Tryg A/s · OMXCOP:TRYG
Tryg A/s — Q4 2017 Earnings Presentation
53 slides from Tryg A/s's earnings presentation, February 2018
Slide 1: Q4 2017 results
Q4 2017 results Investor presentation Follow us on Twitter: @TrygIR
Slide 2: Contents
Contents Highlights Q4 2017 3 Premiums and portfolio 7 Claims and expenses 11 Investment, capital and targets 16 Roadshows & Conferences 24 Background material 25 Appendix 44 Disclaimer Certain statements in this presentation are based on the beliefs of our management as well as assump
Slide 3: Financial highlights Q4 2017
Financial highlights Q4 2017 * - Improved technical result, slightly lower investment income, PTP result slightly higher vs adjusted Q4 2016 - Q4 dividend of DKK 1.60 per share and solvency ratio of 281 or 196 adjusted for the Alka acquisition Pre-tax profit (DKKm) • Pre-tax profit of DKK 685m (DKK
Slide 4: Customer highlights Q4 2017
Customer highlights Q4 2017 - NPS target of 22 acheived NPS • Transactional Net Promoter Score (TNPS) of 62 • Private Denmark launched a new app-based alarm, helping customers to detect and limit house and contents claims. The alarm is now automatically included in Tryg’s insurance packages. • Tryg’
Slide 5: Improved technical result primarily driven by Private
Improved technical result primarily driven by Private Group (DKKm) Private, DK & NO (DKKm) Commercial, DK & NO (DKKm) * Corporate (DKKm) Sweden (DKKm) * Q4 2016 is adjusted for a DKK 250m impact from IT intangibles write-down 5
Slide 6: Shareholders’ remuneration
Shareholders’ remuneration Shareholder remuneration since 2012 Strong focus on shareholders’ remuneration DKK • Q4 DPS 1.6, FY DPS 6.4 3.5 • Extraordinary dividend for 2017 of DKK1bn (3.3 per share) announced at November CMD • Aim for a nominal stable increasing ordinary dividend (annual) • No extra
Slide 7: Premiums and portfolio
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Slide 8: Group premiums up 1.9% in Q4
Group premiums up 1.9% in Q4 • Group premiums were up 1.9% in local currencies, Private Denmark up more than 3% • Private lines increased by 1.1% in particular driven by a positive development in Private Denmark, number of customers developing positively in Private Norway in Q4. Positive top-line de
Slide 9: Private - average prices
Private - average prices House insurance – average price (index 2011 = 100) Average price development Y/Y 2.1% 3.7% (Q3 1.9%) (Q3 3.3%) • DK: 2.1% positive development reflects both price increases and Average price: conversion 5,000 5,800 • NO: 3.7% positive development reflects primarily price inc
Slide 10: Customer retention remains broadly stable
Customer retention remains broadly stable Private DK • DK: customer retention at 90.2% (89.7%) highest level in five years • NO: customer retention down to 85.8% (86.4%) driven by price increases and slightly higher market churn level. Retention higher compared to Q3 2017 level Commercial • DK: cust
Slide 11: Claims and expenses
Claims and expenses
Slide 12: Underlying claims ratio improving
Underlying claims ratio improving Claims ratio, net (Commercial DK & NO) Group underlying claims ratio at 73.6, 40bps better than adjusted Q4 2016 Private underlying claims ratio at 68.3, 60bps better than Q4 2016 Corporate profitability remains under pressure “Expected FY 2018 underlying claims rat
Slide 13: Motor insurance, not all claims are coming down
Motor insurance, not all claims are coming down Number of accidents Jan-Aug Bumpers, price increases in % from 2011-2016 Ford Focus Nissan Qashqai 20000 12000 10000 116% 19,378 15000 242% DKK 11,426 8000 DKK 17% 10000 6000 6,372 15% DKK 4000 5,296 DKK 5000 6,682 5,668 2000 DKK DKK 0 0 2011 2016 2011
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 2018: DKK 550m level 2018: DKK 500m Claims reserves discounting rate (%) Run-off net, effect on combined ratio (%) 14
Slide 15: FY 2017 expense ratio of 14 in line with target
FY 2017 expense ratio of 14 in line with target Efficiency programme of DKK 750m 2015-2017 Expense ratio * As reported Adjusted for one-offs * Adjusted for one-offs FTE - Development Nominal costs in business areas 15
Slide 16: Investment, capital and targets
Investment, capital and targets
Slide 17: Investment – Asset allocation shows low risk
Investment – Asset allocation shows low risk Total assets DKK 43bn Splitting up the portfolio Match portfolio ‘risk-wise’ Free portfolio DKK 32bn DKK 11bn Sweden DKK 4 bn Norway DKK 9 bn Denmark DKK 19 bn 17
Slide 18: Investment return – low risk remains key
Investment return – low risk remains key Key figures - Investments Market risk as % of total investments, YE 2016 DKKm Q4 2017 Q4 2016 2017 2016 Free portfolio 138 541 598 939 Match portfolio 13 8 227 210 Other financial income and expenses -65 49 -298 - 162 Total investment return 86 598 527 987 *
Slide 19: Solvency position Q4 2017
Solvency position Q4 2017 Solvency capital requirement walk • Solvency ratio based on the Partial Internal Model is 281 (Q3 2017: 211) or 196 adjusted for the Alka acquisition (DKK 4bn capital raise) 5,000 5 -303 4,800 152 • Own Funds (OF) is primarily impacted by 0 0 -17 -20 22 4,600 4,400 4,845 •
Slide 20: Capital and solvency ratio development
Capital and solvency ratio development Capital Tiers as % of SCR • Tier 2 capacity fully utilised after issue of SEK 1bn subordinated debt 19 May 2016. 2,342 50% 606 13% • The Danish FSA has explained that a ratio lower than 125 would result in increased surveillance. CETier 1 • As per Q4 Tryg has a
Slide 21: Solvency ratio sensitivities
Solvency ratio sensitivities 320% 287% 286% 293% 286% 281% 278% 276% 278% 284% 280% 282% 279% 283% 278% 284% 276% 280% 269% 240% 200% 160% 2017 Equity Property Interest Spread Spread Spread NOK/DKK SEK/DKK (Covered) (Corporate) (Government) • The Solvency II ratio shows the highest sensitivity to sp
Slide 22: Targets and outlook
Targets and outlook Efficiency programme concluded, new 2018 topline growth between 0-2% financial targets announced 2018 expected tax rate 22-23% Members’ bonus of 8% in September 2017. Alka acquisition will result in annual depreciation of customer relations of approximately DKK100-150m
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: Q4 roadshows & conferences
Q4 roadshows & conferences Date Place Participants from Tryg Arranged by Morten Hübbe, CEO Christian Baltzer, CFO 23/01/2018 Copenhagen Nordea Lars Bonde, COO Investor Relations Morten Hübbe, CEO 24/01/2018 London Christian Baltzer, CFO Credit Suisse Investor Relations Christian Baltzer, CFO 31/01/2
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: Product & Service Claims Excellence Strengthening the core, while embracing the future Innovation DKK 600m in claims cost reduction +DKK 1bn in new Financial targets 2020 a) Customer targets 2020 products by 2020+ • Tech
Slide 27: Why invest in Tryg?
Why invest in Tryg? Pre-tax result by division (YE 2016 data) High insurance penetration in the Nordics Premiums per capita (USD), 2016 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 2017 • Tryg goes back to 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 share:
Slide 29: Premiums and reserves by lines of business
Premiums and reserves by lines of business Gross premium by products 2017 Gross claims reserve by products 2017 Percentage Percentage Run-off net by products Q4 2017 Run-off net by products Q4 2016 Percentage Percentage 29
Slide 30: Gross premium split by geography
Gross premium split by geography DK: Gross premium by products 2017 SE: Gross premium by products 2017 Percentage Percentage NO: Gross premium by products 2017 Run-off net by products 2017 Percentage Percentage 30
Slide 31: 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 32: 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 33: Combined ratio development
Combined ratio development Premium Premium Efficiency Customer and hikes hikes programme efficiency focus Smaller adjustments 2002-2004 price increases of DKK 2.1bn implemented. Reduced combined ratio from 107 to 94. 2011-2012 price increases will improve underlying combined ratio. 2012-2015 operati
Slide 34: Structure of the Nordic insurance market
Structure of the Nordic insurance market Nordic Denmark EUR 25.6bn (as at Q4 2016) DKK 52.7bn/EUR 7.1bn (as at Q4 2016) Percentage Percentage Norway Sweden NOK 56,4 bn/EUR 6,1bn (as at Q3-2017) SEK 79.7bn/EUR 8.3bn (as at Q3-2017) Percentage Percentage 34
Slide 35: Distribution of new sales 2016
Distribution of new sales 2016 Private DK NO SE Commercial DK NO Corporate DK NO SE 35
Slide 36: 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 37: 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 38: 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 39: Population growth (2000-2016)
Population growth (2000-2016) Population development in Denmark in ‘1,000 DK 7% Growth 2000-2016: 0-17 years 1.9% 18+ years 8.5% Total 7.1% Population development in Norway in ‘1,000 NO 16% Growth 2000-2016: 0-17 years 7.1% 18+ years 19.3% Total 16.4% 39
Slide 40: 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 41: Organisational and remuneration structure
Organisational and remuneration structure Organisation chart Remuneration structure The Executive Board are remunerated according to Tryg’s remuneration policy: • Base salary • Pension o 25% of the base salary • Variable pay o Up to 50% of the base salary including pension o The variable pay element
Slide 42: Corporate Social Responsibility in Tryg
Corporate Social Responsibility in Tryg Strategic areas: • Peace of mind in society: The essence of Tryg’s purpose is to ensure peace of mind in a world that is changing. To increase and ensure peace of mind, we are actively working to develop and offer insurance products that meet demands in a chan
Slide 43: Key figures 2017 and Consensus 2018-2020
Key figures 2017 and Consensus 2018-2020 Consensus DKKm 2017A 2018 2019 2020 Gross premium income 17,963 19,425 20,484 20,995 Technical result 2,789 2,758 3,070 3,174 Investment income, net 527 284 299 314 Pre-tax profit 3,239 2,884 3,273 3,391 Net income 2,517 2,204 2,562 2,635 Combined ratio 84.4%
Slide 44: Appendix
Appendix Follow us on Twitter: @TrygIR
Slide 45: Group
Group Gross premiums Combined ratio DKKm % % GEP (LHS) Local currency (RHS) Claims ratio, net of reinsurance Expense ratio % % 45
Slide 46: Private
Private Gross premiums Combined ratio DKKm % GEP (LHS) Local currency (RHS) Claims ratio, net of reinsurance Expense ratio 46
Slide 47: Commercial
Commercial* Gross premiums Combined ratio DKKm % GEP (LHS) Local currency (RHS) 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 % GEP (LHS) Local currency (RHS) Claims ratio, net of reinsurance Expense ratio * More than 100 employees and more than DKK 100m turnover 48
Slide 49: Sweden
Sweden Gross premiums Combined ratio DKKm % GEP (LHS) Local currency (RHS) Claims ratio, net of reinsurance Expense ratio 49
Slide 50: Geographical segments
Geographical segments Denmark Sweden DKKm DKKm Q4 2017 Q4 2016 FY 2017 Q4 2017 Q4 2016 FY 2017 Gross premiums earned 2,448 2,407 9,606 Gross premiums earned 517 463 2,121 Technical result 495 441 1,783 Technical result -13 -26 236 Key ratios: Key ratios: Gross claims ratio 64.3 66.4 64.2 Gross claim
Slide 51: Geographical combined ratio
Geographical combined ratio Denmark Sweden Norway 51
Slide 52: 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 53: Economic key figures
Economic key figures Denmark Sweden % 2017 2018 % 2017 2018 GDP Growth 2.2 2.0 GDP Growth 3.3 2.6 Inflation 1.1 1.5 Inflation 1.9 1.6 Unemployment 4.2 4.0 Unemployment 6.7 6.5 Current account balance in Current account balance in 9.1 8.6 4.8 5.0 % of GDP % of GDP Budget balance in % of GDP -1.2 -0.8