TOPDANMARK 2017 RESULT

Transcription

1 TOPDANMARK 2017 RESULT

2 Highlights 2017 Post-tax profit: DKK 1,733m (2016: DKK 1,536m) The result for 2017 was better than assumed in the interim report for Q1-Q of DKK 1,500-1,600m CR: 82.0 (2016: 85.1) CR excl. run-off: 85.8 (2016: 90.4) Premium growth: 1.4% increase in non-life, 11.0% increase in life Q Post-tax profit: DKK 379m (Q4 2016: DKK 421m) CR: 82.1 (Q4 2016: 84.6) Earnings distribution for 2017 The Board of Directors will recommend to the AGM that dividend of DKK 1,710m be distributed for 2017 This represents a pay out ratio of 98.7 and a dividend rate of 7.4 Profit forecast model for 2018 Assumed positive premium growth for non-life Compared to the profit forecast model for 2018 in the Q1-Q interim report, combined ratio for 2017 remains unchanged at excl. run-off Profit forecast model of DKK 950-1,050m excl. run-off CR excl. run-off: 86.3 (Q4 2016: 93.9) Premium growth: 1.9% increase in non-life, 22.6% increase in life 2

3 Result Results and profit forecast model Forecast 2017 Results as in Q1-Q Results (DKKm) 2016 interim report 2017 Non-life insurance - Technical result 1,320 1,350 1,400 1,622 - Investment return after return and revaluations of non-life insurance provisions etc Profit on non-life insurance 1,712 1,620 1,720 1,909 Life insurance Parent company etc Pre-tax profit 1,942 1,920 2,060 2,235 Taxation (407) (420) (460) (502) Profit for the year 1,536 1,500 1,600 1,733 3

4 Trend in pre-tax results Q Q , , Technical result Investment return (non-life) Life Parent company etc Q Technical result Investment return (non-life) Life Parent company etc. Q

5 Claims trend Q Q Run-off Weather Large-scale claims Claims trend other 2017 Q Run-off Weather Large-scale claims Claims trend other Q

6 Claims trend excl. run-off, weather and large-scale claims Claims trend Q4 Q Claims trend Run-off Weather-related claims (1.3) (0.6) (0.7) (0.4) Large-scale claims (2.9) (0.2) (1.5) (0.2) Claims before run-off, weather and large-scale claims

7 Claims trend excl. run-off, weather and large-scale claims moving average Q Q Claims trend excl. run-off, weather and large-scale claims Improvement in claims trend excl. run-off, weather and large-scale claims pp Q Q

8 Trend in combined ratio 8.0 CR 100 Effect of decline in interest rate levet in pp of CR 4.8pp (2.0) (1.0)

9 Claims frequency theft

10 Trend in technical result DKKm (40) Q Q Q Snowloading claims 3rd and 4th largest Q Q ) storms in Denmark Q ) Changed accounting practice as of 1 January 2016 cf. Accounting practice in Q report Comparative figures have not been adjusted 10

11 Efficiency Digitalisation Self-service Online purchase Efficiency Process optimisation and automation 15.2% of new sales are initiated digitally and processed digitally in full or partly 57% of claims are reported digitally via Topdanmark s website or glass portal and 13% are automated in full or partly 35 processes are executed via RPA (Robot Process Automation) Experimenting with ML (Machine Learning) for two processes Outsourcing of business processes and IT development Topdanmark has reduced the number of FTEs by 11% since 2016 Transformation Culture Digital readiness Since 2016, Topdanmark has established Innovation Lab to ensure digital readiness Topdanmark has entered into an agreement with SingularityU in Denmark 11

12 Premium classification Premiums classified by products 2008 Premiums classified by products % 7.1% 13.8% 27.1% 6.9% 34.9% 16.3% 16.2% 9.2% 27.5% 11.1% 23.7% Personal Motor Agricultural SME Workers' compensation Illness/accident and unemployment Personal Motor Agricultural SME Workers' compensation Illness/accident and unemployment 12

13 Trend in combined ratio Run-off (white) ) E 1) Incl. additional expenses representing 0.5-1pp due to investment in increased digitalisation and automation 13

14 Trend in premiums (%) (0.5) Illness/accident and other SME and Agricultural Motor Personal Defection of largescale industrial customers Trend in premiums (1.0) 14

15 Assumed unchanged CR of for 2018 Excl. run-off CR for 2017 Run-off in 2017 Weather compared to normal level Large-scale claims compared to normal level Exceptionally favourable claims trend in 2017 on workers' comp., accident, fire, motor liability ect. Assumed CR for 2018 excl. run-off 15

16 Trend in retention ratio Personal segment 120 Index

17 Still good customers ratings 10% 48% 50% 9% 45% 8% 7% 6% 6% 40% 35% 5% /Dec 30% Ambassadors Dissatisfied customers Source: ASMA telephone surveys, 29 December

18 Cooperation agreement with Coop Coop is the largest supermarket chain in Denmark counting 1,750,000 members >800,000 customers use the Coop app Digital set-up Simple, modular products Competitive prices Digital first in Sales, Service and Claims handling Push strategy insurances must be sold Fully integrated with Coop s bonus scheme for members Launch Launch of Coop motor insurances and Coop food insurance in spring 2018 Other products to be launched later Contents, accident, house etc. Motor Contents Accident House Food insurance xx xx xx 18

19 Effect of increase in interest rates 3 month and 10-year forward interest rate in DKK Claims provisions are matched by corresponding assets Changes in interest rates have no effect on overall value of claims provisions and matching investment assets A 1pp increase in the interest rate curve reduces the CR by about 1.0pp corresponding to DKK 90m before tax Premium provisions invested in short-term interest bearing assets A 1pp increase in short-term interest rates increases the pre-tax result by about DKK 40m 17 19

20 Movements in the adjusted interest rate curve 20

21 Investment return for the Topdanmark Group excl. Life insurance Investment return Portfolio 31 Dec (DKKbn) Return Q Return Q Return 2016 Return 2017 (DKKm) % (DKKm) % (DKKm) % (DKKm) % Danish equities (4) (1.5) Foreign equities Unlisted equities and hedge funds Government and mortgage bonds (123) (0.9) Credit bonds (0.1) Index linked bonds (1) (0.3) CDOs Properties Assets related to I/A (38) (1.7) Money market etc (2) (0.1) (4) (0.2) (23) (0.7) Subordinated loan capital (1.8) (1.7) (11) (0.7) (10) (0.7) (59) (3.1) (43) (2.8) Interest-bearing debt (0) (0) (52) (0.3) Asset management Investment return Return and revaluations of non-life insurance provisions 145 (81) (423) (143) Investment return after return and revaluations. of non-life insurance provisions The exposure in foreign equities and credit bonds has been adjusted by the use of derivatives. The return percentages are calculated as the ratio between the return on financial instruments and the size of the exposure of the underlying asset. The return on properties includes revaluation of owner-occupied property, which has been included in other comprehensive income. 21

22 Result Life insurance Result of life insurance Q4 Q4 (DKKm ) Investment return on shareholders' equity Sales and administration (14) (5) (42) (25) Insurance risk (4) Risk return on shareholders' equity Profit on life insurance

23 Life trend in gross premiums DKKm ,000 8,000 % change 7,430 8,250 7,000 6,000 5, % 5,000 4,777 4, % 3,000 2,653 2,709 2,000 1, % 0 Current Contribution Total 23

24 Prospects for life insurance 2018 The regular premiums are assumed to decline around 5% due to the termination of the distribution agreements Assumptions: Full recogntion as income of risk return No recognition as income from shadow account Assumed pre-tax result for 2018 of DKK m Termination of distribution agreements with Nykredit and Sydbank by the end of 2017 Premium effect in non-life insurance (I/A) 2018: 0.6pp 24

25 Solvency cover Solvency capital requirement 3,643 3,116 Own funds 6,348 6,370 Solvency cover 174 % 204 % 25

26 Profit forecast Profit forecast 2018 Results (DKKm) 2017 Forecast Decem ber 2017 Non-life insurance - Technical result 1, Investment return after return and revaluations of non-life insurance provisions etc Profit on non-life insurance 1, ,050 Life insurance Parent company etc Pre-tax profit 2,235 1,230 1,370 Taxation (502) (280) (320) Profit for the year 1, ,050 26

27 Capital situation 2018 DKKm Jan 2018 Shareholders' equity year-end ,497 Intangible assets (965) 5,532 Allocated dividend for 2017 (1,710) 3,822 Assumed post-tax profit 2018 (mean value) 1,000 Change, intangible assets (100) Change in shareholders' equity (issue and utilization of options) 200 1,100 Assumed shareholders' equity for solvency, end of ,922 Estimated required shareholders' equity cover for solvency ,400 Excess capital ,522 Subordinated loan capital: DKK 400m tier 1 loan capital, call in 2022 without expiry date DKK 500m tier 2 loan capital, call in 2020, expiry in 2025 DKK 850m tier 2 loan capital, call in 2021, expiry in 2026 Solvency requirement, 1 January ,116 Own funds, 1 January ,370 27

28 Dividend rate of 7.4 for 2017 The Board of Directors will recommend to the AGM that dividend of DKK 1,710m be distributed for 2017 Represents a pay out ratio of 98.7 Dividend rate of 7.4 Dividend per share issued of DKK 19 28

29 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 and assumptions 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 trends in the reinsurance market. See also Investor Risk management. The above description of risk factors is not exhaustive. Investors and others, who may base decisions relating to Topdanmark on statements relating to the future, should give their own careful consideration to 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 announcement of the 2017 Annual Result. This publication is a translation. In case of any divergence, the original Danish text shall prevail. 29

30 Appendix 30

31 Financial calendar 2017 Annual Report 22 Feb 2018 Deadline for submitting items for AGM agenda 28 Feb 2018 AGM 12 Apr 2018 Q Interim Report 24 Apr Half-year Report 20 July 2018 Q1-Q Interim Report 23 Oct

32 Share profile Focused strategy Danish player Stable insurance risks Low expense ratio Limited financial risk Synergy between life and non-life Efficient capital management Limited top line growth Profitable growth in that order The Topdanmark share is a value case not a growth case High net result No protection against a take-over in the Articles of Association 32

33 Comparison CR incl. and excl. run-off (white) (Danish business) ) 2) 1) Scandinavian business from 2012 to H ) From 2012 to Q1-Q Comparative figures have not been adjusted 33

34 Topdanmark Tryg Codan Alm. Brand Gjensidige If GF A lk a Lærerst anden Købst æderne Comparison CR excl. run-off (group level) ) 2) 3) 4) 5) 6) 5) 5) 1) From 2012 to H Scandinavian business 2) From 2012 to Q1-Q ) 2016 adjusted for extraordinary conditions 4) 2015 and 2016 adjusted for extraordinary conditions 5) From 2012 to H ) From 2012 to 2016 Comparative figures have not been adjusted 34

35 Ratios - by segments Personal SME Group Premium grow th Gross loss ratio (%) Net reinsurance ratio (%) Claims trend (%) Gross expense ratio (%) Combined ratio (%) CR adjusted for run-off (%)

36 Value creation Distribution efficiency Customer satisfaction Pricing Efficiency 36

37 Entry barriers Example based on experience from Topdanmark: Premium volume DKK 1,000m portfolio in personal market CR = 90 or a profit of DKK 100m Expense ratio 18%, of which 10% new business Accumulated profit shows result of new business after x years 40 Profit (DKKm) 150 Accumulated profit (DKKm) 20 0 (20) (40) 0 (60) (80) (50) (100) Age of policies number of years Total = DKK 100m (100) Age of policies number of years Profit 20+ = DKK 100m Milestones 37

38 Entry barriers Example based on experience from Topdanmark: Premium volume DKK 1,000m portfolio in personal market CR = 90 or a profit of DKK 100m Expense ratio 18%, of which 10% new business Premium profile (%) Age of policies number of years Total = 100% Combined ratio Age of policies number of years Weighted CR Total = 90 38

39 Normal earnings (DDKm) Non-life CR = 91 DKK 8.9bn x 9pp 800 Run-off (CR effect 1.7pp) DKK 8.9bn x 1.7pp 150 Life 150 Parent company etc. 50 Risk premium assets: DKK 5bn x 2% 100 Equities: DKK 1.0bn x 7% 70 Pre-tax profit 1,320 Tax (290) Post-tax profit 1,030 39

40 How to make money on non-life insurance Assumptions: Shareholders equity 40% of premiums earned Combined ratio 91.0 (claims + costs)/premiums earned Return on shareholders equity 5% Return on operations: Income Expenditure ~ ROE = 23% ROE: 5% Pre-tax ROE 28% 40

41 Large-scale and weather-related claims Large-scale claims net of reinsurance (DKKm) Q1 Q2 Q3 Q4 Full year Large-scale claims are defined as gross claims exceeding DKK 5m. Comprise property claims in SME. Weather-related claims (DKKm) Q1 Q2 Q3 Q4 Full year ,000 1, Comprise gross claims exceeding DKK 4.5m per event. Assumed weather-related claims (DKKm) Q1 Q2 Q3 Q4 Full year

42 Breakdown of run-off profits/losses Run-off profits / losses, net of reinsurance Q4 Q4 (DKKm) IIIness / accident Workers' compensation 101 (35) 113 (0) Third party and comprehensive Other Total run-off profits, net of reinsurance

43 Run-off net of reinsurance as percentage of premiums % , Comparative figures have not been adjusted 43

44 Road accidents in Denmark 44

45 Normal return in life insurance Assumptions: Necessary shareholders equity in Topdanmark Liv: DKK 1,500m Investment return on shareholders equity: 2.0% CR illness and accident 100.0% Earnings, asset management 0.15% 45

46 Normal return in life insurance (DKKm) Normal Return on life insurance: return Investment return on shareholders' equity (excl. Nykredit Liv) 30 Risk allowance of policies subject to contribution 140 Loss on policies subject to contribution (10) Asset management ~16% ROE Other life-related results: Life-related non-life (disability, health, critical illness, unemployment insurance etc.) 15 Other synergies in e.g. distribution ~21% ROE 46

47 Investment return Topdanmark excl. Life insurance % Comparative figures have not been adjusted 47

48 Distribution channels Non-life 2017 Life % 5% 12% 18% 36% 36% 3% 31% Insurance sales reps. Telephone sales etc. Brokers Car dealers and Home Danske Bank Danica Pension 4% 48% Insurance sales reps. Brokers Others (banks etc.) Head office and life sales staff 48

49 Market shares Non-life insurance 2016 Life insurance % 18.0% 6.8% 5.2% 1.3% 3.3% 8.7% 31.2% 4.0% 16.8% 8.9% 4.9% 5.7% 6.9% 9.5% 11.0% 16.3% 21.6% Tryg Topdanmark Codan Alm. Brand Gjensidige If Lærerstanden Alka Forsikring GF-Forsikring Others PFA Pension Danica Pension Nordea Liv & Pension SEB Pension Topdanmark Liv AP Pension Skandia Alm. Brand 49

50 Financial highlights for (consensus for ) Consensus obtained immediately before publication of the announcement of the 2017 Annual Result Highlights: Consensus Gross premiums earned, non-life 8,889 9,116 8,967 8,858 8,985 9,066 9,157 Non-life insurance: Technical result 765 1,289 1,184 1,320 1,622 1,258 1,272 Investment return after return and revaluation of non-life insurance provisions Profit on non-life insurance 1,361 1,803 1,325 1,712 1,909 1,471 1,476 Life insurance Parent company etc Pre-tax profit 1,875 2,010 1,530 1,942 2,235 1,693 1,719 Tax (407) (452) (360) (407) (502) (373) (378) Profit for the year 1,468 1,558 1,170 1,536 1,733 1,317 1,341 Ratios (%): Claims trend Expense ratio Combined ratio Combined ratio excl. run-off Pay-out ratio

51 Macroeconomics for Denmark % 2018E 2019E GDP growth Private consumption Public consumption Inflation Unemployment rate (DST definition) 4,1 4.0 Government debt % of GDP Government balance % of GDP (0.3) (0.1) Current account % of GDP House prices Source: Danske Research ( 51

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