Danske Bank A/s · OMXCOP:DANSKE
Danske Bank A/s — Danica Pension — Debt Investor Presentation (September 2015)
41 slides from Danske Bank A/s's debt investor presentation, September 2015
Slide 1: Danica Pension Callable Subordinated Resettable Notes
Danica Pension Callable Subordinated Resettable Notes September 2015
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Danica Pension, Livsforsikringsaktieselskab for information purposes only and should be viewed solely in conjunction with the oral presentation provided by Danica Pension, Livsforsikringsaktieselskab.It does not constitute advice and should not be us
Slide 3: Agenda
Agenda Summary Danica Group Overview Risk Management & Capital Investment Policy Proposed Transaction Concluding Remarks and Q&A Appendix 3
Slide 4: Executive Summary – Deal terms
Executive Summary – Deal terms The issuer, Danica Pension, is a Danish life insurance company with subsidiaries in Sweden and Norway and is part of the Danica Group Danica Group is 100 per cent owned by Danske Bank Danica Group is a core subsidiary of Danske Bank and rated as such by Standard
Slide 5: Key Investment Highlights
Key Investment Highlights Focus On Capital Light Products Core Part of Danske Bank Unit-linked products share of total provisions were 44% in 2014, compared to 26% in 2010 Considered core part of Danske Bank Group and rated as such by Standard & Danica Traditionel is running off and Poor’s. Rated A-
Slide 6: Organizational structure
Organizational structure Danica Group has been a part of Danske Bank Group since Danske Bank 1995 Activities in Sweden since 1999 and in Norway since 2001 100% ownership Danica Group Forsikringsselskabet Danica Forsikrings- Non life insurance, comprising health care and critical selskabet Dani
Slide 7: Agenda
Agenda Summary Danica Group Overview Risk Management & Capital Investment Policy Proposed Transaction Concluding Remarks and Q&A Appendix 7
Slide 8: Danica Group utilises the opportunities of being a core part of Danske Bank
Danica Group utilises the opportunities of being a core part of Danske Bank Support DB value Drive cross selling and proposition and create support DB value best-in class pension proposition by serving solutions to deliver Personal Business needs of employees, financial confidence in all Customers C
Slide 9: Danica Group’s market share in 2014
Danica Group’s market share in 2014 Denmark; % Denmark; % Premiums AuM 30% 34% 23% 27% 15% 15% 11% 8% 8% 5% 9% 9% 4% 2% PFA Danica DK Nordea SEB AP Pension Skandia Topdanmark PFA Danica DK Nordea SEB AP Pension Topdanmark Skandia Link Link Sweden; % Norway; % Premiums Premiums 17% 19% 31% 16% 26% 24
Slide 10: Improved geographical diversification and significant increase in unit-linked product’s share of total provisions
Improved geographical diversification and significant increase in unit-linked product’s share of total provisions Provisions by Provisions by Gross premiums Profit before tax geography products 2010 24bn DKK 256bn DKK 2.2bn DKK 256bn DKK 2% 2% 24% 2% 26% 7% 6% 70% 74% 91% 96% 2015H1 15.5bn DKK 323bn
Slide 11: Danish Market: Strategic focus on capital light unit-linked products
Danish Market: Strategic focus on capital light unit-linked products Sales mix in 2014 (YoY change, %-points) Gross Premiums; DKKbn Sales of regular premiums + 15% of single premiums Unit-linked products excl. transfers Health and accident Danica traditionel 87% (+3%) 15 10 5 6% (-5%) 7% (+2%) 0 Uni
Slide 12: Danica Pension Group — Stable technical result
Danica Pension Group — Stable technical result (DKK m) H1 2015 2014 2013 2012 Increase in profit for Danish unit link business Technical result, Denmark – Traditionel 624 1.352 1.287 1.223 Technical result, Denmark – Unit Link 218 429 406 258 Traditionel business is slowly running off — in Techn
Slide 13: Agenda
Agenda Summary Danica Group Overview Risk Management & Capital Investment Policy Proposed Transaction Concluding Remarks and Q&A Appendix 13
Slide 14: Danica Pension – Strong and Stable Solvency I Ratio
Danica Pension – Strong and Stable Solvency I Ratio DKK m Capital Base1) Required Capital 20,000 197% 221% 215% 234% Excess Capital Base Solvency ratio2) 15,000 10,000 5,000 0 2012 2013 2014 H1 2015 1) Includes no capital instruments 2) The Solvency ratio is based upon Solvency I. The solvency cover
Slide 15: New Solvency Regime – The Discount Curve
New Solvency Regime – The Discount Curve The final design of the Solvency II discounting curve was released in Spring 2015 – Full implementation from January 2016 – Danica is already able to calculate the full Solvency II loaded SCR on a daily basis using the Solvency II discounting curve The Da
Slide 16: Expected Solvency Levels under Solvency II from January 2016
Expected Solvency Levels under Solvency II from January 2016 The Danish FSA pre-implemented a Solvency II-like capital requirement 1 January 2014 Only a few differences compared to the final 2016 SII-rules: − New discounting curve (previous slide) − Expected future profits are recognized in the
Slide 17: Peer solvency I comparison
Peer solvency I comparison Solvency I ratios Baloise 354 A Codan 318 A Zurich IG 307 AA- NN Group 300 A- ASR 285 BBB+ Groupama 253 BBB+6 Prudential 240 AA Danica 2347 A- Ageas 226 A- AEGON 216 AA- Helvetia 216 A KBC Insurance¹ 210 A- L&G 201 AA- If/Sampo² 193 A Swiss Life¹ 193 A 191 A Gjensidige⁴ AX
Slide 18: Agenda
Agenda Summary Danica Group Overview Risk Management & Capital Investment Policy Proposed Transaction Concluding Remarks and Q&A Appendix 18
Slide 19: Danica Group’s Investment policy addresses two fundamentally different allocation challenges
Danica Group’s Investment policy addresses two fundamentally different allocation challenges Defined Benefit Unit-linked products (Danica Traditionel) (Balance, Link, Sweden and Norway) AUM DKK169bn AUM DKK154bn Policies have an interest rate guarantee Defined contribution – the investment r
Slide 20: Investment portfolio
Investment portfolio Danica Traditionel, customer funds, portfolio and return First half 2015 2014 DKK billion Value Return Share Value Return Share Property investments 18,4 2,4% 10,9% 21,2 5,6% 12,0% Listed equities 8,6 9,5% 5,1% 6,5 9,3% 3,7% Alternative investments 17,2 7,1% 10,2% 13,9 10,4% 7,9
Slide 21: Portfolio construction
Portfolio construction In order to get the highest possible risk-adjusted returns for the given risk budget combined with robustness in the returns, Danica Pension has divided the portfolio construction into three parts 1. Alternative investments Risk assets Rates Alternative investments form the
Slide 22: Agenda
Agenda Summary Danica Group Overview Risk Management & Capital Investment Policy Proposed Transaction Concluding Remarks and Q&A Appendix 22
Slide 23: Ratings at Standard & Poor’s
Ratings at Standard & Poor’s Danske Bank and Danica’s Ratings Abridged Paragraph from S&P’s Methodology An overview of some of the requirements for “Core” subsidiary treatment**: Standalone Credit Profile = Insurer Financial Strength Rating = A- A- • Is highly unlikely to be sold; • Operates in line
Slide 24: New issue – Terms & Conditions (1/3)
New issue – Terms & Conditions (1/3) Issuer Danica Pension, Livsforsikringsaktieselskab (“Danica Pension”) Issuer Rating A- (S&P) Exp. Instrument BBB (S&P) Ratings Description EUR (benchmark) Callable Subordinated Resettable Notes due 2045 (the “Notes”) Status of the Subordinated loan capital a
Slide 25: New issue – Terms & Conditions (2/3)
New issue – Terms & Conditions (2/3) Optional [] 2025 (“First Call Date”) or on any interest payment date thereafter subject to regulatory redemption approval Interest [] % per annum up to but excluding [●] 2025 payable annually in arrear. Thereafter reset to a new fixed rate, payable annually in
Slide 26: New issue – Terms & Conditions (3/3)
New issue – Terms & Conditions (3/3) Optional The Issuer may redeem the Notes at par at any time on or after the fifth anniversary of issue in Redemption case of a “Tax Event” (additional amounts or loss of deductibility), a “Regulatory Event” (ceases to following a count as Tier 2 Capital of the I
Slide 27: New issue – Terms & Conditions
New issue – Terms & Conditions Credit Agricole Danica (envisaged) SOGECAP BNP Paribas Cardiff KLP VIG CNP Assurances Pricing Date [] 2015 January 07th 2015 December 09th, 2014 November 18th, 2014 June 2nd, 2015 February 18th. 2015 May 27th, 2014 Maturity [] 2045 (soft) Perpetual Perpetual Perpetua
Slide 28: Agenda
Agenda Summary Danica Group Overview Risk Management & Capital Investment Policy Proposed Transaction Concluding Remarks and Q&A Appendix 28
Slide 29: Q&A session
1BF-Tailet=3) Pension O&A session eg
Slide 30: Contact details
Contact details Jacob Aarup-Andersen Ole Fabricius Chief Financial Officer, Danica Head of Finance, Danica Tel: (+45) 45 13 12 00 Tel: (+45) 45 13 13 11 jaar@danicapension.dk ofa@danicapension.dk Peter Holm Mads Pallesen Senior Vice President, Danske Bank Chief Risk Officer, Danica Tel: (+45) 45 12
Slide 31: Agenda
Agenda Summary Danica Group Overview Risk Management & Capital Investment Policy Proposed Transaction Concluding Remarks and Q&A Appendix 31
Slide 32: Management
Management Executive Board Board of Directors Per Klitgård Thomas F. Borgen, Chairman CEO – CEO, Danske Bank Henrik Ramlau-Hansen, Deputy Chairman – CFO, Danske Bank Peter Rostrup-Nielsen Jacob Aarup-Andersen – Executive Vice President, Danske Bank CFO Thomas Mitchell – Head of Personal Bank
Slide 33: History of the Danica Group
History of the Danica Group Acquisition by Forsikringsselskabet Change of company Danica of Danica acquired by Non-life insurance sold Subsidiary in Ireland name to Statsanstalten Nordenfjeldske Danske Bank to Topdanmark liquidated for Livsforsikring Personforsikring AS & Gjensidige NOR Fondsforsikr
Slide 34: Highlights for the Danica Group
Highlights for the Danica Group 2014 Danica DKK m Group FD DP Sweden Norway Gross premiums 26.821 319 19.126 5.744 1.632 Gross written premiums1) 16.615 319 12.836 2.219 1.240 P/L before tax2) 2.611 2.002 2.582 59 97 Asset under management 350.821 20.447 308.549 32.075 9.586 Equity value2) 20.056 20
Slide 35: Sweden
Sweden Premiums and AuM Slight decrease in premium volume compared to last year from lower single premiums. Customers chose to defer payments until lower Swedish yield Premiums; DKKm Premiums AuM (right axis) AuM; DKKbn tax in 2015. First quarter premiums are up 8,000 40 approx. 50% as a result. 6,0
Slide 36: Norway
Norway Premiums and AuM Strong growth in DC-schemes for corporates (+16 % in premiums), and DC-schemes now exceeds the DB volume for the first time. The trend will Premiums; DKKm AuM; DKKbn Premiums AuM (right axis) continue because of increased cost for DB- 2,500 10 schemes due to low interest leve
Slide 37: Macroeconomic backdrop in the Nordic Region
Macroeconomic backdrop in the Nordic Region 37
Slide 38: New solvency regime — Background
New solvency regime — Background The Danish FSA pre-implemented a Solvency II-like capital requirement 01 January 2014 (Danica is Solvency II compliant already) Only few differences compared to the final 2016 SII-rules New accounting rules – Easier to book risk allowance – Alignment of solvenc
Slide 39: Specific accounting adjustment for Danica Pension
Specific accounting adjustment for Danica Pension Special allotments – According to a procedure approved by the Danish FSA, Danica Pension has an obligation to allocate special allotments to certain policyholders of the former Statsanstalten for Livsforsikring (SfL): If the percentage by which t
Slide 40: Portfolio with alternatives with bond-like characteristics
Portfolio with alternatives with bond-like characteristics In the current environment with negative real rates it is important to also focus on alternative real assets with low risk – Give a higher yield relative to the risk – Protect against increasing inflation – More stable returns (not as much
Slide 41: Overlay – an essential part of the investment portfolio construction
Overlay – an essential part of the investment portfolio construction The overlays have different functions in the portfolio management Adjust the risk and allocation in the portfolio Tactical asset allocation Ensure the right portfolio characteristics eg. protection against rising inflation
Danica Pension — Debt Investor Presentation (September 2015) on 6ix