Tryg A/s · OMXCOP:TRYG
Tryg A/s — Investor Day (November 2014)
46 slides from Tryg A/s's investor day presentation, Nov 5, 2014
Slide 1: Tryg - Aiming for world class
Tryg - Aiming for world class Capital Markets Day London, 5 November 2014 1
Slide 2: Agenda
Agenda 9:00–9:30 Registration and coffee 9:30 Targets and initiatives • Follow up on CMD 2012 targets and initiatives • Targets and initiatives 2015 – 2017 Tryg – aiming for world class • Customer experience worth recommending • Next level pricing Coffee break • Leading in efficiency Low risk and hi
Slide 3: Disclaimer
Disclaimer Certain statements in today’s presentations are based on the beliefs of our management as well as assumptions made by and information currently available to the management. Forward-looking statements (other than statements of historical fact) regarding our future results of operations, fi
Slide 4: Where are we today? Follow up on targets for 2012-2015
Where are we today? – Follow up on targets for 2012 – 2015 Targets presented on Capital Market Day, 19 June 2012 Parameter Targets 2015 FY 2010 FY 2013 Q3 2014 Combined ratio ≤ 90% 98.8% 87.7% 83.7% 15.1% Expense ratio < 15% 17.0% 15.6% (on schedule) Retun on equity > 20% 6.6% 21.5% 21.7% Efficiency
Slide 5: Delivering accelerated improvement
Delivering accelerated improvement Combined ratio 2010 – H1 2014 Expense ratio 2010 – H1 2014 100.0% ‐16.0% 20.0% ‐2.0% ‐1.4% ‐1.4% ‐14.0% 1.4% ‐1.5% ‐13.4% 18.0% one-off 90.0% ‐12.0% ‐1.0% ‐0.5% ‐10.0% 16.0% ‐0.5% 80.0% ‐8.0% ‐7.5% 14.0% 0.0% ‐6.0% 70.0% ‐4.2% ‐4.4% ‐4.0% 0.5% 12.0% ‐2.0% 1.3% 1.0%
Slide 6: Performance relative to European peers
Performance relative to European peers Combined ratio 2010 - 2013 Expense ratio 2010 - 2013 • Technical result improved from DKK 460m to DKK 2,496m. • Combined ratio improved from 98.3 to 87.7. • Expense ratio improved from 17.0% to 15.6%. 6 Capital Markets Day 2014
Slide 7: Key initiatives driving target realisation
Key initiatives driving target realisation Present Shorter TOM in terms of Customer selection Finland sold and products and pricing opportunistic M&A 4,101 46,000 suppliers 3,633 26,000 suppliers Next Level Sourcing FTE reduction and Change of IT supplier increased efficiency 7 Capital Markets Day 2
Slide 8: Core earnings improved across business areas
Core earnings improved across business areas Combined ratio - Private (DK & NO) Combined ratio - Commercial (DK & NO) 100% 120% 97.5% 48.8% of 18.1% of total premium 110% total premium 95% 92.7% 99.0% 100% 90% 87.7% 89.6% 86.0% 90% 85.4% 85% 81.3% 80.4% 83.3% 80% 80% 70% 75% 60% 2010 2011 2012 2013
Slide 9: Closer to the balance point
Closer to the balance point Development in premium and no. of customers Premium In line with GDP growth 2016 Premium growth 2015 * * Private DK/NO and Commercial DK/NO • In 2013 and 2014, Tryg has seen a positive trend in both its premium and number of customers. • Our ambition is to grow profitably
Slide 10: Value creation through M&A
Value creation through M&A Tryg created and shaped through While we continuously focus on Moderna our latest success story developing our platform successful M&A Market leading positions in Swedish Acquisitions 1999 Acquisition of Vesta niche segments Acquisition of Zurich’s Danish 2002 2014 - Secur
Slide 11: Targets and initiatives 2015 - 2017
Targets and initiatives 2015 - 2017 11 tisdag den 16 december 2014
Slide 12: Earnings and Customers
Tryg – aiming for world class Earnings Customers We aim to provide world class earnings and customer experiences – simultaneously! 12 Capital Markets Day 2014
Slide 13: What does world class look like financially?
What does world class look like financially? Combined ratio/ expense ratio Return on equity/ dividend yield Average 2011 - 2013 Average 2011 - 2013 • Tryg’s strong focus on earnings through greater efficiency has financially placed Tryg amongst the industry’s top performers. • The challenge ahead is
Slide 14: What does world class look like customer wise?
What does world class look like customer wise? ”Thank you for delivering exactly what you ”You should really promise.” consider moving your Delivering peace of mind insurances to Tryg. I and value to its highly recommend them.” customers, employees and • Available wherever, whenever investors. • Fir
Slide 15: Setting new targets for 2017
Setting new targets for 2017 Targets 2015: Strong and necessary earnings and clean up focus Earnings Customers ROE > 20% - - Combined ratio < 90% Expense ratio < 15% Efficiency programme DKK 1,000m Targets 2017: Enhanced earnings capability and improved customer focus Earnings Customers ROE ≥ 21% NP
Slide 16: Increasing momentum
Increasing momentum - A strong starting point for better customer care What is Net Promoter Score (NPS)? Tryg’s NPS by business unit Sep. 2014 R12 How likely is it that you would recommend us to a friend? Significant Best in class differences! Source: Peoplepulse.com Retention rate Q3 2014 CMGR for
Slide 17: Target drivers towards 2017
Target drivers towards 2017 Targets 2017: Enhanced earnings capability and improved customer focus Earnings Customers ROE ≥ 21% NPS +100% Combined ratio ≤ 87% Retention rate* +1 pp Expense ratio ≤ 14% ≥3 products* +5 pp Efficiency programme DKK 750m * Private DK/NO and Commercial DK/NO Target driver
Slide 18: Customer care worth recommending
Tryg – aiming for world class Customer care worth recommending - 2011 2012 – 2014 2015 - 2017 • Profitable focus • Balanced portfolio • Increased retention • Price increases • Improved efficiency • Improved NPS • Pruning of portfolio • Increased number of ≥3 customers
Slide 19: Customer promoters drive real growth
Customer promoters drive real growth Correlation in relative NPS and growth Trust in information sources >2X CAGR Source: Bain & Company • Depending on the industry, NPS explain ~20-60% Customer promoters… of the variation in organic growth rates among • Buy more competitors. • Stay longer • On aver
Slide 20: An example of the strength of a recommendation
An example of the strength of a recommendation Happy storm (week 41) Translation: Thank God, we have all of our insurances with Tryg Translation: Think I’ll buy my next travel insurance at Tryg Translation: >5,000 likes; >216 sharings; >100 comments Your story gave me goosebumps, maybe I should chan
Slide 21: The simple truth to recommendable customer care
The simple truth to recommendable customer care - Put the customer in center of everything you do Example of great customer care by Tryg Example of poor customer care by Tryg Translation: I feel bullied by Tryg Source: Ekstra Bladet 100% internal service level fulfillment 100% internal service level
Slide 22: We aim to improve NPS to drive retention and engagement
We aim to improve NPS to drive retention and engagement Correlation between Correlation between Correlation between retention and NPS loyalty and NPS engagement and NPS Source: Company data • 1 pp change in retention rate = DKK 50-150m change in expenses depending on BU and timing. • The average pre
Slide 23: Prioritisation of initiatives according to impact
Prioritisation of initiatives according to impact NPS impact by interaction point – Top 3 priorities 1 2 3 Customer perspective Financial perspective - Effects of selected initiatives within top 3 - Derived financial effects • 90% first contact resolution • Reduced expenses due to fewer calls, • End
Slide 24: Utilising ownership goodwill
Utilising ownership goodwill Tryg’s ownership structure strongly Goodwill via TrygFonden supports Tryg’s brand value • In 2014, TrygFonden spends DKK 550m in projects and initiatives that promote peace of mind, e.g.: o Coast lifeguards o Defibrillators o Medical Copters Strengthening o Security and
Slide 25: Next level pricing
Tryg – aiming for world class Next level pricing - 2011 2012 – 2014 2015 - 2017 • Simple approach: • 75% of portfolio at market • Tariff quality at a higher level than Pricing significant behind standard market market standard • Improved customer selection
Slide 26: Pricing track record 2012-2014: A step change
Pricing track record 2012-2014: A step change 22 new products across Denmark, Norway and Sweden. 44% reduction in time to market from 18 months to 10 months. 13-27% higher sales hit rate on new products. 270,000 customers have already signed on to the new products. 5-40% reduction in the use of disc
Slide 27: Building pricing power
Building pricing power Number of pricing criteria per product – old vs. new Avg. new product: 49 criteria Avg. old product: 16 criteria Pricing competetivness 2013 2014 2017 27 Capital Markets Day 2014
Slide 28: Next level pricing - mirroring
Next level pricing - mirroring Differentiation of Own customer data Geo demographics approach and offer • By mirroring the characteristics of Tryg’s customers on to the market, Tryg will be able to differentiate and adjust its offer according to the customer groups’ needs and preferences, thus incre
Slide 29: Enhance engagement by better utilisation of product range
Enhance engagement by better utilisation of product range Share of portfolio with 1 - ≥3 products 60% 50% 40% 30% 20% 10% 0% 1 product 2 products ≥3 products Source: Company data, Private portfolio • Tryg offers one of the broadest product ranges in the market, and is continuously looking to strengt
Slide 30: Leading in efficiency
Tryg – aiming for world class Leading in efficiency - 2011 2012 – 2014 2015 - 2017 • Life time employment and • Efficiency programme improving • Efficiency programme of DKK 750m limited use of procurement competetive position and to improve efficiency further power earnings. DKK 835m achived. throug
Slide 31: Reductions in expenses and claims costs
Reductions in expenses and claims costs Efficiency programme 2012 - 2015 Efficiency programme 2015 - 2017 Expense Expense reduction reduction DKK DKK 750m 1,000m Claims Claims reduction reduction Expense reduction 2015 - 2017 Claims reduction 2015 - 2017 DKKm DKKm 31 Capital Markets Day 2014
Slide 32: Expense reductions towards 2017
Expense reductions towards 2017 Sourcing • Staff functions • Business areas DKK Simplification • First contact resolution 250m • Reduced lead time at customer contacts • Continuous improvement Improved retention rates Sourcing criteria Sourcing in Tryg 1. Customer experience 2013: IT 2014: Finance 2
Slide 33: Where will it take us – expense ratio target 2017
Where will it take us – expense ratio target 2017 Target 2017: ≤14.0% 33 Capital Markets Day 2014
Slide 34: New claims initiatives towards 2017
New claims initiatives towards 2017 Utilising spend data and transparency from In4mo system. Dedicated competence team to help customers quickly back to DKK normal life. DKK 500m 500m Further consolidation and utilisation of Nordic procurement volume. Enhanced fraud detection. Reduction in suppliers
Slide 35: High class systems important driver
High class systems important driver Customer centric procurement 35 Capital Markets Day 2014
Slide 36: Low risk and high returns
Tryg – aiming for world class Low risk and high returns - 2011 2012 – 2014 2015 - 2017 • High volatility in dividend • New dividend policy • Solvency II in force and use of and buy back • Individuel solvency (IS) internal model (IS) • S&P primary capital model • Low investment volatility • Increased
Slide 37: Capital efficiency and low risk profile
Capital efficiency and low risk profile Focus on capital efficiency Low risk profile • Payout ratio target of 60-90% • Balanced portfolio in all segments • ROE target of ≥21% • Prudent use of reinsurance • Share buy back • Conservative approach to claims reserves • Subordinated debt • Matching portf
Slide 38: Stable investment return
Stable investment return Maximum and minimum deviation in Return on investment * quaterly return since 2007 – Standard deviation 2011-13 Min Max Average 5.0% 5.0% 2.5% 2.5% 0.0% 0.0% -2.5% -2.5% -5.0% -5.0% Topdk If Gjensidige Sp.Bank 1 Alm.Br. Tryg * Calculations based on own assumptions • Tryg aim
Slide 39: Reserves and capital development
Reserves and capital development Run-off as a percentage of premium Capital development 80% 70% 11% 6% 60% 12% 18% 3% 50% 6% 40% 30% 50% 47% 51% 46% 20% 10% 0% Q4 2013 Q1 2014 Q2 2014 Q3 2014 Underlying capitalisation Retained cash dividend YTD share buy back • Tryg is maintaining a strong reserving
Slide 40: The road to Solvency II
The road to Solvency II Capital requirement An approval of the Internal model by the Danish FSA is expected ultimo 2015. However, these risk factors are present: • Timing - A delayed approval might result in a temporary use of the Standard model. • Model - Adjustments to the existing model due to di
Slide 41: Subordinated capital
Subordinated capital • Solvency II will increase the potential for SCR = 6.7 mDKK Potential subordinated capital in the range DKK Max. under Solvens II Outcome I Outcome II Tier 1 : 10 % 1.5bn to DKK 2.5bn. of SCR 0.7 1.5 o During 2015 the future desired leverage in 2.5 view of Solvency II will be d
Slide 42: Semi annual cash dividend
Semi annual cash dividend • To strengthen Tryg’s position as a yield share, an Effect on capital buffer interim distribution will be implemented following the announcement of the H1 2015 results. • Stable increasing cash dividend remains on a full year basis. • Interim dividends expected at appox. 4
Slide 43: New extraordinary share buy back programme and share split in 2015
New extraordinary share buy back programme and share split in 2015 New extraordinary share buy back Share split Background for extraordinary share buy back of At the annual general meeting in March 2015, DKK 1,000m in 2015: Tryg will propose to split each share of DKK 25 • Strong results in combinat
Slide 44: Concluding remarks
Concluding remarks 44 tisdag den 16 december 2014
Slide 45: Earnings and Customers: target drivers
Tryg – aiming for world class Earnings Customers Target drivers Customer Next level Leading in Low risk and care worth pricing efficiency high returns recommending 45 Capital Markets Day 2014
Slide 46: Key messages of today
Key messages of today Targets 2017: Enhanced earnings capability and improved customer focus Earnings Customers ROE ≥ 21% NPS +100% Combined ratio ≤ 87% Retention rate* +1 pp Expense ratio ≤ 14% ≥3 products* +5 pp * Private DK/NO and Commercial DK/NO Efficiency programme DKK 750m Next level pricing