Q2 and H1 2014 results Investor presentation Follow us on Twitter: @TrygIR
Contents Highlights Q2 2014 3 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
Highlights Q2 2014 - 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 1,000 800 600 400 200 0 688 1,150 Q2 2013 Q2 2014 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. 100 95 90 85 80 75 70 65 60 86.7 80.7 Q2 2013 Q2 2014 Investment return of DKK 259m (DKK 13m) impacted by positive financial markets. 40% of the share buy back programme of DKK 1,000m completed. 20 16 12 8 Expense ratio 15.6 15.4 One-off 2.8 12.6 4 0 Q2 2013 Q2 2014 3
Important news in Q2 2014 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
Strategic initiatives 2014 Increased price differentiation Customer journey & success culture Expenses/claims reductions IT operational stability 5
Key figures Q2/H1 2013/14 DKKm Q2 2014 Q2 2013 H1 2014 H1 2013 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 -582-764 -1,301-1,545 Technical result 941 684 1,464 1,184 Return on investment after technical interest 259 13 348 282 Profit/loss before tax 1,150 688 1,752 1,447 Profit/loss 869 514 1,324 1,089 Claims ratio, net of reinsurance 68.1 71.1 70.7 72.8 Gross expense ratio 12.6 15.6 14.2 15.8 Combined ratio 80.7 86.7 84.9 88.6 6
Combined ratio development in business areas Combined ratio Private (DK & NO) Combined ratio Commercial (DK & NO) 100 100 95 95 90 85 80 84.9 78.8 87.4 83.3 90 85 80 86.7 79.1 88.4 80.4 75 Q2 2013 Q2 2014 H1 2013 H1 2014 Combined ratio Corporate Group CR Q2 2014: 80.7 Q2 2013: 86.7 75 Q2 2013 Q2 2014 H1 2013 H1 2014 Combined ratio Private Sweden 100 110 95 90 85 80 90.6 87.2 88.0 82.9 Q2 2013 Q2 2014 H1 2013 H1 2014 105 100 95 90 85 80 94.3 94.7 88.6 88.6 Q2 2013 Q2 2014 H1 2013 H1 2014 7
Follow up on efficiency programme Savings of DKK 740m achieved so far. DKK 93m achieved in Q2 2014. 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 1,000 800 600 400 200 0 Targeted and achieved savings on claims 1,000 700 740 550 300 190 Expenses Claims Total Target 2015 Achieved 2012-2013 Achieved H1 2014 Efficiency programme up until 2015 8
Premiums and portfolio
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 5,000 420 358 4,000 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 1,000 900 800 700 600 500 400 300 200 100 0 Technical result, DKKm 684 28 139 153 364 941 43 180 224 494 Private Commercial Corporate Sweden 10
Private - average premiums House insurance average premium (index 2008 = 100) 150 Average premiums increase Y/Y 140 130 0.5% (Q1 0.6%) 2.6% (Q1 2.9%) 120 110 100 90 2008 2009 2010 2011 2012 2013 2014 Motor insurance average premium (index 2008 = 100) 140 130 120 110 Average premiums increase Y/Y -0.6% (Q1-0.9%) 1.8% (Q1 2.3%) 100 90 2008 2009 2010 2011 2012 2013 2014 11
Q2-14 92% 90% 88% 86% 84% 82% Q3 12 12 Customer retention Private Commercial 92% 90% 88% 86% 84% 82% Q3 12
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 Q2-14 130 125 125 120 115 110 114 110 105 100 95 90 103 102 103 99 99 97 95 95 94 91 88 88 88 89 89 85 80 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 Q2-14 13
Claims and expenses
CR and claims ratios Q2 2013-14 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 2013/2014 78.7 79.3 76.7 72.3 72.1 70 72.8 68.8 65.6 62.8 Q2 2013 Q2 2014 Group Private Commercial Corporate Sweden Claims ratio development - Group 95 90 85 80 75 70 65 Q1 09 Q4 09 Q2-14 Gross claims ratio Claims rat io, net of reinsurance 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 200 200 150 150 100 207 100 50 0 78 Q2 2013 Q2 2014 50 0 65 60 Q2 2013 Q2 2014 Run-off, net DKKm Run-off net, effect on combined ratio 300 250 200 7.0% 6.0% 150 100 50 0 260 162 Q2 2013 Q2 2014 5.0% 4.0% 3.0% 2007 2008 2009 2010 2011 2012 2013 Q2 2014 3.4% 16
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. 5.0 4.0 3.0 2.0 1.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 1.4 17 Impact NO pension obligation by around DKK 125m. % Pension scheme Norway - discounting rate 5.0 4.0 3.0 2.0 Q3 12 3.3
Expense ratio development Expense improved from 15.6 in Q2 2013 to 12.6 in Q2 2014. Excluding one-off effects, expense ratio was 15.4 - an improvement of 0.2 pp. Nominal expenses on Group level reduced significantly in Q2 2014. Expense ratio 16.6 16.7 16.6 16.4 15.6 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 Q4 2013. 2009 2010 2011 2012 2013 Q2 2013 Q2 2014 FTE development Nominal costs in business areas 4,101 4,076 368 3,913 DKKm 281 206 3,703 3,655 3,639 133 116 98 74 70 Private Commercial Corporate Sweden 2010 2011 2012 2013 Q1 2014 Q2 2014 Q2 2013 Q2 2014 18
Investment, capital and financial targets
Investment result Q2 2014 Investment return Free portfolio Q2 2014 (DKK 12.7bn) DKKm Free investment Match regulatory deviation 244 49 37 3 Equities (22) Investment property (15) Bank deposits/bonds (15) Match performance 50 Percentage 24 Govt. Bonds (3) Other financials Total return -84 259 7 2 10 17 High yield (6) Cov. Bonds (36) Em. market bonds(3) Percentage return free portfolio Match portfolio Q2 2014 (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
Capital structure and status on share buy back Capital Q2 2014 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 2,000 0 21 Equity and subordinated loan 1,818 1,820 11,107 10,525 2013 Q4 2014 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
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 2015 40% ROE after tax 30% 20% ROE target 10% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 H1 2014 2014 2015 22
For new investors
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 2012 2013 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 585 588 Pre-tax result 3,017 2,993 Net result 2,208 2,369 Combined ratio 88.2 87.7 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 - 2013 11 Denmark 24 14 9 Motor - TPL Motor - casco Workers' comp. 40.1 48.9 Norway Sweden 5 11 5 20 12 Health & accident Liability Fire & property - private Fire & property - comm. Other 24
Tryg at a glance 320 Share performance since IPO Tryg goes back to 18th century 300 280 260 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 240 220 200 180 Non-life insurance in Denmark, Norway and Sweden 160 140 120 IPO Oct. 2005 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 100 80 60 40 20 0 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* 60 16 13 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 25 25 9 juli 2014 *Executive Management Tryg A/S and Tryg Forsikring A/S
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 50 45 New dividend policy 40 DKK per share 35 30 25 20 15 10 5 0 16 13 21 13 33 26 27 21 17 15.5 6.5 4 6.52 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Cash dividend Ordinary buy back Extraordinary buy back 26
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) 40.0 4.8 10.5 8.5 8.9 18.2 9.1 Tryg If Codan Gjensidige Länsförsäkringar Topdanmark Other 29.0 6.2 6.0 19.0 Percentage 17.5 9.9 12.4 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) 10.4 25.4 14.2 26.3 Tryg If Gjensidige Percentage 23.7 Sparebank1 Other 15.2 1.3 16.2 15.7 3.5 Percentage 18.2 29.9 Moderna Länsforsäkringar If Codan Folksam Gjensidige Other 27
Distribution of new sales 2013 12% 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 28 28 9 juli 2014
Combined ratio performance 110 105 Premium hikes Premium hikes Efficiency programme 100 95 Smaller adjustments 90 85 80 2000 2001 2002 2003 2004 2004* 2005 2006 2007 2008 2009 2010 2011 2012 2013 H1 2014 2002-2004 price increases of DKK 2.1bn implemented. Reduced combined ratio from 107 to 94. 2011-2012 price increases will improve underlying combined ratio. 2012-2015 operational focus with target to cut expenses and claims costs by DKK 1bn in total. *IFRS from 2004. Previous years are Danish GAAP. Data before 2009 is not corrected for the sale of Marine Hull business. 29
Key figures 2010-13 and consensus for 2014-16 Consensus DKKm 2010 2011 2012 2013 2014 2015 2016 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 -311 507 86 349 Technical interest, net 124 171 62 62 Technical result 460 1,572 2,492 2,496 2,431 2,465 2,498 Investment income, net 550 61 585 588 372 301 321 Pre-tax profit 1,006 1,603 3,017 2,993 2,767 2,750 2,799 Tax -265-455 -837-620 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 9.5 18.9 36.5 39.4 36.0 36.6 38.1 Cash dividend per share 4.0 6.52 26.0 27.0 28.2 29.4 30.8 Share buy back DKKm 0.0 0.0 800 1,000 913 719 616 Combined ratio 98.3 93.2 88.2 87.7 87.4 87.4 87.4 30
Appendix Follow us on Twitter: @TrygIR
Q3 12 Q3 12 32 Group Gross premiums Combined ratio DKKm % 5,400 5,200 5,000 4,800 4,600 110 105 100 95 90 85 80 75 4,400 GEP (LHS) Local currency (RHS) 8 4 0-4 Q3 12 Gross claims ratio Expense ratio 95 90 85 80 75 70 Q3 12 65 18 17 16 15 14 13 12
Q3 12 Q3 12 33 Private Gross premiums Combined ratio DKKm % 2,500 2,300 2,100 1,900 GEP (LHS) Local currency (RHS) 8 4 0-4 110 105 100 95 90 85 80 75 Q3 12 Gross claims ratio Expense ratio 95 90 85 80 75 70 Q3 12 65 18 17 16 15 14 13 12
Q3 12 Q3 12 34 Commercial Gross premiums Combined ratio DKKm % 1,200 1,100 125 115 105 95 85 75 1,000 GEP (LHS) Q3 12 Local currency (RHS) 8 4 0-4 -8 Gross claims ratio Expense ratio 115 105 95 85 75 65 55 21 20 19 18 17 16 15 14 13 12 Q3 12
Q3 12 Q3 12 35 Corporate Gross premium Combined ratio DKKm % 110 1,200 8 1,100 1,000 Gross claims ratio Expense ratio 100 90 80 900 GEP (LHS) Q3 12 Local currency (RHS) 4 0-4 -8-12 125 115 105 95 85 75 65 55 14 13 12 11 10 9 Q3 12
Q3 12 Q3 12 36 Sweden (Private) Gross premium Combined ratio DKKm % 500 450 400 350 300 125 115 105 95 85 250 Local currency (RHS) GEP (LHS) 25 20 15 10 5 0-5 -10-15 Q3 12 Gross claims ratio Expense ratio 100 30 90 80 70 25 20 15 10 60 5 Q3 12
Geographical segments 37
Economic key figures Denmark Sweden % 2014 2015 % 2014 2015 GDP Growth 1.3 1.7 GDP Growth 2.7 2.4 Inflation 0.9 1.6 Inflation -0.1 1.4 Unemployment 5.1 5.0 Unemployment 8.0 7.8 Current account balance in % of GDP 5.3 4.2 Current account balance in % of GDP 6.2 6.5 Budget balance in % of GDP -1.1-2.9 Budget balance in % of GDP -2.0-0.7 Public debt in % of GDP 43.8 43.4 Public debt in % of GDP 41.5 40.6 Norway % 2014 2015 GDP Growth (mainland) 1.8 1.6 Inflation 2.2 1.8 Unemployment 3.7 4.0 Current account balance in % of GDP 11.2 11.3 Budget balance in % of GDP 11.0 11.2 Public debt in % of GDP 0.0 0.0 Source: Economic Outlook, Nordea Markets, June 2014 38 38 9 juli 2014