Earnings Call: Q1 2021

Apr 22, 2021

Everyone, and welcome to this Q1 presentation of Gensidia. My name is Mitra Neegoi, and I am Head of Investor Relations. As always, we will start with our CEO, Helge Lajerboesta, who will give you the highlights of the quarter Before our CFO, Jostijn Amdahl, will go through the numbers in further details. And we will have plenty of time for Q and A at the end. Helge, please. Thank you, Mitra. Good morning, and welcome, everyone. I hope we are healthy and well. We have started 2021 on a strong foot, continuing the good momentum from last year. The pandemic is still in progress, and many countries, including the ones where we operate, have been hit by multiple infection waves, Followed by tough restrictions. However, thanks to tremendous efforts to roll out vaccination programs, It seems like we are bending the curve in many geographies. And although it is too early to see the end of the pandemic, It is encouraging to hear plans for gradual reopening of some societies. We are very pleased to see that despite the challenges and economic hardship, General Insurance continues to be highly valued by our customers. And thanks to our strong product offering and dedicated employees, we have managed to generate good results. Let's turn to Page 2 for some comments on our strong first quarter results. We generated a solid profit before tax kEUR1.597 billion, of which kEUR1.40 billion in underwriting results. Earned premiums rose by 6.1%, reflecting solid renewals and effective and differentiated pricing measures. Our combined ratio was 85.1%, significantly impacted by the unfavorable weather conditions during the quarter. The pandemic had a positive impact on our results this quarter, too, primarily related to travel and motor insurance. Large losses were slightly lower than expected, while run off gains were somewhat higher than the planned releases. Our loss ratio, adjusted for the unfavorable weather conditions and COVID impacts, improved compared with the Q1 last year. Our cost discipline remained strong, as you can see from the ratio of 14.5% for the quarter, And we generated a financial result of SEK556 1,000,000. Justine will afterwards revert with more detailed comments On the results for the quarter. Then turning to Page 3, a few words on our operations. Let me start with Norway. Operations are running very well despite the strict pandemic restrictions And remote working for almost all Jensidige employees. I am very pleased that we have managed to continue putting through necessary price increases In both private and commercial and at the same time, increased volumes and maintain our high customer retention. Being able to do this in this tough competitive environment is a strong proof of our solid value proposition to customers. We see the need for further price increases in Norway to reflect claims inflation. The challenging weather conditions this quarter Our strong reminder of the volatility we must be prepared for with implications for claims inflation. We have been raising prices for private property insurance in Norway well above index during the past couple of years, And we still have pockets in this portfolio, which need to be addressed before we reach a satisfactory profitability. We also plan to continue with significant price increases for certain pockets in the large corporate portfolio in the Commercial segment. With no signs of market contraction so far and a continued hard market, we expect Premiums in Norway to continue this strong development. We have had good progress in our Danish operations. Our efforts To consolidate and strengthen the Gensidige brand have proven effective with a record score for brand awareness among prospective customers this quarter. We see further upside to operational efficiency. And to that end, our cooperation with Tata Consultancy Services It's progressing well with prospects for promising results within claims handling. The new core IT system in Denmark is Currently in the last stage of testing before opening up for the first private products. We have spent some more time Then initially planned on this stage to ensure a successful and smooth launch later this year. In Sweden, we are fully focused on transforming our business to become a more digital insurance provider. Our ambition is to deliver excellent customer experiences through digital services and a high degree of automated internal processes. We are in the process of identifying and implementing a number of new measures, and we look forward to speaking more about this later this year. We see the need to grow in the Swedish market. To that end, we have recently acquired a well established insurance agent, NUHA Groupa, which will strengthen our position in the commercial market. Understanding market trends And Customer Needs is vital to succeed in establishing a strong position for Janssylg in Sweden. We have recently invested in Schist, A platform providing a flexible subscription solution for using and owning car. The offering includes a variety of services such as insurance provided by Jensidige, road assistance, car service and a second holiday car. We expect GIST to provide us with key learnings on mobility ecosystems and car ownership trends. Challenging market dynamics continue to put pressure on our profitability in the Baltics. We have a clear ambition to increase the results Through improving our distribution, pricing and claims handling processes. Then over to Page 4 And a few comments on our latest initiatives and research to support our sustainability goals. We strongly believe in encouraging our customers to make sustainable choices. Earlier this month, we entered into an agreement with the official Nordic Ecolabel, The Swan in Norway. We are the 1st insurance company in the Nordics to provide an ecolabeling of private house reconstruction In connection with claims settlement, we'd focus on low carbon footprint and a good indoor environment. We ranked number 2 in the insurance and pension category in Norway in the Sustainable Brand Index ranking for 2021. Competition is tough, and we have no less ambition than to get back to the top ranking. Earlier this quarter, we launched a new coverage for our health insurance in Norwegian commercial market in collaboration with our partner Brave. The extension includes access to an online mental treatment program led by a psychologist. Many companies have increased focus on mental health among employees with an aim to reduce pressure from stress And depressing following the conditions during the pandemic. Jensidige has recently renewed the sponsor agreement With the Norwegian Athletic Association, which through a number of projects, we continue to target physical and mental health. We have a strong focus on our employees who have shown high resilience and made tremendous efforts To maintain our strong operations through this pandemic. We are very pleased to see that the engagement scores Have remained on a high level so far. We pay high attention to their well-being and monitor the situation closely. We have introduced a number of initiatives to mitigate potential negative aspects in terms of physical and mental health conditions. As you know, the EU taxonomy reporting will come into force from January 2022. We will report on sustainability metrics across 3 dimensions: operations, customer base and product and services. Our focus is currently on transforming product design, tariffs and damage prevention initiatives to meet the criteria. The transformation will be carried out in a customer oriented manner and in close collaboration with academic partners. And with that, I will leave the word to Jostijn to present the Q1 results in more detail. Thank you, Helge, And good morning, everybody. I will start on Page 6. We delivered a profit before tax of SEK 1,597,000,000 in the first quarter, Compared to the loss of almost SEK 500,000,000 in the same quarter last year. The significant improvement was driven by our financial results, Which were hit hard by the financial turmoil last year. Our pension business also recorded higher results than the Q1 of last year. Despite strong growth in premiums, our underwriting result was slightly down year on year, reflecting unfavorable weather conditions in Norway Compared with the same period last year. The winter in Norway this year has been extraordinary cold with long periods of low temperatures in many regions. This resulted in significantly higher freeze and fire claims for property insurance in the Q1 compared with the Q1 of last year, Weather conditions were favorable. We saw some positive claims effects from the COVID-nineteen situation for all segments this quarter too. Adjusters for both the weather and COVID-nineteen claims effects, the underwriting result was up compared with the Q1 of last year, driven by private, Commercial and Denmark. Sweden and the Baltics reported lower results. Turning to Page 7. Earned premiums were up 6.1% or 6.4% adjusted for currency effects. All segments except the Baltics recorded higher premiums. In the Private segment, the increase was driven by price increases for motor, property and accident and health insurance. We also increased the number of customers. I'm very pleased with us demonstrating such strong competitiveness and maintaining our solid position in Norway. Lower demand for travel insurance due to the pandemic resulted in slightly lower earned premiums for this product line. The rise in premiums in the commercial segment was the result of effective pricing measures, solid renewals and portfolio growth, Including one new large contract. All the main product lines in this segment recorded higher premiums. Price increases and volume growth in the commercial segment drove the premium growth in Denmark. Premiums rose for most insurance products in the commercial segment. Price increases for workers' compensation have been substantial going into 2021 in response to index increases. Premiums in the private segment were somewhat down. We continue to see lower demand for travel insurance and multi insurance was negatively impacted by depressed auto sales. Earned premiums for our Swedish operation, mainly driven by volume growth in the commercial portfolio. This was slightly offset by a volume decrease in the private portfolio. Premiums in the Baltics were down year on year. There has been lower demand for travel insurance over the past quarters As a consequence of the pandemic, and we've had significant price pressure on Molten Insurance on the back of fierce competition. Turning over to Page 12. The loss ratio for the Q1 was up 1.7 percentage points to 70.6%. Large losses were up year on year, although the nominal level was somewhat lower than expectations for a quarterly average. And run off gains were somewhat higher than our planned release. We have estimated the increase in weather related claims In Norway, to approximately SEK 360,000,000 or 4.5 percentage points on the loss ratio. The low temperatures Caused problems not only for pipes, but also for vehicles. Our motor claims were not materially above the Q1 last year, As motor rescues are less costly than many other types of motor claims. We saw less travel activity and driving during the Q1 as a result of the pandemic. We estimate the positive impact on claims to approximately SEK130 1,000,000 corresponding to 1.9 percentage points on the loss ratio this quarter. This is 2 percentage points higher than the same quarter last year, then we have the negative pandemic impact of 0.1 percentage point. Adjusting for both these weather and COVID-nineteen claims effects, the loss ratio improved by 0.8 percentage points, And the underlying frequency loss ratio improved by 0.7 percentage points compared with the Q1 of last year. In terms of segments, I'm particularly pleased With the development in Private, Commercial and Denmark, all showing further improvement in profitability. We see a clear upside potential for the results in Sweden and the Baltics. As Sergi mentioned, we are on the path transform our Swedish business into becoming a more digital and highly efficient insurance provider. We're implementing fundamental changes, Laying the ground for becoming a strong niche player in the attractive Swedish market. Also in the Baltics, We have a clear priority of returning to a more profitable level with a particular focus on improving cost efficiency. We have already seen results of some efforts in the cost ratio, However, there is much more to be done. So talking about costs, let's turn to the next page. We recorded SEK1.11 billion in operating expenses in the quarter, corresponding to a cost ratio of 14.5% And 13.9%, excluding the Baltics. We have steadily brought down the cost ratio over time, thanks to a combination of growth in premiums, Cost efficiency measures and strong cost discipline across the group. We are pleased with the decline of our cost ratio in Norway to 11.5%. Denmark recorded a stable cost ratio of 14.6%. As Helgi mentioned, we are in the process of preparing for the launch The new core IT system. The system will allow more flexibility, increase our agility and enable further simplification of processes. We expect this to make a significant contribution to our cost efficiency in Denmark. Our Swedish business had a cost ratio of 18.4%. As mentioned, we are in the process of making significant changes to operations, and we expect to see further cost efficiency when the changes are implemented. The cost ratio in the Baltics came down 0.7 percentage points. Nominal costs were also down, thanks to cost saving initiatives. We'll continue to put through measures to enhance cost effectiveness in the Baltics. A few comments on our pension operation. The pretax profit came to SEK 45,000,000, up year on year, Reflecting growth in the business and good returns on the financial investment, but also the financial turmoil of Q1 last year. Assets under management continued to grow, reaching SEK 44,000,000,000 in the Q1. And rest return on equity was 13%. The solvency margin at the end of the year was 150.5%. So far, the introduction of individual pension accounts Has not led to any significant change in market dynamics. However, it is prudent to expect some pressure on profitability in the short to medium term. We and the other players in Norway are in the process of preparing for the transfer of policies, which will start in May. This is expected to take most of the year. The pension business is an important complement to our general insurance business in Norway, Particularly within the SME part of operation and generates cross selling opportunities. 67% of the customers In our pension business, we're general insurance customers as well in the Q1. Moving on to the investment portfolio. Tremendous fiscal stimulus packages and accelerated vaccine rollout in many countries have fueled optimism about the global economic rebound. Equity markets performed strongly this quarter with a sharp boost in appetite for cyclical shares and credit spreads continue to contract. On the flip side, fair of inflation and rising interest rates put pressure on bonds. Our investment portfolio generated a return of 0 point 9% in the Q1 with the Match and 3 portfolios returning 0.6% and 1.3%, respectively. We have a solid fixed income portfolio with the large majority having an investment grade rating. The rise in interest rates had a negative impact On our fixed income investments with long duration. While we improved the outlook for economic recovery, supported returns on our fixed income investments with credit exposure. Our equity investments and commodities generated good returns, reflecting the strong market development. Our private equity holdings had particularly strong returns this quarter. This was a result of both higher market valuations And successful transactions in some of the underlying PE funds. We have a good share of property investments, mainly in offices In the Central Business District of Oslo and with very low vacancies in the portfolio. We are very pleased with the return on our property investments, reflecting the strong commercial real estate Market in Norway. Over to Page 12, a few words about our successful issue of 2 subordinated loans back in March. We wish to utilize the attractive market opportunities and our loan capacity to ensure a more optimal capital structure. We issued 1 Tier 1 bond and 1 subordinated Tier 2 bond, both in amount of NOK1.2 billion. The Tier 1 bond Has a perpetual tenure, the floating rate coupon of 3 month LIBOR plus 2 25 basis points. And the TEU2 bond has a 30 year tenure, The floating rate coupon of 3 month LIBOR plus 110 basis points. Both bonds were settled on the 7th April. As announced earlier, we will redeem the subordinated Tier 2 loan of SEK 300,000,000 free and CDF parcels for Schickling in June. And we also have the intention to call the CDF for Schickering's Tier 1 loan of SEK 1,000,000,000 issued in 2016 later this year. Looking at our capital position on next page. Our capital position is very strong with a sales rate of 2 15% at the end of the quarter, Including both the subordinated loans, which were settled on the 7th April. The solvency ratio is up 16 percentage points from the end of Q4, Mainly driven by the issuance of the loans I just mentioned. Operating earnings and returns on the free portfolio also contributed to the increase in eligible loan funds. And as usual, we have the Formulate dividend of 80% of the result. The cap requirement is up The authorizing market risk, reflecting higher exposure to equities, both from non life insurance business and in the unique linked portfolio in our pension business. The proceeds from the new subordinated launch also led to an increase in market risk. Our own partner internal MOL gave us Solvency margin of 2 63% At the end of the Q1. Finally, a few words on the latest development of operational targets on Slide 14. I'm very pleased with the progress on the majority of operational targets this quarter. By delivering on these operational targets, we continue to improve our competitive position And lay the ground for future profitability. Both customer satisfaction and retention in Norway remain very high. The latter reflects a strong general renewal both private and commercial. The retention level outside Norway is slightly down for all three segments this quarter, primarily driven by temporary market contraction due to the pandemic. We have exceeded our target on sales effectiveness based on running 12 months at 17% compared to our baseline Year 20 16 'seventeen, mainly driven by higher sales in Norway. There will still be some volatility in these figures going forward. The share of what made the tariffs is somewhat up compared to the level last quarter. And we currently stand at around 53%. Progress is good and we'll continue to include more products going forward. In addition to further refining tariffs already included. On the claims handling side, digital claims reporting has gone slightly down this quarter, whereas the share of claims handled fully automatically have been stable. We'll continue to develop these digital services further through 2021 and onwards. We have reduced claims costs further and have exceeded our target this quarter. With Procurement and Process Automation making the largest contributions to the increase. I'll then hand the word back to Helge Thank you, Justine. To sum up on Page 15, we are very pleased with the strong underlying results We have delivered in this winter quarter. This is, to a large degree, a result of a solid brand, efficient operations and dedicated employees We put strong efforts in serving our customers every day. Structural growth is still on our agenda. Our solvency position is very robust. We are committed to having a strong capital discipline. Together with the encouraging results Outlook. This provides us with a solid base to deliver a continued steady and nice regular dividend curve also beyond 2022, When the planned run of gains will come down. Special dividends have been and will still be utilized from time to time to ensure and Efficient Capital Structure. Our outlook is promising. Our Nordic markets have shown strong resilience And the pricing environments, particularly in Norway and Denmark, are very good. This, together with our strong product offering And efficient operations lay the ground for continued strong research going forward. And with that, we will open for Q and A session. Thank you. Two questions from me. The first question on the Van Nuys. And a particular reason why 1 of what's higher this quarter than usual? And the second question on solvency. We have a very good solvent superstition at the moment, So if we assume that you're going to call bonds later this year, so what would you do with Thank you, Oge. Welcome. On the first one, we continue with the planned runoffs from around SEK 250,000,000 per quarter. And then each and every quarter, there will be volatility around those SEK 250,000,000 and that could go both ways. And that's based on the just ordinary process of setting reserves. Remember that we are talking of around SEK 30,000,000,000 Technical Reserve and parameter changes in the actuarial models may introduce small changes there. And there has been There has been some positive runoffs this year, But there is nothing particular about the run offs this quarter? Yes. So the message with the runoffs coming down after 2022 is still fine. I think the message is still the same that we have the planned run off gains of approximately SEK 1,000,000,000 per year throughout 2022 And that we continue to reserve according to best estimate. On the Sonzi A question. As you correctly point out, if you follow-up on our intention To redeem the Tier 1 issue of 2016, that takes out around SEK 1,000,000,000 or Approximately 10 percentage points on the Solvency ratio. I'd like to stress that what we did now was to utilize What we saw as a good market opportunity to issue new loans. And I think if you look at the spreads That we achieved here, that seems to be at a very competitive level compared to what others have done recently and what we also have done ourselves earlier. And that has been the intention all the way, to utilize good market opportunities to increase The utilization of the available capacity for subordinated loans And then how to spend or use that capital is, Matti, that will be resolved over time. Okay. Thank you very much. We will now move to our next question. Hello. Yes. This is Christopher Adams from Kepler Cheuvreux. And you said that there's a need for further price increases in Norway. How large do you expect these price increases to be? And what do you expect from claims inflation? Yes. Thank you, Adam. First and foremost, we are really Slide with the momentum in our Norwegian business, and we have increased competitiveness and strong growth. As I said, we still see some rooms for further price increases above claims inflation, which is on property, which is Around 4%. We think the claims inflation for motor insurance will be in the span of 3% to 5%, and we will also price Above that. But when it comes to motor insurance, if you look at our e earned premiums, we have a very balanced The mix now between price and volume effects, it's fifty-fifty. So we have a very strong and good Composition of volume and price effects. So I guess going forward, we will be just above claims inflation for Motor. For Private Property, we will be more than above still. And we still see some pockets also in the commercial book For price increases above claims inflation, but we are in a much better competitive position now compared to 1 year ago With a more balanced between volume and price effects. Can you be a bit more specific on the commercial side in terms of the price increases? It's some pockets, both for SME and large corporates. So But as you also have seen from the report, we have strong momentum in our commercial business. It's a hard market. We gain new customers. The retention levels is high, 91%, 92%. But it has been a long period behind us with soft markets. So still, it's pockets where we have to increase price increases more than Claims inflation, and we managed to do that without losing customers. So far, this is very it's a very good position also for the commercial business. All right. Thank you. We will now move to our next question. Good morning. Thanks very much for taking my questions. Firstly, how large was your acquisition in Sweden? What's the Good ROI. And what's your latest hurdle rate for maybe larger M and A more broadly? Secondly, it sounds like your year over year Do you think that the 0.8 percentage points year on year underlying frequency loss ratio improvement you're flagging this quarter is a reasonable run rate For the short term, based on your current actions and what's still to earn through? Thank you. I'll then start on the first one. I might need to Ask you to repeat it also, but I'll start on the you asked about the asset acquisition in Sweden of Nordea Ruka, which is a General Managing Agent. So it's not an insurance company. It's a managing agent. And we have not disclosed neither acquisition price And nor any ROV. There is no reserves or portfolio structure following this. This is not an insurance company, But they have a very competent and good staff with a good standing in the Swedish market, especially towards brokers. And say a loyal customer base, but it's not they're not an insurance company. So we will Take into these customers that you want at renewal. So yes, sorry about not being precise. About the hurdle rate, Our general hurdle rate, as we said, is 6% after tax, is our cost of equity. That's what you're asking. And of course, when we look at acquisitions, we will See how much value can we drive above that hurdle rate or that cost of equity? On the second question, I could maybe start And give you some more visibility regarding the underlying change in frequency loss ratio. And you mentioned 0.8%. As you have seen, it's still positive COVID effects In the Q1 of 2021, at the same level as we had in Q4, 1.9%. And you have also seen from the report that it has been a really cold winter in Norway and significantly Higher freeze and fire claims for property. And you have to go back to the year we listed the company to find its Similar year, 2010. We have estimated this to EUR 360,000,000, 4.5 percent Points on the loss ratio. The impact on the underlying frequency loss ratio was 3.1%. And so you also have large losses into this picture. So and we are very pleased with the Positive change in frequency loss ratio adjusted in Norway and Denmark. So if you look at the Private segment, we have a positive change, 1.9% positive change in underlying frequency loss ratio adjusted and for the Commercial segment, 1% And in Denmark, 0.7%. And talking about the future, and it's hard for us. We have commented that we have strong competitiveness, strong momentum, hard market in commercial market in Norway. And if you adjust for the freeze and the COVID, we have improvement underlying frequency loss ratio. So that's a good starting point for the next quarters. Yes. If I may add also, remember that When things go start to go a bit sour in insurance, it takes time to turn it around. The good thing about that is when things will be in a good Momentum like we are at the moment, it also lasts for some time. And as Helgi mentioned, if you take away one offs, we are or and COVID isn't a one off. As such, it's been the 5th quarter, whatever it is now. But There is a good momentum in our profitability underlying taking away these kind of Disturbing elements like weather and the COVID, no? That combination with growth, so it's a good situation. Thank you. And is it fair to say that your price increases have peaked year on year? Or is it that, I guess, you're saying with Your more corporate business that you're now talking about SME and some pockets of large corporate that need rate increases? Or because it's a hard market, Are you going to try and put through the rate increases even if you don't necessarily need them? I think what we're going to do is to put through the prices Increases where in some pockets we don't think the profitability meets our targets, which is ambitious targets. But in general, we Take out the price increases that we deem also possible here. So it's a combination and it's still a fairly in the commercial segment we're talking about, it's Still a fairly hard market, I would say, also driven a bit by a much harder reinsurance market, which probably most affects the top end of the commercial segment, But still trickles down somewhat to the remaining market. Thank you. We will now move to our next question. Yes. Good morning. It's Jan Erik from ABB. Just to be clear on your weather versus large losses. If I understand correctly that you have 3.1 percentage points underlying where the losses and 1.4 of those are It will take me to the notch level, if you can share by that. It's not 1.4 of those. It's 1.4 on top of the 3.1. So 4.5 percentage points altogether? Yes. So the Okay. Thank you. And then is there any news on the run up gains beyond 2022, which you can shed light into? Jan Nerg, I think the communication is just as it was last quarter. The planned releases ends at in 'twenty two And from 'twenty two onwards, it's best estimate. And we have also said that we Think you will live with positive gains instead of negative gains also after 2022, but we haven't given any guidance on that. Okay. And finally then on the website, the 4.5 percentage points, is All of that into housing or on the other side, also into cars, it sounds like your car, the motor insurance side was more Flattish level versus the last year, if you think about driving versus the weather trends this time around or the colder weather. Yes. Can you just add some more like into the following half, how it fits into housing and motor, please? This is only related to property, only property. Okay. Okay. Finally then on the Structural side, do you expect structural growth to happen? How should you do that? Special what? Structural growth And structural growth, Mark? Yes. The communication is unchanged also there. It's on Our agenda, we want to increase We strengthened our position in Nordic General Insurance, and we are prepared to look into any M and A opportunities that arise. And You know our hurdle rates, etcetera, etcetera, and we have a very strong financial position. So it's quite unchanged Also on that side, Jan Erik. Perfect. Thanks a lot for your answers. We will now move to our next question. Good morning. This is Neegoe from Porento. I was first wondering on the runoff gains in the quarter. Could you say something about which product these are related to? And how we should think about the run rate and the yearly communication? The high run rate The high runoff gains in Q1, should that reduce the expectation for the remainder of the year? Or is this with No impact going forward. The run off gains above the SEK250 that was planned is Spread around different lines of business. It's nothing particular about these run off gains. What we've done now Outside the €250,000,000 does not have an impact on the planned reserve releases for the remaining part of the year. Okay. Thank you. And then on a couple of the foreign operations there. Customer retention seems to be falling in Denmark. Are you losing market shares here? And how should we think about the growth outlook in local FX? I think the target remains the same out of 85 outside of Norway. But the COVID situation and the effect through travel insurance Has an effect on the retention rate as well because these are also policies that are not renewed. So it have a negative effect on retention. I think this is the main single reason there. As we talked about in the Baltics, we have the tough competitive Compared to situation of the especially the obligatory motor product, the motor GPL insurance, which also varies negatively on retention numbers. We are kind of trying to keep up profitability there and then lose some customers. But in Denmark, is it your understanding that you are maintaining your market shares? Market shares numbers in Denmark are extremely lagging. So it's but I think we have the impression that we are more or less in line With market development overall, but these numbers are, I think, more than a year Lagging. It's 1 girl lag, I think, Nager. The situation now in Q1 is it's actually very strong Sales and strong momentum in Denmark also. But the latest market shares do you have? We have the latest market shares, but I think the development So some old figures are sold, so it doesn't really our retention numbers are fresh. Yeah. I think you'll need to look at when the other companies report. Picking up on your commentary on the Baltics and also your previous Remind you that it takes a long time to turn around profitability. With the pressure you see on the multi product there, how long do you expect You used to turn that around? I mean, the 2 problems on the top line in the Baltic is COVID, which bears heavily on the travel insurance and then the competition on the motor side. I think some kind of main two headlines there. And COVID, your guess is as good as mine. On the motor, I think we are Seeing positive signs on the line, which means that we should be able to come back to you with positive results Overcoming quarters, but we'll just wait and see. We're not giving any short term guidance here. But we're still fairly confident that we'll Baltics will contribute positively to the NOK 750,000,000 outside of Norway, which we promised for the next year. Okay. And then finally, moving on to Sweden. You were referring to the loyal customers of Nura Lupa. Could you tell us roughly how much premiums these loyal customers currently have? I don't think we have disclosed that, Neegoye. So it's yes, I'm sorry, I can't You of course have them, but we haven't disclosed those payment figures. It's not a large But we will find out over the next few years. Yes. They say next 12 months really when the renewals. This is We will now move to our next question. Hi, everyone. Alex Evans here from Credit Suisse. I just wanted to follow-up on something you said, Helga. That 3% to 5% claims inflation in motor. I seem to remember you previously saying 3% to 4%. So is that rising claims inflation you've seen there? And then maybe just secondly on private property in Norway. Maybe if you could just give a bit of an overview of what you've seen competitors doing in there. You think you've been a little bit ahead and now competitors are maybe catching up, so there's potential for some volume growth there? And then just finally on Commercial, obviously, very strong growth. It looks like Commercial Accident and Health has been a big driver there. Could you just Some details on what's driving that. Yes. On the claims inflation first, I think we have You commented 4% to 5%, and now we have spent 3% to 5%. I think the main figure from Norway is actually 4% claims inflation. That's Maybe the estimate for that's the estimate for Property, and I guess that's a good estimate also for Motor Insurance. But it's more, I would say uncertainty to motor insurance going forward. It's new cars, as you know. And So therefore, I commented 3% to 5%, but I think 4% is a good estimate. And 4% is a good estimate for Property. And you know Personal Lines is more GE regulation, wage increase regulation. This is higher claims inflation when you compare to Denmark. So in Norway, we still have to increase prices above these levels to maintain the profitability level. And as I said, we have to increase prices Some areas more to strengthen the profitability. So I if anything from last quarter to this Quarter is maybe slightly reduced, around 4% is a good estimate, Talking about motor insurance claims at Perce? In terms following up on the property side, it's I mean, we have a fairly flat development in terms of number of houses that we insure, but fairly high price increases, which drives, of course, for A good premium growth there. Given that we put through price increases significantly above the expected claims inflation, it should mean That and without losing customers, it should mean that competitors probably are doing something of the similar. But this is hard to kind of This is because most companies like us use fairly differentiated tariffs. So it's It's not one market price for house insurance that is observable. But judging from our price increases and the market reactions, I think Probably, competitors are doing something similar. And for motor insurance, you asked if you are head or not Versus our competitors. As I commented, the premium growth for motor insurance, It's absolutely balanced fifty-fifty between price effects and volume effects. That means, I think, that we maybe are ahead of some of the Competition when it comes to price increases for motor insurance. And your final question was about volume growth Within the commercial sector, I think we have a very good starting point there because we have significantly higher profitability in that segment than Couple of our main competitors here, and our market share is higher within commercial than in private. We have an extremely loyal customer base here And a very satisfied customer. So it's I think the potential here for driving true price increases on average Still above expected claims inflation is absolutely in place. And here we have also, as we already commented, This is the total premium growth within commercial. It's a combination of volume and price, although prices Probably a bit more than 50%, but still, it's a combination. Thanks. Can I just follow-up on the commercial accident and health? Is there anything in particular going on in that line? Or is it just a bit volatility? That is mainly volume growth. Thank you. We will now move to our next question. Caller, your line is open. Good morning, everyone. It's Blair Stewart from Bank of America. I've got a couple of questions left. Firstly, you mentioned, Justine, about pressure in the pensions markets. Could you maybe just quantify that? I know it's a small segment for you, but are you able to quantify what margin pressure you would expect As the individual pension accounts rolls through. And I wonder if you could comment just generally on the M and A environment In the Nordic region, is there anything going on that you can talk about? Thank you. I'll give you a flavor of the movements within the pension business rather than quantifying it. It is So as we move away from what's been the main source of income, pension capital certificates and over to this new own pension account, We expect there to be a margin pressure, but also the volume is over time growing here. So I think longer term, this could still be positive for the our profits within that business, given that we maintain or At least maintain our market shares. So that is margin negative, But profitability, as such, will grow in line with increases in assets under management still. M and A environment, Hedger, Blair. As you know, the list has become shorter, but there are still further consolidation opportunities In our markets, and I guess it's always something going on. It's not always it ends with M and A transactions, but We see still opportunities, and we are actively seeking opportunities, and we are well prepared for Small opportunities and bigger opportunities. That's, I think, the signal from us. Thanks, Helga. Can I just ask one thing that's been troubling me on M and A? You've got a very good business that generates attractive returns on equity. I think your target return on equity Is this 20% or 16% excluding reserve releases? Yet when you talk about acquisitions, you talk about a hurdle rate of only 6 Percent. Just wonder, how do you square those two things? Should we just accept that M and A would be dilutive to your ROE targets? Or would M and A, with businesses that you buy, we expect it to move up to the 16% to 20% ROE over time. Thanks. I think the two numbers are slightly different. 6% is the cost of equity, the kind of the cost of New money put into a business, whereas the book return on equity is a 20% after tax that you are referring to. And If you take a look at, for instance, the one really large acquisition that's taken place in the Nordic market over the last 12 months, which is the acquisition of TRIG by of RSA by TRIG or the Scandinavian part. So that, of course, has a huge effect on ROE as a booked ROE. But whereas when we've done our 'seventeen, whatever it is, portfolio transactions and small transactions over the last few years, that is contained within the book ROE target. So it all depends. So I'm assuming by that, that your group ROE target Wouldn't change? It's unchanged. It is unchanged, but Yes. But if you were to do a sizable acquisition, let's say, by historical standards, Does that present a risk to your NOE target? I think I will comment on that when we get there, if we get there. Okay. Cool. Thank you very much. We will now move to our next question. Hi, there. It's Will Harkhalt from UBS. Just a couple of quick questions left. Just now from your way home, I'm just trying to understand what must be the underlying concern on this line with demand in prices above claims inflation. I We're achieving the profit losses that largely goes to one off. Is there any adverse claims trend, for example, I may not have Captured or is it just a pricing issue over a more sustained period? And secondly, Just thinking if one of the markets like the UK that's fighting pressure coming through, for example, because of COVID frequency being passed to the consumer, Is there any debate in the Nordic market? Is there any challenge on pricing to be had as a result? Thanks. The last question is easy to answer. It's no discussion and no pressure so far. First one, the line was slightly better, but I think you asked about private property or housing. Is that correct? Yes, that's right. Just kind of understand the exact drivers of what's causing prices to be expected to be above Claims inflation, is there an adverse claims trend for the long haul? I think we commented on this since around 2019 that there is But we haven't quite been satisfied with the profitability in that line of business. When we kind of Turned the corner on private cars. We kind of moved on to private housing. I said there is a need there to increase We get loss ratio down. And also longer term, we do expect kind of what do you call it, climate effects or at least increased volatility In weather, to be an effect that we need to price in on average. And then from each and every quarter, there will be Volody, in both directions. But on average, would you expect higher claims from for private housing due to Weather or climate. And this is also part of Orestana Strategic. And again, that we try to mitigate those claims effects Through claims prevention and preventive measures. But in the short term, we need to price this up We'll We'll now take our next question. Thank you. Johan Thalmann, Carnegie. First, on weather effects. I'm not sure if I missed any previous comments there, but can you break that down into different segments? And then secondly, you obviously have very impressive cost efficiency with a 13.9% cost ratio excluding the Baltics. But I'm just So a bit curious if you have any impact on costs from COVID-nineteen? Thank you. Maybe you can try to What I tried to explain, Justine, maybe it's easier. What you meant to say was that? No, I said the right thing, but you can With you. Yes. Now on the weather effects that we quantified per segment, it's EUR 316,000,000 overall that we said Yes, sir. And just to be open about it, both weather and COVID effects are estimates. We don't have an account or a claims Type which says weather or COVID. So this is estimates based on our analysis of the claims patterns. On the weather effects, we've only included The property related in there and with the kind of claims types that are typically related to cold weather. And it hits the Private and the Commercial segment in Norway as well as we have one large loss, Included in that the large loss above SEK30 1,000,000 is included in the Corporate Center in our segment setup. So it's on private, we included SEK 136,000,000 And in Commercial, NOK 107,000,000 and the remainder is in Corporate Center related to the large loss. And maybe comment the improvements for underlying frequency losses once again. Yes. Just add one explanation regarding the large loss. It's not one single Thing, it is that within our insurance program, we are allowed to accumulate within a certain time period all Claims related to the freeze. And that's why we kind of call this a large loss. It's also a large loss in the reinsurance market as such, Although not large enough to get us any recovery this time since it's below the €200,000,000 general Limit. If you look at the underlying frequency loss improvements for the Private segment And adjusting for both COVID and which is a positive and weather, which is a negative, we have an underlying improvement of 1.9 percentage points compared to 20. And for the commercial, we have 1.0 percentage points improvement compared to Q1 of 2020. And for the group as such, 0.7 percent on the frequency loss and 0.8 percent on the total loss ratio. Fantastic. Thanks for the numbers, Justin. No problem. We'll now take our next question. Just on the housing claims level, is it so that you have discovered more water damages Other than the fixed pipes, etcetera, in the housing? Or is it because people are staying at home, they actually detect More things at home, is that a trend you have been seeing of late? Could you please repeat? Neegoe didn't quite capture what you said. On the harsh insurance claims, do you have both the damaging Detected by people staying at home, not the cold weather as freezing pipes may have caused, But generally, have you seen any water damage protection as people have stayed more at home during the last year Than previously, and that has been reported so to speak. Is that something you have seen in your housing claims? No, actually, I think, if anything, we have discussed the hypothesis that we could actually see less kind of ordinary water damages because people stay home and discover it Before, it's a serious loss. But I mean, we haven't tried we haven't managed to quantify it really. So these are kind of truly related Okay. So you actually see that people managed to do better Housekeeping, so to speak, by staying at home. This is, I would say, an unquantified hypothesis we have that there could be some positive effects But as I said, it's not included neither in the weather estimates nor the COVID estimates. Thank you for clarification. We will now take our next question. Good morning. It's Thomas Svensson from SEB here. Question to the weather again. Is it fair to say that it was February that was extremely cold And caused all these damages, unless March was more normal, so we don't get risk of any Time lag effects moving into the future? That's right. It's February. That was really a special month. And so it's right what you are saying. Talking about the future, you know what kind of Policy, we have, but that's right. It was February, not March. Thank you. There are no further questions. So I'd like to hand the call back to our speakers for any additional or closing remarks. Thank you. We'll be participating in a number of roadshow meetings and conferences Over the next weeks, virtually also this quarter due to the pandemic, our meetings will be held with investors in Norway, the U. Okay, Switzerland, Sweden and the Netherlands. Please have a look at our financial calendar on our website for more details. Thank you for your attention, everyone. Have a nice day, and stay healthy. Bye.