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Tryg CEO says Norway reserve releases to boost earnings

Reserve releases from the Norwegian business are likely to support Danish insurer Tryg A/S' bottom line following a first quarter boosted by a strong investment performance, CEO Morten Hübbe said April 7.

"We had a very good quarter," Hübbe added, on the back of "a good performance from our portfolio managers."

The reserve releases, he said, will come from the workers' compensation insurance business in Norway.

Tryg's total investment return after insurance technical interest rose on a yearly basis to 223 million Danish kroner from 17 million kroner, contributing to a first-quarter profit of 605 million kroner, up from 445 million kroner in the same period in 2016. Tryg said the sharp rise in investment income was driven by good ROE, which boosted its "free" portfolio, and a narrowing of covered-bond spreads, which benefited the "match" portfolio that is designed to correspond to the value of discounted claims provisions.

The technical result — i.e., profitability of the core insurance business — ticked up year over year to 568 million kroner from 562 million kroner.

"The result was very much driven by the investment income, which came in well above expectations," Kimmo Rämä, an analyst with Handelsbanken Capital Markets, said in an interview. "But looking at the underwriting result that was also nicely in line."

The higher-than-expected investment income and low losses on claims were the main drivers of Tryg's first-quarter performance, RBC Capital Markets analysts said in a note released shortly after the publication of results. "While the increased earnings are a benefit, the core underwriting business is more important to the long-term direction of the business, in our view," they added.

Premium income net of reinsurance came to 4.26 billion kroner in the first quarter, ticking up from 4.13 billion kroner in the year-ago period. Claims net of reinsurance increased to 3.00 billion kroner from 2.86 billion kroner in the first quarter of 2016.

As it had said it would, Tryg proposed a first-time quarterly dividend of 1.60 kroner per share, rather than a semiannual dividend. This corresponds to a payout of 452 million kroner.

The company's solvency ratio, which measures its capital stock relative to the amount needed to withstand a 1-in-200-year shock, stood at 202% at the end of the first quarter, up from 194% at year-end 2016. RBC projected that Tryg would pay a special dividend of 1 billion kroner during 2017, saying that although that would mean payouts exceeding earnings, the insurer has scope to reduce its capital stockpile.

As of April 6, US$1 was equivalent to 6.98 Danish kroner.