Tryg A/s · OMXCOP:TRYG
Tryg A/s — Investor Day (June 2012)
57 slides from Tryg A/s's investor day presentation, Jun 19, 2012
Slide 1: Capital Markets Day
Capital Markets Day London - 19 June 2012
Slide 2: Agenda
Agenda 09.00-09.30: Registration and coffee Introduction and welcome A roadmap to value creation Expenses 11.00-11.15: Coffee break Claims costs Reserves and capital Combined ratio level Concluding remarks 13.30-15.00: Lunch 2
Slide 3: Disclaimer
Disclaimer Certain statements in today’s presentations are based on the beliefs of our management as well as assumptions made by and information currently available to the management. Forward-looking statements (other than statements of historical fact) regarding our future results of operations, fi
Slide 4: A roadmap to value creation
co) = © > fe) =) Q © € Oo © Se) = <x Cc eo) a) 40) cc) i UO
Slide 5: Profitability, profitability and profitability
Profitability, profitability and profitability Premium growth in reporting currency (%) Combined ratio 14 102 11 8 98 5 94 2 90 -1 86 -4 82 2004 2005 2006 2007 2008 2009 2010 2011 Q1 12 2004 2005 2006 2007 2008 2009 2010 2011 Q1 12 If Tryg Gjensidige Tryg excl. Moderna If… Tryg Gjensidige 2005-2009
Slide 6: New structure, financial targets, KPIs and incentives
New structure, financial targets, KPIs and incentives Clear business area and responsibility New financial targets structure CEO Private Commercial Corporate SE/FI Claims Finance Focus Changed incentives for From 20 KPI’s to 5 staff and management 2012 Growth Profitability 6
Slide 7: Strong customer satisfaction and high level of retention rates drive value creation
Strong customer satisfaction and high level of retention rates drive value creation Customer satisfaction in Denmark 2011 Private - retention rate 77 DK 92% 76 75 90% 74 88% NO 73 72 86% 71 84% 2009 2010 2011 T ryg C odan T opdanmark 82% A lm. B rand I ndus try 05 06 06 07 07 08 08 09 09 10 10 11 11
Slide 8: New value drivers
New value drivers Premium increases Size/influence Cost reductions Premium increases Commercial initiatives New House Cost Insurance Premium increases reductions New House Commercial Insurance initiatives Next Level New Nordic Sourcing Contents Premium increases Next Level Sourcing 2009 2010 2011 20
Slide 9: Strategic initiatives
Strategic initiatives - Value creation in mature markets Increased price differentiation Commercial back on track Sweden and Finland in balance Expenses/claims reductions 9
Slide 10: Changes in the environment create need for new tariffs
Increased price Changes in the environment create differentiation need for new tariffs 12,500 Burglary trend in Danish market Claims ratio - Contents insurance in DK 12,000 100% 11,500 99% 99% 11,000 10,500 98% 98% 10,000 97% 9,500 96% 9,000 95% 8,500 95% 8,000 94% 93% 7 8 8 9 9 0 0 1 1 00 00 01 01
Slide 11: Private contents
Increased price Reversing a negative trend differentiation Product examples Tryg was first mover with mileage as part of the motor tariff in 2005. Personal motor It is time to be first mover again: House -New Nordic Contents insurance represents a game changer. Private contents Implemen
Slide 12: Turnaround of Commercial business
Commercial back on Turnaround of Commercial business track Combined and gross claims ratio Commercial premiums and earnings 14,000 115 11,572 12,000 105 10,000 95 8,000 85 6,000 75 4,000 65 2,000 55 445 2009 2010 2011 2012 0 Premiums Technical 2009-11 result 2009- Commercial Combined ratio 11 Target
Slide 13: First time as an independent business area
First time as an independent business Commercial back on track area Previous structure New Structure Private and Commercial CEO CEO Direct Partner Corporate CB&BC Claims Finance Private Commercial Corporate SE/FI Claims Finance Selected price increases and pruning Commercial focus areas 2012 - 2015
Slide 14: Challenging growth in Private Sweden
Sweden in balance Challenging growth in Private Sweden Combined ratio in Swedish business segments 120 Gross premium, SEKm 100 80 600 60 500 40 20 400 0 Private Atlantica Bilsport & Product 300 MC direct 200 2010 2011 100 600 Reduction in Private sales, SEKm 0 500 09 09 09 09 10 10 10 10 11 11 11 11
Slide 15: Sweden in balance: focus on profitability
Focus on profitability Sweden in balance Changed risk selection Luxury car development 1.00% 700 0.90% 600 0.80% 0.70% 500 0.60% 400 0.50% 300 0.40% 0.30% 200 0.20% 100 0.10% 0.00% 0 05 20 0 20 1 20 4 20 7 20 0 20 1 20 4 20 7 20 0 20 1 20 4 20 7 20 1 20 4 20 7 20 0 0 1 0 0 1 0 0 0 1 0 0 0 0 1 0 0 10
Slide 16: Up for strategic review
Up for strategic review Finland in balance Strategic review initiated in early 2012 • Divestment • Partnership • Run-off Finland EUR 3.7bn (Q4-11) Tryg 2.2 Other 17.6 If 23.9 Fennia 9.7 Pohjola Tapiola 18 28.6 16
Slide 17: Strategic initiatives
Strategic initiatives - Value creation in mature markets Increased price differentiation Commercial back on track Sweden and Finland in balance Expenses / claims reductions 17
Slide 18: Key messages of today
Key messages of today • Reduction in staff functions Expenses • Optimise Business units • Sourcing Claims costs Reserves and capital Combined ratio target 18
Slide 19: Efficiency is a competitive parameter
Efficiency is a competitive parameter - Low Nordic expense ratios as entry barrier The Nordic region is significantly more cost efficient 35% Efficiency as a barrier to entry 30% 25% 20% 15% 10% Tryg Group Topdanmark Tryg DK Sampo Tryg NO Alm. Brand RSA Admiral Zurich AXA Generali Direct Line Gjensi
Slide 20: Expense improvements among Nordic players
Expense improvements among Nordic players • Competitors have improved their expense ratio during the last 5 years. • Tryg’s expense ratio has remained stable – but with growing nominal expenses. Expense ratio development Lack of expense 21% focus 20% Competitive landscape drives 19% expense focus 20
Slide 21: Premium growth has enabled Tryg to absorb growth in expenses
Premium growth has enabled Tryg to absorb growth in expenses • Almost unchanged gross expense ratio from 2007 to 2011 - but driven by premium increases. Gross premiums earned Total insurance operating expenses 21,000 3,500 3,400 20,000 3,300 19,000 3,200 3,100 26% 26% 18,000 3,000 2,900 17,000 2,800
Slide 22: Focus on expenses helped finance start-up in SE/FI
Focus on expenses helped finance start-up in SE/FI - Focus behind the scenes Expense ratio • Investing in SE/FI financed through reduction in FTE in DK/NO 18.0 SE+FI 70 60 NO 17.0 50 • Strong expense level in DK 40 16.0 30 15.0 20 • Focus on reduction in expenses e.g. DK 10 travel in the period 14.0
Slide 23: Reductions in expenses and claims costs
Reductions in expenses and claims costs • Savings programme will reduce costs by DKK 1bn (excluding inflation). • Split between DKK 400m on expenses and 600m on claims cost. – After redistributing savings from Business Functions, the split between what effects the cost ratio and the claims ratio wil
Slide 24: Saving initiatives per year 2013–2015
Saving initiatives per year 2013–2015 125 300 125 50 Total targeted 2013 2014 2015 savings 24
Slide 25: Major saving initiatives identified per area
Major saving initiatives identified per area Total • Efficiency improvements • Automation & optimisation Business areas • Benefits from Commercial Programme DKK 175m • Optimisation of distribution and sales channels • Group Finance project Business support • Other staff functions • Completion of IT
Slide 26: Flat nominal expense development to reach target of <15 in 15
Flat nominal expense development to reach target of <15 in 15 - requires total savings of approx. DKK 300m in 2015 3, 900 Forecasted development 3, 700 DKK300m 3, 500 3, 300 Target <15% in 2015 3, 100 2, 900 2, 700 No more 10 in 20 2, 500 2007 2008 2008 2010 2011 E 2012 E 2013 E 2014 E 2015 26
Slide 27: Staff functions increased by 25%
Staff functions increased by 25% Number of full-time employees 1,000 25% 950 900 850 800 750 700 2007 2008 2009 2010 2011 27
Slide 28: Wage drift in Denmark and Norway is stalling
Wage drift in Denmark and Norway is stalling In % 9 7.6 8 7 5.9 5.5 6 4.6 4.5 5 3.9 3.9 4.3 3.5 4 3.1 2.5 2.5 3 2 1 0 2008 2009 2010 2011 2012 2013 Denmark Norway 28
Slide 29: Optimisation of Group Finance
Optimisation of Group Finance 1 1. We can reduce our service level in “lower value areas” 2. We can work more efficiently 3. We can realise synergies by centralising activities in DK 4. We can source better 5. We can organise ourselves smarter 29
Slide 30: The pilot and the following steps
The pilot and the following steps - Savings of 25% in expenses and 22% in FTEs The pilot: Group Finance -25% 100% - 7% - 11% -7% 75% Budget 2012 2013 2014 Target Next steps 2012-13 2012 Group Strategy Legal & Group IT & Communi- Internal & Quality Finance Facilities cation & Audit Corporate HR Ident
Slide 31: Number of full-time employees towards 2015 will decrease
Number of full-time employees towards 2015 will decrease Expected number of employees towards 2015 External turnover (voluntary) 4,400 - 10% 4,318 12.0 4,300 4,250 4,200 10.0 4,100 8.0 4,000 6.0 3,900 3,900 4.0 3,800 2.0 3,700 2011 Target 2012 2013 2014 Target 2015 2003 2004 2005 2006 2007 2008 2009
Slide 32: Key messages of today
Key messages of today - <15% in 2015 Expenses - Reductions of DKK 300m and DKK 100m in claims DKKm Expenses 4,000 Claims costs 3,800 3,600 3,430 300 3,400 3,200 3,000 2,800 Reserves and capital 2,600 2,400 2,200 2,000 Expenses 2011 Inflation Savings Expenses 2015 Combined ratio target 32
Slide 33: Questions and coffee break
Questions and coffee break 33
Slide 34: Key messages of today
Key messages of today - <15% in 2015 Expenses - Reductions of DKK 300m and DKK 100m in claims • Procurement Claims costs • Process improvements • Sourcing Reserves and capital Combined ratio target 34
Slide 35: Claims area
Claims area High quality of claims handling Low level of complaints Maintain High customer satisfaction Procurement power Customer service/differentation Improve Control of suppliers Processes and reduce FTEs 35
Slide 36: High customer satisfaction in claims handling and low level of complaints
High customer satisfaction in claims handling and low level of complaints • 87% of DK customers are satisfied • 80% of NO customers are satisfied • 70-72 % of very satisfied customers will recommend Tryg Customer satisfaction 2011 Claims complaints relative to market share 65 70 61 25 20 60 15 50 10
Slide 37: Savings in claims - completion of NLS and other savings
Savings in claims - completion of NLS and other savings 800 700 700 600 100 500 400 300 250 200 100 100 250 0 Total savings on 2012 2013 2014 2015 claims 37
Slide 38: Examples of initiatives
Examples of initiatives Indirect Contents Motor Expected saving: DKK Expected saving: DKK 40m p.a. 110m p.a. Expected saving: DKK 130m p.a. Health Building Expected saving: DKK 40m p.a. Expected saving: DKK 180m p.a. 38
Slide 39: Sourcing Factory: eAuctions
Sourcing Factory: eAuctions Example of successful eAuction eAuction and outcome • Higher competitive pressure Higher savings • Higher number of bids • Faster negotiation Faster process • More structured process Lower • More automated process sourcing • Fewer face-to-face meetings expenses More •Clai
Slide 40: Time-lapsed recording of live eAuction
Time-lapsed recording of live eAuction 40
Slide 41: Examples of initiatives
Examples of initiatives Indirect Contents Motor Expected saving: DKK Expected saving: DKK 40m p.a. 110m p.a. Expected saving: DKK 130m p.a. Health Building Expected saving: DKK 40m p.a. Expected saving: DKK 180m p.a. 41
Slide 42: Car crash repair – spendings of approx. DKK 3bn
Car crash repair – spendings of approx. DKK 3bn Distribution of spend in motor hull 27 Crash repair Percent Glass repair Total loss 8 65 42
Slide 43: Film clip – Handling motor claims
Film clip – Handling motor claims http://www.youtube.com/watch?v=pVfzRTResLg&feature=youtu.be 43
Slide 44: Three beneficiaries in motor claims handling
Three beneficiaries in motor claims handling Tryg Benefits from increased quality, customer satisfaction and documented lower costs than market. Customer Partner Benefits from fast response, high quality and Benefits from speedy processes and benefits such as courtesy car, cleaning of car higher vol
Slide 45: Repair costs in Denmark are gaining ground
Repair costs in Denmark are gaining ground Development in average repair cost (moving average) Cars and vans excl. glass Development in average repair cost (moving average) In DKK Cars and vans excl. glass Other 11,200 11,000 Other 10,800 10,600 10,400 Tryg 10,200 10,000 '11 2 1 1 '11 11 1 2 1 1 '12
Slide 46: Key messages of today
Key messages of today - <15% in 2015 Expenses - Reductions of DKK 300m and DKK 100m in claims - Reductions of DKK 700m Claims costs - Claims ratio, net <75% DKKm Claims cost 16,500 Reserves and capital 16,000 ? 750 700 15,500 15,000 15,000 14,500 Combined ratio target 14,000 13,500 13,000 Claims lev
Slide 47: Questions
Questions 47
Slide 48: Key messages of today
Key messages of today - <15% in 2015 Expenses - Reductions of DKK 300m and DKK 100m in claims - Reductions of DKK 700m Claims costs - Claims ratio, net <75% Reserves and capital Combined ratio target 48
Slide 49: KPMG loss reserve review confirms Tryg’s own view
KPMG loss reserve review confirms Tryg’s own view Reserves consist to a great extent of Bodily Injury related claims BI – duration >4 years Property & other short tail Status Q1 2012: • Total reserves of DKK 36.4bn Workers' comp 39% • Loss reserves DKK 27bn 28% 72% • Increased duration in Denmark ~
Slide 50: Growth consumes capital
Growth consumes capital DKKm Gross earned premiums 21,000 20,000 19,000 18,000 17,000 16,000 15,000 2005 2006 2007 2008 2009 2010 2011 DKKm Capital 11,000 10,000 9,000 8,000 2005 2006 2007 2008 2009 2010 2011 50
Slide 51: Payout model - transparent but unstable
Payout model - transparent but unstable • Tryg’s payout model has been transparent, but has also been vulnerable to: • Fluctuations in technical and investment result • Change in interest rates (effect on Norwegian pension scheme) Shareholder remuneration 40 Average 2006-2011 35 Payout DKK 1.3bn Pay
Slide 52: Key messages of today
Key messages of today - <15% in 2015 Expenses - Reductions of DKK 300m and DKK 100m in claims - Reductions of DKK 700m Claims costs - Claims ratio, net <75% Reserves and capital External review confirmed Combined ratio target 52
Slide 53: Questions
Questions 53 | Tryg |
Slide 54: Key messages of today
Key messages of today - <15% in 2015 Expenses - Reductions of DKK 300m and DKK 100m in claims - Reductions of DKK 700m Claims costs - Claims ratio, net <75% Reserves and capital External review confirmed Combined ratio target 54
Slide 55: Combined ratio target
55 Ex p 80 82 84 86 88 90 92 en CR 0% 10% 20% 30% 40% 20 se ta 03 /c rg la et im 20 Cl s < 90 04 ai in m s it i at 20 in iv 05 fla es t io n ROE after tax 20 W ab 06 ea Combined ratio th ov er e 20 CP 07 an I Le d gi sl la 20 rg 08 at io e n cl ai 20 et m 09 c s (W C, 20 ta 10 xe s. 20 .) Combined r
Slide 56: Key messages of today
Key messages of today - <15% in 2015 Expenses - Reductions of DKK 300m and DKK 100m in claims - Reductions of DKK 700m Claims costs - Claims ratio, net <75% Reserves and capital External review confirmed Combined ratio at 90 or Combined ratio target below from Q3 2013 ROE of 20% 56
Slide 57: Questions
Questions Further information Visit tryg.com Follow us on twitter.com/TrygIR 57