ALM. Brand A/S
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ALM. Brand A/S
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Hello, and welcome to the Alm. Brand Interim Report for First Quarter of 2023. My name is Alex. I'll be moderating the call today. [Operator Instructions] I'll now hand over to your host, Rasmus Nielsen, CEO, to begin. Please go ahead.
Good morning, and welcome to Alm. Brand Group's First Quarter of 2023 Conference Call. I'm [ Rasmus Werner Nielsen ] and as usual, I have with me today, our CFO, Andreas Madsen; and our IR team with Mads Thinggaard and Mikael Bo Larsen. Before we go into the details of the quarter, I would like to comment on some of the trends that we see in the market. One of the motivations for our acquisition of Codan was to achieve larger scale. As we push forward, it has become even more clear that it was the right step for Alm. Brand. The alternative would have been challenging. And surely in a year like 2022, it has become very clear that there has been winners and losers in our industry. Size matters, and we have seen clear evidence that large insurers have been better to navigate in a challenging market with high inflation and changed customer behavior while the financial markets have been extraordinarily negative.
Scale is crucial and allows us to allocate resources to increase productivity and increase customer focus. I'm certainly happy about this, and I believe that this has been an instrumental [ incluing ] Alm. Brand Group in a [ sweet spot ] where we are today with an attractive upside for the years to come.
Let's now look at the highlights. Please turn to Slide 2 and some of the headlines for our business in the first month of the year. I'm pleased with the overall financial performance. We have made some strategic decisions on how we want to grow and expand our presence in the market. I've stated on several occasions that we are very disciplined in growing our top line only if we can achieve it in a profitable way. Thus, I'm very satisfied with the organic growth of 6% made in Alm. Brand. We appeal to [ a great ] many customers and the impacts of new customers has been very strong. At the same time, we are making steady progress on the integration of Codan. Some of this refers to realization of hard cost synergies but we are also putting a lot of resources into securing that we succeed in creating optimal common structures for governance that our workflows are streamlined across the group.
On a separate note, we are welcome yet another bank to our bank assurance setup. Arbejdernes Landsbank has now joined [ Croatia ], which now has more than 30 members banks with a total reach of around 40% of the banking customers in Denmark. This is an impressive distribution channel with an enormous [ upside ].
Lastly, we have now initiated the process of combining Alm. Brand and Codan into one legal entity. The merger of our 2 legal entities is expected to be finalized in the first half of next year and it will improve the possibility for servicing customers across Codan and Alm. Brand. We will also simplify the legal structure and thereby in some functions, make it easier for us to realize the synergies. And now I'll turn to Slide 3 with our financial highlights. Insurance revenue totaled DKK 2.9 billion in the quarter. Organic growth has continued to be very satisfying. [indiscernible] Alm. Brand added 6% in premise to a total of DKK 1.4 billion. And on top of this, Codan contributed with a similar amount. The technical result was DKK 205 million against the loss of DKK 82 million last year. All in all, a positive start to the year. But in all fairness, also a result that, as expected, is front loaded with more cost compared to what you should expect for the next quarters of the year. I'll come back to that.
Investment income in Q1 was a satisfactory profit of DKK 149 million coming from both the free portfolio and the interest hedging of our technical provision. On January 1, this year, IFRS 17 replaced [ ate ] for as the International Financial Reporting Standard for insurance contracts. The intention is to achieve uniform valuation of insurance contracts at an international level as well as to further align the financial statements of insurers we built of other industries to enable easier comparison of results.
The effect of the financial statements of Danish insurance company is general minimal. As many of the underlying concept of IFRS 17 is already been incorporated in Danish GAAP, such as market value, cash flow approach and discounting. Apart from a very few technical calculation changes the effect is mostly limited to renaming of key figures and a few changes through the presentation of financial statements in general. Thus for Alm. Brand Group, there will be no effect on our bottom line guidance for this year nor our financial targets for 2025.
And now let us continue on Slide 5. The group made a technical result of DKK 205 million in the quarter. The result from Alm. Brand was DKK 138 million against the loss of EUR 82 million last year as claims benefited from tailwinds due to higher interest rates which compensate for claims inflation. We saw a higher number of claims in general as the weather [ both ] led to [ more livery road ] accidents and an increased awareness of claims reporting. Taking this aside, both large claims and weather-related claims were lower compared to last year, which, of course, also adds to the profit. Further, Alm. Brand was able to reduce the expense ratio following both synergy gains and other cost initiatives. And finally, the runoff in the quarter were at a normalized level of 2.2 percentage points versus last year's loss following the reclassification of the result from an inflation swap related to workers' compensation. Codan's technical result amounted to DKK 67 million and included herein is a positive effect from the ongoing synergy program as well as the continuing pruning of the business that step-by-step as to the profitability of the total portfolio.
Please turn to Slide 6. Insurance revenue grew organically in Alm. Brand by 6% in the quarter thus keeping the highest pace from last quarter -- from the last quarter of 2022. I'm very pleased with the continued strong development. And again, we see a positive contribution from both personal lines and commercial lines with a very satisfactory inflows of new customers. Codan is not included in this chart, but it should be noted that the Codan business is more or less the same size as the Alm. Brand and then see a strong growth in the prevailing franchise and a more balanced a subdued growth in the industry as we add in some segments and reducing others. Also, it should be highlighted that the individual pricing initiatives add to the overall profitability.
And now please turn to Slide 7. The development in claims expenses reflects a quarter with an increase in the underlying claims ratio. We believe this is a one-off increase in claims caused by the stormy and rainy weather but not as such classified as weather-related claims. On the other hand, those claims that we classify weather-related claims as well as large claims has been lower than last year. Adding in together, the claims ratio, excluding runoff in Alm. Brand is down to 75.5% against 81.8% last year.
Further, the positive trajectory on reducing insurance operating expenses has improved the expense ratio to [ 17.1 ] against [ 18.0 ] last year. In Codan, the claims ratio amounted to [ 72.6 ] and the expense ratio was [ 22.7 ]. The expense ratio includes the front-end loaded fees in case and is notably down against last year's pro forma ratio of [ 27.7 ].
And moving on to Slide 8 and the combined ratio. Alm. Brand had a combined ratio of [ 90.4 ] in the quarter, including this number is both positives and negatives, as I already mentioned. Our key thinking around the number is that we are making progress on all the various components that affect the number, i.e., we're successfully adding to the pricing whilst growing our volume. We are implementing the initiatives to reduce expenses, and we are gradually offsetting the price inflation as we progress in the year.
Income in Codan, the combined ratio was 95.3. So adding Alm. Brand and Codan together, we get to a group combined ratio of 92.8. And we take that, we acknowledge that the claims ratio in the quarter is higher than we would have expected, but we are confident that this is a one-off issue, thus we would expect to be back at a lower level already next year -- next quarter, sorry.
Now I'll turn to Slide 9. As of 1st of January, we have aligned the amount limit for classifying major claims across the group. This means that we now have a limit of [ DKK 3 million ] in both Alm. Brand and Codan against previously [ 1 and 5 ], respectively. If we had applied the same amount limit in Alm. Brand last year, then the claims between [ DKK 1 billion and SEK 3 million ] would instead be included in the underlying [ cadence ] ratio and the underlying combined ratio would then have been 85.2, i.e., this is the base we use. When looking at this year's number of [ 85.7 million ], we then get an increase of 50 basis points. Again, we had a number of positives working in our favor, but also, as mentioned, an elevated number of claims caused by slippery road accidents as motorists were surprised by the late [ first ] in the end of March. In addition, the weather led to an increased attention to claims reporting as a result of our customers just expecting their house and extra time. Further, we also, as expected, saw an increase in the reinsurance costs as a consequence of general market tightening. This we will expect to pass on to our customers in the same way as general cost inflation. So all in all, we see the increase in Q1 underlying as temporary.
Now please turn to Slide 10. [ Personal Lines ] had a quarter with very strong growth, and at the same time, claims ratio for Alm. Brand has been reduced to [ 83.1% ] against [ 94.4% ] in the same quarter last year, reflecting lower weather-related claims and a higher level of run-up gains. On the other hand, the average claims cost has increased due to the inflation in Specialty Materials & Energy. And as previously mentioned, we have had a quarter with an elevated number of claims due to the weather.
The expense ratio improved from a -- with a healthy 200 basis points to 18.3 and including this is, of course, the effect of the synergy initiatives implemented throughout the last quarters.
In Codan, business had a combined ratio of [ 100.7 ] included herein as expected, commission expenses reflecting the insurance policies payment must i.e., seasonality in net profit is huge. Adding Alm. Brand and Codan together, the group combined ratio was 94.1.
Please turn to Slide 11 and the commercial lines. The combined ratio in Alm. Brand 96.9 i.e., down significantly relative to last year that under IFRS 17 has been restated to [ 116.3 million ]. The improvement is based on tailwinds from higher interest rates that reduces the amount of long-tail provisions that we do for claims in commercial line as well as lower claims expansions relative to last year, which were at a very high level. You should know that the implementation of new limits for large claims affects the large claims ratio for our commercial lines with around 6 percentage points. The combined ratio in Codan was 91.5 despite a somewhat higher-than-expected level of large claims that came in at [ 23.5 ]. On a separate note, it should be noted that highlighting that and highlighting that energy had a good quarter with a combined ratio of [ 7.6% ] Combined ratio for the group was [ 94.1 ], and we expect to reduce both the claims and the expense ratio in the time to come. The latter with the synergies as well as continuous focus on cost in general.
Please turn to Slide 13 for an update on our synergies. The initiatives already implemented in 2022 have been supplemented in the first quarter of '23 with initiatives that will lead to efficiencies in the purchasing and claims processing process. Also, we are adding to our fourth detection capability by expanding the scope of our systems. For the quarter, the synergy gains have had a positive P&L effect of DKK 57 million and we will remain confident that the synergies for the full year will add to at least DKK 240 million that we have stated.
Now I move on to Slide 14 and the investment results. We made a net investment result of DKK 149 million, split almost evenly between the free portfolio and the hedge portfolio. Financing markets were in general positive, although still volatile and we profited from both higher share prices and higher bond prices. But also some of the normal meant that affected our hedge portfolio last year have reversed and given us a profit.
And now finally, please turn to Slide 16 for the outlook of 2023. Our guidance for the year is an insurance service result, excluding runoff for the remaining quarters of DKK 1.2 billion to DKK 1.4 billion, including expected synergies of a total of DKK 240 million. The expectation is based on continued growth in the group's insurance revenue across the various customer segments, supported by the annual indexation of the premier level and individual premium adjustments.
The cost ratio is expected to be in the rate of [ 80 ] to [ 80.5 ] and the combined ratio, excluding the [ Runners ] result is expected to be between [ 88 and 90]. We guide for an investment result of around DKK 300 million. And for other activities, we guide a deficit of around DKK 125 million. Our guidance reflects more changes for each of the reporting lines due to the transition to IFRS 17, but bottom line remains unchanged. Consequently, group profit, excluding special costs is expected to be between 1.375 and 1.575 before tax. In addition, we guide for special costs in the rate of [ DKK 350 million ] for the integration of Codan [ realization ] of synergies. And lastly, depreciation intangible assets is expected to affect the income statement by approximately DKK 360 million. And with this, I conclude my presentation and hand over the word to our moderator. Thank you.
[Operator Instructions] Our first question for today comes from Jakob Brink of [ Nordea ].
Just trying to sort of understand exactly what is happening underlying if we try to adjust for your change or definition change of large claims. So firstly, I guess one question would be, if we look at the large claims ratio on a group level, adjusted for this roughly 3.8% move, it's up to around 13.5% in the quarter. I think before you have stated that it should come down towards 9%. And so in a way, it looks like it's going in the wrong direction. And as you said, Rasmus, the energy segment is actually looking fairly good this quarter, while Codan come -- the rest of Codan commercial looks fairly weak. So some details on the large claims level and the rest of Codan commercial would be appreciated. The second question is you don't split the 3.8 percentage points down to the different segments. But if I look at the personal lines business in Codan and Alm. Brand, I would assume that large claims is a relative small part of claims there. There has been a fairly big increase year-on-year. So could you try and maybe give a few more details on that? That would be my first 2 questions, please.
Yes. I think as from investor relationship just with a bit of clarification on the effect on the large claims because it is true what you say about -- I mean, it's -- that we stated in the presentation that we have moved 3.8% from a large claims to small claims but that is from Alm. Brand standalone. The thing here is that we are aligning across our group, the threshold for large claims to [ DKK 3 million ] -- so we had [ DKK 1 million ] in the Alm. Brand part before, but [ DKK 5 million ] in Codan. So Codan actually moved in the opposite direction, but with a smaller effect so what we have on the group -- group-wide large claims, we have moved 1.4 percentage points to underlying claims from large claims or corresponding to DKK 38 million. So when you look at our large claims of DKK 270 million, there would have been DKK 38 million larger without this adjustment of the threshold.
So [ 1.4 ] is Q1 '23 impact?
Yes. Because we have -- they go in the opposite direction. And I mean it's also stochastic how -- it's a parting point to on Alm. Brand is a much higher level than we would normally expect. We would expect something like a 2.5% change for Alm. Brand going from large claims to smaller claims. And then we would expect around [ 2% ] for Codan moving into the large claims. So with a very small net effect, a group wide for an average year but it's stochastic for each quarter.
Okay. That's clear. Then I guess my second question is I guess that's even more valid then because then if there is a relatively small changes. I guess that would be that in any case on the personal lines since large claims is a small part. So could you explain the increase in the underlying claims ratio here year-on-year?
Yes. For personal lines, Jakob?
Yes.
Yes, let me -- I think it's mostly in line with the overall story because most of what's happening is personal lines in the underlying claims pickup we're seeing both for the group and an [ Minibar Sika ]. So in rough sort of numbers, if we adjust for the tailwind we had from interest rates. We're looking at something like a 3 percentage pickup in underlying loss ratios for [ minivan ] and slightly higher than that for Codan, but more or less 3% for the group. And what we've seen to put some clarity on that is that as we also mentioned now on the call, we've seen 2, let's say, unexpected effects, one being the amount of weather we've had with both very rainy weather and then the windstorm auto has -- we've seen the effect that as we've also seen historically, there is spillover into the other small claims, that effect being very much obviously in the housing segment where the awareness on sort of -- yes, you go out, you check your house. and there's high awareness amongst the customers. So that is something like 1/3 of the pickup in underlying loss ratio coming from that. And then we have another 1/3 coming from the very -- I see weather we had in the end of the quarter. That's -- a lot of that is in the auto lines, but we also do see some effect on personal accidents so we see a higher pickup in frequency, and we see also a pickup in the average claim, especially in [ also stemming ] from that effect. The last part is as expected, more or less, and that comes from -- at least when we look Q-on-Q towards last year, we see the increase in reinsurance coming in with approximately also a deterioration of 1%. So summing it up, we do see 2% that we weren't expecting in our claims this quarter and we see that as a temporary effect.
Okay. And just to understand then the sort of the note no change to your guidance for this year despite of the DKK 73 million runoff gains. What is that related to the fact that you don't upgrade?
Well, you can say more or less putting it roughly, we would have expected to have a 2 percentage points better underlying. We guide without our prior year gains, as you are aware, we had a more or less a bit above expected in prior year gain so that's -- if you sum those 2 effects, we end up at an at the same guidance for the overall year. So to sum it up, we get a normalized prior year experience more or less but that isn't part of the guidance. But we do see the deterioration, which we see as temporary coming from the effects I just mentioned, and we expect an unchanged claims and cost pattern for the rest of the year.
Our next question comes from Asbjorn Mork of Danske Bank.
Actually, a lot of my questions were already answered, but just maybe a little bit of detail. So basically, if I heard you correctly, you would have had around DKK 38 million of higher large claims in Q1 if you hadn't made that change to the definition of large claims. And then maybe in weather claims just to make sure I understood. So you have 200 basis points, let's call that around DKK 60 million that I guess you could have classified as weather claims, if you sort of wanted to, I guess, that is related to the weather we saw in March and to the Storm auto. Was that correctly understood?
Yes. The first one is correctly understood. And the second is also correct. But maybe just a point to clarify, the point is that we are not able to in actually classify the spillover as weather. And we aren't able to do that because we, among other things, use that classification for our reinsurance coverage and other things. So the effect that I mentioned from spillover and IC weather is not in that sense, something that we can categorize as weather, but it is caused by weather.
Okay. Fair enough. And then maybe another thing that impacts your underlying in Q1, the cost ratio in Codan personal, you mentioned the prevailing payments but the cost ratio is 32% in Q1. It has been around 25%. Is that how to look at this 7% on your private premiums in Codan, that will be sort of the one-off effect here or the Q1 effect of DKK 40 million.
I think that is about on the mark, yes, Jago sorry Asbjorn.
No worries. No worries. All right. And then just a final question from my side would be on the reinsurance which goes from DKK 45 million positive in Q1 to minus DKK 144 million in Q1 this quarter. I guess also a bit negative versus the recent trend. I'm just wondering how should we see this develop during 2023 on a quarterly basis given the reinsurance contracts you have made? And how sort of is this progressing relative to your expectations?
Yes. I can hopefully put some clarity on that. We have -- I think what you're seeing, especially in the quarter last year, is that what we sometimes see is that if we have large claims, a larger claims experience, we also received reinsurance coverage sometimes it's not even related to actual one-offs, actual specific claims. It might also be from some of the aggregate programs or other things peaking in so the net reinsurance ratio can fluctuate across the quarters with the overall claims pattern but on average, we see the need there and a pickup, as we've communicated earlier, in the price of reinsurance was approximately 1%. So I hope that answers your question. On average, we should see higher reinsurance ratio than we saw last year.
All right. [ that ] actually, a final question for me on large claims, which are obviously very high in Codan around DKK 200 million in Q1. You're also right that you continue on the prevention work. Could you just give a little bit of flavor maybe you did already in the beginning, I missed it, but just a little bit of flavor on when should we expect to see the benefits of the prevention work here?
Yes. That's a fair question. it's very hard to -- because there is the natural volatility on a quarterly basis to predict exactly when. But we -- as a general observation, we would expect some of the improvements we've been pushing in the overall risk management, the inspection, also the appetite for what type of underwriting we're doing to start to materialize in the quarters going what is very hard. This quarter, we had in the industrial segment, a few single large claims. And then once you have that, then you have a tough quarter but on average, we should begin to see a more normalized and improved claims experience in the large claims.
Our next question comes from [ Gustaf Ho from Kai ].
So my first question, at least will be on your synergies and your synergy targets for 2023. So just looking at Q1 and the target for '23 when you split it out on administration claims processing and IT and infrastructure. It looks like administration is doing quite all right, which was also slightly ahead of plan for '22, I guess. But for IT and for procurement as well, could you just give a bit more flavor or elaborate a bit on how you're seeing -- I mean, I know these synergy targets are smaller than for administration. But are you still on schedule with your plan? Or have you seen any kind of hurdles or anything with the integration of Codan and especially the -- also, I guess, kind of the carve-out of the entire IT system with -- yes, what you acquired from [ ARISE ] than [ Colonoway ] and such?
Yes. Andreas here again. I'm happy to put some flavor on that. What we see in the quarter we just came through is fully as expected and as you may recall, more or less in line with what we actually had in the quarter before that. And that is expected because it comes to a high degree from the run rate we created last year, most of the coming from the first organizational and cost out programs we did. And then that being a lot of the administrative costs we have in the quarter now and in the run rate and then we had, let's say, the quick wins in the claims area, which also came through and now starting to materialize as planned. We provided actually a new -- we provided a new slide, you can see in the back of the deck on some of the timings of the synergies in terms of run rate as we go forward because what we expect to see now is only a marginal pickup in the coming quarters because the timing of the initiatives we now have, which are very much in the claims area, we need to build the solutions, some of it being around fraud and some of it being around, especially procurement activities, both across our auto and building networks. And we expect those to begin to kick in sometime in the end of the year, primarily in Q4, we might be able to surprise positively on some of them. But for now, we are saying Q4 is at least a realistic deadline for when that will start to kick in. So we're seeing -- and as expected, not a lot coming in this quarter, and we'll start to -- we're building the solutions then you'll see, especially claims pick up at the end of this year in run rate and then we'll be further optimizing our organization. We're expecting, as we also have gone through some time to see overall decrease in advertised costs and FTEs as we work forward. And then IT is still only kicking in relatively in a relatively marginal sense because the road map we are on, a lot of it has to do. We need to be able to decommission the legacy systems for us to achieve that. And then we'll only be getting a marginal pickup in run rate from that at the end of the year. I hope that added some clarity to our thinking around synergies.
Yes, definitely. Then my second question is, obviously, you stated that you have a higher average claims repair costs, which is, I guess, no surprise to anyone. But -- is it -- just how should I interpret this? Is this higher than you expected as well and then fitting into your claims ratio? Or is it just high and then your bit have a bit of a lag and you'll try to make up for that in the rest of the year?
Yes. Let me try to put some clarity on that. The comment I had was specifically related to the development in the end of the quarter and especially in the auto segment, from IT roads, and we see people when they have accidents, they have more severe accidents than we normally see in an average month so that's not a structural thing, just to be clear on that point. But there is a general tendency as we've also communicated earlier we have -- we are in a sensible place in terms of the indexation we're getting and the price -- selected price increases we've done last year. But we would fully -- we expect and what we're seeing is that those will start to pick up as we go into the year, you can say we are a bit behind the claims inflation coming in the books in Q1. So there is a slight drag there, but we'll start to pick that up as the full portfolio turns on to the new pricing and indexation we've had. So we'll get more than the average in the end of the year, I should say, in terms of premium pickup. So overall, that's also why we are very firm in our conviction that we are where we need to be. And for the full year, we'll be able to pick up the claims inflation from our premium, yes.
Our next question comes from Martin Birk of SEB Group.
I have 3 auxiliary questions. I guess the first one is when you listen to what your peers are saying, their reasoning over Q1 is mainly travel and accident and your reasoning is somewhat different. Why do you think your experience is different? Or are you also seeing similar trends within travel and accidents. As we have heard from [ few ] insurance companies out in [indiscernible] -- that would be my first question. The second question, your tax rate seems pretty high in the quarter. Any comments on that? And then finally, my last question, coming back to your guidance and especially your guidance on net investment income I understand that you moved DKK 50 million in premium discounting into your net investment income [indiscernible]. But you also reported a result of DKK 149 million which basically implies a run rate of only DKK 50 million for the remaining 3 quarters, which is basically guiding down the run rate from your previous guidance on net investment income. And I -- but that should be higher? Those are my 3 questions.
Let me try to go through those. I think I'm going to have to get back to tax, if that's okay, Martin. So I'll focus on the other 2. We'll check that up for you and get back with a specific answer for tax. But the first question, which I heard was regarding to what we see with our peers. I think as a general rule, it's hard to speculate specifically. I've also -- we have noticed that to some extent. You can see -- now you mentioned travel excellence being some of the lines, which they have mentioned, at least travel is also a minor effect in our books. It's not something which is significant for us that I chose to mention, but we do see a slight pickup. But it's not something that's a major impact compared to what I went through. An accident -- personal accident is a part of our story. It's mainly -- the one that comes from our -- from the slippery roads, especially in the end of the quarter, we saw that it's a lot of auto, but it's also personal accident. So we did have that effect. And then as a general speculation and [ Milliman ] does have quite a lot of insurance in [ Northern Joplin ], where a lot of the snowy and slippery roads were, but I think that's what I could at least contribute from my end on personal explanations. Then the investment guidance roughly when we came out -- we came out in the beginning of the year, guiding DKK 250 million, we were in February. We already had a quite positive January in there when we guided to DKK 250 million. So most of the positive development we've seen for this quarter was already in the numbers. So that's why we are basically only hiking with [ DKK ] [ milion ] for the full year, we're getting from the reclassification of IFRS 17.
Perhaps I could add, Martin, if you want to really scrutinize the numbers, you could say that. ahead of known anything about realized numbers in 2023. We had a horizontal investment or an expectation of the horizontal investment return of DKK 200 million per year. Then we actually got a corrective start. And thus, in February, when we started guiding for DKK 250 million. So now it's DKK 300 million with the IFRS 17 move from premiums. But we would then actually expect DKK [ 62.5 ] million per quarter going ahead with the DKK 50 million split out on [ orders ]. So it is a bit higher on rate with the IFRS 17 move, but not enough for us to adjust the guidance and more than we did.
Okay. So [ 65% ], that's the run rate that we should assume. But then again, coming back to the DKK 200 million, which you are still implicitly saying that is valid. I mean, in current interest market that seems like a long time ago.
I don't -- well, I think it's more or less -- it corresponds to approximately 3 percentage points of average return on our free portfolio you might argue that, okay, should it be slightly higher? You might be right, Martin. But I mean, more or less, I think it's not completely off.
Our next question is a follow-up question from Jakob Brink of Nordea.
Just one follow-up. Codan commercial top line growth was actually relatively strong, at least compared to what I understood when we talked last time, I think you said that short risk in the energy segment would be relatively low in the beginning of this year and hence, low growth. Now it starts with[ 4% ]. Of course, that's a whole Codan commercial, but could you just give any sort of guidance on what we should expect for the next few quarters?
Yes. I think that's fair. We said that it would be -- we'd have a drag on earnings, especially in the beginning of the year. And I mean, we would expect to be clear that we would begin to see a quite noticeable drag, especially in Q2, which we're coming into in the Energy segment. We haven't seen it impact really now in this quarter, but it will impact next quarter. And that stemmed from the earnings patterns we actually had last year. And as I think we've gone through some times, it follows the patterns of when these projects are either entered into or exited. So we expect the back in the lower commercial lines, the top line for quarter and next quarter.
[Operator Instructions] Our next question comes from [ Jaime Jurgen of ABG ]
When it comes to competition, I just wondered how you review the competition in Denmark these days as it seems to be a little bit behind on your pricing. Is it so that you're just following in the indication? Are you also hiking prices more than the claims inflation as we have heard some other players reporting before you are doing. So any like to that in both the industrial side, the commercial side and the private side would be great.
If we just take the market situation, I see I also try to say something about that in the beginning. It is pretty tough markets out there. We saw that the large players in Denmark. They have done pretty well in 2022 and also in Q1. We saw some of the medium player and smaller players, they have had actually quite a tough year, also in terms of growth. So my point here was to say that the -- now scale is starting to be a theme in Denmark, I would say, as expected. So that's at least a really important point right now.
And I can maybe talk a bit about where we are on pricing. We are exactly where we need to be. We did have favorable indexation, as we've gone through some time, especially in [indiscernible] in the housing-related products where we have an indexation of around 10 percentage points going into this year. So as the portfolio renews in [ MiniBar ], we will start seeing that kicking in with a nice effect going forward. And every and then on top of that, we did selected price increases where we needed to do that. That was to a much larger extent in the Codan brand because Codan didn't have that advantage in terms of indexation so -- but to sum it up shortly, with the selected pricing initiatives we've done and the indexation we have, we expect -- we are where we need to be now and where we expect it to be, and we -- and that means that as the year progresses, we expect on a net to the indexation and the price increases we've done to fully mitigate the claims inflation.
Okay. I understand. It seems like the private side has a little bit more competition than the commercial or industrial part of the book. Could you just give some more comments to those 2 areas as well, please?
Yes. We see that in the private market, competition somehow are picking up, it's done. I actually talked about for, I think, 3 years now. It is picking up. I think it's really important that, of course, you take care of your customers and service them but also that you somehow are in the market of partnerships. That is just so important. And I think that's why I also highlighted the important partnership we have the banks and the smaller banks in the whole segment are 40% of the total market there is just important to be in that area. Then it's about scale. Then it's about scale that is just coming up now. And scale means that you are able to service customers with new products, we change products and all that. New digital initiatives and all that. It's simply being a much more important part of managing an insurance company in the private part, but also in the SMB part of the commercials. And then the last thing is that we just see on a total basis in Denmark, more customers are changing companies than in prior years. It's just a fact that we need to cater for. And on that side, I think also that the sizable matters in the end, providing interesting products, interesting services to the customers so they really see that they get some benefit for the money and not just being part of, you can say, more union-based company. So I think that is more or less. And then on the -- you can say -- you also asked about the commercial part, in the top segments of the commercials, we see [ Tragi ]'s not really active there anymore. [indiscernible] see some foreign players be there. But the competition is a little bit lower than in the past. But we -- we're dealing with professional counterparties, they know how to set prices. So also there, we -- there are quite good competition, I would say.
Perhaps I can add [ Janine ], I mean if you look at our actually quite satisfactory growth here in Q1. It's actually the personal lines are actually standing out shining quite a bit. So -- and that is without us lowering the prices or offering any discounts. We have a very good tailwind from our bank assurance partnerships. And it seems actually that this [ Bankston ] franchise is playing very well into the churn that we are seeing in the retail market. So it's not like -- it's for now putting our growth performance as we speak.
That's perfect. Just a follow-up on the outfitting then. Do you know who you are taking the customers from in that sort of scope where you have more access to clients? Or is it just that you have added more banks and brands and unions to this sort of partnership to [ this Tegel ]?
So it's difficult to know the details. It is the fact that our partnerships are providing more leads to us, and it's just important to have a good lead machine, and that is what they are providing. And then, of course, on the individual new customer coming most of the time we know where they are coming from, but to do the total picture is not always -- I do expect that I think among the top 3, we are taking almost the same customers. It's moving around. But I think the growth is coming from the medium and you can say, larger small insurers.
At this time, we have no further questions. So I will hand back to Rasmus Nielsen for any further remarks.
Yes. Thank you very much for your detailed questions. You're always welcome to get back to us. Have a nice day.
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