Gjensidige Forsikring ASA ($GJF)

Good morning, and welcome to the first quarter presentation for Gjensidige. My name is Mitra Negard and I'm Head of Investor Relations. We will start this session with our CEO, Geir Holmgren, who will give you the highlights of the quarter, followed by our CFO, Jostein Amdal, who will run through the numbers in further detail. And we have plenty of time for a Q&A after that. Geir, please.

Thank you, Mitra, and good morning, everyone. I will start with the Danish Supreme Court ruling on the workers compensation scheme announced yesterday, reducing the compensation threshold. This ruling marks a significant change in the Danish authorities practice regarding workers' compensation. The Danish Insurance Association expected the Danish government to assume full responsibility for the industry's losses. At this stage, the financial impact remains highly uncertain. Based on our initial assessment, we estimate that ruling could result in additional claims cost in the range of around DKK 500 million to DKK 820 million for Gjensidige. It is key to point out that our reserves will, to a certain extent, observe such risks. As announced yesterday, we will undertake a thorough review of the ruling and carry out the necessary analysis before providing a reliable estimate of the financial impact. Any related accounting effects will be recognized in the second quarter of '26. I would like to point out that we do not expect a regular dividend for the 2026 accounting year to be affected by this matter, and we will still expect to deliver on the financial targets for 2026. Turning to Page 3. We generated strong insurance results this quarter, driven by efficient operation, disciplined pricing and a consistent focus on serving our customers. The continued loyalty we experienced demonstrates the value and significance of our services. More than 40,000 customers received travel assistance this quarter including many affected by the conflict in the Middle East. We responded swiftly to the situation, extended the coverage and assisted our customers with everything from evacuation and changes through travel plans to accommodation and safe return home. In February, we presented our strategy and ambitions at our Capital Markets Day, setting a clear path for future growth. As part of our focus on damage prevention, we expanded our sensor-based alarm services from homes to cabins, further strengthening our support for customers. The rollout of the sensor-based alarm services in homes has already proven highly successful, resulting in reduced incidence and greater peace of mind for our customers. Building on this strong foundation, we are confident that these initiatives will deepen our customer relationships and drive long-term loyalty. We remain focused on delivering attractive returns to shareholders. The Board's proposed dividend was approved at our Annual General Meeting in March, resulting in a payout of NOK 7.25 billion to shareholders earlier this month. So let's turn to Page 4. This quarter, we achieved a profit after tax of NOK 1.548 billion. Our strong general insurance service results reflect a continued robust growth momentum and a notable improvement in margins. The results from our pension business were negatively affected by a recalculation of reserves in the IFRS 17 accounts. It is also important to emphasize that this did not impact the solvency position. The results were also impacted by a lower net finance income. The performance of our investment portfolios was very satisfactory, especially given the significant market turmoil. Additionally, our return on equity of 27.7% is very strong, and we maintain a solid solvency position of 195%. Turning to Page 5. I'm very pleased with the significant increase in the insurance service result this quarter, amounting to NOK 2.288 billion, lower large losses were part of the explanation, but we also saw a notable contribution from revenue growth and an import improved margin, achieving a combined ratio of 79.2% in our winter quarter is exceptional and well below our annual target of 82%. This strong result was driven not only by few large losses but also by the implementation of ongoing pricing measures. Disciplined cost control and favorable weather condition for motor insurance in Norway also contributed positively. And I'm especially pleased that the underlying frequency loss ratio declined by 3 percentage points, while our commitment to cost discipline further reduced our cost ratio to 11.7%. Our investment portfolio delivered our financial result of NOK 226 million this quarter, reflecting positive returns from both fixed income instruments and real estate. The pension segment recorded a pretax loss of NOK 298 million, adjusted for CSM, reflecting the recalculation of reserves within the insurance portfolio and reduced net finance income. This was partly offset by the Unit-Linked business, which continued its strong performance, thanks to growth in occupational pension memberships and rise in assets under management compared with the first quarter last year. So over to Page 6. Group Insurance revenues increased by 10.6% in this quarter in local currency. I'm very pleased with our strong growth momentum continuing into the first quarter, which demonstrates our robust position and unwavering focus on profitability. Our disciplined pricing approach across all segments has been successfully implemented, strengthening our profitability and supporting our overall growth strategy. We remain committed to maintaining our pricing at least in line with the anticipated increase in claims cost, ensuring that our premiums continue to reflect underlying risk and market trends. This ongoing focus on pricing not only safeguards our margins, but also enable us to proactively respond to evolving claims patent and external factors. Growth in our Private segment was driven by both Norway and Denmark, primarily through price increases, complemented by higher volumes across the main product lines. The commercial segment also saw growth in both Norway and Denmark, reflecting price increases across all key products. As in recent quarters, growth in certain accident insurance products remains subdued, reflecting our consistent prioritization of profitability over growth. Sweden also demonstrated growth, although at a somewhat lower pace driven by price adjustments across all main products and higher volumes. Nevertheless, the increase in gross written premium reflects a solid growth trajectory. So over to Page 7. Improvement in operational targets is important to support the delivery of strategic priorities, and you see these financial targets. The 2028 operational targets for the group were announced at our Capital Markets Day in February this year. Retention rates remain a key driver of cost efficiency. Retention rates in Norway held firm at 91%, a very strong level, especially considering the necessary and significant price increases we have put through it. Retention in Denmark rose to 87% driven by a positive underlying development and an improved reporting structure for the commercial portfolio. Our continued focus on automation and digitization is accelerating operational progress. The quarter saw robust growth in digital sales and distribution efficiency is improving across both private and commercial segments. So thanks to automation initiatives, 42% of claims in Norway are now handled as straight-through processing. This not only greatly reduces manual work and advances [ our broader ] cost efficiency, but also speed of processing types, enhancing customer satisfaction. Over to Page 8. I'm encouraged by the strong progress we continue to make on our sustainability agenda and by our unwavering commitment to developing new initiatives that reinforces our contribution to sustainable development. As highlighted on this slide, [ another ] Capital Markets Day in February, we have set ambitious long-term goals through 2030 and our organization remains focused on delivering these outcomes. The external recognitions and ratings we have received are a testament to our achievements and serve as a powerful motivator for us to sustain and further elevate our efforts in this critical area. So with that, I will leave Jostein Amdal to present the first quarter results in more detail.

Thank you, Geir, and good morning, everybody. I will start on Page 9. We delivered a profit before tax of NOK 2.055 billion in the first quarter, with a significant increase compared with the first quarter last year being driven by a higher insurance service result. Potential segment contributed negatively to the overall results, posting a loss this quarter, primarily due to a recalculation of reserves in the IFRS 17 accounts and reduced net financial income. Net financial results from our investment portfolios were lower this quarter, mainly due to a larger increase in interest rates compared with the same quarter last year. The contribution from other items was lower mainly due to the transfer of profits from Natural Perils insurance and higher amortization. This was partly offset by a NOK 106 million provision reversal after the Danish Supreme Court ruling in February. Higher results from Gjensidige Mobility Group also contributed positively. Turning over to Page 10 to comment on the segments, starting with private. I'm very pleased with the strong development in Private Norway this quarter. The Insurance service result increased by NOK 258 million driven by a significant margin improvement and continued strong growth in revenue. The underlying frequency loss ratio improved by 3.5 percentage points, reflecting both effective pricing measures and favorable driving conditions in Norway this winter, benefiting profitability from motor. Staying ahead of claims inflation through proactive pricing is one of the most important things we do in this business. Heightened geopolitical uncertainty has increased concerns around inflationary pressures and potential supply chain disruptions. We are monitoring developments closely and remain committed to ensuring that our pricing models continues to reflect updated assumptions. Our latest estimates on repair cost increases in Norway are 4% to 7% for Motor and 4% to 6% for Property. Inflationary pressure remains somewhat lower in Denmark and Sweden as has been the case for some time. Turning to our private portfolio in Denmark. I'm pleased to report a marked improvement this quarter. The insurance service result reached NOK 74 million, a substantial improvement from a loss of NOK 57 million in the same period of last year. This positive development was largely driven by the successful implementation of targeted pricing initiatives and the reduction in midsized claims with Property and Motor insurance showing higher profitability. We remain firmly committed to enhancing cost efficiency in Denmark, and it is encouraging to see these efforts beginning to deliver tangible results. Moving on to Page 11 for comments on the performance of our commercial portfolios. The insurance service result in Norway remained stable this quarter. We achieved higher revenues due to effective pricing measures and benefited from lower large losses. It is also very encouraging that we managed to further reduce our already low cost ratio. This was offset by lower runoff gains and a slight decline in underlying profitability in property and liability insurance. Although other product areas such as Motor showed increased profitability. We'll continue to prioritize profitable growth and maintain high operational efficiency. Our insurance service result in Denmark improved [ market ] this quarter. primarily due to a better underlying frequency loss ratio and fewer large losses. Profitability from most product lines increased mainly as a result of effective pricing measures. We remain committed to further advancing cost efficiency and ensuring sustainable growth across our Danish portfolio. Turning over to Page 12. Our Swedish business continues to perform well overall. Although this quarter, we experienced reduced underlying profitability in Commercial Motor, Private Property and Payment Protection insurance. The insurance service result was supported by a higher run-off gains, but was negatively impacted by a higher underlying frequency loss ratio and an increase in large losses. We continue to focus on growth and profitability by implementing efficiency measures, investing in technology and optimizing costs. In addition, we are broadening our partner collaborations most recently by entering a partnership with [indiscernible] for pet insurance. We're also continuing to develop and improve our claims processes, leveraging artificial intelligence for personal injury assessments a newly launched initiative aimed at enhancing efficiency and accuracy in claims handling. Let's turn to Page 13 for comments on our pension business. This segment generated a pretax loss of NOK 298 million after adjustment for the contractual service margin. Of this total, NOK 255 million relates to a recalculation of reserves in our IFRS 17 accounting negatively impacting the insurance service result, whereas a result under IFRS 4 remained unaffected. Excluding this and nonrecurring effects in the first quarter of 2025, the insurance service result declined by NOK 21 million, largely attributable to claims associated with the [indiscernible] pension product. It is important to note that the reserve strength did not have an impact on our solvency position. The result for the quarter was also negatively affected by net finance income following the sharp increase in integrated rates during the quarter. The negative return on assets, unwinding and higher profit sharing with customers as interest rates were above guaranteed levels more than offset the decrease in insurance liabilities caused by the higher interest rates. On a positive note, net income from our unit-linked business continued to improve, underpinned by price adjustments as well as growth in occupational pension members and assets under management compared to the same period last year. Our pension business not only supports our insurance operations, it unlocks attractive opportunities for cross-selling and synergies throughout the company. We are confident that we will continue to generate substantial value across our organization over time. Let's now turn our attention to the investment portfolio as presented on Page 14. The capital markets experienced considerable live volatility this quarter. In light of these market conditions, we are pleased with the performance of our investment portfolio. Our quarterly results benefited from positive returns on fixed income securities and real estate holdings. On the other hand, higher interest rates, wider credit spreads and both private and listed equities negatively affected overall performance. The match portfolio generated return net of insurance finance that was essentially flat, while the free portfolio returned around 70 basis points. Risk in our portfolios remained low and we maintain a well-balanced asset allocation with a focus on high credit quality. We are confident that our investment strategy positions us well to withstand any further market turbulence. Over to Page 15. The group solvency ratio based on the approved model was 195% at the end of the first quarter, an increase from 188% at the end of 2025. Please note that factoring into the redemption of the Tier 1 loan announced and completed earlier this month, the [ solvency ratio ] would have been 190%. Solvency II operating earnings and returns from the free portfolio made positive contributions to eligible own funds. In line with our established practice, for the calculation, we reduced own funds by applying a dividend of 80% of profit after tax. The sale of our Baltic business had a favorable effect on own funds, although this was offset by a reduction in eligible Tier 2 funds resulting from a lower capital requirement. We currently hold around NOK 400 million in Tier 2 funds that are not included in their eligible own funds, but anticipate that their full inclusion over time. The capital requirement declined due to a strengthening of the Norwegian krona against all relevant currencies as well as reduced market risk from the life insurance business. The sale of our Baltic operations further lessened the capital requirement. As previously announced, the overall effect of this divestment was a positive 5 percentage points. And with that, I hand the word back to Geir.

Thank you, Jostein. To summarize on Page 16. We are very pleased with the robust performance this quarter. As mentioned earlier today, staying ahead of the inflation curve remains our top priority. Given the persistent uncertainty surrounding inflation and supply chain disruptions, we are monitoring developments closely and stand ready to take swift action when never required. Our strategic approach is built around 4 central priorities: customer empathy, profitable growth, resilience and disciplined capital management. These priorities ensure that we deliver solid financial results while also creating lasting value for both our customers and stakeholders, strengthening [indiscernible] [ ability ] for long-term sustainable growth. We work continuously to achieve industry-leading cost efficiency and enhance profitability. Based on the progress we have made so far, we are confident that we will achieve our financial targets for 2026 and we see a strong foundation for continuing this positive development in the years ahead as well. And with that, we will now open the Q&A session of this presentation.

[Operator Instructions] And with that, we will take our first question from a Norwegian number ending with the digits 6-0.

Can you hear me? This is Hans Rettedal Christiansen from Danske Bank Markets.

Just a moment.

Can you hear me?

Okay? Just a moment, we're working with the technical side of this.

Okay. Just let me know when I can take my question.

Yes. Just a moment. We're trying to get rid of the echo here. Okay. Please ask your question.

Yes. Congratulations on a very good quarter. I could have two, please. And just because the first one is really related to the quarter, it's relating to the court case in Denmark that was announced yesterday. And I'm just trying to understand how sort of certain you are on the figure you've given for the impact, especially given the fact that sort of other market participants have given quite varying numbers based on sort of market share. So trying to understand what the assumptions that you've used behind that estimate is and how sort of the firm you are on that number? That's the first question. And then the second question is on the change to your guided inflation in Motor and Property in Norway. So you're effectively increasing the sort of expected inflation by 1 percentage point this quarter. Just trying to figure out or wondering a little bit what that means for your pricing going forward in the products? And if you're still firm on sort of pricing above your expected claims and frequency development going forward?

Thank you, Hans. I'll start on the Danish workers' comp estimates. We noted this as everyone, I think, yesterday that they were somewhat varying estimates when taking into account the different market shares there. And we underlined our stock exchange release yesterday that this is a very uncertain estimate. The main building blocks of such an estimate is an assumption of how many claims will be between the 5% to 15% range of the lost working [indiscernible] of these going back decades will actually come forward with a claim. For us, this verdict was very unexpected. We think it's also unreasonable given that this is a reversal of a practice that has been in the Danish workers' comp business for 40 years. But we'll have to take this into account and together with the rest of the Danish insurance industry, estimate or assess what kind of measures we can take.

Okay. Just to add to the first question. Also having in mind that the office handling each different claims regarding the workers' compensation in Denmark. It's handled by a governmental office independent on the kind of handling we do in our own claims division as well. So there is an industry topic going forward, how to handle this against the Danish government and the state. But the second question regarding inflation. Yes, as you mentioned, we have updated our inflation estimates and that's due to what's happening around us as you understand, with higher energy prices and a consequence on different materials. But within property, we see that -- and as you know, 25% of the inflation is due to material prices and 75% is labor cost, which is more fixed over time. But now we know also the salary increases expected in Norway for '26 as well, which is close to around 4.2%. And within motor, 50% is labor cost and 50% material prices. So we have done new kind of new estimates on -- based on each different types of materials affecting both Property and Motor. And that's the basis for the new estimates. When going forward, our pricing will always be at least in line with expected claims development and inflation. So new estimates will definitely have an impact on our kind of pricing strategy going forward.

Okay. We will proceed to a U.K. number with the last digits 0-0.

This is [ Vash ] from Goldman Sachs. Could I just confirm if I'm audible, please.

Excuse me, can we repeat?

This is [ Vash ] from Goldman Sachs. Can I just confirm if I'm audible?

Yes.

We can hear you.

Perfect. So two questions from me. One unfortunately, a follow-up on the Danish workers' comp. I fully appreciate that the financial impact remains quite uncertain. But Are you at least able to share with us at this stage, what would be the next steps that you expect? And sort of the time line that you have in mind before you can get some certainty around this? Because I fully appreciate it's a lot of dealing with that many stakeholders in this process. But would you love to get a sense of the time line and the logistics that we are working with. That's the first question. And the second question was actually around gross written premiums. So if I look at the GWP towards the end of the slide pack, it appears that your growth in commercial lines is much lower. I'm just trying to get a sense of what's driving that or if you could unpack what are your views on the commercial line in January because just the GWP seems a little weak.

Thank you, Vash. We -- on the further work that we will have to do internally before we come up with the exact number that we actually put into the accounts. we will work a bit more detail to narrow down the wide range that we gave in the stock exchange release yesterday. So it's -- I won't give exact time line, but as we have already stated, within -- at the latest when we produce the second quarter results and maybe before that, and I guess we will then put out a separate notice if we end up with something before the second quarter results. So we will be duly informed about that. In terms of other types of measures like how to meet this verdict, I think our approach is to cooperate closely with the other Danish insurance companies through the Danish Insurance Association for how to take this further.

Yes. A second question is regarding growth within especially commercial lines, and you referred to the growth regarding growth -- gross written premium. As -- what we have seen during the first quarter is -- and now we have done 40% of renewables for the commercial portfolio in total, which happened in January. We see that the retention rates are at a very satisfactory level when it comes to the SME part of the business, and we have seen that our kind of competitiveness in the market, especially in Norway has been very good during the first quarter regarding especially SME business. When it comes to larger companies, large corporate companies, we see that especially within product lines, life and accident products, group life products. We have not successfully renewed a couple of larger clients, which are through broker channels and which have an impact on the kind of gross written premium during the first quarter. But that's a due to our core focus on profitable growth. And we did not want to renew the contracts with kind of conditions and pricing conditions, not in line with our profitability expectations.

Okay. We will proceed with another Norwegian number, ending with the digits, 4-3.

This is Ulrik Zurcher from Nordea. Yes. So a couple of follow-up questions on the commercial growth. I was just excluded these larger client to us. This is underlying inflation and growth around the inflation rates for retail. That's number one. And then I was wondering if you could quite like what would be the solvency impact of the provision in Denmark? Is it just a subtraction to own funds? Or is there something -- will there be other factors playing?

Yes. When it comes to commercial lines, we are still doing the pricing at least in line with the expected inflation. And that's also our core focus when prioritizing profitable growth, and that's also part of the kind of low way we were thinking through the renewal in last January. We see that within larger part of our commercial business accepted the price increases, retention rate is still high. But as mentioned, we see on more group life products, we are not coming through to all clients when it comes to our repricing and -- which is consistent with our profitability kind of expectations. But we are talking about a few larger clients. So I'm not concerned on further development within the commercial business.

On the solvency effects of the Danish workers' comp verdict. The main effect is on the owned funds. So you have [indiscernible] and then of course, need to subtract taxes and so on to get to the own funds affected. So that's the main of the calculation.

And just one follow-up. I was just wondering what drove the pension reserve strengthening.

We also note in accounts, there is -- that's IFRS 17 effect where we've gone through all the calculations for -- moving from IFRS to IFRS 17. And so [indiscernible] needs to increase the reserves under IFRS 17, no effects under IFRS 4 or solvency or the solvency regulation. So I would regard it as more of a technical adjustment.

If you look at the business mix in the pension business and the foundation for further growth and profitability, we are not concerned about the development regarding the different product lines in that business and we still have the same kind of drivers for improving that kind of business going forward as well. So -- and if you look for accounting, the changes had no impact this quarter.

Have you made an estimate of what the -- replacing the IT system will cost for pension?

No, we have now finished kind of migration back from the IT system, we terminated and back to the existing system. And now we are having a kind of long-term view how to maintain control development on this system and to kind of assess what you do next, but we are not in a hurry. We have done very good progress when it comes to the existing provider and the existing system to give us good time to actually do the right level of assessment needed when it comes to changing the system in the future. But we are not in a hurry, and we are picking up all the learning points from what's happened during the last 5 years regarding the terminated system.

All right. We will proceed with the question from Vinit Malhotra.

so just yes, my two questions. One is on the Motor commentary on your slide, I think it's slide 5 where you said favorable weather conditions for Motor in Norway. Have you made any attempt to kind of get a sense of how much was just a weather effect? And how much was your pricing or deductible actions or those kind of things in this improvement? So that's my first question. And second question is -- just maybe it's been addressed, I'm sorry, if it has been. But in the Norwegian commercial, you mentioned the higher underlying loss ratio from [indiscernible] from property. Now is that due to already some inflationary effect? Or is that due to some of random events like fire, I mean not fire, I don't think [indiscernible]. But why do you think that is the case, please?

Thank you, Vinit. On Motor, we don't have a quantified effect of the weather, but the main improvements is not related to kind of weather volatility. It's more to do with pricing and a more stable claims inflation and frequency development, excluding the volatility. So there is some favorable weather, and it certainly helps, but it's not the main explanation. On the Norwegian commercial [indiscernible] small change in the loss ratio. This is just normal volatility. We do not really see as of now, that there has been an uptick in claims inflation due to the geopolitical uncertainty. But as Guy said in the expectation going forward, we do see there is a risk for that due to higher energy prices feeding into all types of inflation in the future.

Okay. We will move on to the next question from a Norwegian number ending with the digits, 4-9.

This is Thomas Svendsen from SEB. So on this expected claims inflation, we can see that the currency Norwegian currency has strengthened, but we should not assume that, that would positively impact the inflation or you assume that, for instance, car parts will increase the same as the currency has -- the foreign currency has weakened. That was the first question. And the second question on your most of turning down business in the larger corporate segments, are we talking about sort of big difference to your profitability margins? Or are you talking a lot small deviations that make you turn this down? And what do you think about growth and the competition in this channel for the remaining of the year?

Starting with the first one regarding currency and exchange rates and due to our inflation estimates, we always have in mind currency changes when setting the inflation, but it's difficult to give a precise forecast on that, of course. But when we actually make up, for instance, for Motor set up the inflation, 50% is regarding labor cost and 50% material cost. And then we go down all the different prices for materials used in doing repair of cars. And for some parts, we see that inflation is definitely higher than 5%, 10%. And for other parts, we see that the inflation number is low. And then we do the whole calculation to see what the expected impact on our total inflation numbers. And [ resetting ] our prices when we do repricing, we always have in mind to reprice at least in line with export inflation, and then we also take into account any kind of certainty when it comes to currency development as well. Yes, the second one, I think when it comes to [indiscernible] large corporates leaving in [indiscernible]. I would say that we are talking about customers, which use brokers in bid processes. I will not say that we are seeing prices in the market, which is significant difference from what we are offering, but we do have quite strong and strict profitability measures and ambitions regarding our customers. And you also see that we are very happy with the development regarding SME business, and we are not letting -- pushing the prices down to win the last two larger corporates within the broker channel business to put it that way. So this is a kind of ongoing consideration [indiscernible] prices and to achieve profitability, which is in line with our expectation and targets. But so far, we haven't seen large differences, but there are some differences, which are not kind of within our expectations and requirements.

All right. There doesn't seem to be any further questions. So fine, we will now proceed. We are participating in roadshow meetings in Oslo today. Over the coming weeks, we will travel to London, Helsinki and Zurich for additional road show meetings and a conference. We will also attend group meetings in Oslo later this quarter. Further details are available in our financial calendar on our website as usual. Thank you for your attention, everyone, and have a nice day.