Q results. Webcast presentation. Follow us on

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1 Q results Webcast presentation Follow us on

2 Disclaimer Certain statements in this presentation are based on the beliefs of our management as well as assumptions made by and information currently available to the management. Forward-looking statements (other than statements of historical fact) regarding our future results of operations, financial condition, cash flows, business strategy, plans and future objectives can generally be identified by terminology such as targets, believes, expects, aims, intends, plans, seeks, will, may, anticipates, continues or similar expressions. A number of different factors may cause the actual performance to deviate significantly from the forward-looking statements in this presentation including but not limited to general economic developments, changes in the competitive environment, developments in the financial markets, extraordinary events such as natural disasters or terrorist attacks, changes in legislation or case law and reinsurance. We urge you to read our annual report available on tryg.com for a discussion of some of the factors that could affect our future performance and the industry in which we operate. Should one or more of these risks or uncertainties materialise or should any underlying assumptions prove to be incorrect, our actual financial condition or results of operations could materially differ from that described herein as anticipated, believed, estimated or expected. We are not under any duty to update any of the forward-looking statements or to conform such statements to actual results, except as may be required by law. 2

3 Q key focus areas Efficiency programme proceeds as planned Customer focus and improved topline Balance price adjustments and inflation Price-differentiation and conversion to new products Acquistion in Sweden supports strategy and has capital impact Fulfilment of 2015 ROE target of 20% Long term profitable growth and attractive shareholder value creation 3

4 Financial highlights Q Satisfactory technical result, planned one-off costs and a drop of 9% in equity index (MSCI) result in 6.1% return on equity. Improved development in premium income. Pre-tax profit of DKK 244m (DKK 782m) impacted by: Planned and communicated one-off costs of DKK 120m related to efficiency programme of DKK 750m Negative investment result of DKK 383m (DKK -1m) impacted by MSCI equity index down 9% Pre-tax profit (DKKm) Technical result of DKK 647m (DKK 793m) An improvement before one-off costs, lower interest rate and currency effects Combined ratio Improved premium development with a growth of 0.6% in local currencies (-0.8%) Strengthened market position with acquisition of Swedish child insurance portfolio. This acquisition implies a DKK 400m capital loading Expense ratio 16.3 ROE of 6.1% (21.7%) p.a. after tax Fulfilment of 2015 ROE target of 20% depends on Q4 investment return 4 One-off costs

5 Customer highlights Q General positive development in customer key figures New car insurance product launched in Sweden. NPS Tryg s DNA marking initiative showed a preventive effect. Burglaries in Sønderborg declined by 50% for the 90 properties using the DNA marking and 26% in general in the area. A similar experiment was launched in Norway in Q Tryg required agricultural customers to fit their combine harvester with a fire trace. The fire trace saves the customers unnecessary material and consequential losses and Tryg reduces the number of farm machinery fire claims. CMD 2014 Q Target 2017 Customers with 3 products (%) TryghedsGruppen s members bonus scheme was approved by the Danish Business Authority. CMD 2014 Q Target 2017 Retention rate CMD 2014 Q Target

6 Premiums and portfolio

7 Positive topline development Gross earned premiums increased by 0.6% (-0.8%) driven by: Private impacted by the competitive situation. Retention was unchanged in Denmark but decreased slightly in Norway Commercial helped by one-off regulations on a large account and improved retention level in Denmark. Corporate impacted by positive development in Denmark and Sweden, but slightly negative in Norway. Gross earned premiums development (Local currencies) DKKm Local currencies Q Local currencies Q Private 2,211 2, % 0.5% 0.6 Commercial 1,022 1, % -1.6% Corporate % 0.5% -0.8 Sweden % -8.4% Group 4,583 4, % -0.8% 7

8 Private - average premiums - DK profitability strong but competition increasing House insurance average premium (index 2011 = 100) Average premiums increase Y/Y -1.0% 0.9% (Q2-0.8%) (Q2 1.2%) NO DK NO: price increases from July DK: changed selection reduces average price Motor insurance average premium (index 2011 = 100) Average premiums increase Y/Y -2.6% 0.5% (Q2-2.4%) (Q2 0.4%) NO DK 2.6% decrease y/y driven by: smaller cars competitive situation DK Higher price on new motor tariff DK will somewhat mitigate negative development Profitability very strong on motor 8

9 Customer retention Private 92% 90% 88% 86% 84% 82% DK NO Slightly increasing customer retention in Denmark Slight decrease in Norway 92% 90% 88% 86% 84% 82% Commercial NO DK Customer retention increased in Denmark Retention decreased in Norway impacted by changed distribution set-up and competition 9

10 Combined ratio with underlying improvement Group Private, DK & NO Commercial, DK & NO ,5 Corporate Sweden One-off costs 10

11 Efficiency programme, DKK 45m achieved in Q3 Programme deliver as planned with target to achieve savings of DKK 750m in the next 3 years. Efficiency programme up until 2017 (DKKm) Old programme New programme Planned and communicated one-off costs of DKK 120m in Q3 Lower expected 2015 savings than in Claims initiatives: Tryg Building network Norway Competence team in Health care reduces disability to work Q3 73 H Q1-Q Achieved Target Expense initiatives: IT sourcing Restructuring Commercial Digital communication 11

12 Expense ratio improved before one-off Expense ratio improved 0.5 pp. to 14.6 before one-off costs. Expense ratio One-off provisioning of DKK 80m in Q3 related to efficiency programme Efficiency programme delivered savings of DKK 15m related to: Outsourcing within Finance and IT Commercial reorganisation Reduction in FTE by 174 since Q Q Q Adjusted for one-off effects FTE - Development Nominal costs in business areas 4,077 3,914 3,703 3,599 3, Q Private Commercial Corporate Sweden 12

13 Claims

14 Slight increase in underlying claims ratio, net Group Private (DK & NO) Commercial (DK & NO) Corporate Sweden pp impact from one-off costs Underlying development is adjusted for large claims, weather claims, run-off and interest. 14

15 Large claims, weather claims and run-off Large claims, net DKKm Expected annual Weather claims, net DKKm Expected annual level 2015: DKK 550m level 2015: DKK 500m Q Q Q Q Claims reserves discounting rate (%) Run-off net, effect on combined ratio (%) Q Q Q Q

16 Investment, capital and targets

17 Investment return loss on equities Investment return Free portfolio return (%) DKKm 1.3 Free portfolio Match regulatory deviation 8 0 Match performance Other financials Total return Geographical exposure (%) Portfolio (DKK 39.7bn) Bonds/deposits 13.0% Bonds Equity HY & EM Inv. Property Inv. Property 5.1% Nordics EU ex Nordics North America EM/Other EM 1.0% HY 2.2% Equities 5.8% Bonds/deposits 4.2% Free 10.6bn 27% Match 29.0bn 73% Cov. Bonds 68,6% Rating (%) AAA AA-A BBB-B Match Free Total

18 Capital structure Capital Q3 2015, DKKm Capital buffer based on Individual Solvency increased to 59% (Q2 2015: 51%) and was impacted by: 3,721 6,275 Excess capital Buffer Capital requirement Result Q Executed share buy back of Q Decline in stock market Acquisition of Swedish child insurance portfolio implies a DKK 400m capital loading. Depreciation in the NOK / DKK rate of exchange. Q Equity and subordinated loan, DKKm Based on Solvency II standard model the capital buffer was 26% (Q2 2015: 21%) 1,741 9,235 1,793 10,036 Solvency II unsolved issues: Internal model expected to be approved by 31 December 2015 at the latest. Application has been submitted Inclusion of notional deferred tax and expected future surplus Q Q Equity Subordinated loan capital 18

19 Value creation through M&A M/A to support market development Strategically supportive Acquisitions should support financial targets over a 3 year horizon to reach 21% ROE Product / distribution enhancing Latest acquisitions 2015 Skandia s child insurance in Sweden Securator 2014 Tryg acquires pet insurance in Sweden 2014 Renewal right for Codan s agricultural portfolio New business consumes capital (capital to premium) % % 50-70% 25-35% Workers' Comp Liability Building Private Cars 19

20 Concluding remarks Efficiency programme proceeds as planned. Balance price and inflation Acquistion in Sweden supports strategy and have capital impact Price-differentiation Topline development challenging Fulfilment of 2015 ROE target of 20% depends on Q4 investment return. Leading Scandinavian insurer with strong track record Financial targets 2017 Customer targets 2017 Low risk and high returns ROE: 21% Combined ratio: 87% NPS +100% Retention rate +1 pp Customer care worth recommending Expense ratio: 14% 3 products +5 pp Dividend policy Payout ratio of 60-90% Aiming for a nominal stable increasing dividend Leading in efficiency Next level pricing 20

21 Q&A Follow us on

22 Upcoming roadshows Date Place Participants from Tryg Arranged by 9/10/2015 Copenhagen Morten Hübbe, CEO Tor Magne Lønnum, CFO Investor Relations Danske Markets 12/07/2015 London Morten Hübbe, CEO Tor Magne Lønnum, CFO Investor Relations UBS 19-23/10/2015 USA Tor Magne Lønnum, CFO Peter Brondt, IR Manager Citi 21/10/2015 Edinburgh Lars Møller, IR Director Gianandrea Roberti, IR Officer Goldman Sachs 9-11/11/2015 Tokyo Tor Magne Lønnum, CFO Gianandrea Roberti, IR Officer Goldman Sachs 3/12/2015 Copenhagen Morten Hübbe, CEO Peter Brondt, IR Manager Danske Markets Winter Seminar 3-4/12/2015 Hong Kong Lars Møller, IR Director Citi Global Financials Conference 22