Q2 and H results. Investor presentation. Follow us on

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1 Q2 and H results Investor presentation Follow us on

2 Contents Highlights Q Premiums and portfolio 9 Claims 14 Investment and capitalisation 19 For new investors 23 Appendix 31 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. Forwardlooking 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 Highlights Q Improved results and positive trend in premium income. Pre-tax profit Pre-tax profit of DKK 1,150m (DKK 688m). Technical result of DKK 941m (DKK 684m). Combined ratio improved by 6.0 pp. to 80.7 (86.7). DKKm 1,200 1, ,150 Q Q Combined ratio Premium dropped 1.2% (-2.6%) - however, an improved trend in development. Expense ratio of 12.6 (15.6) impacted by Norwegian pension scheme and IT costs Q Q Investment return of DKK 259m (DKK 13m) impacted by positive financial markets. 40% of the share buy back programme of DKK 1,000m completed Expense ratio One-off Q Q

4 Important news in Q Many customer focused initiatives initiated Customer SMS measuring with strong results Extended opening hours 3 new price differentiated products in Norway. Regular inspection by Danish FSA confirmed satisfactory view on risk control, reserve and capital position. Efficiency programme progress as planned. DKK 93m reached in Q2. Successful integration of agriculture portfolio acquired from Codan. Tryg received fewer complaints than other insurance companies relative to market share. 4

5 Strategic initiatives 2014 Increased price differentiation Customer journey & success culture Expenses/claims reductions IT operational stability 5

6 Key figures Q2/H1 2013/14 DKKm Q Q H H Gross premium income 4,711 4,962 9,294 9,900 Claims, net of reinsurance -2,955-3,277-6,041-6,702 Gross expenses ,301-1,545 Technical result ,464 1,184 Return on investment after technical interest Profit/loss before tax 1, ,752 1,447 Profit/loss ,324 1,089 Claims ratio, net of reinsurance Gross expense ratio Combined ratio

7 Combined ratio development in business areas Combined ratio Private (DK & NO) Combined ratio Commercial (DK & NO) Q Q H H Combined ratio Corporate Group CR Q2 2014: 80.7 Q2 2013: Q Q H H Combined ratio Private Sweden Q Q H H Q Q H H

8 Follow up on efficiency programme Savings of DKK 740m achieved so far. DKK 93m achieved in Q DKK 28m reduction in expenses DKK 65m reduction in claims Increased benefit from Buildings and Content initiatives. Craft network (carpenter, plumber etc.) E-auction Scalepoint DKKm 1,200 1, Targeted and achieved savings on claims 1, Expenses Claims Total Target 2015 Achieved Achieved H Efficiency programme up until

9 Premiums and portfolio

10 Topline and technical result Gross earned premiums reduced 1.2% (-2.6%) related to: Continued high retention level in Private and even improved retention level in Commercial. Higher sales level in general in Private compared to last year. Commercial improved retention but sales lower than expected. Corporate growth in Sweden, slightly positive development in DK and NO. Sweden affected by cancellation of Nordea agreement. Gross earned premiums, DKKm 6,000 4,962 4,711 5, ,000 1,062 1,030 3,000 1,124 1,053 2,000 1,000 2,363 2,275 0 Private Commercial Corporate Sweden Local currency Group: -1.2 (-2.6) -9.3 (-4.3) 1.8 (-2.6) -3.9 (-3.1) 0.1 (-2.0) 1,100 1, Technical result, DKKm Private Commercial Corporate Sweden 10

11 Private - average premiums House insurance average premium (index 2008 = 100) 150 Average premiums increase Y/Y % (Q1 0.6%) 2.6% (Q1 2.9%) Motor insurance average premium (index 2008 = 100) Average premiums increase Y/Y -0.6% (Q1-0.9%) 1.8% (Q1 2.3%)

12 Q % 90% 88% 86% 84% 82% Q Customer retention Private Commercial 92% 90% 88% 86% 84% 82% Q3 12

13 Private Sweden CR and customer retention Customer retention 78% 69% Nordea portfolio 60% Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q

14 Claims and expenses

15 CR and claims ratios Q Underlying development is adjusted for: Large claims Weather claims Run-off and interest Improved underlying development on Group level driven by: one-off effects efficiency improvements Underlying claims, net Q2 2013/ Q Q Group Private Commercial Corporate Sweden Claims ratio development - Group Q1 09 Q4 09 Q2-14 Gross claims ratio Claims rat io, net of reinsurance 15

16 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 % 6.0% Q Q % 4.0% 3.0% Q % 16

17 Interest sensitivity Claims reserves - discounting rate % 6.0 1% increase in interest rate level will: Increase pre-tax result by around DKK 300m. Improve combined ratio by approx. 1 pp Impact NO pension obligation by around DKK 125m. % Pension scheme Norway - discounting rate Q

18 Expense ratio development Expense improved from 15.6 in Q to 12.6 in Q Excluding one-off effects, expense ratio was an improvement of 0.2 pp. Nominal expenses on Group level reduced significantly in Q Expense ratio Q2: One-off effects of 2.8%-point 15.6 One-off effects of DKK 135m Efficiency programme 12.6 Reduction in FTE by 64 since Q Q Q FTE development Nominal costs in business areas 4,101 4, ,913 DKKm ,703 3,655 3, Private Commercial Corporate Sweden Q Q Q Q

19 Investment, capital and financial targets

20 Investment result Q Investment return Free portfolio Q (DKK 12.7bn) DKKm Free investment Match regulatory deviation Equities (22) Investment property (15) Bank deposits/bonds (15) Match performance 50 Percentage 24 Govt. Bonds (3) Other financials Total return High yield (6) Cov. Bonds (36) Em. market bonds(3) Percentage return free portfolio Match portfolio Q (DKK 30.7bn) 5 3.3% 4.0% 5.1% Percentage Cov. Bonds (94) 0.7% 0.6% 1.0% 1.9% 95 Bank deposits/bonds (6) Govt. Bonds Cov. Bonds High-yield Emerging markets Equities Investment property Total 20

21 Capital structure and status on share buy back Capital Q DKKm 12,000 8,000 4,218 Excess capital Buffer Capital buffer based on Individual Solvency increased to 63% (2013 Q4: 50%) and was impacted by: H1 result 2014 H1 share buy back deducted in buffer. 4,000 6,734 Capital requirement Based on Solvency II model the capital buffer was 29% (2013 Q4: 25%). 0 Individual Solvency 40% of 2014 share buy back of DKK 1bn completed. DKKm 14,000 12,000 10,000 8,000 6,000 4,000 2, Equity and subordinated loan 1,818 1,820 11,107 10, Q Q2 Subordinated loan capital Equity Unsolved Solvency II issues: Negatives: Recommendation from FSA Norway Future eligibility in Norway of Natural Perils Pool and the Guarantee scheme provision in Solvency II. Positives: Expected future profits Full inclusion of subordinated capital

22 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% H

23 For new investors

24 Tryg - quick overview Tryg is a non-life insurance company present in Denmark (No. 1), Norway (No. 3) and Sweden (No. 5). 58.8m shares and a market cap of DKK 34bn (June 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 Denmark Motor - TPL Motor - casco Workers' comp Norway Sweden Health & accident Liability Fire & property - private Fire & property - comm. Other 24

25 Tryg at a glance 320 Share performance since IPO Tryg goes back to 18th century Tryg incl. dividend Euro Insurance index 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 3,639 employees november 05 februar 06 maj 06 august 06 november 06 februar 07 maj 07 august 07 Norway Market position: #3 Market share: 14.2% CR in 2013: 84.5 november 07 februar 08 maj 08 august 08 november 08 februar 09 maj 09 august 09 Denmark Market position: #1 Market share: 19.0% 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 Sweden Market position: #5 Market share: 3.5% CR in 2013: 98.9 maj 13 august 13 november 13 februar 14 maj 14 Shareholder breakdown 11 Danish institutional CEO 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 juli 2014 *Executive Management Tryg A/S and Tryg Forsikring A/S

26 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 Cash dividend Ordinary buy back Extraordinary buy back 26

27 Structure of the Nordic insurance markets Nordic EUR 24.5bn (as at Q4 2012) Denmark DKK 50.3bn/ EUR 6.8bn (as at Q2 2013) Tryg If Codan Gjensidige Länsförsäkringar Topdanmark Other Percentage Tryg Topdanmark Codan Alm. Brand Gjensdige If Other Norway NOK 53.2bn/ EUR 7.1bn (as at Q1 2014) Sweden SEK 67.6bn/ EUR 7.6bn (as at Q1 2014) Tryg If Gjensidige Percentage 23.7 Sparebank1 Other Percentage Moderna Länsforsäkringar If Codan Folksam Gjensidige Other 27

28 Distribution of new sales % Denmark Norway 6% 30% 58% 36% 46% Own sales Affinity Nordea 12% Own sales Car dealers Affinity Nordea Sweden Corporate 18% 8% 52% 50% 50% 22% Own sales www & others External partners Atlantica/Bilsport MC Own sales Brokers juli 2014

29 Combined ratio performance Premium hikes Premium hikes Efficiency programme Smaller adjustments * H 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. 29

30 Key figures and consensus for Consensus DKKm Gross premium income 18,894 19,948 20,314 19,504 18,817 18,977 19,275 Gross claims incurred -15,111-15,783-14,675-14,411 Operating expenses -3,136-3,271-3,295-3,008 Ceeded business Technical interest, net Technical result 460 1,572 2,492 2,496 2,431 2,465 2,498 Investment income, net Pre-tax profit 1,006 1,603 3,017 2,993 2,767 2,750 2,799 Tax Net income 593 1,140 2,208 2,369 2,103 2,085 2,126 Total insurance provision 32,031 34,220 34,355 32,939 Shareholders' equity 8,458 9,007 10,979 11,107 Earnings per share Cash dividend per share Share buy back DKKm , Combined ratio

31 Appendix Follow us on

32 Q3 12 Q Group Gross premiums Combined ratio DKKm % 5,400 5,200 5,000 4,800 4, ,400 GEP (LHS) Local currency (RHS) Q3 12 Gross claims ratio Expense ratio Q

33 Q3 12 Q Private Gross premiums Combined ratio DKKm % 2,500 2,300 2,100 1,900 GEP (LHS) Local currency (RHS) Q3 12 Gross claims ratio Expense ratio Q

34 Q3 12 Q Commercial Gross premiums Combined ratio DKKm % 1,200 1, ,000 GEP (LHS) Q3 12 Local currency (RHS) Gross claims ratio Expense ratio Q3 12

35 Q3 12 Q Corporate Gross premium Combined ratio DKKm % 110 1, ,100 1,000 Gross claims ratio Expense ratio GEP (LHS) Q3 12 Local currency (RHS) Q3 12

36 Q3 12 Q Sweden (Private) Gross premium Combined ratio DKKm % Local currency (RHS) GEP (LHS) Q3 12 Gross claims ratio Expense ratio Q3 12

37 Geographical segments 37

38 Economic key figures Denmark Sweden % % GDP Growth GDP Growth Inflation Inflation Unemployment Unemployment Current account balance in % of GDP Current account balance in % of GDP Budget balance in % of GDP Budget balance in % of GDP Public debt in % of GDP Public debt in % of GDP Norway % GDP Growth (mainland) Inflation Unemployment Current account balance in % of GDP Budget balance in % of GDP Public debt in % of GDP Source: Economic Outlook, Nordea Markets, June juli 2014