Alm. Brand. SEB Enskilda Nordic Seminar. CEO Søren Boe Mortensen 8 January 2014

Transcription

1 Alm. Brand SEB Enskilda Nordic Seminar CEO Søren Boe Mortensen 8 January

2 GROUP Alm. Brand - A Danish financial services group Non-life Insurance 4th largest in Denmark 500,000 customers Private customers SMEs Agricultural customers Cost efficient Strongly improved claims scenario Competitive combined ratio High customer satisfaction 69% Income approx. DKK 7bn Banking Danish private customer bank with approx. 50,000 customers 10% Financial Markets Leasing 12% 9% Discontinued lending portfolio Life and Pension Approx. 80,000 customers Low costs for customers Low-risk customer portfolio Stable results and high bonus rate Investments etc. Integrated business model across insurance, banking and pension 2

3 GROUP Return has been far from the target - Target of 10% before tax plus the money market rate 20% 9% 9% 1% M % -16% Financial crisis fostered new strategy Higher profitability on segments and products Efficiency improvements Winding up of higher-risk lending -33% 3

4 GROUP New strategy - CUSTOMERS FIRST Pre-tax return on equity target CIBOR +10% by 2016 Objectives Higher efficiency Higher quality Higher digitalisation rate Higher customer satisfaction rate Focus areas Efficient and service-oriented customer handling More and better digital processes to ensure simple and improved customer service Improved quality in processes and products Focus on customers' product and service needs 4

5 GROUP Customer focus and sales - customer loyalty as a competitive parameter Customer focus Private customers requiring insurance, banking and pension services Agricultural customers and SMEs (but not in banking) DobbeltKUNDER and pluskunder Bank branches Insurance and pension centres Regional offices Headquarters Distribution strategy Focus on cross selling and referral between sales channels Five regions responsible for targeted sales and service In-depth knowledge of customers and local conditions Central functions provide support through specialised resources Distribution through: 270 insurance agents 6 customer service centres 14 sales centres 11 bank branches 5

6 NON-LIFE INSURANCE Non-life Insurance - Denmark's 4th largest insurer Distribution 2012 Market share of approx. 10% 400,000 private customers 100,000 commercial and agricultural customers 6% 20% 1% 37% 93% 80% 63% Private Commercial Agriculture Agents Customer service centres Brokers Products Products 2012 Exposure to building and house (fire and property) Person-related insurance represents just over 17% Other 5.2% Fire and property (commercial) 24.3% Fire and property (private) 22.5% Workers compensation 5.6% Liability 1.9% Health and personal accident 11.6% Motor 28.8% 6

7 NON-LIFE INSURANCE Trend in premium income 4,769 4,714 4,762 4,772 4,866 Index Premium income, DKKm 3,630 3,764 2,292 2,207 2,258 2,232 2,287 1,708 1,800 2,477 2,507 2,504 2,540 2,579 1,922 1, M M 2013 Private Commercial Retention rate Private Dec/08 Jun/09 Dec/09 Jun/10 Dec/10 Jun/11 Dec/11 Jun/12 Dec/12 Jun/13 Increase in premium payments Especially in 2012 and 2013 Expected growth of 3% in 2013 Growth particularly in Commercial in 2013 Agreement with AIG on workers' compensation insurance Large property portfolio taken over Retention rate improved since 2011 Restored after notification of premium increases began in 2009/1010 7

8 NON-LIFE INSURANCE Combined ratio - Successful business improvements Successful focus on improving the underlying combined ratio 88.8 Improvement initiatives Premium increases Cost reductions Procurement Adjustment of terms Use of deductibles Claims prevention Combined ratio 9M Underlying combined ratio 9M 8

9 NON-LIFE INSURANCE Unpredictable weather - Storm on 28 October 2013 DKKm Claims expenses net of reinsurance related to the storm of DKK m Gross storm expenses DKK m Retention on reinsurance programme is DKK 75m Reinstatement amounts to DKK 45-60m Approx. 25,000 claims registered Many claims registered directly by customers online Storm 28 Oct. Reinsurance recoveries 75 Retention Reinstatement costs Net storm costs Storm and flood on 5-7 December Claims related to the storm expected to be lower than those related to the storm on 28 October Flood covered by the Danish Storm Council 9

10 NON-LIFE INSURANCE Expense ratio target achieved in Focus on additional improvements towards Target 2016 (15%) Focus on cost reductions in 2009 Rethinking the distribution strategy Staff cutbacks Strategic target Expense ratio of about 15% by Investments in digitalise customer-facing processes Increase customer selfsufficiency Easier for the customers......and less cost-intensive Q1 H1 9M FY Q1 H1 9M FY Q1 H1 9M FY Q1 H1 9M

11 NON-LIFE INSURANCE Alm. Brand among the best - Peer comparison Expense ratio Combined ratio M 2013 Note: Combined ratio and expense ratio are stated at group level. Codan figures include Danish business only. 11

12 BANKING Alm. Brand Bank - A bank that supports the group Private customer bank Independent bank with nation-wide coverage Mainly car loans, home loans and savings Extra offer available to the group's insurance customers Almost 50,000 customers with loans of about DKK 2.4bn Financial Markets Providing services to private and institutional customers Capital management Securities trading Leasing Car leasing to private customers and businesses Complete solutions including insurance Loans subject to winding up Portfolio of DKK 5.1bn being wound up Mainly mortgage deeds, commercial and agriculture 12

13 BANKING A bank in transition - 30 September 2013 Discontinued loan portfolio: DKK 5.1bn Continuing portfolio: DKK 2.4bn Mortgage deeds DKK 2.6bn Private DKK 2.3bn Property development projects DKK 0.3bn Commercial DKK 1.1bn Agriculture DKK 0.9bn Other lending DKK 0.1bn Car finance DKK 0.1bn 13

14 BANKING Income declining with lending portfolio DKKm Declining interest income from lending Winding up of discontinued activities Fewer loans to continuing customers Increase in fee income in Financial Markets More new customers Increase in business volume per customer Q1 Q2 Q3 Q4 Q1 Q2 Q Return on bond portfolio is interest rate sensitive Interest on loans Net fees Return on bonds* Other value adjustments** * Interest rate and value adjustments ** Value adjustments of shares, mortgage deeds and derivative financial instruments 14

15 BANKING Funding costs aligned - and interest margin improving Interest expenses DKKm Change in funding: Interbank funding repaid Government guaranteed bonds repaid Repayment of state-funded hybrid capital commenced Replaced by deposits Q1 Q2 Q3 Q4 Q1 Q2 Q Deposits and other payables Total subordinated debt Bonds issued Credit institutions and central banks Interest margin 1.9% 1.7% 1.7% 1.6% 1.7% 1.7% 1.3% 1.4% 1.3% 1.4% 1.3% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Repayment of DKK 200m of statefunded hybrid capital in Q DKK 226m remains outstanding Improved interest margin in 2013 Lower funding costs improved interest margin 15

16 BANKING Losses and writedowns remain high - but come from a high level 1,667 DKKm M 2013 Expected losses and writedowns in 2013 DKK m 16

17 BANKING The bank going forward - Still many challenges What have we achieved? Closed down loss-making branches Closed down business areas Reduced balance sheet and risk Aligned calculations to meet DFSA guidelines Repaid loans of approx. DKK 10bn Commenced repayment of expensive hybrid funding Continuing bank essentially in balance after writedowns What should we achieve? More customers Higher earnings per customer Reduction of funding costs Winding up of discontinued lending But a lot hinges on the financial crisis coming to an end Greater borrowing appetite Increase in housing market activity 17

18 LIFE AND PENSION Life and Pension - Small Danish commercial life/pension company 80,000 customers 40% are also customers of Non-life Insurance or Banking Competitive business Good rate on policyholders' savings High bonus potential Low costs Distribution of pension payments in 2012 Group life policy schemes 14% Policies written in employment relationships 23% Investment schemes 27% Individually written policies 36% 18

19 LIFE AND PENSION Premium income 1,235 Total pension payments have been increasing since 2009 High single payments in 2012 DKKm 1, Regular premium payments were declining up until 2011 This trend was reversed in 2012 and continued in 2013 However, the tax reform had a negative impact especially in Q Note: Investment schemes are reported in the banking segment Regular premiums Single premiums Investment schemes 9M Growth target for regular premium payments YTD regular premium payments rose by 2.6% y/y Increase of 12% over and above the rate of inflation in the period

20 LIFE AND PENSION Results 181 DKKm Investment return on assets allocated to equity affected by low rate of interest Less dependent on risk allowance from 2011 Earnings primarily determined by expense and risk results M 2013 Change to shadow account Return on investments allocated to equity Expense and risk results Result of portfolios without bonus entitlement Risk premium 20

21 LIFE AND PENSION Investment returns - Competitive rato on policyholders funds improved in 2014 U74* Interest rate group Total Technical interest rate (% p.a.) Rate on policyholders funds 2013 (% p.a.) Rate on policyholders funds 2014 (% p.a.) Investment assets (DKKbn) Bonus rate (%) Return (% YTD) Bonds 100% 52% 51% 76% 81% 67% Shares 0% 29% 27% 9% 4% 16% Property 0% 19% 17% 13% 10% 14% Interest derivatives 0% 0% 5% 2% 5% 3% *Portfolio without bonus entitlement Strong bonus potential of 7.8% on average Bonus rate for new policyholders of 11.3% Strong competitive base Return of 1.1% in 9M 2013 Return on bonds negatively impacted by rising interest rates Strong return on shares Bonds -1.8% Shares 18.6% Property 3.2% 21

22 GROUP Capital model DKKm Capital base 30 Sep 2013 Consolidated equity 4,658 Tax assets -538 Supplementary capital 975 Total capital base for the group 5,095 Statutory capital requirement for the group, end of period 2,888 Excess relative to statutory capital requirement 2,207 Internal capital target 4,364 Excess relative to internal capital target 731 New capital requirements Effective from 1 January 2014 Scaling down of inclusion of supplementary capital Adverse effect on capital base: 1 Jan 2014 Group: DKK 225m Bank: DKK 160m Additional impact during 2014 Group: DKK 225m Bank: DKK 40m Excess capital adequacy reduced by the new capital rules and by the repayment of remaining hybrid capital 22

23 GROUP Outlook for November 2013 Profit for 2013 of DKK 550m before tax and before losses and writedowns (unchanged) Non-life Insurance Profit of DKK 615m Banking Loss of DKK 100m before losses and writedowns Life and Pension Profit of DKK 75m CR of 89 (unchanged) Expense ratio of approx (unchanged) Growth of approx. 3% (unchanged) Expenses of DKK m related to October storm Negative value adjustments Reduction of lending portfolio of DKK 0.6bn adjusted for losses and writedowns Losses and writedowns of DKK m Other business activities Expected expense of DKK 40m Moderate growth in regular premium payments Low investment return on assets allocated to equity Preliminary outlook for 2014 Profit of DKK m before tax and before losses and writedowns Combined ratio expected to be approx excluding run-off gains/losses Losses and writedowns of DKK m 23

24 GROUP The Alm. Brand share Strong Non-life Insurance Successful turnaround of non-life insurance activities Continued efficiency enhancements through digitalisation Low risk on Life and Pension Stable business model even in difficult market conditions Turnaround of the bank in process Efforts to reduce lending and risk continue but still a long way to go Restore the private customer bank by focusing on the group's main customer segment, private customers Growing activity within Leasing and Financial Markets 24

25 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. 25

26 Alm. Brand SEB Enskilda Nordic Seminar CEO Søren Boe Mortensen 8 January