ALM. Brand A/S

CSE:ALMB

Earnings Call Transcript 2023-Q2

[Operator]

Good morning, everyone, and welcome to today's conference call titled Alm. Brand Interim Report for the Second Quarter of 2023. My name is Ellen, and I'll be the call operator today.

[Operator Instructions]

I would now like to turn the call over to Rasmus Werner Nielsen to begin. Rasmus, please go ahead, whenever you are ready.

[Rasmus Nielsen, executive]

Good morning, and welcome to Alm. Brand Group's Second Quarter Conference Call. I'm, as usual, here today with our CFO, Andreas Madsen; and our IR team with Mads Thinggaard and Mikael Bo Larsen. And without further, I will go straight to the highlights presented on Slide 2. For the first time ever, we made an insurance result of more than DKK 0.5 billion. I'm, of course, excited about this and about how our business has developed and improved during the second quarter, as we also continue to make steady progress on the integration of Codan. This is indeed a very strong result, and it represents the some of many contributions made across our organization as we continue to move forward. We have continued to implement priority initiatives and changes to our exposure to further optimize our business portfolio. And in this quarter, we have seen visible improvements. Thus in general, the claims ratio has developed satisfactory included here in relatively low large claims and weather-related claims. This quarter, Commercial Lines have had a very good quarter, and surely, this is an important driver for the overall group result. We're also making the necessary progress on the synergies. Actually, we are a little bit ahead of the plan and the cost that we take out make a direct positive impact on our net profits. Bottom line, we had a lot of positives adding to the strong performance this quarter. Now I'll turn to Slide 3 with our financial highlights. Insurance revenue totaled DKK 2.9 billion in the quarter, reflecting both an exit of some business within Energy in order to reshape our overall risk exposure and an expected softening on growth in personal Lines. Insurance service result amounted to DKK 507 million, against DKK 378 million we made last year and the investment income was a small plus of DKK 90 million against a huge launch last year. When we compare the earning numbers this quarter with last year, we see a very positive progression. This is particularly important in terms of laying the stepping stones towards the realization of our financial targets for 2025. And I think it's fair to say that the increased guidance published early July also embrace our optimism about the state of our business. And now let's continue on Slide 5. On the graph on the right side of the slide, we have chosen to compare the DKK 507 million with a pro forma number, i.e., including quarter -- and also for the full second quarter of 2022. Thus, the base is DKK 399 million. Similar to the previous quarters, we had also this quarter, some tailwind due to higher interest rates. However, the steep improvement this quarter is primarily driven by a very strong development in Commercial Lines. We have successfully implemented a number of initiatives in connection with renewals, including both premium increases and changes to exposure, and it has, in the short term, produced the desired result. The development in insurance service results reflects an overall satisfactory claims experience including a continued positive effect on the claims provision from a higher interest rates as well as a positive contribution from continued cost savings. Combined ratio for the group improved a healthy 170 basis points to 82.6. A continued focus on profitability is seen to bear fruit, especially in Commercial Lines, including Energy that is gradually turning into a more robust business with strong underlying performance, thus enabling it to absorb the quarterly fluctuation in claims that this kind of business inevitable will face. Personal Lines made a lower result compared to last year. Some of this is due to lower runoff gains but also due to an increase in the underlying credit ratio. And there's a special observation to make here. The number of auto accidents in Denmark has been on the climb and is now above pre-corona levels. Official data shows that this is a general trend towards a higher frequency of car accidents partly explainable by more traffic and more congestion on the roads, which leads to more accidents, i.e., different from the one-off situation with active roads in Q1. Obviously, we have been monitoring this. And since the majority of this is assessed as permanent initiatives will be initiated to approve -- improve profitability. And now please turn to Slide 6. Insurance revenue grew by 4.2% in Personal Lines and 0.3% in Commercial Lines. Growth softened as expected after a number of quarters with very high growth, in line with previous quarters, it stays through the partnerships and in particular, contributed to a positive development. On the other hand, a significant reduction in the premium volume have been implemented in Energy based on selective exits to ensure the right balance between price and our risk appetite. Light -- in line with our expectation, the annual indexation of the premium levels supplemented by selective premium increases are seen to gradually compensate for inflation in claims repair costs and we expect that it will be fully compensated by the inflation by the end of the year. And now please turn to Slide 7 for an overview of insurance service expenses. The development in claims expenses reflects a quarter with an overall positive development in minor claims and a more or less unchanged level of major claims and weather-related claims. It should be noted that included in the total is, as previously communicated, higher cost for reinsurance following capacity restraints in the reinsurance market at the beginning of the year. Further, insurance operating expenses are lower, reflected our continued efforts to streamline and further improve efficiency throughout the organization. Part of this improvement is, of course, directly linked to realized synergies. And moving on to Slide 8 and the claims ratio. The claims ratio for the group was satisfactory 64.5%, i.e., down 110 basis points relative to last year. However, even better was the development in the underlying ratio -- combined ratio with a reduction of 220 basis points to 60.1. In the table on the right side of the slide, we have adjusted for the discounting of the claims provisions and the marginal positive effect from the change in our threshold for large claims. We then get to a like-for-like improvement of the undiscounted underlying claims ratio of 70 basis points. I think this is a strong number as we have just been able to generate enough positive effects to trump the headwinds that we also had in this quarter. Now please turn to Slide 9. The combined ratio in Personal Lines was 87.7, i.e. 3.5 percentage points against the performing number driven by higher claims. On the general note, the quarter -- this quarter, Personal Lines had a higher claims ratio primarily due to the higher frequency of Motor claims but also due to lower runoff gains compared to last year. As already mentioned, we will take appropriate measure to safeguard and improve profitability. On the positive side, we were able to make a substantial reduction of the expense ratio of 320 basis points year-to-year against the performing number to 20.6%. Including in this is, of course, the effect of the synergy initiatives implemented throughout the last quarters. And although I'm happy about the development, we do acknowledge that further actions will be needed. Please turn to Slide 10 and the Commercial Lines. The combined ratio in Commercial Lines were very satisfactory 78.5, i.e., hitting a low point against previous quarters driven by favorable claims experience, and also the expense ratio remains at a satisfactory level. However, the high jump this quarter is the Codan part of Commercial Lines, included a strong performance in industry following the implementation of a series of measures to improve profitability. On a separate note, it should be highlighted that Energy again this quarter had a very strong profitability with a combined ratio of 66.5. And not forgetting the tailwind from higher interest rates that it reduces the amount of long-tail previous supports the numbers this quarter. However, as we move into the next quarters, this effect will be smaller. And with these comments, I will now hand over the word to Andreas, who will walk you through the synergies, investments and the guidance.

[Andreas Madsen, executive]

Thank you, Rasmus. Please turn to Slide 12. We continue to push forward on our various synergy initiatives, and we are successfully getting the economic results that we have planned for. This quarter, we realized DKK 62 million on top of the DKK 57 million in Q1. Thus, the half year total is now DKK 119 million. Further, as we progress on this, we are gradually getting a more firm grip on the timing of the synergies from each initiative. Consequently, we are now in a position that enables us to slightly increase the amount of synergies that we expect to realize for the full year. Thus, we've increased the expectation from DKK 240 million to DKK 260 million based on some of the synergies coming through faster, especially from fraud detection as well as optimization of our claims processes. This means that the expected run rate going into next year is up by DKK 25 million to DKK 345 million, thus providing us with a solid starting point towards the DKK 450 million of synergies to harvest next year. And now I move to Slide 13 and a short comment on the investment results. We made a net investment result of DKK 19 million and with a positive contribution from the fees portfolio and a small negative result from the hedge portfolio. You should consider this as being within the expected fluctuations that the hedging portfolio can give across the individual quarters, meaning this time a little negative and hopefully, a bit positive in the quarters to come. And now finally, please turn to Slide 15 for the outlook for 2023. In early July, we increased our guidance for the year to an insurance service result, excluding runoffs for the remaining quarters to DKK 1.3 billion to DKK 1.45 billion against our previous guidance of DKK 1.2 billion to DKK 1.4 billion. The expectation is based on continued growth in the group's insurance revenue across the various customer segments supported by the annual indexation of premium level and individual premium adjustments. The cost ratio is expected to be in the range of 18 to 18.5, and the combined ratio is expected to be in the range of 87.5 to 88.5. We reiterate our guidance for an investment result of around DKK 300 million base and for other activities, we guide a deficit of around DKK 125 million. Consequently, the group profits, excluding special costs are expected to be DKK 1,525 million to DKK 1,625 million before tax. In addition, we guide for special costs in the range of DKK 300 million to DKK 350 million for the integration of Codan and the realization of synergies. And lastly, depreciation on 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]

[Operator Instructions]

Our first question comes from Jakob Brink from Nordea.

[Jakob Brink, analyst]

Congratulations on the strong Q2. If I can actually start on Q3, there's been a lot of, especially media articles around the weather so far in Q3. Could you maybe put a few words on that? Is it as bad as it sometimes seems or is it not? And then also continuing on Q3, I think you mentioned and I asked that you were potentially hoping for a bit better match portfolio, hedge portfolio in the second half of the year. I think so far this quarter, we've seen quite a reduction in the mortgage spread, which is typically positive. Is that what you're alluding to or not, if that's the first question?

[Rasmus Nielsen, executive]

Yes, I will start with the first one, at least. Yes, we have -- it has been quite a busy time throughout the summer, with all the different things, the storm Hans and hailstorm in Italy and all the fire in Greece. And you are right, it is a little bit more vocal than it actually is in our accounts. It is a lot of smaller accidents. But in terms of the financial situation, it's nothing we cannot go for. It will not change anything in our guidance at all. But it has been business. We are doing our utmost to help our customers and some of these instances has been really bad, especially in Italy. So -- and I guess that is exactly why we are here as an insurance company.

But it also -- you can look into the future, and this will just mean that all the work we are doing with prevention, we'll just continue and work with. And some of the things we are doing in the Danish media is also actually prevention that it comes out to a lot of our customers and a lot of people in Denmark. And I think the more vocal we are around this, the better prevention is. But of course, it has the back side of the card is that we take a lot of cost, but actually it's not that costly for us at all, the July incidents.

[Andreas Madsen, executive]

Okay. I think then I can answer your question, Jakob, regarding the Q3 expectations for the match portfolio. I think you should be careful to sort of read too much into my statement here. I think what I was primarily alluding to is the fact that a DKK 20 million loss in the quarter is practically a zero result on the, let's say, DKK 17 billion, DKK 18 billion we have of provisions in the match portfolio. So that wasn't as such, any more meaning in that. That being said, we now -- we state the DKK 300 million, and that holds still also with the developments we've seen until now.

[Jakob Brink, analyst]

Okay. And then on capital, if I may. Getting closer to year-end. You have a quite strong solvency ratio, I think, almost 15 percentage points better than consensus. Could I know, of course, you have still the extraordinary expenses to the Codan integration that will go off, but even adjusting for this, getting down to around 170% solvency ratio, I think I estimate around DKK 700 million excess capital and your dividend policy is only 80%. So could you be any more specific about your plans after New Year?

[Mads Thinggaard, executive]

Mads from IR here. I think, I mean, you are right that we are actually having a better capital consensus, I guess, both compared to consensus and perhaps also what we would expect at the start of the year. We have seen some improvements in our capital requirement linked to handling of market risk in Codan. We also had some -- I mean, some data modeling in our total risk modeling setup where we are including more data and thus are actually reducing the variants, our frequencies used there.

So we actually get a bit of, I mean, a reduction in the capital requirement. And then of course, we also have the very strong Q2 rolling into the numbers. So you are right that we are -- our current position is perhaps having an excess element, I would say, DKK 200 million to DKK 300 million is probably more how we look at it compared to your DKK 700 million.

[Jakob Brink, analyst]

DKK 200 million to DKK 300 million, but that's -- I mean, if you take adjusted consensus profit or even roughly your own guidance for this year, that 20% would almost be DKK 250 million. So I guess we can agree that DKK 209 million is higher than your target?

[Mads Thinggaard, executive]

I mean we have to, of course, allow for a dividend to be paid if we talk about excess capital as well. So we have to remove that as well as around 15% of -- yes, 15% in the bank for remaining integration costs. So when we remove the, I mean, the expected dividend alongside our policy and also, I mean, the element that we keep for integration costs, I think you get to a lower number than DKK 700 million.

[Jakob Brink, analyst]

But let's just say, DKK 200 million to DKK 300 million then, is that a 2024 payout thing? Or is it later?

[Mads Thinggaard, executive]

I think I'll hand that over to Andreas.

[Andreas Madsen, executive]

But maybe a quick comment also on that. Just I think reiterating as what Mads was saying, I think some of the tailwind we have this quarter is from a lower SCR given this message from model updates and to some extent, also from lower market risk to name another factor. I think we'll see how it ends up. It's a bit hard to consider that as fully structural yet. I would say, SCR can fluctuate, let's say, around even the DKK 100 million or so. That's easily DKK 200 million in surplus capital with the -- in we have. So I think we shouldn't read too much into that right now. And regarding timing, I think, for now, we still have, as we've discussed before, our main aim is to -- within the payout policy we have, to hopefully ensure a continuous increase -- steady increase in our dividends. And that being said, we're also looking into possibilities around a possible share repurchase but we have no news regarding timing on that yet.

[Jakob Brink, analyst]

Okay. And last question from my side. The Codan Private underlying claims ratio, if I look at that in your Excel sheet is still up quite a bit year-on-year, even without adjusting for discounting. Could you just remind me what is going on there?

[Andreas Madsen, executive]

Yes. I think, Jakob, it is -- it alludes very much -- you can say the numbers are maybe slightly worse than we see in the other brands, I mean, in Denmark. But that being said, the main factor we see for this quarter is the higher frequency on auto, which we see as at least to a large extent, being structural. We have more cars on the road, there's more congestion.

And also maybe I want to take the opportunity to reiterate that, that being said, the things that we saw in Q1 were still on top of that, let's say, trend. That was due to one-offs and especially the combination of weather and IC growth in the quarter. But below that, we still see a worsening of frequency and that we are looking into handling that. So we ensure getting back to a better track on profitability within Personal Lines in general.

[Operator]

Our next question comes from Asbjørn Mørk from Danske Bank.

[Asbjørn Mørk, analyst]

From my side, a couple of questions, if I may, on your -- on the Energy segment and the very strong Q2 and obviously also the very strong Q1. Just wondering, basically, you've made a profit in the first half of this year that is close to your '25 target. So just how do you see that stochastical element in what we're seeing right now, how much is luck, how much is structural changes? And maybe if you could give us the data for how the Energy segment performed in Q2 last year, so just we have a comparison, that would be very helpful.

[Rasmus Nielsen, executive]

I guess that a bit, Asbjørn. Normally, we don't talk about luck here. But we have seen a little bit lower level of large claims in the Energy segment, but it also -- and I actually be quite happy about that we now see some of all the hard work of proving the business in Energy part. Getting rid of some not very profitable customers, but also increasing prices -- serious increase of prices in other areas and that is, to some extent, what we see now. And then we all know that a large business can unfortunately cater for large claims. That's why we are here. So that can definitely be a quarter with a large claim and that we need to cater for in the long run. But I think for now, we are very happy with seeing into a business that, that is getting more and more improved. But also having an organization that now fully understand where it is that management wants to take this, it's also taking a little bit of time to change that culture. But I think we are really getting there now.

[Mads Thinggaard, executive]

Yes. And if I may add also on your question, I mean, on Q2 last year, we were at 67.2. I think normally, Q2 is a quite good quarter in the Energy segment and normally -- I mean, we would expect a bit of tilt of major claims towards Q4. So perhaps there is also a bit of seasonality in the very strong result, but I think one thing we would like to note is that it's actually only -- it's only including 1% in one-off gains.

So it is very much driven by lower underlying claims as well as lower major claims. So yes, quite strong quarter in that sense, and we will probably not stay at this very low level. But we do -- I mean, we do see a picture of 2023, having very difficult times, not showing a path towards our target for 2025 of the combined ratio of 83.

[Asbjørn Mørk, analyst]

If I just may follow-up on that. So the 70 basis point improvement Q2 versus Q2 on your Energy segment on combined ratio, so what would be the underlying improvement in that period? You mentioned lower runoff gains this quarter.

[Mads Thinggaard, executive]

Yes. Actually, I mean, when we sort out the underlying improvements, we have actually a double-digit improvement but our change of thresholds for major claims are also playing into that. So in that sense, it's -- I would say, actually, the improvement perhaps is well in line with the initiatives, the effect of the initiatives we have undertaken. So it's more of a small -- I mean, structurally, it's more of smaller, steady progress in the development in Energy. That is what we see perhaps improving -- I mean, the structural combined ratio with 3, 4 percentage points.

[Asbjørn Mørk, analyst]

Okay. Fair enough. We can take it bilaterally afterwards. Okay. If I may then on your Private segment and the 200 basis -- 260 basis point deterioration in your underlying claims ratio, you mentioned Motor frequencies. You also mentioned profitability initiatives. We have seen, I guess, similar trends for some of your peers. Can you maybe just a little bit of flavor on what you expect sort of to be the net impact from this considering that there is also increased competition in Motor? There seems to be still a teaser product to lure in customers. You are growing in the Private segment, we want to take market share. So just to comment on where do you see the 260 basis points' deterioration in land after profitability measures?

[Andreas Madsen, executive]

Yes. Andreas here. I think we are aiming firmly for that to -- sort of to catch that gap. We need to fill it up fully going forward. To be realistic, this is not something that's going to go away in a single quarter or 2 quarters. It will take some time with this type of shift for the initiatives we put into place to be fully in the book.

So I mean, realistically, we would expect some headwind from this in the coming quarters and probably, let's say, around a full year before we are fully there, but the aim is to get fully there. And in terms of initiatives, we're looking into a wide array of options. As you adhere to here, I think you're very right, we need to be smart about it. There's no question that Motor is a very important sort of product for many customers in that segment. So we're not looking with a very sort of -- we're looking at it broader than just in regards of Motor. In terms of initiatives for Personal Lines, we need to get fully there and get that gap back because this is something, as we adhere to in the report also that we see this as a structural thing that has hit the market in general, and we need to catch up with that.

[Asbjørn Mørk, analyst]

Okay. Fair enough. On reinsurance, you mentioned that it has 1% adverse impact on the underlying claims ratio year-over-year. So any comments on -- because you also mentioned the beginning of the year that the repricing should mitigate quite a bit of that. And I guess we are looking into something that could become quite a big increase to reinsurance prices also going into next year, considering what has happened in the market the last couple of quarters. So maybe an update with you on both reinsurance prices going into next year? And how much you can mitigate -- where you expect to be and to mitigate?

[Andreas Madsen, executive]

Yes. We start with going into next year. I think it's too early to say how that will end up, both in terms of the general market and in terms of the mini Bank Group program, I do not, at least personally yet have a firm sort of expectation that we should see either significant price increases or decreases. I think that is simply too soon to say. We had a very sort of -- it was a very big catch-up we saw last year with reinsurance having the upper hand, and I think the dynamics are very hard to predict, so we'll have to see.

And on top of that, there are initiatives within our program also where we remain optimistic that we may be able to further leverage the opportunity we have as a group to better structure and better sort of get better prices relative to the risk coverage within our current program. So we are looking into every opportunity in the toolbox to see we can get to a better place. So I think it's simply too soon to say how it's going to end up for next year. We have taken a firm hold on trying to catch up with the 1 percentage point of loss ratio deterioration we already have in the books. Maybe hard to say exactly where we'll end up for next year on that. But I feel that we are, let's say, at least I would expect that over half the deterioration we'll be able to catch up on -- and we are seeing, in a general sense that a lot of the Lines which are heavy on reinsurance are also the line where we are able to put through quite handsome price increases and still retain the customers. We're seeing -- so we remain at least quite optimistic for that.

[Asbjørn Mørk, analyst]

Okay. And final question from my side would be just a follow-up on the first question on the weather claims for Q3, the hailstorms and the general storms that we've seen, you mentioned that was not spectacular relative to your weather claims budget for Q3, which is also what I have on my numbers. But I was just wondering if there's anything else than the hailstorm in Italy and obviously the Hans Storm in Denmark, anything that has gone a little bit under the radar we should be aware of weather claims in Q3 to date?

[Rasmus Nielsen, executive]

So it's more or less what you can read in the papers. We are quite accurate about the number of accidents. So it is around 1,000 on the Hans Storm and around 300, 400 on the hailstorm in Italy and almost nothing in terms of Greece fires. So that is it. And yes, if you take that all and put it together, we are well below the expectations for a normal quarter. So we don't change anything in our expectations.

[Operator]

Our next question comes from Jan Erik Gjerland from ABG.

[Jan Gjerland, analyst]

I just want to return to this retention levels in the private side versus your price increases. How is it actually going here? Are you increasing quite sharply in your other business areas? What about the distribution? So how should we read your Alm. Brand and Codan brand versus the Privatsikring when it comes to retention after you sort of try to hike the prices for Private? That's my first question.

[Andreas Madsen, executive]

Yes. I'll try to answer that. In general, as we see that we do have better retention levels with the partnerships, also with our banking partners. So to answer the first part of the question regarding to where we stand relatively, we do see a better retention continuously in especially Privatsikring and with Sydbank, our other major partner. And that is also what we've seen historically. So that fact remains and I can say that retention is still on the absolute top list of our priorities within broker business in general, but especially within Personal Lines. I think it's fair to say that there is competition out there, especially in Personal Lines.

We also see that especially the larger players are becoming increasingly good at, actually so to say, rescuing customers once you try to get them over. So we do have factors we need to handle as to our competitors, and we need to keep become even better at that going forward. Obviously, price increases are not, in an isolated way, good for retention. We realize that. That's also why I said before that we are not looking to just mechanically hammer on prices for Motor. We try to do it in a more intelligent way so that we still can remain competitive, both in terms of our sales and our retention. But this is within the sort of core of what makes the balance difficult within insurance business.

[Jan Gjerland, analyst]

Okay. I understand that you work hard for Alm. Brand and Codan Brand. When it comes to the smaller or the reduction in the smaller claims, which you mentioned versus the sort of more unchanged levels for weather and larger claims, how should we read that? Is that sort of a frequency potential that you see? Or is it so that the change in the smaller claims level is just sort of stochastic as well as large claims? And how should we read that into the way ahead, so to speak?

[Andreas Madsen, executive]

I think in general, I think what we're mostly seeing is an improvement on the group level in the relative factor between the frequency and cost to small claims and the premiums. So we are seeing an improvement in the group underlying loss ratios driven by that, but that is driven, as we've mentioned prior. On the positive side, our strong improvement in Commercial Lines, a lot about better risk mix and higher rates, especially for the large corporates and the Energy segment and an improvement in that business. And then on the other hand, we do see, as we just talked to -- talking to before, auto being the largest single product line we have in Personal Lines. And in the group as such, we do see the other trends. We do see higher frequency there and larger small claims. So it's a bit of a mixed picture.

[Jan Gjerland, analyst]

Is the change in terms and condition as an important factor to sort of take away smaller claims levels? Or is that something we should not think about happen this time around?

[Andreas Madsen, executive]

No, I think definitely, we look into the full array of options here. We're not only looking to prices, which could be 1 option at least selectively. And we're also looking to different changes in terms and conditions, looking into market dynamics. So basically, we're not ruling anything out in the toolbox.

[Jan Gjerland, analyst]

Okay. When it comes to the Alm. Brand and the sort of the Energy part of Codan and the volatility here, how should we think about the Alm. Brand Industrial or Commercial Lines versus the Energy business in Codan here? Is it so that we have seen this quarter's quite big changes to the claims levels in both brands? Or is it mainly in the Codan Brand, we have seen the sort of improved trends on the claims side?

[Mads Thinggaard, executive]

Erik, it's Mads here. I mean, it's -- when we look at Alm. Brand, we don't really have any Industrial clients in the old business. It's -- they're all coming from Codan, and then we have Energy. And we have another area that is not that well-known externally, but it's called risk solution where we have large clients that are not related to the Energy segment.

And actually, what we are seeing in this quarter is that we have made a lot of changes in Energy, and we also have a good quarter, so to say. But we have implemented rate plans in the resolution part of our business where we have significantly was premiums for the same risk. And that is, of course, going down to the technical result. So I would say, when we look at our corporate business overall, we are seeing a large good help from the Energy segment, but we are also seeing improvements in risk solution, the other industrial clients, and that is a structural improvement that we will expect to continue in next quarter.

[Jan Gjerland, analyst]

Perfect. That makes sense. Just one final from my side then. The reinsurance sort of retention levels when it comes to weather -- for this weather. Did I recall that you said 1,000 customers on the weather in the Nordics as well as 300, 400 in Italy. So how much will then sort of be your retention level from the home versus the retention levels on the Italian hail?

[Andreas Madsen, executive]

Yes. Sorry, I had a bit of a cough here. I'm not sure, I understand the question fully, but we do have -- apologies, the same retention levels across all types of weather-related events of the group. The one maybe -- let's say, the only difference from that being that Energy business is within its own program, and that's an all-risk program also covering weather events for that. But apart from that, our retention is the same across the different events. And just to be clear, what Rasmus said, that I think I can say safely that these events are nowhere near the retention levels we have in our reinsurance program.

[Operator]

Our next question comes from Martin Birk from SEB.

[Martin Birk, analyst]

Just one question on my side. I guess when you send out the profit upgrade on the 6th of July, you probably did not know the technical result of DKK 507 million, which is a lot better than what we, in consensus, had expected. And given your comments on Q3 that we are still below normalized weather. I assume that you are basically on -- well on the right trajectory, especially in terms of your guidance, and I'm sort of wondering why another upgrade today wouldn't have been or why you guys did not upgrade again today?

[Andreas Madsen, executive]

Yes. Andreas here. I think -- well, I understand where you're coming from. I think just to mention something, we did hike the lower part of our interval by DKK 150 million. But that being said, it's true that if you take out our runoffs of around DKK 65 million, we probably don't see the full effect of the overperformance in the Q2.

But we have some factors here. I'd like to take the opportunity to talk through. There's one factor, especially which is related to our reinsurance. As you may recall, we've had -- we successfully got an aggregate frequency coverage across property per risk and weather-related claims for the Alm. Brand Group. In the program, we had it in Alm. Brand Group particularly historically, but we also got that in place for this year. And now we've had a very good first half year with quite low frequencies of both major claims and weather-related claims. And the consequence of that is that the likelihood of any coverage on that program is lower and is quite low at the point in time we have now after we got the June in the numbers also.

So that effect is roughly around DKK 50 million reduction if you compare to what we would consider an average year when we start out the year with no claims in the books yet. So that is one effect. Then I would say, also key -- if you look at our weather-related claims, we do come out with only 0.4. I think if you take account to the seasonality, that is probably, let's say, only around 1 percentage point or so better than what you normally expect in the Q2. So not mainly -- so not the full improvement you would expect considering an average quarter because Q2 is typically a bit better. That's also a factor that you should keep in mind. And then with large claims, I would also say, and this is not something we factor in very mechanically. But Mads also mentioned that we do see a tendency for some cyclicality in especially the Energy business. And maybe I could factor that into -- that thereby meaning that I would expect all else equal that Q4, especially typically is a bit tougher on large claims. You have a lot of the crews coming in, in the wintertime, claims that haven't been reported for some time. So there's sort of a mechanics there. And at least that's also something that we factor in to some extent. So -- and then I would say, in general, we remain sort of on a prudent and conservative path here, and that's also maybe what we should read into it.

[Operator]

[Operator Instructions]

There are no further questions. I'll now hand back to Rasmus for any closing remarks.

[Rasmus Nielsen, executive]

Thank you, everybody, for joining this call. I hope you will have a nice day. Bye.

[Operator]

This concludes today's conference call, everybody. Thank you very much for joining. You may now disconnect your lines.