Tryg A/s · OMXCOP:TRYG
Tryg A/s — Q1 2018 Earnings Presentation
53 slides from Tryg A/s's earnings presentation, 2018
Slide 1: Q1 2018 results
Q1 2018 results Follow us on Twitter: @TrygIR Investor presentation
Slide 2: Contents
Contents Highlights Q1 2018 3 Premiums and portfolio 7 Claims and expenses 11 Investment, capital and targets 15 Roadshows & Conferences 23 Background material 24 Appendix 44 Disclaimer Certain statements in this presentation are based on the beliefs of our management as well as assump
Slide 3: Financial highlights Q1 2018
Financial highlights Q1 2018 - Broadly flat technical result, lower investment income dragged down by a DKK 145m swing in equities - Q1 dividend of DKK 1.65 per share and solvency ratio of 283 or 197 adjusted for the Alka capital increase Pre-tax profit (DKKm) • Pre-tax profit of DKK 553m (DKK 779m)
Slide 4: Customer highlights Q1 2018
Customer highlights Q1 2018 • Transactional Net Promoter Score (TNPS) of 62 (57) TNPS • In November 2017, Private Denmark launched a contents insurance product which includes Tryg Alarm as part of the package concept. More than 40% of customers who were offered the Alarm concept have accepted. • Pri
Slide 5: Technical result very close to Q1 2017 despite higher weather claims
Technical result very close to Q1 2017 despite higher weather claims Group (DKKm) Private, DK & NO (DKKm) Commercial, DK & NO (DKKm) Corporate (DKKm) Sweden (DKKm) 5
Slide 6: Shareholders’ remuneration
Shareholders’ remuneration Shareholder remuneration since 2012 Strong focus on shareholders’ remuneration DKK • Q1 DPS 1.65 3.5 • Aim for a nominal stable increasing ordinary dividend (annual) • No extraordinary dividend to be expected for the FY 2018 • High proftibility and low growth implies limit
Slide 7: Premiums and portfolio
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Slide 8: Group premiums up 2.2% in Q1
Group premiums up 2.2% in Q1 • Group premiums were up 2.2% in local currencies, Private segment grew 3.8% • Private Denmark increased by more than 7.0% (half of the growth driven by the acquisition of FDM) with a continued high sales level and high retention supported by Tryghedsgruppens member bonu
Slide 9: Private - average prices
Private - average prices House insurance – average price (index 2011 = 100) Average price development Y/Y 1.9% 3.5% (Q4 2.1%) (Q4 3.7%) • DK: 1.9% positive development reflects both price increases and Average price: conversion 5,000 5,800 • NO: 3.5% positive development reflects primarily price inc
Slide 10: Customer retention remains broadly stable
Customer retention remains broadly stable Private DK • DK: customer retention at 90.5% (89.8%) highest level in five years • NO: customer retention up to 86.3% (86.1%) showing an improved trend Commercial • DK: customer retention at 87.8% (87.0%) highest level in last two years • NO: customer retent
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 76.6, 40bps better than adjusted Q1 2017 Private underlying claims ratio at 75.0, 50bps better than Q1 2017 Corporate profitability remains under pressure “Expected FY 2018 underlying claims rat
Slide 13: 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 (%) 13
Slide 14: Expense ratio of 14 - lower than Q1 2017
Expense ratio of 14 - lower than Q1 2017 Expense ratio • Efficiency initiatives in 2017 brought down overall costs • Investments in digitalisation will somewhat offset further efficiency gains • Expense ratio target for 2020 around 14% • Number of employees increased slightly due to in-sourcing of I
Slide 15: Investment, capital and targets
Investment, capital and targets
Slide 16: Investment – Asset allocation shows low risk
Investment – Asset allocation shows low risk Total assets DKK 44bn Splitting up the portfolio Match portfolio ‘risk-wise’ Free portfolio DKK 33bn DKK 11bn Sweden DKK 4bn Norway DKK 9bn Denmark DKK 20bn 16
Slide 17: Investment return – low risk remains key
Investment return – low risk remains key Key figures - Investments Market risk as % of total investments, YE 2017 DKKm Q1 2018 Q1 2017 2017 Free portfolio 54 212 598 Match portfolio 30 98 227 Other financial income and expenses -75 -87 -298 Total investment return 9 223 527 Fixed income portfolio cr
Slide 18: Solvency position Q1 2018
Solvency position Q1 2018 Own funds walk • Solvency ratio based on the Partial Internal Model 13,900 is 283 (Q4 2017: 281) or 197 adjusted for the 13,700 426 -499 Alka capital increase. 13,500 13,300 -47 68 13,100 • Own Funds (OF) is primarily impacted by 12,900 12,700 13,162 13,110 12,500 • Result
Slide 19: 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. 2,313 50% 619 13% • The Danish FSA has explained that a ratio lower than 125 would result in increased surveillance. CETier 1 • As per Q1 Tryg has a
Slide 20: Solvency ratio sensitivities
Solvency ratio sensitivities 300% 295% 289% 289% 290% 286% 286% 286% 283% 285% 285% 281% 282% 282% 281% 280% 279% 280% 278% 272% 270% 260% 2018 Equity Property Interest Spread Spread Spread NOK/DKK SEK/DKK (Covered) (Corporate) (Government) • The Solvency II ratio shows the highest sensitivity to sp
Slide 21: 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 June 2018. Alka acquisition will result in annual depreciation of customer relations of approximately DKK100-150m Pri
Slide 22: 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 22
Slide 23: Q1 roadshows & conferences
Q1 roadshows & conferences Date Place Participants from Tryg Arranged by Morten Hübbe, CEO 11/04/2018 Copenhagen Christian Baltzer, CFO Carnegie Investor Relations Christian Baltzer, CFO 12/04/2018 London Barclays Gianandrea Roberti, IRO Morten Hübbe, CEO 12/04/2018 Geneva Danske Bank Peter Brondt,
Slide 24: Background material
Background material
Slide 25: 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 26: Why invest in Tryg?
Why invest in Tryg? Pre-tax result by division (YE 2017 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 26
Slide 27: 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 28: 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 Q1 2018 Run-off net by products Q1 2017 Percentage Percentage 28
Slide 29: 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 29
Slide 30: Motor insurance, not all claims are coming down
Motor insurance, not all claims are coming down Number of accidents per year 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 201
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 52.9bn/EUR 7.1bn (as at Q1 2017) Percentage Percentage Norway Sweden NOK 57,0 bn/EUR 6,1bn (as at Q4-2017) SEK 80.0bn/EUR 8.3bn (as at Q4-2017) Percentage Percentage 34
Slide 35: Distribution of new sales 2017
Distribution of new sales 2017 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 Executive Board The Executive Board are remunerated according to Tryg’s remuneration policy: CEO Morten Hübbe • Base salary CFO COO CCO • Pension Johan o 25% of the base salary Christian Baltzer Lars Bonde Kirstein B
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 19,298 20,731 21,248 Technical result 2,789 2,724 3,086 3,271 Investment income, net 527 177 219 222 Pre-tax profit 3,239 2,638 3,087 3,288 Net income 2,517 2,052 2,449 2,558 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 Q1 2018 Q1 2017 FY 2017 Q1 2018 Q1 2017 FY 2017 Gross premiums earned 2.492 2.382 9.606 Gross premiums earned 479 482 2,121 Technical result 428 349 1.783 Technical result 42 67 236 Key ratios: Key ratios: Gross claims ratio 65.5 68.3 64.2 Gross claims
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 % 2018 2019 % 2018 2019 GDP Growth 1.9 1.7 GDP Growth 2.6 2.0 Inflation 1.2 1.5 Inflation 1.8 1.8 Unemployment 4.0 3.7 Unemployment 6.6 6.5 Current account balance in Current account balance in 8.1 7.5 4.8 5.5 % of GDP % of GDP Budget balance in % of GDP -0.4 -0.2