Analyst Day Follow us on Twitter: @TrygIR 19 June 2017 Agenda - - PowerPoint PPT Presentation
Analyst Day Follow us on Twitter: @TrygIR 19 June 2017 Agenda Introduction: Morten Hbbe, CEO Recent financial development: Christian Baltzer, CFO Cyber insurance: Ulrik Andersson, Special Risk Director Innovation/The Camp: Lars Bonde, COO
Analyst Day
19 June 2017
Follow us on Twitter: @TrygIR
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Introduction: Morten Hübbe, CEO Recent financial development: Christian Baltzer, CFO Cyber insurance: Ulrik Andersson, Special Risk Director Innovation/The Camp: Lars Bonde, COO and Christian Visti Larsen, CEO of NewBanking Tryg Garanti: Mads Løgstrup, Managing Director Tryg Garanti Concluding remarks: Morten Hübbe, CEO
Agenda
Recent financial development
Christian Baltzer, CFO
50 60 70 80 90 100 50 60 70 80 90 100 75.5 55 60 65 70 75 80 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Underlying Claims ratio, net 50 55 60 65 70 75
Underlying claims ratio at same level as Q1 2016
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Claims ratio, net (Commercial DK & NO) Claims ratio, net (Sweden) Group Claims ratio, net (Corporate) Private (DK & NO)
Underlying development is adjusted for large claims, weather claims, run-off and interest. Q1-16: 76.4+3.4-0.0-4.5+0.2=75.5 Q1-17: 73.7+4.5-0.0-3.0+0.3=75.5
77.0 60 65 70 75 80 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Underlying Claims ratio, net 77.0
Group underlying Claims ratio at 77.0% in line with Q1 2016 Private underlying Claims ratio at 75.5% also in line with Q1 2016 Corporate & Sweden underlying claims ratio developed favourably “Expected FY 2017 underlying claims ratio better than FY 2016”
Underlying development is adjusted for run-off, large claims, weather claims and interest. Q1-16: 72.0+8.6-1.0-3.3+0.7=77.0 Q1-17 72.9+6.4-1.1-2.3+1.1=77.0
75.5
4,076 3,913 3,703 3,599 3,359 3,264 3,281 2011 2012 2013 2014 2015 2016 Q1 2017 313 171 98 61 305 169 107 61 Private Commercial Corporate Sweden Q1 2017 Q1 2016
On track to meet the 2017 expense ratio target
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FTE - Development
15.1 14.4 15.6 15.3 14.9 14.8 14.6 15.3 15.7 2013 2014 2015 2016 Q1 2016 Q1 2017
Expense ratio Nominal costs in business areas
As reported Adjusted for one-offs
Efficiency programme up until 2017 (DKKm)
100 105 150 145 250 45 175 388 395 50 60 75 65 125 25 2012 2013 2014 Target 2015 2015 Target 2016 2016 Target 2017 2017 Expense Claims
10,037 9,850 605
86 5,800 6,800 7,800 8,800 9,800 10,800 11,800 Own Funds Q4 '16 Results Q1 '17 Cash dividend Intangible assets Subordinated debt Miscellaneous Own Funds Q1 '17
Solvency position Q1 2017
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is 202 (Q4 2016: 194).
DKK 120m) as current properties exposure is still below targeted level following the properties transaction announced in December
solvency ratio is 162 (Q4 2016: 157).
Own funds walk Solvency capital requirement walk
4,975 5,077
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26 4,800 4,850 4,900 4,950 5,000 5,050 5,100 5,150 5,200 SCR Q4 '16 Marked Health Life Default Non-Life Opera- tional Adjust- ment Diversi- fication SCR Q1 '17
60 12 15 13 Danish institutional Non-Danish institutional Smaller shareholders
Tryg is an income stock
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Shareholder breakdown 2016 Shareholder remuneration since 2012
DKKPercentage
5.2 5.4 5.8 6.0 6.2 1.6 2.6 3.2 3.4 3.5 1 2 3 4 5 6 7 8 9 10 2012 2013 2014 2015 2016 Q1 2017Ordinary dividend Extraordinary buy back Extraordinary dividend
3.5Share price performance since IPO
50 100 150 200 250 300 350 400 450 500
It is important to know your investment case
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”Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” John D. Rockefeller
Cyber insurance
Ulrik Andersson, Special Risk Director
Agenda
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Cyber Risk - sign of the times
Cyber Risk - sign of the times
technology
goods and capital
production processes
Opportunities and vulnerabilities
Telegeography.com
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In 2016 victims of cyber related crime reported to the Police incurred losses of more than DKK 180m Threat from cyber crime against Danish authorities and businesses is Very High.
Cyber Risk - sign of the times
From security to Risk management
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DATACENTER 1 DATACENTER 2
Outsourced develpoment
Connected world
Cyber threats 2017
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Ransomware
Virus Trojans Malware CEO Fraud Cyber terrorism Advanced persistent threats Spear Phishing Drive by attacks Phishing Crimeware CaaS Denial of Service (Ddos) Internet
Things Data breaches Knowingly /unknowingly EU-GDPR
Criminals are going digital….
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Phishing
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Physical phishing
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CEO fraud
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Threats are real
Satan – a new business model
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Data breaches
An emerging regulatory environment
decade
fines in case of breaches
California 2003 – now in place in 48 US states
affected by breach
revenue or €20m
plates….
PCI DSS ~ Payment Card Industry Data Security Standards PHI ~ Protected Health Information PII ~ Personally Identifiable Information
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Cyber insurance market
Source AON
insurance
Breach Protection Legislation
is expected following both the GDPR and development in criminal activity
a European market in the range $0.3bn to $0.5bn in 2020
20m in 2015. This would grow in turn to approx. $50m-$75m
Tryg estimates 24
Cyber vs traditional insurance
First party Third party Cyber insurance
Property damage Business interruption Data restoration Fraud Extortion Privacy liability Media liability Notification Forensics Credit monitoring Regulatory costs
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Norway in 2017
adjuster Charles Taylor
Tryg Cyber insurance
Forensics Restoration of systems and data Costs associated with extortion Legal assistance Third party liability Regulatory and notification costs PR-assistance ID- og credit monitoring Business interruption (up to 3 months) Media liability
Network damage Loss of Data Media liability
Local product Nordic product
< DKK 100mio)
possible transfer to Norway in 2017
Network damage Loss of Data
Forensics Restoration of IT systems Restoration of data
( )
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Tryg Cyber insurance
Nordic Product
keeps 10% on a proportional basis
case by case basis Local Product
claims adjusting
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Where will it go ?
Risk or Peril ?
Wannacry outbreak map
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Where will it go ?
First party Third party Cyber insurance
Stand alone or integration?
Property Liability
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Where will it go ?
Risk Management never goes out of style..!
Mitigate Monitor Identify Evaluate
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Innovation Tryg
Lars Bonde, COO
Do we have a choice?
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The world is changing around us – our strategy needs to reflect this change
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Analysts predict that every third job in the industry will disappear and that the decisions that we take now will determine our future and will also impact the rest of our society Morten Hübbe The emergence of InsurTech has been a key driver for innovation within the insurance industry
Striking the right balance between short-term, predictable growth and long-term bets
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Radical Incremental High impact Low impact Substantial
90% 10%
Distribution of innovation focus 2016/2017
Initiatives with sufficient scale potential are important considering future challenges
Changing and stronger competition Car and Home & Contents decline: due to new tech and competition I.e. Workers’ Comp.: Automation and robotics will also reduce risk pools in Commercial/Corp.
…and why shouldn't Tryg be the one setting up kites, rather than building fences?
The market and technological development is as much an opportunity, as it is a challenge
Average No. of yearly touch points with
X 2
Through a frequent and insights-driven customer approach we will increase our retention rate and ownership of the customer
$
$
By taking an entrepeneurial approach we
An empirical process of try, fail, try, fail, try succeed at a
create great results
Tryg a cautious entrepeneur
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Innovation in Tryg
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eProtect cyber insurance Ung Sjåfør & We Drive
Share economy – the next big thing?
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DKK 2,300bn expected global
turnover in 2025 – and growth of 25% yearly
Accenture
cooperation with share service companies
economy?
Share economy
Will the disruptive insurtech- or the insurance companies win?
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Increased market and customer focus End-to-end responsibility and authority Speed Adaptation to the new environment – Tryg new organisation
support the change
Delivering peace of mind and value to its customers, employees and investors.
Tryg Garanti
Mads Løgstrup, Managing director, Tryg Garanti
Agenda
Tryg Garanti is about counterparty risk
“Tryg Garanti provides peace of mind when commercial contracts are entered into”
2% of Tryg gross earned premium 7% of technical result
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Tryg Garanti at a glance
Clients and product lines
producing companies
management (trade)
Strength of TMG operation
service functionality
Tryg Garanti (TMG) is the largest provider of surety contract and supply bonds in the Nordic area and has a developing position in trade credit insurance.
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TMG Business model
Seller Buyer
Contract
Reinsurance TRADE SURETY Tryg Commercial & Corporate
Surety: Trade Credit:
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The story:
insurer in the Nordics
insurer in the Nordics
The story
Norway Sweden Finland Denmark
Strong financial performance
“TMG business is highly profitable”
Strong profitability across economic cycles
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100 200 300 400
2005 2007 2009 2011 2013 2015 2016 2017F
DKKm
Premium
TMG - Surety and Trade Credit Insurance
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Premium & technical result
0% 10% 20% 30% 40%
2005 2009 2013 2016
Cost ratio
NO SE FI Trade,DK
100
2005 2007 2009 2011 2013 2015 2016 2017F
Combined ratio
Years of financial crisis
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Efficiency gains by employee
Digitalised business model
“Efficiency is core to client satisfaction and TMG profit”
Further client process integration and development of clever 3rd party distribution
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TMG Strategy
How to create more value:
product integration into client processes and thereby creating more value for clients and efficiency for TMG
internal processes via IT
take over TMG internal processes
Tryg Group distribution network and Tryg brand in the SME segment
Must-win battles:
introduction
the preferred balancing factor in a ‘rate pressure’ surety scenario
including shared pool of resources /concepts is vital to continued efficiency improvement
Critical obstacles:
distribution channels for Nordic Trade Credit
develop strong external (/group) distribution as
resources are available
Internal and external efficiency is seen as main driver of profitable growth and client satisfaction
Strong competitors are few
“TMG has critical mass in a market where critical mass is difficult to obtain”
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Many but small competitors in surety Limited market size deter competition
TMG service offering or efficiency)
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Competitors and market
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Expense ratio in Nordic banking and insurance
TMG advantage over competitors increased further in 2016. The advantage is a key explanation for the high profit potential of the portfolio.
Source: 2016 Annual Reports
Nordic surety market
Rates are under pressure for large clients, whereas rates are stable for SME clients. For 2017, an unchanged market premium volume is expected as increasing demand will level out reducing rates.
Market share split by insurance providers Market share split by bank and insurance providers
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Overall Nordic market premium is EUR 300m, split between banking and insurance providers.
Nordic trade credit market
Overall Nordic market premium is EUR 150m. For 2017, an unchanged overall premium volume is expected as the benign macro economic environ- ment put pressure on rates due to lower claims levels. Also self insurance is an issue in a positive part of the economic cycle
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Market share split by insurance providers
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International Surety and Trade Credit performance
Source: ICISA, homepage
The ICISA organisation publishes market data from its members once a year. Latest available numbers are for 2015. Claims ratios remain very satisfactory for both Surety and Trade Credit Premium growth is strong in the surety line, whereas a flattening trend is seen for Trade Credit. Pressure on rates and self insurance is seen as the main reasons.
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Surety Market Potential
competitive advantage of insurance companies Market split – banking and insurance
90% 30% 70% 35% 85% 65% 70% 50% 70% 80% 10% 70% 30% 65% 15% 35% 30% 50% 30% 20% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Belgium Denmark Germany Ireland Netherlands Finland Sweden United Kingdom Norway Switzerland Bank Insurance
Tryg Garanti is scalable
“Tryg organisation and infrastructure is scalable”
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Matrix organisation Digitalised processes
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Organisational chart
Unit manager Country manager
CEO, Finance & central functions
Client Relations, Trade credit Client Centre Risk management Client Relations, Surety
HES
MDL Markets and products
NIE KIS MDL MIJ
TEP LEF DAA The organisational chart reflects a matrix where unit managers are responsible for guidelines across countries (how things are done) and country managers are responsible for local allocation of resources (who do things) “We rely on shared values, goals and processes” “We want to be perceived as local to local clients”
A risk carrier or a risk broker ?
”Tryg Garanti financial performance is leveraged by reinsurance – and risk reduced”
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Ceding +65% of gross premium Ceding +95% of peak risks
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Managed peak risk and loss ratio
0.0 50.0 100.0 150.0 200.0 250.0 300.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Gross claims ratio Net claims ratio after reinsurance
Financial crisis
Historic claims volatility is managed by reinsurance
Tryg Garanti and The Camp
The Camp provides new opportunities to Tryg Garanti product development:
credit policies into a single transaction market for privately funded receivables
Tryg Garanti application programmers interface (API)
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