Results for 2014 Webcast presentation 25 February 2015 G R O U P - - PowerPoint PPT Presentation

Alm Brand

Results for 2014

Webcast presentation 25 February 2015

Financial highlights of 2014 Pre-tax profit: DKK 401m

Proposed dividend: DKK 0.50 per share Forward-looking activities: Pre-tax profit: DKK 737m

Winding-up activities: Loss: DKK 336m

• Writedowns: DKK 260m

G R O U P

Non-life Insurance

Pre-tax profit: DKK 651m

• CR: 85.5
• Expense ratio: 15.6%
• Premium growth: 0.5%

Life and Pension

Pre-tax profit: DKK 78m

• Risk result: DKK 64m
• Bonus potential: DKK 0.9bn
• Bonus rate: 9.8%

Banking

Pre-tax profit: DKK 61m

• Writedowns: DKK 17m
• Growth in lending
• Growth in full-service

customers

2

Comments on Q4

Completion of mortgage deed transaction in December Benign winter with very few weather-related claims Very satisfactory underlying combined ratio Interest rate drop to all-time low impacted all business areas negatively Tax asset increased, resulting in positive tax for the period

G R O U P

Financial highlights, Q4 Group Pre-tax profit: DKK 83m

Non-life Insurance Pre-tax profit: DKK 202m

• CR: 79.9
• Expense ratio: 15.1

Life and Pension Pre-tax profit: DKK 8m Banking Pre-tax loss: DKK 14m Winding-up activities Pre-tax loss: DKK 99m

3

NON-LIFE INSURANCE Highlights

Pre-tax profit of DKK 651m

• Technical result better than expected

– Combined ratio of 85.5

• Negative investment return due to lower

interest rates – Investment return not satisfactory

N O N - L I F E I N S U R A N C E

Pre-tax profit

DKKm

4

411 823 642 744 74 257 49 30 121

• 93

51

• 55

460 853 763 651 125 202 2011 2012 2013 2014 2013 2014 FY Q4 Technical result Investment return after technical interest

Combined ratio better than expected

Combined ratio of 85.5

• Better than expected
• Weather-related and major down by 0.9 ppt Y/Y
• Reinstatement costs related to storms in Q4 2013
• Positive run-offs improved CR by 2.6 ppts

– 1.5 ppt lower Y/Y

Underlying combined ratio of 77.0

• Claims down by 4%

– Approx. 5% fewer claims – Especially theft and motor claims – Rewriting policies and increasing deductibles – Advising on preventive measures Expense ratio down Y/Y

• Lower sales resulted in lower acquisition costs

N O N - L I F E I N S U R A N C E

Combined ratio

5

76.4 67.1 71.4 69.9 79.1 64.8 15.9 16.2 16.0 15.6 15.1 15.1 92.3 83.3 87.4 85.5 94.2 79.9 80.2 79.7 78.8 77.0 75.8 72.8 2011 2012 2013 2014 2013 2014 Q4 Claims ratio incl. reinsurance Gross expense ratio Underlying combined ratio

Weather-related and major claims

N O N - L I F E I N S U R A N C E

Major claims ratio Major claims down by 1.4 ppt Y/Y Below average annual expectation of 8%

• Unusually few claims
• Claims increased in Q4

Weather-related claims excl. reinstatement up by 0.5 ppt Y/Y In line with normal expectation of 4%

• Reinstatement costs related to storms in Q4 2013
• Benign winters but offset by cloudbursts in May

and August

• Claims at a normal level adjusted for

reinstatement

Weather-related claims ratio

6

6.8 6.2 7.2 5.8 7.0 2011 2012 2013 2014 2014 FY Q4

Major claims ratio Average expectation (8%)

6.9 2.1 3.7 4.2 2.0 1.6 0.2 1.8 1.1 0.4 2011 2012 2013 2014 2014 FY Q4

Weather-related claims ratio Reinstatement Average expectation (4%)

Premiums impacted by stronger competition

Premium income up by 0.5% Y/Y

• Private up by 0.6%

– Negatively impacted by smaller and lower-priced cars and stronger competition – Retention rate has been falling during 2014 due to competition but has remained at a satisfactory level

• Commercial up by 0.5%

– Positively impacted by higher average premiums due to ongoing rewriting of building insurances – Negatively impacted by defection among customers receiving the highest premium increases

N O N - L I F E I N S U R A N C E

Premium income

DKKm

7

2,504 2,540 2,579 2,626 2,642 2,258 2,232 2,287 2,405 2,416 4,762 4,772 4,866 5,031 5,058 2010 2011 2012 2013 2014 FY Private Commercial

Private

• Very satisfactory results

Combined ratio of 84.8

• Improved by 1.7 ppt Y/Y

Improved claims development

• Weather-related claims on level with 2013
• Increased number of major claims but expenses down

– Combined ratio improved by 1 ppt

• Run-off improved combined ratio with 2.2 ppts (2013: 3.8

ppts)

Underlying business developing positively

• Improved claims frequency on most products
• Increased frequency on travel insurance after introduction
• f extended coverage

N O N - L I F E I N S U R A N C E

Combined ratio

8

80.9 77.1 70.0 67.5 68.7 67.4 20.1 18.8 15.3 17.7 17.8 17.4 101.0 95.9 85.3 85.2 86.5 84.8 2009 2010 2011 2012 2013 2014 Claims ratio incl. reinsurance Gross expense ratio

Commercial

• Very satisfactory results

Combined ratio of 86.0

• Improved by 2.4 ppts Y/Y

Improved claims trend

• Strong trend in major claims

– Positive effects from preventive work

• Weather-related impacted by cloudbursts

– Claims increased to 6.2 ppts from 5.7 in 2013

• Run-off improved combined ratio by 3.0 ppts (2013: 4.5

ppts)

• Underlying claims trend continued to improve

Efforts to secure profitability on commercial fire and property insurances will continue in 2015

• Always considering the growing competition

N O N - L I F E I N S U R A N C E

Combined ratio

9

78.0 84.6 83.6 66.7 74.4 72.4 16.8 16.3 16.6 14.6 14.0 13.6 94.8 100.9 100.2 81.3 88.4 86.0 2009 2010 2011 2012 2013 2014 Claims ratio incl. reinsurance Gross expense ratio

Investment return

• Loss of DKK 93m

Investment return negatively impacted by falling interest rate level

• The bond maturity effect impacted investments

negatively

• Higher risk premium in Q4 resulted in negative

value adjustments on mortgage bonds Risk profile exposed to rising interest rates

• Longer duration on workers’ compensation

liabilities than on investment assets

• Implementation of new model for these liabilities is

expected to provide better match – Implementation expected in H1 2015

N O N - L I F E I N S U R A N C E

Investment assets

DKK 9.7bn

Equities 2% Mortgage deeds 19% Bonds 79%

10

LIFE AND PENSION Highlights

Pre-tax profit of DKK 78m

• Down by DKK 8m Y/Y
• Satisfactory risk result
• Growth in total pension premiums
• Regular premiums still negatively impacted by tax

reform

Satisfactory return on policyholders’ funds

• Collective bonus potential up by DKK 85m
• Bonus rate improved Y/Y to 9.8%

– The discount rate of the Danish FSA declined Y/Y from 2.24% to 0.99% (10-year yield)

• Rate on policyholders’ savings for new customers

maintained at 4% for 2015

L I F E A N D P E N S I O N

Pre-tax profit

DKKm

11

116 78 83 76 13 10 21 12 3 2 2

• 2

137 90 86 78 15 8

2011 2012 2013 2014 2013 2014 Q4 Underwriting profit/loss Return on investments allocated to equity

Pension contributions

Total pension contributions up by 29%

Pension premiums up by 34% Y/Y

• Single premiums up by 102%
• Regular premiums up by 1%

– Still negative impact from tax reform Unguaranteed investment schemes in the bank up by 17%

L I F E A N D P E N S I O N

Total pension contributions

DKKm

12

603 618 626 632 188 201 121 285 302 611 85 163 358 332 345 402 102 121 1,082 1,235 1,273 1,645 375 485 2011 2012 2013 2014 2013 2014 Q4 Regular premiums Single premiums Investment schemes

Profit impacted by lower risk result

+ Interest result increased

− Increased due to higher risk allowance in 2014

+Return on equity investments

– Return impacted by the low level of interest rates

÷ Expense and risk results

– Lower risk result – Satisfactory expense result – Offering some of the industry’s lowest costs to customers

L I F E A N D P E N S I O N

Profit split*

DKKm

13

* Profit before tax of the parent company Alm. Brand Liv og Pension A/S, which includes post-tax return on investment in the EMD Local Currency investment fund

86 81 74 62 11 11 11 16 21 12 3 2 24

• 9
• 3
• 5
• 5
• 2

137 90 86 77 2011 2012 2013 2014 Expense and risk results Interest result Return on investments allocated to equity Result of portfolios without bonus entitlement Change to shadow account

Investment return

• Very satisfactory return and improved

bonus rate

L I F E A N D P E N S I O N

Strong bonus potential

• Average bonus rate of 9.8%
• Attractive bonus rate for new

policyholders of 11.6% Rate on policyholders’ savings

• Highest rate on private

policyholders’ savings in Denmark – Maintained in 2015

U74* Interest rate group Total 1 2 3 Technical interest rate

0.5-1.5 1.5-2.5 2.5-3.5 3.5-4.5

Rate on policyholders’ savings, 2014

4.00 4.50 5.00 6.00

Rate on policyholders’ savings, 2015

4.00 5.00 5.00 6.00

Investment assets (DKKbn)

0.1 4.8 1.9 1.2 4.4 12.5

Bonus rate (%)

11.6 19.3 7.6 3.3 9.8

Return (% YTD)

5.4 13.7 8.0 11.0 10.0

Bonds

100% 59% 53% 77% 78% 67%

Equities

0% 24% 20% 8% 3% 14%

Property

0% 17% 14% 11% 9% 13%

Fixed-income derivatives

0% 0% 13% 4% 10% 6%

*Portfolios without bonus entitlement

14

BANKING Highlights

Pre-tax loss of DKK 275m

Improved by DKK 194m Y/Y Forward-looking activities

• Profit of DKK 61m
• Normalised writedowns for the year
• Growth in full-service customers and lending
• Lifted by one-offs

Winding-up activities

• Loss of DKK 336m
• Writedowns of DKK 260m

– Agriculture increased writedowns in Q4

B A N K I N G

Pre-tax profit

DKKm

15

• 164
• 47
• 90

61

• 990
• 472
• 379
• 336
• 1,154
• 519
• 469
• 275

2011 2012 2013 2014

Forward-looking activities Winding-up activities

Forward-looking activities

Pre-tax profit of DKK 61m

(up by DKK 151m Y/Y)

Normalised writedowns in 2014 Several years’ trend of above-normal writedowns on private customers was reversed in 2014 Writedown level in 2014 expected to continue in 2015 Steady improvement of profit before writedowns

B A N K I N G

Profit before tax

DKKm

16

• 59

10 28 78

• 105
• 57
• 118
• 17
• 164
• 47
• 90

61 2011 2012 2013 2014

Profit before writedowns Writedowns

Financial market turmoil

Improvements in Private

• Number of Pluskunde customers increased steadily during

2014

• Earnings per customer also improved
• Increased lending to private customers

Financial Markets

• Increased number of customers and assets under

management

• However, financial market turmoil reduced trading activity
• 2013 lifted by high performance fee

Leasing

• Profit up by DKK 3m
• Portfolio of leased cars increased by approx. 60%

Other incl. Alm. Brand Formue

• Significant change in profit
• Alm. Brand Formue accounted for DKK 13m profit in 2014

(2013: DKK 25m loss)

B A N K I N G

Profit before writedowns

DKKm

17

• 45
• 35
• 22

58 85 46

• 2

1 4

• 1
• 23

50

10 28 78

2012 2013 2014 Private Financial Markets Leasing Other

Winding-up activities

Loss of DKK 336m

In line with expectations Writedowns of DKK260m

• Negatively impacted by agriculture in Q4

Results before writedowns: Loss of DKK 76m (2013: DKK 123m loss)

• Lower funding costs
• Costs down by DKK 8m
• Positive effect from value adjustments

Portfolio reduced by DKK 561m adjusted for writedowns and sale of mortgage deeds

• Better than expected

B A N K I N G

Winding-up portfolio

Total DKK 3,943m

18

820 1,455 2,497 668 1,094 307 1,874 Agriculture Commercial lending Mortgage deeds Credit exposure, mortgage deeds 2013 2014

Agriculture impacted writedowns

Writedowns of DKK 260m

Agriculture Low pork and milk settlement prices contributed to further deteriorating conditions

• Writedowns totalled DKK 115m, of which DKK 71m

related to Q4 Commercial lending Still very low level of writedowns Mortgage deeds Level of writedowns tracks portfolio reduction

• DKK 95m related to private
• DKK 42m related to commercial

B A N K I N G

Writedowns

DKKm

19

227 156 101 115 435 96

• 23

8 226 155 177 137 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 2014 Agriculture Commercial lending Mortgage deeds Mortgage deeds include credit exposure from option agreement

CAPITAL MODEL

AND DIVIDENDS

Excess capital higher than expected

• Drop from 2013 related to

– Implementation of CRD IV and repayment of additional tier 1 capital – Increased capital reservation related to winding-up activities of the bank

Proposed dividend

• DKK 0.50 per share for a total payout of

DKK 87m

• Retention of excess capital due to

– Uncertain effects of current financial market turmoil – Uncertainty regarding new yield curve following implementation of Solvency II

G R O U P

20

Development in excess capital

DKKbn

4,676 4,206 4,506 4,685 4,847

• 660
• 758
• 665
• 556
• 526

1,803 1,753 1,654 925 522 5,819 5,201 5,495 5,054 4,843 82 160 886 906 211

2010 2011 2012 2013 2014

Equity Tax assets Tier 2 capital Excess relative to internal capital target Equity includes minority interest in the period 2010-2013

Competitive strength

NPS: Customer satisfaction measure

• NPS results exceeded

expectations

• High NPS is expected to

improve customer retention Other initiatives

• More individual risk pricing
• New products
• Improving awareness among

customers

G R O U P

Net Promoter Score (NPS)

21

5 10 15 20 25 30 35 40 45 2012-01 2012-12 2013-04 2013-08 2013-12 2014-04 2014-08 2014-12 Group Non-life Insurance Life and Pension Banking

Full-year outlook for 2015

• Unchanged

DKK 200-300m

Pre-tax profit

Forward-looking activities: Pre-tax profit of DKK 550-600m

Winding-up activities: Loss of DKK 300-350m Prices on agriculture products expected to impact writedowns negatively

G R O U P

Non-life Insurance

Pre-tax profit: DKK 500m

• CR at the level of 90-91
• Expense ratio at the level of 16%
• Premiums in line with 2014

Life and Pension

Pre-tax profit: DKK 75m

• Expects to book risk

allowance for all contribution groups

• Expected growth in regular

premiums of 4%

Banking

Pre-tax profit: DKK 40m

• Writedowns of around

DKK 20m

• Negative impact from low

interest rate level

22

NOTE Forecasts are based on the interest level at end-

• 2014. The current extreme level with negative

interest rates is assumed to be of limited duration.

Non-life Insurance: Technical result better than expected, but investment results impacted by lower interest rates. Topline impacted by stronger competition Life and Pension: Growth in pension contributions, but still negative impact from tax reform Banking: Increase in lending to private customers and continued growth in full-service customers Winding-up activities: Increased risk on agricultural lending Outlook Pre-tax profit of DKK 200-300m in 2015

G R O U P

23

Highlights

“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

• bligation to update these statements, whether as a result of new information,

future events, or otherwise.”

24

Alm Brand

Results for 2014

Webcast presentation 25 February 2015