Earnings Call: Q1 2021

Apr 16, 2021

Everybody, my name is Gianandrea Roberti. I'm Head of Investor Relations at TRIC. We published our Q1 results earlier on this morning, and I have here with me Morten Hoeberg, Group CEO Barbara Apluckner Jensen, Group CFO and Johan Christensen Brammer, Group CCO. Morten, over to you. Thank you, Jan, and welcome from my side as well. We start on Slide 3, where we show the financial highlights of Q1. We clearly see a large positive swing with an increase of SEK1.4 billion in the pretax results, reflecting, of course, very, very different capital markets year on year. Technical result is up almost 12%, Driven by good underlying improvements, ALCA synergies and lower weather and large claims. Underlying claims improved 80 basis points, While flat in Private Lines, it improves strongly in Commercial and Corporate Lines, where improvements are more needed. Investment income benefits from good returns on equities in Q1, but do bear in mind that in this Q1, SEK 156 €1,000,000 positive is related to FX derivative contract that is actually related to the RSA deal and Little to do with the ongoing business. Solvency is reported at 8.99 Not very meaningful, but of course, including the rights issue and more appropriate SEK 180 adjusted for the rights issue. On Slide 4, we show a new method of measuring customer satisfaction. The advantage is that the new method includes both touch points, Like for instance, calling or going online to buy an insurance in a single touch point as well as now a full process, For instance, a claims handling from A to Z that could cover multiple touch points and multiple touch channels. The internal benefit is clear that we'll get much more data, many more data points and it will give us much more nuance to constantly improve our Future customer satisfaction. We're very pleased that the overall customer satisfaction improves from 83% to 84%. But actually underlying, there is a lot of variation. We see, for instance, that there's an 82% satisfaction on online claims Compared to, for instance, a 93% satisfaction when a customer calls our customer service in private. And all of that variation will give us a lot of data to create a lot of further improvements, which typically helps the retention rates and helps earnings. On Slide 5, we show the composition of the technical result. Group technical result improves, as I said, almost 12% to $7.51 positively impacted by improved underlying claims rates on Alkercintis. It should be noted, of course, that the economic activity in society was lower year on year, which has improved claims frequency in several products. Private Lines and Commercial SME performed very well in the quarter, Whereas the Corporate segment was impacted by an increase in large claims of roughly 10 percentage points year on year and also a lower level of runoff gains. But on the positive side, we've seen improved underlying claims ratio in Corporate due to both the price increases and the reductions in insurance exposure. And in particularly, we see this improvement in Corporate Norway, But also in Corporate, Denmark and Sweden. On Slide 6, we give a helicopter view of the COVID-nineteen impact. This Q1 total impact from COVID-nineteen was positive due to mainly a much lower level of travel claims. We've seen a somewhat higher number of motor claims year on year. But bear in mind the high growth in number of cars insured, Which means that all in all, the figures represent a slight drop in frequency on Motor. And over to you, Johan. Thanks, Morten. And on Page 7, we are showing an updated timetable of the RSA transaction, and it is essentially a rerun of previous time lines. I should add though that in Q1, we closed one of the largest rights issues in many years and successfully issued a new Tier 1 loan. We have already obtained approvals from different authorities, including antitrust approvals in Denmark, Sweden and Norway, and we continue to expect the Position to close in Q2, 2021. Turning to Page 8, We showed that the synergies from Elkek continue to be delivered according to plan. And in Q1, DKK28 1,000,000 was achieved in synergies, bringing us to a total of €204,000,000 In this slide, we detail the synergy split between claims cost and revenues according to plan. We are still confident that we will achieve the promised synergies related to the Alka acquisition amounting to DKK 300,000,000 in 2021. We also believe that we've learned a lot from the Alka acquisition And we'll be able to replicate these learnings in the RSA acquisition. It gives us additional comfort around the announced synergies of DKK 900,000,000 in 24. And with that, back to you, Morten. Thank you, Johan. And on Slide 9, we continue with the development shareholders' Remuneration. For the Q1 this year, we are paying a dividend of €107,000,000 per share, Giving a total amount of SEK 700,000,000. The quarterly dividend will be flat for the coming three quarters. Even if 2021 is an unusual year, both considering the equity accounting that will start in the second half of the year of the acquired assets, while we wait for the demerger, but also the bookings of restructuring and transaction related costs. As mentioned previously, our pro form a technical result will roughly double by 2024 from the 2019 2020 base. And the dividend trajectory will follow that path of roughly doubling, Making TRK a strong dividend stock also in the future. Back to you, Johan. Thank you, Morten. And that brings us into our next section, premiums and portfolio. And on Page 11, we illustrate that for Q1, top line growth was 6.2%, driven by growth in all segments. Private Lines is the most profitable area, and therefore, we are very satisfied with the growth in this segment 7.8%. Commercial had a growth of 5.3%, which was a combination of organic growth in Denmark. And for Norway, it was driven by price increases for especially data customers. Corporate showed a positive growth of 3.8% and was impacted by profitability initiatives in all countries. In general, it's important to stress that growth is not key in the corporate business. What matters here is improvement in profitability across all countries. Sweden showed a growth of 1.2%, driven primarily by price adjustments and organic growth. Turning to Page 12, we illustrate that Adjusting prices in accordance with claims inflation is very important and a key focus area, and we therefore closely monitor the development in average pricing. Profitability improvement is a combination of claims initiatives and price adjustments. The average price development shown is also impacted by A change in a large partner agreement. In Q2 2020, we did see a drop in the average price for house in Norway, which was ascribed to a reduction in prices for a very big partner agreement. This also impacts the development in Q1 2021, and therefore, We see a low average increase in price per house in Norway. Turning to Page 13, we also turn to Our customers. Customer focus is extremely important and customers' view of TRK is best monitored through the retention rates. For Private Denmark, we see, as expected, a drop in the retention rate as a consequence of a drop in the Nordia portfolio. We are satisfied that we have a net positive impact when looking at the Nordea and Danske Bank portfolio due to very strong sales to Danske Bank customers, But the new sale does not impact the retention level. Excluding Nordea, the retention rate was almost unchanged, But slightly impacted by the high inflow of new customers the last few years, which always have a higher churn the 1st few years. In Norway, we are very satisfied that we continue to see high retention even with high growth levels in the last few years. And for Commercial, We saw a flat development for both Norway and Denmark. And with that, over to you, Barbara. Thank you very much, Johan. Let's have a look at the underlying claims ratio development on Slide 15, where you should remember that this is excluding the impact of the COVID-nineteen claims. The group underlying claims ratio improved by 80 bps compared to the same quarter last year, while private was unchanged. Price adjustments and the claims excellence program, including claims synergies related to ALCA, are the main drivers behind the improvement, But also a rebalancing of the portfolio towards more private business supports the overall improvement for the group. The growth in the private business has been very strong for many quarters now. And as expected, a strong growth with a modest will have a modest Negative impact on the underlying claims ratio as new customers in general have a frequency which is approximately 3% higher than the portfolio in general. We are very satisfied that the initiatives in both commercial, but especially in Corporate Norway, supports the improved underlying claims ratio development. And also the Danish and Swedish corporate book demonstrate a strengthening profitability due to price increases that Johan just mentioned. Please turn to Slide 16. Here, we have updated the slide to provide the most recent development in our core markets. The Nordic countries, especially Denmark and Norway, continues to do comparatively well during COVID-nineteen compared to more large European countries. Lockdown and restrictions in the societies have been very different around Europe, so situations are difficult to compare. Hopefully, the acceleration of vaccination programs and the gradual reopening of societies will stabilize the situation. And to give you some insights, so far 10% have started the vaccination program in Denmark and 4% are now fully covered. It's slightly more Norway, where almost 6% are done with the 2 vaccines. Please turn to Slide 17 for the financial impact on our business. In Q1 'twenty one, the total impact from COVID-nineteen was a positive of DKK 77,000,000, primarily related to travel insurance with a positive impact of €54,000,000 as very few people were traveling and hence needed to use their Ordinary travel insurance. Lower motor frequencies also had a positive impact, albeit smaller. The comparable quarter last year was when COVID-nineteen broke out, and therefore, a very high amount of travel claims were recorded, Driving the overall very negative impact. On Slide 18, we go through the details on the large and weather claims as well as the run offs. In Q1 'twenty one, the level of large claims was similar to Q1 'twenty, But both quarters were slightly below a normalized level of around NOK 140,000,000. Weather claims were almost 15% higher in the first Quarter 2021 compared to the same quarter last year, with weather claims of NOK 130,000,000 primarily due to frost in both Denmark and Norway. In Norway, it was the coldest weather in January in the last 10 years, and the very cold weather led to a higher level of claims related to frozen drains. The discounting impact was slightly lower in Q1 'twenty one compared to the same period last year due to the lower interest rate level. The runoff was somewhat lower with 4.3% this quarter compared to 6.4% in Q1 'twenty And hence, in line with the communication of runoff between 3% to 5%. On Slide 19, you can see that the expense ratio for Q1 was 16.1%, which is flat compared to the same period last year. There's a strong focus on continuously finding efficiencies, including a more efficient distribution, which to a large degree contribute to finance the IT investments. In this quarter, there was a slightly higher number of employees to support the higher business volumes as well as an increase in analytical competencies. Please turn to Slide 21. At the end of the Q1, Truck had a total investment of approximately DKK 43,000,000,000. This overview illustrates the usual split between the match portfolio of just below SEK 31,000,000,000 and the free portfolio of around SEK 12,000,000,000. Overall, the investment approach is unchanged. If you then turn to Slide 22, you have more details on the actual investment results in Q1, A positive result of NOK 343,000,000 benefiting from good returns on equities and narrowing Nordic covered bond spreads. Treg's equity portfolio was up approximately 8% in Q1 2021 versus a minus of 20% in the first quarter of 2020, a very large difference that drive almost 50% of the difference in the normal investment result in the quarter. More generally, the free portfolio was impacted by good returns from equities as well as properties, while increasing rates in the quarter hit the fixed income returns. The match portfolio gained from narrowing covered bond spreads. Furthermore, as Morten also mentioned, In this quarter, TRK reports a one off gain of NOK 156,000,000 related to a derivative contract, a deal contingent forward, which we have entered related to the acquisition of RSA. I'm sure you're all aware that the very large difference versus comparable quarters in 2020 is driven by the outbreak of COVID-nineteen and the huge impact it had on the macroeconomic and financial markets in 2020. On Slide 23, you can see that TRK reported an unusually high solvency ratio of SEK 899 at the end of Q1, Boosted by the recently concluded rights issue of SEK 37,000,000,000 which we will be used to finance our part of the acquisition of RSA. Adjusted for the rights issue, we have a more meaningful solvency ratio at 180 at the end of Q1. Own funds were, as usual, impacted by profits and dividends and, of course, by the aforementioned rights issue. The SCR was approximately SEK 300,000,000 higher, driven by an increase in the market risk charge following the positive developments in the capital market in the quarter. It's important to note that we expect the solvency ratio to be between EUR 170,000,000 EUR180,000,000 at the end of Q2. This is based on an assumption that the acquisition is finally approved in Q2. And this also means that we expect the SCR to be at SEK 9,800,000,000 at that time. Finally, please note that we continue to expect a solvency ratio above 170 per year in 2021, as we have previously disclosed. Please turn to Slide 24. Historically, we have shown TRK's capacity in terms of additional Tier 1 and Tier 2 instruments. Q1 is seen as a transitional quarter, Meaning that the rights issue has been concluded, but the acquisition has not yet closed and hence does not yet impact our balance sheet. Therefore, as per Q1, the current capacity clearly is only temporary. We do expect to utilize most of our capacity based on expected Own Funds and SCR at the end of Q2, taking into consideration the time line for the closing of the deal. On Slide 25, we have shown you the main SCR components as in previous quarters. The main point is that the increase in the SCR is driven by an increase in the market risk following the positive equity markets development in the quarter. Looking at the overall SCR, it's probably not a surprise that the non life risk Is the biggest charge. When looking at the market risk, you can see that equities and spread risk are the ones with a higher capital charge. On Slide 26, we show the historical development of the solvency ratio. It's important to highlight the predictability of the solvency ratio As owned funds primarily are a function of profits and dividends, while the SCR is expected to be broadly stable, bar large movements in the capital That we have experienced in recent times. On Slide 27, you can see that the sensitivities are largely unchanged. Again, please note that the starting point of SEK 899 is hugely impacted by the rights issue and likely to be an isolated Q1 impact, assuming again that the acquisition closes in Q2. The main sensitivity relates to spread risk and is unchanged due to the fact that TRK holds a large amount of Nordic covered bonds. With this, I will hand over to Morten to give you an updated outlook. Thank you, Baba. And on Slide 28, we update our 2021 outlook. We still, unchanged, expect Technical result between SEK 3,300,000,000 and SEK 3,700,000,000, while we've updated the investment result following a strong Q1. Regarding transaction costs, it's important to note that approximately SEK 700,000,000 of the SEK 1,600,000,000 to be booked on the balance sheet have been booked in Q1 against shareholders' equity. And we still expect The full transaction to close in the Q2 and we will start equity accounting from that point And until the demerger where actual consolidation can begin. And then of course, as always, we Finish off on Slide 29 with our favorite quote from John D. Rockefeller. And with that, we are ready to take your questions. Thank you. And Our first question comes from the line of Alexander Evans from Credit Suisse. Please go ahead. Your line is open. Hi, everyone. Alex Evans from Credit Suisse here. Thanks for taking my questions. If I just start on private lines, So the slowdown in underlying improvement there, I mean, how should we think about this relative to the previous guidance? Because Obviously, that was 50 bps and now you said it's sort of below 50 bps, but you still got strong premium growth there. So I mean, Should we expecting a deterioration to come relatively soon? And then secondly, just on the Alco synergies, dollars 28,000,000 in the quarter, That's a little bit below the sort of the run rate that we should expect given guidance. Is that a reflection of the strong Performance in 2019 2020 or is it perhaps expected to come through a little bit later this year? And then just premium growth in corporate has sort of had a positive trend the last couple of quarters. I'm just interested to hear what's That's sort of the main drivers here. And perhaps, are you seeing less customer churn in Norway? Or is it sort of further increasing in pricing? Thank you. Hi, Alex. Thank you very much for your questions. If I'll start answering the question We had on the underlying claims ratio, it is correct that it is the first time that we report a flat development for the private. But I would also say that what you have seen over the last 12, 15 months is actually a move from 0.5 to 0 point And in the last quarter, it was 0.2, which is a very natural consequence of the high growth that we have experienced in the private segment for a very long time now. Bear in mind that new customers use their, you can say, insurance is more frequent. And usually, we say that it has an impact Of 3% more than the ordinary portfolio over time. So this is more or less an expected development. So that is basically what we are seeing at this point in time. We don't guide on future development. But bear in mind, this is a natural consequence of the very high growth. And then if I elaborate, you asked about the premium growth in Corporate. You're right that it is fairly positive this quarter. But I don't think that this means that we should expect sort of generally stable growth in the corporate segment. And if we look beneath The country numbers, there's actually quite a lot of variation. So if we see the Danish Corporate Lines, for instance, we see a growth this quarter of minus 4%. So at the moment, we see a mixture of higher acceptance in Corporate Norway, Which leads to higher corporate growth, reflecting the price growth, but actually still reduction in total exposure. And then that the actual the total growth in Corporate Denmark, including the price increases, is actually negative. So as a starting point, the price increases will pull up the growth and then the lapse will pull down the growth. And our own expectations is still that the net net of this will be slightly more volatile than retail, and we're expecting it to be slightly negative. Yes. And maybe I should answer your question regarding the LK Ascendid is whether they are sort of a little bit below what we Should expect. I think the way to look at the ALCA synergies that we finished we were supposed to finish 2020 with synergies of 150. We were a bit ahead of time at that time and ended up at SEK 176,000,000 We still expect to finish the year with full Run rate synergies of €300,000,000 and we don't see any delays or any risk around that number. And I guess at the same time, we See that the performance of core ALCA from an organic point of view, which is equally interesting, is clearly higher than So all in all, ALCA is delivering very strongly. Perfect. Thank you very much, very much. Thank you. Our next question comes from the line of Mats Singhal from ABG. Please go ahead. Your line is open. Yes. Mads from ABG here. And thanks for taking my questions. I have kind of 2 questions here. And going the 1 the first is going back to the I mean, to underlying claims and the acceleration you have overall Driven helped by the price increases with a 80 basis points drop in total underlying claims year over year. Is that kind of a new run rate we should expect throughout 2021? And Does it contain some effects that we have seen from some of your peers on house insurance claims going up Due to people staying at home and detecting water damages, is that an effect that is also part of this underlying drop That we see here in Q1 of 80 basis points. And then secondly, going to your guidance And the COVID-nineteen gains, especially on Sveril, euros 54,000,000 here in Q1. Are those gains Part of your guidance and I mean is there I mean would you what is your expectations for Q2? I guess travel gains could be quite good at Q2 as well. Is that something to take into considerations For your technical result guidance for 2021. Thanks. Hi, Mats. Well, again, thank you for the relevant questions. If we start in the first camp of underlying claims development, I would say that We are absolutely positive about the development that we have seen in the corporate segment, delivering the strong development. It is also supported by a positive development in the Commercial segment, but I think it's too early to say that this is going to be the new normal. I think, obviously, we are very focused on the profitability initiatives, and we're happy to see, as we also showed in our presentation, that the acceptance rate is It's relatively strong, but it's too early to say whether that will be a continued level. Regarding the effect from house insurance claims, I would say that is not something that has given us Any positive impact in this quarter. On the contrary, we see that, in particular, in Norway, we have seen Quite a lot of insurance claims, not to water, but related to frost in this particular quarter. So I would say we're very happy that we end here in Q1, but I think it's too early to say that this will be a new normal. And I guess we could add that when we look at the corporate business, then not only underlying is important, actually also the Exposure to large claims is important. We saw again in Q1 a single very large claim out of Corporate Denmark in the international portfolio, Danish company, what with factories in other countries. And that's a fairly good example of exposure where the large claim risk is too high. And that's why in Corporate, it's both Price increases, it is massaging the underlying downwards. We're pleased to see that happening at the moment. But we further need to reduce the large claim exposure because that creates too much volatility in the corporate segment. And then you also asked about COVID-nineteen and travel in the coming quarters. We saw that travel was positive €54,000,000 in Q1. In a normal Q1, we'd had 40,000 travel claims. In Q1 last year, it was 80,000. In Q1 this year, it was 12,000. And I guess now everyone is quite anxious to start traveling again. So being very clear on the predictability of this is not very easy. So there is some degree of uncertainty to that. But on the other hand, the numbers are not really large enough to move the needle materially compared to the total expected Technical result for the year. So but we'll see in the coming quarters. I think the summer will be interesting how many people will Travel and how many people will have to cancel their travel or be called back again. And that is a little bit of a wildcard for the summer, But the numbers are not really that large. And in particular also because I think most people are probably still reluctant to book their travels. So compared to last year, where it was a year where most people had already booked their summer holidays, that's probably not the case for this year. But we'll have to see, Mats. I think all of us are pretty eager to get out there and see other parts of the world. So Yes, sure. And thanks. And just to be sure on how you see this guidance, I mean, EUR 100,000,000 expected Increase on the technical result, then you would be expected to change the guidance. Is that correct? Sorry, you lost me on the SEK 100,000,000. Where do you get the guidance? Just to get I mean, when would you change the guidance? Is that more function of time or is it just, I mean, seeing EUR 100,000,000 higher technical result For 2021, then you would raise the guidance? Or when I think, obviously, when we have comfort that it's material enough, Then we will reconsider the guidance. But as a starting point, yes, we are ahead at this quarter. But as Morten was saying, there is a large Volatility related to large claims, and we simply don't know yet what will impact us for the rest of the year. And then honestly, Mads, as we said last quarter as well, we see 1 year and full year guidance as an event only for this year. And then After our Capital Markets Day in the autumn, we will return to having 3 year targets as opposed to sort of Very precise 1 year guidance. And we're not particularly fan of 1 year guidance, to be honest. So We look forward to that disappearing again. Yes. Okay. Understood. Thanks. Thank you. Our next question comes from the line of Asbjorn Morch from Danske Bank. Please go ahead. Your line is open. Yes. Hi, good morning. It's Aspreyen from Danske Bank here. A couple of questions from my side. First, going back To the underlying claims ratio for 2021, and Baba, you said that the 80 basis points is not what we should expect as a run rate going forward. But why isn't that the case? If I look at the synergies from Alika alone and on the good old Trick Before RSA acquisition, that I guess is 60, 70 basis points on your underlying claims ratio, the synergies from that alone. And then I guess, 10 basis points in underlying wouldn't be unrealistic to assume. So why shouldn't 80 basis points be What we should expect for 2021 versus 2020? I think as a starting point, the 0.8 It's somewhat above what we have seen in previous quarters and in particular, the fact that it stems from the corporate and commercial business. Obviously, you're right around the ALCA contribution, and we are very aware of that. But it's also coming down to how sustainable do we anticipate the The development that we have seen, in particular, in this quarter in the commercial and corporate space. And then I would add, Esper, that There's always a lot of moving parts underneath. And if we look at, for instance, the composition of private lines underlying, We see an improved underlying in Private Lines Denmark, but we actually see a slight deterioration in Private Lines Norway, Where particularly the house products in Norway is worse than anticipated. And some of that can be explained with weather and Some of it can be explained with some changes in claims behavior, but we do see a slight deterioration in Private Lines Norway. So that's why predicting precisely from quarter to quarter is a little bit tricky with that many moving parts. But we have a high ambition for underlying to continue to improve. I guess we're just trying to signal that it is not precise enough For us to say that 80 basis points is the precise number every quarter. And we'd like to see that we get our hands around Improving the underlying and Private Lines Norway again. Okay. But that actually leads me to another question because on Norway, you You say that or you state that house insurance prices are down 0.2% year over year. But then if I look at the development on the slide on the prices, I It's mainly actually due to the fact that Q1 sorry, Q2 last year had a price drop. And I guess, if we look sort of year over year trends, they will start Quite benign in the next couple of quarters. So wouldn't that sort of solve the issue for Norway? It will help the issue, but I think it points To 2 issues, I think it points to 1 that sometimes the agreement with a partner on pricing is of historical performance, then we change a price like we did with this one major partner in Norway. But actually, while we do that, There's an upwards trend on claims on house. So in a sense, there's a risk of a little bit stop go that we reduce Slice slightly in a period where the claims actually increased in House Norway. And of course, that's not meaningful. So I think we need to try to capture that in a more up to date manner and with sort of less stop go. And then I think also that the underlying Claims trends in House Norway is slightly more than that, and we need to make sure that we handle that well, Which of course, we are all on board doing and we will handle that. So a little bit of timing and a little bit of house claims in Norway that we need to handle And both are important. Okay. That's clear. Then on the Commercial and Corporate, we're looking at premium development here. And then especially the comment you had, Morten, on the expected the 4% negative growth through corporate premiums in Denmark in Q1. Is there any impact from the customer bonus from your owners being lower to 5%, does that have any impact in terms Of the acceptance that you see from the corporate and I guess to some commercial space for accepting price hikes? No, actually, I think that's a good question. And we were ourselves a little bit uncertain as to how that would play out. We're quite confident that private and SME customers wouldn't react and a little bit unsure in the corporate segment and also a little bit unsure in the broker Channel particularly. But I think our communication has been very good. We've had good dialogues with the brokers. We've had good dialogues with the corporate customers. And we've had virtually no negative reactions to that. We actually saw that a lot of the customers said, given that this is A year with a very sizable RSA Scandinavia transaction, they were actually very positive that there was a bonus paid anyway And virtually no negative reactions to the 5%. Okay. Fair enough. Then on Sweden, normally, I guess, we don't talk too much about Sweden, but I guess that will change quite soon. But if we look at the premium growth In Q1, 1.2%. So clearly, one of the areas you're not growing in and you state that is price adjustments and partner agreements. So what is not delivering at the moment in Sweden? I guess it's a little bit becoming a big point now that When you take RSA on board, so why is it that you believe will change fundamentally from, I guess, already from Q3? So I think we will hopefully talk a lot more about Sweden going forward and also a very different Sweden business. As you may recall, if we go back 1 year, we saw that the combined ratio in Sweden was too high. We saw in Q1 last year that we were sort of very close to 100% in combined ratio, And we are significantly better in Q1 this year. We saw, for instance, last year that pricing on Motor Sweden was not high enough compared to the claims development. And therefore, we've had a task To increase prices very significantly in the Motor segment in Sweden and also to reduce some of the exposure in Motor in Sweden. And what we see is that we almost double our insurance technical result Compared to Q1 last year. So the focus has not been on growth. It has been on price increases. And as a result of that, we've Seeing more of a customer lapse. And I guess you can see that also when we move into the corporate segment where we in general are increasing prices quite significantly. But actually Sweden takes the high score. And our change of prices in Corporate Sweden in Q1 on average was a 21% increase. So I think we're actually very pleased that profitability is improving in our own Swedish book, And we have expected a lower Swedish growth. And then in the autumn, we'll start debating the new and much bigger Swedish business and how we Manage both strong earnings and gradually to improve and increase also the trochanza growth in Sweden With more innovation and more new products. That's probably more than a quarter. It will take a while, but that's a more important long term journey. And Morten, if I could just add one thing with the focus on pricing and the cost on the lapse that comes as a consequence of that. There are actually commercial activities Offsetting that also in the Personal Lines business. So our Swedish Modena business has very strong niche brands, be it Bilsborg MC and Atlantica. And they are actually doing very well in a time of corona where people are spending more time on their boats and on their special cars. So our Nice brands in the Moderna business are doing very well offsetting some of the price initiatives that are creating customer lapses. All right. And then final question from my side on the retention. You mentioned that Your retention would have been 91.1%, excluding the Nordea lost customers from Nordea. Is it fair to assume that, that difference, the 89.9% that you have and the 91.1 1.2 percentage points, if I sort of do the backwards calculation, it means that basically 1 out of 8 customers that Leave you to Topdanmark, meaning that it doesn't seem to be that big of a drain to your Private portfolio, is that a fair math? I don't think we've published that number, but It sounds like you're basically just calculating backwards out of the total laps, how much is that difference? So I think that sounds roughly right. So I guess it's I agree with you that fundamentally it's not a big driver. But of course, it's different to the short period where we had both Nordea And Danske selling for us and no lapse. So now we have a very strong Danske selling for us. We're now up to 35 1,000 new customers with Danske, which is really strong. And of course, you cannot see that in the lapse ratio. You can only see the Nordea customers leaving. But you're right that it is not a major challenge. But of course, it does have a net net impact to retention rates. And that's why we try to specify that so that you can follow it. Another impact is, of course, that there are some customers who Take out their travel insurance. We also see that the sale of new travel insurance is down 35% compared to last year. We know that it will pick up again, but it does have some impact both on the lapse ratio and it also has some impact on the new sales that new sales of travel is 35% lower and there is some lapse of existing customers on Travel as well. All right. Thanks a lot. That was all from my side. Thank you. Our next question comes from the line of Yudhish Sikori from Autonomous Research. Please go ahead. Your line is open. You can go ahead. Your line is open. We'll go to the next question. So the next question comes from the line of Jakob Brink from Nordea. Please go ahead. Your line is open. Thank you, and good morning. I actually would like to start on something which is not specifically related Due to the quarter of the transaction, but looking around in the Nordics, it seems like inflation is picking up, especially on Everything that has to do with building materials and getting things done. Is that something you're experiencing? I'm thinking it's been quite a while since We've seen this level of inflation. Is this something you're seeing in the repair cost? And how are you preparing for that? Is it How supposed to price up in advance? And what exactly is going on? Thank you. I think that's a very good question, Jacob. I think Traditionally and historically, we made sort of fairly high level macro assumptions on What would be repair cost inflation? And I think 2.5 years ago or so, it became quite Clear that, that was simply too macro a way of looking at it. And since then, we are on a monthly basis monitoring typically with our procurement staff, who Monitors every single repair and every single repair contract and sees the mix between the underlying inflation In craftsman's salary, the underlying inflation in actual material and then typically the reduction of inflation that happens Because of our contracts and the deals we get in that. And then they use those trends to try to get ahead of the curve As much as humanly possible and feed that back to our pricing people straight away on a very continuous basis instead of sort of grow once per year. I think in that, we've been worried about the salary costs for several years. So we've been trying very hard to get ahead of the curve on that, both with the pricing and also with the contracts pushing the procurement contracts harder. And then we are seeing in several areas, and we've seen that for a while actually, That also the materials have been increasing in price. So yes, we do see it. But I don't think it's a very New phenomenon. I think we've actually been working on that for more than a year, methodology wise, more than 2 years, but also adjusting the prices Ongoing and trying to get ahead of the curve. So very much a focus area, but not a new focus area for this quarter. Thank you. Just one small follow-up. Do you have any sort of lag time? Is there any contracts to which the craftsmen have sort of signed That they will keep doing whatever kind of repairs for this and that amount for, let's say, half a year? Or is it just instantly changing when prices are changing? Typically, we can change it quite fast. There are contracts that are longer. There are, for instance, fixed Price contracts for various smaller repairs that run the risk that you're pointing to. But honestly, we're a big buyer. And if we see major changes, we tell our suppliers that we need to renegotiate and then we renegotiate. So typically, that is manageable. There is some lapse, but I wouldn't say that the lapse is large enough to meaningfully disturb our capture of inflation. Okay. Thank you. And then second question, a bit more detail. But Barbara, you mentioned SEK 9,800,000,000 SCR in Q2. Too. I guess that's correct, but the but that's up $400,000,000 since last time we you gave us an update. And you mentioned that this is coming from market risk. But looking at the sort of progression of your equity portfolio times 39%, 40% equity weight, which it is right now. That doesn't really give me that big of a number. So where is it coming from? Basically, I think what is missing in your calculations is the SEK 400,000,000 that we were up at year end compared to the original SEK 9 point that we had at the time of the 2.7 announcement because at that time, we had seen also a, you can say, Additional charge of SEK 400,000,000 in that time frame. So basically, agreed to the SEK 300,000,000 that we just talked about related to this quarter, but I think What you're missing out is the SEK 400,000,000 that we had increased at year end compared to the SEK 2,700,000,000 announcement. I did actually mean compared to the updated number, but okay. I guess we can take that later. On the dividend of SEK 1.07 billion, I guess that's I have one sort of unclarity left Here on going forward, so EUR 1.07 billion for every quarter this year. Going forward, how do you or what do you think in relation to Ordinary and extraordinary dividends. Is it the same as we've seen historically? And the payout ratio, will that be based on reported net profit? Or Will we start looking more at adjusted profit given the larger amortizations? Or yes, some clarity here would be nice. If I start by commenting, you can say the trajectory that we see ahead of us. Obviously, the EUR107 1,000,000 is what we Magnus Morten explained to be the dividend in all quarters this year. 2021 is a transitional year where you will have a lot of one off items impacting the financial performance. So it is not to be seen as the base for the future. Taking into account that we expect to be in a more normal future state In 2022, that is where we see a return to more normal dividend considerations. And obviously, as Morten was saying, basically, if you look at 2024, when doubling or expecting to double the Technical results that should also double the dividend capacity that we have. So that is, you can say, is something that I think It's fairly well iterated. And I guess we'll continue, Jacob, to have a view that we have An ordinary dividend following a certain trajectory, also giving the acquisition and then working with extraordinary elements on top. And then of course, even when there is a sale potentially of Kvaerner and Denmark, then there is an event We're, of course, looking at extraordinary payout would make sense. In one shape or the other? Yes. And based And so the ordinary, will that be based on the payout ratio, which I know is only second sort of requirement, but Is that based on the reported profit or adjusted profit? That would be according to the adjusted profit. Bear in mind, we will have significant intangibles impacting us, so that would not make any sense. And I guess, Jacob, Tangibles impacting us, so that would not make a lot of sense. And I guess, Jager, we the predictability and the trend of the total dividend Has always been more important to us than the payout as a percent of earnings. So we have the 60% to 90% target. We've often been at the The upper end of that, we've also actually been higher than that. So really predictability of the total payout is more important than the actual payout ratio. Thank you. That was all for me. Thanks a lot. Thank you. Our next questions come from the line of Percon Blanc from SEB. Please go ahead. Your line is open. Yes. Thank you. It's Per from ACV. Two questions from my side. The first one, Which is simple verification, EUR 156,000,000 gain on the DCF contract. Will that after the acquisition end up as higher goodwill? Or will it end up as you're getting more equity In the deal. I'm a bit surprised you don't use hedge accounting on this contract. Well, basically, the way that you treat a deal contingent forward, which this is, because obviously, when we entered into the transaction And that was at the time or just before the announcement of the SEK 2.7 billion. At that point in time, it's a fair value assessment Because the it has to be weighted according to the, you can say, likelihood of the transaction going through. Then at the time of the RSA AGM, where the shareholders of RSA approved the deal, then obviously, it changed to hedge accounting. So there is a timing dynamic, which somewhat changes over time and what you see during this particular quarter. So we are actually using a hedge accounting for the time from, you can say, the approval of the deal by the RSA shareholders. But this also implies that the gain you have booked right now at 156,000,000 That will end up as higher price you are paying compared to what you originally when you originally did the calculation? Yes, that's correct. And that's also So those went up in EUR 156,000,000 higher goodwill after the steel closing? Correct. Okay. Perfect. I just want to have those things. Then back to Asper's question on the Then back to Asbjorn's question on the 0.8% underlying improvement, whether that's sustainable. As Aspen also outlined, the Elk issued deliver some 60 basis points. My question is corporate. You gave some additional information at the Copenhagen Presentation after Q4 on the profit initiatives taken on the corporate book, Material price hikes or material profit initiatives taken, How much should we expect this to yield to the underlying combined ratio this year? And besides that, you have the guarantee business, With you some years ago, where it wasn't due, but the head of your guaranty business was telling us that they could run this at a sustainable combined ratio at around 60%. Last year, you were in the high 80s. Is that factored in a reversal to normal? And what should we see as normal for the guarantee business being after last year where you I think if we start with the guarantee business, Peer, it's absolutely correct that you could Say, on a longer term horizon, we see the combined ratio around the level of 60%. Obviously, right now, we have a Macroeconomic scenario where we do have an impact also on the guarantee business. Obviously, we're quite happy that we haven't seen more coming through than what we potentially had expected when COVID-nineteen broke out. So I think basically, we are obviously monitoring this very closely in terms of defaults amongst the customers we have. The business model is obviously that we have real insurance in place for the majority of the exposure we have. So over time, you should not expect this to be a new level of combined. But obviously, right now, you have a macroeconomic Scenario where you could even expect that it would be around the 100, but that is not the case. And I guess in the typical run rate, which will also be the Which are on rate pay of 60, which we believe historical data clearly supports that is a major negative component of reinsurance, Which basically means that we overpay for reinsurance in most of the normal years, which is included in those years combined ratio of 60, Which then benefits us in the macro the more challenged macro periods, which typically allows us to stay below 100, But clearly higher than the SEK 60,000,000 in those years. So actually, the real underlying combined In a typical year, it's actually substantially below €60,000,000 but then we overpay for reinsurance, taking the total to roughly €60,000,000 So nothing changed there. And then of course, we continue with the gradual growth. We see now that The outside Nordics exposure is now up to some 10%, and the vast majority of that is Germany. So it is still a very gradual and slow climbing up with international exposure, which is working really well, But in a gradual and slow planned process. I think as far as the Alka synergies and underlying is concerned, I'm not sure I didn't redo your math, but bear in mind that some of the synergies in ALCA is claims And some of the synergies are costs and some of the synergies are revenue. So I'm not sure if you did the math correct and only took the component that was claims. So just make sure you make that distinction right when you try to do that calculation. Back to the guarantee bids, what I actually asked about was whether there were any if you state that the improvement should be less than This is 0.8% for the full year, the underlying improvement. What does that imply with the guarantee That will continue at the close to 90% level combined ratio also for this year? Yes. We are saying that with the sort of elevated macroeconomic risk, we expect a high still continued high Full year combined ratio for the guarantee business. That's correct. Okay. Then what about the corporate business where you have taken Significant pricing initiatives now for the 3rd year in Europe. What should we expect of underlying improvement to that business? We see very clearly a strong improvement to the underlying development in the Corporate Norway business. And when you look at the smaller claims percentages alone, you can see that. But actually still, The commercial and corporate or the midsized claims and the large claims still creates volatility. So when we look at the underlying improvements, it's actually quite strong. But then we have this stochastic element, which is It's completely different to what you see in Private Lines and the SME space. I don't think we've published an Expected underlying improvement on corporate. I don't think we're going to do that either, but it's quite sizable. I think what Barbara said was mainly that It is slightly more volatile than typically what we see in the private segment. And I don't think we said that we couldn't deliver 80 basis points for the full year. I think we said that don't expect this to be a stable new level Because it is not that stable and 0.8 is higher than what we've usually delivered. It's too early to say whether that will be the new normal. We're not saying we'll not get there, but too early to promise that as a stable level there. I'm just a bit surprised on the corporate. Yes, you have some large claims, but when you look at the underlying trends, you have removed the large claims. Of course, there are probably still more volatility in the corporate business than in the other part. I'm just surprised that now we're in 3rd year with double digit profitability initiatives. And you are still not really willing to promise that we should see Clear improvement contributing to the overall group improvement from the corporate business. I think that's a fair pushback, Per. And then I think, Honestly, we're used to most of the underlying improvement coming from the retail segment, where you have a ton of data, You have a lot of predictability and you can see exactly what's going to happen. And their corporate is just a completely different animal. And really no two customers look at like each other. But you're right that when we exclude the larger claims, We will see the underlying improvement. I think you probably just hear us being less bold In an area where data is a lot more tricky than in the retail segment. So we have zero doubt that the underlying in corporate is improving, because we are pushing through price increases. They're very sizable. We are Using the large flame exposure, etcetera. But at the same time, working with underlying as a concept in Corporate Lines is just Data wise, a lot more tricky than working with the same concept in retail. Plus, there is an additional fact, Peer, that it's not all Corporate customers that have an annual renewal. Some of the contracts are 3 year renewal processes. So you can say, in that respect, It might be that we had some customers that we adjusted for 3 years ago, but that was not enough, so to speak. So it's important to bear in mind that it's not an Annual renewal of the full corporate portfolio, but you will see this coming in gradually over time. But again, it's the 3rd year in a row that you are taking these initiatives. Yes. Absolutely. But you can also say that we have Become more bold in what we adjust for now that we did in the 1st year, so to speak. So no doubt, Per, about the trend. No doubt that it is positive. It will Continue to be positive. I guess we're just saying be cautious on the precision and the predictability. That's the only thing we're saying. Okay. Thank you. Thank you. Our next question comes from the line of Jon Benham from Morgan Stanley. Good morning. Thanks very much for taking my questions. Firstly, just returning to Guaranty. What's your latest expectation for how the guarantee business will perform as the financial aid package is removed? I think you're saying kind of High 80s call this year and then maybe returning to the long run kind of 60% level next year? Or are you thinking about a drag into 2022 as well. And then just kind of how is your exposure and reinsurance coverage for guarantee change since it was started last year? Thanks. Well, thank you very much for that question. I think as a starting point, obviously, we see that macroeconomic Expectations are turning. So you start seeing significantly more positive growth expectations for the coming years than what we were looking Just 3, 4 months ago. But I think it's very important to bear in mind that corona is not or COVID-nineteen is not done. It will be a macroeconomic environment that probably will see some swings back and forth Until we are all, you can say, immune globally. And that will obviously have an impact on the Timing and the length of, you can say, the current environment that we're in right now. Obviously, the packages have been a large Support during 2020, where we have actually seen less defaults than usual in the customers that we are dealing with. But in general, we see things coming back to more normal levels now. And obviously, with the growth Expectations that start to prevail. We can be hopeful that, that will be the way the world develops from here, but we just don't know yet. And I would say on reinsurance, we have a combination Of risk attaching programs that are proportional and then risk occurring that is typically the Test programs, so there's a different period cover combination in the reinsurance. But I think I would say overall that We've never actually had any challenges placing our guarantee reinsurance. And the simple reason is that Over time, the reinsurers make substantial amounts of money on our reinsurance programs. And the fact that we buy overly high amounts of reinsurance in all of the good years, which allows them to have a very handsome profits, Means that they are much less aggressive towards us when we see the periods where macro is more challenged. So we're not worried about reinsurance on currency, not at all. Thank you. And you obviously We had very few travel claims this quarter. What's happened to your travel policy count and premiums in Denmark and Norway? What we can say is that so there's an impact on existing portfolio of travel policies And then there's an impact on new sales of travel policies. New sales of travel policies is down 35%. Of course, it's a fairly small product, but still 35% does make a difference. So we see sort of in Denmark, for instance, €1,000,000 to €2,000,000 a week less in sales of new trial insurance. We're quite confident that will increase again over the coming quarters, but that's where we are now. We see less lapse of the current travel customers Most people keep it, but we do see a lapse that is measurable. Brilliant. Thank you very much. Thank you. Our next question comes from the line of Trifonas Stil from Berenberg. Please go ahead. Your line is open. Hi, there. Two questions for me. You mentioned an extraordinary dividend upon potential sale of And Denmark further down the line, could the buyback also be in the table given the foundation with the stated intention to increase the stake From 45% to around 50%. And the second question, are there any comments you can give us regarding the progress of the regulatory approval in the UK If everything is going according to plan. Thank you. Yes. We can certainly give you insights on that. Regarding your questions on the dividends, as we mentioned, extraordinary dividends is one scenario, share buybacks Is another scenario. And as you point out, that would probably be more helpful with respect to the position of the foundation. So obviously, we will come back with more details on that as it becomes relevant. Regarding the progress on the regulatory approvals, I think we are very comfortable with where we are right now. As mentioned, we are in place with the anti Trust approvals that are needed. So both in Canada, Denmark, Sweden and Norway, we have got the approvals in place. And what we are waiting for is, you can say, the regulators' approvals in a number of countries. Bear in mind, this is a global deal, So we need to have the approvals in place across the global activities of RSA today. Intact obviously has the dialogue with the PRA, and that is also moving ahead according to plan. So for now, we are Very comfortable that we should be able to see a closing within Q2. And then I guess the most unusual component of the structure There was really antitrust in Denmark and the splitting of Coda and Denmark fifty-fifty. So really pleased that we got So that approval in place, we always felt that it should be approved, but at the same time, we also knew that the structure was a bit unusual. So really happy that that's in place. Thank you. Very helpful. Thank you. And our last question comes from the line of Gerald Goh from Citigroup. Please go ahead. Your line is open. Good morning, everyone. It's Darryl from Citi, Citigroup. Just a few questions, please. So the first one is just around the Strong growth in private. I'm just keen to hear what are the new product areas that you've recently expanded into and kind of what is the outlook there? I think I've Somewhere in the presentation where you seem to be doing really well in patent sharing. So any more details around the new product lines would be quite interesting. Thank you. Yes. Thank you to you as well. I think really we're seeing several new areas. And let me just give you a couple of examples. We saw, for instance, that the dental insurance, which was new to Trek, has now doubled in Trek Classic. We're selling up to 2,000 new policies a month now. We actually took that business to Alka just by the year end. And we've sold 15,000 new policies in Alka on dental insurance in 3 months. So that's really very high. We also saw that When we go to Norway, it's quite normal that people have health insurance through their workplace. But then a bunch of people do not have any health insurance. We've added now a new simpler, slimmer version of health insurance to individuals in Norway that is not covered by their workplace. And then we've created a number of new products with Neto, the engineers in Norway, for instance, how they can increase safety in their winter cabins Summer houses and how they can monitor heat and water and things in their houses through that. And then we created a new travel insurance, where we tried to take some of the things that people were Not covered for in corona and make that more standard in future travel insurances. So if the Travel agent goes bankrupt if the plane is delayed. We try to include now vaccines in the new travel products, Medical hotline when you're out traveling, etcetera, etcetera. So I think we have a very good Pipeline of more products, sometimes it's just taking existing new products to all of the partner agreements and all of the countries and all the segments. And sometimes it's actually adding new products. And our view is that, that is continuing And also that the claims prevention component is continuing. So we see, for instance, now, It's been a while since we launched, for instance, alarms in Denmark, but it's really picking up in volume. So now we see that Every third time we sell a concert insurance in Denmark, customers choose an alarm as well. That's the highest it's ever been. We see now that every second time we sell house insurance, people choose a rat blocker. Rats are disgusting, but actually selling it as part of insurance is very good. So I think we have a very strong pipeline, both broadening what we have And adding new products. And we see that continuing as part of growing the top line and the bottom line more than the market. Great. Thank you. And just one last question for you. Just how much visibility do you have on ROCE's performance in the Q1? And is there any comments that you can share on that, please? Thank you. Yes. Sorry, we will have to wait with that till we get the keys. So we can't provide any insights on that at this particular time. Okay. No problem. Thank you all. Thank you. And we have a last question. There'll be a brief hold while we just registered your question. Okay. So the next question comes from the line of Yudhishikori. Please go ahead. Your line is open. Good morning, everyone. Hope you all are well. Good. I have just a few questions left. The First question is really on your Private segment and the growth you're registering at the moment. Can you help us understand how the 8% is between Price increases and volume growth. And then secondly, on the corporate, it's more a clarification. I think You grew 4%, but I think in your commentary at the beginning, you mentioned that your guidance is still for like a Basically, a premium contraction. Is that correctly understood? And then finally, on the RSA acquisition, I mean, if the transaction closes by the Q2 of this year and the demerger happens as planned in the Q1 of next year, I mean, in this interim period, do you have full operational control of the businesses? And can you start Extracting or realizing synergies in that period. Those are my 3 questions. Thank you. Well, thank you very much, Jurijs. I think if we look at the corporate contraction that you were asking about, I think it's an absolute fair assumption. In this particular quarter, as mentioned, we have seen A slight growth, in particular, in Norway. Some of that has also been related to, you can say, some one off price adjustments. And in Denmark, as mentioned, you saw a negative development of around 4%. So I think in general, you should expect that to See a flat development. We certainly don't pursue a massive growth. For us, it's a focus on the profitability. And also, if you look at the rebalancing of the overall portfolio of our company, what you have seen in recent years is basically that you saw Corporate and commercial being more or less equal. Now you see the commercial space being around 22% and the corporate space being around 17%. So you see that in the overall numbers. So I think that's a trend you should expect also to continue going forward. When it comes to the growth and the component of price, product and customer growth, It is varying over time. If we take Private Lines Denmark, it is roughly a sort of 40% Price, 30.30 on customer increase and product increase. I think the biggest volatility has Come from Private Lines Norway, where in 2020, there were 2 competitors that almost went belly up And a lot of customers searching for a new insurer. So last year, our the component of new customers Was overly large in Private Norway. We actually grew by 24,000 customers in Private Norway. And at Our growth was 12%. If you look at the Q1 this year, we're returning to something more normal where the growth in number of customers in Private Norway It's 2,200 customers in a quarter, which is, of course, a much more sustainable level, Some 40% of what was last year. So that is roughly a That is the story there, Judith, if that makes sense. No, thank you very much. And then on the our share position, please? Yes. You asked about 2 things essentially. You asked about whether we're going to have operational control over our assets that we will end up with Norway and also whether we can start reaping the synergies. And as for the operational control, we will obtain operational control over our perimeter. There are, of course, going to be limitations to that since we are at closing. The Danish, the Swedish and the Norwegian asset are sort of linked in 1 Scandi So there will be limitation as to how we operate and execute our operational control, but we will have operational control. And there will also, of course, be limitation as to what synergies we can start reaping. But our buildup to the CHF 900,000,000 starts with having a gradual Implementation of synergies already this year, and we still expect that to happen. So going back to some of the initial questions we've had around the time line, One of the benefits of having a time line that still stands the time the test of time, the outline we gave back at the 2.7 announcement, that means we have time to prudently actually start analyzing and planning for the execution of both the demerger, but also for the synergy harvesting. So we are in good shape here, and we still believe to have sufficient operational control and to be able to execute on the synergies. I think the simple version, Judith, is that We can do most of what we would like to do operationally and synergies wise, but there are things we cannot do. So for instance, when and there's data we cannot access. So for instance, when we want to change claims procurement contracts for Sweden and Norway, We need to show that we don't have access to their Danish procurement contracts. And today, they are in the same IT systems. So there are sort of workarounds that need to be done to prove that we don't access any Danish data. We can also work with hiring and firing From having the takeover in the summer. But for instance, we cannot work with the labor unions and the labor contracts Until after the major merger. So I think there's some degree of legal hoops there, But the majority of what we want to do, we can do. But there are some legal limitations until the demerger, And we know exactly what those are, and we need to make sure that, that is abided by. That will make our life a little bit more tricky until the demerger. But we can do most of what we want to do, and that is all according to how we planned it. Yes. And I think that's also if you go back The guidance we gave on the phasing trajectory, we had SEK 60,000,000 related to 20 21, acknowledging that there would be this in between Time period where we would not be able to do all the things that we actually want to. But from 2022, where we will have the full access, etcetera, etcetera, Then it ramps up significantly to SEK 350,000,000 from the SEK 60,000,000 in this year. Yes. Very clear. Thank you very much. Thank you. As we have no further questions, I'll hand in back for closing remarks. Well, this is Gjellandrea, again, I'll just say thanks a lot to all of you for very good questions. Peter and I, of course, remain around all day and beginning of next week if you need more. Thanks.