Tryg Strengthening the Core, while Embracing the Future

Transcription

1 Tryg Strengthening the Core, while Embracing the Future Capital Markets Day London, 20 November 2017

2 Agenda 09:30-11:30 Targets and initiatives Follow-up on CMD targets and initiatives Targets and initiatives Tryg Strengthening the Core, while Embracing the Future 11 Claims Excellence 14 Digital Empowerment of Customers 19 Product & Service Innovation 24 Distribution Efficiency 29 Balance sheet optimisation 36 Concluding remarks 41 2

3 Follow-up on CMD targets and initiatives

4 Earnings Tryg : Aiming for world class Target picture : Simultaneously providing world class earnings and customer experiences Target drivers Next Level Pricing Leading in Efficiency Customers Utilising the mutual benefits of a cost effective operation and customer experiences that strengthen loyalty 3 4 Customer Care worth Recommending Low Risk, High Return 4

5 Delivering on 2017 targets Targets presented on Capital Markets Day, 5 November 2014 Category Key Performance Indicators Targets 2017 Q1-Q Comments Combined ratio Delivered as promised Expense ratio Delivered as promised Earnings Return on equity 21% 30.9% Delivered as promised Efficiency programme DKK 750m DKK 633m On schedule Net Promoter Score +100% (22) 22 Delivered as promised Retention rate +1pp (88.9) 87.8 Delivered in DK, not in NO ( ) Customers 3 products +5pp (61.3) 58.9 Delivered in DK, not in NO ( ) 5

6 Solid performance across all core businesses Combined ratio - Private (DK & NO) 49% of premium Combined ratio - Commercial (DK & NO) 23% of premium Q1-Q Q1-Q Combined ratio - Corporate 21% of premium Combined ratio - Sweden (Private) 7% of premium Q1-Q Q1-Q

7 World class achieved on earnings Combined ratio: Strong Nordic performance Expense ratio: Best in class International peers Nordic peers International peers Nordic peers 100% 95% 90% 85% 80% 75% 30% 25% 20% 15% 10% 5% 0% 2013 Q1-Q Q1-Q Likewise a strong performance on ROE benchmark top 3 Nordic players Return on equity (Q1-Q3 2017) 35% 30.9% 24.6% 22.4% 20% 7

8 Number of products drives value Customer targets put into perspective (case: Private Denmark) Net Promoter Score (NPS) Avg. customer lifetime (years) Lifetime value following number of products product 2 products 3 products 1 product 2 products 3 products 1 product 2 products 3 products A 3 product engagement correlates to a 3X satisfaction score A 3 product engagement increases avg. customer lifetime by ~3X A 3 product engagement renders a value increase of 12.9X 8

9 Targets and initiatives

10 Introducing a new guiding purpose for Tryg Purpose Clarity, unity, differentiation = Value creation Tryg(hed) Feeling protected and cared for As the world changes, we make it easier to be tryg Grasping opportunities to develop rather than defend our business i.e.: Digitalisation New products Analytics Adjusting to customer preferences and needs i.e.: Self-service Straight through processes Packaging of products Staying relevant to maximise share of wallet i.e.: Product innovation Prevention Add-on services 10

11 Earnings Tryg : Strengthening the core, while embracing the future Target picture : Continuously aiming for a healthy balance between earnings and customers Targets 2020 Tryg Earnings Technical result DKK 2.8bn Tryg Combined ratio 87 Expense ratio ~14 reaffirmed ROE 23% Tryg Customers TNPS* 70 No. products per customer +10% Customers * Measured as level of satisfaction in point of contact 11

12 Targeting the highest technical result before run-off ever Technical result: Historical performance vs target DKKbn * Highest technical result before run-off ever! average technical result before run-off *DKK 2.8bn adjusted for one-off relating to the Norwegian pension scheme and the change of IT suppliers Run-off Technical result before run-off Run-off levels will return to normal with a 3-5% run-off level in most years going forward 8% 6% 4% 2% 0% 3-5% range 6-7% range 6.7% 7.0% 6.1% 4.7% 4.4% 4.7% 5.0% 5.0% 5.6% 3.9% Q Current strategy period run-off level of 6-7% Next strategy period elevated run-off level gradually reducing Expected 2020 run-off to be in range 3-5% 12

13 Strategic target drivers & key performance indicators 1 2 Claims Excellence Digital Empowerment of Customers KPI: Straight through processing level of 50% on claims KPI: DKK 600m in claims cost reduction KPI: Self-service level of 70% on all contacts 3 4 Product & Service Innovation KPI: Portfolio of DKK 1bn from new products and services (2020+ ambition) Distribution Efficiency KPI: DKK 150m in technical result impact IT investment DKK 0.5bn investment in IT : Infrastructure, digitalisation & data analytics 13

14 Strategic Theme: Claims Excellence

15 Why is claims excellence important? Targets the bulk of our cost (Q1-Q3 2017) 69.7% 14.1% Claims ratio (2016 gross claims = DKK 11.6bn) Expense ratio A bulwark against claims inflation jumps Bumper prices , Ford Focus (DKK 1,000m) Utilises scale Avg. claim cost car Tryg vs. others % +242% ,000 11,730 11,750 11, % 11,250 11,000 10,750 11,001 10, % 8% 6% 4% 2% 0% Bumper Bumper incl. radar Tryg Others Scale advantage (right axis) 15

16 What will improve claims excellence? New efficiency programme : DKK 600m Procurement: Continuous leverage of scale 50% DKK 600m 25% Fraud: Automating detection and broadening competences 25% Steering & Administration: Claims steering and administration of compensation 16

17 How procurement supports claims excellence Concept: Targeting unaddressed spend Evidence: Savings of DKK 1.2bn realised : Harvesting the low-hanging fruits DKKm 500 1,200 ~10% Non-addressable Renegotiating supplier network Outsourcing % Unaddressed E-auction, Scalepoint 50% Addressed Total Total spend : Reaching for the upper branches Potential: Bringing total saving to DKK 1.5bn Further reducing number of suppliers DKKm % 1,500 Multi-supplier industries e.g. Health 700 Large and complex claims Total 17

18 How fraud and claims steering supports claims excellence Fraud Concept: Broadening competences and introducing automation Claims steering Concept: Better steering of claims to Tryg partners for lower cost Evidence: Improved steering of car glass claims Only ~20% of claims employees excel in fraud detection Tryg partner Repair 60% of claims 40% cheaper! Evidence: Employees generated improvement in fraud detection 1.0% 1.5% Claim 2017: Local workshop Repair 18% of claims DKK -5m Tryg 2014 Tryg 2017 Potential: Targeted 2020 detection level 2.7% Potential: Targeted 2020 cost reductions % DKK 300m; DKK 150m DKKm

19 Strategic Theme: Digital Empowerment of Customers

20 Why digital customer empowerment? Customers increasingly request Growing interest in, and use of Tryg s digital solutions 1,500 1,000 Convenience Logins My Page / 500 My Company +34% 0 Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. No. of logins 2016 No. of logins 2017 Transparency Online claims +36% 40% 30% 20% 10% 0% Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Claims notified online 2016 Claims notified online 2017 Empowerment Digital contact ~70% in % 60% 40% 20% 0% Tipping point Manual Digital 20

21 What are we doing to empower our customers? Tryg s digital journey Digital targets 2020 Digitalisation Straight Through Processing Automation / Robotics Self-service Buy online File claim online Digital customers = ~80% 50% Straight Through Processing on claims 70% Self-service level on all contacts Search online Quotes online Total benefit 2020 = ~DKK 100m Time 21

22 How to work with straight through processing Concept: STP if simple, automation if complex Distribution of claims (number) and claims handling cost Evidence: Automation Private Car, DK (high complexity) = Automation level ~850k DKK 1.4bn 20% 30% 0% 27% 80% 80% 65% 80% 80% Notification Coverage Estimate Payout Closing Recourse No. of claims Low complexity claims 20% Claims handling cost High complexity claims Total automation = 34% Evidence: STP - Travel, NO (low complexity) Potential: STP = 50% / ~DKK 70m by % 50% notification 22% STP 22% 50% 2020: 20% 3 sec. handling time Foundation build for harvesting 10% 0% 9% 2% Q Q Q ~10% Low complexity High complexity next generation potential 22

23 How to work with self-service Concept: Empowerment & fewer non-value contacts Evidence: My Page / My Company Empowerment across functionalities 1,800 1, % Sales Service Claims 1,400 1,200 1, All products Change mileage Adjust own risk Track n Trace Web notification No. of logins Oct YTD (1,000) No. of logins Oct YTD (1,000) Number of incoming contacts ~30% ~70% Non-value adding contacts e.g. status on claim Value adding contacts e.g. claims notification Potential: Self-service = 70% / ~DKK 30m by % 70%

24 Strategic Theme: Product & Service Innovation

25 Why is product and service innovation important? Transformation of traditional risk pools Denmark: Premium development (index: 2008)* and emergence of new ones Example: Health insurance market DK & NO % 120% 100% 80% 60% 40% 20% 0% 110% 90% ,000 1,500 1, ,856 1, Premium Premium ex. price increases (2.5% p.a.) Number of insurees - DK (1,000) Number of insurees - NO (1,000) * Source: F&P (incl. Workers Comp., Car, House/Contents, Accident) Source: F&P ; FNO.no Drivers: Safety, loss prevention, technology Further impact from technology in the long-term e.g.: o Car: Assisted driving Tryg: Avg. claims ratio on Health % 71% o Home/Contents: IOT devices like intelligent alarms Health - Tryg DK Health - Tryg NO 25

26 What will boost product and service innovation? Expanding existing business Development of new products Add-on services Child PaYG Health +55 ID theft Pet Sharing Eco. Product Service Strong traction in new growth products (index = 2014) 176 Target 2020+: DKK 1bn in new products & services People Technology Tryg Garanti Other 1, People (DKK 2,000m) Electronics (DKK 550m) Pets (DKK 125m)

27 How to expand existing business Concept: Expanding Tryg Garanti s market Offers surety contracts and trade credit insurance with very strong performance ratios (Q1-Q3 2017): Expense ratio Combined ratio 63 Net Promoter Score Evidence: Cost ratio benchmark (2015) 35% 30% 25% 20% 15% 10% 5% 0% Potential: Topline growth of 20% in 2020 (CAGR) Evidence: Market characteristics - Germany Financial crisis GER Expense ratio NO SE FI Trade Claims ratio 43 Average price twice as high vs. Nordics F T2018 T2019 T2020 Banks to face increasing capital requirements Premium (DKKm) Tech. result (DKKm) 27

28 How to add new products and services Child insurance Private DK Concept: Child insurance packages (Minimum, Basic, Super) SME cyber insurance, DK Concept: Cyber product in coop. with numerous domain experts Evidence: number of policies sold since launch Only 15% of portfolio with new child product 16,000 23,000 26,500 Evidence: number of policies sold since launch (SME, DK) 4,000 Only 5% of the portfolio 8,500 1,000 1, Oct. 16 Jan. 17 Apr. 17 Jul. 17 Sep. 17 Dec. 16 Jan. 17 Apr. 17 Jul. 17 Oct. 17 Potential: Targeted portfolio of DKK 26m in 2020 Potential: Targeted portfolio of DKK 100m in 2020 (Nordic) Claims ratio Oct YTD: 62% Premium (DKKm) Technical result (DKKm) Premium (DKKm) Technical result (DKKm) 28

29 Strategic Theme: Distribution Efficiency

30 Why is distribution efficiency important? Constitute half of total cost Need for improving both cost and sale Distribution cost as a % of total cost: ~50% ~50% Claims & admin. cost Distribution cost & Lower cost and more sale Distribution cost improved the least since 2012 A continuation of previous efforts 110% 100% 90% 80% 70% 30 Index = Claims & admin. cost Distribution cost shops Overhead cost Leveraging tech. Segmentation Simpler products Leaner processes New channels

31 What will increase distribution efficiency? Focus areas Levers (examples) Target 2020 Efficiency through technology Digital integration to partners Analytics DKK 150m in technical result impact Product simplification Packaging Pay as you go 150 Exploring new channels Integrating claims and sales Online 31

32 How to boost efficiency through technology Concept: Moving from push to pull through digital integration to partners Total Nordic portfolio of large partners = DKK 5bn Evidence (case: large Norwegian partner): 17 percentage points increase in pull distribution year 1 46% +17pp 63% Utilising partners customer relation to leverage digital sale Partner Potential (case: large Norwegian partner): Direct integration o Sale o Service o Claims Broad range of online offers and services Unbiased advisor Distribution cost 31% -25% 23% Technical result impact 2020 (delta) NOKm 20 Create call to action

33 How to simplify products and explore new channels Concept: Packaging of products Concept: Sales & low complexity claims handling Evidence: Increase in avg. number of products sold Evidence: Win-rates improved 13pp on average % 4.1 7% 23% % 35% 50% Tied agents Inbound Outbound Avg. no. of products sold - before Avg. no. of products sold - after Previously: Pure Outbound sales Claims/Sale Integration Claims/Sale Integration - Best performers Potential: Technical result impact 2020 (delta) DKKm 30 28% 18% % 40% 30% 20% 10% 0% Potential: Technical result impact 2020 (delta) DKKm 20 28% 10% % 35% 30% 25% 20% 15% 10% 5% 0% Direct cost per sale 2016 (%) Direct cost per sale 2017 post package launch (%) Direct cost per sale 2016 (%) Direct cost per sale Claims/Sales 33

34 Financial impact of strategic initiatives

35 Total financial impact of strategic initiatives DKK 2,800m Normalised technical result 2017 Lower run-off Investment Claims Excellence Digital Empower. of Customers Growth and Product & Service Innovation Distribution Efficiency Technical result 2020 * Normalised assumptions for weather claims and large claims 35

36 Balance sheet optimisation

37 Shareholder return & balance sheet optimisation Sustained focus on shareholder return Balance sheet optimisation remains core Maintain ordinary dividend policy: Nominal stable growing dividend New dividend policy ROE target increased from 21% to 23% Extraordinary dividend to adjust capital structure Reduced investment volatility Side-way reinsurance cover Extraordinary dividends of DKK 1bn (to be paid after AGM 2018) Historical shareholder remuneration SII and partial internal model Increased subordinated debt Quarterly dividend M SCR improvement Ordinary dividend Extraordinary buy back Expected ordinary dividend Extraordinary dividend Potential Tier 1 issue IT investment 37

38 SCR reduction, potential Tier 1 issue & IT investment SCR reduction through model improvements SCR using partial internal model. Further optimisation = ~ -10% Workers Comp. DK approval = ~ DKK -100m (all else equal) IT investment supporting 2020 targets Increased IT spend impact P&L within 14% expense ratio, DKK 0.5bn impact balance sheet. Further work to be done on Sweden and other parts of the model Potential Tier 1 issue IT investment support: IT infrastructure upgrade Channel digitalisation Fraud detection Analytics New products & services Outstanding Tier 1 capacity of approximately DKK 1.1bn Potential Tier 1 issue H subject to market conditions, amount likely to be ~ DKK 500m to retain some financial flexibility Reducing Enhanced Better long-term retention customer operating cost and sales experience 38

39 Pro-forma solvency ratio of 213 supports further shareholder returns 211% % ,241 9,241 4,845 4,345 Solvency ratio Q SCR reduction of up to DKK 0.5bn Extraordinary dividend of DKK 1.0bn New Tier 1 issue of DKK 0.5bn IT investments of DKK 0.5bn Proforma solvency ratio Q SCR Own funds 39

40 Return on equity Portfolio rebalancing and M&A Solvency ratio improvement via portfolio rebalancing - Portfolio overview as of Q High Health & Accident Private Cars Continuously considering M&A opportunities Long history of M&A Low Low Child Liability Property Comm. Combined ratio Private Content House Workers Comp. Comm. Cars Property Corp. High (DK+NO) 2009 Strict criteria for value creating M&A Value creative 2014 (Agriculture) Portfolio optimisation across businesses, segments and products Potential synergies Constantly seeking to allocate capital for highest returns Strategically supportive Bubble size = Premium Product / distribution enhancing 40

41 Concluding remarks

42 Delivering on 2017 targets Targets presented on Capital Markets Day, 5 November 2014 Category Key Performance Indicators Targets 2017 Q1-Q Comments Combined ratio Delivered as promised Expense ratio Delivered as promised Earnings Return on equity 21% 30.9% Delivered as promised Efficiency programme DKK 750m DKK 633m On schedule Net Promoter Score +100% (22) 22 Delivered as promised Retention rate +1pp (88.9) 87.8 Delivered in DK, Not in NO ( ) Customers 3 products +5pp (61.3) 58.9 Delivered in DK, not in NO ( ) 42

43 Tryg s equity story a leading Scandinavian non-life insurer Claims Excellence DKK 600m in claims cost reduction Tryg : Strengthening the core, while embracing the future Financial targets 2020 Technical result: DKK 2.8bn Combined ratio: 87 Expense ratio: ~14 ROE: 23% Customer targets 2020 TNPS: 70 Number of products per customer: +10% Product & Service Innovation +DKK 1bn in new products by Digital Empowerment of Customers STP on claims: 50% Self-service: 70% Dividend policy Targeting a nominal stable increasing dividend Extraordinary dividend to further adjust the capital structure Distribution Efficiency DKK 150m in technical result impact Long term profitable growth and attractive shareholder value creation 43

44 Tryg: A dividend stock Tryg s historical yield Continuous and attractive shareholder remuneration Benchmark of combined ratio vs. volatility - Leading combination of CR and volatility Avg. combined ratio 2012 Q1-Q % 7% 5% 3% 1% 8.3% 6.6% 6.9% 7.6% 90% 88% 86% 84% 82% 1% 2% Standard deviation tech. result -1% % Total yield (dividend incl. buy back/market-cap) Tryg If Gjensidige Nominally stable and increasing ordinary dividend Potential extraordinary dividend to further adjust the capital structure Do you know the only thing that gives me pleasure? It s to see my dividend coming in. - John D. Rockefeller 44