Capital Markets Day · 2018-09-04 · Sourcing. New House . Insurance . New House . Commercial ....
Transcript of Capital Markets Day · 2018-09-04 · Sourcing. New House . Insurance . New House . Commercial ....
Capital Markets Day
London - 19 June 2012
2
Agenda
09.00-09.30: Registration and coffee
Introduction and welcome
A roadmap to value creation
Expenses
11.00-11.15: Coffee break
Claims costs
Reserves and capital
Combined ratio level
Concluding remarks
13.30-15.00: Lunch
3
Disclaimer
Certain statements in today’s presentations 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 the presentations 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 financial reports 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 presented 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.
4
A roadmap to value creation
5
Growth Profitability
2005-2009
Growth Profitability
2010-
• Financial upswing• High returns • Sweden & Finland growth focus• Acquisition of Moderna
• Financial crisis taking effect• Significant price increases
Profitability, profitability and profitability
Combined ratio
82
86
90
94
98
102
2004 2005 2006 2007 2008 2009 2010 2011 Q1 12
If… Tryg Gjensidige
Premium growth in reporting currency (%)
-4
-1
2
5
8
11
14
2004 2005 2006 2007 2008 2009 2010 2011 Q1 12If Tryg Gjensidige Tryg excl. Moderna
6
CEO
Private Commercial Corporate SE/FI Claims Finance
6
New structure, financial targets, KPIs and incentives
FocusFrom 20 KPI’s to 5
Clear business area and responsibility
structureNew financial targets
Changed incentives for staff and management
Growth Profitability
2012
7
Customer satisfaction in Norway 2011
Private - retention rate
Strong customer satisfaction and high level of retention rates drive value creation
64
66
68
70
72
74
2009 2010 2011Tryg DnBNO R Gjens idige
IF Indus try
Customer satisfaction in Denmark 2011
71
7273
74
7576
77
2009 2010 2011Tryg C odan Topdanmark
A lm. Brand Industry
82%
84%
86%
88%
90%
92%
Q3 05
Q1 06
Q3 06
Q1 07
Q3 07
Q1 08
Q3 08
Q1 09
Q3 09
Q1 10
Q3 10
Q1 11
Q3 11
Q1 12
84%
85%
86%
87%
88%
89%
90%
Q1 08
Q2 08
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Q2 11
Q3 11
Q4 11
Q1 12
Commercial - retention rate
DK
DK
NO
NO
Source: EPSI.
Source: EPSI.
8
Size/influence
Premium increases
2009 2010 2011
Next Level Sourcing
2012
Premium increases
New Nordic Contents
2013 2014 2015
Premium increases
Cost reductions
Premium increases
Cost reductions
Next Level Sourcing
New House Insurance
New House InsuranceCommercial
initiatives
Commercialinitiatives
New value drivers
9
Strategic initiatives - Value creation in mature markets
Increased price differentiation
Commercial back on track
Sweden and Finland in balance
Expenses/claims reductions
10
Changes in the environment create need for new tariffs
98%98%
91%
86%
88%
90%
92%
94%
96%
98%
100%
2009 2010 2011
Claims ratio - House insurance in DK
8,000
8,500
9,000
9,500
10,000
10,500
11,000
11,500
12,000
12,500
Q4-20
07Q2-
2008
Q4-20
08Q2-
2009
Q4-20
09Q2-
2010
Q4-20
10Q2-
2011
Q4-20
11
0
5,000
10,000
15,000
20,000
25,000
2008 2009 2010 2011
Soaring cloudburst level in Denmark
Burglary trend in Danish market
99%
95%
98%
93%
94%
95%
96%
97%
98%
99%
100%
2009 2010 2011
Claims ratio - Contents insurance in DK
Increased price differentiation
11
Reversing a negative trend
Increased price for special itemsImplementation of geomatic data
Tryg was first mover with mileage
as part of the motor tariff in 2005.
It is time to be first mover again:
-New Nordic Contents insurance
represents a game changer.
Personal motor
Product examples
House
Private contents
Increased price differentiation
12
Turnaround of Commercial business
Combined and gross claims ratio
55
65
75
85
95
105
115
2009
2010
2011
2012
Commercial Combined ratio
Commercial premiums and earnings
11,572
445
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Premiums2009-11
Technicalresult 2009-
11
TargetTechnical result of DKK 400m per year
Commercial back on track
13
First time as an independent business area
Distribution
Risk selection
Tariffs
Automation
Commercial focus areas 2012 - 2015
Risk selectionSegmentation
New distribution strategyService setup
Sales process optimisationBack-office automation
Product clean-up
Tariff planTariff reviews
CEO
Private Commercial Corporate SE/FI Claims Finance
Previous structure
CEO
Direct Partner Corporate CB&BC Claims Finance
Selected price increases and pruning
New Structure
Private and Commercial
Denmark 2010 2011 2012
Workers’ comp. 4% 5% 7%
Property 4% 16% 12%
Norway 2010 2011 2012
Workers’ comp. 8% 5% 8%
Property 7% 4% 5%
Commercial back on track
14
0
100
200
300
400
500
600
Q1-
09Q
2-09
Q3-
09Q
4-09
Q1-
10Q
2-10
Q3-
10Q
4-10
Q1-
11Q
2-11
Q3-
11Q
4-11
Q1-
12
0
20
40
60
80
100
120
Private Atlantica Bilsport &MC
Productdirect
2010 2011
Combined ratio in Swedish business segments
Gross premium, SEKm
Challenging growth in Private Sweden
0100200300
400500600
2006
2007
2008
2009
2010
2011
E2012
Nordea Moderna
Reduction in Private sales, SEKm
Sweden in balance
15
12
5055
60
0
10
20
30
40
50
60
70
2009 2010 2011 2012
Cleaning up in unprofitable partner agreements
1
8
13
6
-1
1
3
5
7
9
11
13
15
House & Contents Motor
2011 2012
Changed risk selection
Focus on profitability
Luxury car development
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
0.80%
0.90%
1.00%
2007
0120
0704
2007
0720
0710
2008
0120
0804
2008
0720
0810
2009
0120
0904
2009
0720
0910
2010
0120
1004
2010
0720
1010
2012
05
0
100
200
300
400
500
600
700
Share of Portfolio No Luxury Cars
Sweden in balance
Lower level of discounts
Dis
count
in %
Num
ber
of
agre
emen
ts
16
Up for strategic review
Strategic review initiated in early 2012
• Divestment• Partnership• Run-off
Fennia 9.7
Tryg 2.2Other 17.6
If 23.9
Pohjola 28.6
Tapiola 18
Finland
EUR 3.7bn (Q4-11)
Finland in balance
17
Strategic initiatives - Value creation in mature markets
Increased price differentiation
Commercial back on track
Sweden and Finland in balance
Expenses / claims reductions
18
Key messages of today
18
Combined ratio target
Reserves and capital
Expenses
Claims costs
• Reduction in staff functions
• Optimise Business units
• Sourcing
19
Efficiency is a competitive parameter - Low Nordic expense ratios as entry barrier
Efficiency as a barrier to entry
10%
15%
20%
25%
30%
35%
Direct
Lin
eIn
sura
nce
RSA
Genera
li
Alli
anz
AXA
Zurich
Sam
po
Try
g N
O
Adm
iral
Try
g G
roup
Alm
. Bra
nd
Gje
nsi
dig
e
Topdanm
ark
Try
g D
K
The Nordic region is significantly more cost efficient
20
14%
15%
16%
17%
18%
19%
20%
21%
2006 2007 2008 2009 2010 2011
Tryg Gjensidige If Alm. Brand Topdanmark
Expense improvements among Nordic players
• Competitors have improved their expense ratio during the last 5 years.
• Tryg’s expense ratio has remained stable – but with growing nominal expenses.
Expense ratio development
Lack of expense focus
Competitive landscape drives expense focus
16.5%*
16.4%
15.0%
16.5%*
2015 targets
* Based on estimates from external analysts.
21
Premium growth has enabled Tryg to absorb growth in expenses
16,000
17,000
18,000
19,000
20,000
21,000
2007 2008 2009 2010 2011
• Almost unchanged gross expense ratio from 2007 to 2011 - but driven by premium increases.
Gross premiums earned
2,7002,8002,9003,0003,1003,2003,3003,4003,500
2007 2008 2009 2010 2011
Total insurance operating expenses
26% 26%
Unchanged expense ratio
22
Focus on expenses helped finance start-up in SE/FI - Focus behind the scenes
• Investing in SE/FI financed through reduction in FTE in DK/NO
• Strong expense level in DK
• Focus on reduction in expenses e.g. travel in the period
• No real structural cost cutting through the period
3,600
3,650
3,700
3,750
3,800
3,850
2007 2008 2009 2010 2011
0
100
200
300
400
500
600
700
800
Number of full-time employees
14.0
15.0
16.0
17.0
18.0
2004 2005 2006 2007 2008 2009 2010 20110
10
20
30
40
50
60
70
Expense ratio
Travel expenses
SE+FI
NO
DK
SE+FI
DK+NO
50
55
60
65
70
75
80
2007 2008 2009 2010 2011
23
Reductions in expenses and claims costs
• Savings programme will reduce costs by DKK 1bn (excluding inflation).• Split between DKK 400m on expenses and 600m on claims cost.
– After redistributing savings from Business Functions, the split between what effects the cost ratio and the claims ratio will be DKK 300m and DKK 700m.
600
100
300
ClaimsClaims
DKK 600m
Total reduction in expenses DKK 400m
Transfer to Claims / indirect claims
24
Saving initiatives per year 2013–2015
125
125
50
300
Total targetedsavings
2013 2014 2015
25
Major saving initiatives identified per area
Business areas• Efficiency improvements • Automation & optimisation• Benefits from Commercial Programme• Optimisation of distribution and sales channels
Business support functions
• Group Finance project • Other staff functions• Completion of IT projects and IT maintenance setup • Closing of offices
DKK 175m
DKK 125m
Total
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2,500
2,700
2,900
3,100
3,300
3,500
3,700
3,900
2007 2008 2008 2010 2011 E2012 E2013 E2014 E2015
Flat nominal expense development to reach target of <15 in 15 - requires total savings of approx. DKK 300m in 2015
Forecasted development
DKK300m
Target <15% in 2015
No more 10 in 20
27
Staff functions increased by 25%
Number of full-time employees
700
750
800
850
900
950
1,000
2007 2008 2009 2010 2011
25%
28
Wage drift in Denmark and Norway is stalling
In %
5.95.5
4.6
3.12.5 2.5
7.6
3.94.5
3.9 4.33.5
0123456789
2008 2009 2010 2011 2012 2013
Denmark Norway
29
4. We can source better
1. We can reduce our service level in “lower value areas”11
3. We can realise synergies by centralising activities in DK
5. We can organise ourselves smarter
Optimisation of Group Finance
29
2. We can work more efficiently
30
The pilot: Group Finance
- 7%- 11%
75%
Budget 2012
20132012
-7%
2014 Target
-25%
The pilot and the following steps - Savings of 25% in expenses and 22% in FTEs
100%
30
Group Finance
Strategy&
CorporateIdentity
Group Communi-cation &
HR
Legal &Quality
InternalAudit
IT & Facilities
Next steps 2012-13
31
Number of full-time employees towards 2015 will decrease
Expected number of employees towards 2015
3,900
4,250
4,318
3,700
3,800
3,900
4,000
4,100
4,200
4,300
4,400
2011 Target 2012 2013 2014 Target 2015
Country Age distribution(% of employ. -> age)
DK51% -> 45 and more10% -> 60 and more
NO48% -> 35 – 499% -> 60 and more
FI48% -> 25 – 349% -> 50 and more
SE49% -> 25 – 398% -> 60 and more
Age distribution in Tryg
0
100
200
300
400
500
600
700
800
< 20 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 > 64
Age interval
nu
mber
of
em
plo
yees
External turnover (voluntary)
2.0
4.0
6.0
8.0
10.0
12.0
2003 2004 2005 2006 2007 2008 2009 2010 2011
- 10%
32
Key messages of today
32
Combined ratio target
Reserves and capital
Expenses
Claims costs
- <15% in 2015- Reductions of DKK 300m and DKK 100m in claims
2,000
2,200
2,400
2,600
2,800
3,000
3,200
3,400
3,600
3,800
4,000
Expenses 2011 Inflation Savings Expenses 2015
Expenses
3,430 300
DKKm
33
Questions
and coffee break
34
Key messages of today
34
Combined ratio target
Reserves and capital
Expenses
Claims costs
- <15% in 2015- Reductions of DKK 300mand DKK 100m in claims
• Procurement
• Process improvements
• Sourcing
35
Claims area
High quality of claims handling
Low level of complaints
High customer satisfaction
Procurement power
Customer service/differentation
Control of suppliers
Processes and reduce FTEs
Maintain
Improve
36
0
10
20
30
40
50
60
70
Satisfied Very satisfied Satisfied Very satisfied
Would recommend Other
High customer satisfaction in claims handling and low level of complaints
0
5
10
15
20
25
Alka
Alm. B
rand
Codan GF IF
Topd
anm
ark
Tryg
Market share Share of claims complains*
*House, contents, motor etc. 2011Source: Ankenævnet for Forsikring
Claims complaints relative to market share
• 87% of DK customers are satisfied• 80% of NO customers are satisfied
• 70-72 % of very satisfied customers will recommend Tryg
22
65
19
61
72%
23%
70%
28%
Denmark Norway
Customer satisfaction 2011
37
Savings in claims - completion of NLS and other savings
100
250
250
100
700
0
100
200
300
400
500
600
700
800
Total savings onclaims
2012 2013 2014 2015
38
Examples of initiatives
Indirect
Expected saving: DKK 40m p.a.
Motor
Expected saving: DKK 130m p.a.
Building
Expected saving: DKK 180m p.a.
Health
Expected saving: DKK 40m p.a.
Contents
Expected saving: DKK 110m p.a.
3939
Sourcing Factory: eAuctions
Example of successful eAuction
eAuction and outcome
•Claim: 78 sqm wooden floor damaged by water
•5 participating suppliers
•Final price : DKK 73,000
•Savings achieved: DKK 25,000
Higher savings
Faster process
Lower sourcing expenses
More transparent
process
• More automated process• Fewer face-to-face meetings
• Higher visibility of offers
• More objectivity in selection
• Faster negotiation
• More structured process
• Higher number of bids
• Higher competitive pressure
40
Time-lapsed recording of live eAuction
41
Examples of initiatives
Indirect
Expected saving: DKK 40m p.a.
Motor
Expected saving: DKK 130m p.a.
Building
Expected saving: DKK 180m p.a.
Health
Expected saving: DKK 40m p.a.
Contents
Expected saving: DKK 110m p.a.
42
Car crash repair – spendings of approx. DKK 3bn
27
8
65
Crash repairGlass repair Total loss
Distribution of spend in motor hull
Percent
43
Film clip – Handling motor claims
http://www.youtube.com/watch?v=pVfzRTResLg&feature=youtu.be
44
Three beneficiaries in motor claims handling
PartnerBenefits from speedy processes and
higher volume. Payment is quick with incentives for high quality.
TrygBenefits from increased quality, customer
satisfaction and documented lower costs than market.
CustomerBenefits from fast response, high quality and benefits such as courtesy car, cleaning of car
and extended warranty on repair.
45
Repair costs in Denmark are gaining ground
Source: Autotaks statistics.
Development in average repair cost (moving average) Cars and vans excl. glass Other
Development in average repair cost (moving average) Cars and vans excl. glass
10,000
10,200
10,400
10,600
10,800
11,000
11,200
Janu
ary '11
Februa
ry '11
March '
11
April '1
1
May '1
1
June
'11
July
'11Aug
ust '1
1Sep
tembe
r '11
Octobe
r '11
Novembe
r '11
Decembe
r '11
Janu
ary '12
Februa
ry '12
March '
12
April '1
2
May '1
2
In DKK
Tryg
Other
46
Key messages of today
46
Combined ratio target
Reserves and capital
Expenses
Claims costs
- <15% in 2015- Reductions of DKK 300m and DKK 100m in claims
- Reductions of DKK 700m- Claims ratio, net <75%
13,000
13,500
14,000
14,500
15,000
15,500
16,000
16,500
Claims level2011
Inflation Changefreqency/UW
Savings Claims 2015
Claims cost
15,000
750? 700
DKKm
47
Questions
48
Key messages of today
48
Combined ratio target
Reserves and capital
Expenses
Claims costs
- <15% in 2015- Reductions of DKK 300m and DKK 100m in claims
- Reductions of DKK 700m- Claims ratio, net <75%
49
Premium provisions
Case reserves
Technical provisions
0
5
10
15
20
25
30
35
40
Q1 2012
KPMG loss reserve review confirms Tryg’s own view
Status Q1 2012:
• Total reserves of DKK 36.4bn
• Loss reserves DKK 27bn
• Increased duration in Denmark ~ 4 years
• Duration of 2.8 years in Norway
• Premium reserves DKK 9.4bn
Reserves consist to a great extent of Bodily Injury related claims
28%
39%
14%9%11%
72%
Property & other short tail
Workers' comp
Motor TPL
Accident
Composition of provisions
BI – duration >4 years
Other – duration ~1 year
4.9% 4.7%
3.8%
4.6% 4.6%4.2%
2007 2008 2009 2010 2011 Q1 12
Stable run-off development
Effect on combined ratio
MarginActual year
Run-off
50
Gross earned premiums
15,000
16,000
17,000
18,000
19,000
20,000
21,000
2005 2006 2007 2008 2009 2010 2011
Growth consumes capital
Capital
8,000
9,000
10,000
11,000
2005 2006 2007 2008 2009 2010 2011
DKKm
DKKm
51
Payout model - transparent but unstable
Shareholder remuneration
21
33
17
6.54
6.52
15.5
21
12.5
0
5
10
15
20
25
30
35
40
2005 2006 2007 2008 2009 2010 2011
DK
K p
er
sh
are
Cash dividend Share buy back
• Tryg’s payout model has been transparent, but has also been vulnerable to:
• Fluctuations in technical and investment result
• Change in interest rates (effect on Norwegian pension scheme)
Average2006-2011
Payout DKK 1.3bnPayout ratio 76%Per share DKK 20
52
Key messages of today
52
Combined ratio target
Reserves and capital
Expenses
Claims costs
- <15% in 2015- Reductions of DKK 300m and DKK 100m in claims
- Reductions of DKK 700m- Claims ratio, net <75%
External review confirmed
53
Questions
54
Key messages of today
54
Combined ratio target
Reserves and capital
Expenses
Claims costs
- <15% in 2015- Reductions of DKK 300m and DKK 100m in claims
- Reductions of DKK 700m- Claims ratio, net <75%
External review confirmed
55
Combined ratio target
CR stable below 90
from Q3 2013
ROE 20%80
82
84
86
88
90
92
CR ta
rget
Expe
nse/
claim
s in
itiat
ives
Clai
ms
infla
tion
abov
e CP
I
Wea
ther
and
larg
e cla
ims
Legi
slatio
n et
c (W
C, ta
xes.
.)
Inte
rest
CR ta
rget
< 90< 90
Uncertainty
0%
10%
20%
30%
40%
2003
2004
2005
2006
2007
2008
2009
2010
2011
Q1 2
012
2013
2014
ROE target
ROE after tax
Combined ratio
56
Key messages of today
56
Combined ratio target
Reserves and capital
Expenses
Claims costs
- <15% in 2015- Reductions of DKK 300m and DKK 100m in claims
- Reductions of DKK 700m- Claims ratio, net <75%
External review confirmed
Combined ratio at 90 or below from Q3 2013
ROE of 20%
57
Further informationVisit tryg.comFollow us on twitter.com/TrygIR
Questions