Tryg acquisition of Alka 04 th December 2017 1 4 December 2017 A - - PowerPoint PPT Presentation

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Tryg acquisition of Alka 04 th December 2017 1 4 December 2017 A - - PowerPoint PPT Presentation

Nov 29, 2023 396 likes •594 views

Tryg acquisition of Alka 04 th December 2017 1 4 December 2017 A compelling opportunity for Tryg Acquiring a high-performing business in our core market Alka is a best-in-class operator within the Danish non-life market Attractive

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1

Tryg acquisition of Alka

04th December 2017

4 December 2017

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Acquiring a high-performing business in our core market

  • Alka is a best-in-class operator within the Danish non-life market
  • Attractive financial profile with average combined ratio over last five years of 84%

Strong accretion of earnings and dividends

  • Alka’s technical result for the last 12 months (to Sept-2017) was DKK325m, run-rate

merger benefits of DKK300m

  • Earnings enhancement in the first full year following the acquisition, with high single

digit earnings accretion by 2021 Continuing on a strong financial foundation

  • DKK4bn fully underwritten equity placing to partly finance the transaction
  • Extraordinary dividend of DKK1bn to be paid in Q1 2018 is confirmed

4 December 2017 2

A compelling opportunity for Tryg

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Purchase price

  • DKK8.2bn - valuing operations of Alka at DKK5.7bn, with DKK2.5bn of excess capital

Financing sources

  • Placing of DKK4bn through issuing up to 10% of current shares outstanding through an

accelerated bookbuilding

  • TryghedsGruppen will subscribe for 60% of placing at the bookbuild price – furthermore

TryghedsGruppen has committed to underwrite all shares at DKK146 per share

  • Issuance of DKK500m in Tier 1 to be executed during H1 2018
  • Use of Tryg excess capital and other capital optimisation measures

Financial impact

  • Earnings enhancement in the first full year following the acquisition, with high single

digit earnings accretion by 2021

  • Significant long term potential to increase ordinary dividends
  • Pro forma Solvency II ratio of 170%

4 December 2017 3

Unique opportunity, attractive financial profile

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Increased presence in Tryg’s core market segment

  • Results in market share for Tryg in Denmark of 22%
  • Alka adds market share in private lines of 6%*

Strong complementary market proposition

  • Alka is a consistent top performer in terms of customer loyalty and satisfaction
  • Potential to leverage Alka’s strong presence in the online channel

Significant opportunity to increase penetration rate across unions

  • Tryg expects to continue successful partnership with unions
  • Alka’s customers are eligible for TryghedsGruppen’s members bonus, which has been 8%
  • f premiums per annum over the past two years

Alka has been highly successful in leveraging data analytics

  • The combined entity will leverage the best practices in using data analytics for the

purpose of pricing, lead generation and fraud detection

4 December 2017 4

Strong strategic rationale

*Estimated market share in Danish private lines

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4 December 2017 5

2020 Targets

CMD 2017 Post transaction Technical result DKK2.8bn DKK3.3bn Combined ratio ≤ 87% ≤ 86% Expense ratio ~14% reaffirmed ~14% reaffirmed RoE ≥ 23% ≥ 21% Earnings Customers CMD 2017 Post transaction TNPS 70 70

  • No. products per customer

+10% +10%

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  • 8th largest Danish non-life insurance company with a market share of 4.3%, with an

estimated private lines market share of 6%

  • ~380,000 customers, with a CAGR of 5% of policies over the last 5 years
  • Strong relationships with unions developed over more than 100 years, complementary to

Tryg’s experience built up over more than 75 years with labour unions

  • Consistently reported highly attractive combined ratio (84% average in last five years)
  • Advanced digital platform with ~36% of premiums distributed online
  • Strong brand awareness, supported by high-profile sponsorships

4 December 2017 6

A success story in the Danish market

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Strong brand awareness in Denmark

4 December 2017 7

Unaided knowledge of the Alka brand (%)*

51 40 24 18 17 Tryg Alka Codan Topdanmark

  • Alm. Brand

*As at Q2 2017

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4 December 2017 8

Focused on private lines

Gross premiums by business (DKK2.5bn in 2016) Gross premium, Non-life private (DKK1.9bn in 2016) Gross premium, Non-life commercial (DKK0.2bn in 2016)

37% 33% 25% 4% Fire and property Motor Accident & health Other 14% 86% Workers' compensation Fire and property 78% 15% 7% Non-life, Private Group life Non-life, Commercial

Technical result (DKK288m in 9M 2017)

100% Non-life Group life

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Strong and profitable growth profile

4 December 2017 9

3.6% 3.7% 3.9% 4.0% 4.1% 4.3% 2010 2011 2012 2013 2014 2015

Development in Alka's Danish non-life market share Alka vs. Danish non-life insurance market: indexed gross premiums (%)

100.0 99.1 101.0 105.6 108.0 111.3 114.5 117.6 117.5 100.0 101.7 103.2 105.3 107.5 108.1 110.9 110.7 112.4 2008 2009 2010 2011 2012 2013 2014 2015 2016 Alka Danish non-life insurance market

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Strengthens position in core Danish market

4 December 2017 10

18% 19% 14% 21% 4% 5% 6% 6% 22% 24% 20% 27% Non-life Motor A&H Fire and Property Alka Tryg

Market share (latest available)

Source: Forsikring & Pension.

Estimated private lines market share of 6%

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Best-in-class combined ratio profile

4 December 2017 11

86% 83% 85% 84% 82% 82% 84% 83% 91% 82% 2013 2014 2015 2016 9M 2017 Tryg Private Alka Alka’s 2013 - 9M 2017 average combined ratio: 84%

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Compelling merger benefits of DKK300m

4 December 2017 12

  • Full run-rate impact in 2021 of DKK300m
  • 25% impact expected in 2019, 50% impact in 2020
  • Drivers include:
  • Claims procurement
  • Fraud detection
  • Data analytics
  • Online
  • Product and service innovation
  • Reduction in overlapping labour costs will mostly be

delivered through natural attrition across the combined entity

  • DKK250m in one-off transaction costs and

restructuring provision in 2018

Commentary DKK300m in run-rate merger benefits in combined entity

45% 25% 25% 5% Claims Cost

  • ptimisation

Revenue

  • ptimisation

and commercial best practices Reinsurance and Investments Run-rate synergies DKK300m

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Funding via a fully underwritten equity placing

4 December 2017 13

5.7 8.2 2.5 4.0 0.5 1.2 Price paid Alka excess capital Alka valuation Equity placing Tryg new AT1 issuance Tryg capital

  • ptimisation

measures

Price paid for

  • perations of

Alka TryghedsGruppen has underwritten at DKK146

Sources of funding to finance the transaction (DKKbn)

Tier 1 capital

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Combined Solvency II ratio of 170%

4 December 2017 14

170 211 (21) 3 11 84 (110) (9) Solvency Ratio Q3 '17 Extraordinary Dividend Internal Model for DK WC Tier 1 Issue Capital Raise Goodwill Increased SCR Pro Forma Solvency Ratio Q3 '17

Solvency II ratio Q3’ 17 pro forma

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4 December 2017 15

Strengthening the core, while embracing the future

Acquiring a high-performing business in our core market Strong accretion of earnings and dividends Continuing on a strong financial foundation Long term profitable growth and attractive shareholder value creation

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Q&A

4 December 2017 16

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4 December 2017 17

Contact details

Gianandrea Roberti Investor Relations Officer +45 20 18 82 67 gianandrea.roberti@tryg.dk Peter Brondt Investor Relations Manager +45 22 75 89 04 peter.brondt@tryg.dk Tanja Frederiksen Head of Communications +45 51 95 77 78 tanja.frederiksen@tryg.dk

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APPENDIX

4 December 2017 18

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Alka: Very strong financial track record

4 December 2017 19

DKKm 2012A 2013A 2014A 2015A 2016A 9M 2017 Non-life Gross premiums 1,854 1,938 2,006 2,035 2,078 1,624 Technical result 363 368 335 357 191 288 Expense ratio 16% 15% 16% 18% 18% 16% Combined ratio 81% 82% 84% 83% 91% 82% Life insurance technical result 12 5 (3) (5) (2) (0) Investment income 174 88 76 98 120 124 Profit before tax 550 461 408 454 295 412 Net profit 402 343 307 344 235 319 Shareholders’ equity 1,912 2,195 2,450 2,630 2,696 2,958 Invested assets 4,597 4,592 4,991 5,361 5,146 5,446 Solvency ratio (standard model) n.a. n.a. n.a. 362% 364% 360% Source: Alka company filings for 2012-2016, 9M 2017 via due diligence process.