executives said July 12that they are pushing through price increases on insurance policies to pay forrising claims in some segments, but that the impact on the bottom line will bedelayed.
"We'vebeen carrying out price increases since the beginning of this year," TrygCEO Morten Hübbe told analysts during a conference call to present theinsurer's second-quarter results. "We've carried out a significantproportion of these. We'll start to see the impact of that towards the end ofthis year, and [we expect] the full impact in 2017."
Trygbooked asecond-quarter profit of 734 million Danish kroner, or 2.61 kroner per share,up from 580 million kroner in the year-ago period. But thecompany's technical result — that generated by underwriting activity — fell to770 million kroner from 825 million kroner year over year.
Roughly35 million kroner of the technical result decline was attributable to theweakening of the currency in Norway, where Tryg generated roughly 36% of its4.38 billion kroner of second-quarter gross premium income. The technicalresult from the Norwegian business fell year over year to 356 million kronerfrom 403 million kroner, even as the combined ratio, which measures claims as apercentage of premiums, edged down to 77.5% from 77.6%.
On agroup basis, the combined ratio was 82.6%, rising from 82.2% in the secondquarter of 2015. The insurer is targeting a combined ratio for 2017 of a maximumof 87%.
"Ifyou look at the underlying dynamics, if we bring in price increases on Jan. 1,it takes 12 months to hit the renewal date of all customers," said CFOChristian Baltzer. "We will see an impact on Q3, but we shouldn't expectall of a sudden a big boost in Q3. We'll see a slight impact in Q3, some impactin Q4, and then you'll see the full impact in 2017."
Improvementsin car safety have reduced the frequency and severity of motor accidents in theWest, but these improvements have come at a cost. Simple components such asbumpers that were previously cheap to replace are now much more expensivebecause of the amount of technology that they contain. The full effect of thesetrends still needs to be worked out, Batlzer said.
Onthe investment side, the company registered a return after insurance technicalinterest of 181 million kroner, compared to a loss of 84 million kroner a yearago. The return rose after international investors bought Danishgovernment and mortgage bonds, boosting Tryg's investment income, as thedecision by theBritish on June 23 to exit the EU sparked a flight to safe assets.