why we operate as we do. That brings me back to where we started a minute ago on the financial scorecard. Let me just reiterate a combined ratio around 81%, an ISR of 8.2% with a bit of cushion, so it's 8% to 8.4%, a ROOF of 35% to 40%, and a capital or shareholder remuneration of somewhere between DKK 17 billion to DKK 18 billion. In addition to the financial metrics, we also operate with a set of strategic targets for this period.
The first one is around our customer satisfaction. As I mentioned upfront, this is a huge part of who we are at Tryg. We want to keep investing into customer satisfaction. We have a baseline of 81 that we will bring to 83, an increase of two percentage points over the next three years. If you're somewhat puzzled when I said 87 before, this is because we are rebasing our data now, including all of the data coming from Trygg-Hansa. Alexandra will get back to that later on in her section. In addition to that, we want to increase our straight-through processing. Straight-through processing is when a customer files the claim online and there's no hands associated, no employees involved. It's a fully automated process handling the claim. Today, we have a straight-through processing ratio of 45%.
We're going to take that up to 55%, and I will get back to that later on in my section. The third strategic KPI is around reducing our CO2 emissions. This is important for us to play a pivotal role in society and be a good corporate citizen. Our corporate responsibility is important, and we'll take down the CO2 emissions on average per claim by 6% in 2027. And last, we'll get back to that in his section later on. So these are the targets. Now let's turn to how we are going to actually deliver these targets. I think that's the important part of the day. We're going to do this through three strategic pillars. The first one is around scale and simplicity, two terms that go hand in hand.
As I mentioned upfront, we now, for the first time in 300 years, have the sufficient scale to really flex this. We'll be doing this by transforming and simplifying our IT landscape and also automating our processes to get economies of scale. This will deliver DKK 500 million by the end of 2027. The second strategic pillar is around technical excellence. This is very much around taking existing best practices within portfolio management, underwriting or pricing, especially tapping into some of the insights we're getting from the Trygg-Hansa business. Micke will take you through this in his section later on, but this will have an impact of DKK 300 million by 2027. The last strategic pillar is around customer and commercial excellence.
This is again very much around tapping into the best practices we have around the business, making sure we leverage our commercial scale in terms of our customer value proposition. Alexandra will take you through this later on, and this will deliver DKK 200 million in 2027. I guess the important bit now is to figure out how this stacks up in our financial bridge and our financial modeling. The way to look at this is to look at how is 2024 going to end? Of course, we don't know that yet. Let's wait for December closing. What we do know is that when we normalize the 2024 result for large and weather, we have a very firm grip on our ISR normalized run rate for the business for 2024. So we're coming out with a run rate of DKK 7.2 billion. I'm not saying that's where the 2024 will end.
As you all know, per Q3, we had a little bit of surplus take on large and weather of around DKK 91 million, but let's see how the year ends. This is a normalized run rate in terms of our ISR number for 2024. This is the number upon which we are stacking our three strategic pillars, the 500, the 300, and the 200, getting us to 8.2, and then we put a little bit of cushion around that, so the real number here and the target is 8-8.4. But make no mistake, we're aiming for 8.2. I guess that brings me to a little bit of an educational topic here. I just want to explain to you how we operate in Tryg in terms of having impacts, gross and net.
If we just go back here, as you can see on these pillars, the net impact is 500, 300, and 200, but as you can also see, there's a so-called overhang here. This is the difference between the gross and the net of all the initiatives you're going to see in the next hour or so. For all the initiatives you're going to see in the next hour, we're going to show you the gross impact. Gross impact. We all know that gross is not what's going to hit the bottom line. We know that there are elements like market effects, competitor dynamics. There's going to be execution risk on our side, but there's also going to be investments. We have factored in a gross factor, bringing us to the net impact. For each of the strategic pillars, expect 500, 300, and 200.
Don't get trapped by the numbers you're going to see in a minute, which is all going to be gross numbers. Don't add them up and get to a bigger number. We're aiming for 8.2 based on the net impact from each of these three strategic pillars. Yeah? Okay. So please keep this in mind as we go through the next few sections because I'm going to open up the first strategic pillar, scale and simplicity, in a second. All right. So scale and simplicity, there are terms that go well hand in hand, and I think it's becoming clearer and clearer to everybody that this is a strategic imperative that will help you run an efficient insurance business if and when you are scaled.
We are fortunate enough now to be scaled at Tryg, allowing us to invest in our IT infrastructure to simplify that, to get economies of scale, but also in terms of exercising increased purchasing power, but also allowing ourselves to invest and scale new technologies and AI. That's exactly what I'm going to unfold in this next section. I think it's prudent, though, to start by setting a little bit of context around this strategic pillar. How did we get to where we are? We've had a period of strong growth in T. If you look at this chart, this is the insurance revenue back from 16 up until today. It's gone from DKK 18 billion of revenues to almost DKK 40 billion of revenues as of today, this year. As you can see, we've had inorganic growth in this period. You see Alka, you see Codan Norway, you see Trygg-Hansa.
That's the inorganic part. If you look at the bubbles and the percentages in the bottom, you're seeing the organic growth, which has also been strong throughout this period. This has been exactly on strategy. The byproduct of this, however, when we look at the complexity that this has brought along, we're looking under the hood of our IT functions, and we see now more than 1,000 IT applications. We see more than 1,200 IT vendors, and we see more than 1,000 IT consultants. This is not a surprise to us. It's not a disappointment to us. It's just reality. That's a byproduct and a consequence of the strategy we've been on for the last few years. So for me, this doesn't represent problems. It represents potentials, and this is exactly what this strategy will handle.
The way we are going to approach this is having three focus areas in our scale and simplicity pillar. The first one is around simplifying our IT foundation. The second one is around scaling our already world-class claims handling in Denmark and Norway. And the third one is actually around automating our backend operations. This is how we're going to achieve the DKK 500 million of impact in 2027. I'm going to open up the hood now and show you some of the initiatives that will deliver these DKK 500 million. I think I mentioned that you're going to see gross impacts. That's not what you should expect. We expect the DKK 500 million, as you see it here. But I wanted to just emphasize that this is not a dream and a vision and some pretty pictures.
We have a bottom-up build strategy with a number of set initiatives that are either being rolled out as we speak or in a roadmap to be rolled out. So our confidence around delivering this is very strong. What you're going to see now is just a select list of initiatives. We have selected the ones with the most strategic impact or the highest financial impact, but there are other initiatives that we will be rolling out. So take this as some examples. If we open up the first box around simplifying our IT foundation, the first initiative is around decommissioning IT applications. The second one is around consolidating our IT vendor landscape. As I mentioned, there are 1,200 IT vendors. We will consolidate and streamline that. And the third one is around streamlining our IT development organization.
If we open up the first one around streamlining our IT applications, just to give you a few facts around that, when we look at the IT cost for Tryg in the last three years, it has gone up with 53%. Not a surprise, but nevertheless, a significant step up. And just to give you an example, a data point on this, you can see that 56% of our IT applications are only serving one country. So 56% of our IT applications are serving one country with very limited scale. I'll get back to that specific data point in a minute. We have worked with decommissioning our IT applications before. We know that when we start decommissioning IT applications, we reduce our IT run costs for once. We also accelerate our time to market. And most importantly, actually, we're also improving our customer communication.
When we decommissioned IT applications most recently as a byproduct of our integration work with RSA and Codan Norway, we decommissioned around 335 IT applications. So we know how to do this. We've done this before. And we saw an ISR impact of DKK 120 million. In the next strategy period, we are going to do more of this. We are going to get a benefit of DKK 150 million of ISR impact. We're going to do this from decommissioning our IT applications, a large part of that. We are going to take out redundant IT applications, and we're going to right-size our IT development functions around a landscape with fewer IT applications. And to give you a specific data point, the 56% I mentioned that only serves one country, we're going to take the number down to less than 30% to get more scale out of our IT applications.
This is initiative number one. Initiative number two is around streamlining our IT vendor landscape. As I mentioned, we have more than 1,200 IT vendors. When you look at how that pans out, 60 of those accounts for 80% of our spend, meaning we actually have 1,000 IT vendors who only take up 5% of our total spend. We know that when we consolidate our spend and take the spend from the long tail into our strategic vendors, we see cost savings of around 30%. We've done that before, so we're pretty firm on that. So that's the cost component. We can reduce costs by bundling our vendors. In addition to that, we also see a quality uplift. When we saw the Trygg-Hansa IT landscape being moved into one of Tryg's strategic vendors, we also saw the number of incidents going down by 62%.
There's a significant quality component also. In this next strategy period, we're going to get DKK 100 million out of trimming this vendor tail. We are going to take and make sure that 80% of all our IT projects are going through a very rigorous tender process. We're going to be pruning that long tail of vendors so we don't have 1,000 vendors taking up 5% of our spend. The last initiative in this focus area around our IT application landscape is actually taking and streamlining our IT development functions. If you look to the left, we have established a very agile development function in Tryg in the last many years. We've done that with a very local touch, making sure we were close to customers with responsiveness and speed. That has worked very well and served us well in the last six years.
We're now going to take those benefits of speed and agility and being close to the customers, and we are going to add a scaling element to this. If you look at this future organization of our IT development, you see a larger Scandinavian layer, and you see national layers instead of local layers. So this is going to give us scale on top of the speed and agility we already had. This is not, again, this is not a dream. This is a rollout we are in the midst of doing as we speak. So this will have an impact of around DKK 200 million by 2027. This will be a matter of taking out some of the redundant setups. This will be about taking out some of the external vendors and manning up internally. This will be taking out some of the admin roles in the IT development functions.
This is going to make us more lean. It's going to scale our IT development. That's focus area number one. Number two is around scaling our world-class claims handling. And I think, again, I just want to put a little bit of context around that. We have actually, over the last many years, implemented a new claims handling system called Guidewire in Denmark and Norway. We argue we are actually world-class in our claims handling processes already. In the last three years, we've seen the number of online claims going up. So now 81% of all claims filed in Denmark and Norway are conducted online. That's a very high number. It's gone up with 12 percentage points in the last three years. So more than 80% of all claims are filed online.
Out of those online filed claims, we have seen an increase in the number of claims that go straight through. No employees involved. It's an automated process from the claim is filed online till it's settled. We now see that 45% of all claims filed in Denmark and Norway are being handled straight through, more than 500,000 claims. And then you can ask, so why is this important? Well, it speeds up our claims handling processes. When we look at the amount or the ratio of claims that are closed within 72 hours of being filed, it's gone up dramatically. We see almost 50% of our claims filed online in Denmark and Norway are settled within 72 hours. And again, why is that important? Well, it's important because that's something customers crave for. We see the claim satisfaction in the processes has gone up from 78 to 82.
The customers are demanding this speed and responsiveness. In addition to that, it is also increasing our effectiveness at Tryg. We've seen the number of claims per FTE gone up with 12% in the last three years. This has contributed with DKK 140 million on the ISR annual run rate in the last three years. In the next three years, we're going to see an impact of DKK 100 million from taking this Guidewire implementation rolled out in Denmark and Norway, now scaling that into Sweden, scaling the same system, redesigning the processes inspired by what we've done in Denmark and Norway. We're also going to take that number of 45% in STP straight through processing. We're going to get that to 55%, not just across Denmark and Norway, but across Denmark, Norway, and Sweden. This is a scaled initiative once more.
In addition to utilizing Guidewire and redesigning our processes to get the benefit of DKK 100 million, we're also going to apply new technologies and take use of AI support tools, and I wanted to just show you a quick video of one of our more efficient employees. Her name is Marie. She's sifting through two-thirds of all the repair quotes we're getting from motor shops in Denmark, determining whether they should be an automated process for them or whether it should be kicked off and challenged by some of our manual people. I'll just show you a quick video. Have a look here.
In Tryg, we strive to turn complexity to simplicity. We've succeeded in maximizing our value chain for both Tryg, our partners, and our customers with the help of our AI bot, Marie. Marie is a claims bot that handles reports from auto repair shops in Denmark.
When the repair shop sends the report to Tryg, Marie then has a pre-qualification where she screens the reports. If she finds errors or anywhere in the report that can be optimized, she challenges the report to either be cheaper, better, or more sustainable. She does this by controlling if the report complies with formalities, by checking real-time prices for spare parts, and finding opportunities to use used spare parts. Marie predicts the potential savings on the report that an appraiser has historically created on similar claims. On the basis of the calculated potential savings, Marie decides whether the report should be sent for manual processing by an appraiser or whether it should be automatically approved. Marie handles all the reports faster than any human could.
Out of the approximately 20,000 monthly reports, Marie handles 66%, giving the direct benefit of a shorter processing time, less manual labor needed, and decreasing claims handling costs. All of this entails a smoother experience for both Tryg, our partners, and of course, our customers.
I think this is a good example of how AI will support us going forward, ingrained in the business strategy. I'll go on to the second initiative in this focus area, which is around increasing our repair rates, but also bundling our suppliers. If we look at the repair rates, we see that in motor, when we are able to repair a motor spare part rather than replace it, we get savings of 45%.
Repairing spare parts is not just good for society and the environment. It's also good for the customers in terms of speed, and it's very good financially for Tryg that we get a 45% saving. That's why we've worked in the last three years to increase the repair rates on motor. I'm showing you here a few examples. You can see on car bumpers, we've gone up with 15 percentage points in the repair ratio. We're also showing it for glass, where we've gone up 4 percentage points. And on average, across all categories in motor, we have a repair ratio for spare parts of around 30%. In the next three years, we're going to take that 30% up to 38%. That's one driver in this initiative. Another initiative is around consolidating our spend with Scandinavian suppliers.
It's become clear to us, being now a scaled operator, that when we take the local agreements for repairs in Denmark, Sweden, and Norway and scale that into a Scandinavian supplier, we get savings of somewhere between 5%-15%. An example I'm showing here is how we did this with car windshields and got a saving of DKK 65 million from taking local agreements and making them into a Scandi agreement. In the next three years, we're going to double the amount we spent on Scandinavian agreements, going from a lot of local suppliers into Scandi suppliers. Altogether, increasing repair rates and also increasing our Scandinavian supplier spent will bring an additional DKK 200 million of ISR in 2027. The last initiative in this focus area is around using AI and technology to continue to improve our ability to detect fraud. We've worked with this for many years.
You can see on the left-hand side how we've gone from DKK 150 million to DKK 400 million to DKK 600 million of avoided fraud every year. We're going to take that up a notch by deploying new technologies and AI support tools. Here are two examples. One is called Lima. Lima is an AI support tool in Sweden that scans through more than 600,000 claims every year. Out of that, Lima will take out 2,500 for further investigation. And out of that, 42% of those claims are actually rejected as fraud, giving us an impact of DKK 65 million. Another example here is called Venice. Venice doesn't go through individual claims. Venice is an AI support tool that looks for patterns in the claims. And Venice, we're able to, in Sweden, detect eight motor repair shops that were fraudulent towards Tryg, and they were kicked out of our network.
This gave us an impact of DKK 40 million. These are two examples from our Swedish business in Trygg-Hansa. This next strategy period will be all around scaling these particular AI support tools and other, while also enhancing the existing AI tools we have. This will have an impact of another DKK 100 million in 2027. That brings me to the last focus area in this strategic pillar. Again, we have three initiatives I want to show you. One is around cleaning up product variations across Tryg. Another one is around utilizing chatbots to support our employees. And lastly, also around automating our processes. There's one process to optimize. Simplifying product variations. Why is that a good idea? Well, when we look at how our product variations are across our geographies, we see that 90% of our revenues come from 15% of our product variations.
When we look at the split between geographies, Denmark, Sweden, and Norway, we see that Norway and Sweden are very efficient in terms of use of product variations. Whereas in Denmark, we have two to three times as many product variations. Some of that is, of course, explained by the sheer size and the multi-brand strategy in Denmark. But nevertheless, there's huge potential to improve the number of product variations across all geographies. When we do this, and we have done this in the past, we see a number of benefits. It allows us to do faster pricing and product updates. It allows us a lower IT run cost also. We also see more efficient claims handling. And again, very importantly, we have simpler customer communication.
In the next strategy period, we're going to see an impact of DKK 50 million from simply reducing the number of product variations and also decreasing the amount of niche products with very, very little revenue attached. As for the second and third initiative, we are using chatbots in general already across the group to support our employees. Here is a number of the chatbots we're using today. You can see the names. They're all names. If I were to just unfold Rosa, one of our existing chatbots, Rosa is by design a second-level support chatbot. So when our employees, our front employees, run into technical questions, instead of having to call second-level support, they can open up a chat.
Rosa is able to handle more than 500,000 chats every year, meaning that our customer representatives don't have to wait in line to speak to our second-level support team, meaning that the customers don't have to wait to get an answer because Rosa can actually support most of those queries. This has allowed us to reduce our number of second-level support staff by 75%. In addition to that, we've seen how the automation and use of AI to automate our back-end processes is giving us savings. I'm showing you here an example where we had equivalent of 30 FTEs outsourced from Norway to do manual processes outside of Norway.
Instead of having an outsourcing cost equivalent to 30 FTEs, we invested in AI to automate these processes, reducing the cost to zero on the outsourcing need for these particular processes, but also increasing the customer satisfaction as the speed went up in the processing. In the next three years, we're going to take existing chatbots. We're going to take existing methodologies around automation, and we're going to scale that across the group. This will have an impact of DKK 100 million in 2027. I think that brings me to an end of this strategic pillar. As you can see, we have a list of very specific initiatives. We have a high degree of comfort with what to do and when to do it. We're quite confident that this will deliver the DKK 500 million of net impact in 2027.
And with that, Gianandrea, I'll hand it all over to you.
We're just going to have a 10-minute coffee break back here at 11:25 A.M. sharp. I hope you enjoyed the coffee break.
I think we're ready to reignite here and get started. And now we're going to go into this strategic pillar called technical excellence. And I think it's fair to say that technical excellence is, as I said, the backbone of Tryg. We're going to talk to you in a little while around how we can use portfolio insights and portfolio management to a large extent, how we scale that, also in terms of having the right underwriting and risk selection and setting the accurate prices. I'll leave that to Micke.
I think you're the right person to take us through this with a background as Chief Underwriting Officer at RSA Scandinavia, actually taking the responsibility from what's working in the Trygg-Hansa many years ago, and now we're actually deploying that and scaling that in the business going forward, so I think you're the right person, Micke, to take us through this next section.
Thank you, Johan, and good morning, everyone, so now we're switching over to technical excellence, and technical excellence is about finding the optimal balance between sustainable profitability, growth, and managed volatility, so it's definitely not only around the combined ratio, but nevertheless, the combined ratio is the most fundamental and convincing evidence of having a strong focus on technical excellence.
Despite macroeconomic headwind, we have managed to produce a very solid and stable improvement in the combined ratio over a long period of time, as displayed on the chart here with the combined ratio excluding the prior year runoffs. Now, this is not something that has come for free, but rather from very dedicated actions that we have taken throughout a number of years. To take you through a couple of those actions, those include that we have invested in our portfolio management organization. Heavily inspired by the setup in RSA and Trygg-Hansa. As Johan said, I spent a decade there, last as Scandinavian Chief Underwriting Officer before joining Trygg-Hansa as part of the acquisition. We have invested in more than 20 roles in this organization.
What we've also done is that for a long period of time, we have invested in our infrastructure and our capabilities for pricing and for individual underwriting, so making sure that our pricing sophistication and our underwriting quality has improved over time. And what we've also done over the most recent couple of years is that we have established a Scandinavian Center of Technical Excellence that covers all the different technical disciplines and something that I have the pleasure of being in charge of. So this is what we have done, but let's look at what we will do going forward. So in this coming strategy period, we seek to, first of all, improve our portfolio management. We seek to advance our pricing even further and to optimize our individual underwriting process.
By doing this, we look forward to add DKK 300 million of net bottom line impact by the end of this strategy period. Let's first zoom into portfolio management and how we can use and improve subperforming portfolios to be even more profitable and to increase data granularity. Here is a chart, a simplified chart that shows our portfolios: Sweden, Denmark, and Norway. On the X-axis, we have the profitability in terms of combined ratio going from worst to best. On the Y-axis, we have the growth going from worst to best. Obviously, we seek to have portfolios that are in the top right-hand corner with the best profitability and the best growth rate. As you're familiar with, here we have displayed the Swedish, Danish, and Norwegian portfolio, and the size of the bubbles is the size of the premium.
We then have the Swedish portfolio with the best profitability, but also with a somewhat lower growth rate, followed from a profitability point of view with the Danish portfolio, and then last by the Norwegian portfolio. Now, the interesting thing that happens is if we look at this, but from a slightly different lens, so looking at all our different subportfolios. Here we have divided the subportfolios based on product and based on distribution channel. Then the picture changes. We can see that we have a quite widespread. In terms of profitability, with some portfolios performing really well and some portfolios have the opportunity to do better. Portfolio management is all about de-averaging and understanding where each of the different bubbles are, i.e., the portfolios and where they will move next.
What we also can conclude is that the Swedish portfolios tend to be centered around the right-hand side, which is natural given that Sweden has been through the same kind of portfolio management processes for a longer period of time. Because what we also can conclude is that if we do not actively manage portfolios, then the drift in portfolios and the volatility in how they move around increases. And to take one specific example of that, here is one of the portfolios that we have. And if we look at where that started in 2020, it was here in the middle. And let's then fast forward time one year. Things were actually looking really great. So improving growth, improving profitability, and you can think, well, this looks fantastic, right?
If we then again fast forward time two years to 2022 and to 2023, we can actually see that the portfolio detracted in terms of both growth and profitability. Potentially in hindsight, we could have been maybe overestimating things like COVID effects, underestimating things like the inflation spike that we knew came along later. Portfolio management might seem simple, but it's actually one of the most differentiating things in insurance. That is not to understand where a bubble or a portfolio is at a specific point in time, but rather to understand where it will move next from things like claims trends, changing customer behavior, and so on. More importantly, to take the proactive actions for how we will move it going forward.
That's very much our job: understanding where the portfolios are, where they will move next, and what actions we can take in order to improve it. And those actions can be either to improve profitability, so moving the portfolios to the right in this chart, or to improve growth of already well-performing portfolios. And in this session, I will speak mainly about improving profitability. Alexandra will come back a little bit later on to speak more about commercial excellence and growth. So let's look at one specific example which illustrates really good portfolio management. And here we have the Norwegian commercial property book illustrated here by the dot in the middle. But what we actually could see was that this was further to the left three years earlier. So we had or we have improved the profitability from very dedicated portfolio management actions during this three-year period.
So let's look at what we did. And basically, there were four levers to drive this improvement. First of all, we secured to increase the adherence to our Scandinavian risk management guidelines. And what this in practice means is that we walked away from some of the non-Scandinavian property exposures. So very much in line with the strategic ambition that we've had for this strategy period. The second thing that we did was to make some very strategic exits in this portfolio. So we exited some high volatility segments like food production and recycling, so taking down the exposures by 16% during this point in time. The third thing that we did was to make individual rate adjustments where needed, so making sure that we had a better alignment between risk and price.
And the fourth thing that we did, not least important, is we secured to increase the pricing sophistication in our tariffs, mainly for the large and weather elements of the tariff, which is really important for a commercial property book. So by doing this, we managed to maintain the growth rate, improving the top line by 15% over a three-year period. But more impressively, we managed to, during a time of macroeconomic headwind, improve the profitability by between six and seven points, so adding just short of NOK 40 million to the bottom line. Now, this is just one example of good strategic portfolio management, which we are now scaling across the business. And we will do this from a proven toolbox that we have across the Swedish business that consists of a couple of different things.
So first of all, it holds clear roles and mandates, securing that we have one version of the truth. The second thing is that we have a strong process of going from data to forward-looking insights and actions. And the third thing is that we have a very sophisticated way in how we target specific customer segments, either to increase profitability or to increase growth. So this is now something that we're scaling across the business. So based on this Swedish starting point, adding already really good elements across Norway and Denmark, we set forth a Scandinavian Tryg portfolio management process. And by doing that, we have already in our portfolio review sessions identified more than DKK 5 billion worth of premium that are currently going through specific targeted actions for profitability improvements. And by doing this, we seek to add DKK 200 million of bottom line during this strategy period.
So let me then take you to the next session around pricing and how we can improve pricing sophistication and increase the use of data to make pricing differentiation even further. Now, our ability to update tariffs in a fast and sophisticated way is crucial to run a highly profitable insurance company. And we have established a unified pricing platform that has enabled us to, first of all, decrease the updating time when we deploy tariffs, so taking that from a month down to less than 24 hours. We have also been able to increase the way we update tariffs and the tariff compositions by more than 10x. So this increases our ability to drive pricing sophistication and pricing quality. And this unified platform is established 100% for our Private Lines business for the applicable parts and roughly to 50% for our C ommercial Lines business.
What it also gives us is a very scalable platform to drive further improvements from. For instance, to add more external data, to add new functionalities like AI, and to drive further automation. By doing this, we seek to add DKK 150 million to the bottom line by the year that I said earlier and also to secure that this platform is 100% installed for Commercial Line. Let me take you to one specific example of how we can use external data in increasing our pricing sophistication. Johan talked before about climate and climate risk, and obviously, that is something that we are really focused on. When we look at the Scandinavian market, that is mainly for the flooding elements and water-related risks that come as a consequence.
And here we have established what we describe as a wetness index, something that started in our Norwegian private lines business, where we look at external geodata for things like height, also for slope, drainage. And then we combine that with our pool of historical data. And here we can see that we have an advantage being a large insurer because we have a large pool of historical data to draw conclusions from. And when we do this, we create this, what I called before, the wetness index. So here illustrated by this picture, which shows low-risk areas in green, high-risk areas in red. And then when we backtest this towards our historical claims, we can see that there is a very high correlation between the high-risk areas and the claims that we're seeing. So we actually add a lot of explanatory power that previously wasn't captured in our tariffs.
When doing this, we increase our price differentiation among our clients. In essence, some customers will get a higher price, some customers will get a lower price, but all customers will get a more risk-correct price, increasing the pricing sophistication, increasing the pricing quality that we have. This is just one example of how we can utilize external data, and we have quite a long list to work further from. Let me then move to our individual underwriting process and how we look to scale our underwriting platform that we've built over the last couple of years. Our individual underwriting covers roughly a third of our commercial lines business. The underwriting platform, in one simplified form, is an IT tool that covers all of our six phases of underwriting, so going from customer screening to fulfillment of the agreements.
So this gives a streamlined process for this. And this might seem very basic, but I mean, having done this for more than 20 years, I can actually assure you that it's not. So the prize here is in securing that the intelligence and the know-how that we have from our individual underwriters, that's structured in a format that enables us to utilize that in the best possible way. And here we're secured to do just that. But even more importantly, what it gives us, it gives us a tool to drive further quality from, further sophistication from, for instance, through leveraging all the internal data that we have, potentially also with external data going forward, and to make benchmarking and assessments of how we evaluate risks and how we do pricing.
And when we've done this and analyzed this tool, we can see that this creates an improvement in the combined ratio of somewhere between two and three percentage points. And what it also gives us, again, it gives us a very scalable platform where we can add new functionality. We can actually plug in new tools quite easily, so tools like exposure management, driving further AI, etc. And by doing this, we seek to add DKK 50 million to the bottom line from the facts that I just said, but also through making sure that the adoption rate increases from the current level of 30% and up to 80% during this strategy period. So to sum up, this strategy period is about taking technical excellence to the next level and increasing the use of data accuracy across the different items of portfolio management, of pricing, and of individual underwriting.
The end goal here is quite clear. That's to improve our competitiveness and add it to the bottom line. By that, I will hand it back over to you, Johan.
Thanks a lot. Thanks a lot, Micke, for taking us through a very important part of the strategy and a fairly technical part of the strategy. I think with this, I think we're ready to change gears slightly and go into another part of the strategy that is as important as this is the part that will be future-proofing our business from a more commercial point of view, looking into how we improve our customer loyalty and scale some of our strongholds across the business. I'll leave it to you, Alexandra.
Thank you so much, Johan.
Thank you. Hello, everyone. Now, let's dig into the details of the strategic pillar. At Tryg, we know that commercial excellence is one of our key competitive advantages. Let's try to look at the strong commercial fundamentals that we have. So looking across the three markets, we can see that brand awareness is above 96%, which makes us a household name in Scandinavia. We also see that retention levels are around 88%. And zooming in on the individual markets, we can see that in Denmark, we are the market leader with a 24% market share. In Sweden, we are the market leader in personal accident with a 42% market share. And we're also the leader in online distribution in private lines because half of our new sales is coming from online.
In Norway, we have the most satisfied customers of the entire group, with customer satisfaction at 88 out of 100. Now, looking towards 2027, revenue synergies will be driving our commercial strategy. When we acquired Trygg-Hansa from RSA Group, as Johan mentioned, we acquired a very unique company. And as we have gotten to know it more intimately, it is very evident to us that our newly acquired Swedish business and our existing businesses in Denmark and in Norway have clear complementary strengths. And this is why our commercial strategy is all about harvesting the next generation revenue synergies, really taking the full advantage of the transformative acquisition we did back in the day. It also means that the delivery certainty of our commercial initiatives is high because it's basically all about scaling what we know and what we tried and tested in other markets.
This pillar is divided into two different themes, and they're quite simple. The first theme is all about scaling what we know in Sweden to Denmark and Norway, and the other theme is scaling in the other direction. As we mentioned before, the bottom line impact will be DKK 200 million by 2027. When we open these pillars, today we're bringing five examples, and please bear in mind that this is not an exhaustive list. It is just the examples that we feel are the most strategic and we would like to share with you today. In the first theme, we have two initiatives. The first one is about growing the personal accident portfolio in Denmark and Norway by the pregnancy product, and the second initiative is improving our online offering to small commercial customers. Now, Trygg-Hansa has spent decades building up a world-class portfolio in personal accident.
When they started, they were actually the first mover in this market. Today, we enjoy a market share of 42%, as I mentioned, being the market leader. Looking at private lines in Sweden, PA today still accounts for 38%. The profitability is attractive. We see that combined ratio levels are around 11 percentage points lower than the non-PA segments, and this is really driven by best-in-class risk assessment. Everyone thanks Micke. It's supported by a long history of data. It's also supported by a very strong focus on cost efficiency and working diligently with our suppliers. The way Trygg-Hansa has built this portfolio is by following the customer through different life stages. Everything starts with the pregnancy product, ensuring the mother and unborn child. When the child is born, we're cross-selling child insurances, and when the child becomes an adult, we're cross-selling adult insurances.
Now, this means that customers stay with us in PA for a staggering 30 years on average. Now, being a market leader is quite demanding, and this is why we constantly seek to develop and strengthen our position in PA. This strategy period, we have in Sweden seen an increase in the number of leads by 40% from Preglife. And Preglife is an app that more than 70% of all pregnant women use in Scandinavia, and it's one of our key distribution channels. We've also seen a 20% increase in our child insurance product after revamping it to focus even more on mental health. So in conclusion, we believe that this world-class portfolio is definitely worth scaling to Denmark and Norway. Now, when scaling to Denmark and Norway, let me see if I can change slide. Great.
It is really important for us to replicate what we have done well in Sweden when it comes to products, services, and also distribution model. And this is why in this strategy period, we have launched the pregnancy product in Denmark and in Norway already. In Denmark, we are the first mover, meaning that until now, no pregnant women have been insured by this product, whereas the number in Sweden is 85%. In Denmark right now, we can see that half of the customers we're getting into the pregnancy product are entirely new to Tryg, so it's a great lead generation channel, and the numbers are quite similar to what we see in Norway and in Sweden as well. In Norway, we have, similar to Sweden, relaunched our child insurance product, and that has boosted our sales by 50%.
When we look ahead towards 2027, our ambition is to increase insurance revenue by DKK 1 billion from growing personal accident across Scandinavia. Now, let's switch gears and look at commercial lines, where we will be strengthening our position with small commercial customers by improving our online channel. The way we define a small commercial customer is a company with fewer than 10 FTE. In Scandinavia, we have 2 million of those. This is, from a profitability perspective, a very attractive segment because we can see that combined ratio levels are around 7 percentage points lower than the non-small segments. What we also see is that this segment is quite similar to private customers in their digital readiness. Data shows that 80% of small customers, they say that online is their primary channel for company purchases.
And our own data shows that 75% of the claims that they file with us are done so digitally. So this is why we believe that online is the next frontier when it comes to winning in small. In the strategy period, we have had commercial lines Sweden being our first mover in online, heavily inspired by private lines in Sweden, where, as you know, we are the market leader. And this has resulted in, as you can see, an increase in online sales of 70%. Now, then we decided that Denmark should be our second mover in online. And what we saw the very first year was that we managed to beat our budgets three times over. Now, it's not because Danish companies are more digital than the Swedish ones.
Rather, we think this is a proof point to the tailwind we create when we scale from one market to another. At the same time, we also realize that not all companies are ready to purchase insurances online. And this is why we use information about their visits to our websites as leads into our outbound call centers. And in this strategy period, we have seen that Denmark has captured 130% more leads, and Norway has captured 70% more leads from online visits. So this means that the online channel is also an important leads generator into sales. Looking ahead towards 2027, our ambition is an increase in insurance revenue by DKK 300 million coming from online sales to the small commercial segment, which is almost half of our total ambition of DKK 700 million in growth in small.
Now, this leads us to the second theme, where we have three main initiatives. The first one is about growing our profitable motor portfolio in Sweden. The second one is focusing even more on strategic partnerships. And the third one is about increasing customer satisfaction because we want to further drive cross-sales and retention. Let's look at the first one. So we want to grow our profitable motor portfolio in Sweden by leveraging insights that we have from Denmark and Norway. Let's take a look at Denmark and Norway. Here we can see that our market shares in motor are greater than the fair share we have in the market. And there is no silver bullet explaining this.
Rather, it's a combination of getting many, many things right, ranging from the right brand mix, the right product offering, supported by the right pricing, distribution channel, customer focus, and I could continue listing different factors. But one thing is for sure, and that is that in Sweden, we actually see the opposite picture, namely that we are underrepresented in motor. And in some segments in Sweden, we are as low as the number five or number six player. So there is huge potential in learning from Denmark and Norway. In this strategy period, we have already done a number of things in Sweden focusing on motor. And here I bring two examples. The first one is that we have recently relaunched our motor product, which has earned us the number one ranking by an influential independent consumer rating agency and then boosted sales by 30%.
We have also relaunched recently the Aktsam brand. And in Swedish, Aktsam means careful. And this brand is exclusive to customers above the age of 50. And there are three things you need to know about this segment. First of all, they have a great risk profile because they are indeed careful. Secondly, they own more than 50% of all privately held vehicles in Sweden. And thirdly, our market share is only 11%. And in some regions, it's as low as 8%. So huge potential that we will harvest using Aktsam. Looking ahead towards 2027, the insurance revenue we're targeting is DKK 300 million from growing motor in Sweden. Now let's switch gears and talk about the second initiative in this pillar, which is increasing focus on strategic partnerships.
And we'll do so because we know that they are efficient and effective distribution channels, because ultimately what they're doing is giving us access to attractive customer segments at scale. Now, looking at our own data, we can see that we have 76% more products per customer in the partnership channels. Acquisition costs are 10 percentage points lower, and retention rates are 5 percentage points higher. So there is no doubt that being affiliated with a partner has a direct positive impact on our relationship with the customer. In this strategy period, we have built a number of partnership successes in Denmark and in Norway. Unfortunately, we are not mentioning names, so you have to see two sanitized examples from Denmark and Norway. In Denmark, we have managed to grow one of our largest partners' portfolio by 75%. And in Norway, we have grown a large partner by 60%.
These numbers are driven by customer growth and product growth. The way we have done that is by collaborating extremely closely with the partners, targeting their member base's specific preferences for products and distribution approach. This has fueled what you're seeing on these graphs. Looking ahead towards 2027, we will be targeting an insurance revenue uplift of DKK 300 million from scaling our successful approach to partners to Sweden. The final initiative that I want to walk through is about increasing customer satisfaction. That we'll do that because it's good for business. The way we define a satisfied customer is someone who scores five or four out of five. Our data shows that when a customer is satisfied, their insurance premia grow 20 percentage points more over the next 18 months, and their retention rates are 10 percentage points higher.
That means that happy customers are buying more and staying longer. In this strategy period, as Johan mentioned, we have worked very structured with improving customer satisfaction along the customer journey, and every single year, we're collecting more than one million data points in Denmark and Norway, and here I have three select examples of initiatives and specific touchpoints that increase customer satisfaction, so in Norway, we have seen that by changing the way we communicate with customers during the onboarding process, we managed to increase satisfaction by six points. That's massive. In Norway, we have also managed to increase satisfaction by five points by proactively offering our customers a review, a check-up of their insurances, which of course has the nice byproduct that we managed to cross-sell in those interactions. In Denmark, we have increased satisfaction by six points by slashing claims handling times by one week.
Now, looking ahead, we will of course be including Sweden into our metric in this or the next strategy period, and that inclusion means that we will be rebaselining our group satisfaction measure from 87 down to 81, driven by the fact that Sweden has lower customer satisfaction, especially in the claims handling process, which we need to address, so looking towards 2027, our ambition is to increase customer satisfaction by two points, going from 81 and up to 83. Now, this concludes this strategic pillar, which will yield a bottom line impact of DKK 200 million, and now, Johan, I think you want to be up on stage again with Lars.
Thank you so much. Thank you so much, Alexandra, and I think that brings us to the next section. We've now discussed the three strategic pillars of the strategy.
Now we're going to go to something that I also alluded to initially that's very important for us at Tryg. It is our focus on sustainability and ESG. That is an essential part of who we are at Tryg. And Lars, you will take us through this important section.
Thank you very much. Now let's dive into a topic that gradually has become more and more strategically important for Tryg over the past decade, and that is sustainability and ESG. Good corporate citizenship has always been an integrated part of our DNA, but we will continue to push for sustainable development. The world faces major climate challenges, and we are committed to make a positive impact to the benefit of both people and the planet, while we also future-proof our business long-term. And therefore, we have made ESG and sustainability an integrated part of our 2027 strategy.
We will challenge the entire value chain in Tryg from suppliers to customers. But before we talk about the strategic themes and targets, let's explore the unique Tryg family. The Tryg family consists of Tryg, TryghedsGruppen, and the Tryg Foundation. And TryghedsGruppen is the largest shareholder in Tryg. And a part of their profit comes from the dividend we receive from Tryg, which is returned to their members, which are the customers in Tryg. And this year, they paid out a member bonus of DKK 1 billion to more than 1.3 million Danish customers. And as you can see, the retention rates for customers aware of the bonus are significantly higher. And furthermore, the Tryg Foundation contributed with DKK 650 million to philanthropic products that enhance society development. And in that sense, the Tryg family transcends the standard business model for insurance companies.
TryghedsGruppen and the Tryg Foundation all work together to promote initiatives that create peace of mind for our customers and society at large. Let me give you a couple of examples. Firstly, the lifebuoy was implemented by Trygg-Hansa in Sweden, by Tryg in Norway, and by the Tryg Foundation in Denmark. The red and white lifebuoy have been strategically placed near harbors, docks, and swimming areas. More than 150,000 lifebuoy have been placed throughout Scandinavia and play a vital role in saving lives every year. Secondly, we have been the main partner for the Night Ravens in Norway since the early 1990s. More than 300 groups walk the street at night to create a safe environment for young people and to prevent crimes from happening. These initiatives cause pride. They support our brand position and also have a positive impact on our retention rate.
As I mentioned at the beginning, sustainability is a part of our business model and is anchored in our core business. For 300 years, we have been offering our customers peace of mind by offering them insurance against the risk and also advising them how they can prevent claims from happening. Prevention is an element that we have worked intensively with. Integrating preventive elements in our product offering will remain a top priority for us. If you are a non-life insurance company and really want to make a difference to the environment, you have to work with your claims handling. In this strategy period, we have increased the number of repairs instead of replacing spare parts within motors with 5 percentage points. As Johan have already mentioned in the beginning, that is good for the environment.
And it also has a positive impact on our cost for claims. And lastly, if you are an insurance company, people are very important. And therefore, I'm proud that we again this year were ranked as the most attractive workplaces within the financial sector. Our starting point is simple. Our strategy will comply with all regulatory requirements. We have to mitigate risk and future-proof our business while we also attract and retain talents. And our strategic teams, we have three strategic teams for this strategy period. And that is climate action, future-fit products, and people in Tryg. And we believe what's getting measured gets done. And therefore, we have defined a set of ambitions that will secure the organizational engagement and that will ensure the organization's engagement. It will also support Tryg's resilience and competitiveness. And there will be a clear link to the executive remuneration.
But let's start with the climate action. In 2021, at the Capital Markets Day, we announced some ambitious targets for sustainability. And as Johan have mentioned in the beginning, we are very satisfied that we have achieved those targets. And continuing our high ambition level, our targets towards 2027 will be to reduce the CO2 per claim with 6% on average. And one of the ways to achieve this will be to continue our practice of reusing and repairing spare parts. And as you can see up here, our suppliers have repaired more than 200,000 auto parts this year. And furthermore, we have succeeded in solving almost 30,000 claims with the reuse of recycled spare parts such as doors, fenders, and batteries. And in Tryg, we orientate ourselves towards several ESG ratings. And we are very satisfied that MSCI just awarded us with a triple-A rating.
We are glad to see that our dedication is recognized. Building further on this solid foundation, we will push it even further by joining the Science Based Targets initiative, also named as SBTi. SBTi is invented by the UN and the World Wildlife Fund as a trustworthy and ambitious methodology for corporates to link their targets within climate and sustainability to science. As you can see, more than 6,500 companies have signed up for the Science Based Targets initiative. We will announce our targets as soon as they have been approved by the SBTi organization. I have worked within this industry for more than 25 years. There's no doubt that we in recent years have seen an increasing number of weather events causing damages across Scandinavia. We know that our customers are worried about these weather events.
We aim to give them peace of mind by helping them to mitigate those risks. Let me give you a couple of examples of how we are helping our customers adapt to the climate change, while we also safeguard Tryg's future business model. As Mikael have already told, we are at Tryg enhancing more pricing sophistication. That is very clear if you look at our new house and building insurance, where we have went from using only historical weather data to now also looking forward-looking climate data and weather models. We also want to nudge our customers towards more preventive measures. That's the reason why we have sent out more than 800,000 text messages to relevant customers ahead of a forecasted weather event, advising them how they can prevent their, how they can protect their homes. 39% reacted on the received guidance.
Feedback shows that they really appreciate our proactive communication. Towards 2027, we will continue our work with prevention and climate adaptation of our products. The climate adaptation will be in line with the EU Taxonomy. People at Tryg is the last theme that I will dive into today. We are entering this strategy period with a very healthy organization. We have a solid foundation and a strong business performance. From a dedicated effort over the past many years, we have achieved strong progress in key areas. We have an engaged organization that is indicated by an engagement index score that is consistently above the industry benchmark. Diverse teams have been a strategic priority for us. From this, we have achieved a good mix of industry and non-industry competencies, as well as age and gender diversity.
I'm proud that we have increased our share of female leaders from 35% to 43% over the past five years. Last, we are good at retaining our talents. We have a strong talent pipeline, which provides us with the opportunity to fill our top leadership positions with our internal talents. Towards 2027, we will continue this strong development. Our commitment to this agenda will remain strong because at the end of the day, it's all about people. Thank you. Gian, I think you will guide us what happens next.
Thanks a lot, Lars. We take a short break, 10 minutes back right after 12:20 P.M. Thank you.
Great. Now we are getting ready for what I believe for some people in this room is the most important section. We are going into the financial and capital management.
That is in the safe hands of you, Allan. Here you go.
Thank you very much, Johan. Definitely, this is the most important part of today. In the financial section, I would like to deep dive into four key areas for Tryg. First of all, I'll give a further recap of our core insurance earnings targets towards 2027. Then I'll move to a deep dive into our return on capital framework. That is leading us naturally into an update on the investment activities, highlighting some very important changes. Finally, I will end this section commenting on our plans for shareholder remuneration. But let's start with the core insurance operations. We are targeting our highest-ever insurance service results, targeting the midpoint, DKK 8.2 billion, of the range of DKK 8-8.4 billion. This is driven by our strongest-ever combined ratio target of around 81%.
We find this as a strong continuation of an Insurance Service Result that has virtually doubled in the period from 2020 to 2024, primarily driven by the RSA Scandinavia acquisition, the related synergies, and of course, by all the strategic initiatives that we have realized throughout this existing strategy period. And as mentioned previously, as always, our Insurance Service Result and Combined Ratio targets, as always, assume current interest rate levels, current currency levels, and a normalized impact from large and weather claims. And going forward, we continue to guide DKK 800 million and DKK 800 million per annum for large and weather claims, respectively. Looking at the run-off contribution, it was higher many years ago when we deliberately decided to reduce our buffers. Run-off levels have been gradually reduced over the period. And lately, we have been printing around or just below the 3 percentage points.
For the 2027 strategy period, we are now guiding a run-off result of around 2 percentage points. We find this appropriate, considering that 93% of our portfolio as of today is retail, very diversified earnings streams. You should see the guided run-off level as a continuation of our conservative reserving approach in Tryg. Before I turn into the return on capital part of this section, I would like to wrap up on the impact that is associated with our 2027 strategy, also in a balance sheet perspective. We presented the impact from our strategic initiatives as net numbers. This also means that any OpEx investments are already accounted for in the ISR impact. Regarding CapEx buildup on our balance sheet, we do expect a slight net increase of approximately DKK 300 million towards 2027.
Then I'll move to the return on capital section. Return on own funds is a fundamental part of our capital management in Tryg. Ultimately, we optimize for shareholder remuneration in everything we do. In a Solvency II world, earnings do not equal dividend capacity. Earnings tie up capital that must be kept to maintain our solvency. This is where the return on own funds framework comes into play. There is a large variation in capital consumption across different insurance products. Capital-like products have a more direct route from earnings to dividends. The opposite goes for products with higher capital consumption. Products with higher capital consumption simply need to be more profitable to achieve similar ROOF. The important difference in capital intensity is something that you would miss by only considering the Combined Ratio.
Important to note that we are viewing ROOF as an important supplement and definitely not a substitute to combined ratio. For us, return on own funds and combined ratio simply go hand in hand and keeps us disciplined. And as said, we are focused on capital consumption in everything we do in Tryg. And that includes how we run our investment operation. And I'll get back to that as part of my update on the investment activities. Our return on own funds has continuously improved from around 15% back in 2021 to a targeted level at or above 25% in 2024. And we actually expect to print an even higher level of around 30% out of 2024. And that is before the impact from the de-risking activities and the related share buyback.
This improvement has primarily been driven by the increased earnings and the synergies from the RSA transaction and by the ongoing optimization of our operation. And we are now targeting a very ambitious Return on Own Funds target of 35%-40% in 2027. And as it shows here in this slide, the vast majority of this further improvement is driven by the asset de-risking followed by today's launch of share buyback of DKK 2 billion. Additionally, we also expect to grow in retail areas with low relative capital consumption during the next strategy period. And this will further support the Return on Own Funds level. And in this slide, we show ROOF among the Nordic names that are running business models that are pretty much similar to ours.
Most international players have different business models and are obviously running their business in different geographies, which typically makes the ROOF significantly lower. We remain firmly convinced that having a strong Scandinavian retail footprint with unique and stable earnings diversification reduces the capital requirement and helps achieve a higher return on own funds, all else being equal. And a return on own funds target between 35% and 40% clearly places Tryg among the most profitable insurers worldwide. And that is leading us into an update and a focus on the investment activities, highlighting some important changes. On the investment activities, we are today announcing a significant de-risk of our free investment portfolio. And just to recap, our total invested portfolio is split into two. First of all, we have the match portfolio, totally unchanged, made up of covered bonds hedging the interest rate risk of our provisions.
We have the Free Portfolio that ensures a Return on Own Funds. Now focusing on the free investment portfolio, we have during October and November sold around DKK 7.4 billion of risky assets and replaced them with covered bonds to reflect a less risky and a much more simple free investment portfolio. We believe that this change strengthens our position as a profitable, retail-focused, low-risk, pure-play P&C Scandinavian insurer. With the de-risking, we have released approximately DKK 800 million of Solvency Capital Requirement that is partly financing the extraordinary share buyback that we have announced today. The Free Portfolio is de-risked to reduce the volatility and to improve our Return on Own Funds. We have for many years invested around 55%-65% of our Free Portfolio in equities and in properties and in alternatives and corporate bonds.
With the de-risking, our free portfolio now consists of around 20% properties and around 80% government and covered bonds, which are very liquid, highly rated, and with an average duration of around two years. The free and the match portfolio now consists of approximately 95% highly rated government and covered bonds, up from 85% previously. Short duration, highly rated covered bonds have more than 10 times lower capital charges compared to equities and are charged multiple times lower than other risky asset classes, and this makes the return on own funds significantly higher for covered bonds relative to other asset classes. We have strategically been looking at this for some time now, and we have had an orderly internal process, and we have been looking very much forward to announce this move today. Important to highlight that properties is currently still a part of our free investment portfolio.
Long term, we do not expect properties to be part of our asset mix, releasing a further potential of around DKK 300 million of solvency capital requirement. Important to note here that we expect our exposure to be gradually reduced over time, very much depending on market conditions. In this slide, we show the most important benefits from the de-risking of our free portfolio. First of all, short-dated government bonds are significantly less volatile compared to other asset classes. I'll get back to that on the next slide. The lower volatility lowers the group SCR by approximately DKK 800 million or approximately DKK 1.6 billion of own funds at current solvency level. The new asset mix is associated with lower normalized investment return, but the significantly reduced capital consumption makes the ROOF for free portfolio increase from approximately 20% before the de-risking to around 40% after the de-risking.
And last but not least, our operating earnings per share will be largely unchanged as the lower number of shares following the share buyback program will simply offset the lower normalized investment result of approximately DKK 200 million pre-tax. And as said, the free portfolio is de-risked to enhance stability of our earnings. And in this slide, we show a backtest of the reported quarterly free portfolio results against the like-for-like investment result with the new asset mix as of today. There is a very significant difference in the stability of the results, and this is precisely what we are aiming for with this move. As we showed you previously, owing risky assets introduces volatility, which is simply not a good deal for shareholders in a Solvency II world.
In general, we are agnostic in terms of asset classes, but we are not agnostic in terms of normalized returns on the capital employed covered by our return on own funds framework. The past few years, there have been multiple shocks to capital markets, and we do not really want to be in a position where our solvency position or our dividend capacity can be questioned. Today's move is very supportive of this reasoning. We believe that our balance sheet is strong. We believe that our balance sheet is very resilient, and we hereby take the opportunity to repeat some important points around our risk mitigation strategies in Tryg. As announced today, we have significantly lowered our market exposure from the de-risking of our free portfolio. Our match portfolio, unchanged, is hedging the interest rate changes to ensure our ability to meet our future obligations.
This ensures low capital requirement and a very low overall interest rate sensitivity for Tryg. On that, we are protecting our solvency ratio from currency movements. And finally, we are hedging long-tail lines of business against inflation using financial instruments such as swaps. And in this slide, we show the pro forma Q4 2024 solvency ratio sensitivities. And as part of this restatement, you will see that we have removed risks that we are not exposed to anymore. It should be no surprise that spread risk remains. Our biggest sensitivity, as we now have around 95% of our total invested assets invested in covered and government bonds. And this sensitivity has increased modestly around 2 percentage points following the increased exposure from the 85% previously to the 95% as of today. Generally, low sensitivities due to a strong and hedged balance sheet.
Towards 2027, you should expect solvency development to be primarily driven by our organic capital generation and, of course, the shareholder remuneration. Two exceptions mentioned here today. Firstly, we expect intangibles to slightly increase by approximately DKK 300 million net related to IT investments towards 2027. And secondly, we expect our property exposure to long-term decrease, which over time will impact our capital requirement in a positive direction. We find that stability and predictability of the solvency ratio stands out, and we believe this should be a key valuation driver. And as the last part of my presentation here, I will comment on remuneration of our shareholders. To recap, today we are pleased to announce that we aim at paying ordinary dividends in the DKK 15 to 16 billion range between 2025 and 2027, and that we are launching a DKK 2 billion buyback following our asset de-risking.
And this brings the total remuneration communicated today to DKK 17-18 billion. And taking a step back, we chose a more conservative approach to solvency following the RSA Scandinavia acquisition, and we believe that this has served us very well in the ongoing turbulent macro environment. Long term, we expect to gravitate towards a less conservative level, and we will annually at year-end assess our solvency position, again keeping in mind our very ambitious return on own funds targets. And with the share buyback that we have announced here today, our next year-end assessment will be at Q4 2025. Our dividend policy is totally unchanged with a targeted payout ratio of 60-90%, but still very important to highlight, secondary to the aim of growing the annual ordinary dividends.
And the concluding remarks for this section will be that we find strong capital management as a key enabler for continuing Tryg's attractive dividend journey. And with this, I will hand it over to you, Gian.
Thanks a lot, Allan. I will now ask our executive board to come up, and we will start the Q&A session. Yeah, sorry. 40 minutes. We have two microphones. Two of my colleagues will be in the room. Please ask one question at a time and make sure that your voice is heard also for the people following on the webcast. I think Asbjørn, we can start with Asbjørn there has a question.
Yes, thank you. Asbjørn Mørk from Danske Bank. I'll limit myself to one question.
So, Johan, you said that the DKK 7.2 billion underlying result for 2024, obviously in the lower end of the range for this year, was sort of the starting point for the DKK 8.2 billion, which I think you've highlighted a couple of times, DKK 8.2 billion, not 8 to 8.4. And I guess this has been a period with quite a lot of headwinds. You also mentioned it yourself, FX, inflation, etc. And looking ahead, it seems like the sector, including yourself, is repricing quite a lot above claims inflation. So just wondering, what have you sort of applied in addition to the building blocks? What have you applied to sort of general market trends in the next three years when we sort of look at how the market is developing?
Can you hear me? Thanks a lot for that question, Asbjørn. I'll kick it off.
First of all, thanks for noting that I said 8.2. I think it's fair to assume that yes, by having a normalized ISR run rate at 7.2 for 2024, we are at the lower end of our range. We are in the range, but at the lower end of the range. Looking forward, we are not assuming the world to continue as it's been in the last three years. We are assuming some sort of a normalization of the macroeconomic conditions. So we are assuming sort of, as everybody else expected, we don't believe we have better insight as to where the world is going than the rest of you. We're expecting a normalization. We are seeing inflation in the markets tapering off slowly, not quickly, but slowly. We still see significant claims inflation that requires a need for repricing.
So, I think in general, we are looking into a more benign, but not completely as it was 10 years ago. There's still turmoil out there and there's still claims inflation. So, I think that's the market we're anticipating. So yes, repricing is part of the strategy also towards 2027.
Faizan has a question, thanks.
Hi there, Faizan from HSBC. I'll limit myself with one question as well, and sort of a follow-up on that one. I understand that you see the market as benign, but even if you see sort of a 3% inflation, you sort of get 10% growth in earnings over a three-year period. So that puts you at need at DKK 8 billion anyway. It doesn't feel like it's a great deal of allowance for your three building blocks within that. Are you effectively saying that you assume the market will be flat in terms of growth for the next three years in terms of earnings?
Good question. So I think it's a little bit too many simple assumptions. I think when we look at the group from a sort of portfolio management view, we alluded to some of the initiatives in Alexandra's point around the commercial excellence pillar, which is going to deliver DKK 200 million of bottom-line impact. If you add up those initiatives, we get above DKK 2 billion in top line. In addition to that, we're going to see, of course, repricing and other growth initiatives around the group. But I think if you double-click on each of the countries, they are on each of their own journey. So Norway is on a profitability journey, probably focusing more on profitability than top line.
Sweden, as Alexandra alluded to, will be on a journey of cross and upselling into a very profitable PA book, whereas Denmark is more on a sort of an optimization journey going forward. So I think when you add up these portfolios, I think having a growth assumption for the next three years of somewhere around 4%-5% would make sense. That's what we had historically. And I think assuming the same going forward is probably not completely off.
Youdish, a question.
Thank you. Hi. Youdish Chicooree from Autonomous Research. Is your combined ratio target of around 81% too conservative considering your normalized is already 81%? And on top of that, you've got DKK 1 billion of initiatives planned over the next three years, and I think that's worth around 2.5%.
And then finally, you've been raising rates ahead of inflation for quite a few years now, and I presume you plan to do the same going forward. Thank you.
Thanks for that question. Youdish, Mikael, will you go for that?
I'll start at least. And thanks for the question. I think when looking at the combined ratio, I think the first thing to start is just mentioning the 81% number. It's a very strong starting point, so first of all. And then when we look at the different components of the expense ratio and the underlying claims ratio, I think for both of those items, we are projecting those to be broadly flat or somewhat improving. So that's sort of how the composition is made up. And then I think I'll reiterate again what Johan said, because there will be a couple of different moving parts here.
There will be the Norwegian business, obviously, with an improvement journey, which is on, and that will continue in this strategy period. And there will be other growth areas where the profitability will be somewhat lower in the beginning. But then again, it's important to note as well that we are not only aiming to be a fantastic company in 2024 and 2027, but actually to be a fantastic company for a long period of time.
If I can just add one thing, calling us at around 81 combined ratio conservative is in itself amusing.
Mathias has a question.
Thank you, Mathias from Nordea. So my question is on the capital distribution part. After the Q3 report, I think you were quite vocal about that you wanted to lower the solvency ratio gradually over the coming years. Is that still a part of the plan? And what does long-term mean?
Does that mean that by the end of 2027, that we should expect the capitalization to be at the optimal level at that time?
Good question. Maybe I'll start with that. I think just taking a step back, as we both, Allan and I alluded to, having a conservative approach to our solvency position has served us very well. And the words we've chosen today, stating that long-term, we expect to gravitate towards a less conservative level, are a very deliberate choice of words. So we won't want to lock ourselves in. I think we've been living through three very turbulent years in our macro conditions. Nobody knows what the next three years will give us. So we're going to take a conservative approach. We'll be less conservative going forward, and we'll take it year by year in our annual year-end assessments. We don't want to lock ourselves in.
Our conservative approach has served us very well.
Vinit has a question.
Thanks. It's Vinit from Mediobanca, I'm sorry if I can do one and a half, actually. The topic is still initiatives. So for me, one thing is just back to the conservativeness topic. So when I look at gross versus net, for example, the scale and simplicity topic, it's quite a big delta there. And the reason I'm asking is not because you asked us not to look at it, but the reason I'm asking is that possibly you've kept some buffer there between those two. It's almost half, it's the net versus the gross. So I'm just curious on your thoughts on how you have been a bit conservative there. And just literally following up on the slide 41 from Mikael on the Swedish portfolios. So I'm always curious.
Sweden had a different book for very good reasons that the child healthcare for many years has been prominent. And so how much of that portfolio slide you showed us is just the fact that historically Sweden has different products in the market. So I'm just always curious on how much is that versus actually delta.
All right, thanks for that question that I somehow think was actually two questions. So I'll address the first one around whether there's a conservative element into the scale and simplicity pillar. And I do see where you're coming from in the sense that if you add all the gross initiatives there, you get to a bigger number. But I want to just emphasize that in this particular pillar, there is actually an investment need that is not accounted for in the gross impacts.
When we are cleaning up IT applications, when you are making up, reducing the number of product variations, there's an IT component and an investment needed. That's why even for the scale and simplicity, where the delta is the biggest one, there's no conservatism built in. We should expect the DKK 500 million and hence also expect the 8.2%. And for the second part of the question on the Swedish portfolio. Again, thanks for the question. So I think the Swedish part actually sort of consists of two things. I mean, one, which you alluded to, part of the Swedish business is the personal accident part, which should have a better combined ratio, also from the fact that it requires more capital.
But I think the second part is, and for all the sort of observant guests in the room here and on the TV as well, we saw that all portfolios were actually somewhere from the middle to a better place. So it's definitely not only around the risk mix. It's very much related to the processes that were built around portfolio management and which sort of covers all the different parts, regardless if it's PA or housing content or motor and so on.
Martin has a question.
Martin, SEB. We talk about, or you talk about Norway as being on an improvement journey. We have heard that before. Is there something else wrong in Norway, or is this a game of scale? Are you positioned wrongly in Norway?
Given that this RSA synergy period is now done and dusted, at least the DKK 900 million, what is the inorganic appetite in the Norwegian market?
Thanks a lot, Martin, for addressing Norway for us. I want to make it very clear to your point. There's nothing wrong structurally with Norway, and we have sufficient scale to run a profitable business in Norway. I think we've been pretty clearly stating for the last few quarters that we came into the year with an unacceptable profitability level in Norway. We're in the midst of actually fixing that, and I think we are very confident that you'll see an improving profitability in Norway from now on going forward. When we have sufficient scale to sustainably deliver a strong profit also in Norway.
That being said, in terms of our inorganic appetite, in general, we don't have a strong M&A appetite at Tryg at the moment. We have plenty of opportunities and potential within our current footprint. Should we have any appetite right now, it would probably be sort of an optimistic view on opportunities in Norway. So we'll have a look at any opportunities that might come our way, but we don't need it to run a profitable business in Norway. There's nothing wrong structurally with Norway. I think it's fair to also say, if you take a step back and look into the Norwegian market, we have on Tryg's side, we've grown quite a lot in Norway. That's always something that can have an impact on your short-term profitability. On top of that, Norway has been looking into an environment where there's been high inflation levels. There's also been weather impacts.
On top of that, you've seen the NOK currency devaluing, also creating an imported inflation level. So there's been many factors playing into Norway, but we're confident that we can run a profitable business in Norway going forward.
Jan Erik, a question.
Thank you, Jan Erik from ABG. I have one question regarding the profitability across the countries, because if you run the PA portfolio, which is sort of highly profitable in Sweden with a long-tailed business, how easy is it to replicate it into Denmark and Norway since it's not sort of already done there? It should have been plenty of opportunities for all companies to take that PA business to Norway and Denmark for the last 20 years since Tryg has had so successfully done it in Sweden. So why hasn't that not happened before, and why will it be a success now?
I'll start on that, and maybe Johan, you can add later on, but I think first of all, when doing PA business, it's important to have a really long-term horizon, because when the Swedish book was initiated many decades ago, obviously there was a growth from a quite low level, so this means that that's not sort of growing excessively in the beginning. It's also, which we know from distribution costs and others, that profitability is something that comes over time, but as Alexandra alluded to before, we have customer relationships that last on average 30 years, so it builds fantastic lifetime value as a result of that, and that's also what we take in. So I think that's one perspective. The other perspective is also it's a book of business which takes more competence and more insight to run relative to housing content, relative to motor, etc.
And now we actually have that scale, and we have that in-house knowledge, which enables us to run it also in Denmark and Norway.
If I can just add one thing to this, I think you're going through the right sort of short-term perspective. I think if you take a more strategic stance, expanding and scaling the PA business from Sweden into Denmark and Norway is not a short-term fix. It's not something that will pop up on the P&L in a big manner in the short term. This is us future-proofing the business, building up a very profitable business for the next strategy period. So don't expect this to grow excessively short-term, but long-term, this is about future-proofing our revenues.
Youdish, a question.
Hello again, Youdish from Autonomous Research. I've got a few questions on Swedish motor. Firstly, can you remind us why your market share in Swedish motor is lower than your national market share in non-life, firstly? Then secondly, how are your competitors reacting as you try to gravitate to a higher share of the market? And then thirdly, what is the medium-term ambition in this line of business in Sweden? Thank you.
I didn't quite hear the third question, sorry.
What is the medium-term ambition in terms of market share in Swedish motor? Thank you.
I think maybe Alex, do you want to kick this off?
I can kick it off, and then you can supplement. So if I start with the first part around the market share, right, I think we can see that throughout the past two decades, this market share has been monotonically decreasing, whereas it was sort of around the 20% level back in the day.
Now we are at around 15%. One of the key reasons for this has been, in our view, lack of investments into commercial activities that are more long-term focused. I think it's no secret that when RSA was owning Trygg-Hansa, it was the crown jewel of their portfolio in terms of margins and profitability. In our view, not enough investments. Now, when we look at the competitive response, I think for us, it's daily business, on the one hand, responding competitively and also seeing competitors respond to us. We will not do this as a big bang, very aggressive. We'll do this very controlled, slow, assess the market, but we believe there is room for us as well in this market because we don't have a large market share, right?
Then on your last point around market shares, we are not per se targeting any market share, as you also alluded to. Let's see what the competitive response will be, but ultimately we want to grow profitably.
Johan, do you have anything?
No. Claudia has a question. Jan
Erik has a question. Staying on Sweden, but back to the PA business, are you seeing any changes in terms of competitive behaviors by some of the incumbents? Is anyone becoming more aggressive, trying to grab share? As in Sweden PA is clearly where you need to defend market share, and it's a very profitable business. Thank you.
I would say the short answer is no. I think there will always be different ways of sort of trying to attack the distribution model in Sweden.
We are partnering with the, I would say, the absolute sort of number one in terms of pregnancy insurance and so on. But again, that's normal business, so no changes.
Faizan asks question.
Hi there, Faizan from HSBC again. Can I just turn to the capital sort of management? How do I think about the next three years in terms of the capital intensity of the business, especially if you try to pivot to a sort of PA business? Is premium growth a fair proxy now for SCR? And just attach that as well in terms of capital generation as well. You're not paying out 100% in terms of net income, and especially on an adjusted for intangibles. So that 195 should gravitate towards a higher number. That sort of goes against your long-term thinking.
So why is there not an additional special dividend in the forecast for the next three years?
Yes, thank you very much. Is the mic on? Yeah, yeah, it is. Yeah, thank you very much. I think you had two questions here, and I'll start with the last one. Alluding to our payout ratio as said, totally unchanged policy. But if you do the math, you will see that we are in the very, very high territory of the 60%-90% as of now. And as part of the capital management, we also need to finance capital-wise the growth that we have in our portfolio, and thereby we need to offset a few percentage points as well. And that will leave us to a sort of a build-up of just a couple of percentage points to our solvency ratio, all else being equal.
Then I mentioned the CapEx build-up and so forth. Of course, that will represent some kind of, you can call it a headwind, and then we have some tailwind probably from the provisions' portfolio. We are not amassing a lot of capital here as a starting position. We have a strong starting position, performing at around 195, and this is sort of the point from where you will see the few points ticking in based on this plan. When it comes to PA book, there's a huge difference in the product design, and Mikael can entertain for hours about that. From a capital perspective, it is so that the long-tail part of the PA book is in Sweden. In both Denmark and Norway, it's a short-tail product that does not capture a lot of capital.
You should not see this strategic focus area as something that will, I mean, tie up a lot of capital in our books, not at all.
If I can just add one thing to your initial question, you were saying why are there no extraordinary dividends or other extraordinary buybacks announced today? I think that goes into the term of them being extraordinary. We're not saying that will not happen. We are saying that at the annual year-end process, we'll assess our ability and look at our return on own funds targets, and we will make our decisions on that point. Not starting January this year, but on the back of Q4 next year. That's when we will have the opportunity to assess our solvency position. We were trying to be very clear upfront, saying we expect long-term to gravitate toward a less conservative solvency position.
Jan Erik, a question.
Thank you, Jan Erik from ABG again. When it comes to short and long-term claims trends, we have seen that the claims trend and frequency are picked up in Denmark. It has also in Sweden to some extent, and of course Norway. Looking at what you're saying or peers are saying is that the EVs have the blame. What can you learn and what can you learn short-term and long-term from Norway when it comes to EVs and claims trends and repricing, pricing of them? And how could you give examples, which you haven't really done today, about that type of sort of development, which we think is very important, both short-term and long-term?
Very good question, Mika. I think maybe you're the right to answer that. Yeah, I'll start at least.
I think the first part around EVs is, I mean, the profitability for electrical vehicles is the same as for fossil-driven vehicles. The only difference here is that the profitability improves over time, and that comes not from price increases, actually it comes from risk decreases that come over time. So obviously the electrical vehicle book has a lower sort of has been around for less years, and therefore there is a difference. But there is no profitability difference whatsoever. And then I think, I mean, as you said, yes, there are learnings from the Norwegian book of business. There are also learnings from the fact that we've had Tesla, for instance, as a branded car insurance in the Swedish market.
And maybe I could entertain also in that for hours, but I think the main part here is that when the electric vehicles were introduced and some new customers went on to electric vehicles, that meant also going on to cars with more horsepower. So that took a little bit of sort of customer behavior and learning into sort of driving cars with that kind of horsepower. But again, this is what we should be experts on. This is what we price for. This is what we risk assess. This is what we do all day. So that's what we do, and we will take care of that, making sure that we deliver the results that we need to and that we're presenting today.
Asbjørn has a question.
Yes, thank you. Two follow-up questions from my side.
First, Johan, you said quite a lot that you changed the business mix of Tryg in the last three years, and still you operate with a DKK 400 million range on your insurance service result. I guess you should have a more stable business now than you've had for quite some years. So should we read anything into this when it comes to reinsurance, I guess, with the price changes we've seen and how you would retain risk on your own balance? And then the second question was on personal accident. You said 11 percentage points lower combined ratio. You also had a slide saying there's a 10 times difference in capital charge. So could you, first of all, break up the 11% in terms of how much is acquisition cost on clients? I guess 30-year retention has an impact on acquisition cost and how much is claims.
Secondly, how does the return on own funds actually look in the sort of long-term or long-tail business that you have in Sweden?
Good questions. I will take the first question, then I'll pass it on to you, Mikael, for the second part. Linked to our mix of our book now having 93% retail, that gives us a lot more stability than we've ever had. Then you're saying, so why do we still have a range of DKK 400 million? I would argue when you look three years out in the world we're living in today, having a DKK 400 million range, plus minus 200 from the target of 8.2%, I think that's actually a fairly narrow range and a strong indicator of us having a very stable business and predictable business.
There's no link to any reinsurance or anything that implies that we need this range, but I think it's prudent in a time like this to have that range. I think personally it's a very narrow range for a company of this size three years out in the world we're living in. So I think don't read anything into reinsurance. And as for the second part, Mika, will you take a slide?
If I start with the 11 percentage points better combined ratio, that is something that comes then again over a long period of time, like we said before, sort of having the customers on average for 30 years.
And the profile here, I don't want to go into exact sort of details on the different years, but the profile is very similar to what it is for other clients and other products with sort of more distribution cost in the beginning, i.e., a worse profitability in the beginning that then gradually improves, which has a really good lifetime value for us. And then the second part, when it comes to ROOF and the return on capital, I'll keep it to that it's really good, but there are still parts of the business which are even better from a ROOF point of view, very much linked to what we and Allan described earlier, where this is a more capital-consuming product.
And if I should just add a few comments on that part, and I don't know if my mic is working again.
Yes. Okay, it is. Perfect.
This is actually why we are spending so much time on the ROOF and the capital framework as a supplement to the combined ratio because Swedish PA is a perfect example of a product where you could be, I mean, very impressed by the combined without just, I mean, if you're not taking into account that it ties up much more capital, it just needs to be more profitable in terms of combined ratio compared to the rest. So that was just to add on that.
Vinit, a question.
Thanks. I'll stick to one question. The solvency and the, or rather the asset change is, I mean, I can see your motivation to reduce volatility in the free portfolio, but I have a slight feeling that the match portfolio is also not just a very steady set of numbers.
As an insurance company, living with asset risk is part of the mix that you have to expose yourself to. I'm just curious whether in the quest for being a very low volatile company, you have probably sold all the upside and you still have volatility in the match portfolio. I'm just curious as to if you could share your thoughts on this. It's quite an action to suddenly sell all your free portfolio upside assets. Inflation is still uncertain, all those things. Just a quick number check there. I mean, DKK 7.4 billion assets sold, but roughly 10% capital charge saved. I thought capital charges on risky assets were higher because DKK 800 million is the SCR reduction from DKK 7.5 billion of assets sold. Just a quick check, I mean, shouldn't it have been much more?
Because equities go 30%-40%, real estate is much higher as well. So I'm just curious as to your thought process there. Thank you.
I think those are good questions. I think we see slightly different, and I think Allan will probably have a fir st stab at that.
Yeah, yeah, yeah, yeah. Well, and please chip in. I could start with the last part around the DKK 800 million SCR relief. That is the net-net number for the change in our free investment portfolio. And I think that based on the numbers that we have included in the slides, you should, and again, it is rounded the numbers, some of them, but you should be able to get very, very precise and very clear and very, very close to the DKK 800 million that will free up in the SCR. There was a lot of other questions in this one question.
Maybe I'll address the first point around whether we are selling off potential profits for the future, and I think it's important to remember who we are at Tryg. We are running a very profitable, stable business on our insurance earnings. When you look at the capital that any free portfolio will tie up, the returns on that portfolio is actually not that strong, so I think we want to focus our business on running a very efficient insurance business, and we don't want to tie up capital having investments on this side. Just to clarify, if you look back in time on some of the quarters we've had in the last three or four years of turmoil, we've had, even with a very conservative free portfolio, we've seen pretty strong drops in that free portfolio that we don't need with the profitability we're making on our insurance business.
So I think for many other operators, the answer would probably be different. For us, as a very profitable, stable operator, we do not need that profits from our free portfolio.
Asbjørn has a question.
Hi there. Just quick follow-up on the investment side. You've obviously taken a material change to your structure. What is the running yield on your fixed income portfolio in duration? And if you could just help with the reinvestment yield as well. Thank you.
I couldn't hear that. Sorry. Can you just repeat that? Sorry.
Sorry. What's the running yield on your portfolio now, the duration, and what's the reinvestment yield?
Okay. Yeah. I think that we have actually printed that in the slides about the yield. The duration is around two years for the free portfolio. And I mean, the two years is not just, I mean, a magic number.
If you look at our own funds, that is what the free portfolio represents, an investment of our own funds. You'll see based on the dividend cash flow that you will find, it will, I mean, be somewhat around a duration of two years. That's why we have chosen that.
Just from a strategic point of view, I just want to make it very clear that this is not a tactical opportunistic move. This is a strategic move for us to zoom in on our equity story to be a very profitable operator.
Matthias has a question.
Thank you very much. Just to follow up on the assumption on interest rates on the discounting part. So you say it's based on current levels. Is that current levels as what we saw in Q3, or is it based on forward curves?
I know one of your competitors was quite clear saying that their target is based on 2% discounting impact. So how should we think about that? And then secondly, if I may ask also about the run-off gains of 2%, which you guide for now, is there any specific things that we should keep in mind when seeing you lowering it to 2% instead of 3%-5%, which you had in the previous CMD?
Yes. I mean, starting with the discounting question, we have said today that we are targeting around 81% combined ratio based on current levels, and that is based on forward curves. And it's not very different from actually the level that we have printed previously around the 2.2% at this point. So around 2% at this point, that will be for you to expect on that part.
The other question was related to the run-off. Yes. I mean, deliberately, we came from a much higher level back in the days when we decided to reduce our buffers. In the last two years, we have been printing around 3% at this point. And actually, in the last two quarters, we've been more in the level of 2.5%. And now we have changed the guidance to 2027 to around 2% at this point. That is based on a totally unchanged conservative reserving approach and practice in Tryg. That is mirroring the portfolio that we have now with around 93% retail business, very diversified and stable earnings streams. So this is what gives the level of the around 2% at this point that we are guiding as of now. So actually, it's not a big change from the current run rate that w e have.
Jan Erik, ask a question.
Thank you for taking my follow-up. Just quick question around the return on own funds versus the PA book. You said that the PA book was not long-tailed in Norway and Denmark. So how is the product different? And why do you need then so much more required capital in this period to fund it if it's not as long? Is it long-tailed, or how should we read it? If I may have a second one, it's just about the repair cost because it's cheaper to repair than to shift a thing on a car, for instance. Is it different between the countries? Because in Norway, I cannot actually fix anything without costing it extremely high for just having a repairman coming. It's NOK 10,000, but it's much cheaper to fix it with a new thing.
So where is the sort of the equation around that, how to fix it and when to fix it, and is it different between the countries? Thank you.
Micke, do you want to take a question?
Yeah. Let's start with the PA one. So the big thing here about PA and the child insurance in particular for Sweden is that it's sickness and accident. So accident would be the traditional part that we have and have had in all countries for a long period of time. You have an accident, you get to pay out with X number of kroner, whereas the sickness part is more you have sickness, you have a payment that goes on for the time of the sickness, obviously with some caps included in that. The products in Denmark and Norway is more around sort of the first part, accident, and also keeping sort of the payouts fixed.
As for your second question regarding repair rates, of course, there are differences between the three countries, but they are similarly going in the same direction. I think the reason why these things happen gradually is that we need to work with our repair workshops. We need to make sure that the incentives are in place. We need to make sure that the competencies are in place to actually repair rather than replace. It's a matter of not being lazy and just ordering new spare parts, but actually repairing the spare parts that are broken.
That requires some time to adjust in our networks. Honestly, if you take Norway as an example, there's actually a big pull in Norway to have a sustainable profile. Repairing, not replacing, is the most sustainable thing and the most sustainable repair we can do. Norwegians have actually been pulling that for quite a long time.
Youdish has a question.
Thank you. Just a follow-up on interest rates, actually. Your combined ratio is stated based on current levels of interest rates. The market is actually expecting base rates in the Nordic region to fall by close to 200 basis points, I think, in the next 18-24 months. If that happens, do you downgrade your combined ratio target, or does that get absorbed within what you called your strategic initiatives, but stated at a gross level? Thank you.
So do you want to take that? I can also take a stab.
I think what Allan was trying to say is that our interest rate assumptions are based on the current assumptions also going forward. So if the market does what the market expects interest rates will do in the next 18 months, it will not have an impact on our targets.
Vinit. Sorry. One question for last. Who I remember about 10 years ago was presenting to us about how more and more customers have to go to the selected own network garages of Tryg rather than go in the open market for repairs. I mean, just as a group, do you think that those kind of very basic targets are still there, or you're too focused on getting some chatbots to help out? Because that's something on the ground. A car gets hit, you need to go to the right place. So I'm just curious. Thanks.
We have been working with our procurement processes for a lot of years, and that means that we also have IT systems that are actually helping our claims handlers to choose the best repair shops. So when a claims handler is actually handling a claim, they get some suggestions about which repair shop should they use for. And there we will look at the prices, and we will look at how they are contributing to sustainability and how many repairs they have and average claims cost, etc. So we are actually quite good in guiding our customers to the best repair shops.
Time for the last question. Jan Erik, and then Johan will wrap up.
Jan Erik from ABG Sundal Collier. Just one follow-up on the regulatory environment. You are regulated with the financial supervisory authorities in each country.
So, how much do they follow up on you when it comes to profitability per product? And how profitable could a product actually be at the end of the day? What kind of roof could they actually have per product before it becomes sort of not according to the law? Because since you sort of can print money, so how much money can you actually print there?
I don't think we're printing money, to be quite exact. But Mikael, do you want to go into the regulatory environment part?
I'll start at least. I mean, we're a regulated business. We were a regulated business yesterday. We will be a regulated business tomorrow. So that's just normal practice for us. I think that's the starting point. And I got that question before as well. So to what Combined Ratio levels do you think that the business can go going forward?
As we've shown here, we've shown solid improvement and stable improvement over a long period of time. We've now said that we will be around 81, which we think is a very both ambitious, but also very manageable level. Of course, it will not sort of decrease forever from that. When there are various analyses done, obviously sort of the financial supervisory authorities take in sort of the data that they need. We comply with that in every shape or form. I don't think there's nothing new in this. We are regulated yesterday, and we'll be regulated tomorrow as well. That's sort of just BAU for our business.
Johan, I'll leave it to you for the conclusion of our question.
Thank you so much, Gianandrea. I think we're getting to the end of our three-hour session here.
I just wanted to wrap up with what we believe is sort of the synthesis of not just the last three hours, but also the last 300 years. Who are we at Tryg? Why are we a special one? I hope it's very clear for you guys that we stand out as a pure P&C player with a heavy skew towards the retail business. We are only operating in probably the most attractive region in the world, Scandinavia. In addition to that, we are delivering and will continue to deliver best-in-class combined ratios. We're going to do that with a very low-volatile investment portfolio, even more low-volatile now with the de-risking behind us. And in addition, we have a very robust solvency position and a very predictable dividend trajectory. This is what we believe makes us stand out.
I think with that, I will wrap up today's session with one of my favorite quotes. I hope it's quotes too. It's from a guy called John D. Rockefeller. He loves to see the dividends coming in. So do we, and we'll make sure that they continue to flow out to you guys. Thanks a lot for a good session. I hope to see most of you for lunch now that is served outside in a few minutes. Thank you so much.