Gjensidige Forsikring ASA

OSE:GJF

Earnings Call Transcript 2019-Q1

[Operator]

Good day, and welcome to Gjensidige Q1 2019 Results Presentation. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Mitra Hagen Negård, Head of IR. Please go ahead, ma'am.

[Mitra Hagen Negård, Head of Investor Relations]

Thank you. Good morning, everyone, and welcome to the first quarter presentation of Gjensidige. My name is Mitra Negård, and I'm Head of Investor Relations.As always, we will start with our CEO, Helge Leiro Baastad, who will run through the highlights of the quarter; followed by our CFO, Jostein Amdal, who will go through the numbers in more detail. And we have plenty of time for Q&A after the session. Helge, please?

[Helge Leiro Baastad, Chief Executive Officer]

Thank you, Mitra. Good morning and welcome, everyone. The first quarter in 2019 was characterized by more favorable weather conditions in Norway compared to the first quarter 2018 as well as strong financial markets driving a significant improvement in results.Starting with a few comments on our first quarter results on Page 2. We generated a profit before tax of just about NOK 3 billion. This is including the gain of the sale of Gjensidige Bank of NOK 1.6 billion. The group's underwriting results for the quarter amounted to NOK 798 million, corresponding to a combined ratio of 86.6%, significantly better than the same quarter last year. The improvement was mainly due to more favorable weather conditions in Norway compared with a harsh first quarter last year. Our operations outside Norway showed a mixed picture with progress in underlying results in Denmark and Sweden, while the Baltics were impacted by demanding weather conditions in the first quarter. And our cost -- strong cost discipline resulted in a decline in the cost ratio. The strong development in the capital markets during the quarter drove returns of NOK 682 million on our investment portfolio. Annualized return on equity at 49.6% was significantly impacted by the gain on the sale of the bank. Adjusted for the transaction, the return was 21.6%. Jostein will -- afterwards, will work with more detailed comments on the results. Then turning to Page 3. I would like to elaborate on the operational status in a few key areas. I will start with our motor insurance line in Norway. We have increased prices to counter increased claims inflation, as discussed earlier, and we believe the other players face similar claims inflation and will continue to act accordingly. Our disciplined and focused efforts have proven effective. With yet another promising quarter behind us, we now see that we have reached the turning point for profitability, and we expect to see lower underlying loss ratio for this insurance line from the second quarter. We aim at gradually improving further from what's already a good profitability level, although we don't expect to return to historical peak levels.We are not surprised to see lower new sales coupled with slightly high churn. This is a natural consequence of our significant price increases and the expected initial impact from the announced termination of the NITO partner agreement effective from the 1st of January. We had been prepared for this as we have had a clear priority to improve profitability. Most of the customers we lose are the least attractive ones, meaning the overall portfolio quality is gradually improving. Our retention numbers for the Private segment, although slightly down from the last quarter, are still at the very high level. The upcoming payment of customer dividend from the Gjensidige Foundation will continue to serve as a strong retention tool, and we are convinced that our attractive product offering will continue to secure our strong position in the Norwegian market. We have superior brands with the highest brand recognition among the insurance companies in Norway.Thanks to effective adjustments of terms, including the bonus program, we see a somewhat lower increase in risk premium, currently expected at 45% going forward. Competition is fierce and we need to take that into account in our action, ensuring an optimal balance between profitability improvements and volume. We will continue with differentiated and analytical price increases beyond expected claims inflation. We are very encouraged by the development for our Commercial lines in Norway too, where we have significant price increases and seen solid renewals, proving our strong position. We have a high-quality portfolio, with the majority consisting of SME customers where their reactions -- relations are driven through direct channels. Our operations outside Norway are progressing according to plan, and we are confident in our ambition of an underwriting result of NOK 750 million ex run-off from these operations in 2022. We will continue implementing profit-enhancing measures, improving our cost structure and increasing efficiency. We need to strengthen our position in these markets and increase customer loyalty, and we are getting ready to take part in the market growth both organically and through acquisitions given the right targets at the right price.Then turning to Page 4. We have now completed the sale of Gjensidige Bank to Nordea, laying the ground for enhanced focus on our core operations and with proceeds of NOK 5.6 billion providing us with increased financial flexibility. We had kicked off collaboration with Nordea, targeting a broad customer base in Norway. With limited customer overlap, we see a significant sales potential for both parties.We are very encouraged by the strong start to this partnership based on 2 strong brands and compatible [ cultures ] Together, we will strengthen our presence in key customer processes and approach our customers with relevant, broad and attractive product offerings. Both Nordea and we have strong digital ambitions, and we will work towards providing seamless integrated digital solutions for our customers. Our organizations have prepared well for this journey. The mandates are clear, ensuring effective execution. There are clear referral procedures, and we have -- are also in the process of implementing co-locations at selected banks. Then turning to Page 5. A few words on our operational targets which we announced late last year. Customer satisfaction is core to our business, and we are very pleased to be at such a high level. This is also reflected in our strong retention figures in Norway, and several measures shall lift our retention numbers outside Norway over time.We are also focusing on enhancing sales effectiveness, much of this is related to increasing digital interaction with our customers. It is all about simplification. As an example, we have recently launched the digital sale solution for pension plans for Commercial customers, enabling both offering and signing on our digital platform. Automation of tariffs is an important catalyst for improved efficiency and profitability. Our aim is full automation of all relevant tariffs by 2022. Initially, we have focused on high-frequency products such as health insurance, and we are now working on motor. This stands at around 3% currently, and we'll continue to include more product lines going forward.We strive to continuously improve our tools and introduce features, which will motivate our customers to use the digital solutions for claims reporting as well. So far, 64% of claims in Norway are reported online. We have recently broadened our solutions to include children's insurance, accident and disability, completing the range of personal line insurances. Our ambitions don't stop at the reporting process but rather extend into straight-through claims processing. So far, we have reached almost 14% of all claims in Norway. Efforts are underway to increase automation further. We are working to reduce claims costs, in short, through use of technology in combination with analytical insight. We will be reporting on this on an annual basis. And we have an ambition to reduce our own and claims-related carbon intensity. We are in the process of finalizing the method for establishing a 0 point for CO2 emissions, and we'll report status on an annual basis. And we are very encouraged by once again ranking #1 in the financial sector in Norway in the Sustainable Brand Index study.So with that, I will leave the words to Jostein to present the first quarter results in more detail.

[Jostein Amdal, Executive VP & CFO]

Thank you, Helge, and good morning, everybody. I will start on Page 7. We delivered a profit before tax of NOK 3 billion in the first quarter. This result includes the gain on the sale of Gjensidige Bank of NOK 1.6 billion. But even adjusted for this, our results are considerably higher than in Q1 last year, driven by both our underwriting business and investment activities. The underwriting result improved due to a decline in the underlying frequency loss ratio and lower large losses and with more favorable weather conditions in Norway being the main driver for this. I am particularly satisfied with the development in the Commercial segment, proving our strong position and pricing power in Norway. Results from the investment activities reflected the rebound in the capital markets. And our Pension business saw yet another strong quarter and a significant increase in earnings compared with Q1 '18.Turning to Page 8. Earned premiums are up 1.2% or 1.3% if you adjust the currency effects. They continued picking through significant price increases in Norway, in particular from motor and property and larger accounts in the Commercial segment. The latter is evident in the 8.6% premium increase for the Commercial segment, while increase for the private insurance portfolio was, as Helge mentioned, somewhat dampened by lower new sales and higher churn. We have significant ambitions for operations outside of Norway. The development in premiums for Denmark, Sweden and the Baltics reflects the considerable pricing measures we are putting through in these markets to improve portfolio quality. In addition, in Sweden, one large and profitable account was terminated. It's been for 2.4 percentage points of the fall in premium volume. Our efforts are proving effective, enabling a gradual shift in our focus towards growth, in particular for the Baltics.Now turning over to Page 9. The loss ratio decreased by 6 percentage points to 71.7% primarily due to the improvement in the underlying frequency loss ratio and lower large losses. The harsh weather conditions in Norway in Q1 last year drove up losses for motor and property. With more favorable weather this year, we saw losses coming down. Underlying profitability from motor in Norway, adjusted for weather effects, was lower year-on-year, reflecting the deteriorating trend seen throughout 2018. As Helge mentioned, we reached a turning point for the 12-month rolling underlying loss ratio in Q1. Having reached this point, we expect profitability for this insurance line to gradually improve from the second quarter. Underlying profitability for private property in Norway, adjusted for weather effects in 2018, was also lower year-on-year. We also recorded lower frequency loss ratios in Denmark and Sweden. Less favorable weather conditions drove underlying frequency loss ratio up in the Baltics. Now let's turn to Page 10. We recorded NOK 882 million in operating expenses in the quarter, corresponding to a cost ratio of 14.9% and 14.1%, excluding the Baltics. Both were down 0.4 percentage points from Q1 last year. The improvement is a result of continued cost discipline across the whole group and our focus on simplification of processes, automation of internal [ processes ] and further digitalization. We started the process of developing and configuring the new core IT system this quarter, starting with Denmark. As mentioned earlier, the investment is expected to be handled within the current cost ratio target and will be made step-by-step, starting with Denmark, then Sweden and finally Norway.A few comments on our Pension operation on Slide 11. The strong momentum for our Pension business continued into the first quarter. The pretax profit came in -- came to NOK 53 million and annualized return rose to 20.6%. The rise in profit from Q1 last year affects growth in our customer base, strong operational performance and an increase in assets under management. Results are positively impacted by gains from divestments of loans and receivables. Assets under management amounted to NOK 34 billion at the end of the quarter. For the year and last year, as much as 70% of the customers in our Pension business were general insurance customers as well.Moving on to the investment portfolio on Page 12. The investment portfolio yielded a return of 1.2% in the quarter, reflecting a significant rebound in the capital markets. The total investment portfolio amounted to NOK 60 billion at the end of the quarter, including proceeds from the sale of Gjensidige Bank, which were added to the free portfolio during the quarter. The match portfolio yielded a positive return of 0.7% of the portfolio of NOK 33.8 billion. A large part of the match portfolio consists of bonds at amortized cost, which yield a return of 0.9%. The running yield in this portfolio was 3.7% at the end of the quarter, and the average reinvestment rate for the quarter was close to 3.6%. Unrealized excess value amounted to approximately NOK 0.9 billion. The free portfolio, which amounts to NOK 26 billion, yielded a return of 2.1% in the quarter. The strong development in the equity markets and lower interest rates in credit spreads were the main drivers of the positive returns. The proceeds from the sale of Gjensidige Bank is in our free portfolio. As a reminder, please note that payment of dividends in April and taxes during the current quarter, all else equal, reducing the size of the investment portfolio to approximately NOK 4.5 billion.Looking at our capital position on Page 13. Our capital position is very strong. The approved internal model gives a solvency margin of 248%, up from 169% last quarter; while our own partial internal model gives a solvency margin of 295%. The increase in the solvency margins are mainly a result of the sale of Gjensidige Bank. Retained earnings also contributed positively. Market risk is up from the last quarter following the investment of proceeds from the sale of the bank. Capital requirement for life insurance is also slightly up as a result of growth in the existing portfolio. There have been only minor changes in the capital requirements from long life and health underwriting risks. The solvency margins are all well above our target range of 135% to 200%. As announced earlier, we will give ourselves some time to explore different M&A opportunities. Hence, we did not plan for any -- paying out any special dividends during 2019. We are firmly committed to deliver attractive returns to our shareholders. I will then hand the word back to Helge.

[Helge Leiro Baastad, Chief Executive Officer]

Thank you, Jostein. Then to sum up on Page 14. The first quarter of 2019 was characterized by more favorable weather conditions in Norway and strong financial markets, resulting in a significant improvement in our results. The sale of Gjensidige Bank generated significant proceeds as well as gains of NOK 1.6 billion booked in the quarter. We continued to pursue significant price increases across all segments, which, together with reunderwriting and efficiency measures, are intended to improve underlying profitability. We are particularly pleased in the development in the Commercial segment, reflecting a significantly harder market. We are very pleased to see that profitability adjusted for weather effects of the motor insurance line in Norway reached a turning point during the quarter, paving the way for lower underwriting loss ratio for this insurance line from the second quarter. Our collaboration with Nordea is off to a strong start, and we look forward to continue this path to secure strong customer retention and drive further growth. We are strongly committed to increase profits from our operations outside Norway, expecting the results to become increasingly evident towards 2022 as we implement measures targeting both the top line and operational efficiency. And finally, with the proceeds from the bank on our books, we are well positioned to act upon potential attractive growth opportunities. I will then open up for the Q&A session. Thank you.

[Mitra Hagen Negård, Head of Investor Relations]

Operator, can you open the line for questions, please?

[Operator]

[Operator Instructions] We'll now take our first question from Jonny Urwin of UBS.

[Jonathan Peter Phillip Urwin, Director and Equity Research Insurance Analyst]

Just 2 for me, please. So firstly, should we interpret that the ongoing portfolio actions in Sweden and Denmark in particular are to set you on track for the underwriting profit target of NOK 750 million ex Norway? Or will M&A be needed? I guess just optically, it's a quite significant premium reduction in Sweden on what is already a small business. So I'm just wondering how you're thinking about the NOK 750 million and how you get there organically?And secondly, at the Investor Day, I think automated tariffs were presented as one of the main mechanisms to price more dynamically and to ensure that you stay ahead of claims inflation with pricing. Now the disclosure today shows 2.7% of tariffs are automated, but I guess it's a bit lower than we'd expected to see. So I just wondered what's the timeline from here until you've got those automated tariffs. Are you confident you can stay ahead of claims inflation trends with price?

[Jostein Amdal, Executive VP & CFO]

Thank you, Jonny. On the NOK 750 million, what we are seeing the effects of, in Sweden especially, but also to a certain degree in Denmark, are repricing that we are doing to improve the portfolio quality. That means we do see some churn. And as I specifically mentioned, there is 1 contract in Sweden which were terminated by us. We need to get their profitability level up and then catch up with the market growth. And the NOK 750 million in 2022 should be reached without any M&A activities. Secondly, on the automated tariffs, we are working with a much larger base of tariffs than the 2.7% that you see. That is what's already kind of finished. So this will -- the amount of tariffs that have been through this tool are making profits. So we'll increase bright spots as we go through. What the main purpose or the main benefit of having automated tariffs is that we are able to react quicker and we are freeing up analysts' time to work on the quality side. So you're going to -- you'll reduce the time spent on basically fees and so on. We are able to capture inflation dynamics on the claims side already. It's just that we kind of get more efficient when we have these automated tariffs in place.

[Operator]

We will now take our next question from Blair Stewart of Bank of America.

[Blair Thomson Stewart, Head of the UK and European Insurance]

Just a couple of questions for me. You talked earlier, I think, Helge, about not expecting to return to peak underwriting profit levels in Norway. Could you just expand on that? My impression was that you were getting price increases above the rate of inflation. So I just wonder what you meant by that comment.And secondly, why is it that you're seeing churn in the Private segment but not in Commercial? Is that just a reflection of it being a hard market in Commercial and somewhat less harder or maybe even a softer market in Private? And then just coming back to the Nordic region. You're talking about improving profitability, improving customer retention and growing the top line. These things are seldom done in conjunction with each other. You tend to get one or the other. So I just wonder -- again, if you can expand on how you expect to achieve all of that in the Nordic region.

[Helge Leiro Baastad, Chief Executive Officer]

Yes. Thank you, Blair. Jostein will give some further comments on the Nordic situation. As you know, we presented the target of year-end 2022 just before Christmas, and we will come back with more details regarding the journey towards 2022. What we said in connection with the new target is it will be back-end loaded. So -- but Jostein will comment that and also the situation in Commercial versus Private. When it comes to my comment during my presentation regarding not reaching the peak levels, we have to remind ourselves that we have had very benign winters. So what we expect when we're talking about not coming back to that type of peak levels is more normalized situation regarding where they're going forward. If we had winters like '14, '15, it could be different. But when I commented that, it's more on a -- taking into consideration that we will have more normal winter conditions going forward.

[Jostein Amdal, Executive VP & CFO]

On the second one, the churn in Private versus Commercial or the difference in churn. Starting on the positive side and the ones on the Commercial side. I think it's a hardening market there. We have seen competitors struggling more with profitability than we have done in the commercial market for some time, including the ones that's already reported. And these profitability issues paved the way for rate increases. We've been extremely disciplined in the 1/1 renewal, which is extremely important in the commercial markets. Something like 40% of the portfolio actually renews January 1 and have been able to book just-announced price increases and also get them through into our premiums. And that really started with the contract renewals in the fourth quarter of last year. So it's -- in effect, it's hard market. And we have been extremely disciplined in putting it through. And the market has allowed us to do that without any increase in churn, actually without any [ backlog in the churn ] especially last year.On the Private side. As you see, the -- it's actually slightly different for us. We have lost both number of cars and houses at the insurance. This has actually been clear on -- for a long time, a clear priority for us. We are prioritizing profits ahead of volume. And -- but added to that, a couple of comments on the large partner organization of NITO, the [ insurer ] organization, which we lost in 2018 with effect from January 1 this year. There was one part of that portfolio which we have previously announced, which were a quality agreement which kind of went in 1 bank, as [ Helge ] referred. And then of course, Tryg, which won the contract, has started selling our products again on the lower [indiscernible] of that membership list. And they've been somewhat successful there, but not anything more than we had expected from beginning.So I think that's the main reason behind the developments within the -- for the Private churn. On third question, top line versus profitability in Nordics. Nordics, it's hard to grow top line and improve on the profitability measures at the same time. And we are now raising prices, moving towards a more lean cost side and doing that first before we do the growth side. That's what we see in the figures. And going back to the previous question from UBS, it's -- we are going to deliver the NOK 750 million in 2022 without any M&A activities and such. We have done a number of measures in place to improve profitability outside of Norway and then Sweden and Denmark, specifically including a new core system, which we have talked about earlier.

[Operator]

We will now take our next question from Johan Ström of Carnegie.

[Johan Ström, Analyst of Financials]

Yes. Two questions from me as well. I just -- I'd like to follow up on the comments on the Private segment. Can you quantify the effects from the loss of the NITO contract, for example, the volume last year? You had a few comments there but some more further detail will be interesting. And then also, how do you expect the growth in this segment to develop during the rest of the year if you balance out the effects of price increases and churn? That was my first question.

[Jostein Amdal, Executive VP & CFO]

Okay. Johan, I can't quantify but the one quality agreement that we talked about is NOK 120 million. And the rest is Tryg now being the insurance partner of NITO going -- and with the access to their account membership fees, being able to sell to each and every member. And these are all customers that have typically been with Gjensidige for a long time and are, on average, extremely satisfied with their relationship with Gjensidige. So they need to do the hard work and sell to each and every customer. I don't really predict on what's going to happen in the year. But the onetime effect of NOK 120 million is kind of behind us, and then it's a gradual selling from Tryg on this number. Can you please repeat the second part of the question, Johan?

[Johan Ström, Analyst of Financials]

Yes. For the rest of the year, can you guide us a little bit on your expectations on the premiums growth for the Private segment when you balance out the effects of price increase? Is there an expected churn? I mean the 1% is significantly lower than what we saw in Q4 and we had NITO effects. But for the full year, what can we expect from the Private segment?

[Jostein Amdal, Executive VP & CFO]

I don't think I want to be precised on that. But I will say that price measures that we have in place including pricing on average about the claims expectation both for private cars and property.

[Johan Ström, Analyst of Financials]

Okay. And then finally, on the year-over-year improvement of the underwriting result in motor and property. Where are we now in terms of repricing? How far away are you from, say, getting close to the full effect of the portfolio repricing? And when can we expect that to happen? Is it 2 years from the beginning of 2018? And are we 50% through or have you done more now?

[Jostein Amdal, Executive VP & CFO]

I don't think I will give you a precise percentage. But as you say correctly, it's -- we started kind of repricing according to what was then the expectation of 5% to 6% in the beginning of 2018. In 2017, we had a slightly lower claims inflation expectation around risk premium increase expectation. And we now reduced that somewhat again to 4% to 5%. And it takes kind of 24 months from the first price increase is announced to everything is repriced in the account. And we're now 15 months in tariffs, so we're a lot more than halfway.

[Operator]

We will now take our next question from Kevin Ryan of Bloomberg Intelligence.

[Kevin Ryan, Analyst]

It's Kevin Ryan of Bloomberg Intelligence. I just have one quick question. It strikes me that you have some historically very good returns at group level. And I was just curious as to how this colors your view when you're on the acquisition trail, which you now are. It seems to me that anything you buy is going to have to work pretty hard to be accretive. So a little more background on your thoughts on your targets would be very gratefully received, just to understand a little more about your approach.

[Jostein Amdal, Executive VP & CFO]

Okay. We are looking for new business within our defined markets: Scandinavian, Baltics, nonlife insurance, primarily within private and SME commercial lines of business. As for where we've seen almost all of our acquisitions so far, we're looking at kind of a cost of equity at 7.5% after-tax. That's kind of our absolute target, and then we need to create value about that cost effectively.In addition, we are trying to integrate new business over a certain time period to get to kind of into the Gjensidige way of doing things into our brand preferably, if we can. And -- yes. But -- and bear in mind also that kind of -- if we look back, all our positions outside of Norway is actually a result of acquisitions. We wouldn't have anything if it weren't for these previous acquisitions there.

[Kevin Ryan, Analyst]

Great. So you're looking at a hurdle of at least 7.5% for any deal. Is that right?

[Jostein Amdal, Executive VP & CFO]

Yes. That's with regard of the cost of equity.

[Operator]

We will now take our next question from Jan Erik of ABG.

[Jan Erik Gjerland, Research Analyst]

Jan Erik Gjerland from ABG. I have a couple of questions. The first one is on the A, B, C, D clients. Could you elaborate on how many of those A, B, C and D clients you sort of lose in both Private and Commercial? It might look like you have a very strong hurdle rate in the commercial side, so I just wonder how you're looking at the different kind of A, B, C, D clients in both Private and Commercial and how it -- your client loss and gain has been so far?

[Jostein Amdal, Executive VP & CFO]

Well, this is mainly a topic for the Private side. It's the one we showed on the Page -- I don't quite remember, 3 in the presentation. And these customers' scores are based on the perceived profitability and price of these customers and where customers having a lower score receive potentially a higher price increase. And, of course, they kind of hurt less of losing. That's where you also see that we manage to keep those which are rated higher by us. And this works. Churn is much higher among the ones we perceive as less profitable. And I don't quite know how specific I can be in your question, Jan Erik, on that.

[Jan Erik Gjerland, Research Analyst]

Okay. On the Commercial side then. It just sounds that you have been able to reprice both the best clients and the weak clients equally high. Or is it so that you have taken the weaker clients even higher? Or could you just give us a flavor on the Commercial side as well, please?

[Helge Leiro Baastad, Chief Executive Officer]

Yes. On the Commercial side, as Jostein said, we have increased prices for all kind of customers. We had better churn situation this first quarter compared to last year. And I haven't been in a situation like this for, I would say, more than 10 years. So it's a completely different situation compared to the last few years. I think it's a combination of very benign winters also affecting the commercial businesses. It has been softer market for some years. And no, we are in a completely different situation, actually. We are really satisfied.

[Jan Erik Gjerland, Research Analyst]

Okay. Very good. On the profitability terms. When it comes to year-on-year growth on the underlying side on motor, on housing, you write in your report that it still was down year-on-year. Is it so that we should -- is your comment on turning point being in the second quarter? Is it so that we should then expect the year-on-year to be higher? Or is it just that you have flattened out in Q2? Just to get a flavor on where -- what you're seeing.

[Jostein Amdal, Executive VP & CFO]

That's correct. First, of course, I'll say it's right in the report when we say it's Norway, it's because we take out the weather effects from last year without doing [ any business to this year's accounts. ] We think that's the kind of fair basis to measure out a turning point. In absolute numbers, it's of course better [ than out there ] anyhow. That said, when we internally and I internally look at what's the turning point, we take out seasonal effects or look at 12 months rolling figures and say that during Q1, that turned 12 months rolling underlying loss ratio, excluding weather effects. And that turned down in Q1. That's kind of the basis for the turning point.And then, of course, these are slow-moving methods, so you won't see a dramatic downshift in the underlying former rolling loss ratio from one quarter to the next. But the trend is now downwards from here. Not necessarily fast or much by quarter by quarter, but it will be downwards.

[Jan Erik Gjerland, Research Analyst]

Okay. Perfect. Then on the weather. As you touched upon, is it possible to sort of isolate the underlying weather versus what you saw in the new total underlying combined ratio -- or claims ratio here? How much did weather -- was a much better -- was benign this year than last year, so to speak, in your calculations?

[Jostein Amdal, Executive VP & CFO]

In measuring the weather effect, it's exactly what we've talked about in the first and second quarter last year. It's an impact by science. It's not -- it's based on estimates. It's not like a one single large claim or one single measure per occurrence, which we kind of however it defines events and we can see the loss.But based on our estimates, we talked NOK 250 million to NOK 300 million last -- first quarter of last year in extraordinary weather effects. One thing is it's a well-regarded, fairly normal winter on average. Actually, the precipitation, the amount of downpour were actually higher in first quarter of 2019 than first quarter of 2018, somewhat 30% higher. And it came more as rain that as snow, so didn't get this snow damage to them, the snow -- the weight of snow taking down roofs and so on. So it's really, in a way, a more benign type of precipitation this year than last year. And so then on average, kind of 0 weather effects this year because it's fairly normal. I still don't have an estimate. Last year, we talked about NOK 250 million to NOK 300 million above and normal figures. And I'd just add, I think -- we gave range because these are imprecise estimates.

[Jan Erik Gjerland, Research Analyst]

Okay. Just finally then, on the Nordea, you were quite -- yes, sorry.

[Helge Leiro Baastad, Chief Executive Officer]

No. Just a comment on -- Jostein said the rainfall and snow was 30% higher this year compared to last year. If you had also seen that the northern part of Norway, western part of Norway had been hit harder this year compared to last year. And as you know, our strong part historically is eastern and the central part of Norway. So it's also geographically different. It's -- wanted you to know that also, Jan Erik.

[Jan Erik Gjerland, Research Analyst]

Yes. Perfect. Lastly, on Nordea. Is it so that we should expect you to sort of have start to sell to your -- the Nordea clients? Or you already have some kind of premiums inside your Q1 numbers? Or is it so that you just started those promises, and we should expect it to come from the second quarter?

[Helge Leiro Baastad, Chief Executive Officer]

It started in first quarter. And when exactly -- when in first quarter, Jostein?

[Jostein Amdal, Executive VP & CFO]

It's March 1 or March 3. It's really...

[Helge Leiro Baastad, Chief Executive Officer]

Yes. On the 3rd of March. So it's, yes, 1/3 of the quarter.

[Jostein Amdal, Executive VP & CFO]

You don't see much earned premium, but -- yes.

[Helge Leiro Baastad, Chief Executive Officer]

No, no.

[Jan Erik Gjerland, Research Analyst]

No, no. Of course not. But then we should expect some improvements from that?

[Helge Leiro Baastad, Chief Executive Officer]

Absolutely.

[Operator]

We will now take our next question from Youdish Chicooree of Autonomous Research.

[Youdish Chicooree, Non Designated Member]

I've got 3 questions, please. The first one is really on your motor profitability. I think you sound very confident of a turnaround starting next quarter. I was wondering whether that -- I mean, we should expect an improvement in the underlying loss ratio for the entire group as well, adjusting for the exceptional weather for last year. And secondly, on your solvency. I mean, your coverage is very strong under your own partial internal model at 295%. I was wondering whether you are still in discussion with the regulator. And when do you expect to resubmit that model for approval? And finally, I'd just -- it's just more like a clarification. I think in your opening comments, you mentioned that we should not expect special dividends for the year 2019. Is that correct?

[Helge Leiro Baastad, Chief Executive Officer]

Regarding dividend, we have just the same communication as we had last quarter. So as you -- you can see our comments very precisely in the report. The 2 first questions, Jostein, turning point loss in Q1 and profitability for the group and then the process with FSA.

[Jostein Amdal, Executive VP & CFO]

Yes. On the turning points, and what we talked about is motor -- private motor in Norway, just to be for specific. We didn't talk about the motor book across -- or all the other [ areas ]. It's Norway. And we saw the turning point in Q1, so we should expect then an [ agreement ] -- and as I answered, I think, on a previous question, it won't be dramatic. It won't be clear results. But it will be at the right direction. On the second part. We are, I may not say continuous but regular, the talks with FSA. And as we talked about, when we got the model approved the first time, we disagree on certain important points in the calibration of the model. And we will, over time, seek to engage with FSA further on getting more parts [indiscernible] with them. So that's also a [ well-meaning ] process.

[Youdish Chicooree, Non Designated Member]

Okay. Just to clarify. I mean, those are important points. Are they down to basically, firstly, on underwriting as you use your own data, which they said they're not happy with? And there's also probably on the market risk side of things. Is that down to just the correlation factors you're using? Or is there anything else we should be aware of?

[Jostein Amdal, Executive VP & CFO]

A number of factors, but 2 most important are correlation between market risk and underwriting risk; and our [ allowance ] of use of storm models, which we use commercially available external storm models for estimating the catastrophic capital requirements.

[Youdish Chicooree, Non Designated Member]

Okay. Understood. Sorry to go back on the second question because I didn't quite catch what you said in terms of the overall development for the group, what your expectation was for this year on the underlying loss ratio. I mean if you could clarify that, that would be very helpful.

[Jostein Amdal, Executive VP & CFO]

To be precise, I talked about the motor and that all turning points [ we proposed ] is related to the motor portfolio in Norway. So it's not exactly in Sweden and Denmark. And I didn't give any -- I didn't say anything about the underlying loss ratio expectation for the group as a whole.

[Operator]

[Operator Instructions] At this time, it appears we have no further questions.

[Mitra Hagen Negård, Head of Investor Relations]

Thank you, operator. Thank you, everyone, for listening in. We will be having a few roadshows this quarter 2: Oslo today; Stockholm, Geneva, Zürich next week; followed by Milan, London and Frankfurt in May. Thank you for your attention and goodbye.

[Operator]

This concludes today's call. Thank you for your participation. You may now disconnect.