Tryg A/s · OMXCOP:TRYG
Tryg A/s — Q3 2018 Earnings Presentation
55 slides from Tryg A/s's earnings presentation, 2018
Slide 1: Q3 2018 results
Q3 2018 results Investor presentation Follow us on Twitter: @TrygIR
Slide 2: Contents
Contents Highlights Q3 2018 3 Premiums and portfolio 9 Claims and expenses 13 Investment, capital and targets 19 Roadshows & Conferences 27 Background material 28 Appendix 47 Disclaimer Certain statements in this presentation are based on the beliefs of our management as well as assump
Slide 3: Financial highlights Q3 2018
Financial highlights Q3 2018 - Technical result broadly in line with Q3 17 despite higher large claims, slightly lower investment income - Q3 dividend of DKK 1.65 per share and solvency ratio of 291 or 207 adjusted for the Alka capital increase Pre-tax profit (DKKm) • Pre-tax profit of DKK 825m (DKK
Slide 4: Customer highlights Q3 2018
Customer highlights Q3 2018 TNPS • Transactional Net Promoter Score (TNPS) of 66 (59) with significant improvement for especially Private Norway • Retention improved in all business areas Number of products per customer • Awareness of Customer Bonus improved especially for Non-customers 4
Slide 5: Slightly lower technical result driven by higher large & weather claims
Slightly lower technical result driven by higher large & 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 • Q3 DPS 1.65 3.5 • Aiming for a nominal and stable increase in ordinary dividend (annual) • No extraordinary dividend to be expected for the FY 2018 • High proftibility and low growth impli
Slide 7: Strategic initiatives
Strategic initiatives Claims Excellence (DKK 600m in 2020) Product & Service Innovation (+DKK 1bn in 2020+) • Requirement for a ‘fire tracer’ led to a lower level of fire- • New motor insurance product “SideKick” in Norway for young related claims for agriculture in Denmark (approx DKK 10m). drivers
Slide 8: Alka: Strong financial track record
Alka: Strong financial track record • Alka reported a Q1-Q3 technical result of DKK 276m driven by a Combined ratio of 84 - Premiums growth was 4% while the run-off result was 5% • Tryg on September 25 commented on the Alka approval process. ”Tryg has submitted non-structural remedies expected to re
Slide 9: Premiums and portfolio
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Slide 10: Group premiums up 4.7% in Q3
Group premiums up 4.7% in Q3 • Group premiums were up 4.7% in local currencies, or 3.0% excluding portfolio acquisitions • Private growth of 5.3% with positive trends in Denmark and especially in Norway • Commercial growth of 2.9% with positive trends particularly in the Norwegian commercial segment
Slide 11: Private - average prices
Private - average prices House insurance – average price (index 2011 = 100) Average price development Y/Y 1.3% 3.0% (Q2 1.5%) (Q2 3.2%) • DK: 1.3% positive development reflects both price increases and Average price: conversion 5,000 6,000 • NO: 3.0% positive development reflects primarily price inc
Slide 12: Customer retention improving
Customer retention improving Private DK • DK: customer retention at 91.0% (89.9%) highest level in five years • NO: customer retention up to 86.6% (85.5%) showing an improved trend Commercial • DK: customer retention at 87.9% (87.3%) remains at a high level • NO: customer retention at 88.4% (87.2%)
Slide 13: Claims and expenses
Claims and expenses
Slide 14: Underlying claims ratio improving
Underlying claims ratio improving Claims ratio, net (Commercial DK & NO) Group underlying claims ratio at 73.1, 50bps better than adjusted Q3 2017 Private underlying claims ratio at 68.4, 50bps better than Q3 2017 Corporate profitability remains under pressure “Expected FY 2018 underlying claims rat
Slide 15: Motor insurance (Denmark), not all claims are coming down
Motor insurance (Denmark), not all claims are coming down Number of accidents and vehicles DK, H1 New headlights are becoming more technology intensive Adaptive high beam A headlight control system that continuously automatically tailors the headlamp range, so the beam only reaches other vehicles ah
Slide 16: Motor-insurance (Norway) – Claims inflation
Motor-insurance (Norway) – Claims inflation 108 • Tryg is pushing through price increases around 106 5% in Motor Norway 104 • Norwegian Motor claims inflation approximately 102 4% 100 98 • Some Electric and Hybrid cars have different risk 96 profiles compared to normal cars 94 Q1 17 Q2 17 Q3 17 Q4 1
Slide 17: 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 (%) 17
Slide 18: Expense ratio of 13.9 in line with the ~14% target in 2020
Expense ratio of 13.9 in line with the ~14% target in 2020 Expense ratio • Efficiency initiatives in 2017 reduced overall costs • Investments in digitalisation will somewhat offset further efficiency gains • Expense ratio target for 2020 around 14% • Higher number of employees driven by portfolio ac
Slide 19: Investment, capital and targets
Investment, capital and targets
Slide 20: Investments – Split in Match & Free portfolio
Investments – Split in Match & Free portfolio Total investments DKK 44bn Splitting up the portfolio Match portfolio ‘risk-wise’ Free portfolio DKK 33bn DKK 11bn Sweden DKK 5 bn Norway DKK 9 bn Denmark DKK 19 bn 20
Slide 21: Investment return – low risk remains key
Investment return – low risk remains key Key figures - Investments Market risk as % of total investments, YE 2017 DKKm Q3 2018 Q3 2017 2017 2016 Free portfolio 101 124 598 939 Match portfolio 25 38 227 210 Other financial income and expenses -47 -75 -298 - 162 Total investment return 79 87 527 987 F
Slide 22: Solvency position Q3 2018
Solvency position Q3 2018 Own funds walk • Solvency ratio based on the Partial Internal Model is 291 (Q2 2018: 292). 14,700 • Own Funds (OF) is primarily impacted by 627 -499 14,200 -67 16 -12 • Result Q3 2018 of DKK 627m 13,700 • Dividends Q3 of DKK 499m 13,200 13,732 13,797 12,700 • SCR broadly si
Slide 23: Capital and solvency ratio development
Capital and solvency ratio development Capital Tiers as % of SCR • Tier 2 capacity fully utilized. 2,374 50% • Tier 1 capacity for practical purposes fully utilized 1,137 24% after Atier 1 issue of SEK 700m in Q1. CETier 1 • The Danish FSA has explained that a ratio lower than 125 would result in in
Slide 24: Solvency ratio sensitivities
Solvency ratio sensitivities 310% 305% 300% 296% 296% 295% 296% 293% 292% 292% 291% 290% 290% 289% 287% 290% 286% 285% 286% 280% 277% 270% 260% 2018 Equity Property Interest Spread Spread Spread NOK/DKK SEK/DKK (Covered) (Corporate) (Government) • The Solvency II ratio shows the highest sensitivity
Slide 25: Targets and outlook
Targets and outlook 2018 underlying topline growth between 0-2% Efficiency programme concluded, new financial targets announced 2018 expected tax rate around 24% A one off-charge of DKK200m is expected to be Member bonus of 8% in June 2018 booked in Q4 2018 following the approval of the Al
Slide 26: 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 26
Slide 27: Q3 roadshows & conferences
Q3 roadshows & conferences Date Place Participants from Tryg Arranged by Morten Hübbe, CEO 11/10/2018 Copenhagen Lars Bonde, COO Nordea Investor Relations Espen Opedal, Head of Tryg Norway 23/10/2018 Oslo DnB Peter Brondt, IR Manager Hans Arnum, Head of Commercial DK 24/10/2018 Amsterdam DnB Peter B
Slide 28: Background material
Background material
Slide 29: 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 30: 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 30
Slide 31: 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: 13.3
Slide 32: 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 Q3 2018 Run-off net by products Q3 2017 Percentage Percentage 32
Slide 33: 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 33
Slide 34: 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 35: 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 36: 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 37: Structure of the Nordic insurance market
Structure of the Nordic insurance market Nordic Denmark EUR 25.6 bn (as at Q4 2016) DKK 53.1 bn/EUR 7.1bn (as at Q3 2017) Percentage Percentage Norway Sweden NOK 57,7 bn/EUR 6,0bn (as at Q2-2018) SEK 83.0 bn/EUR 8.2bn (as at Q2-2018) Percentage Percentage 37
Slide 38: Distribution of new sales 2017
Distribution of new sales 2017 Private DK NO SE Commercial DK NO Corporate DK NO SE 38
Slide 39: 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 40: 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 41: 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 42: 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% 42
Slide 43: Every 5th Dane receives a bonus! 8% in 2018
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 44: 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 45: Corporate Responsibility
Corporate Responsibility Our 2020 Corporate Responsibility strategy is built on three strategic pillars; ‘Peace of mind in society’, ‘Tryg as a responsible workplace with responsible management’ and ‘Competent and responsible customer relations’. The Corporate Responsibility strategy supports our ov
Slide 46: Key figures 2017 and Consensus 2018-2020
Key figures 2017 and Consensus 2018-2020 DKKm 2017A 2018 2019 2020 Gross premium income 17,963 18,666 20,715 21,154 Technical result 2,789 2,810 3,118 3,288 Investment income, net 527 66 168 175 Pre-tax profit 3,239 2,647 3,062 3,272 Net income 2,517 2,053 2,422 2,558 Combined ratio 84.4% 84.9% 84.9
Slide 47: Appendix
Appendix Follow us on Twitter: @TrygIR
Slide 48: Group
Group Gross premiums Combined ratio DKKm % % GEP (LHS) Local currency (RHS) Claims ratio, net of reinsurance Expense ratio % % 48
Slide 49: Private
Private Gross premiums Combined ratio DKKm % GEP (LHS) Local currency (RHS) Claims ratio, net of reinsurance Expense ratio 49
Slide 50: 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 50
Slide 51: 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 51
Slide 52: Sweden
Sweden Gross premiums Combined ratio DKKm % GEP (LHS) Local currency (RHS) Claims ratio, net of reinsurance Expense ratio 52
Slide 53: Geographical segments
Geographical segments Denmark Sweden DKKm DKKm Q3 2018 Q3 2017 FY 2017 Q3 2018 Q3 2017 FY 2017 Gross premiums earned 2.512 2.404 9.606 Gross premiums earned 560 584 2,121 Technical result 459 482 1.783 Technical result 120 120 236 Key ratios: Key ratios: Gross claims ratio 62.7 62.2 64.2 Gross claim
Slide 54: Geographical combined ratio
Geographical combined ratio Denmark Sweden Norway 54
Slide 55: 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