Non-life insurance

Alm. Brand
SEB Enskilda Nordic Seminar 2013
Company presentation
9 January 2013
1
GROUP
Alm. Brand in brief
A financial group with DKK 7 billion in
revenue and 1,600 employees
Offering



Bank branches
Insurance and
pension branches
Regional offices
Non-life insurance
Banking
Life insurance
Headquarter
Customer focus


Private customers age +30 with multiple insurance
and banking needs
Agriculture and small to medium-sized commercial
customers (not bank)
Distribution of products through




270 insurance agents
6 call centres
14 life and non-life sales centres
11 bank branches
2
GROUP
Non-life insurance
- Denmark's 4th largest insurance company
Market shares in non-life insurance
 Market share of 10%
 400,000 private customers
 incl. 200,000 plusKUNDER
 incl. 25,000 dobbeltKUNDER
 100,000 commercial and agricultural
customers
0%
5%
10% 15% 20% 25%
Tryg
Topdanmark
Codan
Alm. Brand
If
Gjensidige Forsikring
Sygeforsikringen "danmark"
Lærerstandens Brandforsikring
Alka
GF-Forsikring
 Customer focus
 Private customers age +30
 Agriculture
Share of group revenue Q1-Q3 2012
DKK
3.6bn
66.3%
3
GROUP
Alm. Brand Bank
- Controlled turn around
Retail bank supporting the group’s private customers
Distribution of profit before expenses*
Q1-Q3 2012
Leasing
13%
11 branches
55,000 private customers
 50% also customers in life or non-life
insurance lines
Markets and
Asset
management
34%
Main activities
 Retail banking
 Financial Markets
 Leasing
Banking
activity
53%
*before credit related value adjustments
Share of group revenue Q1-Q3 2012
12.0%
4
DKK
665m
GROUP
Life insurance
- Denmark’s 7th largest commercial life and pension company
Expense ratio on provisions
0.74%
0.67%
0.59%
80,000 customers
 40% also in banking or non-life insurance
lines
Market share
 9% on private capital pension schemes
 4% on private instalment pension
schemes
 5% on insurances with regular
disbursements
5
2007
2008
2009
0.64%
0.59%
2010
Share of group revenue Q1-Q3 2012
11.7%
DKK
643m
2011
GROUP
A period with many challenges
2008-2012
Alm. Brand
forced to
writedowns
Real estate crisis
without end
6
GROUP
FIT FOR FIGHT
Increase profitability
Return to shareholders

Profitable customer relations



ROE of 10% above money market
rate
Earning more per customer
Reducing risk
Improve customer loyalty
Loyalty
Competitive cost structure
5% annual cost reduction
Getting in line with peers
Employee commitment


Efficiency
Bank turn-around

Setting the base for the future bank
Whoever said, “It's not whether you win or lose that
counts, probably lost.” MARTINA NAVRATILOVA, tennis player
7
NON-LIFE INSURANCE
Combined ratio
- Successful improvement of business
98.0
 Successful focus on improving the
underlying CR
98.2
92.3
88.8
85.5
83.7
80.2
2009
2010
2011
Combined ratio
Q1-Q3
2012
2009
2010
2011
79.1
Q1-Q3
2012
Underlying combined ratio
8
 The levers for this improvement
have been
 Premium increases
 Cost reduction
 Procurement
 Amending terms and
conditions
 Use of deductibles
NON-LIFE INSURANCE
Expense ratio target reached
22%
 Strong focus on costs
20%
 Target: Expense ratio of 16-17%
by
 New IT-infrastructure
 Restructuring distribution
18%
 Target are reached and exceeded
16%
 Guidance for 2012
 Just over 16%
14%
2009
2010
2011
2012
9
Q1-Q3
H1
Q1
FY
Q1-Q3
H1
Q1
FY
Q1-Q3
H1
Q1
FY
Q1-Q3
H1
Q1
12%
NON-LIFE INSURANCE
2012 - a very favourable year so far
- but not a new normal
Combined ratio Q1-Q3 2012
Run-offs compared to expectations
Weather-related claims compared to
expectations
83.7
 Run-offs expected at zero
4.4
1.4
 Weather-related claims expected
around 4%-points of CR
 Major claims expected around
8%-points of CR
Major claims compared to
expectations
1.9
Normalised combined ratio
91.4
10
NON-LIFE INSURANCE
Alm. Brand among top performers
Expense ratio
- Peer group comparison
18.5
20.4 20.3
17.6
15.9 15.7
14.9 15.4 15.7 15.7
21.3 21.3
17.2 17.0 16.8 16.5
2009
2010
2011
Combined ratio
Q1-Q3 2012
98.0 98.2
92.3
83.7
91.1 93.3
90.3 88.0
92.2
98.8
93.5
99.5 101.4 102.3
88.5
91.5
Note: Combined and expense ratios are stated at group level. Codan figures include Danish business only (latest figures are from H1 2012)
11
BANKING
A bank under transformation
Winding-up portfolio DKK 6.1bn
Continuing portfolio DKK 2.7bn
Mortgage deeds
DKK 2,991m
Lending to private
customers
DKK 2,493m
Mortgage deed financing
DKK 226m
Property development
projects
DKK 249m
Commercial lending
DKK 1,366m
Car finance
DKK 270m
Other lending
DKK 201m
Agriculture
DKK 1,012m
12
BANKING
Deposits and lending
17.2
15.0
DKKbn
12.7
11.1
11.1
10.6
10.4
8.6
9.2
8.0
FY
FY
FY
FY
Q1-Q3
2008
2009
2010
2011
2012
Deposit surplus
Loans and advances
Deposits
DKKbn
1.4
-2.4
-3.9
-4.1
-6.1
FY
FY
FY
FY
Q1-Q3
2008
2009
2010
2011
2012
13
 From significant deposit deficit to a
surplus of DKK 1.4bn
 Reduction of loan book
 Successful deposit campaign
BANKING
Losses and writedowns still high
- but from a higher level
1,667
DKK million
994
908
DKK 400m writedowns
on commercial property
following new FSAregulation
594
332
FY
FY
FY
Q1-Q3
2009
2010
2011
2012
15
BANKING
Solving the funding crisis
DKK 13.6bn
DKK 12.5bn
DKK 11.3bn
 Financial crisis resulted in a
funding crisis
DKK 6.5bn
FY 2009
FY 2010
FY2011
Q3 2012
Credit institutions and central banks
Supplementary capital
Issued bonds
Hybrid capital
16
 Significant reduction in
funding
 DKK 6.6bn repaid in
Q1-Q3 2012
 Funding developing
according to plan
 Excess liquidity of
DKK 3.6bn in Q3 2012
LIFE INSURANCE
Premium income
889
DKKm
246
719
 Premiums up by 41% Q1-Q3
 Transfer of pension schemes of
new and existing customers
264
643
283
226
455
75
 Lower investment schemes payments
 Significant one-time payments in
2011
100
208
126
2011
2012
2011
Q1-Q3
2012
Q3
Life insurance
Investment schemes
Note: Investment schemes are reported in the banking segment
17
 Total pension contributions up by
24%
LIFE INSURANCE
Results
DKKm
Q1-Q3
Q1-Q3
2009
2010
2011*
2011*
2012
58
30
21
18
9
-24
13
24
21
-8
54
54
11
8
8
22
27
86
61
65
Calculated return on equity
110
124
142
108
74
Reversed from/transferred to
shadow account
29
57
-5
-8
-4
139
181
137
100
70
56
0
5
8
9
Return on investments
allocated to equity
Result of portfolios without
bonus entitlement
Risk premium
Share of expense and risk
results
Profit before tax
Shadow account balance
 Return on investments
impacted by low interest rate
level
 From 2011 reduced
dependence on risk premium
 Earnings mainly depended on
the risk results
*) Changed life expectancy positively impacted portfolios without bonus entitlement by DKK 18 million
18
GROUP
Successful improvement
of the excess capital
DKKm
31 Dec 2010
31 Dec 2011
30 Sep 2012
4,758
4,206
4,426
-82
0
-660
-758
-692
Supplementary capital
1,803
1,753
1,704
Total capital base for the group
5,819
5,201
5,438
Statutory capital requirement for the group, end
of period
3,748
3,376
3,041
Excess relative to statutory capital
requirement
2,071
1,825
2,397
Internal capital target
5,737
5,041
4,917
82
160
521
Consolidated equity
Intangible assets
Tax assets
Excess relative to internal capital target
19
GROUP
Outlook and preliminary guidance
Full-year pre-tax profit of DKK 725m before losses and writedowns
Non-life insurance
Banking
Life insurance
Profit of DKK 725m
Loss of DKK 50m before
losses and writedowns
Profit of DKK 90m
Outlook up by DKK 150m
 CR improved to 86 (88.5)
 Expense ratio adjusted to just
over 16
 Growth unchanged at approx.
2%
Unchanged compared with H1
 Expected loan reduction net of
losses and writedowns
increased to DKK 1.2bn (DKK
1bn)
Unchanged compared with H1
 Expects to book full risk
allowance
Other activities
 Expected cost of DKK 40m (unchanged)
Preliminary guidance for 2013
 Pre-tax profit of DKK 400m to 450m before losses and writedowns
 Assuming CR ratio of 92
20
GROUP
Share characteristics
- The equity story in brief
 Strong non-life insurance
 Successful turn-around of non-life insurance activities
 Turn-around case on the bank
 Continue reducing the loan book and risk
 Re-establish retail bank targeting the group’s core private customers
 Increased activity in Leasing and Financial Markets
 Low risk life insurance business
 Proven stable business model even under difficult market conditions
21
Questions?
22
GROUP
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.”
23
Alm. Brand
SEB insurance seminar
24