Tryg Norway. Analyst Day. Bergen, 13 June 2018

Transcription

1 1 Tryg Norway Analyst Day Bergen, 13 June 2018

2 Agenda 14:45 Welcome by Group CEO, Morten Hübbe 15:00 Understanding Norway and Tryg Norway, SVP and Head of Norway, Espen Opedal 15:15 Retail and Corporate Norway - Operational and Financial review, SVP and Head of Norway, Espen Opedal and SVP Commercial Norway Director, Espen Strømme 16:00 Digitalization & Claims Management, Espen Opedal & Espen Strømme 16:30 OBOS and Troll integrations and opportunities, Espen Opedal 16:45 Q&A 2

3 Welcome by Group CEO, Morten Hubbe

4 Why are we here today? Organisation chart Executive Board Organizational change in February 2016 CEO Morten Hübbe Country based organization, closer to local markets CFO Christian Baltzer COO Lars Bonde CCO Johan Kirstein Brammer Enabling a more agile decision making Empowered organization with increased accountability Private DK Commercial DK Corporate DK & Tryg Garanti Private NO Commercial NO Sweden Private & Affinity Corporate SE Claims DK Corporate NO Claims NO 4

5 Tryg Norway key numbers Gross premium by products 2017 Norway, Combined ratio Norway reported DKK 6.3bn of premiums income at end of 2017 or approximately 35% of Group premiums Motor & Property key products, Accident & Health and Liability to follow In the last five years the reported Combined ratio for the Norwegian business averaged approx 85% Norwegian Expense ratio moved from 15.3% in 2013 to 14.7% (including Obos) in 2017 driven by increased efficiency and a reduced number of employees (from 1,199 in 2013 to 1,042 in 2017) 5

6 Bolt-on acquisitions in Private/Commercial & Rates increases in Corporate OBOS Forsikring Portfolio of 170mNOK 10 years old company, 35 employees private customers, 1050 housing associations One owner OBOS BBL 5 year exclusive distribution agreement private members Portfolio expected to produce returns in line with Retail Norway in a couple of years Norway Corporate rates* under pressure 10% 8% 6% 4% 2% 0% -2% (Q1) -4% -6% -8% -10% -12% Motor Property Sickness etc. Workers' compensation Health Source: FNO statistics, average premium development Troll Forsikring Portfolio of 120mNOK Portfolio is 40% Oslo/Akershus customers private only Distribution through web and inbound Purchase price NOK 72m, including a year-end 2017 equity of NOK 44m and a tax asset of NOK 40m (i.e. no goodwill) Tryg Corporate Norway price increases implemented, Q Motor 6.1% Property 5.3% Fish farming 23.1% Health 13.5% Sickness 7.1% Workers Comp 4.3 % 7% 6

7 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 a) Technical result: DKK 3.3bn Combined ratio: 86 Expense ratio: ~14 ROE: 21% Customer targets 2020 TNPS: 70 Number of products per customer: +10% Product & Service Innovation +DKK 1bn in new products by Digital Empowerment of Customers DKK 100m 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 a) The targets are conditional upon the authorities approval of the Alka acquisition 7

8 Understanding Norway

9 Macroeconomics Norway Macroeconomics Population projections % GDP Growth (mainland) Inflation Unemployment Current account balance in % of GDP Budget balance in % of GDP Public debt in % of GDP Source: Economic Outlook, Nordea Markets, January 2018 Source: SSB, June

10 10 NOK more correlated to USD dollar than EUR

11 * Key indicators for the Norwegian insurance market A sustainable claims ratio for the industry Claims ratio Stable profit margins Solid cost control and efficiency driven by the main players in the market. 24 Expense ratio 19 Customer loyalty is higher within insurance than many comparable industries, despite a slight decline the last 3-4 years. High retention Smaller players have increased pressure on price in the market over the last 3-4 years, but due to their current poor financial performance we expect this to ease. Stable market over time, while now entering a phase of faster changes, digitalization and innovation Mature market Expected market and population growth. Demographic challenges might give new opportunities in insurance 11

12 Tryg Norway 12

13 Tryg Norway in brief Tryg Norway Geography Market share 13.3% employees + ~ 400 franchise sales Premium income 8,1 billion NOK Bodø Tromsø Harstad 3rd largest in general insurance Norway 2 brands (Tryg & Enter) Part of Tryg group Ålesund Førde Bergen Haugesund Stavanger Kristiansand Trondheim Hamar Oslo Tønsberg Drammen Fredrikstad Tryg Norway is an ambitious player in the Norwegian insurance market with it s Norwegian head office located in Bergen, and wide geographical presence. Claims handling and Customer Service located in Bergen and Tønsberg. Strong sales- and underwriting presence for the Commercial- and Corporate market in Oslo and Bergen. 13

14 Tryg Norway - Operational and Financial highlights Distribution channels 2017 Gross premium by products 2017 Private Commercial Corporate Percentage mnok Portfolio split 2017 Combined ratio ,000 4,000 3,000 2,000 1,000 0 Private Commercial Corporate 14

15 Norway Combined ratio Retail (Private & Commercial) Corporate Retail COR as reported Linear Trendline (Retail (Retail COR COR as reported) as reported) Corporate COR as reported Linear Trendline (Corporate (Corporate COR COR as reported) as reported) 15

16 Seasonal variance in CR higher in Norway 107 Index (FY=100) ( ) Q1 Q2 Q3 Q4 Denmark Norway 16

17 Driving costs down focusing on continuous improvement Expense Ratio, Tryg Norway Cost Reduction Programme Staff reductions of 100FTE in Sourcing agreements with low cost partners. Automate processes, utilizing robotics, application development and new solutions Procurement processes * Including Obos * 17

18 Tryg Norway contribution to Group results Average % of Group Premiums* Average % of Group Technical result* % 10.6% 38.5% 50.9% 40.7% 55.7% * Currency: DKK * Currency: DKK DK NO SE DK NO SE 18

19 Market share Norwegian Insurance Market Market share traditional players Market share smaller competitors 30% 25% 20% 15% 10% 25.6% 21.2% 13.0% 10.5% 29.7% 5% 5% 4% 4% 3% 3% 2% 2% 4.7% 4.4% 3.0% 3.4% 2.6% 2.9% 2.0% 2.4% 4.3% 5% 1% 1% 0% Gjensidige If Tryg SpareBank 1 Other 0% 19

20 Retail and Corporate Norway - Operational and Financial review

21 Retail - Private

22 Private Market position #3 Direct v. Partner Balance Key Strengths Partner 50% 27% Direct 1. A healthy, profitable Business 15% 8% Enter Nordea 2. Strong multichannel distribution 3. Strong partner distribution Split by Products Group Life Other Travel 6% 7% 2% Accident & Health 6% 4. Two brands 49% Motor Fire & Contents 30% 22

23 A strong multichannel distribution - Both push and pull BANK CAR CHANNEL FRANCHISE ONLINE PARTNER OUTBOUND INBOUND 9% 6% 6% 32% Franchise Inbound Car channel 22% Outbound Bank 25% Online Online sales at ~20% if initiated sales from online/web to inbound is included With a pricing diversification strategy 23

24 Distribution Efficiency Both push and pull Franchise - Our most important distribution channel The future of insurance is digital 24

25 Digital Sales and Self service Digital Sales 150 MNOK in 2020* Digital contact ~70% in 2020 My Page log-in: Months * Fully automated, non-assisted sales Tryg NO has already more digital touchpoints than analogue 25

26 Strong Partner Distribution Large and growing partner business Examples; Success criteria Strong relations and common goals Relevant and unique products Strong distribution network locally Tailored web solutions Higher customer life time value (CLTV) Strong marketing push by Tryg & Partner 26

27 Two Brands, strong presence within new car sales 35.0% Forhandlersalg vs portefølje Share of new car Personbil sales insurance privat vs marketshare 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Enter Enter/Tryg IF Gjensidige Spb 1 Andre 2017 Portfolio 27

28 Motor-insurance Cost of claims 4.0% 4% 3.0% 3% 1.0% 1% Inflation 2018 Technology Repair costs 28

29 Retail - Commercial

30 Commercial Norway Portfolio development Growth in Property due to the acquisition of OBOS Forsikring 16% YoY growth in Health insurance last three years Decline in Motor insurance driven by portfolio pruning Portfolio Product mix Q % Property 25% 9% 34% Workers comp and Health Motor Liability 29% Other Barriers to entry Being a full-service insurance carrier for SME s requires: A large product offering Knowledge and a lot of data 30 Market position Third in Norway Estimated market share of ~10% Big in Construction and Manufacturing, low on Professional Services and Commercial Property Strong position in Hordaland (Bergen) and the Southern region, largest remaining potential is in big cities (Oslo, Trondheim and Stavanger) Estimated market share by industry Construction 25% Retail 18% Transportation 13% Manufacturing 20%

31 Segmentation and Analytics as profitability driver Segmentation Profitability varies between products, but the variation is bigger between different commercial segments By identifying customer characteristics that predict customer lifetime value we are targeting the right customers to attract and retain Case in point: Churn Through Machine Learning we are able to predict 70% of customer churn, allowing us to focus our retention efforts on a smaller customer base Retention YTD is up by 0.8% Cross-sales External registries and internal customer data helps us to identify existing customers with the highest crosssales potential By some measures our share of wallet is only 50% Prize optimization Price sensitivity models helps us to find the optimal balance between price increases and retention Which segments are outliers? 31

32 Outlook for Commercial Norway Business Area development Better market due to economic recovery New product offerings Greater distribution power Sharing economy GDP growth (onshore) e 2019e 2020e Growth Managed growth in carefully selected segments Low-risk industries Partnerships And better leads management 31, ,197 # of customers +1,075 34,767 Profitability and Efficiency Lower cost of sales (mainly through online sales and self service solutions) Claims reduction, with a particular focus on Fraud Large claims management Risk prevention Automated claims processes 32 CB organic 2017 OBOS 2018 YTD CB 2018 (May) The digital small business customer journey

33 Corporate 33

34 Corporate Norway 57/43 Main competitors Other important players Distribution broker / direct 34

35 Corporate Norway Market rates* under pressure Competitors now increase rates Tryg Corp. NO price increases implemented, Q % 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% (Q1) Motor 6,1% Property 5,3% Fish farming 23,1% Health 13,5% Sickness 7,1% -12% Motor Property Sickness etc. Workers' compensation Health Workers Comp 4,3 % Source: FNO statistics, average premium development 7% 35

36 Digital Empowerment of Customers - Digitalization & Analytics

37 IT investment supporting 2020 target CORE Investment supporting infrastructure, digitalization and data analytics Modularized set-up 37

38 The Digital Future of Insurance CHANGING CUSTOMER PREFERENCES ANALYTICS & BIG DATA INTERNET OF THINGS Customer increasingly request - Convenience - Transparency - Empowerment That s why Tryg Developed «My Page» based on consumer testing, eye tracking and customer analytics Have more digital touchpoints vs. analogue Customer increasingly request - Tailored solutions - Relevance - Better pricing That s why Tryg Create individual actions for each customer based on data from customer behavior, market segmentation and predictive analytics Customer increasingly request - More temporary solutions or a more sophisticated bundle of products (all-in-one) That s why Tryg Offer a new car product, SideKick to young customers Focus from insurance to gamification 38

39 Customer Analytics - Tryg invest heavily in data analytics and machine learning Up-sale in specific customer segments Increase hit rate Proactive holdback Segment specific up-sale New customer prospecting Increase number of 3+ customers Baby churn Market segmentation Cross-sell prospecting Successful onboarding Managing prospects 39

40 Claims Excellence

41 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 41

42 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 Claim Local workshop Repair 18% of claims 2017: DKK -5m Potential: Targeted 2020 detection level Potential: Targeted 2020 cost reductions DKKm DKK 300m; DKK 150m 42

43 Fire in the ventilation at Tine s cheese factory in Sømna, Norway Cheese during maturation Tryg on site Cause of fire/smoke Production 43

44 Digital empowerment - Cost & Efficiency by claims management

45 Super fast claims handling - straight trough processing (STP) in 3 seconds Our customers' time is valuable therefore, we make it faster and easier to be a Tryg customer No. 1 in europe with claims handling STP 45

46 Status straight trough processing June 2018 Travel insurance Digital target % straight trough processing on claims Pet insurance Total benefit 2020 = ~DKK 100m* * Tryg DK+NO+SE 46

47 OBOS and Troll integrations and opportunities

48 Acquisition of OBOS Forsikring in 2017 OBOS Forsikring Portfolio of 170mNOK 10 years old company, 35 employees private customers, 1050 housing associations One owner OBOS BBL 5 year exclusive distribution agreement private members Portfolio expected to produce returns in line with Retail Norway in a couple of years Partnership and growth Very strong cooperation and relationship established between the two organizations Privat portfolio nearly tripled since take-over Continuous development and looking at new opportunities, e.g. extension to Sweden Strategic rationale Stronger Tryg in Norway $ Strengthen market position in central eastern Norway private members, managed Andelsboliger Strong cooperation with strategic partner 48

49 Acquisition of Troll Forsikring in 2018 Troll Forsikring Portfolio of 120mNOK Portfolio is 40% Oslo/Akershus customers private only Distribution through web and inbound Purchase price NOK 72m, including a year-end 2017 equity of NOK 44m and a tax asset of NOK 40m (i.e. no goodwill) Favorable and speedy acquisition Transaction finalized in April 2018 Tryg purchase price 72 mnok, incl. yearend 2017 equity of 44 mnok and tax asset of 40 mnok. Troll investors input ~ 250 mnok. Good customer selection and risk profile but overproportioned cost for e.g. marketing and claims/claims handling Strategic rationale Stronger Tryg in Norway Strengthen market position in central eastern Norway Low acquisition cost vs value 49

50 Consolidation in the Norwegian Insurance Industry? 50

51 Dialogue & Questions

52 Thank you