Gjensidige Forsikring ASA (GJF) Earnings Call Transcript & Summary

Okay. Good afternoon, everyone, and welcome to Gjensidige's Second Quarter Pre-Close call. My name is Mitra Negård, and I'm Head of Investor Relations. With me, I have Marius Fjellbo and [indiscernible] from our IR team here. Please note that this call is being recorded, and the recording will be published on our IR website after the call. We will start with going through the Q2 reminder, which we published on our website yesterday. This reminder highlights relevant public information. Afterwards, we will open up for a Q&A session. And as always, we only answer questions related to already disclosed and public information. And please note that if you want to ask questions, you must log on via the Teams app. So let us start with a few key dates. We will be releasing our second quarter results on the 15th of July. The silent period starts on the 1st of July. As always, we kindly ask analysts to forward estimates using the template we sent you yesterday, and please fill in all open cells in the sheet. The deadline for sending us your estimates is the 5th of July. We will publish consensus on our website on the 10th of July. Now over to the reminder. As usual, we start with comments on the weather. For the sake of good order, we always remind you of the seasonality in our business, with the summer quarters Q2 and Q3, normally having lower claims ratios than the winter quarters, Q1 and Q4. We have avoided floods in Norway so far this quarter, despite the significant amount of snow that we got in Norway, this winter. May was very warm and dry Norway this year, while June has been wet. We have had cloud bursts and thunder and lightning in May and also in June. In the reminder on our website, we've added links to a few examples of media coverage and weather in Norway so far this quarter. And as usual, for statistics and weather, please refer to the link in the section of General Information at the very end of this reminder. Bear in mind the acquisitions we made in Denmark in 2023 in terms of effect on insurance revenue. [indiscernible] was included in the private portfolio in Denmark on the 31st of October last year. At the point of acquisition, it had annual insurance revenues of DKK 118 million, as we stated in the press release. The commercial portfolio from [indiscernible] was included in the commercial portfolio for Denmark from the 1st of September last year. At the point of acquisition, the portfolio had annual insurance revenues of approximately DKK 200 million, as stated in the press release. The next reminder is regarding the regular dividend for 2023 of NOK 8.75 per share. This dividend was resolved at the AGM earlier this year, as you remember, and paid out in the second quarter, or to be more precise on the 5th of April this year. Over to large losses, our general expectation for normalized large losses in 2024, defined as losses above NOK 10 million, is approximately NOK 476 million per quarter, or approximately NOK 1.9 billion for the full year 2024. Please note that this estimate is undiscounted. And while large losses in our IFRS 17 accounts are recognized at discounted values. In terms of excess reserves, there is no change in our communication. As you know, according to IFRS 17, it's not possible to retain identified excess reserves on the balance sheet. We continue to set reserves according to our best estimate. However, bearing history in mind, we expect runoff gains and losses also in the future. On inflation, we will ask permitting provide an update at our second quarter earnings call. Key points on this topic, which we made at our Q1 '24 presentation on the 25th of April were that, our latest estimate on claims inflation for private motor in Norway was 7%, gradually declining towards 4% over the next 12 to 18 months. We are putting through significant price increases, which together with higher deductibles, will improve profitability. Our estimate on claims inflation for private property in Norway was 5% to 7% for the next 12 to 18 months. We have increased prices over several years to take account of not only claims inflation, but also more frequent weather events. We provided more details on claims inflation and pricing measures, which you can find on Slides 4 and 5 in the Q1 '24 presentation package. We also commented on the topic in our Q1 '24 report, stating that staying ahead of claims inflation is key to maintaining good profitability and it has high priority in Gjensidige. Gjensidige vigilantly monitors developments in the relevant markets and will continue to put through necessary price increases. Despite a natural inherent volatility in claims, the recent increase in claims frequency for several product lines is being closely monitored. Gjensidige will continue to strengthen pricing measures and adjust terms and conditions, to ensure that the increase in claims frequency is mitigated over time. So moving on to solvency. A reminder, includes a general explanation of the main drivers of changes in eligible owned funds and capital requirements. These are the same explanations you have seen in our reminder over several quarters, so we won't go through them here now. In terms of the investment portfolio, you will find the same general explanations as you have seen for quite some time. As always, we believe a good starting point for estimating return is using the same asset allocation as the previous quarter, applying returns on the indices we have listed in the reminder, which is also included in the appendix section in the quarterly presentation. We have also added a top-down approach, which is useful to combine with the bottom-up calculations you make. The net financial result for the Match portfolio, consists of the return on the Match portfolio minus unwinding and change in financial assumptions. The interest income from the Match portfolio is intended to equal interest expenses and liabilities over time. Hence, the net result and the Match portfolio, given a perfect match, should over time be zero, except for returns on credit exposure held in the Match portfolio. The investments in the Match portfolio have an average credit spread of approximately 60 basis points, which we explained at our CMD last year. And so far in Q2, talking about mid-June, credit spreads in the Nordics are slightly tighter compared with the average spreads in the first quarter of 2024. We have also added the information on running yields and duration for our investment portfolios as of the end of Q1 in the reminder. This can also be found in our Q1 2024 financial report. And finally, on unwinding and change in financial assumptions, we remind you of the rules of thumb and the example calculation, which we have published on our website. We have also included relevant swap rates for the different currencies in our reminder. So with that, we will now open up for questions. [Operator Instructions].

So we have the question from Tryfonas, I believe.

Yes, we have. So please go ahead Tryfonas and unmute.

I guess, just a question on weather, in general, you mentioned wet sort of May and June, and a bit of a [drier] weather in between. Can you maybe comment on just broadly whether the quarter has been more sort of affected by weather, as you normally expect versus a normal, I guess, Q2 seasonally quarter? And I guess, on just the warm and dry weather, have you seen any sort of -- have there been any sort of fires or large fires being ported across Norway or the Nordics more broadly? That will be my question.

Thanks, Tryfonas. As always, we don't comment on any impact on claims in terms of weather. And just to put it -- to be clear about that, there hasn't been any particular quarter in terms of weather. I mean, it's -- there hasn't been any adverse weather this quarter. Now we say that we have had some cloud bursts in Norway and some thunder and lightening, this is typically what one can get in the second quarter. So nothing particular in terms of any adverse weather situation. And no comments on claims. You will get an update on our results on the 15th of July. [indiscernible] has the next question.

When it comes to the first quarter event on weather, it was quite eventful in that sense. How much of that frequency weather was sort of more winter event, which sort of is not going to be repeated again in the second quarter? Did you mention how many percentage points out of the combined ratio or the weather claims that you sort of thought was weather? Could you just remind us of that? So that would not be repeated again?

Yes. We have given you a very detailed overview of all the effects per segment and per large loss and frequency in the material for Q1. So I suggest that you just have a look at that in the appendix section, you will see a table with all the details you need. And also in the report from Q1, you will see the underlying frequency loss numbers adjusted for the weather effects. [indiscernible]? You have a question?

Yes. Could you remind us in Q2 if there were any frequency impacts from weather as well last year, just to get a sense?

We did not break out any weather numbers in the second quarter last year. There was no adverse effect, but I suggest that you have a look at the second quarter report for last year. For comments around the results in the different segments, you will see some comments regarding torrential rain for private and commercial, but we did not break out the numbers. This is typically something we do when there is adverse weather situations, when there is a significant weather effect, and we did not do that in the second quarter last year.

Okay. So no reason to assume there would be any one-off impacts on that from last year.

I would suggest you just look at the text in the descriptions per segment, where we comment on the profitability per segment. There, as I said, you will find some comments on torrential rain and regarding property. So -- but no numbers were broken out, which we -- which is something we typically do when there are significant weather effects. Jan Erik?

Can I have one more, please?

Yes.

On the unit-linked business or pension business, you use IFRS 17 to run it and there you take all the losses in the first quarter from all of the unprofitable contracts. And then you sort of unwind them during the year. Is that the case or we should expect a much better last 3 quarters, so to speak, than the first quarter? Or is it something happened during the first quarter in 2024, that was different from first quarter last year, just so we understand the sort of sequence from that?

Yes. I'm not sure how to understand your question. We have a look at the explanation in the report in the first quarter where we described some effects which were significant in the first quarter. You can't necessarily call it a one-off, but there are some effects there, which typically were very significant, and not necessarily related to the underlying development of the business. Other than that, the accounting principles are the same. IFRS 17 in terms of calculating onerous contract and CSM. So there is no change in the methodology naturally, but there have been some sort of one-off effects or significant effects, which you won't necessarily see every quarter. These have been broken out and described in the text, for the previous quarters.

I think we have one question from Vinit.

Vinit, please?

Marius, all the best for your new ventures. Just one -- I have one on water, one on property, please. Just looking for public information from the industry, mainly not from your data yet. But just from -- if you could help to guide us a bit that, what was the industry stats from motor frequency in Norway in this quarter, because that would probably be somewhat more visible to you? And from Denmark, I'm hearing that, there were some flattish trends if we adjust for the Easter effect, which apparently there was fewer working days or something. So I'm just curious if what is the industry stats that you could point as to telling you for [indiscernible]. And I have one more on property [indiscernible] here.

The industry stats in Norway are very publicly available, the finance Norway statistics, and they are published for the first quarter. So I suggest that you have a look at the statistics there.

Okay. And just from what you have seen in the media on fires, I think you addressed [indiscernible] question on large fires, but has there been more media news from you guys living in Norway, have there been more news about more fires in private households, or has there been just generally any commentary in the media that you could say you have observed?

Nothing particular in terms of articles that we [indiscernible] right now, but we just generally need to follow the media. And we haven't been -- it hasn't been commented in terms of E&C there specifically. So I don't have any special comments on that. Freya, you have a second question?

Yes. I was wondering if you guys had any comments regarding the press article about the fraudulent claims for the law firms. I think it was NOK 550 million that was mentioned.

Yes. I mean, generally speaking, our involvement in this case is unclear. As a general principle and also in line with regulatory requirements, we don't comment on individual customers. So -- but generally speaking, our exposure on general terms -- our exposure is limited by the terms in the policies. And we also have reinsurance programs, as you know, which cover large losses. Tryfonas?

Yes. So just a follow-up on the question on this potential claim. Would you still have to take a charge even though you may dispute the claim? Or I guess, I'm thinking back on what you did last quarter on the provision with regards to the [indiscernible] dispute in Denmark, clearly, you don't really have a tangible -- besides you on sort of the outcome, but you took a charge anyway sort of almost like a preemptive. So is that -- that'd be the same view to have for this potential loss to come? I appreciate, you may not be able to comment, but any color would be appreciated.

Yes. And that -- you're very right, Tryfonas, it would be very difficult to comment on anything that we do in the future. As I said, our involvement in this case is unclear. So -- and we do not comment on specific cases. Okay, do we have any further questions? Doesn't seem like it.

No.

No? Okay. Thank you very much, everyone, for your attention. Have a good afternoon. Bye-bye.