Storebrand ASA

OSE:STB

Earnings Call Transcript 2023-Q2

[Johannes Narum, executive]

Good morning, ladies and gentlemen, and welcome to Storebrand's Second Quarter Results Presentation. As usual, our CEO, Odd Arild Grefstad, will present the key highlights of the quarter, followed by CFO, Lars Loddesol, who will dive deeper into the numbers.

At the end of the presentation, participants in the team's webinar will have a chance to ask questions. Details on how to join the webinar are found on the Investor Relations website.

But without further ado, I give the word to our CEO, Odd Arild Grefstad.

[Odd Arild Grefstad, executive]

Thank you, Johannes, and good morning, everyone.

During the last quarter, we have seen interest rates in Norway and Sweden increased to levels we have not seen for decades, driven by persistent high inflation. Over time, the higher interest rates give better reinvestment rates for pension portfolios, higher pension for customers and profit sharing for shareholders.

Looking into the second half of 2023, higher running yield are expected to give materially higher financial results compared to 2022. Higher interest rates has also a positive effect for the group's solvency position. A weakened Norwegian kroner towards euro and U.S. dollar has contributed to increased asset under management, but also increased claims and administration costs so far this year.

Now let's look at the second quarter highlights. Storebrand Group's cash-based earnings amounted to NOK 777 million in the quarter, whereof the operating result was NOK 513 million. The operating result was negatively affected by performance-related costs and integration costs amounting to NOK 113 million in the quarter, and this takes the underlying operating result up to NOK 625 million in the second quarter. While these figures so strong development from the corresponding period last year, weak results in the insurance business, driven by claims inflation and increased claims frequency, dampens the results.

I am proud to see Storebrand continue the strong growth development in the quarter. The total assets under management were a record high for the second consecutive quarter, driven by net inflow and tailwinds from the financial markets.

Growth in insurance and retail banking continues to be at the high double digits, driven by high demand for our products and services. The solvency ratio in the quarter increased by 17 percentage points to a record high level of 196%. Due to the robust solvency position, the Board intends to continue with additional NOK 1 billion in share buybacks during the second half of 2023.

At our capital update in December 2022, we announced the ambition to deliver NOK 10 billion of share buybacks to our shareholders on top of the nominal increasing dividends. In the second quarter, we finalized a NOK 500 million tranche. And I'm pleased to announce that the Board have decided to do additional buybacks amounting to NOK 1 billion during the second half of the year. The buybacks will be divided into 2 tranches, the first NOK 500 million tranche starting today and sets us in a very good position to deliver on our buyback ambition towards 2030.

Storebrand's goal is to deliver a combined ratio of 90% to 92% in our insurance business. At these combined ratio levels, we can pursue strong growth and increased market shares in combination with a compelling return to equity enabled by our diversification benefits under Solvency II. As already mentioned, Storebrand experienced high claims in the quarter. The trailing 12-month combined ratio increased to 94%, above the targeted level driven by claims inflation, increased claims frequency in motor and health as well as high disability levels.

Significant price increases were implemented going into the year, and we expect improved result effects from already implemented price increases in second half of the year. On top of this, due to the development in the first half of 2023, we now add additional measures and price increases to get back to the targeted combined ratio.

As you are well familiar with, Storebrand aims to take 3 commercial positions in the market we operate: A, to be the leading provider of occupational pension in both Norway and Sweden; B, to be a Nordic powerhouse in asset management; and C, to be a fast-growing challenger in the Norwegian retail market for financial services. The commercial success is enabled by 2 strategic differentiators, leadership in sustainability and digital frontrunner.

Let me go a little deeper into the progress within each area. Storebrand demonstrates commercial success in the market of occupational pension by winning key mandates and customers, both in private and public sector. We see high double-digit premium growth in Norway and Sweden by 35% and 31% growth compared to last year.

On top of that, in the second quarter, we have once again won the largest defined contribution contract in the Norwegian market, Equinor. And we also won 2 other substantial listed companies from competitors. The new mandates and customers does not yet appear in the second quarter numbers, but will be shown in the second half of the year.

Moving on to our asset management business Total assets under management reached all-time high this quarter, amounting to NOK 1,143 billion. The asset under management growth is driven by strong market and a NOK 27 billion net flow year-to-date. The positive development and results extend across all the Nordic countries and strengthens our position as the Nordic powerhouse in asset management. Notably, Storebrand has excelled in Sweden by securing multiple new mandates and achieving the second highest inflow in the market year-to-date.

Storebrand's retail operation remains on a robust growth track, exemplified by the strong performance of our retail bank during the latest quarter. The results were primarily driven by a 16% increase in mortgage volume growth year-on-year in combination with strong interest margins and improving cost ratios. Therefore, Storebrand maintains its position as the fastest-growing retail bank in the Nordic -- Norwegian market, outperforming other full service retail banks.

Moving on to our 2 strategic differentiators, leadership in sustainability and digital frontrunner. Storebrand continues to lead and demonstrate sustainable value creation as an integrated part of our business strategy. Most recently, we once again was awarded as the #1 sustainable investor in Norway by Prospera. Moreover, for the fourth consecutive year, we were also awarded as the #1 in Sweden. This recognition demonstrates our overall performance and customer satisfaction and position our asset management operation for further growth. Additionally, we have been recognized for the work and reserved on equality through a #1 listing in the SHE Index.

Moving to our second strategic differentiator, digital. Storebrand is driving an ongoing digital transformation in the corporate market through investment in end-to-end digitalization. Through this, we have established Storebrand as a digital frontrunner for life & pension in the B2B market. This is confirmed by external market research in surveys from both Norsk Kundebarometer and Aalund. Our B2B digital transformation is also driving growth, especially in the SME segment. We have delivered significant reduced lead time for customers, and it reduces our acquisition costs.

And with that, I give the word back to you, Johannes.

[Johannes Narum, executive]

Thank you, Odd Arild. Now let's take a closer look at the numbers. Lars, please go ahead.

[Lars Aasulv Løddesøl, executive]

Thank you, Johannes. The cash equivalent group result of NOK 777 million is weak, following disappointing results from the insurance business and ongoing integration expenses in the onboarding of Danica. Performance results have been strong year-to-date, and the quarter is penalized by NOK 49 million in performance-related expenses. As you will be familiar with, the corresponding year-to-date performance income of NOK 132 million can only be booked at year-end.

The solvency is strong following reduced SCR and higher own funds. I will revert to this. Cash earnings per share came in at NOK 2.16 in the quarter. Customer buffers continues up in Sweden, whilst the rise in interest rates in Norway has reduced the Norwegian buffers. That said, the higher interest rate level is positive long term as we can see from the solvency movement.

The first quarter solvency ended at 179%. The VA in Norway has gone up from 10 to 24 basis points whilst the SA has gone slightly up, increasing the stress on equity investments. The combined effect is 7 percentage points positive.

Higher interest rates contribute another 5 percentage points following an increase in the 10-year swap rate of 71 basis points in Norway and 18 basis points in Sweden. Short-term rates have increased more, leading to a twist in the yield curve, which reduced the overall positive effects from higher rates.

Strong equity markets, weak real estate markets and the weaker Swedish kroner has a combined positive effect of 4 percentage points, whilst cash earnings contribute another 4 percentage points. As usual, we set aside solvency capital for future ordinary dividends.

Due to the fall in SCR, our subordinated loans have been kept in terms of solvency contribution. The solvency has strengthened by 17 percentage points in the quarter to a record 196%. The renewed approval for share buybacks will reduce the Solvency by 4 percentage points to 192%.

The sensitivity table shows that our solvency is robust in all the illustrated market scenarios. The group income continues to grow. Insurance results are on the weak side. Operational costs are up following approximately NOK 250 million from, one, double cost during the integration of Danica; two, performance-related expenses; and three, negative currency effects. Underlying the cost level is according to plan. We maintain the guiding of NOK 5.3 billion for the year with the above-mentioned adjustments.

Financial results are improving with a higher interest rate level, in line with the guiding on our last capital update in December 2022. The current yield on the company funds is close to 5%, and this should improve the financial results further in the next quarters. Tax revenue of NOK 222 million in the quarter follows from another clarification in our favor on the outstanding tax cases.

Let's spend 2 minutes on tax. Storebrand has had 2 outstanding disagreements with the tax authorities. One stemming from the liquidation of a real estate holding company in 2015, and one from a change in the tax loss from 2018. We have been confident in our interpretation of the laws. And so far, clarifications and conclusions have supported our views latest in the Tax Appeals Committee in June. This has led to significant tax income booked in the first and fourth quarter last year and now in the second quarter this year. The downside should Storebrand lose in the remaining case is now close to 0 whilst there is still an upside of approximately NOK 1.6 billion, should we succeed with all our arguments.

The recent win related to the 2015 case and put Storebrand in a position with great tax loss carryforwards, which means that we, for all practical purposes, will have close to 0 in payable taxes in the coming years. A small caveat for the record, the tax authority may still challenge the decision in court.

Looking at the group results split by business line, we see stable results in savings, weak results in insurance and satisfactory development in guaranteed. In the interest of time, I will go through the results per business line a little faster than what I've done in the past.

Premiums and reserves in savings continue to grow strongly, both around 30% from last year, including the acquisition of Danica. The margin in Unit Linked Norway is down due to some periodic effects. The negative transfer balance in the quarter is related to a sub portfolio Danica had with the insurance company if that was moved during the quarter. The retail bank continues to grow and has strengthened margins. The second quarter result is the best in the history of the bank, and Storebrand Bank standalone has 10.8% return on equity in the first half.

The Asset Management, AUM, is now at a record NOK 1.143 trillion supported by flow, returns and FX. The statutory results are reduced by NOK 49 million in the quarter due to performance-related expenses. Year-to-date, we have accrued an estimated NOK 132 million in performance fees that will be booked in the fourth quarter.

The insurance combined ratio at 96% is weak. The rolling 12 months combined ratio is now at 94%, 2 percentage points behind plan. As Odd Arild explained, the weakness is linked to higher claims frequency, increased claims inflation, are part of the national payroll's pool and continued disability claims in parts of our portfolio. Furthermore, the results in Storebrand Health are weak. We are implementing further price increases and other measures to bring the combined ratio back on plan.

Overall, the premium growth continues in all business lines, of which approximately half can be attributed to price increases and the rest to volume growth.

The guaranteed reserves continued to decline in accordance with plan. With interest rates climbing, the excess value of bonds at amortized cost is in negative territory. But reinvestments are done at ever higher interest rate levels, securing long-term returns in excess of guarantees and opening up for increased profit sharing in a few years' time.

Under other, we have booked integration costs related to Danica. Financial returns on company portfolio significantly up from last year. The financial return has been hurt by some negative mark-to-market effects in a rising interest rate environment short term, but the running yield continues to rise, promising further improvements from here.

IFRS 17 and 9 are significantly changing our statutory accounts. The understanding of the new accounting rules is still developing internally as well as externally. In our quarterly report, we have an extensive explanation of the new standard as well as comprehensive notes to explain the different parts of the reporting.

Here, you see the group financial statements under IFRS. The profit and loss is split between the business areas that are not affected by IFRS 17 and the ones reported according to IFRS 17. The business areas not affected are presented above the line operating income, excluding insurance. The IFRS 17 related products are presented under insurance service result. For the business areas that are not affected by IFRS 17, the quarterly results are essentially similar to the cash equivalent statement.

Insurance service result under IFRS was NOK 487 million in the second quarter. The reduction in insurance service result compared to last year is due to higher claims in the P&C business and in disability-related products. The group profit before amortization and tax was NOK 616 million in the quarter compared to NOK 555 million last year. More details on CSM sensitivities and the IFRS balance sheet are shown in the appendix and in the interim report.

Last quarter, we promised to include the CSM movement this quarter. The main takeaway here is that higher rates have increased the likelihood of future profits, which will flow through future P&Ls through income recognition, which amounted to NOK 466 million this quarter.

And with that, I pass the word back to you, Johannes.

[Johannes Narum, executive]

Thank you, Lars. Before moving over to Q&A, let me take this opportunity to announce that we will be hosting a Capital Markets Day on the 14th of December. The event will be virtual, stream from our studio here at Lysaker with a focus on the company's growth strategy and ambitions going forward.

With that said, we're now happy to take the questions from our audience.

[Johannes Narum, executive]

[Operator Instructions] And the first question comes from Peter Eliot of Kepler Cheuvreux.

[Peter Eliot, analyst]

So yes, my 2 questions. The first one was just on the share buyback. So I mean, I just want to clarify whether your intention is to do in the second half of the NOK 1 billion sort of straight after the first if your solvency is still open. Or are there other constraints or factors that we should consider?

The second one was on the cost and your cost guidance. I mean you talked about inflation hitting costs. I see some headlines on the news wire saying that your fully cost guidance remains intact. So I was just wondering if you could clarify that -- how that works. Because I mean running at NOK 2.9 billion in the first half of the year, it seems like you're well over. So yes, if you could just give us some help on thinking how you expect it to progress from here.

[Odd Arild Grefstad, executive]

Yes. Thank you. I'll start with share buybacks. You're absolutely right, we now have the permit to do NOK 1 billion share buybacks in total start with the first tranche of NOK 500 million. And the plan is to continue right after that with another NOK 500 million in share buybacks.

[Lars Aasulv Løddesøl, executive]

And with respect to the cost guiding, Peter, we maintained the cost guiding of NOK 5.3 billion adjusted for the factors that I mentioned in the -- earlier. Those are integration costs of Danica where we will have double cost for a limited period of time with double IT systems and double personnel, et cetera. And currency effects, they fluctuate up and down and performance fees related to the performance income we have from certain funds in the asset management business. As you know, the better performance, the more performance fees we have to -- or bonuses we have to pay to portfolio managers. So that's a good cost because it creates value for both customers and shareholders.

It seems that there was an issue with the sound earlier when Odd Arild answered the first question, so I don't know if we need to repeat that.

[Peter Eliot, analyst]

It was good for me. I understood it.

[Lars Aasulv Løddesøl, executive]

And just to like add one more question, there were NOK 250 million worth of expenses that are not part of the NOK 5.3 billion in the first half. So if you deduct that, I think you will see that we are pretty much on plan to reach the NOK 5.3 billion guided level.

[Johannes Narum, executive]

Thanks, Peter. We have a next question here from Håkon Astrup from DNB Markets.

[Håkon Astrup, analyst]

Two questions from me as well. And the first question on Insurance. So you have to do some repricing here. It will take some time before you get the full effect of that. But how early should we expect you to be within your target, the 90% to 92% on the combined ratio? Is 2000 -- next year is that too early? Or should we expect you to be back on track by then?

And then the second question on M&A. I'm just wondering your bank is doing very well and you have a strong solvency. I'm just wondering your appetite for M&A within the bank space at the moment as there are some large portfolios that could be up for sale.

[Odd Arild Grefstad, executive]

Thank you. Let's start with Insurance. As I said, we have already started with quite strong price increases going into this year. So gradually, that takes effect during the year. And we believe we should have more normalized result in our P&C business in the second half and absolutely be back on target in 2024 when it comes to the 90% to 94% target. So what we do now is to do additional price increases, but there is, as I said, quite strong price increases that already has been taken place that comes into the numbers gradually.

On the second question, you know that we are absolutely growing our bank internally. And the bank is important in itself to create value, but it's also very important for us to create the total experience for our retail customers. And based on that, we are happy with the bank platform we have. We don't have to do any acquisitions on the bank field, and we don't plan to do so. We will operate the platform we have, and that is a good platform for the growth in our retail market when it comes to banking, insurance and savings.

[Håkon Astrup, analyst]

Maybe you can just recap the first answer to the first question because at least I did not hear that.

[Odd Arild Grefstad, executive]

Well, then again, on insurance, what I said was that we have quite strong price increases that was done late last year and into the 2023 that gradually now comes into play, and that will also, in our view, normalize more the results for P&C in the second half. And taking that into account and also the increased prices we do now, we absolutely believe that we should deliver on the target at 90% to 92% combined ratio in 2024.

[Johannes Narum, executive]

Thank you, Håkon. The next question then comes from Ulrik Zürcher from Nordea Markets.

Ulrik, can you hear us?

[Ulrik Zürcher, analyst]

I forgot to mute, sorry.

[Johannes Narum, executive]

It seems like we have some technical issues there as well, but we are now prepared to try again. Thank you. Go ahead.

[Ulrik Zürcher, analyst]

Okay. As your sensitivity to a property fall is up quarter-on-quarter, I guess this is due to the lower other headwinds on customer buffers, but would it be possible to give a sensitivity to a property fall if you had no restrictions on, for example, the yearly use of the AST buffer? That's my first question.

And also, I hear you on increased outlook for profit sharing on higher rates. But from your capital update in December, has there been any like material changes, your expectation to solvency generations over the medium term? Is there something we should be aware of that there up or down?

[Trond Finn Eriksen, executive]

Yes. Let me try to answer your questions, Ulrik. First of all, we haven't kind of calculated the solvency with a limit -- without restrictions on the buffer capital. It will definitely have reduced the sensitivity, i.e., you should then expect to reduce sensitivity from year-end when the new legislation are coming into play on guaranteed products. But you will still see some sensitivity, obviously.

The second question was...

[Lars Aasulv Løddesøl, executive]

On profit sharing, we said that with higher rates in the guaranteed portfolios, we expect increasing profit sharing. We see profit sharing from the Swedish business already. From the Norwegian business, we expect profit sharing as we've communicated before, from '25, '26 onward. But the fact that rates are rising higher than we were -- than they seem to be doing when we had our capital update, it means that it will come maybe a little faster and maybe at a slightly higher level than we've indicated at the capital update, but not materially so.

In terms of capital generation, you see that we have generated a lot of capital in this quarter, 17 percentage points of solvency capital generation. So with higher rates, we continue to generate capital at a high level.

[Odd Arild Grefstad, executive]

Yes. And if I just add also on the profit sharing theme. The new legislation that now will come in place using the whole buffers in -- from 2024, of course, is helpful to create more value for policyholders and shareholders and will also bring better opportunities faster for profit sharing.

[Ulrik Zürcher, analyst]

But is your solvency -- because you previously said maybe like 14%, 16% gross solvency generation. Has that changed?

[Lars Aasulv Løddesøl, executive]

I think we'll revert with comments on that on our capital update and Capital Markets Day in December. It's not natural to change that on a quarter basis.

[Johannes Narum, executive]

We have a next question here from Tryfonas Spyrou of Berenberg.

[Tryfonas Spyrou, analyst]

I have 2 questions, please. So the first one is on the -- so just trying to get a feeling on how confident you are on the NOK 4 billion sort of ambition for 2023 sort of the profit target. Obviously, costs are running a little bit higher in insurance. P&C is a bit weaker. What gives you the confidence of achieving that? And what are the sort of maybe any other positive drivers that could get you there?

And the second question is on the mandates you've won in the pension business, obviously, quite positive. I was wondering if there is sort of -- if the process is competitive and how sort of should we expect sort of the underlying impact to the margin would be as a result of putting these mandates. Any comment on that dynamic would be really appreciated.

[Lars Aasulv Løddesøl, executive]

Yes. The first was on the NOK 4 billion...

[Odd Arild Grefstad, executive]

Yes, the NOK 4 billion target. Well, first of all, I would say that me and the team is very dedicated to deliver on the NOK 4 billion target for the year. Of course, there has been some headwind in the first half of this year, especially on the insurance side. So we need to see more normalized insurance result in the second half. Then we know that with higher rates, there will be positive effect in our financial results in the second half. And also, of course, all the profit sharing will be booked in the second half. So I think this is the most important element.

Then Lars has already commented on costs and how we see that the costs develop according to our plan when you deduct then, of course, for the integration cost of Danica. That is coming also in the third quarter, especially.

[Lars Aasulv Løddesøl, executive]

I could add also that fees from higher assets under management will also improve earnings from the capital that we manage in the second half.

[Odd Arild Grefstad, executive]

Yes, both assets under management and on the Unit Linked portfolios in both Sweden and Norway, we have seen a real uplift that will benefit into the second half.

When it comes to the mandates, we have won. That is, of course, good to see that we are very strong in the competition in both Norway and Sweden. I think the guiding on the margins that Lars already have given based on the average of the margins you have seen for the first half is the margin level we expect to also see going forward in our Unit Linked business.

[Johannes Narum, executive]

Thank you, Tryf. We have a next question here from Hans Rettedal Christiansen of Danske Bank.

[Hans Rettedal Christiansen, analyst]

I was just wondering on the NOK 10 billion in capital distribution that you're speaking about, and you've previously said that it's going to be back-end loaded. But if all goes to plan, you then have distributed about NOK 2 billion by year-end this year, of which NOK 1.5 billion is in this year. I mean computationally speaking, if you continue at this pace, will you not be way above the NOK 10 billion in total by the year-end 2023 -- 2030?

[Odd Arild Grefstad, executive]

That is absolutely right. But we had a target of NOK 10 billion that we have communicated on our Capital Markets Day. Of course, the increased interest rates and the development in the solvency ratio that has been stronger than we also saw when we had the Capital Markets Day had made it possible for us now to do more earlier. And of course, that is a very good starting point to at first deliver on our ambition. And then we, of course, have to look at the future when we have a bit more time to look into it.

[Hans Rettedal Christiansen, analyst]

Okay. That's clear. And then my second question was just on the insurance segment. You say the decline or the increase in loss ratio is related to higher frequencies and also the increase in spare parts price. Could you split up the effect of those two?

[Lars Aasulv Løddesøl, executive]

I think we don't want to -- or we can't split it off in that kind of details. But we have seen a quite large increase in frequency, especially around the Oslo area. And I think that's the same that all of our competitors have done in June, which could be related to all of the road works happening these days or other things, but we can't comment on the split from month-to-month and quarter-to-quarter on that detailed basis.

[Johannes Narum, executive]

Thank you, Hans. We have a next question here from Thomas Svendsen of SEB.

[Thomas Svendsen, analyst]

Yes. So a question on non-life again. So you talk about high claims within disability. But I guess you are not on any reserve strengthening there this time. Does that mean that [indiscernible] control got on the level of disability? I know it's more about price increases featuring through.

And secondly, on health insurance, you talked about weak results and also reserve strengthening. Can I just get more detail there on what's happening within health insurance? Are you confident about the current reserve level? Or should they further strengthening in the coming quarters?

[Lars Aasulv Løddesøl, executive]

Both of these businesses are fairly short curtail business. On the disability insurance linked to pension contracts in Norway, we had weak results in the first quarter. They were reasonably good in the second quarter. What we've seen in the second quarter, which has a claims pattern, which is slightly different, was that we had weak results in part of the group life contracts, especially towards certain associations out there. We have not seen a need to increase reserves over and above what we've -- like normal reserve development. So we think we are adequately reserved in both of these portfolios.

With respect to health insurance, we have taken account for -- since there is -- since there were weak results in the first quarter and very weak results in the second quarter, we have made a reservation taking into account that it takes 1 year to fully reprice the portfolio. So we are aiming for about 0 results in the health insurance in the next 2 quarters until we can get the full repricing into the contracts starting early next year.

[Johannes Narum, executive]

Thank you, Thomas. We have a next question here from Jan Erik Gjerland of ABG Sundal Collier.

Are you muted, Jan Erik? We struggle to hear you.

[Jan Gjerland, analyst]

Can you hear me now?

[Johannes Narum, executive]

Yes. Absolutely.

[Jan Gjerland, analyst]

You said that your buybacks were in your report that you would end the buybacks no later than the 22nd of September. So I just wanted to understand why the first program should end sort of before the quarter ends and then you should continue directly thereafter? So just said you're liking to -- why that is happening. And if that is going to, then give you some opportunities to have another program later on this year, actually.

And then secondly, on the Unit Linked margin, you mentioned -- what was the reason why there are technical issues there? Is -- what is the sort of the new underlying margin that we should expect going forward?

[Lars Aasulv Løddesøl, executive]

With respect to the share buyback program ending by 22nd of September, it's basically to get an even distribution of the NOK 1 billion that we plan to do with the first tranche ending 22nd of September, which will be a few days before the blackout period for the third quarter comes into play, which means that we can give a mandate to someone to continue to do the share buyback program after the 22nd of September, so that we have an even distribution up until Christmas. If we were to wait until the publishing of the second quarter -- the third quarter results, the period between 25th of October and Christmas is a fairly short period of time in order to do the full program. So that's the explanation for that.

With respect to the Unit Linked margin, there was a slightly too much fees booked in the first quarter compared to the second quarter, which means that we had 70 basis points margin in the -- or reported according to the supplementary information in the first quarter and 59 basis points in the second quarter. So if you average out the periodic effect here, it should be in the low 60s on average, and that's the area that we expect going forward as well.

[Jan Gjerland, analyst]

Perfect. Just one follow-up on the buybacks. Is it so that we should expect you to sort of have a new approval or application to the FSA after this quarter? Or would you wait for the next quarter? Or will they then wait until the fourth quarter to have the next sort of application to the FSA?

[Lars Aasulv Løddesøl, executive]

We don't need another application now. Now we have gotten an approval to do NOK 1 billion up until year-end from the FSA. So it's only up to the Board to initiate the next tranche when they are comfortable with the situation that they can issue the second tranche. So then the next time we ask for share buybacks will be after year-end.

[Johannes Narum, executive]

Thank you, Jan Erik. We have a next question here from [ Olav Trent ].

Olav, we cannot hear you here. Okay. I think we will progress on with the next question.

Then we have a next question here from Vegard Toverud of Pareto Securities.

[Vegard Toverud, analyst]

Just it was helpful with the comments on the Unit Linked margin. Is it possible to give similar comments to the pension. The pension-related products are strong in the quarter, as you have mentioned. What should we expect here going forward?

And secondly, on the change to the buffer regulations there. If you are making no adoptions, so no changes to your risk appetite. What would the solvency impact from the changes to the buffer from the B from 1st of January?

[Odd Arild Grefstad, executive]

And when you're talking about pension, you're thinking about the guaranteed portfolio?

[Vegard Toverud, analyst]

No, sorry, that was unclear. So the pension-related disability insurance booked in the insurance segment.

[Lars Aasulv Løddesøl, executive]

As I mentioned on the previous question, the pension-related disability claims were normalized in the second quarter. So the results were a lot better in the second quarter. So hopefully, this means that the increase that we saw in the first quarter is now stabilizing, although at a slightly higher level than previously expected. So that's -- the hope is that we are seeing better results from this area going forward than we've seen in the previous quarters.

[Trond Finn Eriksen, executive]

When it comes to effect on the solvency from new legislation, it's too early to give a precise answer on that. We know that it will have a positive impact on the solvency, if we are not kind of using the new risk capital. So -- but we haven't really completed the modeling yet. So it's too early to give exact figures on that.

[Odd Arild Grefstad, executive]

But also to be clear on that, this is better solutions for customers and shareholders, and we are planning to use the capacity to take the right risk in the products to give better profit sharing for shareholders and policyholders going forward.

[Vegard Toverud, analyst]

Yes. And if we leave the exact estimates, Trond, is it possible to give some broad indications to the magnitude of the potential impact?

[Trond Finn Eriksen, executive]

I think it's too early to be speculating. You saw the positive impact from the year-end effect last year, and you should expect at least a similar figures, I guess.

[Johannes Narum, executive]

Thank you, Vegard. It seems like that was the last question today. So that concludes today's presentation. Our next set of results are due on October 25. We look forward to seeing you then, and I wish everybody a good summer. Thank you, and goodbye.