Gjensidige Forsikring ASA Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tryfonas Spyrou - Joh. Berenberg, Gossler & Co. KG - Analyst : Hi there. Good morning. I guess the question will be maybe for Jostein. Upon your transition to IFRS 17, you mentioned 85 percentile is going to be at risk adjustment slightly sort of align with your customer equity. I guess, how has your estimated cost of equity has changed now? And what is actually driving the change? I would have thought the customer equity should be higher, not lower, given where interest rates are versus own? And just conceptually, around the uncertainty on the claims churn and all the volatility, I was intrigued by the timing. On the surface, it looks like there's less prudence in the reserves and appear, where you perhaps make more? And then the other one is more to Norway. If you can just clarify the comment you made on the fleet. Are these mainly electric cars in the fleet? It appears to have been a step-up in new car sales, electric new car sales in 2023 due to change in tax in Norway. And can you please comment whether your market share also sort of slowly step up in terms of your business mix and whether this could be one of the drivers behind step up in increase in frequency of claims? So those will be my two questions? Thank you. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 15, 2024 / 7:00AM, GJFG.OL - Q2 2024 Gjensidige Forsikring ASA Earnings Call

Question: Tryfonas Spyrou - Joh. Berenberg, Gossler & Co. KG - Analyst : And can you just clarify, there's been a step-up in new car sales in terms of electric vehicles in 2023. So if you have stable market share that means you have structurally higher sort of insured cars when it comes to electric vehicles. So can that step up be, obviously, basically the cause of being associated with higher claims frequency and severity. Can that be -- is that a key driver of what we saw over the last year and what you're seeing now in your view? Thank you.

Question: Tryfonas Spyrou - Joh. Berenberg, Gossler & Co. KG - Analyst : Okay. Thank you.

Question: Freya Kong - Bank of America Merrill Lynch - Analyst : Hi. Thank you. I guess my question is, where has your claims experience year-to-date continue to negatively surprise versus your own expectations, given you've essentially revised down your Q1 figures? Is this more in the frequency or the severity side or both? Because to me, it seems like the main difference versus Q1 was perhaps more fires and property in Q2. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 15, 2024 / 7:00AM, GJFG.OL - Q2 2024 Gjensidige Forsikring ASA Earnings Call And then just following up on this, do you think keeping unchanged outlook for claims inflation in Norway motor and property is prudent given the experience we've seen so far?

Question: Freya Kong - Bank of America Merrill Lynch - Analyst : Okay. Thank you.

Question: Alexander Evans - Citigroup Inc. - Analyst : Hi. Thanks for taking my questions. Firstly, just a clarification. I think you previously had the target of Norwegian private lines underlying improvement at some point in 2Q and 3Q. Is that no longer the case? And then secondly, just on the movement in risk adjustment, your previous sort of run rate of reserve releases is about 2%. Is it possible to give any color what you think the movement in the risk adjustment means for that now? Thanks.

Question: Alexander Evans - Citigroup Inc. - Analyst : I mean, historically, you've had reserve releases of 2%. You're obviously moving down and being less prudent in that. Is it possible to give us the sort of quantification of where you think reserve releases on an ongoing basis is now?

Question: Ulrik Znrcher - Nordea Markets - Analyst : Yeah. Thank you. I was just wondering, you previously said you expected around 12% to 13% claims inflation for motor in Norway using 2022 as a base and then 5% increase in claims frequency over -- again, over two years. Have any of those components changed for you now? And then just secondly, a short one, like is it possible to quantify surprise on property in Private and Commercial Norway because like I mean this surprise to expectations are very big.

Question: Ulrik Znrcher - Nordea Markets - Analyst : Yeah, but on the property side because what makes it a bit difficult to see for us is that there is also an increase in severity. So like how much does this cost you versus expectations or something like that? Is it possible to say? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 15, 2024 / 7:00AM, GJFG.OL - Q2 2024 Gjensidige Forsikring ASA Earnings Call

Question: Ulrik Znrcher - Nordea Markets - Analyst : Okay. But it is fair to say that property was what had a big effect this quarter? Not motor. It's up a little bit. I know on frequency, but doesn't seem that much.

Question: Ulrik Znrcher - Nordea Markets - Analyst : Yeah. That's where I had my statement from that. That it looks the property was the big surprise. But yeah, thank you.

Question: Jan Erik Gjerland - ABG Sundal Collier Holding ASA - Analyst : Thank you for taking my question as well. When it comes to page 3 and 4 on the incurred claims changes going forward, it looks like at least on your property side that you have a nice downtick into the second half. And then, of course, you price in line more with inflation, so it's not calling that fast upwards. Should we expect property to be sort of the winner in the second half of this year since you had a tough comparison from Q3 last year with the flooding of homes, et cetera, and the tough winter. So it means that the frequency and the severities, you don't expect to come back in the second half of this year. While on motor, you actually expect severity and frequency to stay high and now you actually start to price that into your pricing for motor. Is that fair to assume that, that is what you're looking at?

Question: Jan Erik Gjerland - ABG Sundal Collier Holding ASA - Analyst : Can I also understand that have you sort of changed your repair cost agreements with the suppliers in a way, which has surprised you negatively versus your expectations due to the high inflation in the past so that those kind of agreements have hit you extra this quarter or when does these agreements being negotiated?

Question: Jan Erik Gjerland - ABG Sundal Collier Holding ASA - Analyst : Okay. Thank you. I'll go back to queue then.

Question: Vegard Toverud - Pareto Securities AS - Analyst : Yes. Good morning. I wondered if you could comment a little more on how the claims impact from Q1 came into the Q2 numbers. Also, if there's any difference here between commercial and private lines, and also if this in any way, have impacted the frequency numbers you have helpfully commented on page 3 and 4? Thank you.

Question: Vegard Toverud - Pareto Securities AS - Analyst : Thank you. That's helpful. Just to trying to dig into it slightly more. You mirror comments from a competitor, which reported also last week and commented on the same effects. So the reason why these claims are then adjusted upwards, is that due to strains or bottlenecks in some part of the total claims handling business for Norway, for instance, in taxation of all the claims, et cetera. I'm just trying to understand why this seems to be an industry issue in the first half of this year?

Question: Vegard Toverud - Pareto Securities AS - Analyst : Okay. Thank you.

Question: Hskon Astrup - DNB Markets - Analyst : Good morning. Thanks for taking the questions. My question would be on the churn in Private Norway. So, so far, a very limited impact from the price increases, but you're now ramping up the price increases, if I understand you correctly. So end of 2024 price increases will be above 50% loss in private motor and property. So do you expect that to have any impact on churn? And if churn increases, will this impact your behavior?

Question: Hskon Astrup - DNB Markets - Analyst : Thank you. That was very clear. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 15, 2024 / 7:00AM, GJFG.OL - Q2 2024 Gjensidige Forsikring ASA Earnings Call

Question: Faizan Lakhani - HSBC Holdings plc - Analyst : Hi, there. Thanks for taking my questions. The first one is on the chart that you show with the property sort of long-term trend and how that developed. It appears that prior to sort of 2019 or COVID, it was sort of still above where it is right now and yet you're expecting to drop down to maybe sort of the trend line for 2022. I can understand some of that may be the structural decrease in fires, but that sounds quite punchy for a reduction in this. Are you comfortable with your incurred claims trends that you're forecasting in property? The second question is sort of a big picture question on the fact that you maintained your 2026 target of a combined ratio of a sub 82%. If I look at where your starting point is today, 88.9%, you take away 3% for weather, you're at 86%. You've earmarked something like [NOK800 million] worth of claims efficiencies. Could you sort of guide in terms of how much of the claims efficiencies have come through? How much of the benefit deductible has already come through? How much more is set to come? And realistically, how much can you bridge via sort of pricing actions to get to that 82% combined ratio guidance that you have for 2026? Thank you.

Question: Faizan Lakhani - HSBC Holdings plc - Analyst : And sorry, just a follow-up on that question, how much of the claims efficiency that you've laid out? How much have you actually achieved so far towards your target 2026 target already?

Question: Faizan Lakhani - HSBC Holdings plc - Analyst : Okay. Thank you very much. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 15, 2024 / 7:00AM, GJFG.OL - Q2 2024 Gjensidige Forsikring ASA Earnings Call

Question: Thomas Svendsen - SEB Equities - Analyst : Yes. Good morning. A question on the dividend policy because if we look at the EPS first half this year and adjusted for the change in risk adjustment, you are far behind last year. So how important is it to keep the dividend and not cut it from one year to another?

Question: Thomas Svendsen - SEB Equities - Analyst : Okay. And second question on the claims frequency in motor because it seems like the tone has changed a little bit from optimism last quarter. So how sure can we be that it's actually not increasing? So it's increasing further amid increased economic activity in Norway?

Question: Thomas Svendsen - SEB Equities - Analyst : Okay. Thank you.

Question: Hans Rettedal - Danske Bank A/S - Analyst : Yes. Thank you for taking the question. I was just wondering on your communication where in Q1, you said that you expect improved underlying frequency loss ratio year-on-year for Private Norway during the next two quarters. And given that it didn't happen this quarter, do you still stick with that statement for the next quarter, so in Q3?

Question: Hans Rettedal - Danske Bank A/S - Analyst : Okay. And then I just have a follow-up to that. I guess you've touched upon previously as well, but on the chart in the lower left -- right-hand corner on page 3 on the property claims inflation, if you compare that chart to what you reported in Q1, I mean there hasn't been any change in sort of the illustratory effect, whereas in the motor chart I guess you've kind of picked up the incurred claims. So how should we think about that compared to the results that you've given this quarter and especially then on property, which seems to be sort of bang in line with what you were expecting in Q1?

Question: Hans Rettedal - Danske Bank A/S - Analyst : Okay. But is it just because the chart hasn't actually changed quarter on quarter? So is it then the severity component that has changed quarter over quarter?

Question: Hans Rettedal - Danske Bank A/S - Analyst : Okay. Thank you very much.

Question: Youdish Chicooree - Bernstein Autonomous LLP - Analyst : Hi. Good morning, everyone. I've got two questions, please. The first question is on your price increases and your financial targets for 2025. I mean there is a significant step-up in your price increases from July. Now as you said earlier, it's going to take you 12 months to work for your renewal book and there's potentially another 12 months before you fully are through those price increases. So what gives you confidence that you can hit your combined ratio target for 2025? That's my first question, please. Thank you. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 15, 2024 / 7:00AM, GJFG.OL - Q2 2024 Gjensidige Forsikring ASA Earnings Call

Question: Youdish Chicooree - Bernstein Autonomous LLP - Analyst : Okay. All right. Thank you. And my last question is on the frequency loss ratio. I mean, in terms of the change year on year, you've told us that two points is from some late reporting from Q1. Of the remainder, are you able to help us like split the 3.6 increase between what you would call these bad luck in terms of property claims to cash the claims and what is actually the motor component, please?

Question: Youdish Chicooree - Bernstein Autonomous LLP - Analyst : All right. Okay. Thank you very much.

Question: Johan Strom - Carnegie Investment Bank AB - Analyst : Thank you. So I'm wondering if you see any changes in the customer behavior in terms of coverage. I mean, after all these price hikes, which are well above inflation, insurance has become fairly costly. So are you seeing any customers reducing the coverage? Thank you.

Question: Johan Strom - Carnegie Investment Bank AB - Analyst : Okay. Thank you.

Question: Michele Ballatore - Keefe, Bruyette & Woods, Inc. - Analyst : Yeah. Thank you for taking my questions. So I will go back to slide 4, I mean, which is an interesting slide in terms of the long-term trends in the claims development in motor. My question is, I guess, around -- do you see the same trends emerging -- the same structural trends emerging also in Denmark and Sweden? Or are these countries different to some extent? Can you maybe clarify and give more color on that? Thank you.

Question: Michele Ballatore - Keefe, Bruyette & Woods, Inc. - Analyst : And when it comes to all the other elements driving behavior, terms and conditions?

Question: Michele Ballatore - Keefe, Bruyette & Woods, Inc. - Analyst : Thank you. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 15, 2024 / 7:00AM, GJFG.OL - Q2 2024 Gjensidige Forsikring ASA Earnings Call

Question: Vinit Malhotra - Mediobanca - Banca di credito finanziario S.p.A. - Analyst : Yes. Good morning. Thank you. So My one question on slide 3, please, on property in Norway. Could you just say something more -- one level more about the measures being taken to reduce exposure to fire risk, fires? Is it that you're increasing far more for a certain class of business within property or something there to suggest why this problem of fires should go away in the near term? And also, if I can for -- I know we are only allowed one question, but property, this deductibles, could you give us an example because property deductibles were differently treated by customers than motor deductibles, where sometimes people might or might not make a claim, but in property, they probably will still make a claim. I'm just curious on these two topics, but I'm happy to wait later as well? Thank you.

Question: Vinit Malhotra - Mediobanca - Banca di credito finanziario S.p.A. - Analyst : Okay. Thank you very much.

Question: Tryfonas Spyrou - Joh. Berenberg, Gossler & Co. KG - Analyst : Hi, there. Just maybe one more on the property. Can you maybe -- and I know you probably touched on this a little bit, but the trend between -- during COVID, 2020, 2023, that the structural sort of COVID had on revenue versus claims. Can you maybe elaborate a little bit more on what was the key driver behind that? And why do you seem comfortable that we're not going to revert back to the mean, it looks like the claims been structurally higher than what you show on slide 3. Maybe just as a follow-up to Faizan's question earlier? Thank you so much. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 15, 2024 / 7:00AM, GJFG.OL - Q2 2024 Gjensidige Forsikring ASA Earnings Call

Question: Tryfonas Spyrou - Joh. Berenberg, Gossler & Co. KG - Analyst : Can I ask on the commercial side, are you seeing similar trends as the graphs on slide 3 and 4 on property and motor? Is that similar trend on the commercial side?

Question: Freya Kong - Bank of America Merrill Lynch - Analyst : Hi. Thank. Can I just ask what the priorities for your new EVP of claims will be when she starts? Do you think the issues that you've seen are, I guess, more broad-based across the market? Is everyone being negatively surprised on frequency? Or do you see something in your systems that need to be improved to catch these issues sooner or rather better anticipate? Thank you.

Question: Freya Kong - Bank of America Merrill Lynch - Analyst : Thank you. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 15, 2024 / 7:00AM, GJFG.OL - Q2 2024 Gjensidige Forsikring ASA Earnings Call

Question: Jan Erik Gjerland - ABG Sundal Collier Holding ASA - Analyst : Thank you for taking my follow-up. Just taking Hskon's retention question back in time here. So how will you differ between your customers when it comes to hikes, price hikes? Will most of them then get a sort of a better client being in the lower end and those who are of least profitability get a much, much higher level. So you try to price them out of your book or how should we look at your sort of repricing or just a different kind of client hikes or profitability of clients, please?

Question: Jan Erik Gjerland - ABG Sundal Collier Holding ASA - Analyst : Isn't it the risk that you actually then push them away because they would get a more decent offer somewhere else?

Question: Jan Erik Gjerland - ABG Sundal Collier Holding ASA - Analyst : Okay. Thank you.

Question: Faizan Lakhani - HSBC Holdings plc - Analyst : Hi, there. I know this was covered last quarter, but I just wanted to sort of catch up on again is the fact that you've increased your large loss budget by some 20%, yet you didn't change your combined ratio target. And personally, I would assume that means mechanically you're forecasting a better underlying frequency loss ratio going forward. Can you maybe just help bridge how that works? Thank you.

Question: Faizan Lakhani - HSBC Holdings plc - Analyst : Okay. So you need to in fact achieve one point more in the combined ratio via pricing to hit the targets, if that's my understanding, correct?

Question: Faizan Lakhani - HSBC Holdings plc - Analyst : Thank you very much.