Analyst Day. 19 June 2017 Follow us on

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Esmond Morton
5 years ago
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1 Analyst Day 19 June 2017 Follow us on

2 Agenda Introduction: Morten Hübbe, CEO Recent financial development: Christian Baltzer, CFO Cyber insurance: Ulrik Andersson, Special Risk Director Innovation/The Camp: Lars Bonde, COO and Christian Visti Larsen, CEO of NewBanking Tryg Garanti: Mads Løgstrup, Managing Director Tryg Garanti Concluding remarks: Morten Hübbe, CEO 2

3 Recent financial development Christian Baltzer, CFO

4 Underlying claims ratio at same level as Q Group underlying Claims ratio at 77.0% in line with Q Private underlying Claims ratio at 75.5% also in line with Q Corporate & Sweden underlying claims ratio developed favourably Expected FY 2017 underlying claims ratio better than FY 2016 Claims ratio, net (Commercial DK & NO) Group Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Underlying Claims ratio, net Underlying development is adjusted for run-off, large claims, weather claims and interest. Q1-16: =77.0 Q =77.0 Claims ratio, net (Corporate) Private (DK & NO) Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Underlying Claims ratio, net Underlying development is adjusted for large claims, weather claims, run-off and interest. Claims ratio, net (Sweden) Q1-16: =75.5 Q1-17: =75.5 4

5 On track to meet the 2017 expense ratio target Efficiency programme up until 2017 (DKKm) Expense ratio Q Q As reported Adjusted for one-offs Target 2015 Expense Claims 2015 Target Target FTE - Development Nominal costs in business areas 4,076 3,913 3,703 3,599 3,359 3,264 3, Q Private Commercial Corporate Sweden 5 Q Q1 2016

6 Own Funds Q4 '16 Results Q1 '17 Cash dividend Intangible assets Subordinated debt Miscellaneous Own Funds Q1 '17 SCR Q4 '16 Marked Health Life Default Non-Life Operational Adjustment Diversification SCR Q1 '17 Solvency position Q Solvency capital requirement walk Solvency ratio based on the Partial Internal Model is 202 (Q4 2016: 194). 5,200 5,150 5,100 5,050 5,000 4,950 4,900 4,850 4,800 5, ,975 Own Funds (OF) is primarily impacted by Result Q of DKK 605m Dividends of DKK 452m (Q1 2017) SCR impacted by a lower market risk (down DKK 120m) as current properties exposure is still below targeted level following the properties transaction announced in December Own funds walk 11,800 10, ,800 8, Based on Solvency II Standard Formula the solvency ratio is 162 (Q4 2016: 157). 7,800 6,800 9,850 10,037 5,800 6

7 Tryg is an income stock Shareholder remuneration since 2012 Shareholder breakdown 2016 DKK Danish institutional Non-Danish institutional Percentage Smaller shareholders Q Ordinary dividend Extraordinary dividend Extraordinary buy back Share price performance since IPO

8 It is important to know your investment case Do you know the only thing that gives me pleasure? It s to see my dividends coming in. John D. Rockefeller 8

9 Cyber insurance Ulrik Andersson, Special Risk Director

10 Agenda 1. Cyber risk sign of the times 2. The criminals are going digital 3. Data breaches regulatory development 4. Cyber Insurance and Tryg s approach 5. Where will it go?

11 Cyber Risk - sign of the times 11

12 Cyber Risk - sign of the times Globalisation fueled by technology Dramatic increases in flows of goods and capital Fully automated and digitalised production processes Telegeography.com Connected devices Generation and hoarding of data Opportunities and vulnerabilities 12

13 Cyber Risk - sign of the times In 2016 victims of cyber related crime reported to the Police incurred losses of more than DKK 180m Threat from cyber crime against Danish authorities and businesses is Very High. 13

14 From security to Risk management 14

15 Connected world DATACENTER 1 Outsourced develpoment DATACENTER 2 15

Ransomware CEO Fraud Virus Trojans Malware

16 Cyber threats 2017 Cyber terrorism Crimeware CaaS Advanced persistent threats Data breaches Knowingly /unknowingly EU-GDPR Phishing Drive by attacks Ransomware CEO Fraud Virus Trojans Malware Denial of Service (Ddos) Internet of Things Spear Phishing 16

17 17 Criminals are going digital.

18 18 Phishing

19 Physical phishing 19

20 CEO fraud 20

21 21 Threats are real

22 Satan a new business model 22

Data breaches An emerging regulatory environment Increased focus on data protection over last decade Industry standards for payment cards including fines in case of breaches Data Security Breach

23 Data breaches An emerging regulatory environment Increased focus on data protection over last decade Industry standards for payment cards including fines in case of breaches Data Security Breach Notification Legislation in California 2003 now in place in 48 US states General Data Protection Regulation in EU all information related to individuals Notification within 72h to authorities and all affected by breach Introduce role of Data Protection Officer PCI DSS ~ Payment Card Industry Data Security Standards PHI ~ Protected Health Information PII ~ Personally Identifiable Information Fines for non-compliance up to 4% of global revenue or 20m PII includes names, usernames, license plates. 23

2bn A similar development in Europe and Scandinavia is expected following both the GDPR and development in criminal activity Assuming

24 Cyber insurance market Source AON Tryg estimates US market frontrunner in development of cyber insurance Increase in market closely connected with Data Breach Protection Legislation European Market estimated at $ bn A similar development in Europe and Scandinavia is expected following both the GDPR and development in criminal activity Assuming similar growths rates as seen in the US a European market in the range $0.3bn to $0.5bn in 2020 Scandinavian market estimated at around $10-20m in This would grow in turn to approx. $50m-$75m 24

25 Cyber vs traditional insurance Cyber insurance First party Third party Property damage Business interruption Data restoration Fraud Extortion Notification Forensics Credit monitoring Regulatory costs Privacy liability Media liability 25

Tryg Cyber insurance Nordic product Targets larger companies Launched in Sweden, Denmark and Norway in 2017 Claims handling by global loss adjuster Charles Taylor Network damage Loss of Data Media

26 Tryg Cyber insurance Nordic product Targets larger companies Launched in Sweden, Denmark and Norway in 2017 Claims handling by global loss adjuster Charles Taylor Network damage Loss of Data Media liability Forensics Restoration of systems and data Costs associated with extortion Legal assistance Third party liability Regulatory and notification costs PR-assistance ID- og credit monitoring Business interruption (up to 3 months) Media liability Local product ( ) Targets smaller companies (turnover < DKK 100mio) Launched in Denmark in 2017 possible transfer to Norway in 2017 Focus on restoration costs Network damage Loss of Data Forensics Restoration of IT systems Restoration of data 26

27 Tryg Cyber insurance Nordic Product Coverage is provided from DKK 1m and up to DKK 20m Tryg is providing cover in cooperation with international reinsurer and keeps 10% on a proportional basis Standard pricing up to a turnover of DKK 500m otherwise referral on a case by case basis Local Product Coverage is up to DKK 5m (typically 1m) Tryg keeps risk in own books and cooperates with local provider for claims adjusting Excludes a number of sectors Possible to buy DNS service as add on 27

28 Where will it go? Risk or Peril? Wannacry outbreak map 28

29 First party Third party Where will it go? Stand alone or integration? Cyber insurance Property Liability 29

30 Where will it go? Risk Management never goes out of style..! Identify Monitor Evaluate Mitigate 30

31 Innovation Tryg Lars Bonde, COO

32 Do we have a choice? 32

predict that every third job in the industry will disappear and that the decisions that we

33 The world is changing around us our strategy needs to reflect this change The emergence of InsurTech has been a key driver for innovation within the insurance industry Analysts predict that every third job in the industry will disappear and that the decisions that we take now will determine our future and will also impact the rest of our society Morten Hübbe 33

Striking the right balance between short-term, predictable growth and long-term bets Initiatives with sufficient scale potential are

Car and Home & Contents decline: due to new tech and competition Low impact I.e. Workers Comp.

and why shouldn't Tryg be the one setting up kites, rather than building fences?

34 Striking the right balance between short-term, predictable growth and long-term bets Initiatives with sufficient scale potential are important considering future challenges Distribution of innovation focus 2016/2017 High impact 90% 10% Changing and stronger competition Car and Home & Contents decline: due to new tech and competition Low impact I.e. Workers Comp.: Automation and robotics Incremental Substantial Radical will also reduce risk pools in Commercial/Corp. and why shouldn't Tryg be the one setting up kites, rather than building fences? The market and technological development is as much an opportunity, as it is a challenge 34 X 2 Average No. of yearly touch points with our customers Through a frequent and insights-driven customer approach we will increase our retention rate and ownership of the customer

Tryg a cautious entrepeneur Startup mentality Exploring

taking an entrepeneurial approach we Build further on New

products to market, fast Address the declining riskpools of

insurance is if not changing, then evolving We partner to

investment risk An empirical process of try, fail, try,

will not pull the organisation as a whole off focus) We use

35 Tryg a cautious entrepeneur Startup mentality Exploring technology and new business models Time to market is key By taking an entrepeneurial approach we Build further on New Business & Customer Innovation abilities to bring new products to market, fast Address the declining riskpools of current core products $ $ Acknowledge that the nature of insurance is if not changing, then evolving We partner to get access to the knowledge we need, and to reduce investment risk An empirical process of try, fail, try, fail, try succeed at a Low cost Low risk Low distraction (it will not pull the organisation as a whole off focus) We use technology as a tool that accelerates success, technology alone cannot create great results 35

36 Innovation in Tryg Ung Sjåfør & We Drive eprotect cyber insurance? 36

cooperation with share service companies 13 partnerships in place Security

37 Share economy the next big thing? Share economy Short term insurance Development of insurance solutions in cooperation with share service companies 13 partnerships in place Security crucial for the success of share economy? DKK 2,300bn expected global turnover in 2025 and growth of 25% yearly Accenture 37

38 Will the disruptive insurtech- or the insurance companies win? 1. Awareness of the need for a change Adaptation to the new environment Tryg new organisation Increased market and customer focus 2. Desire to participate in and support the change End-to-end responsibility and authority Speed 3. What can we bring to the table Delivering peace of mind and value to its customers, employees and investors. 38

39 Tryg Garanti Mads Løgstrup, Managing director, Tryg Garanti

40 Agenda 1. Tryg Garanti at a glance 2. Financial Performance 3. Business Model and Strategy 4. Competitors and market 5. Organisation 6. Reinsurance 7. Tryg Garanti and The Camp

41 Tryg Garanti is about counterparty risk Tryg Garanti provides peace of mind when commercial contracts are entered into 2% of Tryg gross earned premium 7% of technical result 41

42 Tryg Garanti at a glance Tryg Garanti (TMG) is the largest provider of surety contract and supply bonds in the Nordic area and has a developing position in trade credit insurance. Clients and product lines Strength of TMG operation The main product line is surety bonds Trade credit is a developing product line Target client segments are contractors and contract producing companies The SME segment is preferred The client value proposition: Free financial capacity (surety) Protect balance sheet and professionalise credit risk management (trade) On time, high quality service (trade and surety) World class in: Meeting client expectations: NPS 63 Operational efficiency: cost ratio 8.3 Capital efficiency, ROE 136% Digitalised, internet based business model with full selfservice functionality Robust business model ( Broker for reinsurance ) Combined ratio (55.2) 42

43 TMG Business model Surety: Seller Contract Buyer TRADE SURETY Trade Credit: Reinsurance Tryg Commercial & Corporate 43

The story The story: Danish surety portfolio: +100 years old Surety launched: Norway in 2006 Sweden in 2007 Finland in 2008 Trade credit launched: Denmark in 2010 Norway, Sweden

44 The story The story: Danish surety portfolio: +100 years old Surety launched: Norway in 2006 Sweden in 2007 Finland in 2008 Trade credit launched: Denmark in 2010 Norway, Sweden and Finland in 2015 Norway Denmark Sweden Finland TMG is now established as the #1 surety insurer in the Nordics TMG is now the fastest growing trade credit insurer in the Nordics 44

45 Strong financial performance TMG business is highly profitable Strong profitability across economic cycles 45

46 TMG - Surety and Trade Credit Insurance Premium & technical result DKKm 400 NO SE FI Trade,DK F Combined ratio 100 Premium Tech. Result Cost ratio 40% 30% 20% 10% F Years of financial crisis 0%

47 47 Efficiency gains by employee

48 Digitalised business model Efficiency is core to client satisfaction and TMG profit Further client process integration and development of clever 3rd party distribution 48

49 TMG Strategy How to create more value: Critical obstacles: Must-win battles: Product development Solutions allowing TMG product integration into client processes and thereby creating more value for clients and efficiency for TMG Efficiency Continued automation of internal processes via IT Clients increasingly to take over TMG internal processes Distribution Taking advantage of the Tryg Group distribution network and Tryg brand in the SME segment Developing external distribution channels for Nordic Trade Credit Outside DK, TMG must develop strong external (/group) distribution as only limited internal resources are available Trade Credit introduction Growth in Trade Credit is the preferred balancing factor in a rate pressure surety scenario One company A unified company culture including shared pool of resources /concepts is vital to continued efficiency improvement Internal and external efficiency is seen as main driver of profitable growth and client satisfaction 49

50 Strong competitors are few TMG has critical mass in a market where critical mass is difficult to obtain Many but small competitors in surety Limited market size deter competition 50

51 Competitors and market Few but large competitors in Trade Credit Many banks are competitors in Surety (but with little focus) International specialist insurers are main challengers (but do not yet match TMG service offering or efficiency) 51

52 Expense ratio in Nordic banking and insurance Source: 2016 Annual Reports TMG advantage over competitors increased further in The advantage is a key explanation for the high profit potential of the portfolio. 52

Market share split by bank and insurance providers Market share split by insurance providers Rates

53 Nordic surety market Overall Nordic market premium is EUR 300m, split between banking and insurance providers. Market share split by bank and insurance providers Market share split by insurance providers Rates are under pressure for large clients, whereas rates are stable for SME clients. For 2017, an unchanged market premium volume is expected as increasing demand will level out reducing rates. 53

54 Nordic trade credit market Overall Nordic market premium is EUR 150m. Market share split by insurance providers For 2017, an unchanged overall premium volume is expected as the benign macro economic environment put pressure on rates due to lower claims levels. Also self insurance is an issue in a positive part of the economic cycle 54

Claims ratios remain very satisfactory for both Surety and Trade Credit Premium growth is strong in the

55 International Surety and Trade Credit performance The ICISA organisation publishes market data from its members once a year. Latest available numbers are for Claims ratios remain very satisfactory for both Surety and Trade Credit Premium growth is strong in the surety line, whereas a flattening trend is seen for Trade Credit. Pressure on rates and self insurance is seen as the main reasons. 55 Source: ICISA, homepage

56 Surety Market Potential Internationally, surety is a banking product Basel IV rules (capital floors) will improve competitive advantage of insurance companies Market split banking and insurance 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Belgium 90% 10% Denmark 30% 70% Germany 70% 30% Ireland 35% 65% Netherlands 85% 15% Finland Sweden 65% 70% 35% 30% United Kingdom 50% 50% Norway 70% 30% Switzerland 80% 20% Bank Insurance 56

57 Tryg Garanti is scalable Tryg organisation and infrastructure is scalable Matrix organisation Digitalised processes 57

58 Organisational chart The organisational chart reflects a matrix where unit managers are responsible for guidelines across countries (how things are done) and country managers are responsible for local allocation of resources (who do things) We rely on shared values, goals and processes We want to be perceived as local to local clients DAA LEF TEP CEO, Finance & central functions HES Client Relations, Surety NIE MIJ KIS MDL Client Relations, Trade credit Risk management Client Centre Markets and products MDL Unit manager Country manager 58

59 A risk carrier or a risk broker? Tryg Garanti financial performance is leveraged by reinsurance and risk reduced Ceding +65% of gross premium Ceding +95% of peak risks 59

60 Managed peak risk and loss ratio Historic claims volatility is managed by reinsurance Gross claims ratio Net claims ratio after reinsurance Financial crisis 61

61 Tryg Garanti and The Camp The Camp provides new opportunities to Tryg Garanti product development: NewBanking (blockchain) could transform traditional whole turnover trade credit policies into a single transaction market for privately funded receivables UNICONTA could become first cloud based distribution partner for the new Tryg Garanti application programmers interface (API) Continuous innovation could result in new, profitable, business venture 62

DDFs Virksomhedsdag Finansanalytikerforeningens Virksomhedsdag 2008 CFO Morten Hübbe

DDFs Virksomhedsdag Finansanalytikerforeningens Virksomhedsdag 2008 CFO Morten Hübbe 1 Finansanalytikerforeningens Virksomhedsdag 2008 CFO Morten Hübbe Facts about TrygVesta 2 Shares outstanding 68m Market cap DKK 26bn (USD 5.4bn) Danish institutions 15% Non-Danish institutions 7% Smaller