executives warned Oct.11 of rising claims costs in the motor insurance business, which they pledgedto counteract by hiking prices.
The highercosts are attributable both to the rising cost of repairs, a trend seenworldwide, and to an unusual rise in the number of claims.
"Oneof the new things we're bringing to this topic is that we're seeing a trendincrease in accidents," said CFO Christian Baltzer. "The Council forSafe Driving in Denmark are expecting this to be a lot about unaware drivers —people driving with not much attention to the road and more to their phones andother things in their cars."
Figuresreleased by the Danish Insurance Association and cited by Tryg showed anaverage of 27,978 insured motor accidents a month in Denmark in the first ninemonths of 2016, up from 26,505 in the year-ago period. And when claims arefiled, they tend to be more expensive than in the past.
Forexample, the cost of a bumper for a Ford Focus, a common car, rose to 6,682Danish kroner in 2016 from 5,668 kroner in 2011, Tryg said. For a bumper withradar technology, the price stood at 19,378 kroner in 2016.
Thecompany's underlying claims ratio, expressed as a proportion of premiums, was74.1% in the third quarter, up from 71.9% in the year-ago period on an adjustedbasis. The underlying claims ratio in the Danish and Norwegian private customerbusiness was 69.4%, up from 68.8% a year earlier.
Despitethe higher underlying claims level, Tryg reported a third-quarter profit after tax of 732 millionkroner, compared to 110 million kroner in the same period in 2015. The resultwas boosted by an internal efficiency program that saved 55 million kroner,while the year-ago result was negatively affected by the upfront costs of thatprogram.
Themost recent set of earnings was also supported by a marked improvement ininvestment returns, which totaled 191 million kroner in the third quarter,compared to a loss of 441 million kroner a year earlier. The shift wasattributable to a strong third-quarter performance in the equity markets, ascontrasted against a very poor year-ago performance.
Baltzerpromised to do more to push up the profitability of the motor business in theface of rising costs.
"InDenmark, but also in Norway, we are increasing our prices. It's not true thatwe're not doing anything on the pricing side," he said. "I think it'simportant that the market understands that there's a trend here and [for] manyyears we've been [managing] a really, really profitable business. If we're notaware of the early signals of maybe some deterioration here, we're going tohave an unprofitable business, and nobody wants that."
TrygCEO Morten Hübbe reiterated guidance from the company's second-quarter call that the"full impact" of these price rises will be seen in 2017.