Tryg A/s · OMXCOP:TRYG
Tryg A/s — Q4 2019 Earnings Presentation
54 slides from Tryg A/s's earnings presentation, February 2020
Slide 1: Q4 2019 results
Q4 2019 results Investor presentation Follow us on Twitter: @TrygIR
Slide 2: Contents
Contents Highlights Q4 2019 3 Premiums and portfolio 9 Claims and expenses 13 Investment, capital and targets 18 Roadshows & Conferences 26 Background material 27 Appendix 46 Disclaimer Certain statements in this presentation are based on the beliefs of our management as well as assump
Slide 3: Financial highlights Q4 2019
Financial highlights Q4 2019 - Improved technical result driven by profitable growth in the Private segment and the inclusion of Alka and related synergies, Q4 DPS of DKK 1.70 and Extraordinary DPS of DKK 1.65 (DKK 500m), solvency ratio of 162 Technical result (DKKm) • Pre-tax profit of DKK 940m (DK
Slide 4: Customer highlights Q4 2019
Customer highlights Q4 2019 TNPS • Transactional Net Promoter Score (TNPS) of 68 (67) • Retention levels showed improvements in all business areas • Number of products per customer unchanged compared to prior year Number of products per customer • In Q4, awareness of TryghedsGruppen’s member bonus a
Slide 5: Improved technical result primarily driven by Private & Commercial
Improved technical result primarily driven by Private & Commercial Q4 2018 business segments result not impacted by the one-offs from the Alka consolidation Group (DKKm) Private, DK & NO (DKKm)* Commercial, DK & NO (DKKm)* Corporate (DKKm)* Sweden (DKKm)* • Private - run-off level Q4 2019: 1.1% (2.9
Slide 6: Alka synergies status update
Alka synergies status update Targeted benefits 2019-2021 DKKm • Full run rate synergies impact in 2021 of DKK 300m • 25% impact expected in 2019, 50% impact in 2020 • DKK 24m achieved in Q4 2019, half of it is costs • General costs reduction (sponsorship, staff etc.) • Synergies due to improved rein
Slide 7: Shareholders’ remuneration
Shareholders’ remuneration Shareholder remuneration since 2012 Strong focus on shareholders’ remuneration DKK • Q4 DPS 1.70 (1.65), FY Extraordinary DPS 1.65 3.5 • Aim for a nominal stable increasing ordinary dividend (annual) • Quarterly dividend evenly distributed in different quarters • High prof
Slide 8: Strategic initiatives
Strategic initiatives Claims Excellence Product & Service Innovation Financial Target DKK 600m in 2020 – Total improvement DKK 350m Premium target of DKK 1bn in 2020+ - Total GWP DKK 650m • ~DKK 175m: Savings from leverage of • New market demands addressed through Trygs procurement power. In 2019 a
Slide 9: Premiums and portfolio
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Slide 10: Group premiums up 10.4% in Q4, 5.6% excl Alka
Group premiums up 10.4% in Q4, 5.6% excl Alka • Group premiums were up 10.4% in local currencies, or 5.6% excluding Alka • Group premiums impacted in Q4 by a high level of bonus & rebates (strong profitability of partner agreements) • Private lines reported a 7.6% growth excluding Alka, positive tre
Slide 11: Private - average prices
Private - average prices House insurance – average price (index 2011 = 100) Average price development Y/Y 1.4% 2.4% • DK: 1.4% positive development (Q3 1.4%) (Q3 2.3%) reflects price adjustments Average price: • NO: 2.4% positive development 5,100 6,200 reflects primarily price adjustments Motor ins
Slide 12: Customer retention improved in all areas
Customer retention improved in all areas Private DK • DK: customer retention at 91.6% (91.2%) • NO: customer retention up to 87.1% (86.7%) showing an significant improvement Commercial • DK: customer retention up to 88.6% (88.0%) showing strong improvement • NO: customer retention at 89.0% (87.7%) s
Slide 13: Claims and expenses
Claims and expenses
Slide 14: Underlying claims ratio improving
Underlying claims ratio improving Group underlying claims ratio at 73.4, 50bps better than Q4 2018 Claims ratio, net (Commercial DK & NO) Private underlying claims ratio at 69.2, 50bps better than Q4 2018 Underlying claims ratios in all quarters in 2018 have been adjusted for Alka “Expected FY 2020
Slide 15: Claims Procurement - Recycling of used motor parts
Claims Procurement - Recycling of used motor parts Project Description: Impact / Results • Claims has been working on a project with the aim to repair motor vehicles in a more sustainable way, by recycling used spare parts • The repairment process is based on a collaboration between the Car A engine
Slide 16: Large claims, weather claims and run-off
Large claims, weather claims and run-off Large claims, net DKKm Weather claims, net DKKm Expected annual level 2019: DKK 550m Expected annual level 2019: DKK 600m Claims reserves discounting rate (%) Run-off net, effect on combined ratio (%) 16
Slide 17: Q4 Expense ratio of 14.6, FY at 14.2
Q4 Expense ratio of 14.6, FY at 14.2 Expense ratio • The introduction of efficiency initiatives in 2017 has ensured a continued focus on cost in the business • Expense ratio target for 2020 around 14% 14.4 • Investments in digitalisation will somewhat offset further efficiency gains • Higher number
Slide 18: Investment, capital and targets
Investment, capital and targets
Slide 19: Investments – Split in Match & Free portfolio
Investments – Split in Match & Free portfolio Total investments DKK 39.6 bn Splitting up the portfolio Match portfolio ‘risk-wise’ Free portfolio DKK 28.2 bn DKK 11.4 bn Sweden DKK 5 bn Norway DKK 8 bn Denmark DKK 15 bn 19
Slide 20: Investment return – low risk remains key
Investment return – low risk remains key Key figures - Investments Different asset classes Geographical exposure (%) DKKm Q4 2019 Q4 2018 2018 Free portfolio 226 -198 -33 Match portfolio 19 -42 -2 Other financial income and expenses -47 -90 -297 Total investment return 198 -330 -332 Group fixed inco
Slide 21: Solvency position Q4 2019
Solvency position Q4 2019 Own funds walk • Solvency ratio based on the Partial Internal Model is 162 (Q3 2019: 169). 9,600 705 -1.012 • Own Funds (OF) is primarily impacted by 9,100 8,600 -38 • Result Q4 2019 of DKK 705m 8,100 8,464 • Dividends (Ordinary and Extraordinary) of 7,600 8,119 DKK 1.012m
Slide 22: Capital and solvency ratio development
Capital and solvency ratio development Capital Tiers as % of SCR • Tier 2 cap means that DKK 142m of subordinated loans are not included in Own funds 2,510 50% • Tier 1 capacity for practical purposes fully utilized, DKK 17m left as per Q4 (down from DKK 126m as per 1,108 22% Q3 as Core Equity Tier
Slide 23: Solvency ratio sensitivities
Solvency ratio sensitivities 180% 175% 168% 170% 164% 163% 163% 163% 164% 162% 160% 161% 161% 163% 161% 159% 160% 160% 155% 148% 150% 140% 130% 2019 Equity Property Interest Spread Spread Spread NOK/DKK SEK/DKK (Covered) (Corporate) (Government) • The Solvency II ratio shows the highest sensitivity
Slide 24: Targets and outlook
Targets and outlook ✓ Financial targets for 2020 are firmly maintained ✓ As mentioned before the Alka acquisition will result in annual depreciation of customer relations of DKK127m within a 5 to 7 years period. Solvency Targets post Alka acquisition position (hence dividend capacity) not impacted b
Slide 25: 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 25
Slide 26: Q4 roadshows & conferences
Q4 roadshows & conferences Date Place Participants from Tryg Arranged by Morten Hübbe, CEO 22/01/2020 Copenhagen Barbara Plucnar Jensen, CFO Nordea Investor Relations Morten Hübbe, CEO 23/01/2020 London Carnegie Gianandrea Roberti, IRO Barbara Plucnar Jensen, CFO 23/01/2020 Geneva SEB Peter Brondt,
Slide 27: Background material
Background material
Slide 28: Tryg’s equity story – a leading Scandinavian non-life insurer
Tryg’s equity story – a leading Scandinavian non-life insurer Tryg 2018 – 2020: Strengthening the core, while embracing the future Product & Service Claims Excellence Innovation DKK 600m in claims cost reduction +DKK 1bn in new Financial targets 2020 Customer targets 2020 products by 2020+ • Technic
Slide 29: Why invest in Tryg?
Why invest in Tryg? Pre-tax result by division (YE 2018 data) High insurance penetration in the Nordics Premiums per capita (USD), 2017 Motor combined ratios Nordics vs international Tryg is a dividend stock DKK Total yield (dividend and buy backs / market cap) at year end 29
Slide 30: Tryg at a glance
Tryg at a glance Gross premium split by products 2019 • Tryg goes back to the 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: #4 Retention rate - Private Market sha
Slide 31: Premiums and reserves by lines of business
Premiums and reserves by lines of business Gross premium by products 2019 Gross claims reserve by products 2019 Percentage Percentage Run-off net by products Q4 2019 Run-off net by products Q4 2018 Percentage Percentage 31
Slide 32: Gross premium split by geography
Gross premium split by geography DK: Gross premium by products 2019 SE: Gross premium by products 2019 Percentage Percentage NO: Gross premium by products 2019 Run-off net by products 2019 Percentage Percentage 32
Slide 33: 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 34: Combined ratio development
Combined ratio development 34
Slide 35: Structure of the Nordic insurance market
Structure of the Nordic insurance market Nordic Denmark EUR 26.3bn (as at Q4 2018) DKK 56.6 bn/EUR 7.6bn (as at Q4 2018) Percentage Percentage Norway Sweden NOK 62,1 bn/EUR 6,4bn (as at Q3-2019) SEK 86.6 bn/EUR 8.2bn (as at Q3-2019) Percentage Percentage Fremtind excluding DnB Liv and Sparebank1 Liv
Slide 36: Distribution of new sales 2019
Distribution of new sales 2019 Private DK NO SE Commercial DK NO Corporate DK NO SE 36
Slide 37: 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 38: 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, DKK 30m in case of a fifth event and thereafter DKK 25m. This is based on our general reinsura
Slide 39: 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 40: Population growth (2000-2019)
Population growth (2000-2019) Population development in Denmark in ‘1,000 DK 9% Population development in Norway in ‘1,000 NO 19% 40
Slide 41: TryghedsGruppen and its members’ bonus
TryghedsGruppen and its members’ bonus Denmark's ‘biggest’ family Bonus has a 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 g
Slide 42: Organisational and remuneration structure
Organisational and remuneration structure Organisation chart Remuneration structure The Executive Board are remunerated according to Tryg’s CEO Morten Hübbe remuneration policy: • Base salary CFO CCO • Pension COO Barbara Plucnar Johan Kirstein o 25% of the base salary Lars Bonde Jensen Brammer • Va
Slide 43: Corporate Responsibility in Tryg
Corporate Responsibility in Tryg Corporate Responsibility contributes to long-term value creation Tryg’s Corporate Responsibility 2020 strategy is aligned with our corporate strategy and purpose: As the world changes, we make it easier to be tryg*. • Tryg has published an independent Corporate Respo
Slide 44: Corporate Responsibility in Tryg
Corporate Responsibility in Tryg UN Sustainable Development Goals Tryg has a direct and indirect impact on the 17 SDGs. However, we have focused on SDGs where we have a 41% 2% direct impact and pinpointed two specific goals for which women in reduction in we have defined Key Performance Indicators (
Slide 45: Key figures 2019 and Consensus 2020-2021
Key figures 2019 and Consensus 2020-2021 Consensus DKKm 2019A 2020 2021 Gross premium income 21,741 22,376 22,931 Technical result 3,237 3,362 3,535 Investment income, net 579 140 148 Pre-tax profit 3,628 3,305 3,488 Net income 2,845 2,572 2,711 Combined ratio 85.1% 85.0% 84.6% Expense ratio 14.2% 1
Slide 46: Appendix
Appendix Follow us on Twitter: @TrygIR
Slide 47: Group
Group Gross premiums Combined ratio DKKm % % Claims ratio, net of reinsurance Expense ratio % % 47
Slide 48: Private
Private Gross premiums Combined ratio DKKm % * Including two months Alka Claims ratio, net of reinsurance Expense ratio 48
Slide 49: Commercial
Commercial* Gross premiums Combined ratio DKKm % Claims ratio, net of reinsurance Expense ratio * Less than 100 employees or less than DKK 100m turnover 49
Slide 50: Corporate
Corporate* Gross premiums Combined ratio DKKm % Claims ratio, net of reinsurance Expense ratio * More than 100 employees or more than DKK 100m turnover 50
Slide 51: Sweden
Sweden Gross premiums Combined ratio DKKm % Claims ratio, net of reinsurance Expense ratio 51
Slide 52: Geographical combined ratio
Geographical combined ratio Denmark Sweden Norway 52
Slide 53: 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 54: Economic key figures
Economic key figures Denmark Norway % 2020E 2021E % 2020E 2021E GDP Growth 1.5 1.5 GDP Growth 2.3 2.1 Inflation 1.2 1.4 Inflation 2.2 2.0 Unemployment 3.9 3.9 Unemployment 3.2 3.1 Current account balance in Current account balance in 5.5 5.1 5.9 6.0 % of GDP % of GDP Budget balance in % of GDP 0.6 0