Alm. Brand A/S ($ALMB)

Ladies and gentlemen, thank you for joining us, and welcome to the Alm. Brand First Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Andreas Ruben Madsen, CEO at Alm. Brand. Please go ahead.

Good morning, and thank you for joining us on our conference call. I'm Andreas Ruben Madsen, the CEO of Alm. Brand Group since March 1 this year. And as usual, I have with me our Head of IR, Mads Thinggaard. This morning, we published our interim report for the first quarter of '26, and I will now walk you through the presentation of our results. Let's now look at the highlights from my first quarter as CEO. Please turn to Slide 2 for some of the headlines regarding our business in the first month of the year. I'm pleased with the overall financial performance in a very satisfactory Q1 with strong underlying improvement in the claims ratio. Growth in Personal Lines faded somewhat in Q1 '26 from a double-digit level in Q4 '25. This was as expected due to the year-on-year effects from last year's repricing fading out. Growth of over 6% during Q1 in private line, does, however, indicate that we are continuing to take market shares in this market. In Commercial Lines, we experienced a decline in the top line revenue as a result of our efforts to improve profitability and reduce volatility in an increasingly soft market for workers' compensation. Adjusted for the areas we work on in this respect, which is workers' compensation and industrial customers, the Commercial portfolio reflected a premium growth of 2% year-on-year. We succeeded with an improvement in the undiscounted underlying claims ratio in Commercial Lines of 2.6 percentage points year-on-year, while Personal Lines are more impacted by icy road conditions in Q1, but still delivering an improvement of 1.3 percentage points in underlying claims. And now I would like to turn to Slide 3 for our financial highlights. Insurance revenue grew to above DKK 2.9 billion in the quarter. The insurance service result was DKK 496 million compared to DKK 337 million in Q1 last year. We view this as a good start to the year, especially considering the strong underlying development. Weather-related claims were much lower than we would normally expect for Q1, while I would characterize large claims as being on a normal level in Q1. Investment income in Q1 was a loss of DKK 43 million, which related to the geopolitical turmoil impacting equities as well as bond returns in a negative direction. It's worth remembering that we, as a company, are set to benefit from increasing interest rates looking ahead. Other income and expenses are significantly lower compared to last year, primarily due to the absence of integration costs related to Codan, reflecting the completion of the integration process. And now let's move on to Slide 5. The group made a technical result of DKK 496 million in the quarter, up from DKK 337 million last year. The significant improvement was driven by underlying improvements as well as higher runoff gains. In Personal Lines, year-on-year, we had an improvement in insurance service result of DKK 55 million to now DKK 246 million. This was due to underlying improvements, lower ratios for weather and large claims as well as continued growth. Insurance service results from Commercial Lines was DKK 250 million against DKK 146 million last year, driven by a combination of significant underlying improvement and much higher runoff gains than Q1 last year. Please turn to Slide 6. Insurance revenue grew 2.5% in the quarter compared to 4.6% last quarter as a result of fading effects from last year's repricing and an increasingly soft market for workers' compensation. In Personal Lines, we're still taking market share, while the effects of repricing are fading as expected. Therefore, I'm quite pleased with the growth in Personal Lines of 6.4 percentage points year-on-year. In Commercial Lines, we see a decline in premiums of 1.8% due to our work with improving profitability and reducing volatility in an increasingly soft market for workers' comp. Adjusted for workers' compensation and industrial customers, commercial portfolio reflected a premium growth of 2%, which is acceptable. And now moving on to Slide 7 with the claims ratio. The Q1 claims ratio was down 480 basis points year-on-year in a quarter with lower weather claims for -- than a normal Q1, a higher level of runoff gains and a strong underlying improvement. The underlying claims ratio was 160 basis points lower year-on-year, driven by profitability initiatives, 170 basis points on an undiscounted basis. The underlying improvements, especially visible in Commercial Lines with a 260 basis point improvement in underlying claims year-on-year, while Personal Lines, still positive, were impacted more negatively by icy road conditions. Personal Lines showed an improvement in undiscounted underlying claims of 120 basis points year-on-year. And now please turn to Slide 8. The combined ratio in Personal Lines improved to 84.5 from 87.1 last year due to lower underlying claims decline in the cost ratio and lower weather and large claims. Premium growth is still on a high level of 6.4% despite fading effects from repricing. Please turn to Slide 9 for Commercial Lines. In Commercial Lines, we observed a significant reduction in the combined ratio to 81.3 in Q1 '26, down from 89.3 in Q1 '25. This improvement was supported by higher runoff gains of around 600 basis points year-on-year, largely driven by cargo and property-related claims. Additionally, lower underlying claims contributed to a further 240 basis point reduction year-on-year. The cost ratio was also decreased by 50 basis points year-on-year in Commercial Lines, providing additional support, although the large claims rose to 11.3 percentage points in Q1, slightly above the normal level of 10% typically expected for Commercial Lines. And now move on to Slide 11 for the investment results. You may notice that we, as of this quarter, have begun disclosing returns on our free portfolio in response to requests from many of you. The investment result in Q1 showed a loss of DKK 43 million in Q1, with DKK 35 million of this loss stemming from the free portfolio, which was adversely affected by a decline in share prices. Additionally, our bond portfolio was impacted by rising interest rates and widening credit spreads. As you'll be aware, this was driven by the geopolitical turmoil experienced during Q1. I'd also like to take a moment to address our fixed income line, which amounts to DKK 0.9 billion, with approximately half that number placed in private debt and asset class, which has received some attention recently. I'd like to highlight that this exposure is limited to a well-diversified portfolio of loans to European companies. And now finally, please turn to Slide 13. We are revising our guidance for the insurance service result in '26 upwards by DKK 150 million to DKK 1.8 billion to DKK 2.0 billion, excluding runoff gains for Q2 to Q4 of 2026. This follows a strong underlying development in Q1 as well as a high level of runoff gains. Continue to expect around 2% in runoff gains looking ahead. The cost ratio is still expected to be at around 17% for 2026, while the combined ratio, excluding the runoff result in Q2 to Q4, is expected to be 83.5 to 85.5, an improvement of 100 basis points. Our guidance for the investment result is lowered by DKK 50 million to DKK 150 million in '26 following the loss in Q1. This adjustment also reflects a nice rebound in Q2 so far. Consequently, guidance for profit before other income and expenses is upgraded by DKK 100 million to DKK 1.95 billion to DKK 2.15 billion. Other income and expenses remain unchanged and guided an expense of DKK 0.5 billion for 2026. And this -- with this, I conclude our presentation and hand over the word to our moderator. Thank you.

[Operator Instructions] Your first question comes from Asbjørn Mørk from Danske Bank. Please go ahead.

Yes. First question would be on something that is not part of the report, but the Supreme Court ruling that we will get in an hour. Just wondering, since you don't mention it as a contingent liability in your report -- you did mention in the annual report the dispute you had with Gard. So just wondering why you don't mention it as a contingent liability? You don't see it as a contingent liability or you don't see it as a material impact on your reserves? So how should we look at sort of the potential outcome here versus the DKK 7 billion of claims reserves you have in workers' compensation? So since we will get the ruling after this call, most likely it will be good to get a bit of flavor at this please.

Yes. Thank you, Asbjørn. Well, I mean, to answer your question, we see nothing new in this regard compared to the situation when we did our annual report not that many months ago. We have a general statement in our annual report regarding the general exposure we will always have as a group to these types of lawsuits or disputes. And we have -- we don't see no reason to sort of -- of that going into -- as we approach the ruling today. And then to round off on that, I would say, as you also say, I think, let us now just wait. I think we'll get clarity very soon. And obviously, we will aim to provide clarity as soon as we can, and are following it closely up to the ruling coming here at 12.

Okay. Fair enough. But if I then may -- I mean you paid a dividend a little more than 2 weeks ago. And I guess, we're still waiting for you to initiate the buyback. Is there any sort of link between, first of all, the postponed buyback, but secondly, your dividend payment, your decision to pay a dividend and what you see as sort of a scenario and potential outcomes of this case?

In general, I would say, I think you're aware, we have a very comfortable solvency situation. We have a robust solvency situation. We're not postponing any buyback. We communicated that we were expecting to start it in Q2. We are now only 1 month into that. That being said, I think there's some good reason to -- we, first of all, had a Q1 -- a general Q1 financial statement we'd like to have provide clarity for and then we also have the Supreme Court ruling coming very soon. But we're still on within the overall time frame that we communicated, being sometime during Q2.

Okay. Fair enough. Then if I may, on your actual numbers and the underlying claims ratio improvement in Q1, the 170 basis points somewhat above the guidance that you've given for the full year and your communication on the improvement being back-end loaded during the year. How much of this -- also given that you raised your guidance by 150, which is, to a large extent, seems to be, you can say, low quality driven in Q1. So how recurring do you see this underlying improvement? How much has been stochastic and basically luck in Q1?

Yes. Well, I think, first of all, just -- I would confirm that you are right that most of our upgrade comes from weather and runoffs this time around, but does, however, provide a good solid bottom line in Q1, nonetheless. I think to give you some flavor of it, I think something just above 1 percentage point, maybe slightly above that is probably more what I would consider a structural level for now. We did have some tailwinds within certain segments seeing both a favorable development in private lines and also in Commercial Lines, especially in Commercial Lines. But I would say, probably, you shouldn't expect quite as much on a growing basis for now.

But for the full year, is it fair to assume that we'll be above the 100 basis points given the good start of the year?

Yes, that would be our -- slightly above would be our sort of -- what we're aiming for.

Your next question comes from the line of Martin Birk with SEB.

Just following up on the questions in regards to the underlying improvements coming through. I guess you -- ahead of the quarter, you communicated them to be back-end loaded, and now they're suddenly front-end loaded. What has happened? And why is this only just above the 100 basis points for the full year?

Yes. I mean I think -- as I think we've commented on previously that you will see some fluctuations from quarter-to-quarter. And most of the improvements you're seeing are definitely structural, created by some of the effects we've been mentioning previously being, to highlight them, I would say, a bit of tailwind from synergy overhang in Q1. We also have a favorable impact from reinsurance, maybe around, let's say, 50 basis points for the group, most of that being in Commercial Lines. And then I also think it's fair to say that we have some support also in Q1 coming from our overall profitability initiatives in Commercial Lines, where, as you may have noticed also, we did see some workers' comp and industrial customers leave. So those are some of the effects playing in, but we also had, to be fair, some stochastic tailwind, on average, which we would not expect to see every quarter from now on.

And Martin, if I may add, it's Mads here. What we actually said ahead of Q1 was that the strategy, the effect from the strategy initiative would be back-end loaded, but in the start of the year, we would have support from still delta, from the synergies we implemented last year, from the integration of [indiscernible] that have a bit of effect still during the start of the year as well as the effects from the massive repricing last year kicking in mostly in the start of the year. So we were actually pointing to kind of a [indiscernible] improvement during the year, but from different sources.

Okay. All right. Just a final question from my side. In terms of the customer dividend, I guess you have shed some more light on it over the course of Q1. What has the response been so far in -- or what kind of feedback do you get on it? And what are sort of the ambitions with this customer dividend or this loyalty scheme?

Yes. Thank you, Martin. I think we're happy to see that we are getting the type of feedback that many of our customers sees as a definite positive. We feel it's -- it may not be unique for us compared to some of the other market players, but we feel that it is definitely new for us that we have the ability now because our main owner has gotten financial strength to support us in this meaningful way and we feel this is a good way to also -- we will benefit, especially our loyal customers, which have been for us -- with us for many years and which have a number of products with us, also the customers we would be aiming most to retain. So we're looking very much forward to seeing the effects of this.

Your next question comes from the line of Mathias Nielsen from Nordea.

So the first one I have is a bit on the revenue growth, especially for the Personal Lines, like the year-on-year growth you see in Q1, is that a good indication of where we should expect growth to be in the coming quarters or do we -- do you still expect some headwinds from pricing or other items that could indicate that growth to come down through the year? How should we think about that? If you could give a bit of guidance on that, as the first question, that would be nice.

Yes. Thanks, Mathias. Well, I think -- we're very happy to see a continued growth in Personal Lines, sort of rough indications we would consider. We would consider half of the growth around 3 percentage points coming from actual new customers being brought continuous to the group, much of that from our strong partnerships with the banks. And then now we are in the beginning of Q1, as Mads also mentioned. So you might see a slight sort of tailwind in the beginning still from the remaining parts of the repricing fading. Even though we are starting to come down now, as you also have mentioned, as you've seen compared to last quarter. So I think an indication for the full year could be something for Personal Lines around, and we have the indexation and around 2 and then maybe, let's say, 2 or 3 coming from market shares on top of that.

That was very clear. And then if you move to the workers' compensation segment where you now say you lose out on a bit of -- on a few customers. Maybe you could say a bit more about the profitability of those lost contracts? Were they on par with the group combined ratio or the return on capital allocated? Maybe you could say something there on what's going on in that segment at the moment?

Yes. I'm happy to do that. I think many of you will recall that also from previous discussions that workers' compensation, both for us and for our peers, has historically been a product, which, from time to time and recently so, has struggled a bit in terms of overall profitability. We've had sort of a conviction that we have, for some time, quite skeptical around, especially stand-alone workers' compensation. We are -- we feel it typically creates a better balance for us if we can do it in combination with other products, where we typically, on average, would have a higher margin and earnings. And what's happened this time, I would say, is that we have seen a development where, for reasons not completely known to us, we have certain players being willing to underwrite workers' compensation and levels that we would see as not profitable. And we have not been willing to do so this way around either. So most of the reduction would be from stand-alone customers and leaning towards the larger segments where we've been the most skeptical. And this is not a new theme for us, as I mentioned -- you would have mentioned -- I think you would recall that I have mentioned this in the past, but we see the effect now in Q1 also because we -- as you also may recall, we do have a large part of our commercial portfolio turning on 1/1.

Sure, sure. So just to clarify a bit of that. So is it fair to assume that the combined ratio and the return on capital has not been fantastic on those people that is leaving Alm. Brand at the moment, quite contrary. So it's improving the profitability despite that the revenue goes a bit down.

That is right. That's the way we see it or else we -- in general, we wouldn't have that approach. But we do not see this as something that's really adding meaningful margins to us. And also from a capital standpoint, this is not the best segment to be in.

If I may like do this last third question and then I'll jump back in the queue. On inflation, what are you seeing out there at the moment? There's a lot of stories out there on oil prices and what else. What are you seeing? And have you already started to adjust some prices or how long can you wait before you start to adjust price? Maybe you have something you could say there? And then I'll jump back in the queue.

Yes. Sure. Of course, we're following the situation closely. Also, I think you might be, I think, pointing at the -- especially the development we're seeing in energy prices after the situation in -- with the war in the Middle East, which may also start to translate into certain material prices. I think as we see it for now, we do not see this as something that puts us in a position where we need to do repricing on any meaningful large scale. So we don't see that for now. And -- but that being said, obviously, we're following it closely. And if this turns in to be something that is very prolonged, then we'll have to reevaluate continuously to -- yes, to see where we go. But for now, we don't see that impact there.

Your next question comes from the line of Simon Brun with ABG.

Yes. Just a quick question, and I basically got a follow-up on Mathias' question on the Commercial Lines. Just in terms of the premium growth, how should we think of it? I appreciate that you write in the report that there is an ongoing initiative in workers' comp. Does that apply to industrial as well? Meaning that this is a continued sort of pruning process that will continue to impact the Commercial premium growth through the year? Or should that turn sort of positive on a quarter-on-quarter basis anytime soon?

Yes. Like, I can start by maybe giving some rough indications of the decomposition. We have 1.8 percentage points overall reduction. I would put indexation at around 2%. And we also -- we have a slight tailwind from some of the repricing fading out last year that could come to, let's say, around 0.5%. And then the initiatives or at least the effects of our renewal within -- especially workers' compensation and certain industrial clients would account for 3.5% in reduction of premiums. And if you look at that effect, the last one is something that we would see continue through the year. Mechanically, we would probably see a slight fade towards the end, if you look at it on a relative basis to last year. But I think in an overall statement, it is something that will impact the group growth for the entire year. So if you put it sort of up and if you go in very high sort of numbers, you might argue that if you look at the Personal Lines, we still see some positive market intake of 3% to 4% on top of indexation and price repricing. And on the other hand, you have, on Commercial Lines, we have the opposite effect coming from the effects of this pruning, so to say.

Your next question comes from the line of Youdish Chicooree with Autonomous Research.

My first question is actually a clarification on your comments of Commercial Lines. I mean, judging that you started this repricing and portfolio pruning action recently. Is that going to be like a multiyear adjustment process? Or is that just an impact we should consider just for this year? So that's my first question. And secondly -- sorry, go ahead, please.

Maybe start with that, and I'm happy to take a second one following. Well, I think, Youdish, if you go back in a slightly longer perspective than just recent quarters, I think this has been sort of a core part of our strategy and narrative for a long time. If you go back to the CMD, you'll also see our voiceover of what segments we sort of are most focused on growth, and within Commercial Lines, that would be agriculture and the sort of the larger part of the small to medium-sized. We've always stated that we don't guide growth and that we need to be able to walk away from unprofitable business. So I don't think this is a new thing for us, but I would say that, to be fair, I think we couldn't have fully sort of foreseen what the market would be like in workers' compensation. And it's definitely not become better during the last year. It's gone worse. It's been -- become even, I would say, yes, even more soft. And so I wouldn't -- we wouldn't maybe fully have predicted this. How it will be next renewal for the major parts turning in the end of the year, we'll have to see. But that's sort of the situation. So now we are where we are.

All right. All right. And my second question, unfortunately, is on the upcoming ruling on workers' comp. Look, in the event of adverse ruling, we only have some offshore estimates from the Ministry of Employment. I was wondering, I mean, you must have already reviewed your own book post cases, et cetera. I mean how swiftly would you be able to come out and give us your best estimate of what the cost is likely to be? Is that going to be like a very -- like within a day or was that going to take weeks or months?

Well, I think, just to restate it, now we will have to see what the Supreme Court ruling will be. But as you adhere to, obviously, we prepared for what may come. And depending on how clear the ruling is, we'll have to see, but I can promise you guys that we will do our utmost to provide clarity as soon as possible.

There are no further questions at this time. I will now turn the call back to Andreas Ruben Madsen for closing remarks.

Yes. Thanks for joining today, and have a good day.

This concludes today's call. Thank you for attending. You may now disconnect.