Results for Q3 2014 Webcast presentation 20 November 2014 G R O U - - PowerPoint PPT Presentation

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Results for Q3 2014 Webcast presentation 20 November 2014 G R O U - - PowerPoint PPT Presentation

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Alm Brand Results for Q3 2014 Webcast presentation 20 November 2014 G R O U P Financial highlights of Q3 2014 Pre-tax profit: DKK 69m Outlook unchanged Forward-looking activities: Pre-tax profit: DKK 146m Non-life Insurance Life and

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SLIDE 1

Alm Brand

Results for Q3 2014

Webcast presentation 20 November 2014

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SLIDE 2

Financial highlights of Q3 2014 Pre-tax profit: DKK 69m

Outlook unchanged Forward-looking activities: Pre-tax profit: DKK 146m

Winding-up activities: Loss: DKK 77m

  • Writedowns: DKK 56m

G R O U P

Non-life Insurance

Pre-tax profit: DKK 105m

  • CR: 89.9
  • Expense ratio: 14.4%
  • Premium growth: -0.3%

Life and Pension

Pre-tax profit: DKK 20m

  • Risk result: DKK 12m
  • Bonus potential: DKK 1.0bn
  • Bonus rate: 10.7%

Banking

Pre-tax profit: DKK 31m

  • Writedowns: DKK 3m
  • Growth in lending
  • One-off income of DKK 17m

2

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SLIDE 3

Comments on Q3

Cloudbursts impacted profit in Non-life Insurance Intensified competition impacting insurance premiums One-off adjustment in the bank related to liquidation of Alm. Brand Formue Lending to private customers increased Pre-tax profit outlook

  • 2014: Unchanged at DKK 250-350m
  • 2015: DKK 200-300m

G R O U P

Financial highlights, Q1-Q3 Group Pre-tax profit: DKK 318m

Non-life Insurance Pre-tax profit: DKK 449m

  • CR: 87.2
  • Expense ratio: 15.7

Life and Pension Pre-tax profit: DKK 70m Banking Pre-tax profit: DKK 75m Winding-up activities Pre-tax loss: DKK 237m

3

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SLIDE 4

Mortgage deed transaction

Optimising group balance sheet

  • Repay high-yielding deposits using low-yielding bonds

Non-life Insurance buys DKK 1.9bn of well-performing mortgage deeds from the bank

  • Non-life Insurance gets a higher yielding investment mix

– And the bank retains the credit risk

  • The bank eliminates the need to refinance a significant part of the expensive

deposits

The group improves the investment return, reduces the balance sheet and lowers funding costs without changing the risk involved The transaction is subject to approval by the Danish FSA Net consolidated effect in 2015 DKK 30m

4

G R O U P

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SLIDE 5

NON-LIFE INSURANCE Highlights

Q3 pre-tax profit of DKK 105m

  • Technical result better than expected
  • Negative investment return due to lower

interest rates Combined ratio of 89.9 in Q3

  • Weather-related claims affected by

cloudbursts

  • Major claims lower than expected
  • Positive impact from run-offs
  • Lower expenses
  • Underlying CR worsened Y/Y to 77.2

– Fewer claims but higher average claims

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

Pre-tax profit

DKKm

5

61 245 237 130 568 487

  • 22
  • 17

29

  • 25

70

  • 38

39 228 266 105 638 449 2011 2012 2013 2014 2013 2014 Q3 9M Technical result Investment return after technical interest

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SLIDE 6

Premiums impacted by intensified competition

Premium income down by 0.3% Y/Y

  • Private unchanged

– Lower prices due to smaller and lower-priced cars and intensified competition – Excluding lower prices on motor insurance premiums were up by 1.5%

  • Commercial down by 0.7%

– Higher average premiums due to ongoing rewriting of building insurances – 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

6

634 662 651 668 668 567 567 578 613 609 1,201 1,229 1,229 1,281 1,277 2010 2011 2012 2013 2014 Q3 Private Commercial

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SLIDE 7

Retention rate remains high

  • Competition still impacting

retention rate negatively

  • Competition is still most

intense within motor insurance

  • Customer satisfaction

measured as net promotion score increased to above 30

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

Retention rate

2008 = index 100

90 92 94 96 98 100 102 Dec/08 Dec/09 Dec/10 Dec/11 Dec/12 Dec/13 7

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SLIDE 8

Combined ratio still strong

Combined ratio of 89.9

  • Better than expected in spite of cloudbursts
  • Weather-related and major claims up by 5.5 ppts Y/Y
  • Positive run-offs improved CR by 1.2 ppts

– 0.7 ppt higher Y/Y

Underlying combined ratio of 77.2

  • Higher average claims in Q3
  • Partly offset by fewer claims

– down by 4 ppts – especially theft and cars Expense ratio down Y/Y

  • Expenses lower than expected
  • Lower due to accrual of expenses

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

Combined ratio

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81.0 65.1 66.2 75.5 68.9 71.5 14.6 15.1 15.5 14.4 16.2 15.7 95.7 80.2 81.7 89.9 85.1 87.2 77.0 76.9 74.1 77.2 79.9 78.3 2011 2012 2013 2014 2013 2014 Q3 9M Claims ratio incl. reinsurance Gross expense ratio Underlying combined ratio

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SLIDE 9

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 0.7 ppt Y/Y Below average annual expectation of 8%

  • Lower expenses than expected
  • Better than expected in both Private and Commercial

Weather-related claims incl. reinstatement up by 6.5 ppts Y/Y Above-average annual expectation of 4%

  • Cloudbursts in Q3
  • Claims primarily related to cloudburst in

Copenhagen

  • Significantly fewer claims compared with the cloudburst

in July 2011 − Reinsurance and preventive work since 2011 reduced number of claims and the average claims size

Weather-related claims ratio

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5.4 6.6 7.4 6.7 5.4 2011 2012 2013 2014 2014 Q3 9M Major claims ratio Average expectation (8%) 9.1 2.9 0.7 6.9 4.9 5.4 0.3 1.3 2011 2012 2013 2014 2014 Q3 9M Weather-related claims ratio Reinstatement Average expectation (4%)

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SLIDE 10

Optimising investment allocation

Investment return challenged by low interest rate

  • Shares increased 1.5% in Q3

Higher-yielding mortgage deed portfolio acquired from the bank

  • Low-interest mortgage bond portfolio reduced
  • Bank retains credit risk through option agreement

Net effect with the current interest rate level DKK 20m in 2015

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

Asset allocation

DKKbn

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9.7 9.8 10.1 8.2 1.9 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2

40% 50% 60% 70% 80% 90% 100%

Q1 2014 Q2 2014 Q3 2014 New portfolio* Mortgage bonds Mortgage deeds Shares Other

* Based on Q3 2014 adjusted for sale of mortgage bonds and acquired mortgage deeds

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SLIDE 11

LIFE AND PENSION Highlights

Pre-tax profit of DKK 20m

  • Down by DKK 2m 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 down by DKK 25m
  • Bonus rate reduced to 10.7%

– The discount rate of the Danish FSA declined from 1.27% to 1.04% in Q3

  • 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

24 23 22 18 14 1 2 38 24 22 20 Q3 2011 Q3 2012 Q3 2013 Q3 2014

Underwriting profit/loss Return on investments allocated to equity

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SLIDE 12

Pension contributions

Total pension contributions up by 13%

Pension premiums up by 12% Y/Y

  • Single premiums up by 35%
  • Regular premiums down by 3%

– Still negative impact from tax reform

  • Inflow of new policyholders secured overall growth

in premiums Unguaranteed investment schemes in the bank up by 16%

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

Total pension contributions

DKKm

12

137 123 118 114 16 85 72 97 100 75 77 89 253 283 267 300 2011 2012 2013 2014 Q3 Regular premiums Single premiums Investment schemes

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SLIDE 13

Profit impacted by lower risk result

+ Interest result increased

− Increased due to higher risk allowance in 2014

+Return on equity investments

– Lower interest rates lifted the return

÷ Expense and risk results

– Lower risk result in the quarter – Satisfactory expense result achieved while

  • ffering 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

24 28 21 12 64 53 3 2 2 5 8 13 14 1 2 1 4 2

  • 5
  • 1
  • 1
  • 5
  • 2
  • 2

38 24 22 19 71 69 2011 2012 2013 2014 2013 2014 Q3 9M Expense and risk results Interest result Return on investments allocated to equity Result of portfolios without bonus entitlement Change to shadow account

* 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

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SLIDE 14

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 10.7%
  • Attractive bonus rate for new

policyholders of 12.8% Rate on policyholders’ savings

  • Highest rate on private

policyholders’ savings in Denmark – Continues 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 4.7 1.9 1.2 4.4 12.3

Bonus rate (%)

12.8 19.4 8.7 4.2 10.7

Return (% YTD)

4.7 10.7 6.9 9.1 8.5

Bonds

100% 58% 54% 76% 79% 67%

Equities

0% 25% 21% 8% 3% 15%

Property

0% 17% 15% 12% 9% 13%

Fixed-income derivatives

0% 0% 11% 4% 8% 5%

*Portfolios without bonus entitlement

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SLIDE 15

BANKING Highlights

Pre-tax loss of DKK 46m

Improved by DKK 7m Q/Q Forward-looking activities

  • Profit of DKK 31m
  • Better than expected
  • One-off adjustment related to Alm. Brand Formue
  • Lower writedowns Q/Q
  • Growth in full-service customers and lending

Winding-up activities

  • Loss of DKK 77m
  • Better than expected
  • Writedowns of DKK 56m

B A N K I N G

Pre-tax profit

DKKm

15

  • 4
  • 20

22 22 31

  • 99
  • 84
  • 85
  • 75
  • 77
  • 103
  • 104
  • 63
  • 53
  • 46

Q3 Q4 Q1 Q2 Q3 2013 2014 Forward looking activities Winding-up activities

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SLIDE 16

Forward-looking activities

Core earnings of DKK 17m

(down by DKK 15m Q/Q)

Income down by DKK 11m Q/Q

Net interest and fee income, Private

  • As expected
  • Increase in full-service customers and lending

Trading income (excl. value adjustments)

  • Down by DKK 12m Q/Q
  • Normally lower trading activity in July and August

Other income

  • Up by DKK 4m Q/Q
  • Leasing assets of DKK 432m (up by DKK69m in Q3)

Costs on level with Q1 and Q2

B A N K I N G

Income distribution

DKKm

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44 44 43 48 45 59 78 54 59 47 25 28 29 31 35 128 150 126 138 127 Q3 Q4 Q1 Q2 Q3 2013 2014 Net interest and fee income, Private Trading income (excl. value adjustments) Other income

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SLIDE 17

Losses and writedowns

DKKm

Increased lending and lower writedowns

Writedowns maintained at the expected level

  • Lower writedowns in Q3

Lending to private customers increased

  • Growth in lending to private customers in both Q2

and Q3

  • Demand has increased

− Portfolio of Totalkredit loans facilitated through the bank increased by DKK 0.3bn in Q3 to DKK 4.8bn

B A N K I N G

Lending

DKKm

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2,315 2,293 2,288 2,300 2,377 150 275 222 136 119 2,465 2,568 2,510 2,436 2,496 Q3 Q4 Q1 Q2 Q3 2013 2014 Lending to private customers Other loans and advances 18 44 7 7 3 2013 2014

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SLIDE 18

Winding-up activities

Loss of DKK 77m in Q3

Better than expected

  • Writedowns of DKK 56m
  • Result before writedowns:

Loss of DKK 21m

Q1-Q3 2014

  • Writedowns of DKK 179m
  • Result before writedowns: Loss of DKK 58m

B A N K I N G

Winding-up portfolio

Total DKK 4,264m

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820 1,455 2,497 768 1,200 2,296 Agriculture Commercial lending Mortgage deeds 2013 Q3 2014

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SLIDE 19

Writedowns as expected

Writedowns of DKK 56m (Q1-Q3: DKK 179m)

  • Worsened conditions for agriculture

– Affecting especially pig and dairy farmers

  • Writedowns on mortgage deeds high

– But lower than in 2013

Loans reduced by DKK 94m (Q1-Q3: DKK 329m)

  • Commercial lending and mortgage deeds reduced in

line with expectations

  • Minor reduction in Q3 in agricultural lending

B A N K I N G

Losses and writedowns Loan reductions

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10 11 18 15 1 25 10 43 27 42 31 74 9

  • 4

3 101 101 67 52 67 26 36 39 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Agriculture Commercial lending Mortgage deeds

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SLIDE 20

Sale of mortgage deeds

DKK 1.9bn mortgage deeds sold to Non-life Insurance

  • Bank retains credit risk through option agreement

– Bank’s credit risk is unchanged Reduced need for funding

  • Refinancing of DKK 2.3bn eliminated

Loss of income from mortgage deed portfolio

  • Interest income lost
  • Loss of interest income on excess liquidity

Higher excess liquidity in adjustment period Positive net effect at current interest rate level DKK 10m in 2015

B A N K I N G

Required deposits reduced by DKK 2.3bn

DKKbn

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3.6 6.5 5.6 5.1 1.9 0.4 2.8 2011 2012 2013 2014 9M Transaction Fixed-interest deposits Sale of mortgage deeds Reduced liquidity requirement Remaining fixed-interest deposits

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SLIDE 21

Stable solvency

Excess solvency in line with Q2 level

Credit risk reduced in Q3 Mortgage deed transaction will not change the bank’s credit risk Drop in group (banking) excess solvency related to liquidation of Alm. Brand Formue

B A N K I N G

Development in capital need and solvency need

DKKm

21

1,083 962 982 1,004 991 171 177 176 155 147 117 104 97 96 95 1,371 1,243 1,255 1,255 1,233 5.1% 6.1% 6.1% 6.0% 6.2% 4.5% 4.1% 7.4% 7.2% 4.3% Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Credit risk Market risk Operational and other risks Excess solvency, parent Excess solvency, group

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SLIDE 22

CAPITAL MODEL

Excess capital improved in Q3

  • Excess capital up by DKK 96m
  • Lower risk related to the bank represents
  • approx. DKK 50m of the reduction

Drop from 2013 related to implementation of CRD IV and repayment of hybrid capital

G R O U P

22

4,676 4,206 4,506 4,685 4,701 4,749

  • 660
  • 758
  • 665
  • 556
  • 526
  • 522

1,803 1,753 1,654 925 530 525 5,819 5,201 5,495 5,054 4,705 4,752 82 160 886 906

  • 16

80 2010 2011 2012 2013 H1 2014 9M Equity Tax assets Tier 2 capital Excess relative to internal capital target

Development in excess capital

DKKbn

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SLIDE 23

Full-year outlook for 2014

  • Unchanged

DKK 250-350m

Pre-tax profit

Forward-looking activities: Pre-tax profit of DKK 625-675m

Winding-up activities: Loss of DKK 325-375m (unchanged)

G R O U P

Non-life Insurance

Pre-tax profit: DKK 575m

  • Unchanged
  • CR at the level of 89
  • Expense ratio at the level of 16%
  • Premium growth below 1%

Life and Pension

Pre-tax profit: DKK 80m

  • Unchanged
  • Expects to book risk

allowance for all contribution groups

Banking

Pre-tax profit: DKK 70m

  • Up by DKK 20m
  • Writedowns of around

DKK 35m

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SLIDE 24

Outlook for 2015 Pre-tax profit of

DKK 200-300m

Forward-looking activities Pre-tax profit of DKK 500-550m with a combined ratio of 91-92 Winding-up activities Pre-tax loss of DKK 250-300m

G R O U P

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SLIDE 25

Non-life Insurance: Technical result better than expected, but investment results impacted by lower interest rates Life and Pension: Growth in pension payments, but still negative impact from tax reform Banking: Increase in lending to private customers and continued growth in full-service customers Winding-up activities: Writedowns better than expected Outlook 2014 unchanged at DKK 250-350m 2015 at DKK 200-300m

G R O U P

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Highlights

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SLIDE 26

“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.”

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SLIDE 27

Alm Brand

Results for Q3 2014

Webcast presentation 20 November 2014