Alm. Brand Financial results FY 2012

Transcription

1 Alm. Brand Financial results FY 2012 Investor presentation February

2 G R O U P Highlights of FY 2012 Pre-tax profit of DKK 860m before and DKK 380m after losses and writedowns Non-life Insurance: Strong underlying business Strong CR of 83.3 and 82.1 in Q4 Few weather-related and major claims Positive run-off result Banking: Lower net interest and fee income; Reduced loan book and lower interest rate level Losses and writedowns; Down to DKK 480m from DKK 994m in 2011 Loan book reduced by DKK 1.3bn net of losses and writedowns Life and Pension: 25% growth in pension premiums Good investment results - collective bonus potential of 5.8% up by 1.3ppts Outlook for 2013 Profit of DKK 440m before losses and writedowns Losses and writedowns estimated at DKK m given the current economic environment DKK 700m injected into Alm. Brand Bank to repay DKK 430m of hybrid capital 2

3 N O N - L I F E I N S U R A N C E Non-life Insurance - Financial highlights in brief Results FY 2012 Profit of DKK 853m Premiums up by 2% CR improved: Premiums Underlying business Weather-related and major claims Run-off gains (4.9ppts of CR) Discounting effect Key figures/ratios (DKKm) Q4 FY Gross premiums 1,236 1,205 4,866 4,772 Investment income Claims expenses ,180-3,851 Expenses Reinsurance Technical result Investments return after technical interest Profit before tax Combined Ratio Underlying Combined Ratio Results Q4 Profit of DKK 247m Premiums up by 2.6% CR improved: Premiums Weather-related and major claims Run-off gains (6.2ppts of CR) Expenses DKK 4.8bn 66.2% 3

4 N O N - L I F E I N S U R A N C E Gross premiums (DKKm) Trend in premium income Premium income 4,762 4,772 4,866 2,258 2,232 2,287 Premiums FY 2012 up by 2.0% y/y Private premiums up by 1.5% (2.5% adjusted for non-recurring income in 2011) Commercial premiums up by 2.5% 2,504 2,540 2,579 1,205 1, Premiums up by 2.6% in Q4 Private premiums up by 2.5% Commercial premiums up by 2.7% Premium growth Customer defection rate declined Q Q Private Commercial 4

5 N O N - L I F E I N S U R A N C E Positive trend in underlying business Underlying CR continues to develop favourably Limited snowfall caused motor claims to decline Fewer burglaries Good development in private property insurances Commercial property insurances still underperforming Q4 Number (index) Avg. claim (index) Claims (index) Fewer claims Development with fewer claims continued in 2012 Average claims decreased for the year Higher average claims in Q4 primarily related to property Note: Excluding workers compensation 5

6 N O N - L I F E I N S U R A N C E Positive trend in major claims Major claims lower than expected Major claims have remained low in all quarters of 2012 FY FY FY FY FY Q1 Q2 Q3 Q Major claims ratio Average expectation Q Q Number (index) Avg. claim (index) Claims (index) Fewer claims but higher average claims in 2012 Average claims impacted by a few major events Preventive measures Risk reduction team Fixed-sum insurance Always a matter of chance Note: Major claims are defined as claims in excess of DKK 1m 6

7 N O N - L I F E I N S U R A N C E Weather-related claims Weather-related claims below expected level Significantly lower than in 2010 and FY FY FY FY FY Q1 Q2 Q3 Q Weather-related claims ratio Average expectation Note: Figures stated net of reinsurance recoveries Weather related claims Q Q Number (index) Avg. claim (index) Claims (index) Very few weather-related claims Mild winter No significant storms Very few water damage claims in spite of wet summer Claims in Q4 significantly below impacted by storms in November and adjusted estimate of July cloudburst 7

8 N O N - L I F E I N S U R A N C E Expense ratio target for 2012 reached 20% 18% 19.0% 18.5% 17.6% Expense ratio at the lower end of the targeted range 16.2 in % 15.9% 16.2% Higher expenses in Q4 due to Acquisition costs Expenses for system development due to the nonlife insurance tax Bonuses 14% 12% Target 2009 to

9 N O N - L I F E I N S U R A N C E A very favourable year - but not a new normal Combined Ratio FY Run-offs compared to expectations Weather-related claims compared to expectations Major claims compared to expectations Normal expectation Zero in run-offs 4ppts in weather-related claims 8ppts in major claims Normalised Combined Ratio

10 N O N - L I F E I N S U R A N C E Expense Ratio Combined Ratio Alm. Brand among top performers - Peer group comparison Note: Combined and Expense Ratios are stated at group level. Codan figures include Danish business only 10

11 B A N K I N G Alm. Brand Bank - Financial highlights Results 2012 Loss of DKK 39m before losses and writedowns Lower funding Value adjustments of bonds and shares Lower interest rate level Reduction of loan book Loan book 2012 Loan reductions of DKK 1.3bn adjusted for losses and writedowns Losses and writedowns still high, mainly due to Agriculture deteriorated economic conditions for dairy farmers Mortgage deeds and commercial lending due to commercial property vacancies Key figures/ratios (DKKm) Q1 Q2 Q3 Q4 FY FY Interest receivable Net interest and fee income Value adjustments* Losses and writedowns* Profit/loss before tax , Profit/loss before tax and excl. losses and writedowns Interest margin 1.4% 1.3% 1.6% 1.4% 1.6% 1.4% *Credit related value adjustments included under losses and writedowns 11.6% DKK 852m 11

12 B A N K I N G DKKbn DKKbn Deposits and lending Reduction of loans and advances Increased deposits Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Deposit surplus Loans and advances Deposits Deposit surplus of DKK 2.6bn, up from a deficit of DKK 2.4bn Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

13 B A N K I N G DKKm Net interest and fee income Interest income lower due to Low interest rates Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Interest receivable Interest payable Net fees and commissions etc. Interest margin 2.5% 2.4% 2.2% 2.2% 1.9% 1.7% 1.7% 1.6% 1.3% 1.4% 1.3% 1.4% Reduction of loan book Interest expenses in 2012 down due to repayment of funding Partly offset by interests on new deposits Lower customer activity reduced net fees in Financial Markets Interest margin target Margin to be increased towards 2016 by 1ppt from 2012 level by Repaying of hybrid capital Reducing costs for deposits Improving average loan quality Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

14 B A N K I N G Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Losses and writedowns still high DKKm Continuing portfolio Agriculture Car finance Commercial lending Property development projects Total mortgage deeds Large writedowns on agriculture Dairy farmers hit by deteriorated contribution margins in Q3 Commercial lending impacted by large nonrecuring writedowns Commercial property vacancies impacted commercial lending and mortgage deeds 14

15 B A N K I N G DKKm Loan book reductions - Excl. losses and writedowns Continuing portfolio Agriculture Car finance Commercial lending Property development projects Mortgage deed financing Mortgage deeds Total, loan book Reversals and intra-group transactions Total, group FY 2012 Q Total loan book reduction of DKK 1.3bn in DKKm Fortsættende portefølje Landbrug Bilfinansiering Erhverv Ejendomsudviklings- Pantebrevsfinansiering 267 Pantebreve 69 Total, 1,289 udlån Reverse forretning og koncerninterne transaktioner 68 Koncernen 1,357 total Decrease in continuing portfolio due to savings and loan repayment Funding to agriculture Necessary investments and operations Declined by DKK 38m in Q4 Successful winding-up of commercial loans Net mortgage deeds declined by DKK 336m (DKK 97m in Q4) Equal to repayment of approx. 9% p.a. 15

16 B A N K I N G Loan portfolio and credit losses Loans Losses and writedowns Share of FY Q1 Q2 Q3 Q4 FY Loss DKKm portfolio ratio Continuing portfolio 2,983 2,694 2, % % Lending to private customers 2,848 2,493 2, % % Other loans and advances % % Winding-up portfolio 7,059 6,114 5, % % Agriculture 1,038 1, % % Car finance % % Commercial lending 1,613 1,366 1, % % Property development projects % % Mortgage deed financing % % Mortgage deeds 3,154 2,991 2, % % Equities % % Bank packages etc Total - excl. reverse transactions 10,042 8,808 8, % % Reverse transactions including intra-group transactions % Total, group lending 10,217 8,962 8, % % Minority interests % Total, pro rata 10,393 9,169 8, % % 16

17 B A N K I N G Capital reservations CAPITAL RESERVATION Gross loans Book value Accum. writedowns Required capital Total reservation Reservation/ gross loans Total reservation Reservation/ gross loans DKKm Continuing portfolio 2,834 2, % % Winding-up portfolio 7,727 5,642 2, ,952 38% 3,439 37% Bank packages etc Total - excl reverse transactions 10,561 8,289 2,272 1,195 3,467 33% 3,888 31% Reverse transactions and intra-group transactions % 28 16% Total group 10,668 8,396 2,272 1,206 3,478 33% 3,916 31% Continuing portfolio up by 4ppts More conservative approach to exposures Winding-up portfolio up by 1ppt Affected by writedowns in agriculture 17

18 B A N K I N G DKKm Funding - At 31 December ,530 Deposits DKK 11.3bn Other debt DKK 1.1bn Supplementary capital DKK 0.4bn Issued bonds DKK 2.0bn Hybrid capital DKK 1.0bn DKK 7.7bn repaid in 2012 DKK 2.5bn to be repaid in 2013 DKK 2.0bn in issued bonds DKK 0.1bn in supplementary capital DKK 430m in hybrid capital 100 1, Funding developing according to plan Excess liquidity of DKK 4.1bn Interbank funding Issued bonds Supplementary capital Hybrid capital Other debt Note: Hybrid capital of DKK 856m is perpetual. DKK 430m to be repaid in

19 B A N K I N G DKKm Individual solvency need 1,803 1, ,591 1,620 1, ,443 1,342 1,266 1,226 1,213 Credit risk reduced by DKK 220m Total risk reduced by approx. DKK 250m in 2012 Q Q Q Q Q Credit risk Market risk Operational and other risks Excess solvency 4.3% 3.5% 3.6% 3.7% 1.4% Excess solvency 3.7ppts above solvency need Further strengthened by DKK 270m in capital injection Q Q Q Q Q

20 L I F E A N D P E N S I O N Life and pension - Financial highlights and key ratios Profit before tax of DKK 90m in line with expectations Investment result generating 8.6% return on policyholders funds Positive impact from value adjustments Positive equity market Collective bonus potential of 5.8% Up 1.3ppts DKKm Q Return on investments allocated to equity Result of portfolios without bonus entitlement Risk premium Share of expense and risk results Calculated return on equity Reversed from/transferred to shadow account Profit before tax Shadow account balance Strong risk and expense results Growth 25% in gross pension premiums 2.5% in regular premiums 14% in total pension contributions* 12,3% DKK 903m * Including investment schemes in the bank 20

21 L I F E A N D P E N S I O N DKKm Premium income 1, , Total pension contributions up by 14% Premiums in Life and Pension up by 25% Transfer of pension schemes of new customers Reduction in investment schemes payments Large single payments in Growth target for regular premiums Lifted by 2.5% in 2012 Target of 12% increase on top of inflation by 2016 Regular premiums Single premiums Investment schemes Note: Investment schemes are reported in the banking segment 21

22 L I F E A N D P E N S I O N Results DKKm Q Return on investments allocated to equity Result of portfolios without bonus entitlement Risk premium Return on investments impacted by low interest rate level Share of expense and risk results Calculated return on equity Reversed from/transferred to shadow account Profit before tax Shadow account balance

23 L I F E A N D P E N S I O N DKKm Provisions and bonus potential % % 3.65% % Successful increase in bonus potential Bonus potential Interest group (new agreements) Competitive rate on policyholders funds 12,463 11,263 11,493 11,829 10, ,758 10,994 10,931 11,332 11,832 Technical provisions up primarily due to falling interest rate level Life insurance provisions Collective bonus potential Outstanding claims provisions 23

24 G R O U P Investment mix - As of 31 December 2012 Non-life Insurance DKK 9.3bn Banking, pro rata DKK 7.6bn Life and Pension DKK 14.4bn Government bonds 0.8% Government bonds 0.7% Government bonds 11.1% Index-linked bonds 1.4% Credit bonds 3.5% Mortgage bonds 93.6% Shares 0.7% Property 0.2% Credit bonds 3.1% Liquidity 1.7% Mortgage bonds 87.2% Shares 5.8% Credit bonds 0.5% Mortgage bonds 58.1% Liquidity 5.7% Shares 9.6% Property 11.4% Emerging markets 2.9% Liquidity 2.0% Government and mortgage bonds accounts for more than 95% of the portfolio Very little exposure to shares and property Low risk investment portfolio Shares account for less than 5% of the portfolio Large exposure to bond markets Shares and property acounts for approx. 20% of the portfolio 24

25 G R O U P Capital target DKKm Target 31 Dec 2012 Non-life Insurance (40% of premiums) 1,946 Life and Pension (9% of provisions for insurance contracts) 1,065 Banking (18.7% of risk-weighted assets)* 1,858 Alm. Brand Bank subsidiaries 40 New capital target of Non-life Insurance Using Alm. Brand's own partial internal capital model Target reduced from 45% to 40% of premiums Diversification effects -300 Total capital target 4,609 *Calculated as the individual solvency requirement as at 31 December 2012 plus 3 percentage points 25

26 G R O U P Capital model - Significant increase in excess capital DKKm Capital base 31 Dec 2011 Capital base 30 Sep 2012 Capital base 31 Dec 2012 Consolidated equity 4,206 4,426 4,506 Tax assets Supplementary capital 1,753 1,704 1,654 Total capital base for the group 5,201 5,438 5,495 Statutory capital requirement for the group, end of period 3,376 3,041 3,085 Excess relative to statutory capital requirement 1,825 2,397 2,410 Internal capital target 5,041 4,917 4,609 Excess relative to internal capital target

27 G R O U P Outlook for 2013 Full-year pre-tax profit of DKK 440m before losses and writedowns Non-life Insurance Profit of DKK 400m Assumptions CR of 92 Expense ratio of approx Growth of approx. 2% Low return on investments Banking Profit of DKK 5m before losses and writedowns Assumptions Repayment of DKK 430m hybrid capital end Q Loan reduction net of losses and writedowns of DKK 0.6bn Losses and writedowns of DKK m Equity injection of DKK 700m Life and Pension Profit of DKK 75m Assumptions Modest growth in continuing pension premiums Low return on investments allocated to equity Other activities Expected cost of DKK 40m 27

28 G R O U P Alm. Brand Highlights Very strong year for Non-life Insurance Good result and strong premium growth in Life and Pension Weak core earnings in Banking Repayment of DKK 430m of hybrid capital in 2013 Losses and writedowns still high Outlook for 2013 of DKK 440m profit before losses and writedowns Losses and writedowns in 2013 estimated at DKK m 28

29 G R O U P New Strategy - Focus on customers Where we come from Fit for Fight Increase profitability Higher earning per customer Reduce risks Improve customer loyalty Underlying CR reduced with 9ppts to 79.9 Competitive group cost structure 5% annual cost reduction Getting in line with peers Expense ratio of 16.2 (18.5 in 2009) Bank turn-around Reducing business risk Loan book reduced by more than DKK 6.5bn since 2009 Setting the base for the future bank Where we are going Customers First Return on equity target: 3M CIBOR +10% in 2016 Cost efficiency Improve customer loyalty Generate more business with each customer Profitable growth Focusing on customers More efficient customer handling Improve digital processes to ensure faster and simpler customer service Enhance quality in processes and products Attend to customers product and service requirements 29

30 G R O U P New strategic goals: Non-life Insurance - Efficiency and customer service in focus Return on equity target Increased from 16% to 20% plus 3M CIBOR Reduction of internal capital target from 45% to 40% of premiums A maximum Combined Ratio of 92 Continue improving risk reporting Strengthening profitability monitoring Increasing deductibles on commercial property insurances Annual efficiency enhancement of 2.5% Build on achieved efficiency enhancements Invest in improved digital customer processes Cost ratio target of around 15% in 2016 Return on Equity 19.0% 12.0% 23.2% 38.7% 3M CIBOR +20% Customer defection rate p.a. 110% 100% 90% Maintain market share of 10% Focus on customer loyalty 80% 70% Index 30

31 G R O U P DKKm New strategic goals: Banking - Profitable growth and risk reduction Return on equity target Target of 5% plus 3M CIBOR by 2016 Increase earning Losses and writedowns will still impact Long term target of 3M CIBOR +10% Income/cost ratio to exceed 1.1 by 2016 Increase number of full service customers Growth in Financial Markets and Leasing Return on equity 3M CIBOR +5% % -81.0% % % Increase interest margin +1ppt by 2016 Repayment of hybrid capital Annual effect of approx. DKK 95m Increased earning per customer Losses and writedowns 1, Reduce winding-up portfolio by 10% p.a. Reducing the risk in the bank Subsequent reduction in losses and writedowns

32 G R O U P New strategic goals: Life and Pension - Strong base for further growth Return on equity target Lifted from 8% to 10% plus 3M CIBOR Continue stable results Reduction of the capital requirement Return on equity 17.0% 13.3% 12.0% 9.7% 3M CIBOR +10% Growth: Inflation +12% in regular premiums Growth in pension payments of 12% above inflation by 2016 Utilise strong competitive position Improve customer experience Invest in improved customers servicing Collective bonus potential Competitive return on policyholders' funds Compounded rate of interest on funds Accumulation of collective bonus potential 3.00% % 3.65% 3.00% Bonus potential Interest group (new agreements) 32

33 G R O U P Disclaimer The statements made in this presentation are based on current expectations, estimates and projections made by management. All statements about future financial performance are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by the statements. All statements about future financial performance made in this presentation are solely based on information known at the time of the preparation of the last published financial report, and the company assumes no obligation to update these statements, whether as a result of new information, future events, or otherwise. 33

34 Alm. Brand Financial results FY 2012 Investor presentation February