Gjensidige Forsikring ASA (GJF) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to Gjensidige's Third Quarter 2024 Pre-Close Call. My name is Mitra Negård, and I'm Head of Investor Relations. With me, I have Apineya Maheswaran and Anne Landa from our IR team. 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 Q3 reminder which we published on our website yesterday. This reminder highlights relevant public information. Afterwards, we will open up for a Q&A session. As always, we only answer questions related to already disclosed and public information. [Operator Instructions] So let us start with a few key [indiscernible]. We will be releasing our third quarter results on the 22nd of October. Our silent period starts on the 1st of October. As always, we kindly ask you to forward your estimates using the template we sent you yesterday. Sorry, we actually didn't send you those -- that template yesterday. I will be sending it to you after this call. Please fill in all the open cells in the sheet. The deadline for sending us your estimates is the 10th of October. We will publish consensus on our website on the 17th of October. Now over to the reminders. 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. Norway has been very wet this quarter. We have been hit with several cloud bursts and a storm. Denmark has also had several cloud bursts. In the reminder on our website, we have added links to a few examples of press releases from Gjensidige and media coverage on weather in Norway in this quarter. For statistics on weather, please refer to the links in the section General Information at the very end of the reminder. Bear in mind the Q3 results last year with significant weather-related claims and one-off expenses. The majority of the weather impact were recognized as large losses in the corporate center. The one-off expenses were recognized as operating expenses in the corporate center. Please refer to our reminder and the Q3 2023 report for further details on this. And as you can see in the reminder, we have added an extract from our Q4 '23 report regarding strengthening of reserves for claims incurred earlier in 2023. The next reminder is regarding the sale of ADB Gjensidige, our operations in the Baltics, which we announced in July. As we announced, the sales price was agreed at EUR 80 million, and we will be recognizing a loss of approximately NOK 120 million in the third quarter '24 accounts. This will be recorded in the group accounts in the line called other items. Until closing, which is expected at the latest in the beginning of 2026, the accounts for ADB Gjensidige will be presented separately in the Gjensidige group accounts in a line called Profit/Loss from Discontinued Operations. This line will include the Baltic segment's insurance service result and net financial result from investments for the Baltics. And the line will show the result after tax. We will also recognize the balance sheet items for ADB Gjensidige on separate lines in the group accounts. Please see our reminder for further details. Please note that as announced in the stock exchange release in July, we estimate a positive solvency ratio impact of around 4 percentage points from the transaction. This impact will be recognized upon closing of the transaction. Bear in mind the acquisitions we made in Denmark in 2023 in terms of effect on insurance revenue. You will find the details in the reminder and the year-on-year impact on insurance revenue for Private Denmark and Commercial Denmark in our Q2 2024 report. Over to large losses. This is also the same information we have conveyed the past 2 quarters, with a general expectation for normalized large losses of NOK 476 million per quarter in 2024. In terms of excess reserves, there is no change in the 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, as per routine, provide an update on our Q3 2024 earnings call. Please see our reminder for the key topics on -- for the key points on this topic from our communication in connection with our Q2 2024 earnings release. In the reminder, we have included comments we made at our Q2 presentation regarding expected claims inflation and implemented pricing measures as well as outlook comments from our Q2 report. We have also added the link to the press release we published on the 4th of September with some statistics on motor collisions in Norway, showing that so far this year, as per the beginning of September, the number of collisions have increased by 6% compared with the same period last year. Moving to the exercise of call option on our Tier 2 bond, which we announced on the 15th of August. The outstanding loan amount is NOK 241 million, and we will be settling it on the 2nd of October. The call will reduce the own funds in the solvency ratio calculation, and although the settlement will take place in the fourth quarter, we will be taking account of this in our calculations for the solvency ratio for the third quarter. Moving on to solvency and our investment portfolio. Our reminder includes the same general explanations you have seen over many quarters. For the investment results, as always, we believe a good starting point for estimating returns 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 for Q2. We have also added a top-down approach, which is useful to combine with the bottom-up calculations. Bear in mind the separation of figures for ADB Gjensidige on a separate line, as I've already commented. And finally, on unwinding and change in financial assumptions, remember 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 as we have done in the previous quarters. And remember the separation of figures for ADB Gjensidige here, too. So with that, we will now open up for questions.

[Operator Instructions] Thank you very much, everyone. So let's go over to the questions. I don't see any hands raised. Okay. So there doesn't seem to be any questions here. All right, in that case, thank you very much -- sorry, is there a question here? Faizan? Please, can you open your line?

Yes. I just wanted to ask, did you provide any guidance in terms of how you expect the underlying to develop? Because I know a couple of quarters ago, you said that you should see underlying improvement that didn't come across H1. Did you revise that at the half year?

That we will be expecting underlying results -- frequency loss ratio for Private and Commercial to improve over time. So no specifics beyond that, and that's included in the extract that I just referred to from the Q2 '24 report. That's included in the reminder.

Okay. And your second question, as you mentioned, there's some reserve strengthening at Q4 for adverse experience earlier on in the year, which [ you again ] alluded by the Q3 underlying was higher. Can you maybe give us a sense of how much of that reserve strengthening done in Q4 related to Q3 being worse than what we saw?

We haven't broken down the number in detail. But what we said in Q4 was that in terms of the decline in the underlying frequency loss ratio for Private Norway in Q4 '23 compared to Q4 '22, approximately 40% of the decline in the underlying frequency loss ratio was related to strengthening reserves, but this is related to the previous quarter. So we haven't broken down in terms of how much for each quarter. But 40% of the decline or the worsening of the UFLR for Private Norway was related to strengthening reserves.

Okay. Okay. And will you be -- at Q3, at the results, will you give us the underlying? Or will we just have to work with the assumption that the Q3 last year was just actually a little bit worse, but we can't see that year-on-year comparison when you come to give it to us?

The numbers you will see are the reported numbers, not adjusted. Okay. It looks like there are no further questions. Thank you for your attention, and have a nice afternoon.