Q3 2014 results Webcast presentation 10 October 2014 Follow us on Twitter: @TrygIR Disclaimer Certain statements in this presentation are based on the beliefs of our management as well as assumptions made by and information currently available to the management. Forward-looking statements (other than statements of historical fact) regarding our future results of operations, financial condition, cash flows, business strategy, plans and future objectives can generally be identified by terminology such as “targets”, “believes”, “expects”, “aims”, “intends”, “plans”, “seeks”, “will”, “may”, ”anticipates”, “continues” or similar expressions. A number of different factors may cause the actual performance to deviate significantly from the forward-looking statements in this presentation including but not limited to general economic developments, changes in the competitive environment, developments in the financial markets, extraordinary events such as natural disasters or terrorist attacks, changes in legislation or case law and reinsurance. We urge you to read our annual report available on tryg.com for a discussion of some of the factors that could affect our future performance and the industry in which we operate. Should one or more of these risks or uncertainties materialise or should any underlying assumptions prove to be incorrect, our actual financial condition or results of operations could materially differ from that described herein as anticipated, believed, estimated or expected. We are not under any duty to update any of the forward-looking statements or to conform such statements to actual results, except as may be required by law. 2 Highlights Q3 2014 - Strong result despite cloudbursts. Topline trend improving. Pre-tax profit D KKm • Pre-tax profit of DKK 782m (DKK 907m) impacted by lower investment return. 1,200 1,000 800 782 907 600 • Technical result of DKK 793m (DKK 766m). 400 200 0 Q3 2014 Q3 2013 • Combined ratio improved to 83.7 (84.8) despite cloudburst claims of approx. DKK 150m. Combined ratio 95 • Premium dropped 0.8% (-3.4%) - however, an improved trend in development. 90 83.7 84.8 Q3 2014 Q3 2013 85 80 75 • Efficiency programme helped expense ratio down 70 to 15.1 (15.5). 20 • Investment result of DKK -1m15.1(DKK 152m) driven by lower equity and bond return. 16 20 15.1 15.5 Q3 2014 Q3 2013 15 12 10 • 75% of the share buy 8back programme of 5 4 DKK 1,000m completed. 0 0 Q3 2014 3 Expense ratio Q3 2013 Important news in Q3 2014 • Heavy cloudbursts – however, implemented claims initiatives reduced claims costs. • Tryg acquires Securator and strengthens its position in the Nordic Market for product and extended warranty insurance for electronics. • Continued development of new price differentiated products. New launches in Q4. • Efficiency programme progresses as planned. DKK 95m reached in Q3. • Launch of health care portal – advice on physical and mental health. • Tryg hosts Capital Markets Day on 5 November in London. 4 Combined ratio development in business areas Combined ratio – Private (DK & NO) Combined ratio – Commercial (DK & NO) 100 100 95 95 90 85 90 85.5 80.8 81.5 85 82.4 80 81.1 75 Q3 2014 Q3 2013 9M 2014 9M 2013 Combined ratio – Corporate 100 Q3 2014 Group CR Q3 2014: 83.7 Q3 2013: 84.8 Q3 2013 9M 2014 9M 2013 Combined ratio – Private Sweden 110 96.3 105 95 89.6 87.5 90.7 100 95 92.5 87.8 90 85 90.0 92.2 85 80 Q3 2014 5 79.0 80 75 90 85.4 82.3 Q3 2013 9M 2014 9M 2013 80 Q3 2014 Q3 2013 9M 2014 9M 2013 Follow up on efficiency programme • Savings of DKK 835m achieved so far. • DKK 95m achieved in Q3 2014. • DKK 30m reduction in expenses • DKK 65m reduction in claims • Claims initiatives – Craft Network, Scalepoint and E-auction. • Expense initiatives – New customer split between Commercial/Corporate, let of part of Bergen HQ, IT outsourcing and digital communication. DKKm Targeted and achieved savings on claims 1,200 1,000 1,000 800 615 600 400 200 0 220 300 Expenses Target 2015 835 700 Claims Achieved 2012-2013 Total Achieved Q1-Q3 2014 Efficiency programme up until 2015 6 Premiums and portfolio Topline and technical result Gross earned premiums reduced 0.8% (-3.4%) related to: • Continued high retention level in Private and even improved retention level in Commercial. • Higher sales level in general in Private compared to last year. • Commercial – improved retention but sales lower than expected. • Corporate – growth in Sweden, slightly positive development in DK and NO. • Sweden affected by cancellation of Nordea agreement. Technical result, DKKm Gross earned premiums, DKKm Local currency 6,000 5,000 4,712 4,867 386 442 4,000 999 1,025 3,000 1,045 1,075 -8.4 (-4.7) 0.5 (-2.6) -1.6 (-4.7) 2,000 1,000 2,289 2,329 Q3 14 Q3 13 0.5 (-2.9) 0 Private 8 Group: -0.8 (-3.4) C ommercial C orporate Sweden 1,100 1,000 900 800 700 600 500 400 300 200 100 0 Private 793 766 30 130 54 42 188 230 445 440 Q3 14 Q3 13 C ommercial C orporate Sweden Private - average premiums House insurance – average premium (index 2008 = 100) 150 Average premiums increase Y/Y 140 130 0.0% 2.2% (Q2 0.5%) (Q2 2.6%) 120 110 100 90 08 20 09 20 10 20 11 20 12 20 13 20 14 20 Motor insurance – average premium (index 2008 = 100) 140 130 Average premiums increase Y/Y 1.4% -0.9% (Q2 -0.6%) (Q2 1.9%) 120 110 100 9 20 14 20 13 20 12 20 11 20 10 20 09 20 08 90 10 Q Q 1 4 3 2 1 4 3 2 1 4 3 2 1 4 3 2 1 3- 2- Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 14 14 14 13 13 13 13 12 12 12 12 11 11 11 11 10 10 10 10 Q 1 1 Q 0 2 1 Q 0 3 1 Q 0 4 1 Q 0 1 1 Q 1 2 1 Q 1 3 1 Q 1 4 1 Q 1 1 1 Q 2 2 1 Q 2 3 1 Q 2 4 1 Q 2 1 1 Q 3 2 1 Q 3 3 1 Q 3 4 1 Q 3 1 1 Q 4 2 1 Q 4 3 14 Customer retention Private 92% 90% 88% 86% 84% 82% Commercial 92% 90% 88% 86% 84% 82% 11 212 Q 312 Q 412 Q 113 Q 213 Q 313 Q 413 Q 114 Q 214 Q 314 112 110 Q 411 115 Q 311 102 103 Q 211 99 Q Q 111 103 Q 410 100 Q 310 210 110 105 Q Q Q 95 97 90 95 91 88 Q Q Q Q Q 31 21 11 41 31 21 11 41 31 21 11 41 31 21 11 4 4 4 3 3 3 3 2 2 2 2 1 1 1 1 60% Q Q Q Q Q Q Q Q Q Q Private Sweden – CR and customer retention Customer retention 80% 70% Nordea portfolio 50% 130 125 125 120 114 110 99 95 94 88 88 89 89 93 85 80 Claims and expenses CR and claims ratios Q3 2013-14 • Underlying development is adjusted for: • Large claims • Weather claims • • Underlying claims, net Q3 2013/2014 87.3 79.4 75.0 70.1 67.8 Run-off and interest 72.6 75.1 68.5 66.9 67.2 Improved underlying development on Group level driven by: • one-off effects • efficiency improvements Q3 2014 Group Private Q3 2013 C ommercial C orporate Claims ratio development - Group 95 90 85 80 75 70 65 60 Q 1 09 Q 3 09 Q 1 10 Q 3 10 Q 1 11 Q 3 11 Gross claims ratio 13 Q 1 12 Q 3 12 Q 1 13 Claims ratio, net of reinsurance Q 3 13 Q 1 14 Q 14 3- Sweden Large claims, weather claims and run-off Large claims, net DKKm Expected annual Weather claims, net DKKm Expected annual level 2014: DKK 550m 400 350 300 250 200 150 100 50 0 350 300 250 200 373 80 83 Q3 2014 Q3 2013 356 14 328 150 100 50 9M 2014 2 Q3 2014 9M 2013 202 147 0 Run-off, net DKKm 900 800 700 600 500 400 300 200 100 0 level 2014: DKK 500m Q3 2013 9M 2014 9M 2013 Run-off net, effect on combined ratio 7.0% 6.3% 5.7% 6.0% 793 298 243 Q3 2014 Q3 2013 723 5.0% 4.0% 3.0% 2007 2008 2009 2010 2011 2012 2013 9M 2014 9M 2013 Q3 9M 2014 2014 Tivoli cloudburst claims 2011 vs. 2014 ’Flood Barrier’ • Volume of water twice as massive in 2014 as in 2011. • Claims costs in 2014 were only 1/3 of the costs in 2011. Changes since 2011 • Tivoli now has a contingency plan for cloudburst. • Investments in protection initiatives (pumps, tubes, flood barriers). Before: Wooden floor (600,000 DKK) Now: Quarry tile (0 DKK) • Reconstruction in ’water-proof’ material in consultation with Tryg. • Storage of contents in basements above floor level based on Tryg’s instructions. Future • The contingency plan to be refined by new knowledge. • Flood barriers are established in several places. (extremely effective) • Last vital breaker panel will be moved/ secured. • Upgrade of back-up power system. • Tivoli seeks exchange of experience with other business groups. 15 Tivoli note archive Expense ratio development Expense ratio • Expense improved from 15.5 in Q3 2013 to 15.1 in Q3 2014 - an improvement of 0.4 point. 16.6 • Nominal expenses on Group level reduced significantly in Q3 2014. • 16.7 16.6 16.4 15.1 15.5 15.6 Efficiency programme • Reduction in FTE by 127 (excl. Securator) since Q4 2013. 2009 FTE development 4,101 2010 2011 2012 2013 Q3 2013 Q3 2014 Nominal costs in business areas 4,076 351 346 3,913 210 DKKm 183 119 115 3,703 3,639 16 2011 2012 2013 Q2 2014 60 3,633 Private 2010 65 Q3 2014 Commercial Q3 2013 Corporate Q3 2014 Sweden Investment, capital and financial targets Investment result Q3 2014 Free portfolio – Q3 2014 (DKK 12.8bn) Investment return DKKm Free investment 38 21 Equities (22) 2 Investment property (15) 0 Match regulatory deviation Bank deposits/bonds (15) 23 Percentage 16 Match performance High yield (6) -38 Other financials C ov. Bonds (36) 7 -1 Total return Govt. Bonds (3) 3 Percentage return – Free portfolio 17 10 Em. market bonds(3) Match portfolio – Q3 2014 (DKK 31.2bn) 7 C ov. Bonds (94) Percentage 1.3% 0.3% 0.2% Bank deposits/bonds (6) 0.2% 0.0% 93 ta l To ty t en ve st m In 18 pr op er ar m Em er gi n g Eq ke ts el d -y i ig h H ov . C G o vt . B on B on d ds s -1.6% ui ti es -1.2% Capital structure and status on share buy back DKKm Capital – Q3 2014 12,000 4,297 • Capital buffer based on Individual Solvency increased to 64% (2013 Q4: 50%) and was impacted by: • 9M result 2014 • Share buy back deducted in buffer • Based on Solvency II model the capital buffer was 29% (2013 Q4: 25%). • 75% of 2014 share buy back of DKK 1bn. completed. Excess capital 8,000 Buffer Capital requirement 4,000 6,723 0 Individual Solvency Equity and subordinated loan DKKm Further planned implementation of Solvency II in Denmark postponed until January 2016 by Danish FSA. 14,000 12,000 1,818 1,842 10,000 8,000 6,000 11,107 10,716 2013 Q4 2014 Q3 4,000 2,000 0 19 Solvency II issues: Subordinated loan capital Equity Unsolved issues: • Future eligibility in Norway of Natural Perils Pool and the Guarantee scheme provision • Expected future profits • Full inclusion of subordinated capital Financial targets ROE after tax of 20% to be achieved by delivering a full year combined ratio of 90 or lower. Expense ratio <15 in 2015 ROE after tax 40% 30% ROE target 20% 10% 20 14 15 20 20 20 14 13 H 1 20 12 20 10 11 20 20 08 09 20 20 06 07 20 20 20 05 0% Q/A Follow us on Twitter: @TrygIR Upcoming roadshows Date 22 Place Participants from Tryg Arranged by 10/10/2014 Copenhagen Morten Hübbe, CEO Tor Magne Lønnum, CFO Lars Bonde, Group EVP and COO Investor Relations Nordea Markets 20/10/2014 London Tor Magne Lønnum, CFO Lars Møller, IR Director Goldman Sachs 22/10/2014 London Morten Hübbe, CEO Peter Brondt, IR Manager Goldman Sachs 23/10/2014 Edinburgh Tor Magne Lønnum, CFO Peter Brondt, IR Manager Handelsbanken 28-29/10/2014 Tokyo Morten Hübbe, CEO Lars Møller, IR Director Goldman Sachs 12/11/2014 Amsterdam Lars Møller, IR Director JP Morgan 13/11/2014 Brussels Lars Møller, IR Director JP Morgan 27/11/2014 Zurich Tor Magne Lønnum, CFO Peter Brondt, IR Manager Nordea Markets 28/11/2014 Geneva Tor Magne Lønnum, CFO Peter Brondt, IR Manager Nordea Markets 05/11/2014 London Tryg’s Capital Markets Day Tryg 03/12/2014 London Morten Hübbe, CEO Lars Møller, IR Director Berenberg European Conference More details on tryg.com