Tryg A/s · OMXCOP:TRYG
Tryg A/s — Merger or Acquisition (November 2020)
37 slides from Tryg A/s's merger presentation, November 2020
Slide 1: Recommended Offer for RSA Insurance Group plc
Recommended Offer for RSA Insurance Group plc Investor Presentation
Slide 2: Introducing the Recommended Offer for RSA
Introducing the Recommended Offer for RSA Transaction • Recommended offer for RSA Insurance Group plc Total • £7.2bn (c. DKK 60bn) for RSA Consideration • Tryg to acquire RSA’s Sweden and Norway operations Split of Assets • Intact to acquire RSA’s Canada and UK & International operations and obligat
Slide 3: Transaction Highlights and Timetable; Deal and Transaction Structure; Financial Implications
1 Transaction Highlights and Timetable 2 Deal and Transaction Structure 3 Financial Implications 4 Financing 5 Concluding Remarks
Slide 4: Creating the largest Scandinavian non-life insurer
1 Creating the largest Scandinavian non-life insurer A ESTABLISH THE LARGEST NON-LIFE INSURER IN SCANDINAVIA: Increase premiums earned by ~45% B BECOME TOP 3 INSURER IN SWEDEN AND NORWAY: Strengthen position in home markets C DIVERSIFY BUSINESS AND LEVERAGE BEST PRACTICE: Reap benefits across a bala
Slide 5: Strategic rationale behind the proposed acquisition
1 Strategic rationale behind the proposed acquisition A B C Establish the largest non-life Become top 3 insurer in Sweden Diversify the business and insurer in Scandinavia1 and Norway leverage best practice Gross premiums earned, DKKbn Sweden market shares2, % Technical result, Five year avg., % 30
Slide 6: Financial rationale behind the proposed acquisition
1 Financial rationale behind the proposed acquisition D E F Harvest significant synergies Deliver value for shareholders Accelerate dividend capacity • Annual potential pre-tax synergies of • Expected ROI at ~7% • Significant long-term potential to ~DKK 900m to be fully realized by 2024 increase the
Slide 7: Indicative acquisition time-table and key milestones
1 Indicative acquisition time-table and key milestones Separation estimated Public Shareholder Rights issue Expected Deal closing complete announcement vote (1H 2021) (2Q 2021) (1Q 2022) Public announcement RSA and Tryg Rights Issue Completion following Separation of RSA of recommended offer shareho
Slide 8: Transaction Highlights and timetable; Deal and Transaction Structure
1 Transaction Highlights and timetable 2 Deal and Transaction Structure 3 Financial Implications 4 Financing 5 Concluding Remarks
Slide 9: Split of assets in the transaction
2 Split of assets in the transaction Acquired fully by Tryg Co-owned on 50/50 economic basis with Intact RSA Insurance Group 2019 Scandinavia Geography UK & Sweden1 Norway Denmark Canada International Brands Market share, % 14 2 Net premiums earned 2019, 8.8 1.1 5.7 24.7 14.3 DKKbn New owner Co-owne
Slide 10: Post transaction Tryg expects DKK 32bn in premiums and pro-forma technical result of ~DKK 6.3bn
2 Post transaction Tryg expects to have DKK 32bn in premiums and a pro-forma technical result of ~DKK 6.3bn Gross premiums earned, DKKbn Technical result1, DKKbn Tryg 2019 8.8 10.9 0.5 3.0 Acquired 2.3 2024 Synergies (rounded) Tryg Group post acquisition 2.1 0.2 1.1 7.6 0.3 0.6 6.5 0.5 -0.1 13.2 0.0
Slide 11: Trygg-Hansa will add resilient and diversifying earnings
2 Trygg-Hansa will add resilient and diversifying earnings Trygg-Hansa is a large player in the Swedish Stable premium growth over past 4 years at market CAGR of 1.9% • Trygg-Hansa has seen Market shares Sweden, 2019, % Net premiums earned, SEKbn (local currency) positive premium growth at 1.9% CAGR
Slide 12: Trygg-Hansa: a strong cultural fit, unifying the two Tryg brands
2 Trygg-Hansa: a strong cultural fit, unifying the two Tryg brands Strong fit with the spirit of A part of Swedish insurance history Strong social responsibility TryghedsGruppen • Founded in 1828 • Since 1954, Trygg-Hansa has supplied • Supports a wide range of beneficial • Trygg-Hansa is the fourth
Slide 13: Codan NO will further strengthen Tryg's Norwegian market position
2 Codan NO will further strengthen Tryg’s Norwegian market position Decrease in premiums due to pruning of Codan NO will add to current scale portfolio and loss in partner agreements • Portfolio pruning and Market shares Norway, 2019, % Net premiums earned, NOKbn (local currency) loss in partner 26
Slide 14: RSA in Denmark is comprised of both Codan and Privatsikring
2 RSA in Denmark is comprised of both Codan and Privatsikring RSA DK is made up of Codan and Privatsikring is delivering strong topline Codan combined ratio has been hit by large Privatsikring – and recently gained access growth while Codan is experiencing some claims in the last two years to 25% of
Slide 15: Codan has demonstrated significant recent forward momentum
2 Codan has demonstrated significant recent forward momentum #3 Significant improvement potential exists for Codan has started improving performance RSA Denmark is #3 player in the market2 Codan with a gap of ~12 p.p. to peer with a combined ratio of ~90% in H1 2020 combined ratios Non-life Insuranc
Slide 16: Financial Implications
1 Transaction Highlights and timetable 2 Deal and Transaction Structure 3 Financial Implications 4 Financing 5 Concluding Remarks
Slide 17: Total consideration of ~DKK 34.9bn with ~7% ROI and high teens EPS accretion
3 Total consideration of ~DKK 34.9bn (~£4.2bn) with attractive returns: ~7% ROI and high teens EPS accretion by 2023 Total consideration Synergies to be realized Expected deal returns DKKbn DKKm % 34.9 ~900 ~650 ~350 ~60 ROI Total consideration 2021 2022 2023 2024 ~7 • Total consideration of ~DKK •
Slide 18: Tryg estimates pre-tax synergies at ~DKK 900m per year
3 Tryg estimates to be able to realize pre-tax synergies at ~DKK 900m per year across the entire group by 2024 • Leverage the proven Estimated annual pre-tax synergies by 2024, DKKm experience and expertise from the Alka acquisition to reduce ~150 ~900 integration and operational risk ~250 • Majorit
Slide 19: Majority of synergies are realized through cost-related initiatives
3 Majority of synergies are realized through cost-related initiatives • ~80% of synergies primarily driven by costs (operating expenses, procurement, and claims) Estimated annual pre-tax synergies by 2024, DKKm • Administration and distribution synergies to be realized through reduced ~170 ~900 mark
Slide 20: Tryg's total invested assets up ~60% and free portfolio up ~DKK 6bn
3 Tryg’s total invested assets up ~60% and free portfolio up ~DKK 6bn • Total invested assets Match portfolio Free portfolio following the acquisition will be approximately Norway Denmark Sweden Norway Denmark Sweden ~DKK 67bn Pre- Pre- • Tryg’s approach 8.0 18.5 3.6 3.5 6.9 0.7 transaction transact
Slide 21: Dividend capacity will increase significantly as technical result is expected to double
3 Dividend capacity will increase significantly as pro-forma technical result is expected to double from ~DKK 3.2bn to ~DKK 6.3bn Historically, Tryg has paid out a stable and increasing … and with pro-forma technical result expected to double, ordinary dividend … dividend capacity will increase simi
Slide 22: Material uplift in dividend capacity post-integration
3 Material uplift in dividend capacity post-integration Expected ordinary dividend payout capacity, DKKbn • Shareholder remuneration will remain a key focus for the group post- acquisition >2x • Dividend policy will be Illustrative projections unchanged – the group will continue to target a nominall
Slide 23: Solvency II ratio expected to remain robust immediately post-transaction
3 Solvency II ratio expected to remain robust immediately post- transaction Main drivers of Solvency II development: Solvency II, based on Tryg partial internal model, % Impact on own funds Based on current + Rights Issue dividend trajectory >170 + Hybrid debt of ~DKK 2bn ~175 ~160-170 RSA Scandinav
Slide 24: Financing
1 Transaction Highlights and timetable 2 Deal and Transaction Structure 3 Financial Implications 4 Financing 5 Concluding Remarks
Slide 25: The transaction will primarily be financed through an equity raise
4 The transaction will primarily be financed through an equity raise Breakdown of total funds to be raised, DKKbn Equity raise Total financing overview ~39 ~DKK 37bn (including TryghedsGruppen participation) Equity raise fully underwritten by Morgan Stanley and Danske Bank with firm commitment f
Slide 26: TryghedsGruppen is highly supportive of the transaction
4 TryghedsGruppen is highly supportive of the transaction participating with as much capital as possible …Yet solvency restrictions will limit …However long-term shareholding Highly supportive of transaction… its initial participation… expected to be above 50% TryghedsGruppen has committed fully to
Slide 27: Concluding Remarks
1 Transaction Highlights and timetable 2 Deal and Transaction Structure 3 Financial Implications 4 Financing 5 Concluding Remarks
Slide 28: Creating the largest Scandinavian non-life insurer
5 Creating the largest Scandinavian non-life insurer ESTABLISH THE LARGEST NON-LIFE ACCELERATE DIVIDEND CAPACITY INSURER IN SCANDINAVIA: Increase earned premiums by Significant long-term potential to ~45% increase ordinary dividend F A DELIVER VALUE FOR SHAREHOLDERS BECOME TOP 3 INSURER IN SWEDE
Slide 29: 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 29
Slide 30: Appendix
Appendix Investor Presentation
Slide 31: Several items driving ROI and EPS accretion calculations
Several items driving ROI and EPS accretion calculations ROI EPS accretion Return / nominator would include1: Pro-Forma earnings would be based on1: Acquired run-rate earnings, adjusted for diligence findings Acquired run-rate earnings, adjusted for diligence findings Transaction perimeter equ
Slide 32: Several items impacting 2021 P&L
Several items impacting 2021 P&L Up to and including Closing Post closing, pre SE+NO de-merger out Post SE+NO de-merger of RSA Scandinavia (Expected 1H 2021) (Expected 2H 2021) (Expected from 2022) Accounting of RSA Equity accounted, i.e. premiums not Full consolidation SE/NO reflected in top-line y
Slide 33: The deal is structured back-to-back with RSA DK co-owned 50/50
The deal is structured back-to-back where RSA SE and NO is sold on to Tryg and RSA DK is co-owned 50/50 on an economic basis Step 1 Step 2 Step 3 Intact acquires RSA Intact sells RSA Sweden and Norway Denmark is co-owned(1) to Tryg, with RSA Denmark co-owned RSA DK is #3 player and has demonstrated
Slide 34: Trygg-Hansa deep-dive: Strong historical performance
Trygg-Hansa deep-dive: Strong historical performance with increasing topline and improving profitability Sweden Total1 DKKm, unless 2016 (SFCR) 2017 (SFCR) 2018 (SFCR) 2019 (SFCR) stated otherwise NPE (DKKm) 9,293 9,226 8,909 8,810 NPE (Local 11,816 11,955 12,264 12,489 currency, m) Net Combined Rat
Slide 35: Codan NO deep-dive: Focus on operational performance
Codan NO deep-dive: Focus on operational performance will ensure improved profitability Norway Total DKKm, unless 2016 (SFCR) 2017 (SFCR) 2018 (SFCR) 2019 (SFCR) stated otherwise NPE (DKKm) 1,358 1,420 1,058 1,098 NPE (Local 1,695 1,781 1,398 1,449 currency, m) Net Combined 97.6% Ratio 104.0% 116.9%
Slide 36: Thank you
THANK YOU
Slide 37: Legal Disclaimer
Legal Disclaimer This announcement (including any information incorporated by reference in this announcement), oral statements made regarding the Transaction, and other information published by Bidco, Intact, Tryg and/or RSA contain statements which are, or may be deemed to be, "forward-looking stat