Gjensidige Insurance Group Q4 2008 and preliminary 2008
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Agenda I. Highlights II. Financial Performance III. Performance by Business Area IV. Investment Performance 3
Q4 highlights Positive premiums development in general insurance operations. Growth in premiums earned, net of reinsurance, of MNOK 92 compared to Q4 2007, corresponding to a 2.4 per cent growth Continued good profitability in general insurance operations. The underwriting result amounted to MNOK 167 (MNOK 220). The reduction is mainly due to an increase in larger claims in the Commercial Norway operations. Combined ratio was 95.7 (94.1) Operating expenses increased with MNOK 18. Cost ratio in General Insurance of 18.0 (18.1) Net financial loss of MNOK 737 (gain on MNOK 513), including the following effects on the investment in Storebrand: Further impairment over profit and loss of MNOK 736 Negative goodwill of MNOK 79 (as per reclassification from available for sale to investment in associates) Positive result Q4 2008 of MNOK 183 (24.33 per cent, including tax and amortization of excess value) Loss before tax of MNOK 653 (profit before tax of MNOK 645) The combination of good underwriting profitability and financial strength and flexibility gives Gjensidige many options for further growth and development 4
Outlook The target for the combined ratio for the general insurance business is being lowered from the current level of 97 to 90-93 from 2011 Claims expenses are to be reduced by between MNOK 400 and 500 (adjusted for inflation) starting in 2011 Operating expenses are to be reduced by NOK 300 to 400 million (adjusted for inflation) from the same period An effort has been initiated to specify further measures relating to the above Insurance operations have posted good results throughout 2008, and satisfactory profitability in insurance is also expected for 2009 The turbulence in the financial markets is expected to continue to affect Gjensidige s results in 2009 The Group s capital situation and financial strength is strong 5
Financial Performance
Key Financials Group Figures MNOK Q4 2008 Q4 2007 2008 2007 Gross written premium 3,476 3,342 17,429 15,727 Claims ratio gen. ins. 77.7% 76.0% 77.4% 78.6% Cost ratio gen. ins. 18.0% 18.1% 17.0% 17.5% UW result gen. ins. 167 220 860 553 Net financial income/(loss) (737) 513 (220) 2,820 Profit/(loss) before tax (653) 645 307 3,020 Profit after tax (827) 589 486 2,479 7
Key Figures (MNOK) Earned premiums general insurance, net of reinsurance 15,482 14,848 Underwriting result general insurance 860 553 3,936 3,843 167 220 Net financial income/(loss) Profit/(loss) before tax 2,820 3,020 513 645 307 (220) (737) (653) 8
Combined Ratio Development General Insurance 95.7% 94.1% 94.4% 96.1% 18.0% 18.1% 17.0% 17.5% 77.7% 76.0% 77.4% 78.6% Loss Ratio Cost Ratio 9
Large losses in Q4 General Insurance Norway Estimated cumulative probability, % 100 90 80 70 60 50 40 30 20 10 Effect on gross loss ratio for Norwegian portfolio of losses over 5 MNOK Actual: 8.4% Expected: 6.2% 0 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% Effect on gross loss ratio Estimated effect of large losses over expected for the quarter: 2.2% (-2.5%) 10
Large losses in 2008 General Insurance Norway Estimated cumulative probability, % 100 90 80 70 60 50 40 30 20 10 Effect on gross loss ratio for Norwegian portfolio of losses over 5 MNOK Actual: 8.3% Expected: 6.1% 0 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% Effect on gross loss ratio Estimated effect of large losses over expected for 2008: 2.2% (1.1%) 11
Quarterly Underwriting Results General Insurance (MNOK) 346 433 167 270 78 220 101 (201) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 2008 2007 Underwriting result general insurance, quarterly 12
Run-off General insurance (MNOK) 403 166 50 (92) Run-off gain in Q4 2008 of MNOK 166 Run-off gain due to: Continued positive claims development within parts of the personal lines in Norway Accident- and health insurance Group life insurance Positive effect on previous claims years in KommuneForsikring Liability insurance Child insurance 13
Premiums General Insurance (MNOK) Growth in gross premiums written General Insurance Q4 2007 Q4 2008 (38) (57) 71 53 (13)* 3,092 3,108 Q4 2007 Private Commercial Other Nordic Baltic Q4 2008 Growth in gross premium written of 0.5 per cent quarter on quarter Slight decrease within Private and Commercial influenced by low growth and strong competition in the market Increased organic growth in the Other Nordic segment in the quarter Continued growth within the Baltic segment. RESO included from June 1, 2008 * Q4 2008 Group adjustments/internal reinsurance 14
Premiums General Insurance (MNOK) Growth in gross premiums written General Insurance 2007 2008 225 (78)* 100 66 323 15,866 15,230 2007 Private Commercial Other Nordic Baltic 2008 Growth in gross premiums written of 4.2 per cent Implemented price increases yields growth within the Private segment Almost flat development in the Commercial segment Growth in Other Nordic due to transfer of municipal portfolio and full year effect of Tennant (consolidated as from August 2007) Continued strong growth in the Baltic segment including RESO from June 1, 2008 * 2008 Group adjustments/internal reinsurance 15
Cost Development General Insurance (MNOK) Cost Development General Insurance Q4 2007 Q4 2008 12 5 (25) 21 695 708 Q4 2007 Private Commercial Other Nordic Baltic Q4 2008 Cost increase of 1.9 per cent (in a year with significant salary increases) Increased costs in Private and Commercial include extra ordinary write-offs in Q4, i.e ICT Decrease in Other Nordic due to efficiency programs in Denmark Increased costs in Baltic due to acquisition of RESO and general inflation 16
Cost Development General Insurance (MNOK) Cost Development General Insurance 2007 2008 (19) (9) (3) 70 2,599 2,638 2007 Private Commercial Other Nordic Baltic 2008 Cost increase of 1.5 per cent (decrease when adjusted for full year Tennant and acquisition of RESO) Continued reduction within Private and Commercial Reduction in Other Nordic taken into account the consolidation of Tennant full year 2008 (costs in 2008 of MNOK 103 compared to MNOK 41.5 in the period August to December 2007) Increased costs in Baltic due to acquisition of RESO and general inflation 17
Cost Development going forward General Insurance Norway Employees general insurance Norway 2,272 2,242 2,033 2,060 1,990 Baseline YE 2005 YE2006 YE2007 YE2008 70 employees transferred from GPS June 1, 2008 Branch offices general insurance Norway 141 138 104 72 18 Baseline YE 2005 1 April 2007 YE2007 YE2008
General Insurance Private Norway
Highlights General Insurance Private Norway Highlights fourth quarter Product Lines December 31, 2008 1.4 per cent decline in earned premiums, net of reinsurance, in Q4 2008. For the year as a whole earned premiums, net of reinsurance, increased with 2.3 per cent Strong improvement in underwriting result. MNOK 198 in the quarter against MNOK 93 in Q4 2007 Cost ratio of 18.2 in Q4 2008 against 17.3 Q4 2007. For the year as a whole the cost ratio improved from 18,7 in 2007 to 18,0 in 2008 Combined ratio of 89.9 in Q4 2008 (95.1 in Q4 2007) Other 8.1% (8.0%) Agriculture 12.1% (12.0%) Accident and health 16.2% (16.0%) (December 31, 2007) Property 20.2% (20.0%) Motor 43.3% (44.0%) 20
Key Figures General Insurance Private Norway Gross Premiums Written (MNOK) Combined Ratio (%) 8,011 7,911 95.1 93.0 91.2 89.9 1,743 1,781 Net Loss Ratio (%) Cost Ratio (%) 77.8 18.7 71.8 73.2 74.3 18.2 17.3 18.0 21
General Insurance Commercial Norway
Highlights General Insurance Commercial Norway Highlights fourth quarter Product Lines December 31, 2008 Earned premiums, net of reinsurance, increased by 20.1 per cent in Q4 2008 compared to Q4 2007. The Norwegian municipal portfolio (the annual premium for 2007) was transferred to Other Nordic in Q4 2007. For the year as a whole earned premiums, net of reinsurance decreased by 3.2 per cent Underwriting result influenced by major claims in the quarter. Negative underwriting result of MNOK 61 in Q4 2008 against positive underwriting result of MNOK 137 in Q4 2007 Positive development in cost ratio. Cost ratio of 14.0 in Q4 2008 against 16.3 in Q4 2007 Combined ratio of 104.9 in Q4 2008 (86.1 in Q4 2007) Motor 19.3% (19.0%) (December 31, 2007) Ansvar; 5,5 % Liability 5.5% Marine (6.0%) 8.3% (9.0%) Property 26.6% (27.0%) Accident and health 39.1% (39.0%) Other 1.2% (0%) 23
Key Figures General Insurance Commercial Norway Gross Premiums Written (MNOK) Combined Ratio (%) 5,120 5,465 104.9 86.1 99.6 98.6 871 928 Net Loss Ratio (%) Cost Ratio (%) 91.0 85.9 85.2 16.3 69.7 14.0 13.7 13.4 24
General Insurance Other Nordic
Highlights General Insurance Other Nordic Highlights fourth quarter Product Lines December 31, 2008 Earned premiums, net of reinsurance, of MNOK 548 in Q4 2008, compared to MNOK 704 in Q4 2007. The Q4 2007 figures includes the 2007 annual premium of the Norwegian municipal portfolio. For the year as a whole earned premiums, net of reinsurance, increased by 18.5 per cent Underwriting result of MNOK 36 in Q4 2008 against negative underwriting result of MNOK 12 in Q4 2007 Cost ratio of 19.9 (20.0 in Q4 2007) Combined ratio in Q4 2008 of 97.5 (101.7 in Q4 2007) (December 31, 2007) Other Liability 1.9% 10.3% (7.0%) (4.0%) Accident and health 31.1% Property (32.0%) 30.7% (25.0%) Motor 26.0% (32.0%) 26
Key Figures General Insurance Other Nordic Gross Premiums Written (MNOK) Combined Ratio (%) 2,156 1,810 101.7 103.1 97.5 327 589 94.5 Net Loss Ratio (%) Cost Ratio (%) 77.6 81.8 77.6 81.7 19.9 20.0 17.0 21.4 27
General Insurance Baltics
Highlights General Insurance Baltics Highlights fourth quarter Product Lines December 31, 2008 Continued strong premium growth in the Baltic markets. 54.3 per cent growth in earned premiums, net of reinsurance, in Q4 2008 compared to Q4 2007 Underwriting result of MNOK 16 in Q4 2008 against MNOK 3 in Q4 2007 Cost ratio of 32.6 in Q4 2008 against 33.9 in Q4 2007 Liability 2.4% (2.0%) Accident and health 3.7% (4.0%) Property 9.6% (11.0%) (December 31, 2007) Other 7.8% (3.0%) Combined ratio in Q4 2008 of 91.6 against 98.2 in Q4 2007 RESO consolidated as of June 1, 2008 Motor 76.5% (80.0%) 29
Key Figures General Insurance Baltics Gross Premiums Written (MNOK) Combined Ratio (%) 658 98.2 433 95.4 181 128 91.6 93.2 64.3 Net Loss Ratio (%) Cost Ratio (%) 62.1 63.7 32.6 33.9 31.0 31.6 59.0 30
Pension and savings
Highlights Pension and savings Highlights fourth quarter Total AUM growth in Q4 2008 of MNOK 340, to MNOK 2,847 as of 31 December, 2008 Assets Under Management (MNOK) December 31, 2008 (December 31, 2007) Total asset margin of 0.7 per cent in Q4 2008. A reduction from 0.8 per cent in Q4 2007 due to altered product combination and reduced insurance profitability Net increase of 6,266 new customers in Q4 2008 84.4 per cent of the customers at the end of the quarter were also insurance customers Pension 2,041 (597) Savings 806 (613) 32
Key Figures Pension and savings Assets Under Management (MNOK) Total Asset Margin (%) 1 2,847 2.5 Addition in the period 340 362 1,210 0.7 0.8 1.7 Q4 2008 Q4 2007 YE 2008 YE 2007 Customer Development (1) Net premiums earned less claims plus other income divided by average AUM 41,027 Addition in the period 22,325 6,266 6,716 Q4 2008 Q4 2007 YE 2008 YE 2007 33
Online retail banking
Highlights Online retail banking Highlights fourth quarter Loan book growth of MNOK 431 in Q4 2008, to a total of MNOK 6,711 Loans and Deposits (MNOK) December 31, 2008 (December 31, 2007) Deposits increased with MNOK 954 in Q4 2008m to a total of MNOK 6,131 Deposits-to-loan ratio of 91.4 per cent as at December 31, 2008 7,754 persons registered as potential customers in Q4 2008 52.8 per cent shared customers with General Insurance Norway at the end of Q4 2008 Lending 6,711 (3,381) Deposits 6,131 (1,701) 35
Key Figures Online retail banking Loans (MNOK) Deposits (MNOK) 6,711 6,131 Addition in the period 3,381 Addition in the period 431 1,276 954 726 1,701 Q4 2008 Q4 2007 YE 2008 YE 2007 Addition in the period 221.7 Deposit Ratio (%) Q4 2008 Q4 2007 YE 2008 YE 2007 Customer Development 44,413 91.4 Addition in the period 22,244 56.9 50.3 7,754 6,248 Q4 2008 Q4 2007 YE 2008 YE 2007 Q4 2008 Q4 2007 YE 2008 YE 2007 36
Health care services
Highlights Health care services Highlights fourth quarter Strong increase in operating income of 24.8 per cent in Q4 2008, to MNOK 143, including acquired businesses Revenue Split Health care services December 31, 2008 (December 31, 2007) Revenues in the health segment are characterised by seasonal fluctuations. Activities are substantially lower in July August and December than at other times of the year Operating costs increased to MNOK 132 in Q4 2008 (MNOK 102 in Q4 2007) EBITA-margin of 7.8 per cent in Q4 2008, against 11.5 per cent in Q4 2007 Personal security alarm services 18.8 % (20.0%) Private hospital and specialist services 23.0 % (22.0%) Corporate health care services 58.3% (58.0%) 38
Key Figures Health care services Revenues (MNOK) Costs (MNOK) 504 463 336 309 143 115 132 102 EBITA Margin (%) EBITA (MNOK) 11.5 41.0 8.1 7.8 7.9 26.4 11.2 13.2 39
Investment Performance
Investment Performance Highlights fourth quarter Asset Allocation December 31, 2008 Negative return on the investment portfolio in Q4 2008 of 1.6 per cent (positive return of 1.3 per cent). Negative return on the investment portfolio as of 31 December 2008 of 0.6 per cent (positive return of 6.3 per cent) Adjusted for impairment in Storebrand and gain on sale of headquarter and shares in Lindorff, the financial return was negative 0.2 per cent in Q4 2008 and positive 0.1 per cent FY 2008 Hedgefunds and other 2.6 % Real Estate 13.2 % HTM-bonds 28.6 % Equities 7.9 % Current bonds 24.1 % Money Market 23.6 % Total investment portfolio of MNOK 47,772 as at 31 December 2008 Return Q4 2008 Per Asset Class 2.2 % 1.6 % 5.7 % Return FY 2008 Per Asset Class 4.9 % 5.6 % (0.6) % (2.6) % (3.1) % (2.3) % (5.2) % (20.3) % Equities 41 Money Market HTM-bonds Bonds Real estate Hedgefunds and other (32.3) % Equities Money Market HTM-bonds Bonds Real estate Hedgefunds and other
Asset class exposure Fixed income exposure Non-public rated issuers are mainly Norwegian savings banks, municipals, credit institutions and power producers and distributors Split of fixed income portfolio NOK mill. % Money market instruments 11.324 31,0 % Bonds: Bonds held to maturity 13.710 37,5 % Bonds held for trading 8.030 21,9 % Investment grade bond (international) 2.233 6,1 % High yield bond funds (international) 1.287 3,5 % Total bonds 25.261 69,0 % Sum 36.586 100,0 % Rating NOK mill. % Investment grade 28.135 76,9 % High yield 1.270 3,5 % Non rated 7.180 19,6 % Sum 36.586 100,0 % Equity exposure The equity exposure is primarily the stake in Storebrand and private equity investments Rating - including internal rating by Storebrand NOK mill. % Investment grade 33.607 92,2 % High yield 1.167 3,2 % Non rated 1.690 4,6 % Sum 36.465 100,0 % The difference in total value of the fixed income portfolio in this table compared with figures in the interim report is due to exposures in interest rate derivatives 42
Net financial income/(loss) Quarterly Analysis (MNOK) 938 513 503 1.020 785 73 (494) (737) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 2008 2007 Group financial result by quarter 43
Return on Equity Equity (MNOK) Pre-tax Return on Equity (%) 19,820 20,303 15.4 2.9 2008 2007 2008 2007 Equity of MNOK 19,820 Capital adequacy of 21.0 per cent (26.1 per cent year end 2007) Solvency margin of 658.7 per cent (561.3 per cent year end 2007) 44
Capital Allocation by Segment NOK bn 2.4 1) 19.8 6.3 2.3 0.2 0.4 0.8 0.1 7.3 General Insurance Norway General Insurance Other Nordic General Insurance Baltic GPS Bank Health Excess Intangible assets 31/12/2008 Equity Source: Unaudited financial statements and company data 1) Total intangible assets as at 31/12/2008 (NOK 2.8 bn) less intangibles allocated to General Insurance Norway (NOK 0.4 bn) 45
Appendix
Tax Group Figures Up until and including 2007, Gjensidige Forsikring was exempt from tax on income and net wealth attributed to fire and livestock insurance In its fiscal budget for 2009 the Government removed the tax exemption for mutual fire and livestock insurers with effect from the 2008 tax year As a consequence, effective tax rate as of 2008 is estimated to 22-24 per cent (from 16-18 per cent) Re. 2008 preliminary figures The regulations concerning annual accounts for insurance were amended in 2008 introducing IFRS, with certain exceptions, in the statutory accounts The amendments have a positive effect on equity in the Company accounts, primarily because several of the actuarial provisions have been reclassified from liabilities to equity In this connection, the natural perils fund is regarded as a permanent difference, i.e. no deferred taxes have been deducted This represented one-off tax income in 2008 of MNOK 554 Gains and losses on equities are tax-exempt/non-deductible. In 2008, the equity portfolio yielded net loss and therefore had a negative effect on the effective tax rate. 47