Tryg A/s · OMXCOP:TRYG
Tryg A/s — Q3 2017 Earnings Presentation
54 slides from Tryg A/s's earnings presentation, 2017
Slide 1: Q3 2017 results
Q3 2017 results Investor presentation Follow us on Twitter: @TrygIR
Slide 2: Contents
Contents Highlights Q3 2017 3 Premiums and portfolio 7 Claims and expenses 11 Investment, capital and targets 16 Roadshows & Conferences 24 Background material 25 Appendix 44 Disclaimer Certain statements in this presentation are based on the beliefs of our management as well as assump
Slide 3: Financial highlights Q3 2017
Financial highlights Q3 2017 - Improved technical result, lower investment income, pre-tax result slightly below Q3 2016 - Q3 dividend of DKK 1.60 per share and solvency ratio of 211 Pre-tax profit (DKKm) • Pre-tax profit of DKK 860m (DKK 923m) driven by: • Higher technical result of DKK 789m (DKK 7
Slide 4: Customer highlights Q3 2017
Customer highlights Q3 2017 - Many new digital solutions launched NPS • NPS of 22 and Transactional Net Promoter Score (TNPS) of 59 • 20% of travel claims in Norway are fully automated, it only takes 3 seconds to process each claim • Moderna, Tryg’s Swedish business, launched a new Smart Flex digita
Slide 5: Improved technical result driven by Private & Commercial
Improved technical result driven by Private & Commercial 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 1.6, 9M DPS 4.8 3.5 • Aim for a nominal stable increasing dividend (annual) • High proftibility and low growth implies limited increase in capital requirement Q3 • Strong Solvency p
Slide 7: Premiums and portfolio
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Slide 8: Group premiums up 1.5% in Q3
Group premiums up 1.5% in Q3 Group premiums were up 1.5% in local currencies, Private lines DK and of Skandia child book key drivers Danish business growing while Norwegian business still declining Private lines increased 1.2% in particular driven by a positive development in Private Denmark Sweden
Slide 9: Private - average prices
Private - average prices House insurance – average price (index 2011 = 100) Average price development Y/Y 1.9% 3.3% (Q2 1.7%) (Q2 2.6%) • DK: 1.9% positive development reflects both price increases and Average price: conversion 5,000 5,800 • NO: 3.3% positive development reflects primarily price inc
Slide 10: Customer retention broadly stable
Customer retention broadly stable Private DK • DK: customer retention at 89.9% (89.9%) remaining constant at very high levels • NO: customer retention down to 85.5% (86.5%) driven by price increases and slightly higher market churn level. Retention stable vs Q2 2017 level Commercial • DK: customer r
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 73.6, 40bps better than Q3 2016 Private underlying claims ratio at 68.9, 60bps better than Q3 2016 Corporate profitability remains under pressure “Expected FY 2017 underlying claims ratio better
Slide 13: Motor insurance, not all claims are coming down
Motor insurance, not all claims are coming down Number of accidents Jan-Aug 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 2011
Slide 14: 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 2017: DKK 550m level 2017: DKK 500m Claims reserves discounting rate (%) Run-off net, effect on combined ratio (%) 14
Slide 15: On track to meet the 2017 expense ratio target
On track to meet the 2017 expense ratio target Efficiency programme of DKK 750m 2015-2017 Expense ratio As reported Adjusted for one-offs FTE - Development Nominal costs in business areas 15
Slide 16: Investment, capital and targets
Investment, capital and targets
Slide 17: Investment – Asset allocation shows low risk
Investment – Asset allocation shows low risk Total assets DKK 41bn Splitting up the portfolio Match portfolio ‘risk-wise’ Free portfolio DKK 29bn DKK 12bn Sweden DKK 4.4bn Norway DKK 10.0bn Denmark DKK 15.2bn 17
Slide 18: Investment return – low risk remains key
Investment return – low risk remains key Key figures - Investments Market risk as % of total investments, YE 2016 DKKm Q3 2017 Q3 2016 2016 Free portfolio 124 211 939 Match portfolio 38 75 210 Other financial income and expenses -75 -95 - 162 Total investment 87 191 987 return * Solvency II, Standar
Slide 19: Solvency position Q3 2017
Solvency position Q3 2017 Solvency capital requirement walk • Solvency ratio based on the Partial Internal Model is 211 (Q2 2017: 209). 5,100 5,000 • Own Funds (OF) is primarily impacted by 30 1 -9 -3 -22 4,900 33 -7 0 • Result Q3 2017 of DKK 671m 4,800 • Dividends of 440m DKK (Q3 2017) 4,700 4,821
Slide 20: 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. 2,422 50% • The Danish FSA has explained that a ratio lower than 125 would result in increased surveillance. 633 13% CETier 1 • As per Q3 Tryg has a
Slide 21: Solvency ratio sensitivities
Solvency ratio sensitivities 230% 223% 220% 216% 214% 214% 214% 213% 213% 212% 211% 211% 211% 210% 210% 206% 209% 209% 210% 200% 200% 190% 180% 170% 2017 Equity Property Interest Spread Spread Spread NOK/DKK SEK/DKK (Covered) (Corporate) (Government) • The Solvency II ratio shows the highest sensiti
Slide 22: Targets and outlook
Targets and outlook Efficiency programme proceeds as 2017 topline growth between 0-2% planned. 2017 expected tax rate 22-23% Members’ bonus of 8% in September 2017. Markets remain very competitive High focus on capital repatriation Price increases to offset claims inflation. 2017 ROE a
Slide 23: 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 23
Slide 24: Q3 roadshows & conferences
Q3 roadshows & conferences Date Place Participants from Tryg Arranged by Morten Hübbe, CEO 10/10/2017 Copenhagen Christian Baltzer, CFO Carnegie Investor Relations Morten Hübbe, CEO 11/10/2017 London Christian Baltzer, CFO UBS Investor Relations Espen Opedal, SVP Private Norway 06/11/2017 Oslo DnBNO
Slide 25: Background material
Background material
Slide 26: Tryg’s equity story
Tryg’s equity story Leading Scandinavian insurer with strong track record Financial targets 2017 Customer targets 2017 • ROE: ≥21% • NPS +100% Low risk and high Customer care worth returns • Combined ratio: ≤87% • Retention rate +1 pp recommending • Expense ratio: ≤14% • ≥ 3 products +5 pp • Matchin
Slide 27: Why invest in Tryg?
Why invest in Tryg? Pre-tax result by division (YE 2016 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 27
Slide 28: Tryg – at a glance
Tryg – at a glance I Gross premium split by products 2016 • 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 sha
Slide 29: Premiums and reserves by lines of business
Premiums and reserves by lines of business Gross premium by products 2016 Gross claims reserve by products 2016 Percentage Percentage Run-off net by products Q3 2017 Run-off net by products Q3 2016 Percentage Percentage 29
Slide 30: Gross premium split by geography
Gross premium split by geography DK: Gross premium by products 2016 SE: Gross premium by products 2016 Percentage Percentage NO: Gross premium by products 2016 Run-off net by products 2016 Percentage Percentage 30
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 25.5bn (as at Q4 2015) DKK 52.7bn/EUR 7.1bn (as at Q3 2016) Percentage Percentage Norway Sweden NOK 55,9 bn/EUR 6,1bn (as at Q2-2017) SEK 78.6bn/EUR 8.2bn (as at Q2-2017) Percentage Percentage 34
Slide 35: Distribution of new sales 2016
Distribution of new sales 2016 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 The Executive Board are remunerated according to Tryg’s remuneration policy: • Base salary • Pension o 25% of the base salary • Variable pay o Up to 50% of the base salary including pension o The variable pay element
Slide 42: Corporate Social Responsibility in Tryg
Corporate Social Responsibility in Tryg Focus areas: • Peace of mind: Tryg’s overall vision is to create peace of mind for our customers and for society as a whole. We contribute to peace of mind through a number of initiatives focusing on prevention. We believe there lies opportunities within preve
Slide 43: Key figures 2016 and Consensus 2017-2019
Key figures 2016 and Consensus 2017-2019 Consensus DKKm 2016 2017 2018 2019 Gross premium income 17,707 18,004 18,345 18,630 Technical result 2,390 2,705 2,694 2,721 Investment income, net 987 502 246 243 Pre-tax profit 3,220 3,144 2,882 2,907 Net income 2,471 2,450 2,243 2,262 Combined ratio 86.7%
Slide 44: Appendix
Appendix Follow us on Twitter: @TrygIR
Slide 45: Key figures Q3 2017
Key figures Q3 2017 DKKm Q3 2017 Q3 2016 FY 2016 Gross premium income 4,576 4,514 17,707 Technical result 789 744 2,390 Return on investment after technical interest 87 191 987 Profit/loss before tax 860 923 3,220 Profit/loss 671 732 2,471 Claims ratio, net of reinsurance 69.0 69.2 71.0 Gross expens
Slide 46: Group
Group Gross premiums Combined ratio DKKm % % GEP (LHS) Local currency (RHS) Claims ratio, net of reinsurance Expense ratio % % 46
Slide 47: Private
Private Gross premiums Combined ratio DKKm % GEP (LHS) Local currency (RHS) Claims ratio, net of reinsurance Expense ratio 47
Slide 48: 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 48
Slide 49: 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 49
Slide 50: Sweden
Sweden Gross premiums Combined ratio DKKm % GEP (LHS) Local currency (RHS) Claims ratio, net of reinsurance Expense ratio 50
Slide 51: Geographical segments
Geographical segments Denmark Sweden DKKm DKKm Q3 2017 Q3 2016 FY 2016 Q3 2017 Q3 2016 FY 2016 Gross premiums earned 2,404 2,389 9,467 Gross premiums earned 584 518 1,888 Technical result 482 366 1,587 Technical result 120 21 40 Key ratios: Key ratios: Gross claims ratio 62.2 57.9 63.7 Gross claims
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 Sweden % 2017 2018 % 2017 2018 GDP Growth 2.2 2.0 GDP Growth 3.3 2.6 Inflation 1.1 1.5 Inflation 1.9 1.6 Unemployment 4.2 4.0 Unemployment 6.7 6.5 Current account balance in Current account balance in 9.1 8.6 4.8 5.0 % of GDP % of GDP Budget balance in % of GDP -1.2 -0.8