TOPDANMARK H RESULT

Transcription

1 TOPDANMARK H RESULT

2 Highlights H Post-tax profit: DKK 613m (H1 2017: DKK 889m) EPS: DKK 7.1 (H1 2017: DKK 10.4) CR: 85.5 (H1 2017: 81.8) CR excl. run-off: 88.5 (H1 2017: 85.3) Premium growth: 2.2% increase in non-life and 20.2% increase in life insurance Profit in life insurance: DKK 106m (H1 2017: DKK 128m) Investment return: DKK 41m (H1 2017: DKK 221m) Profit forecast model for 2018 Topdanmark still expects a positive premium growth in non-life The assumed CR for 2018 remains unchanged at 88-89, excl. run-off profits in H Still incl. additional expenses of 0.5-1pp due to the investment in increased digitalisation and automation The post-tax profit forecast model for 2018 remains at DKK 1,050-1,150m, excl. run-off in H Q Post-tax profit: DKK 345m (Q2 2017: DKK 474m) EPS: DKK 4.0 (Q2 2017: DKK 5.6) CR: 85.9 (Q2 2017: 77.8) CR excl. run-off: 89.0 (Q2 2017: 81.6) Premium growth: 2.6% increase in non-life and 22.0% increase in life insurance Profit in life insurance: DKK 62m (Q2 2017: DKK 56m) Investment return: DKK 60m (Q2 2017: DKK 69m) 2

3 Trend in pre-tax result H H Q Q ,

4 Claims trend excl. run-off, weather and large-scale claims Claims trend Full year Q2 Q2 H1 H Claims trend Run-off Weather-related claims (0.4) (0.2) 0.0 (0.1) 0.0 Large-scale claims (0.2) (0.1) (2.5) (0.1) (1.5) Claims before run-off, weather and large-scale claims

5 Premium growth H Personal SME Termination (0.3) 1) Premium growth total (1) 1) Termination of the distribution agreement with Sydbank within life insurance (illness/accident) 5

6 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

7 Trend in combined ratio 8.0 CR 100 Effect of decline in interest rate level in pp of CR 5.0pp (2.0) (1.0) H

8 Reasons for the improved claims trend Change in business mix Improved underwriting Loss preventing initiatives Filtering out unprofitable customers Customer scoring system Digitalisation Robotics Machine Learning Outsourcing Improved purchasing power Improved churn rate 8

9 Efficiency Digitalisation Self-service Online purchase 17.6% of new sales are initiated digitally and processed digitally in full or partly 63.9% of claims are reported digitally via Topdanmark s website or glass portal and 18.4% are automated in full or partly Efficiency Process optimisation and automation 38 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 12% since

10 Assumed CR for 2018 remains unchanged at Excl. run-off in H ) Assumed CR for 2018 in the Q1 report for 2018 excl. run-off Weather Run-off Large-scale claims Discounting Fire claims Assumed CR for 2018 excl. run-off in H Assumptions for CR in 2018 A normal year for weather with weather-related claims of DKK 95m in H A level of interest rates corresponding to the interest rate curve on 29 June 2018 An expense ratio of around 16 1) Incl. additional expenses of 0.5-1pp due to an update in investments in digitalisation and automation 10

11 Trend in combined ratio Run-off (white) ~87 1) H E 1) Incl. additional expenses representing 0.5-1pp due to investment in increased digitalisation and automation 11

12 Trend in retention ratio Personal segment Index H H H H H H H H H

13 Effect of increase in interest rates Claims provisions are matched by corresponding assets 3-months and 10-years forward interest rate in DKK 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 13

14 Movements in the adjusted interest rate curve 14

15 Investment return for the Topdanmark Group excl. Life insurance Investment return Portfolio 30 June (DKKbn) Return Q Return Q Return H Return H (DKKm ) % (DKKm ) % (DKKm ) % (DKKm ) % Danish equities (5) (1.8) (6) (2.1) Foreign equities (0) (0.1) Unlisted equities and hedge funds Government and mortgage bonds (12) (0.1) Credit bonds (0) (0.3) Index linked bonds CDOs Properties Money market etc (16) (0.4) (1) (0.0) (19) (0.6) (4) (0.1) Subordinated loan capital (1.8) (1.7) (11) (0.6) (12) (0.7) (22) (1.2) (23) (1.3) Interest-bearing debt 0.0 (0.2) Asset management Investment return Return and revaluations of non-life insurance provisions 9 (48) (4) (66) 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. 15

16 Result Life insurance Result of life insurance Full year Q2 Q2 H1 H1 (DKKm ) Investment return on shareholders' equity Sales and administration (25) (9) (5) (19) (16) Insurance risk 17 6 (2) 11 (9) Risk return on shareholders' equity Profit on life insurance

17 Life trend in gross premiums DKKm H H ,500 % change 4,665 4,500 3,881 3,500 3,238 2,500 2, % 1,500 1,431 1, % 500 (0.3%) -500 Regular Single Total 17

18 Prospects for life insurance 2018 Assumed growth in regular premiums is down from slightly positive to around 0% The termination of the distribution agreement with Sydbank and Nykredit has a negative impact on regular premiums in 2018 Assumptions: Full recognition as income of risk return No recognition as income from shadow account Assumed pre-tax result for 2018 continues to be DKK m 18

19 Solvency cover H Solvency capital requirement 3,643 3,116 3,328 Own funds 6,348 6,370 7,103 Solvency cover 174% 204% 213% 1) 1) Excl. potential dividend for

20 Profit forecast model for 2018 Profit forecast 2018 Results (DKKm) 2017 Forecast March 2018 Forecast June 2018 Non-life insurance - Technical result 1,622 1,000 1,050 1,000 1,050 - Investment return after return and revaluations of non-life insurance provisions etc Profit on non-life insurance 1,909 1,050 1,150 1,050 1,150 Life insurance Parent company etc Pre-tax profit 2,235 1,330 1,470 1,330 1,470 Taxation (502) (280) (320) (280) (320) Profit for the year 1,733 1,050 1,150 1,050 1,150 20

21 Top Topdanmark More joint development and exploiting larger synergies focusing on best principles in the Topdanmark Group Larger execution power for the benefit of the Group (Life and Non-life) Enabling large scale benefits fewer prioritization meetings, more execution meetings Ambition to operate with one IT customer platform (SOE) 2 Customer types The customer journey for private and corporate clients must reflect the full experience across divisions We must differentiate ourselves by proactive and individualized customer service based on experience and data Customer loyalty must be ensured by customer concepts/customer journeys and a joint approach to customer service for private and corporate clients and by bridging between them 3 Distribution channels Direct sales, partner sales and digital sales We must focus on all distribution channels in order to ensure growth, retention and additional sales 21

22 Yield Yield

23 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 unexpected 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 Interim Report for H

24 Appendix 24

25 Financial calendar Q1-Q Interim Report 22 Oct 2018 Announcement of 2018 Annual Results 24 Jan 2019 Deadline for submitting items for AGM agenda 19 Feb Annual Report 21 Feb 2019 AGM 03 Apr 2019 Q Interim Report 25 Apr Half-year Report 18 July 2019 Q1-Q Interim Report 24 Oct

26 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 26

27 Trend in technical result 2001-Q DKKm (40) Q Q Q Snowloading Q Q ) claims 3rd and 4th largest storms in Denmark Q ) Changed accounting practice as of 1 January 2016 cf. Accounting practice in Q report Comparative figures have not been adjusted 27

28 Comparison CR incl. and excl. run-off (white) 2012 H (Danish business) ) 1) Scandinavian business from 2012 to 2017 Comparative figures have not been adjusted 28

29 Topdanmark Tryg Codan Alm. Brand Gjensidige If GF A lk a Lærerst anden Købst æderne Comparison CR excl. run-off 2012 H (group level) ) 2) 3) 4) 1) From 2012 to Scandinavian business 2) 2016 adjusted for extraordinary conditions 3) 2015 and 2016 adjusted for extraordinary conditions 4) From 2012 to 2017 Comparative figures have not been adjusted 29

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

31 Normal earnings (DKKm) Non-life CR = 91 DKK 9.1bn x 9.5pp 870 Run-off (CR effect 1.7pp) DKK 9.1bn x 1.7pp 150 Life 160 Parent company etc. 50 Risk premium assets: DKK 5bn x 2% 100 Equities: DKK 1.0bn x 7% 70 Pre-tax profit 1,400 Tax (300) Post-tax profit 1,100 31

32 Premium classification Premiums classified by products 2008 Premiums classified by products H % 7.5% 13.8% 27.1% 7.2% 35.3% 16.1% 16.2% 9.2% 27.5% 10.9% 23.0% Personal Motor Agricultural SME Workers' compensation Illness/accident and unemployment Personal Motor Agricultural SME Workers' compensation Illness/accident and unemployment 32

33 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 33

34 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 34

35 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% 35

36 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

37 Breakdown of run-off profits/losses Run-off profits / losses, net of reinsurance Full year Q2 Q2 H1 H1 (DKKm) IIIness / accident Workers' compensation (0) Third party and comprehensive Other 84 7 (10) 2 (18) Total run-off profits, net of reinsurance

38 Run-off net of reinsurance as percentage of premiums % H Comparative figures have not been adjusted 38

39 Cooperation with Coop Coop is the largest supermarket chain in Denmark counting 1,750,000 customers >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 Soft launch of Coop motor insurances in April 2018 Other products to be launched later Contents, accident, house etc. 39

40 Road accidents in Denmark 40

41 Normal return in life insurance Assumptions: Shareholders equity in Topdanmark Liv: DKK 2,000m Investment return on shareholders equity: 2.0% CR illness and accident 100.0% Earnings, asset management 0.15% 41

42 Normal return in life insurance (DKKm) Normal Return on life insurance: return Investment return on shareholders' equity (excl. Nykredit Liv) 40 Risk allowance of policies subject to contribution 140 Loss on policies subject to contribution (10) Asset management ~13% ROE Other life-related results: Life-related non-life (disability, health, critical illness, unemployment insurance etc.) 15 Other synergies in e.g. distribution ~16% ROE 42

43 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 43

44 Market shares Non-life insurance H Life insurance % 1.3% 20.1% 17.9% 6.6% 8.6% 29.8% 3.4% 4.1% 16.8% 8.8% 4.9% 5.6% 7.1% 9.6% 10.5% 17.6% 21.8% Tryg Topdanmark Codan Alm. Brand Gjensidige If Lærerstanden Alka Forsikring GF-Forsikring Others PFA Pension Danica Pension Nordea Liv & Pension Topdanmark Liv SEB Pension AP Pension Skandia Alm. Brand 44

45 Financial highlights for (consensus for ) Consensus obtained after publication of the Interim Report for H Highlights: Consensus Gross premiums earned, non-life 8,889 9,116 8,967 8,858 8,985 9,180 9,349 Non-life insurance: Technical result 765 1,289 1,184 1,320 1,622 1,381 1,391 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 1,461 1,578 Life insurance Parent company etc Pre-tax profit 1,875 2,010 1,530 1,942 2,235 1,736 1,833 Tax (407) (452) (360) (407) (502) (378) (402) Profit for the year 1,468 1,558 1,170 1,536 1,733 1,353 1,431 Ratios (%): Claims trend Expense ratio Combined ratio Combined ratio excl. run-off Pay-out ratio

46 Capital situation 2018 DKKm July 2018 Shareholders' equity beginning of ,497 Intangible assets (965) 5,532 Dividend for 2017 (1,710) Assumed post-tax profit 2018 (mean value) 1,100 Change, intangible assets (100) 3,822 Change in shareholders' equity (issue and utilization of options) 200 1,200 Assumed shareholders' equity for solvency, end of ,022 Estimated required shareholders' equity cover for solvency ,400 Excess capital ,622 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, 30 June ,328 Own funds, 30 June ,103 46

47 Solvency requirement Solvency requirement (SCR) and own funds for the Topdanmark Group (DKKm) 30 June , , , ,054 *Bonus risk means the insufficient risk absorbing impact of the bonus potentials by interest group for life provisions 47

48 Macroeconomics for Denmark % 2018E 2019E GDP growth Private consumption Public consumption Inflation Unemployment rate (DST definition) Government debt % of GDP Government balance % of GDP (0.2) (0.2) Current account % of GDP Source: Danske Research ( 48

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