Tryg A/s · OMXCOP:TRYG
Tryg A/s — Q2 2019 Earnings Presentation
54 slides from Tryg A/s's earnings presentation, 2019
Slide 1: Q2 2019 results
Q2 2019 results Investor presentation Follow us on Twitter: @TrygIR
Slide 2: Contents
Contents Highlights Q2 2019 3 Premiums and portfolio 9 Claims and expenses 13 Investment, capital and targets 17 Roadshows & Conferences 25 Background material 26 Appendix 46 Disclaimer Certain statements in this presentation are based on the beliefs of our management as well as assump
Slide 3: Financial highlights Q2 2019
Financial highlights Q2 2019 - Higher technical result and positive investment income - Q2 dividend of DKK 1.70 per share and solvency ratio of 171 Pre-tax profit (DKKm) • Pre-tax profit of DKK 979m (DKK 735m) driven by: • Technical result of DKK 979m (DKK 846m) including Alka and related synergies
Slide 4: Customer highlights Q2 2019
Customer highlights Q2 2019 TNPS • Transactional Net Promoter Score (TNPS) of 67 (64) • Retention rate improved in all areas • Number of products per customer increased Number of products per customer • In June, TryghedsGruppen paid out a member bonus of DKK 925m, equivalent to 8% of premiums paid f
Slide 5: Improved technical result primarily driven by Private & Commercial
Improved technical result primarily driven by Private & Commercial Group (DKKm) Private, DK & NO (DKKm) Commercial, DK & NO (DKKm) Corporate (DKKm) Sweden (DKKm) 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 22m achieved in Q2 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 • Q2 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: Strategic initiatives
Strategic initiatives Claims Excellence Product & Service Innovation DKK 600m in 2020 – DKK 200m in H1 2019 DKK 1bn in 2020+ - DKK 250m in H1 2019 ~DKK 110m: Further leverage of Trygs procurement power New market demands addressed through a balanced mix between • 5 year contract with Recover Nordic
Slide 9: Premiums and portfolio
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Slide 10: Group premiums up 19.7% in Q2, 5.9% excl Alka
Group premiums up 19.7% in Q2, 5.9% excl Alka • Group premiums were up 19.7% in local currencies, or 5.9% excluding Alka • Private lines reported a 7.9% growth ex. Alka, positive trends in both Denmark and Norway (and inclusion of NITO) • Commercial growth was 3.4% ex. Alka, helped by high sales and
Slide 11: Private - average prices
Private - average prices House insurance – average price (index 2011 = 100) Average price development Y/Y 1.2% 2.6% • DK: 1.2% positive development (Q1 1.1%) (Q1 3.0%) reflects price increases Average price: • NO: 2.6% positive development 5,100 6,100 reflects primarily price increases Motor insuran
Slide 12: Customer retention improved in all areas
Customer retention improved in all areas Private DK • DK: customer retention at 91.6% (90.8%) highest level in five years • NO: customer retention up to 87.2% (86.5%) showing an significant improvement Commercial • DK: customer retention up 88.5% (88.1%) showing strong improvement • NO: customer ret
Slide 13: Claims and expenses
Claims and expenses
Slide 14: Underlying claims ratio improving
Underlying claims ratio improving Group underlying claims ratio at 70.6, 50bps better than Q2 2018 Claims ratio, net (Commercial DK & NO) Private underlying claims ratio at 68.3, 50bps better than Q2 2018 Underlying claims ratios in all quarters in 2018 have been adjusted for Alka “Expected FY 2019
Slide 15: 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 (%) 15
Slide 16: Expense ratio of 14.2
Expense ratio of 14.2 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 17: Investment, capital and targets
Investment, capital and targets
Slide 18: Investments – Split in Match & Free portfolio
Investments – Split in Match & Free portfolio Total investments DKK 41bn Splitting up the portfolio Match portfolio ‘risk-wise’ Free portfolio DKK 30bn DKK 11bn Sweden DKK 4 bn Norway DKK 9 bn Denmark DKK 17 bn 18
Slide 19: Investment return – low risk remains key
Investment return – low risk remains key Key figures - Investments Different asset classes Geographical exposure (%) DKKm Q2 2019 Q2 2018 2018 Free portfolio 161 10 -33 Match portfolio -43 -15 -2 Other financial income and expenses -61 -85 -297 Total investment return 57 -90 -332 Group fixed income
Slide 20: Solvency position Q2 2019
Solvency position Q2 2019 Own funds walk • Solvency ratio based on the Partial Internal Model is 171 (Q1 2019: 168). 9,600 • Own Funds (OF) is primarily impacted by 782 -514 9,100 -40 8,600 • Result Q2 2019 of 782 mDKK 8,100 • Dividends of 514 mDKK 8,469 7,600 8,241 7,100 SCR is primarily impacted b
Slide 21: Capital and solvency ratio development
Capital and solvency ratio development Capital Tiers as % of SCR • Tier 2 capacity fully utilized. • Tier 1 capacity for practical purposes fully utilized 2,474 50% after Atier 1 issue of 700 mSEK in 2018 Q1. 1,111 22% CETier 1 • The Danish FSA has explained that a ratio lower than 125 would result
Slide 22: Solvency ratio sensitivities
Solvency ratio sensitivities 190% 185% 178% 180% 173% 174% 172% 173% 171% 172% 170% 169% 170% 170% 172% 169% 169% 170% 164% 157% 160% 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 23: Targets and outlook
Targets and outlook ✓ Financial targets announced at 2017 CMD ✓ 2019 topline growth above GDP level ✓ Members’ bonus of 8% in June 2019. ✓ 2019 normalised tax rate 22-23% ✓ Alka acquisition will result in annual depreciation of ✓ Price increases to offset claims inflation customer relations of DKK12
Slide 24: 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 24
Slide 25: Q2 roadshows & conferences
Q2 roadshows & conferences Date Place Participants from Tryg Arranged by Morten Hübbe, CEO 10/07/2019 Copenhagen Barbara Plucnar Jensen, CFO Danske Bank Peter Brondt, IR Manager Morten Hübbe, CEO 11/07/2019 London Barbara Plucnar Jensen, CFO Danske Bank Peter Brondt, IR Manager Espen Opedal, Head of
Slide 26: Background material
Background material
Slide 27: 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 28: 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 28
Slide 29: 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: #3 Retention rate - Private Market sha
Slide 30: 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 Q2 2019 Run-off net by products Q2 2018 Percentage Percentage 30
Slide 31: 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 31
Slide 32: Claims inflation differs from core CPI
Claims inflation differs from core CPI Annual Danish insurance gross claims increase vs CPI • Danish non-life insurance gross claims development 2009-2015 • Cloudburst hitting Copenhagen in 2011 explains jump and fall of figures in 2011-2012 • Figures not adjusted for changes in number of insured ob
Slide 33: 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 34: Combined ratio development
Combined ratio development 34
Slide 35: Structure of the Nordic insurance market
Structure of the Nordic insurance market Nordic Denmark EUR 25.9bn (as at Q4 2017) DKK 55.8 bn/EUR 7.5bn (as at Q2 2018) Percentage Percentage Norway Sweden NOK 60,4 bn/EUR 5,8bn (as at Q1-2019) SEK 84.9 bn/EUR 8.7bn (as at Q1-2019) Percentage Percentage 35
Slide 36: Distribution of new sales 2018
Distribution of new sales 2018 Private DK NO SE Commercial DK NO Corporate DK NO SE 36
Slide 37: 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 38: 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 39: 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 40: 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% 40
Slide 41: 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 42: 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 43: 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 44: 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 45: 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 21,344 21,795 22,202 Technical result 2,766 3,216 3,385 3,497 Investment income, net -332 436 154 160 Pre-tax profit 2,262 3,463 3,350 3,463 Net income 1,731 2,716 2,600 2,692 Combined ratio 85.1
Slide 46: Appendix
Appendix Follow us on Twitter: @TrygIR
Slide 47: Group
Group Gross premiums Combined ratio DKKm % % * * Including two months Alka Claims ratio, net of reinsurance Expense ratio % % 47
Slide 48: Private
Private Gross premiums Combined ratio DKKm % * * Including two months Alka Claims ratio, net of reinsurance Expense ratio 48
Slide 49: 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 49
Slide 50: Corporate
Corporate* Gross premiums Combined ratio DKKm % Claims ratio, net of reinsurance Expense ratio * More than 100 employees or more than DKK 100m turnover 50
Slide 51: Sweden
Sweden Gross premiums Combined ratio DKKm % Claims ratio, net of reinsurance Expense ratio 51
Slide 52: Geographical combined ratio
Geographical combined ratio Denmark Sweden Norway 52
Slide 53: 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 54: Economic key figures
Economic key figures Denmark Sweden % 2019E 2020E % 2018E 2019E GDP Growth 1.8 1.7 GDP Growth 2.6 2.2 Inflation 1.2 1.5 Inflation 2.4 2.1 Unemployment 3.7 3.5 Unemployment 3.4 3.0 Current account balance in Current account balance in 6.1 5.7 6.8 6.2 % of GDP % of GDP Budget balance in % of GDP 0.2 0