Tryg A/s · OMXCOP:TRYG
Tryg A/s — Q3 2019 Earnings Presentation
52 slides from Tryg A/s's earnings presentation, 2019
Slide 1: Q3 2019 results
Follow us on Twitter: @TrygIR Q3 2019 results Investor presentation
Slide 2: Contents
Contents Highlights Q3 2019 3 Premiums and portfolio 8 Claims and expenses 12 Investment, capital and targets 16 Roadshows & Conferences 24 Background material 25 Appendix 45 Disclaimer Certain statements in this presentation are based on the beliefs of our management as well as assump
Slide 3: Financial highlights Q3 2019
Financial highlights Q3 2019 - Higher technical result and lower investment income - Q3 dividend of DKK 1.70 per share and solvency ratio of 169 Pre-tax profit (DKKm) • Pre-tax profit of DKK 779m (DKK 825m) driven by: • Technical result of DKK 870m (DKK 761m) positively impacted by Alka synergies, l
Slide 4: Customer highlights Q3 2019
Customer highlights Q3 2019 TNPS • Transactional Net Promoter Score (TNPS) of 67 (66) • Retention improved in all business areas • Number of products per customer increased Number of products per customer • Awareness of customer bonus improved, especially among non-customers - 29% in Q3 2019 vs 21%
Slide 5: Higher technical result driven by the inclusion of Alka and improved underlying performance
Higher technical result driven by the inclusion of Alka and improved underlying performance Group (DKKm) Private, DK & NO (DKKm) Commercial, DK & NO (DKKm) Corporate (DKKm)* Sweden (DKKm) * Large claims level was DKK 13m (1.3%) in Q3 2019 vs. DKK 193m (19.5%) in Q3 2018 5
Slide 6: Alka synergies status update
Alka synergies status update Targeted benefits 2021 DKKm • Full run rate synergies impact in 2021 of DKK 300m • 25% impact expected in 2019, 50% impact in 2020 • DKK 23m achieved in Q3 2019, half of it is costs • General costs reduction (sponsorship, staff etc.) • Synergies also coming from improved
Slide 7: Shareholders’ remuneration
Shareholders’ remuneration Shareholder remuneration since 2012 Strong focus on shareholders’ remuneration DKK • Q3 DPS 1.70 (1.65) 3.5 • Aim for a nominal stable increasing ordinary dividend (annual) • Quarterly dividend evenly distributed in different quarters • High proftibility and low growth imp
Slide 8: Premiums and portfolio
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Slide 9: Group premiums up 20.0% in Q3
Group premiums up 20.0% in Q3 • Group premiums were up 20.0% in local currencies, or 6.8% excluding Alka • Private growth of 8.6% ex. Alka with positive trends in Denmark and Norway • Commercial growth of 4.8% ex. Alka with positive trends in Denmark and Norway • Top-line fall in Corporate Norway (f
Slide 10: Private - average prices
Private - average prices House insurance – average price (index 2011 = 100) Average price development Y/Y 1.4% 2.3% • DK: 1.4% positive development (Q2 1.2%) (Q2 2.6%) reflects price adjustments Average price: • NO: 2.3% positive development 5,100 6,200 reflects primarily price adjustments Motor ins
Slide 11: Customer retention improved in all areas
Customer retention improved in all areas Private DK • DK: customer retention at 91.7% (91.0%) highest level in five years • NO: customer retention up to 87.1% (86.6%) showing an significant improvement Commercial • DK: customer retention up to 88.6% (87.9%) showing strong improvement • NO: customer
Slide 12: Claims and expenses
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Slide 13: Underlying claims ratio improving
Underlying claims ratio improving Group underlying claims ratio at 72.7, 60bps better than Q3 2018 Claims ratio, net (Commercial DK & NO) Private underlying claims ratio at 69.1, 70bps better than Q3 2018 Underlying claims ratios in all quarters in 2018 have been adjusted for Alka “Expected FY 2019
Slide 14: Large claims, weather claims and run-off
Large claims, weather claims and run-off Large claims, net DKKm Expected annual Weather claims, net DKKm Expected annual level 2019: DKK 550m level 2019: DKK 600m Claims reserves discounting rate (%) Run-off net, effect on combined ratio (%) 14
Slide 15: Expense ratio of 13.9
Expense ratio of 13.9 Expense ratio • The introduction of efficiency initiatives in 2017 has ensured a continued focus on cost in the business • Expense ratio target for 2020 around 14% • Investments in digitalisation will somewhat offset further efficiency gains • Higher number of employees driven
Slide 16: Investment, capital and targets
Investment, capital and targets
Slide 17: Investments – Split in Match & Free portfolio
Investments – Split in Match & Free portfolio Total investments DKK 40.7 bn Splitting up the portfolio Match portfolio ‘risk-wise’ Free portfolio DKK 30.0 bn DKK 10.7 bn Sweden DKK 4 bn Norway DKK 9 bn Denmark DKK 17 bn 17
Slide 18: Investment return – low risk remains key
Investment return – low risk remains key Key figures - Investments Different asset classes Geographical exposure (%) DKKm Q3 2019 Q3 2018 2018 Free portfolio 97 101 -33 Match portfolio -69 25 -2 Other financial income and expenses -57 -47 -297 Total investment return -29 79 -332 Group fixed income p
Slide 19: Solvency position Q3 2019
Solvency position Q3 2019 Own funds walk • Solvency ratio based on the Partial Internal Model is 169 (Q2 2019: 171). 9,600 599 -514 • Own Funds (OF) is primarily impacted by 9,100 -46 -44 8,600 • Result Q3 2019 of 599 mDKK 8,100 • Dividends of 514 mDKK 7,600 8,469 8,464 • Actuarial loss on pension l
Slide 20: Capital and solvency ratio development
Capital and solvency ratio development Capital Tiers as % of SCR • Tier 2 cap means that DKK 107m of subordinated loans are not included in Own funds. 2,500 50% • Tier 1 capacity for practical purposes fully utilized, 1,092 22% DKK 126m left as per Q3. CETier 1 • The Danish FSA has explained that a
Slide 21: Solvency ratio sensitivities
Solvency ratio sensitivities 190% 183% 180% 176% 170% 171% 170% 170% 171% 172% 169% 167% 168% 168% 167% 170% 167% 167% 163% 160% 156% 150% 140% 2019 Equity Property Interest Spread Spread Spread NOK/DKK SEK/DKK (Covered) (Corporate) (Government) • The Solvency II ratio shows the highest sensitivity
Slide 22: Targets and outlook
Targets and outlook ✓ 2019 topline growth well above GDP level driven by ✓ Financial targets announced at 2017 CMD portfolio acquisitions, new partner agreements and selected price adjustments ✓ In 2020 a continued good growth in Private & Targets post Alka acquisition Commercial is expected while t
Slide 23: 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 23
Slide 24: Q3 roadshows & conferences
Q3 roadshows & conferences Date Place Participants from Tryg Arranged by Morten Hübbe, CEO 10/10/2019 Copenhagen Barbara Plucnar Jensen, CFO ABG Investor Relations Barbara Plucnar Jensen, CFO 11/10/2019 London Nordea Gianandrea Roberti, Head of IR Lars Bonde, COO 22/10/2019 Montreal DNB Peter Brondt
Slide 25: Background material
Background material
Slide 26: Tryg’s equity story – a leading Scandinavian non-life insurer
Tryg’s equity story – a leading Scandinavian 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 by 2020+ • Technic
Slide 27: Why invest in Tryg?
Why invest in Tryg? Pre-tax result by division (YE 2018 data) High insurance penetration in the Nordics Premiums per capita (USD), 2017 Motor combined ratios Nordics vs international Tryg is a dividend stock DKK Total yield (dividend and buy backs / market cap) at year end 27
Slide 28: Tryg at a glance
Tryg at a glance Gross premium split by products 2018 • Tryg goes back to the 18th century. • Very strong brand position especially in Denmark. • Non-life insurance in Denmark, Norway and Sweden. Percentage • Approx. 80% retail business. Norway Market position: #4 Retention rate - Private Market sha
Slide 29: Premiums and reserves by lines of business
Premiums and reserves by lines of business Gross premium by products 2018 Gross claims reserve by products 2018 Percentage Percentage Run-off net by products Q3 2019 Run-off net by products Q3 2018 Percentage Percentage 29
Slide 30: Gross premium split by geography
Gross premium split by geography DK: Gross premium by products 2018 SE: Gross premium by products 2018 Percentage Percentage NO: Gross premium by products 2018 Run-off net by products 2018 Percentage Percentage 30
Slide 31: The run-off cycle
The run-off cycle We assessed the claim at DKK 18,000 but reserve for DKK 20,000 Run-off development Run-off: 3 years Claims estimate: Claims buffer: • Initial assessment of the claims was DKK 18,000, but Tryg reserved for DKK 20,000 adding some conservatism to best estimate • At the time of setting
Slide 32: Combined ratio development
Combined ratio development 32
Slide 33: Structure of the Nordic insurance market
Structure of the Nordic insurance market Nordic Denmark EUR 25.9bn (as at Q4 2017) DKK 56.4 bn/EUR 7.6bn (as at Q3 2018) Percentage Percentage Norway Sweden NOK 61,4 bn/EUR 6,3bn (as at Q2-2019) SEK 85.9 bn/EUR 8.2bn (as at Q2-2019) Percentage Percentage Fremtind excluding DnB Liv and Sparebank1 Liv
Slide 34: Distribution of new sales 2018
Distribution of new sales 2018 Private DK NO SE Commercial DK NO Corporate DK NO SE 34
Slide 35: Things that you may not know
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 insurance remains a highly attra
Slide 36: Things that you may not remember
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 reinsurance programme. •
Slide 37: IBM study from 2007, probably little has changed
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 offers me enough flexibili
Slide 38: Population growth (2000-2019)
Population growth (2000-2019) Population development in Denmark in ‘1,000 DK 9% Population development in Norway in ‘1,000 NO 19% 38
Slide 39: TryghedsGruppen and its members’ bonus
TryghedsGruppen and its members’ bonus Denmark's ‘biggest’ family Bonus positive effect on retention ‘I expect to be in Tryg next year’ Have heard about Customer bonus 93% Have not heard about Customer Bonus 81% Retention rate increase by 1% gives approx. DKK 50-150m reduction in expenses on group l
Slide 40: Organisational and remuneration structure
Organisational and remuneration structure Organisation chart Remuneration structure The Executive Board are remunerated according to Tryg’s CEO Morten Hübbe remuneration policy: • Base salary CFO CCO • Pension COO Barbara Plucnar Johan Kirstein o 25% of the base salary Lars Bonde Jensen Brammer • Va
Slide 41: Corporate Responsibility in Tryg
Corporate Responsibility in Tryg Our Corporate Responsibility contributes to long-term value creation Tryg’s Corporate Responsibility 2020 strategy is aligned with our corporate strategy and purpose; as the world changes, we make it easier to be tryg*. In 2018, Tryg launched an independent Corporate
Slide 42: Corporate Responsibility
Corporate Responsibility UN Sustainable Development Goals Highlights 2018 • A UN Sustainable Development Goal (SDG) assessment was completed. Conclusion SDG prioritised list • Tryg has a direct and indirect impact on the 17 SDGs The SDGs on which Tryg has the most direct impact and 196 targets. Howe
Slide 43: Key figures 2018 and Consensus 2019-2021
Key figures 2018 and Consensus 2019-2021 Consensus DKKm 2018A 2019 2020 2021 Gross premium income 18,740 21,689 22,245 22,746 Technical result 2,766 3,228 3,404 3,534 Investment income, net -332 429 145 148 Pre-tax profit 2,262 3,458 3,350 3,479 Net income 1,731 2,735 2,604 2,705 Combined ratio 85.1
Slide 44: Appendix
Appendix Follow us on Twitter: @TrygIR
Slide 45: Group
Group Gross premiums Combined ratio DKKm % % * * Including two months Alka Claims ratio, net of reinsurance Expense ratio % % 45
Slide 46: Private
Private Gross premiums Combined ratio DKKm % * * Including two months Alka Claims ratio, net of reinsurance Expense ratio 46
Slide 47: Commercial
Commercial* Gross premiums Combined ratio DKKm % * * Including two months Alka Claims ratio, net of reinsurance Expense ratio * Less than 100 employees or less than DKK 100m turnover 47
Slide 48: Corporate
Corporate* Gross premiums Combined ratio DKKm % Claims ratio, net of reinsurance Expense ratio * More than 100 employees or more than DKK 100m turnover 48
Slide 49: Sweden
Sweden Gross premiums Combined ratio DKKm % Claims ratio, net of reinsurance Expense ratio 49
Slide 50: Geographical combined ratio
Geographical combined ratio Denmark Sweden Norway 50
Slide 51: Corporate history
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 Royal Decree
Slide 52: Economic key figures
Economic key figures Denmark Norway % 2019E 2020E % 2018E 2019E GDP Growth 1.8 1.7 GDP Growth 2.7 2.5 Inflation 1.5 1.8 Inflation 1.5 1.8 Unemployment 3.6 3.4 Unemployment 3.2 2.8 Current account balance in Current account balance in 6.5 6.5 8.7 7.5 % of GDP % of GDP Budget balance in % of GDP 0.2 0