Danske Markets Navigating the Nordics CFO Tor Lønnum Download presentation at Tryg.com 1
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
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 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 14 Motor - TPL Denmark 24 10 Motor - casco Workers' comp. 40,1 48,9 Norway Sweden 4 11 5 20 12 Health & accident Liability Fire & property - private Fire & property - comm. Other 3
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 225 200 175 Non-life insurance in Denmark, Norway and Sweden 150 125 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 3,655 employees 100 75 50 25 0 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* 60 10 17 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 4 4 6 juni 2014 *Executive Management Tryg A/S and Tryg Forsikring A/S
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 10.5 18.2 9.1 Tryg If Codan Gjensidige Länsförsäkringar Topdanmark Other 14.2 26.3 Tryg If Gjensidige Percentage 23.7 Sparebank1 Other 10.4 4.8 8.5 8.9 25.4 Sweden SEK 68bn/EUR 7.6bn (as at Q1-2014) Denmark DKK 50.4bn/EUR 6.8bn (as at Q1-2013) 15.2 1.3 16.2 15.7 3.5 Percentage 18.2 29.9 Moderna Länsforsäkringar If Codan Folksam Gjensidige Other 29.1 6.1 5.9 19.1 Percentage 17.5 9.8 12.5 Tryg Topdanmark Codan Alm. Brand Gjensdige If Other 5 6 juni 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 Q1 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. 6
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 Q1 2014 2014 2015 7
Strategic initiatives 2014 2014 Customers, culture and continous improvements Increased price differentiation Customer journey & success culture Expenses/claims reductions IT operational stability 8
Price differentiation New products improves hitrate New products reduces discount level 130 125 120 115 110 % 20 15 10 Workers' Compensation 105 5 100 Travel Holiday home Camp. 0 Old product New product 9
Follow up on efficiency programme Savings of DKK 647m achieved so far. DKK 90m achieved in Q1 2014. 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 1.200 1,000 1.000 800 700 647 600 485 400 300 162 200 materials and repairs. Expenses Claims Total 0 Target 2015 Achieved 2012-2013 Achieved Q1 2014 Efficiency programme up until 2015 10
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 Q3 13 82% Commercial 92% 90% 88% 86% 84% Q1 09 Q3 09 Q1 10 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 11 82%
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
Efficiency is a competitive parameter CR 102 100 98 96 94 92 90 < 90 88 86 84 SME companies Cost advantages Claims procurement Tryg Continued focus on efficiency and claims procurement Enables both strong results and competitive products 13 18. april 2013
CR and claims ratios Q1 2013-14 Underlying development is adjusted for: Underlying claims ratio, net Q1 2013/2014 Large claims Weather claims Run-off and interest 87.2 76.2 76.7 75 75.3 67.7 68.4 69 81.8 71.4 1.2 %-point improved underlying claims ratio on Group level driven by efficiency programme. Q1 2013 Q1 2014 Group Private Commercial Corporate Sweden Claims ratio development - Group 95 90 85 80 75 70 65 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
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 50 0 67 215 Q1 2013 Q1 2014 100 50 0 140 114 Q1 2013 Q1 2014 Run-off, net DKKm Run-off net, effect on combined ratio 350 300 250 200 150 100 50 0 220 333 Q1 2013 Q1 2014 7,0% 6,0% 5,0% 4,0% 3,0% 4,9% 4,7% 4,0% 3,7% 4,7% 5,0% 5,0% 7,3% 2007 2008 2009 2010 2011 2012 2013 Q1 2014 15
Expense ratio development Expense ratio improved from 16.0 in Q1 2013 to 15.9 in Q1 2014. Nominal expenses on Group level reduced significantly in Q1 2014. 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 Q1 2014. Expense ratio 16.6 16.7 16.6 16.4 15.6 16.0 2009 2010 2011 2012 2013 Q1 2013 15.9 Q1 2014 FTE development Nominal costs in business areas 4.101 4.076 365 347 3.913 3.703 3.655 DKKm 211 184 131 125 74 63 Private Commercial Corporate Sweden 2010 2011 2012 2013 Q1 2014 Q1 2013 Q1 2014 16
Investment result Q1 2014 Investment return Free portfolio Q1 2014 (DKK 13.6bn) Free investment Match regulatory deviation Match performance Other financials Total return Q1 2014 DKKm 129-3 30-67 89 36 5 4 15 Percentage 3 15 22 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 Q1 2014 (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
Capital structure and status on share buy back DKKm 12.000 Capital Q1 2014 10.000 8.000 6.000 4.000 3.591 6.740 1.770 8.561 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 2.000 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 14.000 12.000 Equity and subordinated loan 1.818 1.834 DKKm 1.200 1.000 Share buy back 10.000 8.000 6.000 11.107 11.480 Subordinated loan capital Equity 800 600 400 787 Remaining share b.b. Acquired end Q1 2014 4.000 2.000 200 213 0 2013 Q4 2014 Q1 0 18
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 19
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