Capital Markets Day 2009

Transcription

1 December 2009 Capital Markets Day 2009 CMD 2009 Page 1

2 Agenda 10:00 - Steffen Heegaard Head of IR and Group Communications Introduction 10:05 - Lars Thykier CFO Solvency II 10:35 - Brian Rothemejer Jacobsen CEO of Topdanmark Life Insurance Value creation in life insurance 11:20 Break 11:30 - Christian Sagild CEO Trends and competitive environment in the Danish non-life market 11:55 - Ole Rasmussen Head of Claims Administration Initiatives in claims handling 12:40 - Christian Sagild CEO Goals for profit margin and growth 12:50 Lunch CMD 2009 Page 2

3 Agenda 10:00 - Steffen Heegaard Head of IR and Group Communications Introduction 10:05 - Lars Thykier CFO Solvency II 10:35 - Brian Rothemejer Jacobsen CEO of Topdanmark Life Insurance Value creation in life insurance 11:20 Break 11:30 - Christian Sagild CEO Trends and competitive environment in the Danish non-life market 11:55 - Ole Rasmussen Head of Claims Administration Initiatives in claims handling 12:40 - Christian Sagild CEO Goals for profit margin and growth 12:50 Lunch CMD 2009 Page 3

4 December 2009 Capital Markets Day 9 December 2009 Solvency II By Lars Thykier CFO CMD 2009 Page 4

5 Purpose of Solvency II New rules and compilation of existing rules Customer protection From rules-based to risk-based solvency capital requirement Incentivises to risk management Single rule book and no supervisory arbitrage European rules to be identical Interpretation of rules to be identical Supervision of rules to be identical CMD 2009 Page 5

6 The three pillars of Solvency II Capital requirement - quantitative Calculation of capital requirement based on Insurance risk Credit risk Market risk Liquidity risk Operational risk Special focus on valuation of provisions Capital elements ( quality of capital ) Supervision - qualitative Supervision standards and processes Internal controls and management structures Organisation (internal audit, actuary, risk officer) Risk management Capital add-ons Own risk and solvency assessment (ORSA) Fit and Proper Reporting / market discipline Transparency Disclosure Supervisory reporting Risk management Risk-based supervisions supported by market discipline Accounting rules Pillar I Pillar II Pillar III Pillar V CMD 2009 Page 6

7 Total balance principle - All balance sheet items are valued at market value Shareholders equity Surplus capital Solvency capital requirement (SCR) Minimum capital requirement (MCR) Assets Provisions Market value of liabilities including cost of capital (CoC) CMD 2009 Page 7

8 If solvency capital requirement (SCR) is not met - restoration plan to be prepared Assets Source: DFSA Shareholders equity Provisions SCR MCR 1. The DFSA is notified by the company immediately upon ascertainment 2. The company is to present a realistic restoration plan no later than two months after the ascertainment 3. The company is to meet the SCR no later than six months after the ascertainment. The DFSA may extend the time limit by three months. In the event of exceptionally large declines in the financial market, the time limit may be extended to an appropriate period 4. Quarterly progress report from the company 5. If the DFSA believes that the company s financial situation further deteriorates, it may restrain or prohibit the free disposal of the company s assets CMD 2009 Page 8

9 If minimum capital requirement (MCR) is not met - implementation of short-term capital restoration plan SCR Assets Shareholders equity Provisions MCR 1. The DFSA is notified by the company immediately upon ascertainment 2. The company is to present a shortterm, realistic financing plan no later than one month after the ascertainment, in order to meet the MCR no later than three months after the ascertainment 3. Furthermore, the DFSA may restrain or prohibit the free disposal of the company s assets Source: DFSA CMD 2009 Page 9

10 Solvency II The directive text was adopted by the European Parliament and the Council of Ministers in April / May Goes live on 31 October 2012 CEIOPS is advising the Commission on the implementing measures CEIOPS: Committee of European Insurance and Occupational Pensions Supervisors CMD 2009 Page 10

11 Draft directive - spring 2008 Risk-based A one-in-200-year event over a one-year time frame First year s result recognised as risk-cover Market values Diversification between companies in a group (group support) Consistent with accounts Commission s proposals CMD 2009 Page 11

12 If Solvency II was in force - principles as expected in spring 2008 Required capital risk-based Risk-based required capital (QIS 3) 1,247 Increase in stress levels and correlations 500 Risk-based required capital 1,747 Capital base 31 Dec ,612 Buffer to capital required 1,865 CMD 2009 Page 12

13 Risk based capital Capital requirement as a function of the expected combined ratio (10) CMD 2009 Page 13

14 Risk based capital In principle a non-life insurance company of a reasonable size and with an expected low combined ratio needs no capital Example: Motor in Topdanmark Expected combined ratio plus 2,6 standard deviations < 100 Profit with a probability exceeding 99.5% In general: catastrophe risk covered by reinsurance CMD 2009 Page 14

15 If Solvency II was in force - principles as expected in spring 2009 Required capital Solvency II Required capital risk-based Risk-based required capital (QIS 3) 1,247 1,247 Increase in stress levels and correlations Risk-based required capital 1,747 1,747 Expected surplus coming year 1,300 3,047 Capital base 31 Dec ,612 3,612 Buffer to capital required 565 1,865 CMD 2009 Page 15

16 Risk based capital Capital requirement is dependent on the expected combined ratio CMD 2009 Page 16

17 Directive and CEIOPS advice autumn 2009 No diversification between the companies of a group Next year s result cannot cover risk Operational risk - significant increase and no diversification with other risks Parameter values and correlations strictly tightened - some of them fair but others too extensive CMD 2009 Page 17

18 If Solvency II was in force December Principles as CEIOP s advice - final outcome uncertain! Required Required CEIOPS capital capital decision Solvency II risk-based Risk-based required capital (QIS 3) 1,247 1,247 Increase in stress levels and correlations Open Risk-based required capital 1,747 1,747 Expected surplus coming year 1,300 Final No diversification between life and non-life 500 Final Increase in risk weighting operational risk 500 Open Risk-free interest rate to AAA gov. bonds 200 Open Concentration risk mortgage bonds 100 Final Increase in CoC 100 SCR estimate based on CEIOPS advice 4,447 1,747 Capital base 31 Dec ,612 3,612 Buffer to capital required (835) 1,865 CMD 2009 Page 18

19 Surplus capital? The Commission is expected to reduce requirements but how much? Topdanmark has to prepare for a situation consistent with the advice from CEIOPS Real capital-at-risk far below SCR only small convenience cushion on top of SCR A lot of uncertainty - slow adjustment justified CMD 2009 Page 19

20 Actions Optimise group structure Approved partial internal model Reduce investment risk Optimise investment portfolio with respect to SCR Optimise liabilities with respect to SCR Optimise reinsurance with respect to SCR CMD 2009 Page 20

21 If Solvency II was in force December Principles as CEIOP s advice - final outcome uncertain! Required Required CEIOPS capital capital decision Solvency II risk-based Risk-based required capital (QIS 3) 1,247 1,247 Increase in stress levels and correlations Open Risk-based required capital 1,747 1,747 Expected surplus coming year 1,300 Final No diversification between life and non-life 500 Final Increase in risk weighting operational risk 500 Open Risk free interest rate to AAA gov. bonds 200 Open Concentration risk mortgage bonds 100 Final Increase in CoC 100 SCR estimate based on CEIOPS advice 4,447 1,747 Optimisation assets and liabilities (400) (200) SCR estimate based on CEIOPS advice after portfolio adjustments 4,047 1,547 Capital base 31 Dec ,612 3,612 Buffer to capital required (435) 2,065 CMD 2009 Page 21

22 Surplus capital? Using assumptions based on CEIOPS advice to the Commission, SCR calculated at year-end 2008 is higher than the capital base even after optimisation The capital base will be increased by around DKK 800m in (DKK 300m included in the 2009 guidance) Accordingly the share buy-back will be reduced by DKK 250m in 2010 and 2011 Assuming normalised profit of around DKK 1,000m after tax, the share buyback will amount to DKK m each of the two years Reconsiderations if inconsistencies between assumptions and expectations CMD 2009 Page 22

23 Individual solvency principles 2009 Group calculation QIS3 (higher requirements than after QIS4) Partial internal model for non-life insurance Partial internal model contribution in life insurance Equity risk increased from 32% to 45% A number of CDOs recognised as equity risk Future years results not included CoC of non-life insurance provisions included CMD 2009 Page 23

24 Thank you for your attention - questions? CMD 2009 Page 24

25 Agenda 10:00 - Steffen Heegaard Head of IR and Group Communications Introduction 10:05 - Lars Thykier CFO Solvency II 10:35 - Brian Rothemejer Jacobsen CEO of Topdanmark Life Insurance Value creation in life insurance 11:20 Break 11:30 - Christian Sagild CEO Trends and competitive environment in the Danish non-life market 11:55 - Ole Rasmussen Head of Claims Administration Initiatives in claims handling 12:40 - Christian Sagild CEO Goals for profit margin and growth 12:50 Lunch CMD 2009 Page 25

26 December 2009 Capital Markets Day 9 December 2009 Value creation in life insurance By Brian Rothemejer Jacobsen CEO, life and pensions Topdanmark Livsforsikring CMD 2009 Page 26

27 Three sources of value creation Focus in presentation Life and pensions business Focus in presentation Life-related non-life business Synergies CMD 2009 Page 27

28 Sources of value creation - Life and pensions business Underwrites new business Liv I With-profit Life-related non-life business (illness/accident) Mainly 1.5% guarantees 2.5% underwritten from 1994 to 1999 Link Unit-linked business Closed portfolio since 1st July 1994 Liv V With-profit 4.5% guarantees (hedged) CMD 2009 Page 28

29 Blood sharing between existing and new customers Challenge in the market Large proportion of business guaranteed 4.5% - in the current financial environment Leads to conservative investment strategy: Derivatives (interest rate options) Few equities Uncertainty for new customers (since 1994) CMD 2009 Page 29

30 Split improves investment strategy Investment strategy Significant proportion of bonds 4.5 Properties Few equities (10%) Interest rate options Investment strategy 1.5 Bonds Properties Equities (30%) CMD 2009 Page 30

31 Sources of income - A typical traditional with-profit pension scheme in Topdanmark Part of non-life insurance Part of life insurance Disability Critical illness Health Death (risk) Expenses Savings / provisions Combined ratio Investment return from provisions Risk and administrative result Acquisition Investment return Asset management Risk allowance Shareholders equity Customer Shareholders equity CMD 2009 Page 31

32 Sources of income - A typical traditional unit-linked scheme in Topdanmark Part of non-life insurance Part of life insurance Disability Critical illness Health Death (risk) Expenses Savings / provisions Combined ratio Investment return from Risk and administrative result Balance costs + Asset management Investment return provisions Shareholders equity Customer CMD 2009 Page 32

33 Sources of income - Topdanmark Livsforsikring Group Definition of profit With profit policies Legend Risk premium Customers savings Result payable to shareholders less Claims = Risk result Investment return Asset mgmt. Risk allowance Result payable to customers Administrative costs less Cost contribution = Administrative result Acquisition costs High capital requirement less Cost contribution = Acquisition result Unit-linked policies Risk premium less Claims Customers savings = Risk result Investment return Asset mgmt. Balance costs Administrative costs less Cost contribution = Administrative results Acquisition costs Low capital requirement less Cost contribution = Acquisition result CMD 2009 Page 33

34 Normalised return in life insurance 1/2 - Assumptions Solvency I Liv I 555m (of which 95 is related to non-life) Liv V 344m Link 25m Target capital requirement in Liv Holding (150 % of 555m+344m) 1,349m Shareholders equity in Liv Holding 1,121m Subordinated loans in Liv Holding 300m Total 1,421m Investment return on shareholders equity: 4.5% Result from acquisition expenses (10)m Customers savings: Liv I : DKK 16.2bn Risk allowance 0.5% Liv V : DKK 7.9bn Risk allowance 0.65% Link: DKK 2.6bn Premium income life-related non-life business 600m CMD 2009 Page 34

35 Normalised return on life insurance 2/2 Return on life insurance: DKKm Investment return on minimum capital requirement 4.5% 50 Risk allowance : 0.50% / 0.65% of customers savings 133 Result from acquisition expensens (10) Risk result from Link 0.1% of provisions 3 Other life-related result: Life-related non-life - combined ratio 94% 37 Asset management 0.2% of provisions 53 Other synergies within, among others, distribution ~ ROE = 12.7% ~ ROE = 28.2% CMD 2009 Page 35

36 Sources of income - A typical traditional with-profit pension scheme in Topdanmark 16.2bn Liv 1 7.9bn Liv V Part of non-life insurance Part of life insurance Disability Critical illness Health Death (risk) Expenses Savings / provisions Combined ratio Investment return from provisions Risk and administrative result Acquisition Investment return Asset management Risk allowance 133m Shareholders equity Customer Shareholders equity CR94 = 37m (10)m 48m +Investment 50m CMD 2009 Page 36

37 Sources of income - A typical traditional unit-linked scheme in Topdanmark Part of non-life insurance Part of life insurance 2.6bn Disability Critical illness Health Death (risk) Expenses Savings / provisions Combined ratio Investment return from Risk and administrative result Balance costs + Asset management Investment return provisions Shareholders equity Customer 3m 5m CMD 2009 Page 37

38 Value drivers Topdanmark Livsforsikring Growth in provisions Investment return Asset management Risk and admin. result Capital requirement Discount rate CMD 2009 Page 38

39 Note: Excl. Illness / Accident Basic scenario CMD 2009 Page 39

40 Note: Excl. Illness / Accident Synergies already included in non-life insurance CMD 2009 Page 40

41 Note: Excl. Illness / Accident Change in discount rate by 1 percentage point CMD 2009 Page 41

42 Note: Excl. Illness / Accident Increase of risk result in link to 0.2% of savings CMD 2009 Page 42

43 Note: Excl. Illness / Accident Significant increase in capital requirements CMD 2009 Page 43

44 Slower increase in provisions Note: Excl. Illness / Accident CMD 2009 Page 44

45 Summary Stable, relatively high cash-flow stream from life and pensions business Substantial synergies, including earnings potential on asset management Substantial value in life-related non-life business Substantial goodwill compared to capital requirement CMD 2009 Page 45

46 Thank you for your attention - questions? CMD 2009 Page 46

47 Agenda 10:00 - Steffen Heegaard Head of IR and Group Communications Introduction 10:05 - Lars Thykier CFO Solvency II 10:35 - Brian Rothemejer Jacobsen CEO of Topdanmark Life Insurance Value creation in life insurance 11:20 Break 11:30 - Christian Sagild CEO Trends and competitive environment in the Danish non-life market 11:55 - Ole Rasmussen Head of Claims Administration Initiatives in claims handling 12:40 - Christian Sagild CEO Goals for profit margin and growth 12:50 Lunch CMD 2009 Page 47

48 December 2009 Capital Markets Day 9 December 2009 Trends and competitive environment in the Danish non-life market By Christian Sagild CEO CMD 2009 Page 48

49 Conclusions on last year s CMD Several competitors need to increase prices - Particularly in the personal market Topdanmark has no intention of making general price increases quite the opposite - Prices in motor reduced in selected segments with a positive claims trend - Prices in workers comp to be reduced by an average of 5% on the basis of the index Non-life insurance is relatively resistant to recession For all markets the insurance company s key issues for success are - Sales power - Risk management ability CMD 2009 Page 49

50 What happened in 2009? Financial crisis has put pressure on companies premium income Less to insure Dramatic decline in turnover from purchase / sale of homes and cars Decline in earnings due to financial crisis Decline in risk-free interest rate Increase in fire and theft claims Increase in CR for most companies Financial crisis requires cost control Most companies have given notice of price increases CMD 2009 Page 50

51 Growth changes - Summary of most significant factors Growth - % p.a. Mass market Cars, lower car and housing sales SME market Liquidations, fewer in employment and fewer goods to insure Estimated adverse effect: 1-2% on growth in 2009 and 2010 Few options for action!!! Instead significant need for focusing on retaining earnings CMD 2009 Page 51

52 Growth changes - Summary of most significant factors Financial crisis puts pressure on companies turnover Number of private cars in Denmark Number of vans / trucks in Denmark Number 2,120,000 2,110,000 2,100,000 2,090,000 2,080,000 2,070,000 2,060,000 2,050,000 2,040,000 End 07 Feb 08 Apr 08 Jun 08 Aug 08 Oct 08 Dec 08 Feb 09 Apr 09 Jun 09 Aug 08 Oct 09 Number 530, , , , , , , , , ,000 End 07 Feb 08 Apr 08 Jun 08 Aug 08 Oct 08 Dec 08 Feb 09 Apr 09 Jun 09 Aug 09 Oct 09 CMD 2009 Page 52

53 Growth changes - Summary of most significant factors Financial crisis puts pressure on companies turnover Motor policy requests - Jan to Oct 120,000 98, ,000 77,675 80,000 57,169 60,000 40,000 20, Change of ownership proposals - Jan to Oct 5,000 4,000 3,000 2,000 1,000 0 Liquidations - Jan to Oct Unemployment 14,000 12,000 12,975 11, , , ,000 10,000 8,000 8, ,000 80,000 71,400 6,000 4,000 60,000 40,000 49,000 2,000 20, Sep 07 Sep 08 Oct 09 CMD 2009 Page 53

54 Earnings changes - Summary of most significant factors Earnings - CR Interest rates Negative claims inflation Increase in fire claims Increase in theft claims Positive claims inflation Trend in claims frequency for motor insurance Need to know the consequence of all three factors in order to assess the effect on earnings CMD 2009 Page 54

55 Earnings changes - Interest rates: Changes in short and long-term interest rates Short-term interest rates - impact on technical interest rate % p.a. % p.a End 03 End 04 End 05 End 06 End 07 End End 03 End 04 Long-term interest rates - impact on discounting of reserves End 05 End year bond 10-year bond End 07 End Change in interest rates of plus / minus 1 pp causes a change in profit margin of plus / minus 0.6 pp Change in interest rates of plus / minus 1 pp causes a change in CR of minus / plus 1.1 pp CMD 2009 Page 55

56 Topdanmark - Examples of trend in claims incurred Fire claims Theft claims DKKm Q1 Q2 Q3 Q DKKm Q1 Q2 Q3 Q Effect on CR 1-2 pp Effect on CR 2 pp CMD 2009 Page 56

57 Topdanmark - Examples of trend in claims incurred DKKm Contents - theft Property - SME / I - theft DKKm House - plumbing claims Q Q Q Q Q Q Q Q Q Q Q Q DKKm Q Contents - fire Q Q Q House - fire Q Q DKKm Q Buildings - fire Q Q Property SME / I - fire Q Q Q CMD 2009 Page 57

58 Earnings changes - Positive claims inflation - frequency: Examples in motor insurance Claims frequency private cars excl. glass claims January February Claims frequency for private cars - Group - Excluding hail claims in July 2007 and glass claims Martch April May June Effect on CR Frequency around minus ½ pp Fraud around 0.1 pp July August September October November December Number of burned cars Q Q Q Number of disappeared cars Q Q Q CMD 2009 Page 58

59 Earnings changes - Summary of financial consequences Factors affecting earnings Estimate - earnings Interest rates Short-term: 1 pp decline. Long-term: 1 pp decline. Negative claims inflation Fire claims Theft claims Positive claims inflation Claims frequency for motor insurance Minus 0.6 pp profit margin 1.1 pp on CR 1-2 pp on CR 2 pp på CR Minus ½ pp on CR Own options for action Important: Estimates connected with uncertainty and are regularly changed CMD 2009 Page 59

60 Comparison of combined ratio (Danish insurance) H Q1-Q CMD 2009 Page 60

61 Financial crisis requires cost control Trend in expense ratio Consequences , Focus on Staff saving 10 Other cost savings 5 0 Efficiency improvements H Q1-Q CMD 2009 Page 61

62 Media focus on price increases CMD 2009 Page 62

63 Market situation Market Retail Characteristics Significant price increases for house and contents Low sales of cars and homes Topdanmark s most significant competitors Lærerstanden, Alka, Tryg Agricultural Moderate price increase Tryg, Alm. Brand, Nykredit SME Less to insure house and contents Moderate price increase If, Tryg Industrial Slightly less to insure New players AIG, Zurich, ACE and Allianz Tryg, Codan, If CMD 2009 Page 63

64 Examples of companies price increases Company Personal market SME market Tryg House Contents Accident and Health Travel Agricultural Codan House Contents SME Property / Buildings Workers comp Alm. Brand House Contents Agricultural Nykredit House GF House Accident CMD 2009 Page 64

65 Summary Decline in earnings due to financial crisis The financial crisis has put pressure on companies premium income Cost control required Most companies have increased prices CMD 2009 Page 65

66 Thank you for your attention - questions? CMD 2009 Page 66

67 Agenda 10:00 - Steffen Heegaard Head of IR and Group Communications Introduction 10:05 - Lars Thykier CFO Solvency II 10:35 - Brian Rothemejer Jacobsen CEO of Topdanmark Life Insurance Value creation in life insurance 11:20 Break 11:30 - Christian Sagild CEO Trends and competitive environment in the Danish non-life market 11:55 - Ole Rasmussen Head of Claims Administration Initiatives in claims handling 12:40 - Christian Sagild CEO Goals for profit margin and growth 12:50 Lunch CMD 2009 Page 67

68 December 2009 Capital Markets Day 9 December 2009 Initiatives in Claims Handling By Ole Rasmussen Head of Claims Administration CMD 2009 Page 68

69 Agenda Claims vision Efficient claims handling Initiatives CMD 2009 Page 69

70 Claims vision Vision We want to be the market leader in terms of delivery and development of claims solutions which create value for customers and cooperative partners We want our management of claims paid to customers to be the most efficient in the market CMD 2009 Page 70

71 Strategy in six areas Customers Employees Processes Internal cooperative partners IT External cooperative partners CMD 2009 Page 71

72 Customers Proactive and efficient claims handling Increased accessibility Self-service Employees Service mindedness Flexibility Motivation and coaching Processes Support of differentiated customer service Guides to best practice Each step in the process creates value Automation of routine tasks Internal cooperative partners Proactive sparring partner Active participation in the development of products and cover External cooperative partners Closer cooperation with more cooperative partners Using cooperation to offer service / customer advantages that create loyalty IT One common system Electronic information provides a complete overview Continuous update system real time CMD 2009 Page 72

73 Agenda Claims vision Efficient claims handling Initiatives CMD 2009 Page 73

74 Focus on efficient claims handling Combined ratio Operating expenses Claims operating expenses Claims paid Reducing overall claims costs and maintaining a high level of customer satisfaction Fact box 320,000 claims 550 employees 5.5bn on own account Personal 3.1bn SME/Agricultural 2.1bn Industrial Line of business Personal Motor SME Agricultural Industrial 0.3bn CMD 2009 Page 74

75 Topdanmark endeavours to minimise those areas with the highest risk of claims inflation Main areas of focus: Personal injury Tradesmen services Motor claims We are building a claims system, TopPro, which supports our business strategy. CMD 2009 Page 75

76 Agenda Claims vision Efficient claims handling Initiatives CMD 2009 Page 76

77 Customers IT Cooperative partners Processes Initiative TopPro system support Replacement of 3 outdated claims systems Designing a state of the art claims system Proactive claims handling High data quality Support of terms and conditions Best practice in claims handling Result Quick online claims handling Improved quality Correct coverage Correct claims data for business purposes Proactive and quick claims handling ensures correct claims provisioning System integration with other systems Higher employee satisfaction TopPro R1 Personal 27 Jan TopPro R2 Motor 27 Nov TopPro R3 Agricultural SME Industrial TopPro Fully implemented CMD 2009 Page 77

78 Customers Processes Initiative Personal injury - quick diagnosis and treatment Well-helped (follow-up on treatment) Cooperation with public authorities Mediconnect a/s (referral specialist) Falck Health Care (Quick diagnosis) Appeal decision from National Board of industrial Injuries Scan Crash to simulate traffic accidents and calculate the consequences for both the personal injury and the material damage Result Customer helped by the provision of treatment and the support to resume working sooner Total saving DKK 70-80m Receipt of notification Referral to FHC for quick diagnosis Treatment Return to work CMD 2009 Page 78

79 Customers Cooperative partners Processes Initiative Loss adjusters (tradesmen) Quick identification of damage extent High quality Competitive price Result More correct coverage Lower development in average claims than official index High level of customer satisfaction Total saving DKK 60m Topdanmark Customers Tradesmen Plumbing 39 businesses Draining 30 businesses Glass repair 200 businesses Bricklaying 26 businesses Carpentry 38 businesses Electricity 6 businesses CMD 2009 Page 79

80 Initiative Result Processes Customers ITs Auto repair Photo assessment (quick and efficient) Tablet PC calculation Online booking of loss adjuster on TDF s website Increase in productivity means lower claims operating expenses Saving on assessment at the garage Saving on administration Glass savings: repair instead of replacement 20% discount on glass repair/replacement Total saving DKK 30m 49% 51% CMD 2009 Page 80

81 Customers Initiative Strengthening of service goals Phone calls: 95% answered within 60 seconds s: 80% answered within 24 hours Letters etc.: 80% answered within 3-5 days Result 87% of all phone calls answered within 60 sec. 80% of all s answered within 1 day 67% of all letters answered within 3-5 days New goal: 95% of all communication within 24 hours Customers Cooperative partners Loss prevention / repair companies Cooperation with three companies Topdanmark first priority Quick reaction in case of storms and cloudbursts Increased capacity in case of storms and cloudbursts A discount agreement with three companies and the possibility to benchmark prices IT Processes Fraud detection Automatic fraud detection integrated with the claims system Fraud consultants Scan Crash Not yet in production Saving of DKK 60m in 2008 CMD 2009 Page 81

82 Initiative Result Processes Employees Internal lawyers Use of internal instead of external lawyers Internal training of paralegals Cost-saving and faster administration Customers Processes Increased availability Expanded opening hours Internet notification Expanded from 8-16 to Emergency 24/7 Internet 24/7 and 24-hour response Processes Employees Customers Improved customer service Customer survey and follow-up on customers, employees and processes Improved customers satisfaction and follow-up on unsatisfied customers. 94% of the customers are satisfied with the service Customers Cooperative partners Purchasing portal Scalepoint Handling day-to-day replacement services through Scalepoint with interfaces and customer self-service features 38,000 claims settled through Scalepoint Cost reduction CMD 2009 Page 82

83 Initiative Result - Quality and productivity Processes IT Customers Processes Employees Internet notification At a time convenient for the customer Integration with claims system Lean Each step in the process creates value (1/3 through Claims department) 18% online notifications Personal / Motor 28,000 SME 9,000 Agricultural 4,000 Saves 2 minutes on each claim Increased service performance Increased productivity reduces staff by 10% in certain areas Customers Processes Quality 2% of all claims undergo a second opinion Quality increased from 96% to 98% Total saving DDK 50m CMD 2009 Page 83

84 Main areas of focus Area Personal injury Well-helped, Appeal, Scan Crash Tradesmen services and cooperative partners Loss adjusters, Scalepoint, loss prevention Motor claims Table PC, photo assessment, glass Fraud Consultants Quality, productivity Lean, best practice Present Saving (DKKM) Future saving CMD 2009 Page 84

85 Thank you for your attention - questions? CMD 2009 Page 85

86 Agenda 10:00 - Steffen Heegaard Head of IR and Group Communications Introduction 10:05 - Lars Thykier CFO Solvency II 10:35 - Brian Rothemejer Jacobsen CEO of Topdanmark Life Insurance Value creation in life insurance 11:20 Break 11:30 - Christian Sagild CEO Trends and competitive environment in the Danish non-life market 11:55 - Ole Rasmussen Head of Claims Administration Initiatives in claims handling 12:40 - Christian Sagild CEO Goals for profit margin and growth 12:50 Lunch CMD 2009 Page 86

87 December 2009 Capital Markets Day 9 December 2009 Goals for profit margin and growth By Christian Sagild CEO CMD 2009 Page 87

88 Own options for action Extraordinary focus on expenses Intelligent employment freeze Goal: To reduce number of employees > 130 General restraint Efficient control of claims incurred Focus on savings on claims paid to customers within motor, building and property insurance External suppliers and own staff Goal: To reduce CR by app. 1 pp Price increases Mass market House and contents SME market Fire and theft within building and property insurance CMD 2009 Page 88

89 Profit forecast model - increased by DKK 100m for 2009 (DKKm) 2008 Forecast for August 2009 Forecast for November 2009 Non-life insurance - Technical result 1, Investment return after transfer to technical result etc. (1,705) Profit on non-life insurance 91 1,210-1,290 1,330-1,410 Life insurance (57) Parent company etc. (58) (50) - (30) (50) - (30) Pre-tax profit / (loss) (24) 1,420-1,540 1,550-1,670 Taxation (165) (320) - (340) (350) - (370) Profit / (loss) for the year (189) 1,100-1,200 1,200-1,300 Representing a post-tax ROE of 32.4% CMD 2009 Page 89

90 Operational goals for non-life insurance It is Topdanmark s goal to achieve profitable growth Profit margin of 10% Corresponding to CR of 91 excl. any gains on or strengthening of claims provisions, using current level of interest rates Growth in gross premiums: 1 pp higher than wage inflation adjusted for any price changes Goal for expense ratio Lower than general market level Goal for CR in 2010 In line with the effect of the measures taken to improve profitability the profit margin is expected to increase to around 10% (CR of 91-92) in 2010 CMD 2009 Page 90

91 Measures taken to improve profitability Price increases Personal House and contents policies Average increase of 12% SME Buildings and property policies Average increase of 9% Effect on premiums earned at least DKK 300m, with just over half of this being seen in 2010 Improved utilisation of purchasing power and claims handling => approx. 1 pp Price increases are measures to improve profitability, not growth measures 2011 Effect of price increases of around DKK 150m Other things being equal, favourable effect of 1.7 pp on premium growth and CR CMD 2009 Page 91

92 Assumptions for 2010 forecast Premium growth as a percentage 1 0 CR excl. any gains on claims provisions ~ (1.7) (1)-(2) ~(1) Index Indeks Workers comp Price increases Bank bank distribution Recession effect Assumed premium growth 2009E Gains on claims provisions in Q1-Q Price increases Improved purchasing power etc. 2010E CMD 2009 Page 92

93 Effect of increase in interest rates Effect of increase in interest rates Claims provisions are matched by corresponding assets No effect on results of a change in interest rates A 1 pp increase in the interest rate curve reduces the CR by about 1.1 pp The premiums reserve is invested in shortterm interest-bearing assets A 1 pp increase in short-term interest rates, increases the pre-tax result by about DKK 40m % Three-month and 10-year forward interest rates in DKK / / / / month forward interest rate 10-year forward interest rate CMD 2009 Page 93

94 Trend in gross profit margin - probable scenario 20 All companies Almost all companies are announcing price increases Estimate 7.0 Estimate 8.0 Estimate (5) (3.9) (3.3) (3.3) CMD 2009 Page 94

95 Thank you for your attention - questions? CMD 2009 Page 95

96 Agenda 10:00 - Steffen Heegaard Head of IR and Group Communications Introduction 10:05 - Lars Thykier CFO Solvency II 10:35 - Brian Rothemejer Jacobsen CEO of Topdanmark Life Insurance Value creation in life insurance 11:20 Break 11:30 - Christian Sagild CEO Trends and competitive environment in the Danish non-life market 11:55 - Ole Rasmussen Head of Claims Administration Initiatives in claims handling 12:40 - Christian Sagild CEO Goals for profit margin and growth 12:50 Lunch CMD 2009 Page 96

97 Disclaimer This presentation includes statements relating to the future. Such statements are uncertain and involve both general and specific risks. Many factors may cause a significant deviation from the forecasts set out in the presentation. Such factors could be, for example, cyclical movements, changes in the financial markets, the financial effect of non-anticipated events like acts of terror or exceptional weather conditions, changes in Danish and EU rules, competitive factors in the insurance industry and trend in reinsurance market. Also see Risk management on our website Risk management. The above description of potential risks is not exhaustive. Investors and others, who may base decisions relating to Topdanmark on statements relating to the future, should make their own careful considerations on these and other factors of uncertainty. Topdanmark s statements relating to the future are solely based on information known at the time of the preparation of the Q1-Q report. This publication is a translation. In case of any divergence, the original Danish text shall prevail. CMD 2009 Page 97