Tryg A/S
CSE:TRYG
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Good morning, everybody. My name is Gianandrea Roberti. I'm Head of Investor Relations of Tryg. We published our Q3 results this morning. And I have here with me Morten Hubbe, Group CEO; Barbara Plucnar Jensen, Group CFO; and Johan Kirstein Brammer, Group CCO. With these words, over to you, Morten.
Thank you, Gian, and good morning to all of you, and we start on Slide 3, where we show a Q3 with a strong insurance quarter with a lot of operational improvement. We report a technical result of DKK 1.8 billion. I like that number. It's up 85% versus reported DKK 988 million in the same quarter last year. An unusual increase and clearly reflecting the fact that the RSA acquisition has increased our size and where we have a completely different scale in the new and large group.
If we look at the pro forma numbers, the DKK 1.8 billion technical is up roughly 21% to the pro forma DKK 1.5 billion in the same period last year. The main drivers of improvement is, of course, the higher interest rates, which you may recall, improves our discounting. But more importantly, 0.8% improved underlying claims, including synergies, but also the positive technical result from the positive top line growth.
Combined ratio for the quarter is 81.1% against 82.9% last year. And if you look at the geographical split, it's worth noticing that Sweden as a country delivers a combined ratio of 76%, of course, to a large extent, a driver of the new Trygg-Hansa book, but of course, combined with our old Moderna book in Sweden. And bear in mind that the Swedish technical result, which was DKK 61 million in Q3 last year is actually SEK 784 million in Q3 this year. So a major step-up in the enlarged group.
As I mentioned, the group underlying claims improved 80 basis points. The improvement comes from commercial and corporate, where we want to see the improvement. It's very positive. And then it's offset by a small deterioration in the private lines. Expense ratio is roughly flat at 14.1%.
Clearly, Q3 saw challenging and volatile capital markets. Interest rates move up, war inflation, uncertainty hit nearly all asset classes that were down, and our total investment return for the quarter is minus DKK 348 million. We will pay a dividend of DKK 1.58 per share, which we're very pleased with an increase of 48% compared to Q3 last year, starting the dividend growth journey that we're expecting following the large acquisition. And of course, driven by higher insurance earnings, the DKK 1.8 billion, but also the operational improvements and the RSA synergies.
And then just to remind you, we're currently buying back 5 billion of Tryg shares. We've bought back 2 billion of the 5 billion so far, and we expect the program to run until the summer of '23. Solvency ratio at 198%, quite robust in a period of turbulence as we're seeing now.
On Slide 4, we show the customer highlights. Generally, customers set stay very high at 85% in Q3. That is a strong result in a turbulent period. But as you know, our ambition is to reach 88% by '24 at the end of the strategy period. For this quarter, specifically, we're seeing claims and increase in customer satisfaction. We see that particularly the digital customer experience has been improved.
And in particular, our visual way of showing the customer how can they easily follow a claim once they have reported it. But also in Commercial Norway, we've seen increase in customer set. We have improved response time, which is often characterized as the #1 most important by customers. And in particular, we have improved response time in the sales processes, improving customer set in Commercial Norway.
On Slide 5, a little bit of a new layout on this technical -- split of technical development. As I mentioned, the group technical result for the quarter was [ NOK ] 1.8 billion. On the left-hand side, you see the business area journey from the DKK 988 million that we reported in Q1 -- in Q3 last year to the DKK 1.8 billion in Q3 this year.
And as you see on the left-hand side, the vast majority of the more structural increase in size in our new group comes in the private and commercial segments. And actually, if you look at the technical result in private and commercial put together, it increases year-on-year by 93%, actually an increase by DKK 819 million. And of course, bear in mind that private and commercial are always and historically the stronger segments with the strongest stability, the strongest profitability and the strongest return to shareholders.
So to have the majority of our uplift in those segment is very satisfying. Also, if you look at geography, we live Sweden from delivering around 6% of the group technical result to now delivering 43% of the group technical result, Denmark at 34%, Norway at 23%, improving significantly our earnings diversification across the countries. And then on the right-hand side, we show the drivers of the improved technical result. Clearly, discounting in this quarter is the largest driver.
The second largest driver is the 0.8% improved underlying claims for the group. And then also we see as number three, the technical result driven by the strong top line growth. Barbara will get back to the cost development, but fair to say that RSA historically did not report first quarter and third quarter. There's a little bit of fluctuation in the quarters from costs. but roughly flat. So over to you, on synergies, Johan.
Thank you, Morten, and I'm turning to Page 6. The RSA acquisition has produced synergies of DKK 97 million in Q3, bringing the total for the year to DKK 239 million for 2022 and DKK 302 million accumulated, including also the DKK 63 million realized in 2021. Half of the synergies in Q3 were cost synergies. The remaining half was almost evenly split between claims synergies with 2/3 and commercial synergies with 1/3.
The cost synergies came primarily by reduced marketing spend, lower RSA group charges and FTE reductions primarily from natural attrition. Procurement synergies came from the utilization of the lowest priced contracts, mainly within property and auto. The commercial synergies were driven by pricing initiatives in Norway and Sweden as well as cross-selling of pet insurance to Trygg-Hansa customers.
Moving to Page 7 on shareholders' remuneration. Tryg is paying a Q3 dividend per share of DKK 1.58 slightly higher than Q2, primarily driven by lower share count following the buyback progress. The DPS is 48% higher versus the same period in 2021, supporting our journey towards a doubling of the dividend towards 2024.
And as Morten mentioned previously, we are currently in the market with our 5 billion buyback program, and we have bought back just more than 2 billion so far with the program expected to last until the summer of 2023. We report a healthy solvency ratio of EUR 198 million, a good level at the start of our new journey, a level that can protect us well from the uncertain macroeconomic times and can ensure our dividend delivery.
And with that, I'll turn to the next chapter on premiums and portfolio on Page 9. The group premium growth was 6.4% in Q3, once again primarily driven by the private and commercial segments. In this slide, you can see that Corporate is reporting a growth of 5.8%. However, please note that the number is slightly inflated due to a resegmentation of the Codan Norway book that initially was allocated to commercial and subsequently moved to corporate.
Adjusting for this resegmentation, the top line development would have been negative by minus 1% for the Corporate segment. And since profitability remains key in our corporate business, this development is in line with our expectations and our strategy.
The Private segment continues to report a healthy growth of 7.3% driven both by organic growth and price adjustments to offset the inflation levels. The Commercial segment reported a growth of 4.6%, also helped by good organic growth and price adjustments. Again, adjusting for the resegmentation mentioned before, the growth would have been around 7% for the Commercial segment.
In general, it is important to highlight that Scandinavian economies remain relatively healthy, and we see no change in consumer patterns towards insurance. This is not in any way to deny that we live indeed in challenging times, and we, as a company, try to remain even closer to our customers and best advise them on their insurance needs going through these times.
Turning to Page 10. We are taking a deep dive into the rebalancing of the Corporate portfolio. At the Capital Markets Day in November 2021, we announced the rebalancing of our Corporate portfolio with an ambition to reduce the property exposure outside the Nordics by 50% and exposure to U.S. liability by 70%, bearing in mind that the exposure to U.S. liability came from a very low starting point.
Our ambition is overall to have a corporate business that is somewhat smaller but more profitable and less volatile. And as you can see from the charts here, both the change in portfolio mix and the reductions of risk exposures are moving us in this direction. You can see on the right-hand side that we have been reducing some 27% on our exposure and property outside the Nordics and reduced 49% on our U.S. liabilities.
And as a reminder, we have a combined ratio target of 90% for the corporate business in 2024 with a much lower runoff contribution compared to the previous periods.
Turning to Page 11, on average price movements. We continue to monitor inflation development very closely, and work a lot with procurement to mitigate this development and increase the prices to protect our book of business. The macroeconomic situation remains very volatile and therefore, this has been an area of heightened focus for truck for some time.
Price increases in Denmark and Norway in Private and Commercial for the main products are anywhere between 3% to 8%. For Sweden, price increases are somewhat lower, reflecting a generally lower inflation level up until now.
On Page 12, we are showing customer retention, which is generally improving. Retention rates are improving slightly looking at recent developments and overall retention levels remain around 90% for the private and commercial segment. This is very important for us and a key feature of our markets despite these challenging times. And with that, I'll hand it over to you, Barbara.
Thank you very much, Johan. Now please turn to Slide 14 for details on our claims ratio development. The group's underlying claims ratio is improving by 80 basis points Q-on-Q, driven by the commercial and the corporate segment. The private underlying claims ratio is deteriorating by 40 basis points, primarily driven by a spike in travel insurance claims over the summer and a continued good growth in the business, which ordinarily slightly hampers profitability in the first period.
Inflation continues to accelerate, and we continue to work diligently to try and mitigate inflation via our strong procurement agreements as well as adjusting price and monitor the situation carefully. It is important to understand that currently, we experience very volatile times with challenging macroeconomic backdrop. And due to this and the phasing impact of the various moving parts may result in an underlying claims ratio pattern, which subsequently may display a slightly more volatile pattern on a quarterly basis than usual.
Long term, we have no doubt that our work with procurement and the price adjustments will match claims inflation.
Please turn to Slide 15. During Q3, we have seen a high level of large claims, actually almost a double of normally quarterly expectations for the new group, which we expect to be at around DKK 200 million. At the same time, weather claims in Q3 were lower than the guidance for this quarter despite a high number of smaller cloud bursts in August in Denmark in particular. However, we do not assess this to be a changed pattern going forward, but categorize the quarter as statistical randomness.
The discount rate has moved higher in the quarter, and it is now 2.2% compared to 0.8% in Q3 2021. The overall runoff result is 3.9% in the quarter, which is right in the middle of our guidance for runoffs between 3% and 5% in 2024.
On Slide 16, you can see that the expense ratio was 14.1% in the quarter, a stable level, which is in line with our guidance of approximately 14% in 2024.
In Q3 2021, the level was unusually low, but as Morten mentioned previously, this was due to a lack of periodization between quarters at Trygg-Hansa. In general, please do remember that cost synergies will partly be financing investments in business development and in digitalization.
Now please turn to Slide 18, where we will provide more details on our investments. At the end of Q3, Tryg had total invested assets of DKK 67 billion, which are split between a match portfolio of DKK 49 billion, matching the insurance liabilities and a free portfolio of DKK 18 billion. Having finished the conversion of the portfolio from RSA in Q2, the asset allocation is broadly unchanged.
On Slide 19, you can see more details on the overall investment return. The total investment return was minus DKK 348 million, following a quarter where capital markets have been very volatile given the macroeconomic environment and heavy inflationary pressures. Except for property, virtually all asset classes in the free portfolio reported negative results. And as an example, Tryg's equity portfolio was down by 3%.
This quarter, the match portfolio reported a positive result as the yield spread between Danish kroner and euro narrowed slightly, offsetting widening covered bond spreads. Other financial income and expenses included a negative value adjustment of DKK 119 million on a Trygg-Hansa inflation swap, an instrument which we use to protect the long-tail reserves against inflation movements.
Interestingly, long-term inflation expectations in September have fallen in Sweden, which has caused the negative value adjustment. Normalized expectations for this line remains unchanged at around DKK 70 million per quarter or a negative DKK 70 million per quarter, as we have previously disclosed.
On Slide 20, you can see that Tryg reports a solvency ratio of 198 at the end of Q3 compared to 195 at the end of the last quarter. Own funds were almost flat in the quarter, helped somewhat by favorable currency movements, which have offset the negative difference between profits and dividends.
The SCR fell primarily driven by lower market risk and reflecting a lower capital charge for equities as well as lower spread risk in the market module.
On Slide 21, you can see that the debt capacity is basically unchanged compared to previous quarters. Tryg had a Q3 capacity of approximately DKK 1 billion for Tier 1 funds and approximately DKK 600 million Tier 2 funds, but we have no current plans to issue additional debt. You should remember that the capacity is capped by some specific threshold, and hence, we want to avoid having debt, which in the end, does not qualify for solvency purposes.
On Slide 22, we're showing the building blocks of our solvency capital requirements and the SCR stands just above DKK 8 billion at the end of the quarter. The building blocks are shown previously and as expected, the non-life model and market model are the ones that tie up more capital.
Looking at the market risk, the 2 main drivers are the spread risk, which again should not be a surprise considering our large covered bond holding as well as currency risk.
On Slide 23, you can see that the solvency ratio, as mentioned, was DKK 198 million at the end of Q3, slightly higher than in the last quarter. In a historical perspective, this is a robust level for Tryg, but it's important to note that we are at the start of a new journey and in the middle of unprecedented capital markets and macroeconomic turbulence with the highest geopolitical tensions in a long time.
We are increasing the dividend by 48% in Q3, continued to progress on our 5 billion buyback and are pleased to have a solvency ratio that can protect us well at times of turbulence together with a business that continues to produce stable results.
On Slide 24, you can see the solvency ratio sensitivities. There are no particular changes to the solvency ratio sensitivities. And as usual, the main one is towards spread risk and primarily to its covered bonds, which is in particular, Nordic-covered bonds. So no changes compared to previous quarters.
2022 is a year of transition. And if you turn to Slide 25, we have listed a few of the most important things to remember here. In the second box, you can see that the RSA intangibles amortization of approximately DKK 900 million per annum should be added to the Alka intangibles amortization of DKK 120 million per annum. These are noncash items that do not impact our dividend capacity. And we started the amortization at the end of Q2 by the full consolidation of the business in Tryg's numbers.
The third box highlights that a smaller proportion of the restructuring costs will end up in 2023. However, we will have to come back with a precise number at the time of publication of the annual report. With this, I will hand over to Morten to finalize our presentation of today.
Thank you, Barbara. And turning to Slide 26, we reiterate our 2024 targets from the Capital Markets Day, with no changes whatsoever, which leads us to our finish on Slide 27, and we finish, as always, with our favorite quote from John D. Rockefeller. And with that, we are ready to take your questions.
[Operator Instructions] The first question is from the line of Youdish from Autonomous.
The first one is really on pricing. I mean, there seems to be an improvement in the third quarter. So I was wondering how the price increases of 3% to 8%, you talked about compares to claims inflation. And secondly, on the rebalance of your corporate portfolio, I mean, you seem to have made very good progress in cutting exposure in just 1 year. So I mean, could you tell us what's the likely capital benefit when the mix and managers to shift the way you want by 2024, please?
Thanks for those questions. Maybe I'll start with the first one around the 3% to 8% that we are highlighting in the slides. I think the question is, how does this actually mitigate the inflation we are seeing right now. And I think it's important when we are answering this question that we remember the fact that the chart is looking backwards. But when we are repricing at the moment, we are looking forward.
So the pricing we are rolling through in our different books in the different markets right now are based on our expectations on inflation going forward. So I think what you're seeing here in the chart is the historical year-on-year movements on price. But what we are doing with the business today is actually trying to determine what we believe inflation will be in the next 6, 12, 18 months. And through that, we are determining the price increases.
We're not doing that sort of across the board. We are being very specific going through each country through each customer segment through each product category because it does vary quite a lot. Even though energy inflation is going through pretty much all claims cost at the moment, it differs quite a lot. So we will see within property, there are certain elements where installing a new roof for a house has gone up with 10%. Swapping a new windshield for a car has gone up 6%, but there are other categories where we, through our procurement agreements are actually able to mitigate the inflation seeding through into our book. So I mean, the 3 to 8 are historical numbers. Going forward, you will see new numbers. And I think one thing to highlight is also when you're looking at the chart in the deck here, the Swedish numbers has not moved a lot. We haven't seen a lot of inflation in the market or in the Swedish book of our book in Trygg-Hansa. I expect that to change going forward, and we are preparing for that also to readjust our pricing also in the Swedish market.
I guess it's fair to say -- and I think it's fair to say, Youdish, that all of our business segments in all countries in the recent months, have moved from fairly high price increases planned to higher price increases planned. So all business segments, as you say, Johan, with a lot of variation by line of business and by country. But homogeneously across the board, the price increases planned have been moved up further from a high level in the recent months to make sure that we capture the inflation not only through the procurement agreements but also through being conservative in our assumptions on inflation going forward.
For your latter question around the rebalancing of the corporate portfolio and how that actually see through to release of capital, you are, of course, right that over time, if we reduce the volatility on our corporate book, we will inherently also be able to release capital. This doesn't happen overnight, and it will happen gradually over the next 5 to 7 years as we go through the motions of changing the mix and reducing the volatility on the corporate book. So we will get back to that as it comes through the numbers, but you cannot see it from day to day.
But maybe Youdish, we could deliver a bit more data on that going forward because on one hand, you have the premium capital requirement, which falls away almost immediately, but that's the smallest capital requirement. And then, of course, as you say, Johan, the capital requirement, which is the largest, is the one related to the claims reserve, which actually only falls away with the duration of the business in terms of claims. So -- but maybe we should give you a little bit of data on that. I think this quarter is the first time we show you how exposure is reducing. I think we will follow further down that path of showing both exposure reductions, but also capital consequences. So let us get back with more detail on that, Youdish.
The next question is from the line of Asbjørn Mørk from Danske Bank.
I have 3 questions, one relating to the private business and the 40 basis point deterioration in the underlying claims ratio. I guess we're talking something like DKK 25 million of claims, all things equal. Could you just try to split up how much of that is actually travel claims inflation during Q3? And how much would be sort of underlying, so to speak? I mean if you look at your tourist assistance development, I can see that the combined ratio has gone from around 100% in 2019 to 56%. Obviously, there's been a significant improvement. Is that -- is it fair to assume that, that is basically the vast majority of the deterioration? Or is there also a true underlying?
I would say -- thank you for the question, Asbjørn. I would say when it comes to the underlying development, you can say that as we have a growth, which is for the private segment above 7% in the quarter, you will see an impact on the underlying as we know that new business is typically used a little bit more when it comes to the claims than existing business. But on the travel, it's actually quite interesting because now that we're at the end of Q3, we're all focusing on recession, inflation, war in Ukraine, energy, et cetera, et cetera. But if we go back when the quarter started, we were in the middle of the summer holidays where everyone was eager to travel and travel long haul or a more expensive holidays, after 2 years of COVID lockdown. So basically, what we have experienced is that the level of travel claims has been 25% up compared to 2019, which is the first time since COVID broke out that we actually see an increase. Just to put it into perspective, the number of calls and claims that we received was at 42,000 where ordinarily, you would see -- you can say, significantly lower levels.
And I guess also, as you say, Barbara, we can see that it feels like people have been saving up money and energy for the long and expensive journeys. So not only are we up 25% in travel claims compared to pre-COVID, as you said, Barbara, but also we're seeing it is significantly more expensive claims from significantly more expensive travels. So it is a change pattern.
Yes. And then we also saw a number of the airliners being on strike, which also meant that a number of people that have planned to fly on their holidays had to change plans and go in their cars. And what we have seen a pickup on is also having to help people with getting home from travels because their cars were not ready or in a good quality to travel far has also had an impact. So there is a number of different items that actually add up to the impact on travel in this quarter. .
But I guess my question is more that when I look at the tourist assistance insurance, basically, you made DKK 365 million of technical profits here last year. In 2019, that was a little bit of a loss making. So there's been a big swing factor. And considering the, the 40 basis points, which is around DKK 25 million. It just, to me, sounds like travel insurance could be more than the 40 basis points, but it doesn't seem like it's the case.
I think it's fair to say that, that travel is the single largest negative driver in Private lines in the 40 basis points. But I think it's also fair to say that if you look at it more broadly, we've had a couple of months where car inflation repairing has been a little bit higher than planned. We've also seen again that house inflation is a little bit higher. Not big numbers, as you say, Asbjørn, is fairly small numbers really, but we're trying to control underlying with a very, very accurate methodology. And there, we see that travel is the biggest driver, but also that motor and property is a little bit worse than anticipated.
And also one of the reasons why we're saying we're bumping up further the price increases we're carrying out to make 100% certain that we more than handle that, while at the same time realizing that when it is so volatile, there will be slightly more bumps from quarter-to-quarter, but with small numbers. And then longer term, we have zero doubt that we're mitigating at least the inflation.
Okay. Fair enough. On large claims, so you have DKK 392 million here in Q3. You had almost DKK 300 million in Q2. It seems like the trend at the moment, at least is quite well above the DKK 800 million full year guidance range, but it seems like you don't think that is about to change or there's any structural changes. So maybe a comment on that. And also on the large claim or the very high level of large claims in the corporate business in Q3, if you could just enlighten us on where they were placed geographically, that would be nice.
Yes, I think that's a very relevant question because I think everyone is trying to watch is there a certain pattern in the claims that we experienced. And I must just say that, that is not the case. We see that it is claims in all of our markets. And there is no specific trend, so to speak. But you're right, we are above guidance. We have seen Q2 and Q3, which are somewhat higher than the DKK 200 million we guided. But we don't see that as you can say, a long-term trend, but it's just you can say, a matter of coincidence between geographies and the matter of claims that have been raised.
So actually, when we do -- we always do the quarterly reporting, of course, on large claims, Asbjørn, and then we, every month, calculate what we call the baseline risk ratio. So where is the underlying risk moving. And when we look at the underlying risk movement on large claims, it is not moving up. If anything, it is actually moving down because of the exposure changes we're doing. So longer term for steering, the actual trend in the baseline risk rate for large claims is more important, and that is, if anything, moving down.
Okay. Fair enough. Final question from my side on the rising rates and impact on your combined ratio or claims ratio and linking that to the inflation hedge in Trygg-Hansa that you have lost money on in Q3. So how does that actually work this inflation hedge? And I guess the 100 basis point improvement to the claims ratio that you have guided for, for 100 basis point parallel shift to the rising rates, I guess, is an equal effect. I guess there could be an inflationary rise that could offset that partially. But how would that work with the inflation has with that sort of hedge? And do you have similar hedges in the rest of your book. I guess my question is, is the net impact from 100 basis point per shift, is that also 100 basis points in the current inflationary environment?
Yes. I think that there was a lot of questions in one, but I think I'll try and untangle them, Asbjørn, because they are super relevant. If you start by the inflation hedge, this is, of course, related to the long-tailed motor and PA business that we have in Sweden. And bear in mind, it's not current inflation that is impacting the value of the inflation swap. It is the expectations to the long term, in this case, 10-year Swedish inflation. So right now, obviously, we are in a scenario where we see that current inflation is trending upwards. But given the outlook, which points towards more a recession and the slowdown of the macroeconomic environment, the expectation is that longer term, inflationary pressures will go down.
And that is why you see the impact on the particular swap. When you look at the Danish business, we also have something similar related to our workers' comp. But bear in mind that there we have paired historically the accounting on the claims reserves as well as the inflation swap. So there, it will be more or less neutralized. But looking at the Swedish business, we have the 2 separate as will be the standard in the new IFRS 17 accounting. So that's why you will see the impact in the investment result as you see here.
And I guess if you look at it longer term, I think that was also your question, Asbjørn. When we make the logic of how 100 basis points on interest rates impact our total business, that is the short-term run rate impact. There, we don't try to make assumptions on what is expectation for 10- or 15-year inflation, which impacts the swap. So -- because, I think, your guess is as good as ours on what does 10- to 15-year inflation look like. So we don't move -- we don't take that into account for the simple illustration of what is a short-term 100 basis point delta on the interest rate, how does that impact our business? So just to clarify that.
And just coming back to your comment about all other things being equal, that is exactly the simple methodology that we use because it's a parallel shift of interest rates in all countries at the same time. So therefore, even if you see, you can say, different development across the curve, it won't be reflected. So see it as a simple rule of thumb in terms of having a steer of the impact. And bear in mind that it's a combination also on what happens on the insurance business as well as on our investment results.
The next question is from the line of Jakob Brink from Nordea.
Barbara, just coming back to actually what you just answered to Asbjørn's question. I'm not 100% sure I understood the difference between how you do this for Denmark and how you're now doing it for Sweden. So did you say that the positive impact from the inflation heads had hit the combined ratio previously? And -- but from next year, it will be unwound and basically booked in investment income, just like in Sweden. Was that how to understand it? And what lines have you been hedging in Denmark and Norway?
Yes. Thank you, Jakob. Obviously, a very relevant point. And I think one that we will be discussing somewhat also when we go to the new accounting standard in 2023. I think if you look at the way that it has been handled so far, you have the net result impacting you can say, the insurance results in the Danish business. In Sweden, they have been because they also reported as part of a U.K. group. They have had a slightly different approach where they have had the 2 lines, so the claims reserving and the inflation swap on 2 separate lines. And that is the world that we are looking into after IFRS 17. So we have decided not to move, you can say, to our ordinary accounting for 2, 3 quarters this year in order to move it back again in 2023. So that's why I said as I did, that the Swedish, you can say, impact has been slightly different than what we have seen in the Danish accounting for the workers' comp inflation swap that we have in place.
So for next year, the economic reality of the hedge will be unchanged. But reporting-wise, the positive and negative lag will be split. So I guess from a reporting point of view, that that's a little bit less optimal, I guess, but that's the new accounting rule, but the economic reality will be unchanged.
But exactly to your point, Morten, so I guess that's a bit unfortunate, of course, that in a high inflation environment that, that you'll be facing more inflation on the combined ratio, but can't offset it's in the combined ratio. So is there any way you can mitigate this by sort of, I don't know, smoothing it or also should we look at a different -- I guess if you're removing a support, is it only going forward? Or is it also the balance sheet impacts, you'll be removing as support to the combined ratio that will fall away? And hence, lift the whole level? Or how does it work?
I think you can say, obviously, the 2 line items will be more visible, so to speak, than they have been in the past because they have netted out, you can say, for a large proportion. Overall, you can say in our net results, there you should see that there will be a good link between -- but as you point out, there will be volatility in the 2 other lines to a larger degree than what we have seen in the past.
I think what we should do, Jakob, is mainly we should give you more transparency on each of the 2 legs, positive and negative, so that it doesn't disturb your interpretation of the result. And then secondly, we do know that the net impact should get as close to zero as possible, and that is just mainly that is now split over 2 different lines. So I think -- I don't think we should adjust methodology. I think having net close to zero in most periods is what hedging is for. But I think we should adjust the reporting and the transparency in order for you to always see each of the 2 legs positive and negative with clear visibility. .
But just sorry if I -- to keep on going on this one. But the way I understand is that the workers' compensation inflation is lagging, I think, 2 years compared to the current one. So you have obviously seen while the swap -- the inflation swap is mark-to-market. So there you have been earning money recently, while you haven't really felt the pain or the inflation picking up yet. Now you have to remove it, are you then going to remove the buffer that has been built up as well? Or are you allowed to keep that within the technical result or yes.
I would say we haven't sort of built a buffer on the balance sheet as such. What you will have seen is the impact on the P&L, you can say, on the quarterly results. But I think as Morten said, let's give some more clarity on this. I think we already have a newsletter on the implication of our IFRS 17. But having a bigger proportion of our business being long tailed, obviously, this is something that we will be talking a lot more about also in the future. .
And then I guess, overall, if you look at workers' comp, it's quite clear that inflation swap is, of course, one thing being conservative and prudent on reserving. It's another thing and being conservative and prudent on pricing is yet the third component. So I think it's fair to say that we are working with all 3 parameters to make sure that the long-tailed lines in all 3 countries are as stable as possible. And I think generally, we are well equipped to manage that stability.
Okay. Fair enough. My second question is also regarding inflation in the report, you're right, a number of places that given inflation is now picking up in the recent 3 months, there could be more volatility in the underlying combined ratio short term. I don't think you had that quote last quarter. So what has changed? Is it just that you're actually seeing something? Or is it more sort of precautionary measure?
I think, Jakob, on that point, none of us have been expecting an acceleration of the inflation levels to the degree that we have seen now for a number of quarters. I think as Morten was alluding to before and Johan as well, when we price, we are looking forward in terms of what do we expect on inflation looking ahead, and must simply say that what we have experienced in the last couple of quarters have been more than you have seen in 4 decades basically. So yes, we do increase prices. We do have very strong procurement agreements that take, you can say, a large proportion of the pressures in our results. But given the development, we're just flagging that, it may be that quarter-to-quarter, you will not see, you can say, the flat or positive development that you've been seeing before. But over time, obviously, that link will strongly be there.
I think to your question, Jakob, is it things we have seen? Or is it things we're expecting to see? I guess if you look at Private lines, we have seen a bit more inflation in motor claims. We have repairs. We have seen a bit more inflation in house repairs. Honestly, not big numbers, but we have seen a bit in those 2 areas. But when you then look through the front window and we know that we need to try to price right for the next 12 to 24 months, trying to predict for how long does an energy crisis continue. How much will be the impact of that energy crisis to salary increases? How -- in which areas will the repair costs continue to increase? We're basically just saying that, that space is more volatile than before and harder to predict than before. So what we try to do is to say we push harder on the procurement programs. We increased prices even more than we thought we were going to do. And at the same time, we make sure that we are not surprised if we have 1 or 2 quarters where underlying is a bit more bumpy.
And honestly, I think 40 basis points negative for private is a bit -- and we're very pleased that the group then improves through corporate and commercial. So the whole group actually improved 0.8 basis points. So I think actually, we are in a quite fortunate situation compared to most other companies. We just like to be able to control it with very, very precise and diligent steering. And I guess we're just saying that the current volatility, both what we have seen and what we could fear to see from the surrounding world is a bit more volatile than we'd like and makes the precision of the steering short term a bit weaker. But longer term, we have zero doubt that we will more than mitigate that.
Okay. Fair enough. And my last question, just a small one. In the investment slide or -- sorry, SCR walk slide. You mentioned -- and Barbara, you mentioned that as well a lower spread risk. What does that exactly mean? .
I think it was a narrowing of the spread between Danish kroner and euro that we have seen in the current quarter. So that's what we are referring to. .
But you're -- okay, because you write lower spread risk and then DKK, but so it's all related to FX, is that -- I was just trying to estimate it going forward, and I thought most spreads had [ widened ] quite a lot this quarter.
Yes. Yes, I have to come back on that one. I'm not really sure where you're pointing to it, Jakob. So leave that with me, and I'll come back to you later today.
The next question is from the line of Tryfonas Spyrou from Berenberg.
I just had a question on the underlying loss ratio. You mentioned that the full impact of price increases will likely take 12 to sort of 18 months to [indiscernible]. I was just wondering how we should think about the dynamics of the underlying group loss ratio going forward? Obviously, given the majority of the improvement now is coming from Corporate pilot is lagging behind, do you potentially see some acceleration in your managed inflation in line with your expectations? And overall, related to -- I was wondering how we should start seeing about the overall improvement, again, pointing about the synergies that will be coming through from you appreciate this will be quite substantial next year. So maybe help us impact how should we think about the dynamics going forward next year.
So let me start and then you can add on the synergies, Johan. I think it's fair to say that we're very fortunate in the sense that we started price increases earlier than most peers. I think we've done procurement better than most peers, and now we're increasing prices even further. And then, of course, we have the synergies that will give us tailwinds on the underlying development as well, as well as the improvement measures we've been taking on Corporate and Commercial lines.
So I think when we look at the underlying improvement of 80 basis points in this quarter, that is a level we expect to continue, and we're pleased to see that commercial and corporate pulls most of that weight. I think longer term, we'll start to see private contributing again. And the synergies will, of course, as they grow stronger and larger give us more tailwind into that number. But perhaps a comment on the synergies, Johan?
Yes, just a comment on that. You are mentioning the fact that the synergies will sort of become meaningful and sizable in the next few years, which I absolutely agree with you on, especially procurement synergies and claims synergies will help support the underlying claims ratio development. That's -- if you add that up, that's more than 1/3 of the total synergy target of EUR 900 million that will absolutely help to support the improvement of underlying going forward. This particular quarter, it's not a sizable part of the genesis, but going forward, it will grow, and we will also report that ongoingly as to where it flows.
The next question is from the line of Jimmy Fan from UBS.
I have 3, please. So first is a follow-up on the large claims topic. I mean, the commercial and corporate as seen quite high level of large losses. I just wanted to understand what are the key drivers for it. And is it because of inflation that has inflated some loss above your large loss threshold? And you also mentioned that you expected large loss actually is going to go down in the future or just because of bad luck?
Yes. I think it's important to say that when we have the large losses and how -- or where they happen, it's not something that we can put into a model. So you can call it bad luck or a coincidence of timing, yes, stochastic timing. But it is simply, you can say, a number of events happening in our different geographies at the same time. So I wouldn't read more into it than it is -- you can say, a quarter where we have a higher-than-normal amount of large claims.
And then, of course, large claims will always be a stochastic question, and that is the case for this quarter as well. But I think structurally, we have a lot of influence on the likelihood of large claims. And of course, when we are systematically pushing up the size of our retail business, Private and Commercial, which will at the end of the strategy period, get close to 90% of our total book, where historically it was more like 3/4 of the total book, then of course, we have 90% of our total book in a non-large claim exposed area, apart from, of course, the higher end of commercial. And when at the same time, as Johan showed, we're reducing the most volatile elements like international property and international liability and systematically pulling down the exposure, then we are systematically pulling down the likelihood of large claims going forward. And that is, I think, the longer-term message when it comes to large claims. But you can never take away the stochastics of whatever happens to a single quarter in large claims, but we can systematically reduce likelihood, which we are doing.
And another follow-up on the inflation swap. Can you give a bit of color on the size of the reserves that these inflation swaps are related to? And perhaps could you also give a bit of color on the impact on the ICR from taking on these inflation swaps.
Yes. I think I can push to the fact that the inflation for swap we have in place is related to our claims reserves on the PA and the motor business in the Swedish business. But I won't sort of give another percentage or a number in terms of the size of the inflation swap as such. When it comes to the capital impact on the inflation swaps in place, those have already been factored in, you can say, both in -- you can say, Tryg classic when it comes to the inflation swaps that we have related to the workers' comps that we mentioned as well as the impact of the new inflation swap that follows with the Trygg-Hansa business.
I guess it's fair to say sort of structurally that given how much retail business we have, the vast majority of our retail business has a duration of less than 1 year. So the longer tail lines where we do use the inflation swaps, of course, the longer tail lines like workers' comp in Denmark and Norway and like PA, but also MTPL on motor in Sweden. So of course, a very large proportion of our total reserves sits in those categories because those are the longer duration lines by definition. And I guess you can see the size of those lines in our annual report, if you look at the line of business split.
Is it fair to say because of the inflation swaps that your solvency ratio is not much sensitive to changes in long-term inflation assumptions on your reserves? .
If what you're asking is, is there a positive SFCR impact from the fact that we have less net exposure to long-term inflation, then the answer is yes. And because we've had the swaps in place for quite a while, that positive impact has already been factored in, as you said, Barbara. .
And my last question is around the solvency ratio. I think if you are not paying a special dividend this year and the solvency ratio is very likely to be shoot above 200% over the course of next year. I just wonder at what stage will you give yourself a solvency ratio targets? .
I think internally, we do have, you can say, a number of things that we are weighing out towards each other. So we're looking at how is the business performing, how do we invest in the business, as Morten was saying, how do we actually take out volatility and thereby release capital in certain parts of our business. That is a journey that doesn't happen overnight. But all these factors we tie in when we steer towards what we believe is the right level of solvency for us.
I think it's fair to say that 2022 is a year of transition. You see a year where we have only 3 quarters of consolidated results. In the first quarter, we had equity accounting for the new business. We have now got the full results, but we also have integration and restructuring costs that impact us to a large degree, this year, et cetera, et cetera. So therefore, 2022 is a year, I would probably call a little bit odd or particular compared to usual. Looking at 2023, we should have a year which is far more back to normal where you don't have these large items of 1-year impact. And therefore, you can say I would be looking at our ordinary dividend policy and how we envisage to distribute dividends to our shareholders as we have been doing in the past as well.
I guess, it's fair to say you shouldn't expect us to give a solvency target because we don't want to work with the solvency target. What you can say is that being at 198 now is clearly very positive and a lot higher than what we were, for instance, after the Alka acquisition. So that is very comfortable, getting to above 200 would be very comfortable as well. So of course, that gives us new optionality when it comes to our payout, which is, of course, very positive. And if we gave you a solvency ratio target, then all of a sudden, we made solvency priority #1. But for us, having high payouts, high dividends and generally high distribution to our shareholders is a much bigger priority number one, than having a specific solvency ratio target. So you won't get that, not next year either. But we are at a high and very positive position, and I think that is a great starting point.
[Operator Instructions] Next question is from the line of [indiscernible] from Carnegie.
I actually only have one short question left, which we have been discussing quite a bit already. But in terms of the price increases due to inflation that you had already put in place. I'm just wondering how has the customer acceptance been for these price increases so far? Because everyone just said all right, pay a higher premium? Or have you seen some pushback? And how do you expect this going forward as well?
I think that's a very valid point, especially at times like this where we are pushing through quite significant price increases to cater for inflation. I think the best way to gauge this is actually looking at the retention rates or the renewal rates of our customer bases. And if you look at the retention rates also in this presentation, you're seeing that the renewal rates are actually very, very stable, even increasing in certain parts of our business, hovering for private and commercial around the 90% mark, where they've been for quite a while. So I think it's fair to say that the customers are accepting the price increases. I think it's right now on the headlines of all newspapers and all TV shows you open up. So all customers understand the necessity of going through price increases. And I guess it gives us some indication that this is not just a sort thing, it's also a market thing. So for now, we are quite comfortable that customers are accepting the price increases as they are flowing through.
I guess it's also fair to say, [ Gustaf ], if you look at other geographies than Scandinavia, there is historical empirical data to suggest that in periods of financial turbulence or crisis, some people start to dump some of their insurances and ensure themselves less. But we've seen Scandinavia a strong tendency that both people understand the price increases, as you say, Johan, but also that they keep the insurances that they have. And actually, if you look at just the most recent quarter, actually, our top line growth, all to have declined because they're so fewer new cars to ensure. But actually, our ability has been to further increase the number of products per customer in the recent quarter.
So people actually ensure more things now than a quarter ago despite the financial pressure they're getting from higher energy prices on certainty, et cetera. So price increases are being accepted. Retention is high and actually, the number of product per customer is increasing despite more financial pressure in the families out there.
The next question is from the line of Jan Erik from ABG.
Yes. I have 2 questions. The first one is regarding your targets, you repeated your 2024 targets of below 82% or equal to [indiscernible] combined ratio. And is that something you have to change when IFRS 17 is coming up, as you discussed with Jakob's questions regarding the combined ratio volatility as well as how the financial income impact will change this? Or was the interest rates so low when you did this? So the T2 and the technical reserve is actually where you would think it should also be in 2024. That's my first question. .
Okay. I think if we start backwards, looking at the interest rate movements since we launched the Capital Markets Day, it's obvious that they have moved a bit, where they will be in 2024 is a good question. I think what we focus on is that we have set out a target for our insurance business to deliver a technical result between DKK 7 billion to DKK 7.4 billion. And we don't know basically what will happen with discounting and so forth in the meantime. So you should not -- because of the current movements in interest rate, expect us to go out and change anything to our guidance on the technical result at this point in time. When it comes to the implementation of IFRS 17, I would guide you to look at the newsletter we have already posted earlier in the year regarding how our results will be impacted. For now, we are not changing any of our targets, and we, of course, need to revisit that. But my expectation is not that we will have any meaningful changes in the short term. But let's leave that for 2023, where we will be actually using the new accounting standard.
So the volatility in the combined ratio will not increase or will it increase as you pointed to?
Not as a starting point. .
Okay. When it comes to the inflation in Sweden, which you mentioned was picking up for now, but you sort of haven't seen maybe in the pricing so far. How much are you pushing the Swedish pricing up versus expected inflation?
I think, first of all, the reason why we haven't had the need to do significant price increase in Sweden has been because the Sweden has somewhat has its own inflation run towards Denmark and Norway. We haven't seen the inflation in the market the same way we have. Going forward, we will adjust our prices accordingly, but there's no -- not one fixed number for price increases in Sweden going forward. It varies quite a lot from product category to product category. And we are seeing quite a big variance also between the private segment and the Commercial segment. So it'll be ranging anywhere between 0% and 10%, depending on the product categories we are going through.
And coming back to, I think, more than Barbara's point earlier around the predictability of inflation going forward. We need to be careful making sure we are actually proactive and taking enough pricing to cater for future inflation. So we will go through significant price increases in the Swedish market, but there's not one specific number, to be honest. I wish it was that easy.
And then I guess, Jan Erik, when we -- when looking at the baseline risk ratios for Trygg-Hansa in Sweden, it's quite clear that they are moving in the right direction, both for Commercial lines and for Private lines so that for a while, price increases have been slightly higher than inflation. And then now we think that inflation will pick up also in Sweden. So we are at a good spot where we are today in Sweden. But we want to make sure that the price increases we do now are high enough to keep us in a good spot. And I think there's no reason to think that the Swedish market will be an Ireland away from the rest of Europe when it comes to inflation. It just seems that inflation hits the Swedish market later than what we're seeing in Denmark and Norway, and we're making sure that we're prepared for that with the price increases we're carrying out.
Great. Can I just have one more question and that is the property return. You have sort of a bigger book than the other peers in the Nordics when it comes to property. How have you sort of where is the valuation been on that book this quarter? And what do you think going forward given the change in interest rates and change in valuation for a property, especially in Sweden, you probably don't have that much in Sweden. But what do you have in Denmark and what you experienced so far? .
Yes. I think if you look at the exposure that we're having, it is diversified both when it comes to a geographic point of view, but also when it comes to the underlying properties. Bear in mind also that we invest into, you can say, certain indices or you can say, funds in global property markets. For instance, in the U.S., you would also see that the properties that we have invested in have a clear inflation link. So you will have an adjustment in terms of the value on that following the inflation that you experience in the economy.
I would actually say, if you look at the Q2 presentation, we tried to give you a little bit more details in terms of what are the characteristics of our property book in the investments exactly to provide you with further knowledge of what it is we have on our books.
Perfect. So you will not do any changes and give a decent return every quarter on that book? .
I think we have been quite happy with the returns of the property part in our portfolio year-to-date. If you look at this quarter, as an example, we had a positive yield of around 3.3% on our property, whereas all other assets were down in the markets that we have experienced. So I think we like to have a diversified asset allocation on our free portfolio and having properties as part of these assets is something that we actually see as being quite positive. .
The next question is from the line of Vinit Malhotra.
This is Vinit from Mediobanca. Great to be back on the call again. So very, very quick ones. 2 quick ones, please. One is the -- just looking at Slide 5, again, margins. And I'm just curious that you were underlying, obviously, including the synergy from RSA, which probably is a bulk of that -- how do you think about the underlying excluding the synergies? Because obviously, there's a business which is running anyway, and that needs to improve as well? And just curious to hear your thoughts if you think of that metric, maybe more or less important?
And second question is on the bonus, which is now 8% as per Slide 4 and was 5% last year. Is this becoming more -- I mean, I can see why it's increased because our larger group. But also, is that now more awareness? Is it helping the retention, helping this fight against inflation? Just any comments would be helpful.
I think if I start with the bonus question, I think this is a bonus, which is returned from our majority shareholder. They have been paying the bonus to the customers of Tryg since 2016. It has been around the level of 8%. But last year, it was slightly smaller down to 5%. Given they obviously also supported the rights issue that we did to finance the acquisition of RSA. It has nothing to do. The level is not set with a link back to how large the group is, but it is something where they look at their value creation in terms of dividends they receive for us -- from us. Funds, they pay out in charitable activities across the Danish society and so forth. And obviously, it is important that it is being paid to our customers, and it does actually help the retention, as you also point out. But not linked to the size of the group, it's linked to the activities of the foundation themselves. And as I said, historically, it's been around the 8% like this year.
And I guess we can argue that -- it's very positive to have the bonus in a period like this with the RSA acquisition and the dividend trajectory to roughly double our dividends. The Tryg Foundation will have an even bigger bonus paying ability than before, which is really positive. And it's really positive, as you said, by our we're back to the 8% and of course, with the period of having to adjust prices in a period of turbulence. Those will be very supportive to retention, and it will be very supportive to the reaction on price increases, which we're also seeing in the numbers. So I think overall, that is a very positive contribution to our ability to have a strong performance through this rather turbulent period.
And then if we go to your initial question around how the synergies are actually impacting and affecting our underlying, I think it's fair to say that for the quarter, we have DKK 97 million worth of synergies. If you break it up, around half of that goes into the cost levels and DKK 18 million and DKK 13 million comes from procurement claims. They are essentially the numbers that will support our underlying claims ratio development. So it's less than 1/3 of the total synergies for this particular quarter. But going forward, you're right, we will -- all of us expect to see a more meaningful contribution from the synergies into the underlying claims ratio.
Yes, I was more curious that shouldn't you be looking at underlying building any synergies because the business exist anyway. So I'm just curious then you ever look at that number, excluding. But otherwise, it would be more flattish. I mean interest rates have moved, not need to move. There's not much left.
I think if you do the math, Vinit, for this quarter, it wouldn't be flat if you took out the claims synergies. So I think -- if you take the numbers that Johan just pointed to and the 80 basis points, it would clearly not be flat if you isolate it for synergies. But of course, that topic becomes even more important as we move into '23 and '24. And I think we'll make sure that we give a perspective on the synergies relative to underlying the synergies relative to the cost development as well. But bear in mind that we've also said that if you look at the acquired business, particularly in Sweden, it has a combined rate of 76% before synergies. And actually, we're seeing that historically, the growth in Sweden in Trygg-Hansa has been lower than we would like. .
So at a combined ratio in this quarter of 76% in Sweden, it makes sense to invest in product innovation, in distribution, in branding and cross-selling. In some cases, also in some of the digital experiences because with that, we can improve growth further at a very attractive combined ratio, which will create a lot of value to our shareholders, which does mean that some of the synergies, we will actually reinvest in creating a bigger version of Trygg-Hansa in Sweden. So we should just make sure when we communicate underlying and synergies and the investments in creating growth in Sweden that we talk about all 3 and don't make the world too simple. But let's make sure for '23 and '24, we give you transparency or more insight into some of those 3 categories at the same time. And let's make sure when we look at the numbers for this quarter, that if you take out the synergies that comes from procurement and claims and isolate them out of the 0.8, the remaining part of underlying is not flat. So -- but you can do the math on that.
[Operator Instructions] The last question is from Faizan Lakhani from HSBC.
This is Faizan calling from HSBC. Last question is sort of just a follow-up to what you've already discussed. It feels like you're fairly negative on impacting potential inflation on your business. I know you mentioned that [indiscernible] maybe some volatility underlying development. But my basic understanding is if your underlying misses in 1 quarter, to correct that it would take 4 quarters to correct that given the fact that if you write this now, it would take 12 months for it to earn through? Or have I got that wrong?
My second question is on the Swedish price increases of 1.5%. I understand inflation is fairly benign that, but I would have assumed that your underlying inflation assumption in household Sweden will be sort of 3% to 5% and up by the level of price increase would have been anyway. The fact that it's well below, is that due to competitive pressures or risk mix, what's driving that?
And the third one is on the inflation swap. And I appreciate you've answered this already, but going forward under IFRS 17 would be the case that if your long-term inflation assumption change based on your inflation swap would you see greater volatility on your underwriting results, i.e., would you have to potentially do reserve strengthening even though economically making different.
So let me start with your first question. I think your view on timing is roughly right. You may argue that if we decide to make a price change today, it takes 12 months for all customers to have a renewal date and get that higher price offered. And then it takes another 12 months to earn the full accounting impact of that. So from birth to grave, that's 24 months. And then, of course, you start to earn the impact from month 12 and onwards. So that is roughly the timing if you get things completely wrong. I think the likelihood that we get inflation completely wrong is very close to 0%. We do this very diligently. We do it in a great detail in each country and in each product category.
We now even have inflation committees in each country, digging into this at greater detail than ever before. So if you look at the broader picture, there's zero doubt that we will get that right. And if we have doubt, then we do bigger price increases than we think is necessary because we don't want to be behind the curve. But we're also saying is that within quarters, all of a sudden, there's 1 or 2 months where inflation and motor for a particular repair makes a jump. And that is just the smaller volatilities that could hit the finer detail of the underlying for a specific quarter. But even having seen that in Q3, the group underlying still improved 0.8. So we will continue to improve the underlying. We are making sure that the inflation is more than matched with pricing to be on the cautious side. We're just saying that volatility quarter-by-quarter is a bit higher than usual. So that's the only thing you should read into that message and nothing else.
As for your second point around Sweden, I think you're referring to the 1.5% price increase year-on-year in Sweden house. And you're right, historically, up until now, Sweden has had its own run in terms of inflation compared to Denmark and Norway. That being said, you're also absolutely right that when we look ahead, we are seeing more inflation seeding into the book of Sweden, and we will expect higher price increases going forward also in house in Sweden. So we do expect that. So rest assured that we will cater for the inflation that is also picking up in Sweden.
And I guess in between the graph and what you're saying, Johan is also the price increases we've already carried out, but haven't earned yet. So they're not in the graph yet. And they're clearly higher than what you see in the graph.
It goes to your last question on the inflation swap and whether the fact that we will be moving to IFRS 17 will require a different reserving approach. The answer to that is, no. We're doing our capital reserving, looking at, you can say, the characteristics of our lines of business and claims patterns and so forth. So it will not have an impact that we change our accounting in order to drive that through the reserving.
My question on the last one is more of the fact that if the inflation swap improved so would you see a counter impact on the combined ratio where you have to maybe release lower reserve releases, assuming, let's say, if you had a 100 basis point movement in long-term claims, Sweden, for example.
I think looking ahead, obviously, when it comes to the new accounting standard, then you won't see the benefit of the inflation swap stand-alone in the combined.
But you'd see the impact on the reserve release?
The reserve releases will not be impacted by how the valuation of the inflation swap as such is.
Okay. So there's a mismatch in the way you think about the movement in inflation on the swap versus your own sort of...
No. I think if you refer to the way that we look at our reserving in general, taking into the models and looking at the claims patterns, there, obviously, the assumptions will be the same, but it's not that you will go in and directly look at what is the impact on the swap and tie that to whether you will release more reserves or less. I think those are to be seen stand-alone, but obviously, the movement in inflation and the assumptions that go into the modeling of the claims reserving will be aligned with what the market chose.
The run-off claims will be decided on whether the reserving of each claim has been slightly higher than needed, which it usually or almost always is in the longer-tail lines. If there are changes to the more fundamental assumptions then you make a one-off adjustment to reserves catering for that macro change assumption, either it's helped by the swap or it's not helped by the swap. That has always been the case on workers' comp and PA and longer MTPL in Sweden. That's why we keep bigger buffer or security measures on the reserving side for those lines to be able to absorb those adjustments when needed. And that has been the case for many years, and that's why we choose to be more cautious on the reserving, on those lines to be able to capture such bigger adjustments.
As there are no more questions at this moment, I will hand it back to the speakers for any closing remarks.
Thank you. Thank you, everybody, for all your very good questions. Investor Relations is obviously around today in the next few days, if you have any follow-up, and then we're also having different roadshows. Thanks a lot, and we'll speak to you soon.