Tryg A/s · OMXCOP:TRYG
Tryg A/s — FY2016 Earnings Presentation
54 slides from Tryg A/s's earnings presentation, February 2017
Slide 1: 2016 Annual results
2016 Annual results Follow us on Twitter: @TrygIR Investor presentation
Slide 2: Contents
Contents Highlights Q4 2016 3 Premiums and portfolio 7 Claims and expenses 12 Investment, capital and targets 19 Background material 29 Appendix 46 Disclaimer Certain statements in this presentation are based on the beliefs of our management as well as assumptions made by and information
Slide 3: Financial highlights 2016
Financial highlights 2016 • DPS of 6.2 for the FY and extraordinary dividend of DKK Dividend, buy back & total yield 1bn in 2017 (3.5/share) 15 10% 8% • DPS growth in line with our aim 12 9 6% • Extraordinary dividend of DKK 1bn in 2017 3.2 3.4 3.5 3.5 6 2.6 4% • Quarterly dividend introduction from
Slide 4: Financial highlights Q4 2016
Financial highlights Q4 2016 - Improved technical result adj. for write-downs and substantially higher investment return driven by capital gain on the sale of properties • Pre-tax profit of DKK 800m (DKK 745m) driven by: Pre-tax profit (DKKm) • Lower technical result of DKK 314m (DKK 522m) weighed d
Slide 5: Customer highlights 2016
Customer highlights 2016 - Number of customers with three or more products increased from 56.7 to 57.2 NPS • NPS of 22 and Transactional Net Promoter Score (TNPS) of 49 22 22 22 • Tryg acquired child insurance portfolio in Sweden and a new child insurance was launched in Denmark. • Cyber insurance l
Slide 6: Key figures Q4/FY
Key figures Q4/FY Q4 2016 FY 2016 FY 2015 DKKm Q4 2015 adjusted adjusted adjusted Technical result 564* 522 2,640* 2,543* Investment income, net 98** 242 487** -22 Other income/costs -12*** -19 -57*** -91 Pre-tax result 650 745 3,070 2,430 Claims ratio 73.2% 74.2% 70.5% 71.2% Expense ratio 14.4% 14.
Slide 7: Premiums and portfolio
Premiums and portfolio
Slide 8: Positive topline development in Private
Positive topline development in Private Group premiums were up 1.7% in local currencies, Private lines and full inclusion of Skandia child book key drivers Private lines increased 1.3% driven primarily by a positive development in Private Denmark Commercial lines declined 0.8% primarily driven by co
Slide 9: Improved technical result adjusted for intangibles write-down
Improved technical result adjusted for intangibles write-down Group (DKKm) Private, DK & NO (DKKm) Commercial, DK & NO (DKKm) 366 285 166 147 Q4 2016 Q4 2015 Q4 2016 Q4 2015 564* 522 Corporate (DKKm) Sweden (DKKm) 85 23 9 5 Q4 2016 Q4 2015 Q4 2016 Q4 2015 Q4 2016 Q4 2015 *Adjusted for intangibles wr
Slide 10: Private - average prices
Private - average prices House insurance – average price (index 2011 = 100) • DK: 0.4% positive development Average price development Y/Y reflects both price increases and 125 0.4% 0.7% conversion 120 NO (Q3 -0.2%) (Q3 0.2%) 115 • NO: 0.7% positive development 110 Average price: DK reflects primaril
Slide 11: Customer retention remaining stable
Customer retention remaining stable Private 92% DK • Customer retention slightly 90% down at 89.7 (89.9 at Q3) in 88% Denmark 86% NO 84% • Stable development in Norway 82% Commercial • Customer retention slightly up 92% at 87.1 (86.8 at Q3) in 90% NO Denmark 88% 86% • Retention slightly down in DK N
Slide 12: Claims and expenses
Claims and expenses
Slide 13: Underlying claims ratio showing an improved trend
Underlying claims ratio showing an improved trend Group Private (DK & NO) Commercial (DK & NO) 72.7 69.8 68.9 68.6 74.0* 73.3 Q4 2016 Q4 2015 Q4 2016 Q4 2015 Corporate Sweden 86.6 84.8 76.9 77.3 Q4 2016 Q4 2015 Q4 2016 Q4 2015 Q4 2016 Q4 2015 Underlying development is adjusted for large claims, weat
Slide 14: Motor insurance, not all claims are coming down
Motor insurance, not all claims are coming down Number of accidents per year Bumpers, price increases in % from 335,578 2011-2016 316,429 304,308 294,458 301,550 2012 2013 2014 2015 2016 Motor, comprehensive 115 Top 10 sold cars in DK, Jan. - dec. 2016 110 Model sold cars 105 1 PEUGEOT 208 9,381 100
Slide 15: 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 9% claims development 2009-2015 7% 7% • Cloudburst hitting Copenhagen 6% 6% in 2011 explains jump and fall 3% 3% 1% 2% 2% 1% 1% 1% of figures in 2011-2012 • Figures not adjus
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 2017: DKK 550m level 2017: DKK 500m 574 613 620 614 447 407 391 351 197 237 134 115 2013 2014 2015 2016 Q4 2015 Q4 2016 2013 2014 2015 2016 Q4 2015 Q4 2016 Claims reserves d
Slide 17: Efficiency programme, DKK 59m achieved in Q4
Efficiency programme, DKK 59m achieved in Q4 • Programme proceeds as planned, target to Efficiency programme up until 2017 (DKKm) achieve savings of DKK 750m over 3 years. Old programme New programme • Savings achieved in 2015 and 2016 equal to 388 395 DKK 375m in line with targeted level 125 • Clai
Slide 18: Strong costs focus to meet 2017 target
Strong costs focus to meet 2017 target • Expense ratio at 14.4 (14.2) adjusting for DKK162m of Expense ratio intangibles write down hitting the expense line • Efficiency programme lowered costs by 15.6 15.3 15.7 15.3 DKK 18m for Q4 mainly related to: 14.8 14.9 14.2 14.4 • Outsourcing within Finance
Slide 19: Investment, capital and targets
Investment, capital and targets
Slide 20: Investment return – low risk remains key (1)
Investment return – low risk remains key (1) Free Portfolio (DKK 12 bn) Q4 2016 Match Portfolio (DKK 29.1 bn) Q4 2016 Bonds/deposits 2% Other 1% Govenment bonds 3% Inflation linked bonds 4% Emerging Markets 4% Equities 18 % Investment grade 5% High Yield 6% Inv. Property 21% Cov. Bonds 37% Cov. Bond
Slide 21: Investment return – low risk remains key (2)
Investment return – low risk remains key (2) Different asset classes Geographical exposure (%) Corporate bonds (3% of total investments) 1400 1,276 98 100 1200 62 62 1000 546 38 800 18 15 2 5 600 Bonds Equity HY & EM Inv. Property 400 730 Nordics EU ex Nordics North America EM/Other 200 0 High-Yield
Slide 22: Solvency position Q4 2016
Solvency position Q4 2016 Solvency capital requirement walk • Solvency ratio based on the Partial Internal Model is 194 (Q3 2016: 217). 5,200 40 -70 5,150 • Own Funds (OF) is primarily impacted by 27 5,100 0 -29 21 -19 15 5,050 • Result Q4 2016 of DKK 560m 5,000 4,950 • Dividends of DKK 1,017m (H2 2
Slide 23: 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. • As per Q4 some DKK207m of Tier 2 instruments are 2,539 50% not included in the Own Funds as they exceed the 655 13% 50% SCR cap. CETier 1 ATier 1
Slide 24: Tier 2 instruments, Solvency II vs Balance sheet
Tier 2 instruments, Solvency II vs Balance sheet Solvency 2 Balance sheet 3,000 3,000 2,500 2,500 2,000 2,000 DKKm DKKm 1,500 1,500 1,000 1,000 500 500 - Subordinated Subordinated Natural Perils Tier 2 before Cap Tier 2 after cap debt, NOK debt, SEK Pool cap 1,400m 1,000m - -500 Subordinated debt, S
Slide 25: Solvency ratio sensitivities
Solvency ratio sensitivities 220% 210% 206% 203% 200% 196% 196% 194% 193% 194% 194% 193% 192% 192% 193% 190% 184% 182% 180% 170% Q4 '16 +20% -20% +20% -20% +100 -100 +100 -100 +20% -20% +20% -20% -100 bps bps bps bps bps 2016 Equity Property Interest Spread NOK/DKK SEK/DKK UFR • The Solvency II rati
Slide 26: 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% paid in June 2016. Markets remain very competitive Price increases to offset claims inflation. High focus on capital repatriation 2017 ROE a
Slide 27: 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 27
Slide 28: Upcoming roadshows
Upcoming roadshows Date Place Participants from Tryg Arranged by Morten Hübbe, CEO Christian Baltzer, CFO 20/01/2017 Copenhagen SEB Lars Bonde, COO Investor Relations Christian Baltzer, CFO 24/01/2017 Oslo DnBNOR Peter Brondt, IR Manager Morten Hübbe, CEO 25/01/2017 London Christian Baltzer, CFO Bar
Slide 29: Background material
Background material
Slide 30: Why invest in Tryg?
Why invest in Tryg? Pre-tax result by division (YE 2015 data) High insurance penetration in the Nordics Premiums per capita (USD), 2015 200% 2,000 150% 1,401 1,330 1,380 100% 1,129 1,067 50% 1,000 612 0% -50% 0 -100% Non-life Life Banking Other Motor combined ratios Nordics vs international Tryg is
Slide 31: 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 43% 33% services of my insurance company 50% 72% • My insurance agent only sold me 43% 20% insurance coverage that I really needed 49% 67% • My present insurance cov
Slide 32: Tryg – at a glance I
Tryg – at a glance I Gross premium split by products 2016 • Tryg goes back to 18th century. 9 • Very strong brand position especially in Denmark. 30 Motor 14 Workers' comp • Non-life insurance in Denmark, Norway and Sweden. Health & accident Percentage • Approx. 80% retail business. Liability Norway
Slide 33: Tryg – at a glance II
Tryg – at a glance II Shareholder remuneration since 2012 Share price performance since IPO DKK 10 500 9 450 8 3.5 Tryg Euro Insurance index 3.5 400 3.4 7 3.2 2.6 350 6 300 5 250 4 3 6.0 6.2 200 5.4 5.8 5.2 2 150 1 100 0 50 2012 2013 2014 2015 2016 0 Ordinary dividend Extraordinary buy back Extraord
Slide 34: Tryg – at a glance III
Tryg – at a glance III Gross premium by products 2016 Gross claims reserve by products 2016 12 8 16 30 Motor Motor 9 Workers' comp Workers' comp 14 Health & accident 8 Health & accident Percentage Percentage Liability Liability Fire & property - private 8 Fire & property - private 5 Fire & property
Slide 35: Gross premium split by geography
Gross premium split by geography DK: Gross premium by products 2016 SE: Gross premium by products 2016 6 7 Motor TPL 2 Motor TPL 4 Motor Casco 14 14 Motor Casco 19 Workers' comp 15 Health & accident Health & accident Percentage Liability Percentage Liability 21 Fire & property - private Fire & prope
Slide 36: 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 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, maximum exposure is DKK 25m thereafter. This is based on our general reinsurance programme. •
Slide 39: TryghedsGruppen members’ bonus
TryghedsGruppen members’ bonus Denmark's ‘biggest’ family Positive effect on retention ‘I expect to be in Tryg next year’ Have heard about Customer bonus 93% > DKK 400m to Private costumers Have not heard about Customer Bonus 81% Retention rate increase by 1 pct. gives approx. DKK 50-150m reduction
Slide 40: 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 +2,000 Claims estimate: -18,000 Claims buffer: -2,000 • Initial assessment of the claims was DKK 18,000 but Tryg reserved for DKK 20,000 adding some conservatism to best estimate. •
Slide 41: Population growth (2000-2016)
Population growth (2000-2016) Population development in Denmark in ‘1,000 6,000 DK 7% Growth 2000-2016: 5,800 0-17 years 1.9% 5,600 18+ years 8.5% Total 7.1% 5,400 5,200 5,000 Population development in Norway in ‘1,000 5,600 NO 16% Growth 2000-2016: 0-17 years 7.1% 5,200 18+ years 19.3% 4,800 Total
Slide 42: Structure of the Nordic insurance market
Structure of the Nordic insurance market Nordic Denmark EUR 25.7bn (as at Q4 2014) DKK 52.0bn/EUR 7.0bn (as at Q4 2015) 9.3 18.0 4.8 Tryg Tryg 31.6 Topdanmark Topdanmark 42.2 If If Percentage 17.2 Codan Percentage Codan 17.2 Gjensidige Gjensidige Länsforsikringar Alm. Brand 8.7 Other Other 9.7 5.7 9
Slide 43: Distribution of new sales 2016
Distribution of new sales 2016 Denmark Norway 6 14 Own sales Own sales Car dealers Affinity 44 Percentage 57 Percentage 38 Affinity Nordea 29 Nordea 12 Sweden Corporate 15 Own sales External partners Own sales Percentage Percentage Online & others 55 Brokers 31 51 45 Atlantica/Bilsport MC 3 43
Slide 44: Combined ratio development
Combined ratio development 110 Premium Premium Efficiency Customer and hikes hikes programme efficiency focus 105 100 Smaller 95 adjustments 90 85 80 2002-2004 price increases of DKK 2.1bn implemented. Reduced combined ratio from 107 to 94. 2011-2012 price increases will improve underlying combined
Slide 45: Key figures 2011-15 and consensus 2016-18
Key figures 2011-15 and consensus 2016-18 Consensus DKKm 2011 2012 2013 2014 2015 2016 2017 2018 Gross premium income 19,948 20,314 19,504 18,652 17,977 17,660 17,941 18,151 Technical result 1,572 2,492 2,496 3,032 2,423 2,404 2,702 2,724 Investment income, net 61 585 588 360 -22 989 173 171 Pre-tax
Slide 46: Appendix
Appendix Follow us on Twitter: @TrygIR
Slide 47: Group
Group Gross premiums Combined ratio DKKm % 21,000 GEP (LHS) Local currency (RHS) 4 100 20,000 3 95 2 19,000 1 90 18,000 0 -1 85 17,000 -2 16,000 80 -3 15,000 -4 75 Claims ratio, net of reinsurance Expense ratio 80 18 17 75 16 70 15 14 65 13 60 12 47
Slide 48: Private
Private Gross premiums Combined ratio DKKm % 10,500 GEP (LHS) Local currency (RHS) 4 100 10,000 3 95 9,500 2 1 90 9,000 0 8,500 85 -1 8,000 -2 80 7,500 -3 7,000 -4 75 Claims ratio, net of reinsurance Expense ratio 80 18 17 75 16 70 15 14 65 13 60 12 48
Slide 49: Commercial
Commercial* Gross premiums Combined ratio DKKm % 5,000 GEP (LHS) Local currency (RHS) 4 100 3 4,500 95 2 4,000 1 90 0 3,500 -1 85 -2 3,000 80 -3 2,500 -4 75 Claims ratio, net of reinsurance Expense ratio 75 20 19 70 18 65 17 16 60 15 55 14 * Less than 100 employees or less than DKK 100m turnover 49
Slide 50: Corporate
Corporate* Gross premiums Combined ratio DKKm % 5,000 GEP (LHS) Local currency (RHS) 4 100 3 4,500 95 2 4,000 1 90 0 3,500 -1 85 -2 3,000 80 -3 2,500 -4 75 Claims ratio, net of reinsurance Expense ratio 85 15 14 80 13 75 12 70 11 65 10 * More than 100 employees and more than DKK 100m turnover 50
Slide 51: Sweden
Sweden Gross premiums Combined ratio DKKm % 2,500 GEP (LHS) Local currency (RHS) 10 105 8 100 2,000 6 4 95 2 1,500 90 0 -2 85 1,000 -4 80 -6 500 -8 75 Claims ratio, net of reinsurance Expense ratio 85 20 80 19 75 18 70 17 65 16 60 15 51
Slide 52: Geographical segments
Geographical segments Denmark Sweden DKKm DKKm Q4 2016 Q4 2015 FY 2016 Q4 2016 Q4 2015 FY 2016 Gross premiums earned Gross premiums earned 2,407 2,330 9,467 463 463 1,888 Technical result Technical result 441 289 1,587 -26 109 40 Key ratios: Key ratios: Gross claims ratio Gross claims ratio 66.4 65.
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 % 2016 2017 % 2016 2017 GDP Growth 1.0 1.5 GDP Growth 3.2 2.3 Inflation 0.3 1.4 Inflation 1.4 1.7 Unemployment 4.2 3.9 Unemployment 6.9 6.6 Current account balance in Current account balance in 8.0 8.2 5.1 5.7 % of GDP % of GDP Budget balance in % of GDP -1.0 -1.6