Extract from. Études et Dossiers No th Meeting of The Geneva Association s Amsterdam Circle of Chief Economists

Transcription

1 International Association for the Study of Insurance Economics Études et Dossiers Extract from Études et Dossiers No th Meeting of The Geneva Association s Amsterdam Circle of Chief Economists Insurance Prospects 2012 and Beyond 28 February-1 March 2013 Amsterdam This document is free to download from The Geneva Association website, March 2013 Working Paper Series of The Geneva Association Association Internationale pour l'etude de l'economie de l'assurance Geneva Route de Malagnou 53, CH-1208 Geneva Tel: Fax: Basel Sternengasse 17, CH-4051 Basel Tel: Fax:

2 Please note that The Geneva Association will stop the production of Etudes & Dossiers on 1 May Instead, conference programmes, presentations and related documents will be available on our website () in the Conferences & Events section and under the relevant research programme. The Geneva Association Working Paper Series Études et Dossiers appear at irregular intervals about times per year. Distribution is limited. The Études et Dossiers are the working paper series of The Geneva Association. These documents present intermediary or final results of conference proceedings, special reports and research done by The Geneva Association. Where they contain work in progress or summaries of conference presentations, the material must not be cited without the express consent of the author in question. The opinions expressed in Geneva Association newsletters and publications are the responsibility of the authors. We therefore disclaim all liability and responsibility arising from such materials by any third parties. This document is free to download from The Geneva Association website, please visit:. Layout & Distribution: Alessandra Platania The Geneva Association Association Internationale pour l'etude de l'economie de l'assurance

3 Maintaining Insurance Industry Profitability How to Replace Investment Income in a Nordic Insurance Perspective Peter Brondt Structure of the Nordic insurance markets Denmark Norway DKK 49.4bn/ EUR 6.6bn (Q4 11) NOK 47.4 bn/ EUR 6.4bn (Q3 12) Percent Tryg Topdanmark Codan Alm. Brand Gjensdige If Other Nordic EUR 23.2bn (Q4 11) 11.5 Tryg Percent Tryg If Gjensidige Sparebank Other Percent 17.4 If Codan Gjensidige Länsförsäkringar Finland EUR 3.7bn (Q4 11) Percent Tryg If Pohjola Tapiola Fennia Other Other Topdanmark Other Sweden SEK 64.0bn/ EUR 7.5bn (Q3 12) Percent Moderna Länsforsäkringar If Codan Folksam Gjensidige Other 3-1

4 Economic key figures in Denmark, Norway & Sweden Denmark Sweden % % GDP Growth GDP Growth Inflation Inflation Unemployment Unemployment Current account balance in % of GDP Budget balance in % of GDP Public debt in % of GDP Current account balance in % of GDP Budget balance in % of GDP Public debt in % of GDP Norway Finland % % GDP Growth GDP Growth Inflation Inflation Unemployment Unemployment Current account balance in % of GDP Budget balance in % of GDP Public debt in % of GDP Current account balance in % of GDP Budget balance in % of GDP Public debt in % of GDP Source: ECONOMIC OUTLOOK, Nordea Markets, December % Interest rate development Claims reserves (Tryg) - discounting rate % increase in interest rate level will improve combined ratio by approx. 1 pp. 3-2

5 Large Nordic companies Tryg, 11.5 Other, 39.8 Percent If, 17.4 Codan, 9.0 Topdanmark, 5.0 Länsförsäkringar, 8.7 Gjensidige, 8.6 Sampo / IF(Nordic) 3-3

6 Sampo / IF (Nordic) Sampo / IF (Nordic) 3-4

7 Sampo / IF (Nordic) Sampo / IF (Nordic) 3-5

8 Sampo / IF (Nordic) Tryg (Nordic) Combined ratio performance * price increases of DKK 2.1bn implemented. Reduced combined ratio from 107 to price increases will improve combined ratio going forward operational focus with target to cut expenses and claims costs by DKK 1bn. in total. *IFRS from Previous years are Danish GAAP. Data before 2009 is not corrected for the sale of Marine Hull business. 3-6

9 Tryg (Nordic) Business areas Combined ratio Private (DK & NO) Combined ratio Commercial (DK & NO) % % Q Q Group CR 75 Q Q Q4 2012: 87.4 Combined ratio Corporate 2012: 88.2 Combined ratio Sweden % % Q Q Q Q Tryg (Nordic) Follow up on savings programme Total Savings programme Updated financial targets CR at 90 or below from Q Expense ratio below 15 in 2015 Roe at 20% after tax Savings programme of DKK 1bn launched Total reduction in expenses DKK 400m 300 Transfer to Claims Claims DKK 600m 600 Claims Achieved savings in expenses Targeted and achieved savings on claims DKKm Q Q1-Q Q Q1-Q Total savings expenses 2013 Achieved Total savings on claims 2012 Achieved Target Target 3-7

10 Combined ratio target % Uncertainty 92 < < CR target Q Tryg (Nordic) Expense/claims initiatives Claims inflation above CPI Weather and large claims Legislation etc (WC, taxes..) Interest CR target CR at 90 or below from Q Expense ratio <15 in 2015 ROE 20% after tax ROE after tax 40% 30% 20% ROE target 10% 0% Tryg (Nordic) Customer retention and average premium development Motor insurance average premium (index 2008 = ) Average premiums increase YoY % 5.8% Private - retention rate 92% 90% 88% 86% 84% % House insurance average premium (index 2008 = ) Commercial - retention rate Average premiums increase YoY 4.4% 4.6% % 90% 88% 86% 84% 82%

11 Tryg (Nordic) - creating long-term value for our shareholders Payout ratio of 60 90% Aiming for a nominal stable increasing dividend Ambitious ROE target of 20% after tax calls for disciplined capital approach Adjustment of the capital level can be made via share buy back DKK per share Total distribution to shareholders Proposed 2012 Cash dividend Ordinary buyback Extra-ordinary buyback New dividend policy RSA / Codan (Nordic) 3-9

12 RSA / Codan (Nordic) RSA / Codan (Nordic) 3-10

13 RSA / Codan (Nordic) RSA / Codan (Nordic) 3-11

14 Gjensidige (Nordic) Gjensidige (Nordic) 3-12

15 Gjensidige (Nordic) Länsforsäkring (Sweden) 3-13

16 TOP (DK) TOP (DK) 3-14

17 TOP (DK) TOP (DK) 3-15

18 TOP (DK) TOP (DK) 3-16

19 Conclusion Focus on core business Profitability highest priority No growth agenda for large companies in DK and NO (somewhat in Sweden) High customer loyalty (high rentention rates) and multiple products discount Low level of Internet sales Expense and claims procurement in focus Important tp build high barriers of entry against new players and reduce price compettion from smaller players Investments should support insurance In general low risk profile Low level of equities in investment portfolio Match investments against insurance provisions (specific model in Tryg, Gjensidige) Capital regimes (both SII and local requirements also support low risk profile) 3-17