Hello, there. Pardon the interruption. We are now at the top of the hour. Please do let me know whenever you're ready to start. We currently have 13 participants. You're ready? Thank you so much, Mitra. One moment, please, and have a good call. Thank you. Hello and welcome to Gjensidige Forsikring's Q2 2025 results presentation. My name is Laura, and I will be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen-only mode. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero, and you will be connected to an operator.
I will now hand you over to your host, Mitra Negård, Head of Investor Relations, to begin today's conference. Thank you.
Thank you, Operator. Good morning, everyone, and welcome to Gjensidige Forsikring's second quarter presentation. My name is Mitra Negård, and I am Head of Investor Relations. As always, we will start with our CEO, Geir Holmgren, who will give you the highlights of the quarter before our CFO, Jostein Amdal, will run through the numbers in further detail. We have plenty of time for a Q&A after that. Geir, please.
Thank you, Mitra, and good morning, everyone. Let us turn to page two for comments on our second quarter results. I'm very pleased to see that our efforts to improve the results are continuing to come through. The results this quarter show a significant improvement. However, it is important to emphasize that part of this is due to natural variability inherent in the insurance business. The profit before tax was NOK 2,955,000,000 billion. General insurance service result was NOK 2,200,000,000 billion, significantly up year-on-year. Insurance revenue increased by 11.7%. The combined ratio declined to 79%, reflecting improvements in both the loss and cost ratios. It is very encouraging to see that the underlying profitability improved by 7.5 % points when adjusting for adverse development in claims and the changing risk adjustment in the second quarter last year.
Our investment generated returns of NOK 1,102,000,000 billion, contributing to delivering a solid return on equity of 31.3%. Our solvency ratio was 182% at the end of the quarter. Jostein will revert with more detailed comments on the results for the quarter. A few words about property insurance on page three. I'm very pleased to see higher profitability for private property this quarter as well, thanks to our persistent focus on implementing necessary pricing measures. It must also be noted that there were no significant weather events during the quarter. The second quarter is usually a quarter with the fewest weather events. In addition, we had fewer fires impacting both claims frequency and severity. Although claims for property insurance are highly volatile, we see a promising development in underlying profitability for this product line. Claims inflation has developed as expected.
Average premiums increased by more than 40% during the past year. These are necessary price increases, but having this in mind, it is particularly encouraging to see that our customers remain loyal to us and that we continue to attract more customers. Although these are difficult times to predict future claims costs, given ongoing geopolitical instability, rising defense and infrastructure spending, and potential trade barriers, we see a reduced inflation picture and lower over-the-term forecast for claims inflation, somewhere between 3%-5%. Based on this and the improved profitability for products so far, we have also dampened current price increases to just above 40% from this month.
Over to page four and a few words on motor insurance in Norway, which, thanks to the significant pricing measures over many quarters combined with a stabilization of claims costs, is an important driver for the improved profitability for private Norway, together with the improvements just discussed for private property. The upward pressure on frequency is gradually abating. Adjusting for the timing of Easter this year and the mild winter, the increase in underlying claims frequency continued its downward trend, resulting in an estimated underlying increase of only 1% this quarter. Our pricing will reflect a continued moderate increase in claims frequency. Claims inflation increased by 4.6% this quarter, within our expected range. Average premium rose by more than 9% during the past 12 months.
We are aware of the risk from tariffs and potential supply chain disruption on the cost for spare parts, but our short-term outlook is somewhat reduced. Claims inflation picture down to 3%-6%. Given the risk mentioned, the range is, as before, quite wide. Based on the downward trend in growth in underlying frequency and our more moderate forecast for claims inflation and the improved profitability for the product, so far, we have dampened our price increases to around 16% from this month. We are closely monitoring the situation for all our products and will respond swiftly should any of our assumptions change. Moving on to page five. We delivered high results across all segments this quarter. The strong growth momentum in Norway continued, supported by effective pricing measures, high customer retention, and an increase in the number of private customers.
As expected, our strategic focus on risk selection and prioritizing profitability moderated the growth rate for our commercial portfolio. Profitability improved significantly, supported by the favorable development in claims, but also reflecting pricing measures, efficient operations, and continued delivery from our claims cost-saving program. Our Danish operation also demonstrated improved performance this quarter. I am particularly pleased with the results for the private portfolio, reflecting our strong efforts to put through targeted pricing measures and enhanced operational efficiency. Favorable weather conditions also impacted results, although there is still an upside potential for retention in Denmark. It is encouraging to see the improvements for the private portfolio despite the price increases. The Danish commercial portfolio also delivered better results, although retention was somewhat down. We are placing strong emphasis on pricing and tightening our terms and conditions.
At the same time, we are implementing cost-efficiency initiatives, including process improvements and headcount optimization. The implementation of our new core IT system for our commercial portfolio is progressing steadily, and we look forward to realizing its full potential over time. We remain committed to driving continuous improvements across all areas of our Danish business. At the same time, we recognize that quarterly volatility may occur. Our Swedish operation continues to build on its positive momentum, showing sustained progress based on good growth and increased profitability. Turning to page six, the customer dividend paid by Gjensidige Stiftelsen is one of the most important ways we demonstrate our commitment to customers. It strengthens customer loyalty, continues to build trust, and reinforces the value of being a customer in Gjensidige.
Ultimately, the customer dividend sets us apart in the insurance market and helps us stay true to our roots as a customer-owned operation. This year, around 900,000 customers will receive a total of NOK 2.8 billion, corresponding to 11.1% of the premiums paid in 2024. Over to page seven. We continue to actively pursue our strong sustainability ambitions. As shown on this slide, we have launched a number of innovative initiatives that are designed to create significant customer value while reducing claims costs over time. I'm also very pleased to share that our AAA ESG rating from MSCI has been reaffirmed, reflecting our ongoing commitment to responsible and sustainable business practices. With that, I will leave the word to Jostein to present the second quarter results in more detail.
Thank you, Geir, and good morning, everybody. I will start on page nine. We delivered a profit before tax of almost NOK 3 billion in the second quarter. The insurance service result increased significantly to NOK 2.2 billion, driven by continued strong top-line growth and a lower loss ratio across all segments. A further decrease in the cost ratio also contributed to higher results. The improved results in private Norway were driven by motor and property insurance due to lower claims frequency, including a reduction in the number of fires. Accident and health insurance also showed improved profitability. The improvement from our commercial portfolio in Norway was mainly driven by property and motor insurance due to pricing measures and lower claims frequency. The results in both the commercial and private portfolios in Denmark improved this quarter.
The increase in the commercial portfolio was mainly driven by motor and accident and health insurance. The improvement reflects pricing measures and tightened terms and conditions. Travel and property insurance also showed improved profitability. In the private portfolio, the improvement was primarily driven by property insurance due to lower claims frequency and effective pricing measures. Motor insurance also contributed to the improvement. In Sweden, the increase in insurance service result reflected higher profitability for commercial property, private motor, and private payment protection insurance. The pension segment reported a higher pre-tax result, mainly driven by higher net finance income. The net result from our investment portfolios amounted to NOK 699 million in the quarter, with positive returns from all asset classes. We see good progress in our mobility services.
The transfer of profits from natural perils insurance to the natural perils pool and higher amortization and interest expenses had a negative impact on the other items line. The result from our Baltic business is recorded as discontinued operations pending regulatory approval for the sale. The result reflects improved profitability from an improved combined ratio, but with modest growth. We expect to close the transaction at the latest in the beginning of next year. Turning over to page ten, our strong growth momentum continued in the second quarter, with insurance revenues for the group increasing by more than 11%. This was mainly driven by pricing measures across the private and commercial portfolios in all geographies, solid renewals in the commercial portfolios, and higher volumes in Denmark and Sweden. The growth rate within private increased from the previous quarter and was particularly high in Norway.
This was primarily driven by price increases in all main product lines, but we also saw volumes increase for motor, property, travel, and accident and health insurance. I'm also very happy with the increase in our Danish private portfolio, reflecting price increases and higher volumes for all main products. Growth in commercial was more evenly driven by both Norway and Denmark. In Norway, the growth was driven by price increases for all products and solid renewals. As in the previous quarter, growth for some products within accident insurance was muted due to a continued focus on profitability improvements. In Denmark, the growth was driven by price increases for all main products and higher volumes for property, accident and health, and liability insurance. Insurance revenue in Sweden also showed solid growth, driven by higher volumes and price increases for motor and property insurance in the commercial portfolio.
Leisure boat insurance, distributed in cooperation with our recently affiliated partner, also contributed to the growth. Turning over to page 11, the group's loss ratio improved by 5.4 % points. Large losses are inherently random and stochastic. While unpredictable in timing and size, they are a natural part of the risk landscape. This quarter, these losses were slightly higher than our quarterly estimate, but still contributed marginally to the improvement in the loss ratio from the previous quarter. The difference from risk adjustment you can see on this slide is related to the sizable changes we made in the risk adjustment in the second quarter last year, related to the solvency ratio target. The underlying frequency loss ratio, excluding the discounting effect, improved by more than 10 % points, reflecting effective pricing measures across all the segments.
As Geir has mentioned, we also benefited from a favorable development in claims, but within normal volatility. Let's turn to page 12. Our commitment to operational efficiency remains strong. The group's cost ratio was 12% this quarter. The 0.5 % points improvement was driven by private in Norway and Denmark, thanks to both higher insurance revenue and a continued focus on cost discipline. We continue our work to optimize our cost base across the group to increase room for further investments in technology and growth. Over to slide 13 for comments on our pension operations. Our pension business delivered a pre-tax profit of NOK 201 million this quarter, up 8% due to a higher net finance income.
The insurance service result decreased compared with the second quarter last year, mainly reflecting the reduction in risk adjustment last year and lower results for occupational pension in the second quarter of this year. Net finance income was NOK 186 million, driven by running yields, lower credit spreads, and a decrease in shorter-term interest rates. The unit-linked business continues to grow, with the number of occupational pension members increasing by almost 10,000 to more than 329,000 at the end of the second quarter. Assets under management rose by more than NOK 8 billion - NOK 95.8 billion. This drove an increase in administration fees and management income, improving the net income from the unit-linked business. Moving on to the investment portfolio on page 14. Our investment portfolio generated positive returns for all asset classes, driven by running yields, lower credit spreads, and positive equity and real estate markets.
The match portfolio, net of unbinding and the impact of changes in financial assumptions, returned around 70 basis points, mainly reflecting lower credit spreads and the fact that investments did not fully match the accounting-based technical provisions. The free portfolio returned 180, 90 basis points, reflecting positive returns from all asset classes. We added three commercial properties to our real estate portfolio during the quarter. The return on this asset class was 7.8%, including a positive non-recurring effect related to the transactions. The risk in our free portfolio increased slightly with the real estate investments I just mentioned. A few words on the latest development of operational targets on slide 15. The customer satisfaction score is measured annually in the fourth quarter. We continue to identify measures and take steps to maintain a strong customer offering and high customer satisfaction. As Geir mentioned, retention in Norway remained high and stable.
Retention outside Norway remained broadly stable, supported by improvement in Sweden and the private portfolio in Denmark, whereas the commercial portfolio in Denmark experienced a somewhat weaker retention rate due to the pricing measures. The improvement in the digital distribution index this quarter reflects an increase across all components of the index, with the strongest improvement in digital service. Distribution efficiency is progressing well as a result of improvement initiatives in Norway and Denmark. Digital claims reporting increased during the quarter, driven by Denmark and Sweden, and automated claims in Norway increased as well. Over to page 16. We had a solvency ratio of 182% this quarter, down 6 % points from Q1. As mentioned already in the Q1 presentation, the acquisition of BioSure in April reduced solvency by approximately 4 % points.
Solvency to operating earnings and returns from the free portfolio contributed positively to eligible loan funds, while the formulaic dividend calculation, which corresponds to a payout ratio of 80%, reduced eligible loan funds by NOK 1.8 billion this quarter. This is significantly more than 25% of the ordinary dividend for 2024. The increased stake in the Swedish insurance agent Varsama reduced loan funds by approximately 1 % point. On the other hand, the increase in capital requirement during the quarter increased the share of the tier two loans that is eligible by somewhat less than NOK 300 million. We expect the full amount of that loan to be eligible by year-end as business volume grows. The capital requirement increased due to growth, changes in technical provisions, and changes in currency rates. Increased exposure to property in the free portfolio also contributed to the increase in capital requirement. I'll now hand the word back to Geir.
Thank you, Jostein. To sum up on page 17, we are encouraged by the progress across all geographies this quarter. Although it can partly be ascribed to natural variability in claims, there is no doubt that our pricing measures have been effective and are an important driver for the increase in the results. Our focus on operational efficiency remains high, and our capital position is strong, making us well prepared to navigate economic and geopolitical turbulence. We are on good trajectory, and we firmly believe that we will deliver on our financial targets this year and in 2026. With that, we'll now open the Q&A session of this presentation.
Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. We kindly ask you to ask one question per person at a time. We'll pause for a brief moment. Thank you. We will now take our first question from Hans Rettedal of Danske Bank. Open, please go ahead.
Yes, good morning, and thanks for taking my question. Congratulations on very strong results this quarter. I guess my question is just around private Norway and the claims development this quarter, where kind of nominally speaking, you're down 10% year-over-year. You say sort of some of that is driven by weather, and it also looks like quite a lot of it is driven by the fires that occurred in Q2 2024. I guess my question is a little bit around what should we, or what is your expectation going into the second half of this year for the sort of nominal development in claims? The second part of that question is also, I guess, as you're saying, you're kind of very confident about your pricing measures so far. The only uncertainty kind of lies within large losses, as I see it.
How kind of certain can you be on the NOK 2 billion guidance that you reiterate when you're at NOK 1.2 billion so far this year? Thank you.
Thank you, Hans. I think. Private Norway, as you know, the two main products for Private Norway are motor and property. If we refer to the slides that Geir used on page three and four, I think it is, we see our expectations for claims inflation going forward for these two main products of the Private Norway portfolio. We give a range there because these are somewhat uncertain figures, but that we are in this range around, yeah, 3%-6%, 4%-6% claims inflation going forward. The shift in the motor portfolio from fossil to electric will continue, giving us a slight increase in claims frequency for motor going forward. That is kind of how we see it.
We recognize that there is volatility, especially in the number of fires within private property from quarter to quarter and even from year to year, which we just need to live with, I think. The same goes for weather effects. I think that is so far we can go in giving you a view on the second half claims development for private Norway. Large losses are inherently random. I do not see the deviation from the guidance here as significant even from a statistical perspective. These could vary quite a lot. We are blessed with few weather-related expenses in the second quarter, but there has been a number of medium-sized losses spanning all products, really from property to marine to agriculture in both Norway and Denmark, without any specific pattern to these losses, I would say.
Okay, thank you very much.
Thank you. We will now take our next question from David Barma of Bank of America. Jolanis, open, please go ahead.
Good morning. Thanks for taking my questions. Firstly, on property particularly, it seems that in Q1, you expected a faster price increase and a sharper improvement of profitability in 2026. I'm just reading the slides you have at the beginning with the price increases and the frequency and severity. Has this changed a bit between Q1 and Q2? It seems like your expectations there have reduced a bit. That is my first question. Secondly, on the investment portfolio, real estate started contributing nicely to the free portfolio investment results. Are you at the target allocation to the asset class now? You also mentioned a non-recurring item in the real estate result. How much was that, please?
I do not think you should read the property slide as we have a lower expectations for improvement now. We have been lucky with a good development within the second quarter in terms of kind of volatile fires within private property. Our guidance on the pricing and the claims inflation and so on are fairly stable from the first to second quarter. I probably misunderstood somewhat your question there. Real estate on the investment side, we do not have any specific plans to do anything on the real estate allocation. There is, of course, that is a judgment that we will do on an ongoing basis, really. We have not disclosed the specific amount from these non-recurring items. They are more for technical nature, which is a positive effect on the real estate return there. I mean, the underlying development within the real estate portfolio is nonetheless very positive.
Thank you. We will now take our next question from Ulrik Jørgensen of Nordea. Jørgensen , open, please go ahead.
Thank you. Just one question. Is it possible to quantify the impact that lower claims frequency had on the for property in private Norway had on the combined ratio year-over-year?
As I mean, don't disclose that detailed numbers, Ulrik. I don't think I'll, those details. If you look at second quarter.
I thought so.
If you look at second quarter last year, we actually had a higher number of fires than you usually should expect if you look at the trend line in Norway when it comes to fires. In second quarter this year, it is definitely a lower number of fires. In addition to very favorable weather conditions in general. We will not try to quantify what it actually means on the combined ratio level.
A bit differently then. Are you happy with the overall level of the combined ratio in this quarter? Yes, you were lucky, but it is also roughly where you need to be in the summer quarter to reach your target for 2026. Is that correct?
Yes. I have to admit, it's a strong result. Based on some favorable conditions in the quarter, but also as a result of hard work over time, many different pricing measures, strengthening terms and conditions, and so on. Definitely been an organization doing the right things over time over many quarters. Now, this is part of the result as well. It's helpful when we talk about dividend capacity as well. It's definitely a strong result, and I'm very happy with the result.
Because I just see it as Denmark, you still want to improve Denmark, of course, on the retail side, and you're still repricing above claims inflation in Norway. I am just trying to think about sort of the run rate when all these price increases come through versus the tailwinds you had on the frequency.
Yeah.
Okay, but I understand you do not want to give that to those numbers.
Yeah.
All right. Thank you so much.
Thanks.
Thank you. We'll now move on to our next question from Thomas Swenson of SEB. Please go ahead.
Yes, good morning. If we focus on your Norwegian operations and adjustments you do yourself, those are the underlying picture on the combined ratio there in Norway. When you're planning more for further price increases, are you thinking that this underlying combined ratio that you see should be constant around these levels, or are you planning for further improvements in the Norwegian combined ratio?
As you know, Thomas, the second quarter is usually a good quarter when it comes to weather conditions. Also, if you look at the last 10 years, you will probably see that the second quarter is usually the best quarter, which also we have seen many positive impacts on that this quarter as well. We are having our financial targets, as mentioned in the presentation, and as you know, below 84% this year and below 82% in combined ratio next year. We are still having these targets, and that is what we work to achieve, I would say. We are still having pricing measures about inflation, but I also have to admit that we are dampening the pricing measures, as already mentioning from July, from this month. We will definitely follow the market condition and market dynamics day by day. Now to understand our competitiveness and to.
Keep up with the good position we have in the, especially in the Norwegian market.
Okay. Just a follow-up there. Do you see any changes in customer behavior among your Norwegian clients, or is it just stability across all segments there?
Yeah, retention rate's very stable. In Norway. I would also argue that they are stable in Denmark. Very happy to see that we have a retention rate of 85% in Denmark. Somewhat little, slightly down on the commercial side, but not concerned about that. Now. We are in a situation where I think all our competitors and all the players in the market are doing some heavy price increases to improve the insurance results. And that's what we still also have an impact on the market dynamics as well.
Okay. Thank you very much.
Thanks.
We'll now take our next question from Michelle Balatard of KBW. Please go ahead.
Yes. Thank you for taking my question. I'm just wondering, I mean, the improvement was very strong, and of course, we can see the claim frequency, especially in property, the improvement was also particularly strong. My question, I guess, is trying to understand the contribution from the pricing improvement that you're doing. To what extent this improvement of the pricing, I mean, how far are you in the process? If we look at 2025, do you still need to increase prices? I mean, yeah, I guess my question is how far you are in the process in terms of improving the overall pricing of your portfolio. Thank you.
We are still continuing to reprice higher than what we have seen and forecast on the inflation side. We still have, if you look at the frequency of motor Norway, it is somewhat a smaller increase in frequency by approximately 1% if we compare to the second quarter last year. We are still repricing higher than the expected inflation, but also say that we continue to follow the market dynamics very closely to understand our competitiveness and to see what is necessary to do going forward as well. Yeah. If we look at our on the revenue side, we have during the last five, six quarters since we started with all the repricing, or seven quarters ago, we have been very confident about the revenue development. As you have definitely seen in the past, there is volatility regarding the claims development. They also have to.
It will have some kind of volatility from quarter to quarter. We have to understand the underlying claims development and see some kind of stabilization before we actually dampen the pricing any more than we are doing at the moment. This is something we follow very closely, actually on a daily basis.
Okay. Thank you. I don't know if I can basically follow up on a second question regarding the investigation in Denmark on the pricing. On the indexation. Just wanted to know your point of view on this, also considering your growth prospect there.
Yes. Gjensidige has a number four position in Denmark across private and commercial business. We are being more challenging in the Danish market, you can argue. Having more transparency regarding pricing and pricing conditions, and also being more transparent about repricing to the customers. I think that's positive. It will have a positive dynamic and impact on the market conditions. You will probably see some changes in the Danish market going forward that the practice with using, having this indexation system where you do not give any notice to the customers if you are pricing according to the indexation. If you actually remove that, I think that will probably improve the transparency when it comes to pricing in the Danish market. If you look at our business in Denmark, we have good growth over time now. I think I'm very happy to see more improvements when it comes to profitability.
is definitely an upside potential going forward, but we have to work hard to realize that.
Okay. So a suggested change in behavior, if this investigation will lead to that, you see as a positive development?
Change in behavior will be positive, but the investigation has just started. The authorities will collect a lot of data from all players in the market. It is too early to say anything about the outcome on this investigation.
Thank you.
Thank you. We will now take our next question from Nitin Malhotra of Mediobanca. The line is open, please go ahead.
Yes. Good morning. The one question I would choose from my side is really, we have seen that Q2 was very good from lower fires, from slightly tapering frequency. I am just curious, what is driving the outlook improvement for the inflation? I think it is about one-point improvement in both motor and in private lines in Norway. I am just curious why we think that is happening. Is it because we just had a good quarter, or is it something else you have seen or are expecting? Linked to that, obviously, is that the pricing is tapering off from your side, which is following that outlook. I am just curious about the outlook for inflation, which is lower than the drivers. Thank you.
Yeah. Inflation regarding motor and property is a combination of labor cost and parts cost expenses, material expenses. We see we have been in a period, if you look at the last two, three years, especially in Norway, with quite high increase when it comes to labor cost and salary expenses. It's a more common expectation that this will go down over time, which is part of the inflation number we forecast. In addition, we also see, expect that the material cost expenses will somewhat go down. So that's the main reason for driving the inflation forecast slightly down. We also, as mentioned in the presentation, there are some kind of uncertainty when it comes to supply chain and more driven by geopolitical uncertainty, which also makes us having quite a wide range when it comes to the inflation forecast interval we are talking about.
Okay. Thank you very much.
Thank you. We will now move on to our next question from Fredrik Andersson of ABG. Fredrik, please go ahead.
Hi. Thank you for taking my question. I have a question about if you can make a comment on your current hit ratio. If you can comment on the decline in the pricing measures and split it into how much of it comes from us rolling one quarter forward and how much of it is from you actively taking down your repricing.
I can probably take the first one. It's a question about hit ratio when it comes to sales. That's right. As probably mentioned before, that's one of the daily kind of information we follow to understand our competitiveness in the market. On a daily basis, we have been in a situation where we over time have seen that 40%-50% of every phone call coming into Gjensidige is generating a sale in the Norwegian part of the business. We are still definitely within that interval. What the numbers I see now are not making me concerned about our competitiveness. If you look at the private segment in Norway, as mentioned today as well, we are getting more customers, and we have a very stable market position.
During the last couple of years, we have also seen that we have increased our market share when it comes to the commercial business in Norway as well.
Greg, could you please repeat the second question? I didn't quite capture what you were after there.
Yeah. It was about the repricing measures. It is down in property from 17.5% - 14.5%. In motor, it is also down. I was wondering how much of the decline is from us comparing a different quarter. We have one quarter ahead. How much of the decline is from you actively taking down the pricing measures?
Okay. Sorry. Then I understand. No, this is an active decision that we have already implemented in July, where the pricing increases are still significant compared to the estimate we give on the claims inflation, but a couple of percentage points lower than we've been repricing so far. It is not a rolling effect. These are active decisions we make continuously during the year.
Okay. Thank you.
Thank you. Once again, if you would like to ask a question, please press star one on your telephone keypad and kindly be reminded to ask one question per person at a time, please. Thank you. We will now take our next question from Youdish Chicooree of Autonomous Research. Please go ahead.
Good morning, everyone. Thank you for taking my question. The first question, if I could go back on the topic of claims inflation and the fact that you've moderated your expectations. I think you touched on the impact of tariffs and geopolitical uncertainty earlier on. Could you just elaborate what are your assumptions around that and whether the top end of the inflation range essentially is your expectation if some of your fears around tariffs, etc., materialize? That's my first question. If I could ask a second question, please, just on your pricing. I think the gap between pricing and severity is around 9-10 points. This is still very high. Is it actually that puts you in a position to potentially outperform your own target in the next couple of years? Thank you.
The first one, I mean, it's a very broad question. How will we suffer from any tariff or trade wars and geopolitical events? I think to narrow it somewhat down. On the motor side, when repairing cars in Scandinavia, there is very little import of actual spare parts from the U.S. So it's mainly a European-Asian supply chain, which we need to look at there, which takes maybe down the risk somewhat at the moment. On the property side, it's also a bit more kind of close-to-home type of materials that we're talking about. Also remember that on the property side, 75% of the claim, approximately, are labor-related costs, whereas only 25% are materials. You can have all kinds of effects.
General downturn in the economy leads to less demand for these types of materials that you use in property, which could also have a negative effect on the prices. They're getting prices down. This is a complex picture to analyze. That is why we take note of this uncertainty and have an interval in these claims inflation estimates that we give you. We give you the kind of what we have experienced every quarter. Of course, as soon as we see something different, we adjust our behavior according to that. I think that's as far as I'll go in these speculations now.
Okay. Thank you.
The second on the pricing side, Youdish, what kind of. What actually, if you can pinpoint what you're after there?
Hi. Sorry, sorry. I couldn't quite catch your question.
I think you had a follow-up to the inflation on pricing. Could you try to be precise on what you're really asking for there?
I mean, if you maintain that kind of gap between pricing and claims inflation, then already, if you normalize your combined ratio, you're below 80. That means if you maintain this kind of pricing, you probably outperform your own combined ratio targets, no?
Our financial targets remain as they are, both for 2025 and 2026. It's below 84 and below 82 on the combined ratio.
All right. Okay. Thank you.
Thank you. There are no further questions in queue. I will now hand it back to Mitra for closing remarks. Thank you.
Thank you. Thank you, everyone, for great questions, as always. We will be participating in roadshow meetings, conferences, and group investor meetings organized by brokers in August and September. Please have a look at our financial calendar on our website for more details. Thank you for your attention, everyone, and have a great summer.