Codan Longer term profitability and capital management CEO Jens Erik Christensen. 8 September 2005 Danske Equities

Transcription

1 Codan Longer term profitability and capital management CEO Jens Erik Christensen 8 September 2005 Danske Equities Tre Kronor Försäkring AB

2 Strong Nordic position with attractive brands % General insurance market share 1% 19% Tre Kronor Försäkring AB 13% 31% 23% 2 September 2005

3 Significant market shares in mature and profitable markets with growth opportunities in the Baltics and Norway Sweden No. 3 in the market (19% market share) with a strong brand name Economies of scale and skill across entire portfolio Focus on direct distribution, differentiated pricing models, and highly developed UW skills supported by UW tool Baltics No. 1 in the markets Lithuania (31% market share) Latvia (23% market share) Growth markets 57% 5% 1% Denmark No. 3 in the market (13% market share) with a strong brand name Economies of scale and skill across entire portfolio 37% Focus on direct distribution, differentiated pricing models, and highly developed UW skills supported by UW tool Norway Small market presence, focusing on personal insurance business Potential growth opportunity for commercial market Slowly adapting to EU insurance penetration standards after recent membership of the EU 3 September 2005

4 Codan has a diversified business mix GEP 2004 Commercial Lines Total 12% 7% 6% 3% 35% 22% (S) DK 31% (S) 46% Motor P&C Liability Marine 22% (DK) 17% (DK) Personal Lines 26% Personal Commercial DK 29% 46% Baltics & Norway Marine Motor H&H Care Substantial position in general insurance leads to less dependency on any one line of business 4 September 2005

5 Results development General insurance to H1 05 DKK bn NEP COR COR 115% 110% 105% 100% * H H1 05* 95% *IFRS basis 5 September 2005

6 Codan Group Summary Results for the first half of 2005 Satisfactory development DKK 981m profit after tax compared to DKK 613m profit in H Value adjustments of DKK 433m in H compared to DKK 36m in H Return on shareholders funds of 19.8% p.a. Net asset value per share of DKK 226 at 30 June 2005 General insurance Combined ratio of 95.0% against 95.3% in H Profit before tax of DKK 1,225m compared to DKK 722m in H Investment return of DKK 1,048m corresponding to an annualised return of 7.0% 6 September 2005

7 Codan Group - general insurance Satisfactory results for the first half of 2005 Continued satisfactory performance in most lines of business Combined ratio of 95.0% in H against 95.3% in H Net cost of January storm of DKK 110m offset by fewer than expected medium-sized claims Gross expense ratio of 19.9% in H against 19.0% in H Combined ratio 125% 120% 115% 110% 105% 100% 95% 90% Q1 Q2 Q3 Q4 Year Gross expense ratio 30% 25% 20% 15% 10% 5% 0% Q1 Q2 Q3 Q4 Year September 2005

8 Codan Group General insurance (II) Premium growth as expected 3% growth in gross earned premiums 7% growth in net earned premiums after restructuring of reinsurance programmes Growth in gross earned premiums Personal 6%, combined ratio 100.3% (99.2%) Commercial -1%, combined ratio 88.5% (89.7%) Nordic Marine -2%, combined ratio 82.0% (114.2%) Scandinavian Holdings 0%, combined ratio 105.7% (99.3%) Satisfactory growth in Baltic operations (8%) Combined ratio influenced by an unfavourable performance in respect of large claims in Latvia 8 September 2005

9 Codan Group - forecast Overall combined ratio target unchanged at 95%-97% Profit before tax, minority interests and discontinued business revised to DKK 1,790-2,130m due to value adjustments of DKK 433m profit before tax, minority interests and discontinued business of DKK 1,578m for 2004 Profit after tax revised to DKK 1,285-1,520m against DKK 1,281m for September 2005

10 Continuous improvements are built into the business model Operational efficiency Portfolio re-underwriting Distribution productivity i.e. call centre optimisation New, advanced pricing models Claims process improvements Nordic integration Market effectiveness Segment-specific value propositions Brand profiles Channel strategy Retention management Profitable growth Fully leverage efficiency and effectiveness to drive organic growth Look for opportunities for acquisition-based growth 10 September 2005

11 ..underpinned by Operational Improvement Programme Pricing New advanced pricing models Standard rate plans, Commercial Increased pricing sophistication Overhauled and automated rate plans 70% on automated rate plans Distribution Distribution productivity Increased call centre effectiveness Increased sales via direct channels 90% of motor claims via preferred repairers Claims Claims process improvements Share best practice Improved supply chain management 40% more time on the phone Organisation and other Nordic integration More cost-effective infrastructure Nordic IT strategy IT costs cut by 10% Efficiency and effectiveness pave the way for the next step 11 September 2005

12 In the forthcoming period, focus will be on more top-line growth Products 2005 Products with growth opportunities Disappearing boundaries between public and private services creates new growth opportunities 2008 Distribution Channel strategy Invest in additional distribution capacity to achieve above market growth Markets Look for growth opportunities Market entry in Norway (through brokers) Opportunistically evaluate bolt-on acquisition targets (e.g. Topdanmark s Marine portfolio) Customer value propositions Segment-specific value propositions Strengthen market presence by building superior value propositions to prioritised customer segments Focus on profitable growth opportunities 12 September 2005

13 Profitability in non-life insurance Multiple figures Return on capital / shareholders funds Combined ratio Return on allocated capital Other components to consider Level of discounting Tail value (reserve levels and duration) Capitalisation 13 September 2005

14 Tail value COR 110.0% 105.0% 100.0% 95.0% COR COR excl unwind Technical reserves* Claims reserves* Tailratio 330% 300% 270% 240% 210% 90.0% 85.0% 180% 150% 120% 80.0% 90% if... TrygVesta Codan LF Alliance Gjensidige TopDK Folksam Pohjola Alm Brand Reserves at 30 June 2005 /((NEP H1 2005)x2). Source: H announcement. Reserves for Folksam, Pohjola, Alm Brand are based on 2004 annual reports. 14 September 2005

15 Capitalisation NEP H ,500 DKKm 13,500 NEP H1 05 Shareh funds/(nep H1 05 x2) Capital/(NEP H1 05 x2) Capitalisation 160% 140% 11,500 9,500 7,500 5, % 100% 80% 60% 3,500 40% 1,500 20% if... TrygVesta Codan LF Alliance Gjensidige TopDK Capital at 30 June Shareholders fund excluding goodwill. Source: H announcement. Folksam is based on 2004 annual reports. *Group shareholders' fund (i.e. including life business) Folksam Pohjola* Alm Brand 15 September 2005

16 Changing solvency regime - Solvency II Current Solvency II Capital requirements - Expected implementation Expected detailed standards 2008 Future Formula based solvency requirement No risk based assessment Mainly backward-looking reporting and supervision No explicit management/control requirement Use of historic information Extended senior management responsibilities Allocated capital assessments Risk management framework required Rigorous documentation standards Extended Group supervision Explicit systems and controls requirements 16 September 2005

17 Our Capital management project Capital has been treated primarily as a regulatory matter. Less emphasis on reasons for movement in capital requirements or on the different capital needs relative to return of different business lines. ICA is an opportunity to create more informed decisions about use of capital. Introducing additional performance measures with focus on capital will drive capital management into the business Determine Capital Requirement Risk and Internal Capital Assessment Optimise business on new capital basis Capital Investment Management Planning, Strategy & Performance Pricing Capital Integration Risk Capital Risk Management Allocation Reinsurance Methodology Embed in business processes Training and Communications Support 17 September 2005

18 Strong platform for the future... Growth play and key enablers Core skills excellence Customer Value Proposition development Performance culture Creation of common Nordic Operating Model Growth and capability enablers Vision 18 September 2005

19 19 September 2005