ALM. Brand A/S

CSE:ALMB

Earnings Call Analysis

Earnings Call Transcript 2024-Q3

[Operator]

Good morning or good afternoon, and welcome to the Alm.Brand Q3 2024 Results Call. My name is Adam, and I'll be your operator today. [Operator Instructions] I will now hand the floor to CEO, Rasmus Werner Nielsen to begin. Sir Rasmus, please go ahead when you are ready.

[Rasmus Nielsen, executive]

Yes. Good morning, and welcome to the Alm.Brand Group's Third Quarter '24 Conference Call. As usual, today, I have with me our CFO, Andreas Ruben Madsen; and our Head of Mads Thinggaard. This morning, we published our interim report for the third quarter. I will walk you through the operating highlights, and in the end, Andreas will comment on the financials.

Overall, I view our results for Q3 as satisfactory especially seeing the light of headwind. We see for motor claims in the Danish market in general. I'm especially pleased with the strong growth in Personal Lines in Q3, while Commercial Lines growth has muted this quarter. Synergies are kicking in, and we do reach small undiscounted underlying improvement this quarter despite the headwind on motor.

Let's now look at the highlights. Please turn to Slide 2 and some of the headlines for our business in this quarter. As mentioned before, I view our results for Q3 are satisfactory especially given the headwind we have from motor claims in the Danish market in general. While motor frequency has been increasing for many quarters, we are now also seeing higher average repair costs related to motor claims which leads to a significant rise in our expenses for motor claims. This calls for even more profitability initiatives, which we are now executing.

Major claims in Q3 was significantly down from the high level in Q2 and below what we consider a normal level. Our growth in Personal Lines is standing out against in the quarter with a year-on-year growth of 7.7%. We do take quite a bit of market share in Personal Lines with our strong bank partnership as a driver.

Commercial premiums were flat year-on-year for last year, but this is acceptable to me given the normal volatility related profitability initiatives among our larger customers. Synergies are kicking in, just as we planned. And while we have seen good momentum for claim synergies for a period, I note higher contribution for admin and IT this quarter. We had a smaller year-on-year reduction in our cost ratio this quarter compared to recent quarters in order to secure a lower run rate for costs going into '25, we executed a new FTE reduction last week where 110 positions were eliminated. Satisfactory Q3 and a strong investment result led an upgrade in our guidance for '24 for the '24 profit before tax and extraordinary costs of DKK 100 million to the range DKK 1.58 billion to DKK 1.68 billion.

Now I'll turn to Slide 3 with our financial highlights. Insurance revenue for our continuing business grew to DKK 2.8 billion in the quarter with a good growth in the quarter driven by Personal Lines, as mentioned before. The Insurance services results for our continuing business was DKK 400 million compared to DKK 366 million in Q3 last year. Many elements were quite stable from last year while lower weather-related claims drove the increase in insurance service results. The premium growth helped as well. Investment income in Q3 was a profit of DKK 133 million, which mostly related to income in our free portfolio related to bonds. This quarter, we had a fairly strong result on discontinued activities after tax of DKK 48 million as well.

Now let's turn shortly to Slide 4 just to illustrate my point from the start of the presentation regarding moderate major claims in Q3. Looking at our continuing business back from Q1 '23, it's clear to me that our last quarter will make a case of 8.8% was stochastically high and not a new normal. Our view is that a normal level for major claims for our renew business is around 7%. In reality, the average the last 7 quarters has been just 4.9%. So I'm quite comfortable with the current level.

Slide 5 shows the same story. This is just to highlight. We see normal major claims in our Commercial Lines was 12% with an average the last 7 quarters of just 8.9%. Now let's continue on Slide 7. The group made a technical result of DKK 400 million in the quarter. The insurance service results was balanced between Personal Lines and Commercial Lines, contributing around DKK 200 million each a large improvement in Personal Lines and a moderate decrease for Commercial Lines. Both segments were helped by less weather-related claims than last year, although still above normal level. Personal Lines were helped by strong growth, synergies and a drop in the cost ratio of 0.7 percentage points year-on-year and relatively strong underlying improvements linked to earlier profitability-enhancing initiatives.

In Commercial Lines, we had a drop in the insurance service results to DKK 197 million from DKK 228 million last year driven by underlying headwind for motor claims and workers' compensation. Premiums as well as the cost ratio was flat year-on-year, providing no improvement to the insurance service result while the drop in the interest rate had negative discounting effects, especially so in the commercial lines.

Please turn to Slide 8. Insurance revenue grew by 3.9% year-on-year in the quarter compared to 5.3% last quarter. We are very pleased to see the strong growth in Personal Lines continuing in Q3 while the muted growth in Commercial Lines is acceptable for now as the drop in growth is mostly linked to profitability initiative targeted at larger customers. In Personal Lines, we are clearly taking market share on top of indexation and the price increases we do. We do consider 7.7% growth in Personal Lines a quite bright spot in our report and the net winning of business volumes comes with thanks to our many banking partners and our strong cooperation.

And moving on to Slide 9 and the claims ratio. The Q3 claims ratio was down 50 basis points year-on-year in Q3 with 150 basis points lower weather-related claims than in Q3 last year. The underlying sales ratio increased by 50 basis points year-on-year, driven by higher motor claims while commercial lines were also negatively impacted by workers comp, the latter partly related to lower discounting effect. Moving to an undiscounted basis, we see a 40% increase -- decrease in underlying claims year-on-year. The small improvements is driven by the profitability initiatives and synergies being larger than the additional headwind from motor in '24, but we still see a strong need for further profitability initiative going into '25, which we are executing on now.

Now let's turn to Slide 10. Combined ratio in the Personal Lines dropped to 86.0% in Q3 from 89.7% last year. The drop was due to a lower cost percentage but also supported by lower weather-related claims, while underlying teams in Personal Lines was down 2.2 percentage points year-on-year as well. I view the underlying improvement as very satisfactory given the headwind on Motor again in Q3 2014.

Please turn to Slide 11 and the Commercial Lines. Combined ratio of Commercial Lines was in an adverse development in Q3 growing to 85.5%, which was driven by an increase in the underlying claims of 3.2%. This was partly caused by lower discounting effects. On top of this, headwinds from the underlying claims in motor continue in Q3, where premiums as well as the cost ratio was just flat year-on-year in the Commercial segment. We're now executing new profitability initiatives to support the underlying development into '25 and last week, we executed on the FTE reduction to bring down admin costs in general.

And with these comments, I'll now hand over the word to Andreas, who will walk us through synergies investment and the guidance.

[Andreas Madsen, executive]

Thank you, Rasmus. Please turn to Slide 13 for an update on synergies. We had an increase in house for synergies in Q3 to DKK 118 million from DKK 68 million in Q3 '23. Which implies a DKK 50 million uptick in synergies year-on-year, improving our underlying claims ratio with 1.4 percentage points and our cost ratio by 0.4 percentage points year-on-year. The synergy uptick is still somewhat concentrated on the claims side, while administration and IT synergies are starting to pick up this quarter. We remain confident that the synergies for the full year will add to the DKK 450 million that we have stated previously.

And now I move to Slide 14 and the investment results. Net investment result of DKK 133 million, stemming from our free portfolio, while we had a small loss in the match portfolio. Our return in Q3 was driven by bond prices moving up due to the decrease in interest rates. We maintain a conservative stance regarding our investments, but we are changing our portfolio a bit in order to get a higher expected return while drop in interest rates put some pressure on our structural investment return after 2024.

And now finally, please turn to Slide 16 for the outlook for 2024. We upgraded our guidance for the insurance service results in '24, excluding one-offs for the remaining quarters to DKK 1.25 billion to DKK 1.35 billion from previously DKK 1.15 billion to DKK 1.35 billion. We thus upgrade the midpoint by DKK 50 million following a good Q3 and narrow the range with DKK 100 million due to less than 2 months remaining of the year. The guidance includes expected synergies of a total of DKK 450 million. The cost ratio is still expected to be in the range of 18% to 18.5%, while the combined ratio, excluding the one off for the remainder of the year is expected to be 88% to 89%, which is an improvement from 88% to 90% before.

On the back of a strong investment result in Q3, we upgraded our guidance for the investment result in '24 by DKK 50 million to around DKK 450 million. And for other activities, we still guide a deficit of around DKK 125 million. Group profit, excluding special costs is thus expected to be DKK 1.58 billion to DKK 1.68 billion before tax from previously DKK 1.43 billion to DKK 1.63 billion.

We now guide for special costs in 2024, around DKK 250 million compared to previously DKK 200 million to DKK 250 million as this item now includes DKK 50 million related to the FTE reductions in October, not recognized as integration costs related to Codan. We expect a depreciation on intangible assets of DKK 350 million in '24, while the result of discontinued business after tax in '24 is still guided to 0.

And with this, I conclude my presentation and hand over the word to our moderator. Thank you.

[Operator]

[Operator Instructions] And our first question comes from Asbjørn Mørk from Danske Bank.

[Asbjørn Mørk, analyst]

Yes. I have a couple of them. If I may start with your underwriting trends. And let's start with the commercial business. So you had a very strong Q1. You had a very weak Q2, and you sort of indicated back then that we should sort of take the average of the 2 quarters. Now if you look at Q3, you're 320 basis points higher on the underlying claims ratio year-over-year, if you adjust for discounting. I guess it's more like 180 or something like that. So there is an improvement to the sort of second order derivative. But I guess it's still a deterioration.

With the things we're seeing right now with the repricing that you're doing, considering that we just had motor claims out for October still up 8% year-over-year. And you're also mentioning the workers' compensation with the, I guess, the regulation eventually will have an impact on that underwriting business. What should we sort of expect for your year-over-year trend for Q4? And what is your expectation for 2025? What have you sort of boiled into your 18, 50 insurance service result target for next year on the underlying in commercial?

[Andreas Madsen, executive]

Thanks, Asbjorn. I'm happy to try to add some clarity to that. I agree with sort of the presented time line and the effects we've been seeing through the year. And as we conclude, we did have a somewhat soft Q2 and what we're seeing now is a moderation, so to say, as you also say, in at least the undiscounted underlying loss ratio hike compared to year-on-year last year. But we still see this uptick. And as we also state the explanations are more or less the same as in Q2. It is the motor, which is still problematic both from frequency, but now also from average claims. And then also, we still have the workers' comp in Q3 adding some pressure through Commercial Lines.

We are very focused on this. We have been for some time. A lot of the commercial book is turning either by -- has just turned October 1 or will be turning around the year-end. So we have clear plans to get back on track. In terms of Q2 -- Q4, there are a lot of moving parts, but I would expect to see some of the same trends as we've seen at least for motor. And I probably also expect to see some uptick in workers' comp. So all else equal, I would expect to see more or less the same for Q4, maybe hopefully seeing some benefit from the amount of business turning in October. But from the beginning of next year for the full year, at least -- we are at least -- we are planning for commercial lines improvements in underlying in the vicinity of, let's say, around 1 to 2 percentage points over the full year.

[Asbjørn Mørk, analyst]

So that was a 1 to 2 percentage point improvement in the underlying claims ratio next year versus '24?

[Andreas Madsen, executive]

Yes, for the full year.

[Asbjørn Mørk, analyst]

Okay. So not versus the current trend. So not a flat trend, but more an actual improvement in the underlying claims ratio full year '25 versus full year '24. And then if you...

[Andreas Madsen, executive]

Sorry, just to -- maybe just also, we've previously talked around sort of the improvements we need to do with next year. And I think that also more or less translates to roughly DKK 100 million we are aiming for, not exact numbers, but at least Commercial will be participating in adding that profitability going into next year.

[Asbjørn Mørk, analyst]

Okay. Fair enough. Then on private, if you do sort of the same math here, private also doing very well. You talked about the growth above market with your partner distribution agreements, with the price initiatives you're also doing in private, what would be sort of the effect for the full year '25, given the starting point is significantly better in '24?

[Andreas Madsen, executive]

Yes. In very rough terms, we're also looking to get around, let's say, around the DKK 100 million mark in improvements going from '24 into '25, that more or less translates to the same on a full year effect. And these are rough numbers, there are moving parts, but we do see both in private and commercial the need for improvements in terms of underlying profitability going into next year.

[Asbjørn Mørk, analyst]

Okay. Fair enough. If I may turn to synergies, you're obviously doing well on target. But I guess, it was also the low-hanging fruits that you've been harvesting initially. What are sort of the biggest concerns from your side for next year on the sort of the delta and synergies that you need to deliver next year?

[Andreas Madsen, executive]

Yes. I can try to answer that. I don't think we see any, let's say, major concerns. We are very comfortable in the overall picture, and we are maybe especially comfortable with the claims side. We have a very strong program running with also significant improvements coming in into next year. We have -- we'll start seeing as we also enter '25, more admin and more also IT coming into the numbers as we are progressing with the integration journey. And so it's a big IT project. We need to keep our strict focus on that. But we are fully where we want to be and also comfortable with that. So I think that should give some flavor at least.

[Asbjørn Mørk, analyst]

Okay. Then final question from my side. On your capital and capital distribution. So it seems like you have more visibility now on the energy sale. So could you then elaborate a little bit, given the DKK 3.7 billion minimum capital return that you have shown earlier. And I guess, given the numbers today, that number is maybe slightly higher, if anything. How should we sort of see you play out over the full year report? How will you sort of initiate the capital distribution? And have you made any sort of plans in terms of how we should expect all that money to come out to shareholders?

[Andreas Madsen, executive]

Yes. I think we do have some moving parts there, but we still expect the DKK 1.6 billion in extraordinary, they are following the divestment. As we stated in this report, we expect that to close now in the beginning of March. So we previously communicated in Q1. So we're well within there, and we have -- now have a firm belief that will be in the beginning of March. We'll be coming out, as you know, early February with Q4 results. And we expect by then could add full clarity on these items.

The DKK 1.6 billion, which will be the first amount coming already in March, at least we need to communicate specifically about that in March after closing. We still see -- we have an ambition to do as much as we can in terms of share buybacks, and we will see what we'll be able to do. And then the rest would mechanically be in terms of an extraordinary dividend. But I think we'll have to wait a bit to add further clarity on that.

[Asbjørn Mørk, analyst]

Okay. Now that you mentioned extraordinary items. What about the PIM model approval process with the FSA, any news there?

[Andreas Madsen, executive]

Yes. Well, I think we have basically no news, which is good news. We still expect, as we've previously communicated that we will be able to apply by the -- within this year. So just before Christmas, we should be able to apply, and that would -- in a very blue sky scenario where we don't have any major, let's say, dialogue with FSA around substantial matters than the earliest option would be mid next year. And I'm not, at this point in time, ready to communicate around specific numbers for that.

[Asbjørn Mørk, analyst]

But sort of the solvency target for year-end '25, the 170, that still stands, including PIM model, right? So if you get a PIM model approval next year, that amount will come out to shareholders during '25 as well.

[Andreas Madsen, executive]

Yes, that would be the base expectation, yes. And we'll have to see what the specific number becomes. But we have -- we've been firm on the same capital target of 170.

[Operator]

The next question comes from Mathias Nielsen from Nordea.

[Mathias Nielsen, analyst]

And also congratulations on the decent results this time. So my first question is on the Personal Lines. In your Slide 9, you say like otherwise favorable experience from minor claims in Personal Lines. Could you maybe put a bit more flavor on what that means and how much that deviates from a normalized level?

[Andreas Madsen, executive]

Yes, I can try to do that. It is mainly our housing, our content and our personal accidents, which contribute positively to the numbers. We don't have -- I wouldn't be able to do -- I don't think it would be meaningful for me to do basically a very detailed bridge for that. But it does add some, let's say, support for the underlying improvements. But the main improvements are still related to the profitability initiatives we've had running through the books and the effects we are seeing there. So this is only a minor explanation in the underlying improvements.

[Mathias Nielsen, analyst]

That's very clear. And then also on repricing. Now you talk about the repricing on 1st of October, and then when I look at the claims of the Commercial Lines, it looks like the top line growth is a bit weaker in Q3. Is there anything around the renewal on 1st of October? Is the declines into the renewal that at least at brand -- is that some part of the expectation for the weaker top line development in Q3? Or is there any comments around how that has been received by customers in the start of Q4?

[Andreas Madsen, executive]

Yes. Well, I mean, mechanically, the turn we've had in 1st of October isn't in the numbers yet. So that will be a Q4 effect. Basically, what development we'll see there. But this is an effect we see as -- we've also seen in previous quarters, also for the let's say, our continued business, we had maybe even more volatility while we had energy and marine in the numbers.

But as you can also see on the quarterly earnings patterns in our business now, we've restated there is some fluctuation to be had also in -- yes, throughout the year, basically. And it is as we -- the main explanation will be that when we do -- we see price -- when we put pressure on prices to single customers, some of them from time to time don't wish to maintain business with us. And that's at least the big part of the effects we're seeing also for this quarter's numbers.

[Mathias Nielsen, analyst]

Okay. And then is there any on how that has been received like when you did the 1st of October, then do you have any comments on that?

[Andreas Madsen, executive]

Well, I think more or less, I think I would still expect somewhat muted growth for Q4. I wouldn't expect earnings to explode to put it that way. But I also think just to restate what we've said many times before, we do not guide on growth and what we're doing is driven by the ambition to maintain sound bottom line profits. So that's what we are mostly aiming for and as we just talked into before, we are very focused on also delivering underlying loss ratio improvements. So we -- that is our main focus and ambition also going into next year.

[Mathias Nielsen, analyst]

Great. And when we look into '25, should we expect the premium growth in '25 to be higher than the premium growth in '24, given that you do so many price hikes?

[Andreas Madsen, executive]

This is regarding the commercial business?

[Mathias Nielsen, analyst]

From the whole group, you can split it up if you want to, it'd be even better.

[Andreas Madsen, executive]

Think again, just again, restating we do not guide specifically for growth also from the argument I just came from. But I think we will be getting at least some sound support from indexation and also from the effect on repricing from customers, which they onboard and therefore, I would expect also a sound growth next year, hopefully, with a somewhat stronger at least year-on-year growth when we get to Q3 and Q4 for commercial.

[Mads Thinggaard, executive]

Yes, Mathias, I can add a little there with -- I mean, we are -- of course, we are going to have an indexation again. It's not completely settled, but it could be around 3%. And you know we have been communicating about the price increases. And there we could see an effect of up to 2%. And then you have probably noted that we are winning quite a bit of business in our Personal Lines with our banking partners. And that seems to have moved into a quite good momentum. So that would come as add-on on top of the 2 other components. So in that way, you have some building blocks that are looking quite positive but then again, we are continuing to reprice our larger corporate clients.

And their reactions to those price increases are a bit difficult to predict. So there, there will -- you could have some -- a bit of volatility around that as we are seeing in this quarter. Just to help out with some of the blocks.

[Operator]

The next question comes from Jan Erik Gjerland from ABG.

[Jan Gjerland, analyst]

The first one is to continue on the growth path here. You said that you have won a lot of new banking clients or volume in the banking channel. How would you say the profitability is on that book, the first year, the second year and the third year, if you could shed some light into your profitability improvement during such a trend. Is it so that you should expect that first year to be a little bit less profitable than your back book? Or should we think it's equal profitability as your back book? That's my first question.

[Andreas Madsen, executive]

Yes, I can try to answer that, Jan Erik. But we -- I think we -- the overall answer is that we -- as you know, banking -- we're very happy with the banking partnerships we're having and that they're adding very significantly to our growth. And it is at profitable levels. the partnerships as all partnerships come with some costs, and these are no exceptions. So there is some cost to the distribution channel also to the banks. But in terms of the underlying, let's say, the claims ratio for the Personal Lines book, the partners, the banking partnerships are still in a relative sense, the most profitable customers we have in the group within Personal Lines.

So that needs to balance out, and it also does. We are also working, as we are with the rest of the Personal Lines business to get the right level, and there also some price initiatives will also be needed for that part of the group. But we are comfortable we'll get there. In terms of that sort of an earnings pattern over year 1, 2, 3, you can say that there isn't any specific sort of factor there compared to other types of business we bring in. There's a higher average cost load in general on the banking book, but all insurance Personal Lines customers, mechanically, there is a cost in year 1 where you need to pay some costs also to the people.

We have our outside agents, which is a big part of that distribution also. So there will be some higher costs in the first year when you get the customers in and then as you progress over time, the combined would be improved. But that's nothing special about the banking channel.

[Jan Gjerland, analyst]

Very good. The second one is, I think it was Mads mentioning a little bit of indexation around 3% as our best guess so far. But then you also talked about price increases on top of it. Is it so that it's 2 percentage points, which we should think about as a potential price hikes in the commercial or in private or in a combination of its 2% on top, which means that it should be potentially higher in commercial and lower in private. If you can shed some more light to that comment.

[Mads Thinggaard, executive]

You're correct that I was mentioning those numbers. And I mean taking mechanically then DKK 100 million in each line is around 2%. So I think that is what we are looking into, in each line in total.

[Jan Gjerland, analyst]

Okay. Then finally, on the profitability measures. Is it so that the DKK 100 million each is sort of what you still expect for the '25 outcome? And the current year improvement in especially Private Lines then is not part of this DKK 100 million. So we still should expect the DKK 100 million to come on top of the current sort of improvement? Is that fair? Or is that still that you've taken some of the DKK 100 million already in 2024?

[Andreas Madsen, executive]

Just keep in mind, when we're talking about the 100, these are sort of rough numbers. But that being said, the DKK 100 million comes on top of the realized profitability we are expecting to see for the -- implicitly in the '24 full year guidance for both Personal Lines and for Commercial Lines. So roughly, what we have seen the need to bridge on top of the planned synergies and other effects, but the major part being we need to do around DKK 100 million more in costs.

A lot -- a big part of that was the adjustments we made last week. And then we still need roughly, and these are rough but just to give sort of illustration, DKK 100 million in both Commercial Lines and 100 in Personal Lines, and that will bridge where we are from our current year guidance to the DKK 1.85 billion, including one-offs for 2025.

[Jan Gjerland, analyst]

Okay. Very clear. Then on financial, you said, I think, on the return for the running book is the interest rate has come off quite dramatically during the quarter. So how should we think about your sort of running yields in the books? How should we think about your match portfolio versus your free portfolio? If you can shed some more light into those discussions?

[Andreas Madsen, executive]

Yes, I can try to do that, Jan Erik. Most of the investment assets are in the match book. We have -- is it around DKK 24 billion, I think, DKK 24 billion, something like that in total assets this quarter. let's say, around DKK 7 billion of those are in the free portfolio, just rough numbers. Not all of that is tied into products which are -- it's not all bonds or bond-like structures.

Some -- there will be some that's DKK 500 million equity and we have some real estate, but which will also be, to some extent, over time, at least, depending on interest rates. But in a rough sort of figure, you could say maybe 100 basis points deterioration, lower interest rates would lead to, let's say, DKK 50 million to DKK 70 million lower structural returns for the full year. And that's just rough estimates. But -- so we will see some pressure, but we now see -- we'll have to see how it ends up.

On the other hand, we are also moving -- we are continuously moving to harvest more illiquidity premiums in the total investment book, not only being the free portfolio, but within the total book, and that should at least provide some effect in the other direction even as -- even if we are pressured on lower interest rates.

[Operator]

[Operator Instructions] And the next question comes from Martin Birk from SEB.

[Martin Birk, analyst]

Just a couple of questions from my side. Perhaps starting with the expense ratio. I guess, when we talk to Mads, he has sort of saying that your expense ratio should decline by roughly 1 percentage point year-over-year recent quarter. And what is exactly happening here in Q3 in terms of your expense ratio development?

[Andreas Madsen, executive]

Yes. I think the 1% is probably a rough sort of illustration on mostly on a, let's say, a full year basis. But that being said, we -- for this quarter, specifically, you can see we do see some sound improvement in Personal Lines, 0.7%, as I recall, improvement there. And then we have a flat ratio in Commercial Lines. If you look at the synergies we're communicating, we still -- I think it's 0.4 percentage points, which is what you would expect in terms of actual cost ratio improvement, all else equal. So we are, in effect, a bit behind that curve. Commercial Lines is impacted by the flat premium growth this quarter, which does put some pressure on that ratio.

And that being said, we also have some, let's say, fluctuations in the quarter, which puts a bit of uptick in commercial compared to what we would normally on average expect. And then to round it all off, I think the important message here is that we are very focused on delivering on the cost improvements we need. And we have full comfort that what we did with the reorganization -- yes, taking out some FTEs last week, that adjustment will put us into the right run rate also into next year.

[Martin Birk, analyst]

Okay. And then perhaps on the FTE reduction that you guys communicated in late October, how will that translate into benefits to the expense ratio already in Q4?

[Andreas Madsen, executive]

That's a good question. Well, it's basically 2 months support for the quarter.

[Martin Birk, analyst]

So what's the monthly support?

[Andreas Madsen, executive]

The full year support would be DKK 85 million effect from what we have in the books, 85 person, DKK 85 million roughly is what -- is the amount of people we actually set the buy through then you can divide by.

[Martin Birk, analyst]

And then perhaps a CEO question here. I guess a 3 that makes a trend, Rasmus, this is, as far as I know, the third time that you have made around 100 people FTE reduction. Why is that? And is this something that we should expect to be a recurring event every single year?

[Rasmus Nielsen, executive]

I think what we have done is that we really try to establish this new big, huge 100% Danish insurance company and from time to time, it is necessary to do what we did. We would really have appreciated if we could have done it without any layoffs, but it was necessarily this time. We will continue working with the efficiencies and new products, new systems and all that. And by the end of the day, that caters for less FTEs. But we will do our utmost to avoid having a layoff from time to time is really -- is just needed.

[Martin Birk, analyst]

But Rasmus, what are you seeing? Are you seeing less natural attrition? Is that because you need these rounds every year? Or has this been part of the plan all along? Or how should we view it?

[Rasmus Nielsen, executive]

I'd say it's a mix, but we see less natural attrition that we actually expect. That is maybe the main reason why we had to do it.

[Martin Birk, analyst]

So after this, do you think -- do you still sit back to the feeling that you have more to do in FTE, so this is it?

[Rasmus Nielsen, executive]

I think it's -- there's a lot of years coming in front of us. I think what we all are working on with the efficiency, AI coming in and all these things, it would be difficult to say that it will be fixed at the same number of FTE as we are today. There will also be differences in who has to work with the new process and procedures, customers and all that. So there will be a change in the workforce, and we will do our utmost to avoid having these layoffs, but from time to time, it could be.

[Martin Birk, analyst]

All right. And then just perhaps a couple of small questions from my side. Andreas on the previous question in regards to your investment results, did you come up with the running yields in your free portfolio?

[Andreas Madsen, executive]

I think interest rates are moving a lot in recent days. So I think -- but we are probably around, let's say, the DKK 250 million mark. And hopefully, we'll see how interest rates go from here.

[Martin Birk, analyst]

Okay. And what's the -- a couple of -- well, a very harsh ending to U.S. hurricane season, what is the latest chatter on reinsurance prices?

[Andreas Madsen, executive]

Well, in an overall sense, I think we are at least in a more, let's say, orderly renewal this time.

[Martin Birk, analyst]

Regarding cat or?

[Andreas Madsen, executive]

Well, I'll get into that in a minute. But in an overall sense, the renewal seems to be progressing in a more orderly fashion than we've had, obviously, especially going from '22 into '23, but also last year, we're seeing -- the dialogue has been going on in good time and for some time also. I think cat is somewhat pressurized but at least what I hear is that the events we've seen, at least after now, we have some clarity to what we've seen also with the hurricanes in the U.S.

These events are not of the size that they are structurally sort of changing our expectations to cat from what we had before that. I think you also see that some insurers are actually making quite a lot of money. Reinsurers are making quite a lot of money in cat, at least if you look over a number of quarters in total. So we'll see how it goes. I think cat, I would be at least hopeful that we can at least maintain the pricing we have and maybe even we can -- we'll be working with the arguments we've had all along for improving our data and adding clarity to reinsure, see how far that can get us.

And I think property per risk or property XL in the Nordics is a very pressure -- is a more pressurized segment also compared to cat. So the market is not with us here. We've seen some sizable events, both in Denmark and also in the other Nordics. And we are -- and that is also hitting us to some extent. But the good thing for us being that we have had no claims for our property programs either last year or this year. So we stand with a very strong book relative to peers, and we are hoping that get us to a relatively at least better pace than some of our peers, but we'll see how it goes.

[Martin Birk, analyst]

So what is your gut feeling tells you about the presented increase year-over-year reinsurance cost for Alm. Brand Group?

[Andreas Madsen, executive]

My best expectation right now is that we would be able to do it more or less flat.

[Martin Birk, analyst]

And then maybe final question. When you announced your DKK 150 million share buyback program, you mentioned front-loading of capital distributions. If you look over the course of October, I know your weekly reporting has been volatile in terms of what has actually been bought back, but you're just shy of DKK 10 million per week. And at that pace, you're looking at completing your share buyback programs and well, within the first weeks of December. Why wasn't Q3 and also given where your solvency position, why wasn't Q3 a good quarter to top that up?

[Mads Thinggaard, executive]

Hi, Martin, Mads here. The thing is that -- I mean, for the last many years, we have had an employee program for shares where our employees, they get shares instead of wage, so kind of an ordinary program without incentives. And we -- today in the report, we announced that we are buying shares for that under our safe harbor program. So that is increased by DKK 7 million. And that, on your own math, that brings us well into 2025, before we have executed all these years, we want to buy it back. I mean as a combination of shares both for cancellation and for distributing to our employees. So I think when the program is executed, there won't be that much time to the closing.

We expect related to the divestment of energy and marine. And as such, we don't have much more capacity to distribute in that way.

[Operator]

Next question comes from Bhavin Rathod from HSBC.

[Bhavin Rathod, analyst]

The first question that I had was just trying to untangle the pricing and volume effect on the premium growth, both for Personal Lines as well as for the Commercial Lines, the 7.7% premium growth we have seen in the Personal Lines. I appreciate if you can say what proportion of that was probably driven by price increases and how much of that was driven by volume increases. And likewise, within the Commercial Lines, the flattish development we have seen, appreciate if you can say how much of that was driven by higher price increases? And what was the volume losses on those premiums?

[Andreas Madsen, executive]

Yes. I can try to add some clarity to that. If we start with Personal Lines, we have just below 8% overall premium growth, 7.7%. And in rough numbers, I would say around 3% of that is from higher -- from indexation. So that explains 3% then we already in this year, have significant price initiatives mostly related to the motor profitability issues that would add around 2 percentage points out of the 7.7 and then the rest, 2.7 roughly, it would be -- that is due to actual volume growth.

Most of it coming from our banking partnerships out of the Privatsikring channel. So that's Personal Lines. And I don't think in actuality, if you look at Commercial Lines, we get to a flat standpoint, mostly being the effect from this premium volatility where we see some larger clients exit going into this quarter. But more or less, you would see below there, you'd probably have indexation of more or less the same level and -- but then a lower contribution from pricing. So I hope that gives you some flavor for premium growth.

[Bhavin Rathod, analyst]

All right. That's very helpful. And then related to that, you've been going quite strongly within the Personal Lines because of this banking partnership and going ahead of the market. Can you just give some colors on the sustainability of the growth going into 2025 in the context of competitive landscape in Denmark?

[Rasmus Nielsen, executive]

Yes. We can put a bit of flavor on that. You're right, the growth is quite significant actually in '24, and we are very happy for that quarter after quarter. And very much of that is linked to the cooperation we have with the local banks and some of the larger banks as well. And to cut it short, we expect that to continue into 2025. We have -- it is really good, this cooperation. We have these banks are covering more or less 30% of the Danish market and there's still a bit of -- a lot of market share to catch for us to reach that level of 30%. So the growth in Personal Lines will definitely come from that cooperation. But also in general, we will grow in the other lines of personal bank.

[Bhavin Rathod, analyst]

All right. And just one related to the higher claim inflation, high frequency within the Motor segment, can we talk about what's your expectation for the claims inflation going into 2025? Do you see inflation to remain at similar levels? Or do you see some sort of improvement going into next year with respect to frequency as well as with respect to inflation?

[Andreas Madsen, executive]

Yes. Well, I think what we're seeing in recent quarters is a year-on-year uptick in the market of around 6 to 8 percentage points in frequency. And I think that is at least what we are planning for as, let's say, the new normal but we do not, on the other hand, have any expectations that, that should increase further from the levels we're seeing right now. You might also -- in a blue sky scenario, we might argue that there could be some effects at least this year from -- we've had quite a lot of rain through consecutive quarters, so quite wet roads, but that would be more speculative.

And what we are planning for is the new normal we're seeing right now, and that's also what we're doing the price initiatives regarding. So that frequency uptick has translated now also into some uptick in the average claims mostly coming from higher prices on spare parts. But we do see spare price, on average, coming up something like 40% compared to last year. But keep in mind that around 2/3 of our costs are related to wages, which are more or less flat because we had strong procurement agreements with our partners, keeping that in check for now.

But in an overall sense, we do see that uptick also now on top of the overall frequency. So -- and that's what has basically added into this headwind that we need to -- and that's a lot of why we need to do these. We've talked about many times today, but that's why we need to do these further price increases in both Commercial and Private Lines is a big part of that answer.

[Operator]

[Operator Instructions] As we have no further questions, I'll hand the call back to Rasmus for closing comments.

[Rasmus Nielsen, executive]

Yes. Thank you all for participating, and thank you for the questions. Hope to see you soon.

[Operator]

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.