FWD Group Holdings Limited · HKEX:1828
FWD — FY2023 Earnings Presentation
41 slides from FWD's earnings presentation, March 2024
Slide 1: 2023 results presentation
2023 results presentation March 2024
Slide 2: 1. FWD at a Glance
1. FWD at a Glance 2 Results Presentation @ FWD 2023 C1 - Public
Slide 3: FWD at a glance
FWD at a glance Customer led, Customer led DNA, set-up with right technology and distribution platforms; with a tech-enabled 1 digital insurer business model aiming to increasingly be powered by AI Southeast Asia Contributing 50%+ value of new business (VNB) with multiple exclusive bancassurance par
Slide 4: Demonstrated consistent and resilient business growth
Demonstrated consistent and resilient business growth Value of new business (VNB) New business sales (APE1) Operating profit after tax2 Net capital generation3 CAGR: CAGR: +25% $991m +11% $1,646m $372m CAGR: $1,446m YoY: $786m $686m +285% +27% $299m $95m 2021 2023 2021 2023 2022 2023 2021 2023 VNB c
Slide 5: Access to dynamic and unrivalled SEA market opportunities
Access to dynamic and unrivalled SEA market opportunities Southeast Asia1 offers tremendous value growth potential, Growth drivers powering SEA insurance market expansion generating ~41% of Asia’s2 life insurance premiums3 Annualised Premium Equivalent Large and growing younger populations ~65% of
Slide 6: Overview of our business segments
Overview of our business segments Thailand & Cambodia Emerging Markets • Extended banca partnership with SCB in 2023 • Market disruption in Vietnam offset steady growth in other Emerging Markets countries, • Strong growth in new business sales across all key distribution channels, especially through
Slide 7: Overview of our business segments (cont’d)
Overview of our business segments (cont’d) Japan Hong Kong & Macau • Focus on enhancing capital efficiency of the business and freeing up capital through Athene • Increase in new business sales driven by increase in offshore sales as borders reopened in reinsurance transaction 2023 • VNB increased d
Slide 8: Executing on our strategy: An elite and tech-enabled distribution network
Executing on our strategy: An elite and tech-enabled distribution network Sustainable bancassurance growth driven by Strong agency value creation through an expanding Partnership with businesses across the eCommerce, partners with strong strategy alignment productive agency force retail and fintech
Slide 9: Strong 2023 financial performance across key metrics
Strong 2023 financial performance across key metrics New business $1,646m Growth sales (APE)1 (+18%) New business contractual $1,349m Total weighted $6,416m premium income Value of new business $991m service margin2 (+4%) (+22%) Profitability Segmental adjusted operating profit $372m Net profit / ($
Slide 10: On clear path to achieve strategic ambitions
On clear path to achieve strategic ambitions • Maintain focus on our customer led and digitally enabled strategies in order to deliver sustainable growth and profitability • Scale up high quality agency force to match leading position built in bancassurance • Expand presence in each market with aim
Slide 11: 2. 2023 Financial highlights
2. 2023 Financial highlights 11 Results Presentation @ FWD 2023 C1 - Public
Slide 12: 2023 was a critical year of progress
2023 was a critical year of progress – setting the stage for continued sustainable and profitable growth • Entered into reinsurance transaction with Athene, improving capital position and EV Reinforced balance • Issued $325m MTNs and $900m Subordinated Note to pre-finance notes due July and Sept 202
Slide 13: Robust balance sheet further boosted by enhanced liquidity management
1 Robust balance sheet further boosted by enhanced liquidity management Successful pre-financing of notes due July and Sept 2024 Robust solvency position on a GWS basis Group LCSM cover ratio (PCR basis1) (%) Amount Outstanding FWD Peers As of December 2023 ($m) Coupon Maturity Date 300% 288% 292% 2
Slide 14: Reinsurance transaction in Japan is beneficial in the long-term
1 Reinsurance transaction in Japan is beneficial in the long-term • In November 2023, we executed a reinsurance transaction with Athene Re on an in-force block of whole life insurance policies of FWD Japan Impact to Group Impact to net profit Impact to Group EV Impact to NB CSM solvency free surplus
Slide 15: Inaugural credit ratings confirming our Investment Grade balance sheet
2 Inaugural credit ratings confirming our Investment Grade balance sheet Company Insurance Previous Current rating Previous Current Rating Insurer Financial - A3 - A (Strong) Strength1 FWD Group Holdings Limited Issuer Rating / - Baa2 / Positive - BBB+ / Stable Issuer Default Rating A/ FWD Life Hong
Slide 16: Dividends from operating entities accelerating on the back of profitability improvements
3 Dividends from operating entities accelerating on the back of profitability improvements 2023 net capital contributions from / 2023 adjusted operating profit after tax1 213 (to) operating entities Positive net remittances for the first time ($m; ‘22-23 YoY) ($m) Hong Kong $210m 93% $204m 2021 2022
Slide 17: Overall positive outcome from IFRS 17 adoption
4 Overall positive outcome from IFRS 17 adoption Reduced • CSM1, estimated future unearned profits on in-force business, is recognised gradually over time volatility in • Reduced volatility in earnings given improved alignment in the financial market related impacts of key metrics assets and liabili
Slide 18: 3. Financial results
3. Financial results 18 Results Presentation @ FWD 2023 C1 - Public
Slide 19: Consistent organic growth delivery across markets
Consistent organic growth delivery across markets Total Hong Kong & Macau Thailand & Cambodia Value of new business ($m) Value of new business ($m) Value of new business ($m) ’21-23 CAGR: ’21-23 CAGR: ’21-23 CAGR: 25% 26% 30% 991 323 335 4 270 132 205 216 217 104 823 137 71 17 20 41 47 686 121 197 1
Slide 20: Stable and growing operating profit under IFRS 17
Stable and growing operating profit under IFRS 17 Segmental adjusted operating profit after tax1 ($m) 2023 adjusted operating profit after tax1 ($m; ‘22-23 YoY) IFRS 4 IFRS 17 ’22-23 YoY: 27% Hong Kong $210m +93% 372 299 Thailand $151m +17% 153 Japan $164m (10)% 2021 2022 2023 Emerging Turned Operat
Slide 21: CSM release is the core driver of operating profit
CSM release is the core driver of operating profit Insurance service result % of operating profit2,3 IFRS 17 operating profit bridge (2023) 65% 59% 64% ($m) FWD Peer A Peer B CSM release % of CSM1,3 10% 10% 9% 4 31 FWD Peer A Peer B 308 892 608 55 584 (22) (57) 5 (389) (27) 372 (140) CSM release Ope
Slide 22: Net profit impacted by one-offs and non cash items
Net profit impacted by one-offs and non cash items IFRS 17 NPAT to OPAT (2023) ($m) Non-market Related Market Related 140 512 Reinforcing our balance sheet position through the Athene 372 reinsurance transaction and (147) bond disposal (137) (65) Other non-operating investment return (198) (39) Majo
Slide 23: High organic growth of CSM before one-off assumption change
High organic growth of CSM before one-off assumption change CSM evolution (2023) ($m) Operating CSM movement: $(577)m Operating CSM (excl. operating variances and assumption changes) YoY growth: 22% 1,742 48 5,400 506 5,046 (1,759) (150) (133) (608) Opening CSM 1 New business Interest Operating vari
Slide 24: Robust embedded value growth before one-off assumption changes
Robust embedded value growth before one-off assumption changes 2023 embedded value evolution1 ($m) EV operating profit: $606m 991 Economic factors: ($356m) (132) (223) 615 (645) Strengthened actuarial (211) assumptions to reflect the (145) 6,066 latest post-COVID experience and market disruption in
Slide 25: Appendix
Appendix 25 Results Presentation @ FWD 2023 C1 - Public
Slide 26: Balanced investment portfolio
Balanced investment portfolio Investment portfolio by asset class1 Corporate bonds by credit ratings1 Non-par and surplus assets by asset class1 2023 2023 2023 Cash & others 4% Investment 10% 2% 2% 2% properties Government bonds 2% 37% 9% 6% Equities & Other fixed 5% Investment funds income securiti
Slide 27: Diversified products make protection more accessible across all channels
Diversified products make protection more accessible across all channels Provide customers with a suite of accessible product offerings through diversified channels, allowing them to choose the protection coverage they want1 Standalone Protection riders to Multi-channel distribution Diverse product
Slide 28: Automated, flexible and secure digital transformations
Automated, flexible and secure digital transformations Digital Enablement Fiby Gen-AI and Innovation Security and Financial Needs Product Digital Payments FWD Marketing Messaging and Core Authentication Analysis Configurator Cloud Communications Insurance Platform STP Underwriting Claims Policy Docu
Slide 29: Holistic and end-to-end digital architecture increasingly powered by AI
Holistic and end-to-end digital architecture increasingly powered by AI 85 proprietary applications leveraging Data Lake and proprietary AI models supported by an experienced technology team Omne Cloud adoption FWD MAX 94% 97% Customer 70% Engagement 27% AI Chatbots D2C eCommerce platform 2020 2021
Slide 30: Experienced management team with strong execution record
Experienced management team with strong execution record Embracing our digital-first culture and promoting agile decision-making and execution Sustaining the culture of continuous innovation with continuous investments to stay ahead of peers Key management team Average 25+ years of experience in the
Slide 31: Environmental, Social and Governance (“ESG”) strategy and progress
Environmental, Social and Governance (“ESG”) strategy and progress Our value creation strategy Progress 3 Strong • Strong corporate governance and risk management to ensure robust and transparent decision-making • Nomination & Corporate Governance Board committee provides a leadership role in ESG st
Slide 32: Embedded value: Economic assumptions vs. peers
Embedded value: Economic assumptions vs. peers Risk discount rate comparison1 (%) 14.0% 14.0% 13.8% 12.8% 12.8% 13.2% 12.5% 12.1%12.3% 10.8% 10.8% 10.8% 10.0% 9.9% 9.5% 9.0% 9.0% 9.2% 8.8% 8.0% 8.3% 8.8% 8.8% 7.2% 7.6% 7.8% 7.8% 7.0% 7.2% 7.6% 7.4% 5.5% 6.0% 6.0% 6.3% 6.2% 4.8% 4.1% Hong Kong Thaila
Slide 33: Embedded value and value of new business sensitivities
Embedded value and value of new business sensitivities Key embedded value sensitivities comparison1 (%) 2.7% 1.3% 1.4% na (0.3)% (2.3)% (2.5)% (2.7)% (2.2)% (1.9)% (2.0)% (3.8)% (3.3)% (3.0)% (3.2)% (3.3)% (2.7)% (3.2)% (3.0)% (3.0)% (4.3)% (5.8)% (6.0)% (6.9)% (6.5)% (7.3)% (7.2)% (8.0)% (7.3)% (10
Slide 34: IFRS 17: Risk-free rates assumed vs. peers
IFRS 17: Risk-free rates assumed vs. peers Risk free rate – USD Risk free rate – HKD Risk free rate – CNY 4.7% 4.7% 4.3% 4.3% 4.3% 4.2% 3.9% 3.9% 3.8% 3.8% 3.8% 3.8% 3.3% 3.3% 3.3% 3.3% 3.4% 3.4% 3.5% 3.7% 3.1% 2.9% 2.6% 2.6% 2.8% 2.8% 2.4% 2.4% 2.1% 2.1% 1 year 5 years 10 years 15 years 20 years 1
Slide 35: IFRS 17: Risk-free rates with illiquidity premium comparison
IFRS 17: Risk-free rates with illiquidity premium comparison Risk-free rate (“RFR”) with illiquidity RFR with illiquidity premium – HKD RFR with illiquidity premium – CNY premium – USD 5.7% 5.3% 5.2% 5.2% 5.3% 4.8% 4.8% 4.9% 5.0% 4.9% 4.7% 4.6% 4.3% 4.1% 4.3% 4.3% 4.4% 4.5% 4.5% 4.8% 3.6% 3.4% 3.0%
Slide 36: Robust solvency on a GWS basis
Robust solvency on a GWS basis Group LCSM cover ratio (PCR basis1) Sensitivity analysis of Group LCSM cover ratio (PCR basis 1) (%) 2023 11% 300% 292% 288% 2% (2%) (4%) 2021 2022 2023 Interest Interest Equities Equities rates rates +10% -10% +50bps -50bps 1 Based on Local Capital Summation Method. P
Slide 37: Disclaimer (1/5)
Disclaimer (1/5) THIS PRESENTATION IS PROVIDED TO YOU FOR REFERENCE ONLY. Forward Looking Statements This presentation may contain a number of "forward-looking statements". Forward looking statements include information concerning FWD Group (“FWD”)’s possible or assumed future results of operations,
Slide 38: Disclaimer (2/5)
Disclaimer (2/5) Key Performance Indicators This presentation may also contain indicators of historical financial and operating performance that are based on a number of assumptions. These indicators include, but are not limited to, value of new business, new business margin, embedded value (EV), op
Slide 39: Disclaimer (3/5)
Disclaimer (3/5) Financial Presentation This presentation includes historical financial data, including annualised premium equivalent ("New Business Sales"), adjusted operating profit before tax and expense ratio, which has been prepared by management. This data has not been prepared in accordance w
Slide 40: Disclaimer (4/5)
Disclaimer (4/5) No invitation is made by this presentation or the information contained herein to enter into, or offer to enter into, any agreement to purchase, acquire, subscribe for or underwrite any securities or structured products, and no offer is made of any shares in or debentures of a compa
Slide 41: Disclaimer (5/5)
Disclaimer (5/5) By attending the presentation to which this document relates or by accepting this document you will be taken to have represented, warranted and undertaken that (i) you are an intended recipient; (ii) you have read and agree to comply with the contents of this notice; and (iii) you w