Danske Markets Navigating the Nordics CFO Tor Lønnum. Download presentation at Tryg.com

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1 Danske Markets Navigating the Nordics CFO Tor Lønnum Download presentation at Tryg.com 1

2 Disclaimer 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 historical fact) regarding our future results of operations, financial condition, cash flows, business strategy, plans and future objectives can generally be identified by terminology such as targets, believes, expects, aims, intends, plans, seeks, will, may, anticipates, continues or similar expressions. A number of different factors may cause the actual performance to deviate significantly from the forward-looking statements in this presentation including but not limited to general economic developments, changes in the competitive environment, developments in the financial markets, extraordinary events such as natural disasters or terrorist attacks, changes in legislation or case law and reinsurance. We urge you to read our annual report available on tryg.com for a discussion of some of the factors that could affect our future performance and the industry in which we operate. Should one or more of these risks or uncertainties materialise or should any underlying assumptions prove to be incorrect, our actual financial condition or results of operations could materially differ from that described herein as anticipated, believed, estimated or expected. We are not under any duty to update any of the forward-looking statements or to conform such statements to actual results, except as may be required by law. 2

3 Tryg - quick overview Tryg is a non-life insurance company present in Denmark (No. 1), Norway (No. 3) and Sweden (No. 5). 59.4m shares and a market cap of DKK 32bn (March 2014). Standard & Poor s rating: A-/Stable. Dividend policy: Payout ratio of 60 90% Aiming for a nominal stable increasing dividend. DKKm Gross earned premium 20,314 19,504 Gross claims -14,675-14,411 Gross expenses -3,295-3,008 Insurance result 2,492 2,496 Net investment result Pre-tax result 3,017 2,993 Net result 2,208 2,369 Combined ratio No. of employees (FTE) 3,913 3,703 Shareholder s equity 10,979 11,107 Gross premium split by geography 2013 Gross premium split by products Motor - TPL Denmark Motor - casco Workers' comp. 40,1 48,9 Norway Sweden Health & accident Liability Fire & property - private Fire & property - comm. Other 3

4 Tryg at a glance 300 Share performance since IPO 275 Tryg incl. dividend Euro Insurance index Tryg goes back to 18th century 250 The current Tryg was formed in 2002 by sale of Nordea s non-life activities with a continuing strategic partnership Non-life insurance in Denmark, Norway and Sweden IPO Oct on Nasdaq OMX Copenhagen Majority owner: TryghedsGruppen (60%) a mutual company in Denmark Turnover 2013: DKK 19.5bn (~EUR 2.6bn) CEO: Morten Hübbe 3,655 employees november 05 februar 06 maj 06 august 06 november 06 februar 07 maj 07 august 07 november 07 Norway Market position: #3 Market share: 14.7% CR in 2013: 84.5 februar 08 maj 08 august 08 november 08 februar 09 maj 09 august 09 Denmark Market position: #1 Market share: 19.1% CR in 2013: 87.5 november 09 februar 10 maj 10 august 10 november 10 februar 11 maj 11 august 11 november 11 februar 12 maj 12 august 12 november 12 februar 13 maj 13 august 13 november 13 februar 14 Sweden Market position: #5 Market share: 3.3% CR in 2013: 98.9 Shareholder breakdown CEO 13 Danish institutional Morten Hübbe* Non-Danish institutional Smaller shareholders TryghedsGruppen CFO Tor Magne Lønnum* Private Lars Bonde* Commercial Trond Bøe Svestad Corporate Truls Holm Olsen Sweden Per Fornander Claims Jesper Joensen People & Reputation Rikke Larsen juni 2014 *Executive Management Tryg A/S and Tryg Forsikring A/S

5 Structure of the Nordic insurance markets Nordic EUR 24.5bn (as at Q4-2012) Norway NOK 53bn/EUR 7bn (as at Q1-2014) 40.0 Percentage Tryg If Codan Gjensidige Länsförsäkringar Topdanmark Other Tryg If Gjensidige Percentage 23.7 Sparebank1 Other Sweden SEK 68bn/EUR 7.6bn (as at Q1-2014) Denmark DKK 50.4bn/EUR 6.8bn (as at Q1-2013) Percentage Moderna Länsforsäkringar If Codan Folksam Gjensidige Other Percentage Tryg Topdanmark Codan Alm. Brand Gjensdige If Other 5 6 juni 2014

6 Combined ratio performance Premium hikes Premium hikes Efficiency programme Smaller adjustments * Q price increases of DKK 2.1bn implemented. Reduced combined ratio from 107 to price increases will improve underlying combined ratio 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. 6

7 Financial targets ROE after tax of 20% to be achieved by delivering a full year combined ratio of 90 or lower. Expense ratio <15 in % ROE after tax 30% 20% ROE target 10% 0% Q

8 Strategic initiatives Customers, culture and continous improvements Increased price differentiation Customer journey & success culture Expenses/claims reductions IT operational stability 8

9 Price differentiation New products improves hitrate New products reduces discount level % Workers' Compensation Travel Holiday home Camp. 0 Old product New product 9

10 Follow up on efficiency programme Savings of DKK 647m achieved so far. DKK 90m achieved in Q DKK 25m reduction in expenses DKK 65m reduction in claims Increased benefit from use of Scalepoint. Agreements based on fixed prices on DKKm Targeted and achieved savings on claims , materials and repairs. Expenses Claims Total 0 Target 2015 Achieved Achieved Q Efficiency programme up until

11 Q1 14 Q1 14 Customer retention Private 92% 90% 88% 86% 84% Q1 09 Q3 09 Q1 10 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q % Commercial 92% 90% 88% 86% 84% Q1 09 Q3 09 Q1 10 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q %

12 Aggregators and new competitors in the Nordics DK Insurance sectors own and free comparison page Aggregators will become more important in Nordic markets Will increase distribution costs and lead to low cost products Insurance sectors own and free comparison page to be relaunched later 2014 Internet companies and new companies - a very long term investment Skills, expense level, claims procurement and customer/product data

13 Efficiency is a competitive parameter CR < SME companies Cost advantages Claims procurement Tryg Continued focus on efficiency and claims procurement Enables both strong results and competitive products april 2013

14 CR and claims ratios Q Underlying development is adjusted for: Underlying claims ratio, net Q1 2013/2014 Large claims Weather claims Run-off and interest %-point improved underlying claims ratio on Group level driven by efficiency programme. Q Q Group Private Commercial Corporate Sweden Claims ratio development - Group Q1 09 Q3 09 Q1 10 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Gross claims ratio Claims ratio, net of reinsurance 14

15 Large claims, weather claims and run-off Large claims, net DKKm Expected annual Weather claims, net DKKm Expected annual level 2014: DKK 550m level 2014: DKK 500m Q Q Q Q Run-off, net DKKm Run-off net, effect on combined ratio Q Q ,0% 6,0% 5,0% 4,0% 3,0% 4,9% 4,7% 4,0% 3,7% 4,7% 5,0% 5,0% 7,3% Q

16 Expense ratio development Expense ratio improved from 16.0 in Q to 15.9 in Q Nominal expenses on Group level reduced significantly in Q Efficiency programme. Adapting to lower premium level by reducing nominal expenses by more than 2% in local currency. Expense ratio level normally higher in Q1 related to commissions and provisions for holiday pay. Reduction in FTE by 48 in Q Expense ratio Q Q FTE development Nominal costs in business areas DKKm Private Commercial Corporate Sweden Q Q Q

17 Investment result Q Investment return Free portfolio Q (DKK 13.6bn) Free investment Match regulatory deviation Match performance Other financials Total return Q DKKm Percentage Equities (22) Investment property (15) Bank deposits/bonds (17) Govt. Bonds (1) High yield (6) Cov. Bonds (36) Em. market bonds(3) Percentage return Free portfolio Match portfolio Q (DKK 31.4bn) 3,0% 3,7% 5 0,4% 0,6% 1,8% 1,4% 0,9% Percentage Cov. Bonds (94) Bank deposits/bonds (6) 95 Govt. Bonds Cov. Bonds High-yield Emerging markets Equities Investment property Total 17

18 Capital structure and status on share buy back DKKm Capital Q Buffer Capital requirement Capital buffer based on Individual Solvency increased to 53% (2013 Q4: 50%) and was impacted by: Q1 result 2014 Increase in capital requirement due to transition to new capital regime. Increase in available capital due to transition to new capital regime Q1 share buy back deducted in buffer Capital buffer based on the Solvency II (QIS5) model decreased to 21% (2013 Q4: 25%). 0 Individual solvency Solvency II - Standard model Share buy back initiated in beginning of January and proceeds as planned. DKKm Equity and subordinated loan DKKm Share buy back Subordinated loan capital Equity Remaining share b.b. Acquired end Q Q Q1 0 18

19 Dividend policy - 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. Total distribution to shareholders New dividend policy 40 DKK per share ,5 6,5 4 6, Cash dividend Ordinary buy back Extraordinary buy back 19

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