Topdanmark CEO Q&A Session 27 November 2018 CEO Peter Hermann
Agenda Introduction Termination of the distribution agreement with Danske Bank Performance of the Topdanmark share Strategic initiatives Claims trend Assumed combined ratio for 2019
CEO Peter Hermann Born 1973 Master of Actuarial Science Feb 2018 May 2016 May 2014 May 2011 Nov 1995 CEO Topdanmark CEO Topdanmark Life and Pension Director, Actuarial Dept., Health PFA Pension COO Nordea Life and Pension Director, Actuary Service PFA Pension
CEO Peter Hermann Executive Board CEO Peter Hermann Responsible for HR, Communications, IR, CSR, Group Secretariat, Corporate Legal Matters and Topdanmark Life Insurance. CFO Lars Thykier Responsible for Asset Management, Finance, Accounts, Statistical Services, Reinsurance, Tax and Credits COO Brian Rothemejer Jacobsen Responsible for Personal and Commercial, Claims Handling, customer service and Marketing CIO Thomas Erichsen Responsible for Digitisation, IT and Group Development. 4
Agenda Introduction Termination of the distribution agreement with Danske Bank Performance of the Topdanmark share Strategic initiatives Claims trend Assumed combined ratio for 2019
Termination of The Distribution Agreement with Danske Bank Danske Bank has terminated the distribution agreement with Topdanmark by the end of 2019 Facts: New sales distributed through Danske Bank represent approx. 10% of total sales in non-life New sales represent approx. 1/3 of total sales as cross sales to existing customers represent approx. 2/3 of total sales In the Q3 report, we assumed a positive premium growth and a combined ratio of 89-90, excluding run-off for 2019 within non-life insurance. If we assume zero in new sales via Danske Bank in 2019, this assumption still maintains Topdanmark owns the portfolio in Danske Forsikring a portfolio of approx. DKK 2 bn. CR in Danske Forsikring is somewhat higher compared with the CR in the remaining private segment Low churn rate Approx. 40% of the customers in Danske Forsikring are either not customers in Danske Bank or are commercial customers who have typically not been sold through Danske Bank. 6
Termination of The Distribution Agreement with Danske Bank Strategic initiatives: Topdanmark has record low churn rate and a net inflow of customers in the private, agricultural and commercial lines Topdanmark will further develop existing distribution agreements If necessary, Topdanmark will reallocate sales resources from servicing Danske Bank leads to servicing leads from other sales channels Topdanmark will intensify the identification of alternative distribution partners in replacement of the sales through Danske Bank. 7
Termination of The Distribution Agreement with Danske Bank Strategic challenge: Replacing the loss of new sales through Danske Bank and the outflow of customers from Danske Forsikring We are examining every possible solution. 8
Agenda Introduction Termination of the distribution agreement with Danske Bank Performance of the Topdanmark share Strategic initiatives Claims trend Assumed combined ratio for 2019
Topdanmark vs. Share Market Topdanmark vs KFX / OMXC20 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 Topdanmark KFX / OMXC20 10
Agenda Introduction Termination of the distribution agreement with Danske Bank Performance of the Topdanmark share Strategic initiatives Claims trend Assumed combined ratio for 2019
Top 1-2 - 3 1 Topdanmark More joint and more profitable synergies focusing on best practice within the Topdanmark Group Stronger execution power, across the entire Group (Life and Non-life) Economies of Scale fewer meetings of prioritisation, more meetings of execution With time: one customer IT platform 2 Type of Customers The customer journey within B2C and B2B must reflect the full experience across divisions Base proactive and personalised customer service on knowledge and data Base good customer loyalty on customer journeys and a joint approach to customer service for B2C and B2B, by building bridges between the two. 3 Distribution Channels Direct sales, partner sales and digital sales Focus on all distribution channels to ensure growth, retention and additional sales
New Organisation to Ensure Flexibility and Synergy Five divisions merge into three Focus on sales (on-line, partner and personal) and profitability Shared service in claim, customer service and business development Focus on efficiency and development Personal Partners Commercial Agriculture Life/Pension Personal Commercial Life/Pension Claim Customer service Business development 13
How to Differentiate Ourselves? Non-life and Life Any insurance requirements within Non-life, Life and Pension are covered by the Topdanmark Group joint customers will experience advantages from this. Customer Relation We provide focused services (insurance and security) on time and proactively when customer requirements can be predicted, by use of experience and data. Market Access We offer the purchase of insurance, through the most suitable channels: Distribution Partners Digitally Personal Risk Management We know the risk and quote the right price. We contribute to damage prevention and security. Commitment and Leadership Future Technology Execution
Customer Aspiration As a Topdanmark customer, you need not worry about insurance and pension. We will take care of this for you. Based upon your requirements, we make provisions for your security. Making sure, that being a Topdanmark customer is easy and simple. We are proactive and available when you need our assistance.
Customer Aspiration leads to Strategy Corridors Customer Aspiration We take responsibility for helping the customer and we aspire to be the best. This requires, that we divide and elaborate our initiatives into strategy corridors, which will assist us in a joint priority, joint direction and joint goals. Strategy Corridors
Strategy Corridors Long Term Customer Relations Strong Distribution Power Expert in Risk Management Non-Life and Life within One Group Commitment and Leadership Future Technology Best at Execution
Long Term Customer Relations Strong Distribution Power Strategy Corridors Customer Aspiration As a Topdanmark customer, you need not worry about insurance and pension.we will take care of this for you. Based upon your requirements, we make provisions for your security. Making sure, that being a Topdanmark customer is easy and simple. We are proactive and available when you need our assistance. Expert in Risk Management Non-life and Life within One Group Commitment and Leadership Future Technology Best at Execution
Agenda Introduction Termination of the distribution agreement with Danske Bank Performance of the Topdanmark share Strategic initiatives Claims trend Assumed combined ratio for 2019
Trend in Combined Ratio 8.0 100.0 Effect of decline in interest rate level in pp of CR 4.8pp 6.0 4.0 2.0 0.0 91.1 1.3 93.3 1.1 90.3 88.0 1.6 91.5 86.0 0.5 0.4 86.8 0.7 85.1 84.2 82.0 0.1 0.1 0.0 95.0 90.0 85.0 80.0 75.0 (2.0) (1.0) 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1-Q3 2018 70.0 20
Moving average Q1 2016-Q3 2018 Claims Trend excl. run-off, weather and large-scale claims 73 72 71.1 71 71.7 70.8 71.4 71.3 Improvement in claims trend excl. run-off, weather and large-scale claims 70 69 70.0 70.0 69.1 68.7 69.5 69.6 1.5pp 68 67 Q1 2016 Q3 2018 21
Reasons for the Improved Claims Trend Change in business mix Improved underwriting Loss preventing initiatives Screening for unprofitable customers Customer scoring system Digitisation Self-service Robotics Outsourcing Improved purchasing power Improved churn rate 22
Premium Classification Premiums classified by products 2008 Premiums classified by products Q1-Q3 2018 6.2% 7.4% 13.8% 27.1% 7.2% 35.5% 16.0% 16.2% 9.2% 27.5% 10.9% 23.0% Personal Motor Personal Motor Agricultural SME Agricultural SME Workers' Compensation Illness/accident and unemployment Workers' Compensation Illness/accident and unemployment 23
Customer Score Customers in the private segment are split into 20 risk groups Price decline Price increase Customer Score is used for both existing and potential customers Backtested 24
Efficiency Digitisation Self-service Online purchase 17% of new sales are initiated digitally and processed digitally in full or partly 64% of claims are reported digitally via Topdanmark s website or glass portal 18% are automated in full or partly 10% are fully automated Pilot experiment: Machine Learning IoT Efficiency Process optimisation and automation 46 processes are executed via RPA (Robot Process Automation) Automation, digitisation and outsourcing of business processes and IT development in Topdanmark have reduced the number of FTEs by 14% since 2016 25
Topdanmark s Fraud Detection Model We have built a model for fraud detection. This model is based on structured data The model was built as a reference model to compete with external vendors. These companies have long established frameworks for fraud detection. Our own fraud model, however, outperformed the models of the external vendors Therefore, it was decided to set up our own model in real time. The first version of the model was launched on 19 November. 26
PREMIUMS EARNED Our Goal Is to Have Satisfied Customers because they stay longer 10 % 1000 kunder 48 % 50 % Annual churn rate: 4% 9 % 45 % 46 % 46 % 45 % 8.1 % 43 % Annual churn rate: 8% 8 % 875 7.7 % 39 % 40 % 7 % 37 % 6.8 % 6 % 750 34 % 6.0 % 6.2 % 6.2 % 6.2 % 6.4 % Annual churn rate: 24% 35 % Dag 1 5 % 360 dage 2010 2011 2012 2013 2014 2015 2016 2017 30 % 27 Utilfredse kunder Ambassadørkunder
Personal segment Trend in Retention Ratio Index 101.5 101.5 101.6 101.1 101.0 100.3 100.4 100 99.9 Q1-Q3 2010 Q1-Q3 2011 Q1-Q3 2012 Q1-Q3 2013 Q1-Q3 2014 Q1-Q3 2015 Q1-Q3 2016 Q1-Q3 2017 Q1-Q3 2018 28
Trend in Risk on Motor Claims frequency Average claim Risk premium 29
Agenda Introduction Termination of the distribution agreement with Danske Bank Performance of the Topdanmark share Strategic initiatives Claims trend Assumed combined ratio for 2019
Excl. run-off Assumed CR of around 89-90 for 2019 86-87 2.3 1.3 0.3 ~1.0 89-90 1) Assumed CR for 2018 Run-off in Q1-Q3 2018 Weather in Q1-Q3 2018 compared to normal level Risk margin in Q3 Efficiency gains/improved insurance risk Assumed CR for 2019 excl. run-off 1) Assumed normal level for i.a. fire and large-scale claims 31
Any Questions? 32