Tryg A/s · OMXCOP:TRYG
Tryg A/s — Q4 2020 Earnings Presentation
63 slides from Tryg A/s's earnings presentation, February 2021
Slide 1: Q4 2020 results
Q4 2020 results Investor presentation
Slide 2: Contents and Disclaimer
Contents • Highlights Q4 2020 3 Disclaimer • Premiums and portfolio 17 Certain statements in this presentation 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 histor
Slide 3: Financial highlights Q4 2020
1 | HIGHLIGHTS Q4 2020 Financial highlights Q4 2020 1 2 3 4 5 Pre-tax profit of DKK 1,223m Investment income of DKK Solvency ratio of 183 and Q4 Recommended offer for RSA 86.3% Combined ratio (DKK 940m) 513m (DKK 198m) DPS of 1.75 Insurance Group plc Extraordinary dividend 1,223 Ordinary dividend 86
Slide 4: Technical result higher than Q4 2019
1 | HIGHLIGHTS Q4 2020 Technical result higher than Q4 2019 Group (DKKm) Private, DK & NO (DKKm) Commercial, DK & NO (DKKm) Q4 2019 Q4 2020 Q4 2019 Q4 2020 Corporate (DKKm) Sweden (DKKm) Q4 2019 Q4 2020 Q4 2019 Q4 2020 • Private – Run-off Q4 2020: DKK 12m or 0.4% (DKK 33m or 1.1%) • Commercial – Run
Slide 5: Customer highlights Q4 2020
1 | HIGHLIGHTS Q4 2020 Customer highlights Q4 2020 1 2 3 Transactional Net Promoter Score (TNPS) Number of products per customer TryghedsGruppen paid out the member bonus (%) 4.0 +18% 3.9 3.8 Q4 2019 Q4 2020 Target 2020 Q4 2019 Q4 2020 Target 2020 Q4 2019 Q4 2020 • Transactional Net Promoter Score (
Slide 6: COVID-19, helicopter view
1 | HIGHLIGHTS Q4 2020 COVID-19, helicopter view Financial impact Q1-Q4 2020 Number of claims DK (‘000) Number of claims NO (‘000) 4% 5% 2019 2019 2020 2020 74% 17% -9% 5% Gross impact Expenses Total COVID-19 impact Motor, Content, accident etc Travel resinsurance Travel insurance Travel Motor Prope
Slide 7: Alka synergies status update
1 | HIGHLIGHTS Q4 2020 Alka synergies status update Targeted benefits 2019-2021 • Full run rate synergies expected impact in 2021 of DKK 300m • Realised synergies of DKK 176m in 2020 demonstrating that Tryg is slightly ahead of plan for delivering synergies. • DKK 46m achieved in Q4 2020 • DKK 19m f
Slide 8: Strategic initiatives
1 | HIGHLIGHTS Q4 2020 Strategic initiatives Claims Excellence Product & Service Innovation Financial Target DKK 600m – delivered as promised Premium target of DKK 1bn in 2020+ - delivered as promised 640 1.060 Accumulated total saving from Claims Excellence at DKK New market demands addressed throu
Slide 9: All financial targets were achieved in 2020
1 | HIGHLIGHTS Q4 2020 Financial targets have been realised Technical result Expense ratio Combined ratio ROE Targets DKK 3,300m ~14 ≤ 86 (≥21%)* Result DKK 3,495m 14.1% 84.5% 22.5% All financial targets were achieved in 2020 * ROE target ≥21% was suspended in March 2020 due to investment losses in
Slide 10: Shareholders' remuneration
1 | HIGHLIGHTS Q4 2020 Shareholders’ remuneration Shareholder remuneration since 2012 Strong focus on shareholders’ remuneration Extraordinary dividend 8.45 3.54 3.31 Extraordinary buy back 3.40 3.50 1.65 Ordinary dividend Aim for a nominal stable increasing ordinary dividend 3.20 2.60 (annual) 7.00
Slide 11: Recommended offer for RSA Insurance Group plc
1 | HIGHLIGHTS Q4 2020 Recommended offer for RSA insurance Group plc Tryg will establish the largest non-life insurer in … While realising ~DKK 900m in synergies and delivering All while becoming a top three player in all Scandinavia attractive returns Scandinavian markets Tryg technical result pre
Slide 12: Strategic rationale behind the proposed acquisition
1 | HIGHLIGHTS Q4 2020 Strategic rationale behind the proposed acquisition A B C Establish the largest non-life Become top 3 insurer in Sweden Diversify the business and insurer in Scandinavia1 and Norway leverage best practice Gross premiums earned, DKKbn Sweden market shares2, % Technical result,
Slide 13: Financial rationale behind the proposed acquisition
1 | HIGHLIGHTS Q4 2020 Financial rationale behind the proposed acquisition D E F Harvest significant synergies Deliver value for shareholders Accelerate dividend capacity • Annual potential pre-tax synergies of • Expected ROI at ~7% • Significant long-term potential to ~DKK 900m to be fully realized
Slide 14: A detailed 2021 Outlook
1 | HIGHLIGHTS Q4 2020 A detailed 2021 Outlook Tryg stand-alone outlook for 2021 A B C Tryg expects a technical result between Investment income between DKK 0-200m Other income and costs in the P&L are DKK 3.3 – 3.7bn expected between DKK – 150 to -250m The range is driven by the natural volatility
Slide 15: Premiums and portfolio
Premiums and portfolio
Slide 16: Group premiums up 7.4% in Q4
2 | PREMIUMS AND PORTFOLIO Group premiums up 7.4% in Q4 Gross earned premiums development (local currencies) Local currencies Local currencies DKKm Q4 2020 Q4 2019 Q4 2020 Q4 2019 Private 3,245 3,059 9.0% 7.6%* 7.4 5.6 Commercial 1,132 1,079 7.2% 4.3%* Corporate 973 987 2.0% 1.1% Q4 2019* Q4 2020 Sw
Slide 17: Private - average prices
2 | PREMIUMS AND PORTFOLIO Private - average prices House insurance DK NO • DK: 3.1% (Q3 2.8%) positive development reflects price adjustments • NO: 0.0% (Q3 0.8%) partly reflected in large partner agreements negotiation Average price Denmark Norway House insurance 5,300 6,200 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q
Slide 18: Customer retention remains at very high levels
2 | PREMIUMS AND PORTFOLIO Customer retention remains at very high levels Private DK NO • DK: Retention fell to 90.1% (91.6%) and was driven by the outflow of customers from the Nordea agreement - retention was 91.3% excluding Nordea • Nordea churn more than offset by new sales to Danske Bank custom
Slide 19: Claims and expenses
Claims and expenses
Slide 20: Underlying claims ratio improving
3 | CLAIMS AND EXPENSES Underlying claims ratio improving Claims ratio, net (Commercial DK & NO) Group underlying claims ratio at 72.8, 60bps better than Q4 2019 Private underlying claims ratio at 69.0, 20bps better than Q4 2019 “Expected FY 2021 underlying claims ratio better than FY 2020” Going fo
Slide 21: COVID-19 cases and recent development in DK and NO
3 | CLAIMS AND EXPENSES COVID-19 cases and recent development in DK and NO COVID-19 cases per day in Denmark COVID-19 cases per day in Norway Most recent developments in DK and NO Denmark and Norway were hit by a second wave starting late November On Dec 25th, Denmark experienced a nationwide lockdo
Slide 22: COVID-19 financial impact
3 | CLAIMS AND EXPENSES COVID-19 financial impact Gross Q1 Q2 Q3 Q4 YTD • The impact is calculated by comparing to a normalised level of frequency Group and average claims level for specific lines of business Travel -255 10 64 31 -150 Motor 35 33 10 28 106 • The Q4 net impact was a positive with DKK
Slide 23: Large claims, weather claims and run-off
3 | CLAIMS AND EXPENSES Large claims, weather claims and run-off Large claims, net DKKm Weather claims, net DKKm Expected annual Expected annual level 2020: DKK 550m level 2020: DKK 600m 550 600 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q4 Q4 2010 2011 2012 2013 2014 2015 2016 2017 2018
Slide 24: FY Expense ratio of 14.1 in line with 2020 target
3 | CLAIMS AND EXPENSES FY Expense ratio of 14.1 in line with 2020 target Expense ratio • Efficiency initiatives in 2017 brought down overall costs • Investments in digitalisation will partly be financed through efficiency gains • Expense ratio target for 2020 around 14% 15.7 14.0 14.4 14.2 14.1 14.
Slide 25: Investment, capital and targets
Investment, capital and targets
Slide 26: Total investments
4 | INVESTMENT, CAPITAL AND TARGETS Investments – split in match & free portfolio Match portfolio split Free portfolio split DKKm Splitting up the portfolio ‘risk-wise’ Emerging markets Inflation linked bonds Investment grade 2% Equities High yield Match Free portfolio portfolio DKK 28.1bn DKK 12.4b
Slide 27: Investment return Q4 2020 – low risk remains key
4 | INVESTMENT, CAPITAL AND TARGETS Investment return Q4 2020 – low risk remains key Key figures investments Q4 2020 Q4 2019 2020 2019 • Total net investment result of DKK 513m in Q4, mainly driven by the free (DKKm) portfolio return Free portfolio 513 226 585 857 • Free portfolio returned approxima
Slide 28: Solvency position Q4 2020
4 | INVESTMENT, CAPITAL AND TARGETS Solvency position Q4 2020 Own funds walk • Solvency ratio based on the Partial Internal Model is 183 (Q3 2020: 214). 9.774 • Own Funds (OF) is primarily impacted by 1.038 2.115 187 8.884 Tier 2 2.282 Additional Tier 1 2.428 Core Equity Tier 1 • Strong Q4 organic c
Slide 29: Tier 1 & Tier 2 instruments
4 | INVESTMENT, CAPITAL AND TARGETS Tier 1 & Tier 2 instruments Tier 1 funds can be maximum 25% of Core Equity Tier 1 • The maximum capacity of additional Tier 1 instruments is a function of the Core Equity Tier 1, which can be up to 25% of the 5,374 Core Equity Tier 1. Tryg has DKK 1,082m of Tier 1
Slide 30: Solvency capital requirement build up Q4 2020
4 | INVESTMENT, CAPITAL AND TARGETS Solvency capital requirement build up Q4 2020 Solvency capital requirement building blocks • The SCR at the end of Q4 was DKK 4,855m • Tryg uses a partial internal model where only the insurance risk 6 865 1.263 is modelled internally (that is the non-life and the
Slide 31: Solvency ratio historical development
| INVESTMENT, CAPITAL AND TARGETS 4 Solvency ratio historical development Approval of new Both 9M dividends partial internal model, (announced in Final approval of the November) and Q4 very strong Q2 result Alka acquisition from dividend (announced and dividend decision the Danish authorities with F
Slide 32: Solvency ratio sensitivities
4 | INVESTMENT, CAPITAL AND TARGETS Solvency ratio sensitivities Q4 +20% -20% +30% -30% +20% -20% +100 bps -100 bps +100 bps -100 bps +100 bps -100 bps 100 bps -100 bps +20% -20% +20% -20% 2020 Equity Equity Property Interest Spread Spread Spread NOK/DKK SEK/DKK (Covered) (Corporate) (Government) •
Slide 33: A detailed 2021 Outlook
1 | HIGHLIGHTS Q4 2020 A detailed 2021 Outlook Tryg stand-alone outlook for 2021 A B C Tryg expects a technical result between Investment income between DKK 0-200m Other income and costs in the P&L are DKK 3.3 – 3.7bn expected between DKK – 150 to -250m The range is driven by the natural volatility
Slide 34: It is important to know your investment case
It is important to know your investment case ”Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” John D. Rockefeller 34
Slide 35: Q4 roadshows & conferences
5 | ROADSHOWS & CONFERENCES Q4 roadshows & conferences Date Place Participants from Tryg Arranged by Morten Hübbe, CEO 26/01/2021 Copenhagen roadshow Barbara Plucnar Jensen, CFO Danske Bank Investor Relations Morten Hübbe, CEO Barbara Plucnar Jensen, CFO 27/01/2021 to 09/02/2021 Europe, US, Canada,
Slide 36: Background material
Background material
Slide 37: Tryg's equity story – a leading Nordic non-life insurer
5 | BACKGROUND MATERIAL Tryg’s equity story – a leading Nordic non-life insurer Tryg 2018 – 2020: Strengthening the core, while embracing the future Product & Service Claims Excellence Innovation DKK 600m in claims cost reduction +DKK 1bn in new Financial targets 2020 Customer targets 2020 products
Slide 38: Why invest in Tryg?
5 | BACKGROUND MATERIAL Why invest in Tryg? High insurance penetration in the Nordics Pre-tax result by division (YE 2019 data) Premiums per capita (USD), 2017 1,557 1,519 Non-life Life 1,296 1,224 Banking Other Tryg Topdanmark Alm. Brand Sampo Gjensidige Storebrand Denmark Norway Germany France UK
Slide 39: Tryg at a glance
5 | BACKGROUND MATERIAL Tryg at a glance Gross premium split by products 2020 • Tryg goes back to 18th century. • Very strong brand position especially in Denmark. Motor 11.0% Workers’ comp • Non-life insurance in Denmark, Norway and Sweden. 30.0% 12.0% Health & accident Liability • Approx. 80% reta
Slide 40: Premiums and reserves by lines of business
5 | BACKGROUND MATERIAL Premiums and reserves by lines of business Gross premium by products 2020 Gross claims reserve by products 2020 6.0% 11.0% 5.0% 15.0% Motor Motor 30.0% 7.0% 12.0% Workers’ comp Workers’ comp Health & accident Health & accident 10.0% Liability Liability Fire & property - priva
Slide 41: Gross premium split by geography
5 | BACKGROUND MATERIAL Gross premium split by geography DK: Gross premium by products 2020 SE: Gross premium by products 2020 3% Motor Motor Health and accident Workers comp Liability Health and accident Fire & property - private Liability Fire and property comm Fire & property - private Other Fire
Slide 42: The run-off cycle
5 | BACKGROUND MATERIAL The run-off cycle Run-off development • Initial assessment of the claims was DKK 18,000 but Tryg reserved for DKK 20,000 adding some 3 years conservatism to best estimate. Run-off: +2,000 • At the time of setting up the claims reserves and Claims estimate: -18,000 18.000 book
Slide 43: Combined ratio development since IPO
5 | BACKGROUND MATERIAL Combined ratio development since IPO 98.8 92.2 93.2 89.0 88.2 88.2 87.7 87.8 85.9 86.8 86.7 85.1 85.1 86.6 85.2 84.4 84.2 84.4 84.5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Since 10Y 5Y avg. IPO avg. 43
Slide 44: Structure of the Nordic insurance market
5 | BACKGROUND MATERIAL Structure of the Nordic insurance market Nordic (EUR 26.7bn as at Q4 2019) Denmark (DKK 57.5bn/EUR 7.7bn as at Q4 2019) Tryg Tryg 10.8% Topdanmark Topdanmark 20.3% 22.9% 4.7% If If Codan Codan 43.0% Gjensidige 3.8% Gjensidige 15.7% Länsforsikringar Percentage Alm. Brand 5.1%
Slide 45: Distribution of new sales 2020
5 | BACKGROUND MATERIAL Distribution of new sales 2020 Private 6% Customer services 1% Franchise 12% Outbound Own sales Customer service Online DK Web and external sales Outbound DK Affinity NO SE Atlantica/Bil sport/MC Enter Sales agents Other Web 8% Danske Bank Commercial Customer centre Customer
Slide 46: Things that you may not know
5 | BACKGROUND MATERIAL Things that you may not know • Motor insurance prices relatively similar in DK and the UK but cost of the insured good (the car) substantially higher in DK driven by the registration tax for passenger cars (100%-150% of taxable value on new vehicles approx.). • Motor insuranc
Slide 47: Things that you may not remember
5 | BACKGROUND MATERIAL Things that you may not remember • Our maximum annual net exposure to a single large Property claim is DKK 100m which falls to DKK 75m in case of a second event and DKK 50m in case of a third/fourth event, maximum exposure is DKK 25m thereafter. This is based on our general r
Slide 48: IBM study from 2007, probably little has changed
5 | BACKGROUND MATERIAL IBM study from 2007, probably little has changed Danish customers completely and strongly agree • Overall I am very satisfied with the services of my insurance company • My insurance agent only sold me insurance coverage that I really needed • My present insurance coverage of
Slide 49: Population growth (2000-2019)
5 | BACKGROUND MATERIAL Population growth (2000-2019) Population development in Denmark in ‘1,000 DK 9% Population development in Norway in ‘1,000 NO 19% 49
Slide 50: Organisational and remuneration structure
5 | BACKGROUND MATERIAL Organisational and remuneration structure Organisation chart Remuneration structure CEO Morten Hübbe The Executive Board are remunerated according to Tryg’s remuneration policy: CFO CCO Base salary COO • Barbara Plucnar Johan Kirstein Lars Bonde Jensen Brammer • Pension o 25%
Slide 51: Corporate Responsibility in Tryg
5 | BACKGROUND MATERIAL Corporate Responsibility in Tryg Corporate Responsibility Board Chair: CFO, Barbara Plucnar Jensen Corporate Responsibility team Procurement/ Legal/ Investments Investor Communications Sourcing HR Facilities Compliance Relations Claims Private Commercial Corporate Tryg’s inde
Slide 52: Corporate Responsibility strategy
5 | BACKGROUND MATERIAL Corporate Responsibility strategy Tryg wants to contribute to a more sustainable society, support our suppliers and help our customers make more sustainable choices. Tryg is to integrating sustainability into every corner of Tryg. • 50% CO2 intensity reduction from equity por
Slide 53: Environmental, Social and Governance (ESG) data
5 | BACKGROUND MATERIAL Environmental, Social and Governance (ESG) data Climate and environmental data Unit 2020 2019 2018 2017 2016 Total direct and indirect carbon emissions Tonnes 2,501 5,127 5,386 Car travel Tonnes 852 880 1,594 Air and train travel Tonnes 474 2,443 2,545 Total waste Kg 226,027
Slide 54: Key figures 2020 and Consensus 2020-2022
5 | BACKGROUND MATERIAL Key figures 2020 and Consensus 2020-2022 Consensus DKKm 2020A 2020 2021 2022 Gross premium income 22,653 22,614 23,439 24,012 Technical result 3,495 3,488 3,497 3,606 Investment income, net 311 179 158 161 Pre-tax profit 3,541 3,409 3,466 3,739 Net income 2,773 2,614 2,708 2,
Slide 55: Appendix
Appendix Follow us on Twitter: @TrygIR
Slide 56: Group
6 | APPENDIX Group Gross premiums Gross premiums Combined ratio DKKm % % * Excluding Alka Claims ratio, net of reinsurance Expense % ratio % 56
Slide 57: Private
6 | APPENDIX Private Gross premiums Combined ratio DKKm % * Excluding Alka Claims ratio, net of reinsurance Expense ratio 57
Slide 58: Commercial
6 | APPENDIX Commercial* Gross premiums Combined ratio DKKm % Claims ratio, net of reinsurance Expense ratio 58 * Less than 100 employees or less than DKK 100m turnover
Slide 59: Corporate
6 | APPENDIX Corporate* Gross premiums Combined ratio DKKm % Claims ratio, net of reinsurance Expense ratio 59 * More than 100 employees or more than DKK 100m turnover
Slide 60: Sweden
6 | APPENDIX Sweden Gross premiums Combined ratio DKKm % Claims ratio, net of reinsurance Expense ratio 60
Slide 61: Geographical combined ratio
6 | APPENDIX Geographical combined ratio Denmark Sweden Norway 61
Slide 62: Corporate history
6 | APPENDIX Corporate history • 1728, Copenhagen experienced what was later to be known as the Copenhagen Fire of 1728. The fire heightened public awareness of the need for insurance • 1731, The oldest component of Tryg’s history was the Danish insurance company Kjøbenhavns Brand was established by
Slide 63: Economic key figures
6 | APPENDIX Economic key figures Denmark Norway % 2020E 2021E % 2020E 2021E GDP Growth -4.5 3.0 GDP Growth -3.5 4.0 Inflation 0.6 0.9 Inflation 3.1 2.5 Unemployment 5.1 4.9 Unemployment 5.0 3.3 Current account balance in Current account balance in 8.3 7.0 4.1 5.2 % of GDP % of GDP Budget balance in