ALM. Brand A/S

CSE:ALMB

Earnings Call Transcript 2022-Q4

[Operator]

Good morning and a warm welcome to the Alm. Brand Interim Report for the Full Year 2022. My name is Candice and I will be the operator for today's call. [Operator Instructions]I would now like to hand the conference over to our host, Rasmus Werner Nielsen. The floor is yours. Please go ahead.

[Rasmus Nielsen, executive]

Thank you. Good morning and welcome to all of you on this Alm. Brand Group result call for the fourth quarter of 2022. As usual, I have with me today our CFO, Andreas; and our IR team with Mads and Mikael. Let us start on Slide 2 with the highlights. 2022 has been a very busy year for Alm. Brand Group; a year characterized by restructuring, integration and swift execution to create a strong foundation. We have successfully achieved what we have planned for and we have a clear road ahead for the next steps that we will take. But it is equally important that we throughout the year have been able to further add to the positive momentum in our business. Growth has picked up to a satisfactory level of more than 5% whilst we have worked hard on delivering on the Codan integration and the realization of the synergies. Our agenda has been a mix of customer-facing activities and making sure that the operational setup of Alm. Brand and Codan will be successfully integrated.I think we have made good progress on all parts of the agenda. The result that we present today is a satisfactory result on a technical result, but also a result marked by the negative development on the financial markets. Bottom line is that we get to a result that enabled us to pay out a nominal dividend at par with last year. Thus the Board will propose DKK0.3 per share to be paid out after the AGM in April. And now I'll turn to Slide 3 with our financial highlights. Gross premiums totaled DKK2.9 billion in the quarter and DKK9.6 billion for the full year. Organic growth has been very satisfactory throughout the year thus Alm. Brand added 5.5% in premiums to a total of DKK5.7 billion and on top of this, Codan contributed with DKK3.9 billion for the 8 months starting on the 1st of May. The technical result in Q4 was DKK411 million thus full year technical result totaled DKK1.16 billion i.e. topping off our guidance 3 months ago.Investment income in Q4 was a loss of DKK21 million stemming from the interest hedging of our technical provisions. This means that the full year investment result was a loss of DKK411 million. This is of course not satisfactory, but as mentioned also in the previous quarters, the main driver for this is the exceptional interest rate increase in 2022. And on an overall level, we will benefit from higher interest rates in our insurance business. Again in this quarter we have made progress on the integration of Codan and realization of synergies thus we have spent DKK90 million on this. And finally, in line with the previous quarters, we have amortized customer relationships and brand amount related to Codan with DKK89 million. This is of course a noncash item and please remember that this has no effect on our dividend capacity going forward.Now let's continue on Slide 5. The group made a technical result of DKK411 million in the fourth quarter. The result from Alm. Brand was DKK298 million against DKK207 million last year thus showing a positive development as underlying business develops fine with claims benefiting from tailwinds due to higher interest rates, which compensates for claims inflation. Again this quarter, both large claims and weather-related claims are lower compared to last year, which of course also adds to the profit. And lastly, Alm. Brand was able to reduce the expense ratio following both synergy gains and other cost initiatives. Codan's technical result amounted to DKK113 million. Overall, this is a satisfactory number for the quarter, but it should be noted that large claims with commercial lines are too high although we understand that the Codan business comes with more volatility compared to what we have in Alm. Brand.We have already introduced some specific actions to curb this exposure and to improve profitability and we are confident that this will have the effect that we want. Please turn to Slide 6. Premium income grew organically in Alm. Brand by 6.2% in the quarter, i.e. accelerating from the high pace from the previous quarters in the year. Again we see a positive contribution for both personal and commercial lines. I'm very pleased with the development throughout the year and I believe that we have been able to strike a good balance between growing our business and safeguarding profitability. Looking into the new year, we'll be looking at a higher indexation of premiums for most products except for workers' compensation and overall we are confident that indexation and individual premium increases will fully compensate for the claims inflation in 2023.And now please turn to Slide 7. It's been a quarter with good weather thus there's only been a very few weather-related claims across the group totaling a modest 0.6 percentage points. However, large claims in Codan were too many and although this to some extent reflects the more volatile nature of the acquired corporate business, then this development is not sustainable. In addition to further premium increases in the first half of 2023, we plan to execute on several initiatives to improve profitability, including a reduction of offshore construction to 20% of the total premium income within industry against around 30% in 2022. We will also improve control and management of assembly and setup risks and reduce exposure to the U.S. to lower our exposure to natural disasters.And now I'll turn to Slide 8. Here we have illustrated the bridge for combined ratio for Alm. Brand for Q4 '21 to Q4 in '22. The higher interest rates are estimated to have provided a tailwind of 2.6 percentage points. And the net effect of lower claims, expenses for large claims and weather-related claims, lower risk margin and lower runoff totals 2.2 percentage points leaving us with 90 basis points improvement before getting to a combined ratio of 79.4%. This improvement is made up by a reduction in the expense ratio of 180 basis points, which is partly offset by especially the claims inflation. Codan made a combined ratio of 92.2% in the quarter based on a very satisfactory low 80%s in the private lines and around 98% in the commercial lines. This leaves the group at 85.8% in Q4 and a satisfactory 87.9% for the full year and I think that this is a fine number given that we still have a journey in front of us to fully integrate the 2 companies and realize the synergies.And now please turn to Slide 9. For the personal lines, claims ratio for Alm. Brand was 62.8% against 60.5% same quarter last year, primarily reflecting that average claims cost having increased due to inflation in especially materials and energy. The expense ratio improved to 17.4%, i.e., down 270 basis points relative to last year and included in this is of course the effect of synergy initiatives implemented throughout the year. Also the Codan business achieved a satisfactory combined ratio of 82.8% reflecting a very low level of claims in the quarter, but on the other hand, a somewhat high expense ratio although this is moving in the right direction. The group combined ratio totaled 81.4%. There's still a lot of things we can do to improve this, but the starting point is very good.And then turn to Slide 10 for the commercial lines. The combined ratio in Alm. Brand was down 78.6%, i.e. down significantly relative to last year and trending down also relative to the very good second and third quarter we had in 2022. Although we continue to see claims inflation also within commercial lines, it should be noted that most of our benefit from high interest rates derived for the long-tail provisions that we do for claims in commercial included here in for example workers' compensation. The combined ratio in Codan was 98.5% and, as mentioned before, this is affected by a high amount of large claims. With the initiatives already implemented, including the ongoing pruning of the business plus the additional actions already mentioned, I'm sure that we will obtain an attractive combined ratio also in commercial lines in Codan.Combined ratio for the group was 89.2% and we expect to reduce both the claims and the expense ratio in the time to come, the latter with synergies as well as continued focus on cost in general. Please turn to Slide 12 and an update on the synergies. We have highlighted that an important part of our investment case is the delivery of synergies. We had an initial ambition to extract synergies of DKK90 million this year. We upped this a bit during second half of the year and we achieved DKK111 million with a PL effect in 2022, of which DKK57 million is included in Q4 numbers. Our approach is to be very detailed and well documented and thus we'll be able to push forward according to plans. This provide us with a strong starting point for the DKK240 million in synergies that we want to achieve in 2023.And now please turn to Slide 13. After adding Codan investment portfolio, our total portfolio more than doubled back in May and the total investment portfolio now amounts to DKK22 billion split between a hedge portfolio of around DKK15 billion and a fee portfolio of around DKK7 billion. In Q4 the financial markets have generally been slightly positive and we made profit on the fee portfolio. However, interest hedging of the technical provision has been somewhat challenging as rapid interest rate movements in December has caused deviations between the portfolio and the mortgage credit component in the discounting. Over time this should be leveled out, but in Q4 it produced a loss on investment of DKK21 million. Still we consider our investment strategy quite conservative and it includes investment limits carefully designed to curb the impact of the investment result relative to the result of the group.And again although this means that the full year investment result is a loss of DKK411 million, then bear in mind that over time our business will gain from higher interest rate level in general. And now finally, please turn to Slide 15 for the outlook of 2023. Our guidance includes a technical result excluding runoffs of DKK1.2 billion to DKK1.4 billion, including expected synergy gains of a total of DKK240 million. The guidance also reflects expected lower claims for both weather-related and large claims compared to 2022 as well as the full year effect of other implemented savings, but in turn also higher cost for the group's reinsurance program. The expectation is based on continued growth in the group's gross premium income across the various customer segments supported by the annualization 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 excluding runoff result is expected to be 88% to 90%. We guide for an investment resulted of around DKK250 million based on the current estimation horizon returns for the fee portfolio and a 0 result for the hedge portfolio. For other activities, we guide a deficit of around DKK75 million. Consequently, the group profit excluding special cost is expected to be almost DKK1.4 billion to DKK1.6 billion before tax. In addition, we guide for special cost in the range of DDK 300 million to DKK350 million for integration of Codan and realization of synergies. And lastly, depreciation on intangible assets is expected to affect the income statement by approximately DKK360 million.And with this, I conclude my presentation and I hand over the word to our moderator. Thank you.

[Operator]

[Operator Instructions] So our first question comes from the line of Jakob Brink of Nordea.

[Jakob Brink, analyst]

I have a few questions. I'll do them one at a time. On reinsurance, in your Capital Markets update, you mentioned that you wanted to also increase the reinsurance coverage. You write in the report this morning that reinsurance has become more expensive and that's baked into the guidance. But could you just give us an overview of what changes of retention or retained risk have you been able to do here on the 1st of January and what changes in general also to your property and catastrophe programs, please?

[Andreas Madsen, executive]

Jakob, Andreas here. Let me shed some light on that. Reinsurance markets have been extraordinarily hard this year and the renewal has been in historical terms extraordinarily difficult for us as I think for some of our peers also. So as we've mentioned also in the guidance, we do have some headwind from higher prices in general on reinsurance. Even though we actually saw some synergies from putting the programs together, the net result is still a drag and a headwind for next year. And some of the options we were looking into and considering earlier on for actually reducing the risk, we simply weren't able to put through in this market. There wasn't capacity to truly reduce in a general sense the risk we have as a group. I would, however, say we still have a very strong and solid reinsurance program with solid protection across both catastrophe and property per risk. We also have succeeded in getting an aggregate for the group. So there are positives, but in a general sense, we didn't obtain the improvement that we were hoping for in terms of reducing risk.

[Jakob Brink, analyst]

So what does that mean in terms of your again going back to the capital markets update so you wanted to push through price increases in the segment and you wanted to reduce exposure like Rasmus said in his initial remarks and then you wanted to increase reinsurance. But I guess the fact that you didn't come through with these lower retention levels, does that make you then change some of the other things or maybe take even lower risk or raise prices even more?

[Andreas Madsen, executive]

Well, just a quick comment. I wouldn't say we were exploring the opportunity to derisk via reinsurance, but it was never a prerequisite for our plans that we did so. And the price increases that we've seen will be a drag for 2023. I think to be honest, we won't be able to get fully there this year. That's also why we have that in our guidance. But we're expecting in a general sense to push that through to customers because this is a general market thing. It means that the price of doing insurance has just gone up and we need to push that on to our customers. So that's the plan for the years to come.

[Jakob Brink, analyst]

Just one last question on that topic. So in the Capital Markets update, I think you talked about fairly significant price increase needs and since then we have had this reinsurance issue where prices have gone up so I guess that means even larger price increases are needed. Do you feel that is still possible?

[Andreas Madsen, executive]

Yes, we definitely feel that is possible and a quick comment around the renewals we've had, I would say we have in a general sense been able to push through large price increases where we felt they were needed being especially in our corporates and in our industrial segment. We've seen double-digit price increases in general. We've seen very low in a general sense at least, low -- we have high retention still. Most of our customers actually renew and the customers that do not renew are in a general sense the ones we don't want to renew. So we still feel we have a quite hard market especially in the segments where most of the price increases are needed.

[Rasmus Nielsen, executive]

Okay. It's worth mentioning also I mean the reinsurance part, it's very much about bringing down volatility. I mean you don't normally get a profitability advantage by doing reinsurance, but that was a part of the toolbox we mentioned where we could dampen volatility. So that has been kind of a challenge there a bit.

[Jakob Brink, analyst]

Yes. I get that. It's just still seeing 36% loss claims ratio in Codan commercial then in the quarter, but okay. On premium growth guidance, you don't have one this year as far as I can tell. But if I try to calculate backwards from the midpoint of your technical profit guidance and the midpoint of your combined ratio target range, I get to DKK11.8 billion premiums, which is a growth of 3.5% versus pro forma '22. I don't think that sounds like a lot when you're pushing through, what did you say, double-digit price increases with high retention and significant price increases in private above inflation. And I guess you still have an ambition to sort of relaunch the Privatsikring or at least keep growth high there and together with Sydbank as well. So why only 3.5% growth?

[Andreas Madsen, executive]

Yes, I think that's a fair question, Jakob. The price increases I am talking about are in a general sense related to a very low proportion of our overall premiums so that would be within our corporate and industrial segments. So those are not the price increases we are seeing in general. So that's just one comment. And I mean I think another headwind so to say we have in terms of top line next year is that, as we've talked about before, especially the energy part of the business does have some volatility coming from the fact that the premiums we are going to earn in the next year are actually determined by the premiums which were written 1.5, 2 years ago and we will expect from that segment simply because we are -- not because we are writing necessarily lower in a general sense, but because we have that earned patterns. We will see a negative effect from that segment next year. And on top of that, we've also seen some single large industrials go, but it's been in types of business that we didn't want to continue and it's because the profitability wasn't where it needed to be and that's also in the commercial part of the business. So those are some of the things that are in top line growth bringing that a bit down next year.

[Jakob Brink, analyst]

Okay. Makes sense. And then a last question, please, from my side. On the guidance for technical profit, if I take again the pro forma 2022 so Codan plus Alm. Brand for 12 months, it was DKK1.17 billion according to the Excel file you put up. So taking again the midpoint of the '23 guidance, you're basically guiding for DKK130 million increase year-on-year, which is in line with the step-up in synergies year-on-year so basically 0 from underlying or other underlying. So what's your guidance in 2025? Do you need around DKK450 million from other underlying? So why wouldn't we see any of that other underlying improvement in 2023?

[Andreas Madsen, executive]

I think your math is more or less right, Jakob. As one fact that we talked into, we do have reinsurance as a headwind. To put it in combined terms, we are looking at something like 1% increase so that is definitely 1 thing we do see against us. And in a general sense, we have an underlying also cost inflation in general which we are getting a lot of that from the premium increases, but that also puts a somewhat drag on it. So I think what we're seeing is actually quite in line with what we expect given the overall synergy improvements we were aiming for for next year compared to this year. And what we are putting in here is a belief that we'll be able to maintain what we feel is a strong and satisfactory, what you call it, underlying claims ratio, but not improving it further. We are aiming to maintain that given the inflation we're seeing. And then we expect a somewhat lower, but not a lot lower, but somewhat lower contribution from weather and large claims next year compared to this year.

[Rasmus Nielsen, executive]

This is Rasmus. I just wanted to -- I mean a bit on your question here. I mean you're talking about DKK130 million here and that sounds like you are comparing a technical result including oneoff gains with a guidance excluding oneoff gains. Is that correct?

[Jakob Brink, analyst]

I guess that is actually correct, yes. Sorry.

[Rasmus Nielsen, executive]

[ Primarily just ] the delta from the oneoffs in that comparison.

[Operator]

Our next question comes from the line of Asbjorn Mork from Danske Bank.

[Asbjørn Mørk, analyst]

Maybe to start with some of your comments on very benign trends when it comes to small claims especially in Codan, but I guess you're seeing more or less the same for the Alm. Brand business. Could you just quantify that by any means? What are we looking into as an underlying extraordinary tailwind in Q4, please?

[Andreas Madsen, executive]

Well, we have had a very strong, just in the general sense especially in terms of frequency, we've seen across both personal lines and also let's say the smaller and medium sized commercial, we've seen very sound lower than average frequencies.

[Rasmus Nielsen, executive]

But maybe we can add that were some of the parts we were a little bit worrying about in Q2 and Q3 and now we see this development in Q4. But I would say already now in January, things are picking up a little bit again. So it's been a 1 quarter event until now.

[Asbjørn Mørk, analyst]

Okay. But maybe if you can quantify the impact because basically the reason I'm asking is if I look at the underlying development in Q4 in the technical profits and actually try to compare your guidance ex runoff with the sort of delivery in Q4 ex runoff so we don't make the same error as we did in the previous question. But if I do that, I get to something like DKK370 million as a normalized technical profit for Q4 and I annualize that, I get to DKK1.5 billion almost. So just wondering how much was sort of an extraordinary tailwind in Q4 that I should not extrapolate because it looks a bit like your guidance is a little bit on the conservative side, but I don't have the missing puzzle here. So it would be nice to get some sort of quantified insight there.

[Andreas Madsen, executive]

To put it roughly, I'd say something in combined sales of maybe around 1% to 2% I would say tailwind in this quarter from the impacts as we said. And then remember also next year, we have reinsurance coming in as a headwind.

[Asbjørn Mørk, analyst]

Sure. But wouldn't it be -- that was actually my next question because if you look at the headwinds from the reinsurance part and the incremental synergies, that should more or less offset each other, right?

[Andreas Madsen, executive]

And by incremental synergies, you mean the extra DKK130 million or so for next year compared to this year?

[Asbjørn Mørk, analyst]

Yes.

[Andreas Madsen, executive]

Those 2 factors are more or less the same, yes.

[Asbjørn Mørk, analyst]

Okay. Perfect. Then maybe a question on the synergies actually because if you look at the run rate for Q3 and Q4, now Q4 DKK57 million and you're saying that the annualized effect is DKK202 million. So why is it that the annualized effect is not basically annualizing the DKK57 million? What is it that is not going to give you a synergy for 2023? Why only DKK240 million in synergies for 2023?

[Andreas Madsen, executive]

So we did have -- I mean we are close to the DKK200 million mark as we say, as we also worked previously. We had some front-loading of single effects in the total DKK110 million we are making this year and most of the -- I mean you're right to assume that the effects we see in Q4, we are expecting to see next year also. So I'd say we are comfortable and in line with our overall target, which remains unchanged for now, but we are comfortable and in good traction.

[Asbjørn Mørk, analyst]

But just if I look at the slide, basically you say that it's only DKK202 million that is sort of an annualized effect from what you have done so far at least if I read the slide correctly. I'm just wondering if I take DKK57 million and annualize that, I get to quite a lot above DKK202 million. So are there any things that should not impact 2023 versus 2022?

[Andreas Madsen, executive]

I don't think I have a specific answer for that. Let's get back to you on that, Asbjorn.

[Rasmus Nielsen, executive]

I think Asbjorn, there may be some periodization and stuff like that that is filtering in a bit to our expectations here.

[Asbjørn Mørk, analyst]

Okay. Fair enough. We can take that bilaterally. A final question from my side would be on the large losses now obviously quite high again in Q4 discussing reinsurance and discussing some of the previous questions as well. I was just wondering whether you still think that 9% is sort of the go-to number normalized for large losses looking ahead?

[Andreas Madsen, executive]

Yes. To put it broadly that is still what we expect something in vicinity of 9%, maybe a bit above 9%, but that is what we are expecting. We've gone through obviously also the recent claims experience. We don't see anything structural as yet. So we're not worried in a general sense that the things we put into play aren't the right things and we'll get to the right place in time, but it is something that we are monitoring closely.

[Operator]

[Operator Instructions] Our next question comes from the line of Martin Birk of SEB.

[Martin Birk, analyst]

Just coming back to the large claims that we see and particularly the large claims in Codan. I mean, I guess Codan commercial is producing a technical result of DKK4 million in 2022. Given that you haven't been able to reduce as much of your risk as you want to with your reinsurance programs, what other tools do you have in your toolbox to mitigate such a scenario in the current year?

[Andreas Madsen, executive]

I think in a general sense we need to keep what we are doing in terms of being very selective in the risks we write and the risks we renew and also being willing to exit unprofitable subsegments. There are certain segments we've had a view on also within the energy segment. We've already talked around limiting offshore construction. But on top of that given what we saw in Q4, we are now also aiming to further reduce the exposures towards the U.S. specifically because we've seen an elevated and unexpected also higher claims experience there and we feel that that's not in a general sense the right place to focus our risk appetite at this point in time. But other than that, we just need to be willing to walk away from business and be willing to put through the price increases, which will in time not necessarily reduce large losses, but will further improve the underlying which we also need to do.

[Martin Birk, analyst]

So when are we going to be -- when will we start to see these initiatives coming through your P&L?

[Andreas Madsen, executive]

We should expect in a general sense that we would see continuous improvement, but it is hard to -- also given the volatility here, it's hard to predict exactly what we'll see. But we are expecting it to come through, let's say, in the quarters to come. On average we should see a better claims experience than we have.

[Martin Birk, analyst]

Okay. So basically you see there is no risk in you guys producing a DKK4 million technical result for 2023 that would be significantly higher.

[Andreas Madsen, executive]

It's very hard to say that there is no risks in this business, but I mean that is certainly not what we're expecting.

[Martin Birk, analyst]

Okay. And then maybe perhaps just coming back to the reinsurance topic because I guess Jakob also asked a couple of interesting questions around reinsurance that you did not answer especially on net retention levels, how have they -- what are they now? Where are they coming from? That was the of course Alm. Brand classic business, but then that's also very significantly higher than what it was. I assume a significantly higher net retention level for Codan franchise.

[Andreas Madsen, executive]

Well, as I said, in general we have been able to maintain what was a strong reinsurance program, which mitigates also if we have severe events. We are not in any way at risk with the capital we have in this business. We weren't able to reduce the own risk for the group as such and the programs are different now than they were because all the places we were able to do so, we put them together as group programs, but those group programs more or less add up to the same risk as we had given the Codan program and the Liv og program separately in this last year. But we weren't able to get through the extra improvement so to say simply because there was no capacity for any activity in that sense given the market situation this time.

[Martin Birk, analyst]

Okay. But so sort of in DKK, how does that net retention level, how does that change?

[Andreas Madsen, executive]

I don't think it's the right time to go through every single line we have, but we have more or less the same retention levels. If you look at our catastrophe program, but now it's a group program not two single programs and we are also with our property per risk. We still feel that we have -- we were hoping maybe to bring down the Codan exposures, but that has not been possible but we still feel that they are, I mean, manageable as they also were the same as this year. And then as a positive, we have been able to obtain some extra protection for the group with the aggregate we only had on the [indiscernible] side historically. So if you add the things up, we are more or less in the same place as we were.

[Martin Birk, analyst]

Because maybe we can continue to discuss this tomorrow. But perhaps just a final one on reinsurance, your energy business. I guess if I remember correctly back from your Capital Markets Day, a vital part of the 84% consistent combined ratio was more reinsurance. How does these reinsurance prices change that 84% assumption?

[Andreas Madsen, executive]

Martin, that was not a vital part. As I also mentioned earlier on this call, we never had a prerequisite for our plans to do extra reinsurance not in the energy business as such either. And the energy business is unchanged in terms of retention levels and overall coverages compared to this year. So as I mentioned a couple of times already, we weren't able to do anything extra. We're in the same place, but it was never a prerequisite for us to do that to obtain the targets we put forth.

[Martin Birk, analyst]

Okay. And then just sort of staying with the 2025 target and looking at your expense ratio a tad higher than expected. How does that boil down to the at or below 16% that you guys are targeting in 2025?

[Andreas Madsen, executive]

I think, as I'm sure you're all aware, we did have -- if you look at the pro forma full year combined expense ratio, we had something like 21.5% for the group -- I think it's 21.6%. We're bringing that down now to the 18% to 18.5%. So given what we have communicated and the extra synergies we would expect coming next year and adding a little bit on top of that from what we also did in the autumn, we will do some positions. But also keep in mind, we have had a hiring freeze so some of that is already in the numbers for this year. So if you add that up, I think that sums nicely to the improvement we should expect and we are as such on track towards achieving 16% in 2025.

[Rasmus Nielsen, executive]

Martin, if I could elaborate just a bit on going down from 19.6% pro forma in 2022 on the cost and then looking a bit at the moving parts, then it's clear that we will have synergies that could be on the cost component around DKK80 million, but we would like to see inflation to counter that so that won't get that much nominal effect. And then we have some other initiatives that will help us. So when we are moving down to 18% to 18.5%, we are actually putting a bit of pressure on ourselves to do more than just harvesting the synergies. So I think we are actually moving the needle with our plans for 2023.

[Martin Birk, analyst]

Okay. And then just a final clarification on your parent company cost guidance that was up to negative DKK75 million annually. What's the driver behind this change?

[Rasmus Nielsen, executive]

I can answer that. This is Rasmus. We added our bit. We have 1 more initiative management now. That is basically the easy explanation on that. But on the other hand, there are many components in this result as well. There is a little bit of income from our [indiscernible] business and all that. So it's a mix of many things, also wind and so forth, but that is the most obvious explanations.

[Martin Birk, analyst]

Okay. And if I just may, just one final question. Sorry about that. We hear other companies talking about -- we see one of your peers walking away from losing VA. What are your thoughts on this?

[Andreas Madsen, executive]

Well, I think this is definitely something that we are considering in a general sense. I mean it's no secret that the protection you would want to harvest from obtaining VA in 2022 was not there. It was actually less helpful and it actually added volatility to our match portfolio. So that is fair and I think that's something we're looking into. If you look at this year, actually we had the VA come down in general sense full year while actually credit spreads were a bit up. So the VA dynamics weren't working in a predictable way and that has something to do with the very fast and also quite extreme, in a historical context, rate hikes especially also on Danish mortgage bonds and the dynamics around those VA component. I would say though that we also should look at this in a bit longer perspective than only 2022. Our match portfolio is, if you look on a 5-year basis, is still positive even with the losses we had this year. So I think we haven't determined anything, but obviously we are looking into that going forward because 2022 was not a good year for the VA match concept.

[Martin Birk, analyst]

And then if you just remotely think about walking away from it, isn't right now the perfect timing to abandon it?

[Andreas Madsen, executive]

Yeah. You could argue that it would be. It's easy when the VA is low and it is quite low at this point in time. So we've noticed that, but again I think we should be a bit mindful of not -- you need to look at this in a longer run perspective than just what we've seen in 2022.

[Martin Birk, analyst]

So if I understand correctly, this is not a discussion that you guys are willing to make over the next 1 or 2 quarters.

[Andreas Madsen, executive]

I didn't say that necessarily. We're looking into it, but we have as of yet not made a decision on that.

[Operator]

Thank you. As there are no additional questions waiting at this time, I will hand the call back over to our management team for closing remarks.

[Rasmus Nielsen, executive]

Thank you for listening in and have a good day,

[Operator]

Ladies and gentlemen, this concludes today's conference call. Have a great day ahead. You may now disconnect your lines.