Tryg A/s · OMXCOP:TRYG
Tryg A/s — Q2 2018 Earnings Presentation
56 slides from Tryg A/s's earnings presentation, 2018
Slide 1: Q2 2018 results
Q2 2018 results Follow us on Twitter: @TrygIR Investor presentation
Slide 2: Contents
Contents Highlights Q2 2018 3 Premiums and portfolio 7 Claims and expenses 12 Investment, capital and targets 18 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 Q2 2018
Financial highlights Q2 2018 - Higher technical result, lower investment income driven by turbulent fixed-income markets - Q2 dividend of DKK 1.65 per share and solvency ratio of 292 or 207 adjusted for the Alka capital increase Pre-tax profit (DKKm) • Pre-tax profit of DKK 735m (DKK 915m) driven by
Slide 4: Customer highlights Q2 2018
Customer highlights Q2 2018 TNPS • Transactional Net Promoter Score (TNPS) of 64 (57) • Retention continues to increase and it is at the highest level of the last seven years in Private Denmark & Commercial Denmark while it is also improving in Private & Commercial Norway • Commercial Denmark launch
Slide 5: Improved technical result despite higher large & weather claims
Improved technical result despite 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 • Q2 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: Premiums and portfolio
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Slide 8: Group premiums up 4.9% in Q2
Group premiums up 4.9% in Q2 • Group premiums were up 4.9% in local currencies, Private segment grew 5.0% both helped by portfolio acquisitions • Private growth of 5.0% helped by portfolio acquisitions and positive trends in Denmark and Norway • Commercial growth of 4.0% helped by portfolio acquisit
Slide 9: Private - average prices
Private - average prices House insurance – average price (index 2011 = 100) Average price development Y/Y 1.5% 3.2% (Q1 1.9%) (Q1 3.5%) • DK: 1.5% positive development reflects both price increases and Average price: conversion 5,000 6,000 • NO: 3.2% positive development reflects primarily price inc
Slide 10: Customer retention remains broadly stable
Customer retention remains broadly stable Private DK • DK: customer retention at 90.8% (89.8%) highest level in five years • NO: customer retention up to 86.5% (85.5%) showing an improved trend Commercial • DK: customer retention at 88.1% (86.9%) highest level in five years • NO: customer retention
Slide 11: Recent Bancassurance developments in Norway
Recent Bancassurance developments in Norway DnB non-life proposed merger with Sparebank 1 non-life Nordea proposed acquisition of Gjensidige bank • Both players have been producing very strong financial • Tryg/Nordea bancassurance agreement was renewed in the summer results in the last five years of
Slide 12: Claims and expenses
Claims and expenses
Slide 13: Underlying claims ratio improving
Underlying claims ratio improving Claims ratio, net (Commercial DK & NO) Group underlying claims ratio at 70.9, 40bps better than adjusted Q2 2017 Private underlying claims ratio at 68.1, 40bps better than Q2 2017 Corporate profitability remains under pressure “Expected FY 2018 underlying claims rat
Slide 14: Motor insurance, not all claims are coming down
Motor insurance, not all claims are coming down Number of accidents and vehicles DK, Jan.-May 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 ahead,
Slide 15: Motor-insurance (Norway) – Claims inflation
Motor-insurance (Norway) – Claims inflation 4% 1% 3% Inflation 2018 Technology Repair costs • Slide shown at analysts day in Bergen on June 13 (all slides on Tryg.com) • Norwegian Motor claims inflation approximately 4% • Tryg is pushing through price increases around 5% in Motor Norway • Electric a
Slide 16: 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 (%) 16
Slide 17: Expense ratio of 14.1 - lower than Q2 2017
Expense ratio of 14.1 - lower than Q2 2017 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 acquisitions (Trol
Slide 18: Investment, capital and targets
Investment, capital and targets
Slide 19: Investment – Assets split in Match & Free portfolio
Investment – Assets split in Match & Free portfolio Total assets DKK 45bn Splitting up the portfolio Match portfolio ‘risk-wise’ Free portfolio DKK 34bn DKK 11bn Sweden DKK 5 bn Norway DKK 9 bn Denmark DKK 20 bn 19
Slide 20: Investment return – low risk remains key
Investment return – low risk remains key Key figures - Investments Market risk as % of total investments, YE 2017 DKKm Q2 2018 Q2 2017 2017 2016 Free portfolio 10 124 598 939 Match portfolio -15 78 227 210 Other financial income and expenses -85 -71 -298 - 162 Total investment return -90 131 527 987
Slide 21: Investment return – key considerations
Investment return – key considerations Credit Spreads widening in Q2 • Free portfolio 400 120 • Low return on equities (1%) and loss on overall fixed income 115 375 portfolio driven by widening credit spreads on selected exposures 110 (emerging market debt and investment grade bonds). EM spreads 350
Slide 22: Solvency position Q2 2018
Solvency position Q2 2018 Own funds walk • Solvency ratio based on the Partial Internal Model is 292 (Q1 2018: 283). 13,900 568 -499 519 45 13,700 • Own Funds (OF) are primarily impacted by 13,500 -11 13,300 13,100 • Result Q2 2018 of DKK 568m 12,900 13,732 12,700 • Dividends of DKK 499m (Q2 2018) 1
Slide 23: Capital and solvency ratio development
Capital and solvency ratio development Capital Tiers as % of SCR • The Danish FSA has explained that a ratio lower than 125 would result in increased surveillance 2,351 50% • Tier 2 capacity fully utilised 1,126 24% CETier 1 • Tier 1 capacity of DKK 1,438m as per Q2, but it will be down to DKK 90m,
Slide 24: Solvency ratio sensitivities
Solvency ratio sensitivities 310% 306% 300% 297% 297% 296% 297% 294% 293% 293% 292% 291% 291% 290% 288% 290% 288% 287% 287% 278% 280% 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 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 DKK 100- Price i
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: Q2 roadshows & conferences
Q2 roadshows & conferences Date Place Participants from Tryg Arranged by Morten Hübbe, CEO 10/07/2018 Copenhagen Johan Kirstein Brammer, CCO ABG Investor Relations Morten Hübbe, CEO 11/07/2018 London Johan Kirstein Brammer, CCO Autonomous Gianandrea Roberti, IRO 21/08/2018 Helsinki Gianandrea Robert
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 Q2 2018 Run-off net by products Q2 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 Q2 2017) Percentage Percentage Norway Sweden NOK 57,1 bn/EUR 5,9bn (as at Q1-2018) SEK 81.0 bn/EUR 8.2bn (as at Q1-2018) 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 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 46: 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 19,061 20,588 20,973 Technical result 2,789 2,762 3,055 3,237 Investment income, net 527 153 197 207 Pre-tax profit 3,239 2,665 3,034 3,257 Net income 2,517 2,071 2,405 2,546 Combined ratio 84.4%
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 Q2 2018 Q2 2017 FY 2017 Q2 2018 Q2 2017 FY 2017 Gross premiums earned 2.495 2.372 9.606 Gross premiums earned 523 538 2,121 Technical result 565 457 1.783 Technical result 7 62 236 Key ratios: Key ratios: Gross claims ratio 52.4 61.9 64.2 Gross claims r
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
Slide 56: Economic key figures
Economic key figures Denmark Sweden % 2018 2019 % 2018 2019 GDP Growth 1.8 1.7 GDP Growth 2.5 1.9 Inflation 0.9 1.4 Inflation 1.8 1.7 Unemployment 3.9 3.6 Unemployment 6.2 6.2 Current account balance in Current account balance in 7.7 7.3 4.8 5.4 % of GDP % of GDP Budget balance in % of GDP -0.2 0.0