Tryg A/s · OMXCOP:TRYG
Tryg A/s — Q2 2020 Earnings Presentation
55 slides from Tryg A/s's earnings presentation, July 2020
Slide 1: Q2 2020 results – Investor presentation
Q2 2020 results Investor presentation
Slide 2: Contents and Disclaimer
Contents • Highlights Q2 2020 3 Disclaimer • Premiums and portfolio 10 Certain statements in this presentation are based on the beliefs of our management as well as assumptions made by and information currently available to the management. Forward- looking statements (other than statements of histor
Slide 3: Financial highlights Q2 2020
Financial highlights Q2 2020 - Higher technical result of DKK 1,063m, strong top line development and improved core business - Investment income of DKK 541m following a strong rebound in capital markets after Q1 shock - Solvency ratio of 193, as mentioned on March 27 FY dividend decision as opposed
Slide 4: Customer highlights Q2 2020
Customer highlights Q2 2020 Number of products per customer • Transactional Net Promoter Score (TNPS) of 70 (67) 4.0 3.9 • Retention remained at very high levels – Private Denmark as 3.8 expected impacted by a drop in Nordea portfolio (more than offset by new customers from Danske Bank) Q2 2020 Q2 2
Slide 5: Technical result higher than Q2 2019
Technical result higher than Q2 2019 Group (DKKm) Private, DK & NO (DKKm) Commercial, DK & NO (DKKm) 1,063 Q2 2020 Q2 2019 Q2 2020 Q2 2019 Corporate (DKKm) Sweden (DKKm) Q2 2020 Q2 2019 Q2 2020 Q2 2019 • Private – Run-off Q2 2020: DKK 45m or 1.4% (DKK 84m or 2.8%) • Commercial – Run-off Q2 2020: DKK
Slide 6: COVID-19, helicopter view
COVID-19, helicopter view Financial impact H1 2020 Customer contacts Travel insurance DK (‘000) Number of claims DK (‘000) -0.1% +51.5% 2019 2020 +80.0% -7.5% Gross impact Total COVID-19 impact Expenses Motor, Content, accident etc Investment Reinsurance Net technical result impact Travel insurance
Slide 7: Alka synergies status update
Alka synergies status update Targeted benefits 2019-2021 • Full run rate synergies impact in 2021 of DKK 300m • 50% impact expected in 2020 • DKK 43m achieved in Q2 2020 • DKK 18m from “lower” claims using Tryg procurement for Alka • DKK 15m from cost benefits especially related to staff functions •
Slide 8: Strategic initiatives
Strategic initiatives Claims Excellence Product & Service Innovation Financial Target DKK 600m in 2020 –improvement DKK 125m in H1 2020 Premium target of DKK 1bn in 2020+ - DKK 200m in H1 2020 Accumulated total saving from Claims Excellence at DKK New market demands addressed through a balanced mix
Slide 9: Shareholders' remuneration
Shareholders’ remuneration Shareholder remuneration since 2012 Strong focus on shareholders’ remuneration 8.45 Extraordinary dividend 3.50 3.30 Extraordinary buy back 3.40 3.50 1.65 Aim for a nominal stable increasing ordinary dividend 3.20 6.60 Ordinary dividend (annual) 2.60 Tryg moves to FY 6.80
Slide 10: Premiums and portfolio
Premiums and portfolio
Slide 11: Group premiums up 7.0% in Q2
Group premiums up 7.0% in Q2 Local currencies Local currencies DKKm Q2 2020 Q2 2019 Q2 2020 Q2 2019 • Group premiums were up 7.0% in local currencies Private 3,169 3,010 10.0% 33.6% • Private lines reported a 10.0% growth, impacted by much higher portfolio start 2020 Commercial 1,068 1,062 4.4% 8.6%
Slide 12: Private - average prices
Private - average prices House insurance DK NO • DK: 2.6% (Q1 2.1%) positive development reflects price adjustments • NO: 0.7% (Q1 2.0%) slightly lower level than previous quarter partly reflected in large partner agreements negotiation Average price Denmark Norway House insurance 5,300 6,000 Q2 Q4
Slide 13: Customer retention remains at very high levels
Customer retention remains at very high levels Private • DK: Retention fell to 90.9% (91.6%) DK NO driven by outflow of customers from the Nordea agreement, retention would have been 91.8% excluding this • Nordea churn more than offset by new sales to Danske Bank customers • NO: customer retention u
Slide 14: Claims and expenses
Claims and expenses
Slide 15: Underlying claims ratio improving
Underlying claims ratio improving Claims ratio, net (Commercial DK & NO) Group underlying claims ratio at 69.9, 60bps better than Q2 2019 Private underlying claims ratio at 68.1, 20bps better than Q2 2019 “Expected FY 2020 underlying claims ratio better than FY 2019” Going forward a slightly lower i
Slide 16: COVID-19 financial impact
COVID-19 financial impact Gross Q1 Q2 H1 • The impact is calculated by comparing to a normalised level of frequency and average claims level for specific Group lines of business Travel -255 10 -245 Motor 35 33 68 • The Q2 net impact was a positive DKK 95m primarily Property 15 11 26 driven by lower
Slide 17: Large claims, weather claims and run-off
Large claims, weather claims and run-off Large claims, net DKKm Weather claims, net DKKm Expected annual Expected annual level 2020: DKK 550m level 2020: DKK 600m 550 600 2014 2015 2016 2017 2018 2019 Q2 2019 Q2 2020 2014 2015 2016 2017 2018 2019 Q2 2019 Q2 2020 Claims reserves discounting rate Run-
Slide 18: Expense ratio of 14.3 in line with 2020 target
Expense ratio of 14.3 in line with 2020 target Expense ratio • Efficiency initiatives in 2017 brought down overall costs • Investments in digitalisation will partly be financed through efficiency gains • Expense ratio target for 2020 around 14% 15.3 15.7 14.0 14.4 14.2 14.2 14.3 • Alka synergies of
Slide 19: Investment, capital and targets
Investment, capital and targets
Slide 20: Total investments
Investments – split in match & free portfolio Match portfolio split Free portfolio split Splitting up the portfolio ‘risk-wise’ Emerging markets Inflation linked bonds DKKm Investment grade Equities High yield Match Free portfolio portfolio DKK 29.3bn DKK 10.9bn Inv. Property Bonds Denmark Norway Sw
Slide 21: Investment return – low risk remains key
Investment return – low risk remains key Key figures investments (DKKm) Q2 2020 Q2 2019 2019 • Total net investment result of DKK 541m in Q2, strong returns from all Free portfolio 519 161 857 asset classes following an abysmal Q1 • Free portfolio returned approximately 4.9% with especially equities
Slide 22: Solvency position Q2 2020
Solvency position Q2 2020 Own funds walk • Solvency ratio based on the Partial Internal Model is 193 (Q1 2020: 159). 8,800 48 Tier 2 7,506 1,246 • Own Funds (OF) is primarily impacted by 2,277 Additional Tier 1 2,335 Core Equity Tier 1 1,044 • Strong Q2 organic capital generation of DKK 1,246m • “Ot
Slide 23: Tier 1 & Tier 2 instruments
Tier 1 & Tier 2 instruments Tier 1 funds can be maximum 25% of Core Equity Tier 1 • The maximum capacity of additional Tier 1 instruments is a function of the Core Equity Tier 1, which can be up to 25% of the 5,479 Core Equity Tier 1. Tryg has DKK 1,044m of Tier 1 funds so currently the company has
Slide 24: Solvency ratio historical development
Solvency ratio historical development Final approval of the Alka Approval of new partial internal acquisition from the Danish model, very strong Q2 result and 292 291 authorities implying booking of dividend decision for 2020 moved DKK 4bn raised for the 281 283 goodwill to year-end as opposed to Al
Slide 25: Solvency ratio sensitivities
Solvency ratio sensitivities 208% 201% 194% 194% 196% 194% 195% 195% 194% 193% 192% 191% 192% 192% 189% 190% 186% 185% 179% Q2 +20% -20% +30% -30% +20% -20% +100 bps -100 bps +100 bps -100 bps +100 bps -100 bps +100 bps -100 bps +20% -20% +20% -20% 2020 Equity Equity Property Interest Spread Spread
Slide 26: Targets and outlook
Targets and outlook ✓ New financial targets announced at 2017 CMD ✓ 2020 topline growth above GDP level ✓ Members’ bonus of 8% in September 2020. ✓ 2020 normalised tax rate 22-23% ✓ Price increases to offset claims inflation ✓ Alka acquisition will result in annual depreciation of customer relations
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: Q2 roadshows & conferences
Q2 roadshows & conferences Date Place Participants from Tryg Arranged by Morten Hübbe, CEO 09/07/2020 Copenhagen roadshow Barbara Plucnar Jensen, CFO Carnegie IR Barbara Plucnar Jensen, CFO 10/07/2020 London virtual roadshow Barclays Peter Brondt, IR Manager Zurich/Geneva virtual Peter Brondt, IR Ma
Slide 29: Background material
Background material
Slide 30: Tryg's equity story – a leading Nordic non-life insurer
Tryg’s equity story – a leading Nordic 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+ • Technical res
Slide 31: Why invest in Tryg?
Why invest in Tryg? High insurance penetration in the Nordics Pre-tax result by division (YE 2018 data) Premiums per capita (USD), 2017 1.557 1.519 Non-life 1.296 Life 1.224 Banking Other Tryg Topdanmark Alm. Brand Sampo Gjensidige Storebrand Denmark Norway Germany France UK Italy Motor combined rat
Slide 32: Tryg at a glance
Tryg at a glance Gross premium split by products 2019 • Tryg goes back to 18th century. • Very strong brand position especially in Denmark. 8.0% Motor Workers’ comp • Non-life insurance in Denmark, Norway and Sweden. 13.0% 31.0% Health & accident Liability • Approx. 80% retail business. Norway Fire
Slide 33: 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 8.0% 7.0% 14.0% 5.0% Motor Motor 13.0% 31.0% 7.0% Workers’ comp Workers’ comp Health & accident Health & accident Liability 9.0% Liability Fire & property - private Fire & property - priva
Slide 34: Gross premium split by geography
Gross premium split by geography DK: Gross premium by products 2019 SE: Gross premium by products 2019 Motor Motor Health and accident Workers comp Liability Health and accident Fire & property - private Liability Fire and property comm Fire & property - private Other Fire and property comm Tourist
Slide 35: The run-off cycle
The run-off cycle Run-off development • Initial assessment of the claims was DKK 18,000 but Tryg reserved for DKK 20,000 adding some 3 years conservatism to best estimate. Run-off: +2,000 • At the time of setting up the claims reserves and Claims estimate: -18,000 18.000 booking the claims in the P&
Slide 36: Combined ratio development
Combined ratio development 98.8 92.2 93.2 89.0 88.2 88.2 87.7 88.0 88.0 85.9 86.8 86.7 85.1 85.1 85.6 84.4 84.2 84.4 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Since 10Y 5Y avg. IPO avg. 36
Slide 37: Structure of the Nordic insurance market
Structure of the Nordic insurance market Nordic (EUR 26.3bn as at Q4 2018) Denmark (DKK 57.2bn/EUR 7.7bn as at Q2 2019) Tryg Tryg 10.2% Topdanmark Topdanmark 21.4% 22.5% 4.7% If If Codan Codan 43.0% Gjensidige Gjensidige 15.8% 3.7% Länsforsikringar Percentage Alm. Brand 5.1% Other LB Forsikring 16.3
Slide 38: Distribution of new sales 2019
Distribution of new sales 2019 Private 7% Customer services 7% Franchise Outbound Own sales Customer service Online DK Web and external sales Outbound DK Nordea NO SE Atlantica/Bil sport/MC Enter Affinity Other Web Sales agents 9% Nordea 4% Danske Bank Commercial Customer centre Customer centre Sale
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 (2000-2019)
Population growth (2000-2019) Population development in Denmark in ‘1,000 DK 9% Population development in Norway in ‘1,000 NO 19% 42
Slide 43: Organisational and remuneration structure
Organisational and remuneration structure Organisation chart Remuneration structure CEO Morten Hübbe The Executive Board are remunerated according to Tryg’s remuneration policy: CFO CCO Base salary COO • Barbara Plucnar Johan Kirstein Lars Bonde Jensen Brammer • Pension o 25% of the base salary Priv
Slide 44: 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 45: 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 46: Key figures 2019 and Consensus 2019-2021
Key figures 2019 and Consensus 2019-2021 Consensus DKKm 2019A 2020 2021 2022 Gross premium income 21,741 22,471 22,980 23,542 Technical result 3,237 3,369 3,468 3,588 Investment income, net 579 -421 137 141 Pre-tax profit 3,628 2,746 3,415 3,540 Net income 2,843 2,033 2,659 2,759 Combined ratio 85.1
Slide 47: Appendix
Appendix Follow us on Twitter: @TrygIR
Slide 48: Group
Group Gross premiums Gross premiums Combined ratio DKKm % % Claims ratio, net of reinsurance Expense % ratio % 48
Slide 49: Private
Private Gross premiums Combined ratio DKKm % * Including two months Alka Claims ratio, net of reinsurance Expense ratio 49
Slide 50: Commercial
Commercial* Gross premiums Combined ratio DKKm % Claims ratio, net of reinsurance Expense ratio 50 * Less than 100 employees or less than DKK 100m turnover
Slide 51: Corporate
Corporate* Gross premiums Combined ratio DKKm % Claims ratio, net of reinsurance Expense ratio 51 * More than 100 employees or more than DKK 100m turnover
Slide 52: Sweden
Sweden Gross premiums Combined ratio DKKm % Claims ratio, net of reinsurance Expense ratio 52
Slide 53: Geographical combined ratio
Geographical combined ratio Denmark Sweden Norway 53
Slide 54: 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 55: Economic key figures
Economic key figures Denmark Norway % 2020E 2021E % 2020E 2021E GDP Growth -5.0 4.0 GDP Growth -6.0 4.0 Inflation 0.5 1.1 Inflation 2.6 2.7 Unemployment 5.2 5.3 Unemployment 5.5 4.0 Current account balance in Current account balance in 5.7 6.4 4.1 5.2 % of GDP % of GDP Budget balance in % of GDP -7.