Tryg's 2027 Financial Targets: A Bullish Case for Strong Returns

Tryg A/S, Denmark's largest insurer, has laid out an ambitious roadmap for 2027 that could position it as a standout performer in the Nordic insurance sector. With targets including a 35%–40% return on own funds (ROE), an insurance service result (technical result) of DKK 8.0–8.4 billion, and a combined ratio of 81%, the company is betting on operational synergies, underwriting discipline, and a de-risked investment strategy to deliver sustained growth. Let's dissect the feasibility of these goals and their implications for investors.

The Synergy Engine: Unlocking Value from Integration

At the core of Tryg's ambitions is the integration of its 2021 acquisitions—Trygg-Hansa (Swedish operations) and Codan Norway—into its operations. These deals were expected to generate DKK 900 million in synergies, with 80% coming from cost savings in areas like administration, distribution, and claims processing, and 20% from commercial opportunities such as cross-selling and pricing optimization.

While the integration process is still ongoing, progress is evident. The synergy target aligns with Tryg's 2024 performance, which saw a DKK 930 million improvement in operational efficiency. This suggests that the integration is on track to deliver its full potential by 2027. The combined entity's scale—now serving 9 million customers across Denmark, Norway, and Sweden—provides economies of scale in underwriting, IT systems, and risk management, further fueling profitability.

Underwriting Excellence: The Combined Ratio at 81%

A combined ratio of 81%—the ratio of claims and expenses to premiums—would represent a significant improvement from the 84.2% reported in Q1 2025. Achieving this target hinges on three pillars:

1. Cost Discipline: Streamlining operations through automation and digitization. For example, Tryg aims for 55% of digitally reported claims to be processed via straight-through processing by 2027, reducing manual intervention and lowering administrative costs.
2. Pricing Power: Leveraging data analytics to refine pricing models, particularly in high-margin segments like motor and liability insurance.
3. Risk Management: Mitigating large-claim volatility through reinsurance and underwriting rigor.

The shift to a “technical excellence” strategy—focusing on underwriting quality and loss ratios—is critical here. If achieved, the 81% combined ratio would place Tryg among the most profitable insurers in the Nordic region.

Strategic Initiatives: Scale & Simplicity

Tryg's “Scale & Simplicity” initiative aims to reduce complexity in its operations and investment portfolio. A key move was replacing DKK 7.4 billion in equities and corporate bonds with short-duration Nordic covered bonds, which carry lower capital charges. This shift:
- Improves capital efficiency: Reducing the risk-based capital ratio, allowing more capital to be deployed profitably.
- Reduces volatility: Lower exposure to equity markets and interest rate swings stabilizes returns.

The result is a solvency ratio expected to drop to around 195% by year-end 2024, from an earlier high of 200%, signaling a more optimal capital structure without compromising safety.

ROE: The 35%–40% Target

Tryg's ROE target is underpinned by a virtuous cycle:
1. Synergy-Driven Margin Expansion: The DKK 900 million in synergies directly boost pre-tax margins.
2. De-Risked Investments: Lower capital charges on the portfolio reduce the cost of capital, elevating returns.
3. Share Buybacks & Dividends: A DKK 2 billion buyback in 2025 and plans to return ~DKK 17–18 billion to shareholders by 2027 shrink equity, amplifying ROE.

Valuation: A Compelling Case for Long-Term Investors

Tryg's current price-to-book ratio of ~1.5x is reasonable given its fortress balance sheet and growth trajectory. If the ROE target is met, the valuation could expand further. For instance, a 40% ROE would justify a P/B of 2.0x–2.5x, especially if peers trade at similar or higher multiples.

Risks to Consider

• Integration Hurdles: Delays or cost overruns in harmonizing IT systems or labor agreements could dent synergies.
• Market Volatility: While the investment strategy reduces risk, extreme equity market declines could pressure returns.
• Regulatory Scrutiny: Changes in capital requirements or pricing rules could disrupt underwriting margins.

Investment Thesis

Tryg's 2027 targets are ambitious but achievable, given the progress to date and the structural tailwinds of scale, de-risking, and digital transformation. The company's focus on sustainable profitability—not just growth—aligns with the preferences of long-term shareholders. With a robust capital base, clear synergy pathways, and a shareholder-friendly payout policy, Tryg is well-positioned to deliver returns that justify its valuation.

For investors seeking stability and upside in the Nordic insurance sector, Tryg offers a compelling mix of defensive characteristics and growth potential. The road to 2027's targets is clear—execution will be the key.

Final Takeaway: Tryg's 2027 targets are a testament to its strategic discipline. With synergies materializing and a de-risked portfolio, investors can be bullish about the company's ability to sustain ROE above 35%—making it a buy for portfolios seeking resilience and growth.