2018 INTERIM RESULTS 2 August 2018
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION This presentation may contain ‘forward-looking statements’ with respect to certain of the Group’s plans and its current goals and expectations relating to its future financial condition, performance, results, strategic initiatives and objectives. Generally, words such as “may”, “could”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “aim”, “outlook”, “believe”, “plan”, “seek”, “continue” or similar expressions identify forward-looking statements. These forward-looking statements are not guarantees of future performance. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the Group’s control, including amongst other things, UK domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities (including changes related to capital and solvency requirements), the impact of competition, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation or regulations in the jurisdictions in which the Group and its affiliates operate. As a result, the Group’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in the Group’s forward-looking statements. Forward-looking statements in this presentation are current only as of the date on which such statements are made. The Group undertakes no obligation to update any forward-looking statements, save in respect of any requirement under applicable law or regulation. Nothing in this presentation should be construed as a profit forecast. Basis of presentation This presentation uses alternative performance measures, including certain underlying measures, to help explain business performance and financial position. Further information on these is set out in the 2018 Interim results announcement.
AGENDA 1 Introduction 2 Strategy & business improvement actions Regional update 3 4 2018 Interim results 5 Q&A
INTRODUCTION
Summary 2018 INTERIM RESULTS HIGHLIGHTS Strategy & balance sheet as we want it 1 2 EPS up 18%; Interim dividend up 11%; ROTE 16% Underlying EPS down 10% due to impact of adverse weather on 3 underwriting result (up ex. weather) Business progressing to plan (ex. natural volatility) although top 4 line sacrifice needed where profitability threatened Focused on drive towards best-in-class performance levels – 5 customer service, underwriting, costs 5
STRATEGY & BUSINESS IMPROVEMENT ACTIONS
Strategy PURSUIT OF OUTPERFORMANCE 1 Strong customer franchises 2 Disciplined strategy, focused on strengths, seeking to avoid mistakes A balance sheet that protects customers and the company 3 Intense and accomplished operational delivery – improving customer 4 service, underwriting and costs Seeking to win for customers and for shareholders 7
Performance PERFORMANCE IMPROVEMENT AMBITIONS Targets ‘Best-in-class’ COR ambitions Advance customer service • Scandinavia <85% • UK & International <94% Digital platforms for convenience, flexibility and speed • 1 • Canada <94% Increase customer satisfaction and retention • Sharpen customer acquisition tools • Further improve underwriting Earnings Elevate underwriting disciplines • • High quality, repeatable earnings 2 Ongoing ‘BAU’ portfolio re-underwriting • • Attractive EPS increases Invest in analytics, tools and technology • • ROTE 13-17% or better Optimise reinsurance • Drive cost efficiency Deploy ‘lean’, robotics & process redesign • Dividend 3 Optimise overheads & procurement • • Regular payout 40-50% , plus Site consolidation & outsourcing • additional payouts as available Automation • and prudent Technology Key enablers: Underpinned by strong balance Focused performance culture sheet and capital management 8
Customer CUSTOMER METRICS STABLE OR IMPROVING EXCEPT WHERE IMPACTED BY UNDERWRITING ACTIONS Customer retention (%) Personal Lines - Policies in force Scandinavia -3% 85 85 +1% 74 71 +2% Personal Commercial Canada Scandi UK & Canada 86 International 90 83 88 H1’17 H1’18 Commercial Lines – Volumes -6% Personal Commercial UK & International -7% 74 +5% 82 81 70 1 Scandi UK & Canada 2 International Personal Commercial H1’17 H1’18 H1’17 H1’18 1 Ex. Norway 9 2 Ex. schemes exited in the UK
Customer CUSTOMER INITIATIVES - EXAMPLES Growth opportunities in Canada Personal Lines – Johnson D. L. Deeks Insurance Services Circa $50m in premium • Opportunity to build large national faith-based • affinity program Strong history of profitability • Scotiabank 10 year contract as exclusive provider of Home and Auto • insurance products; starting Q1 2019 Expansion into bancassurance channel • Growth in Swedish Personal Lines UK Personal Lines platform update Three factors behind new business growth trajectory: New platform launched in December 2017 for the Nationwide book and now live in More Th>n Motor Competitive pricing driven by • 1 analytics and enhanced pricing Performance statistics for Nationwide: PL New Business capability 75% of policies migrated +14% Improved online sales capabilities, 2 • Strong retention rate of 87% with online sales +74% vs. H1 2017 NPS at +68 for claims and +64 for sales and Maximising customer base and • 3 service customer lifetime value through cross-selling and retention More Th>n Motor: Positive customer feedback 6 weeks activities H1’17 H1’18 into go-live 10
Underwriting ATTRITIONAL LOSS RATIO STEADY Invest in tools, Improve underwriting Underwriting Ongoing ‘BAU’ portfolio technology & 1 2 3 capabilities re-underwriting actions insights Attritional loss ratio (%) Group Scandinavia 58.6 66.5 64.5 55.3 63.2 1 55.2 63.1 54.9 0.3 0.2 55.0 1 63.0 H1’15 H1’16 H1’17 H1’18 H1’15 H1’16 H1’17 H1’18 Canada UK & International 61.2 55.2 58.2 58.1 57.9 0.3 49.3 49.0 48.9 0.8 57.9 1 48.5 1 H1’15 H1’16 H1’17 H1’18 H1’15 H1’16 H1’17 H1’18 11 1 Loss ratios presented ex. the impact of reinsurance changes
ACTIONS LOSS RATIO ACTIONS TAKING HOLD Canada UK Scandinavia Actions Actions Actions Improve profitability in 1 1 1 Reduce Commercial large losses Reduce Commercial large losses Commercial Lines Managing exposures through large • 4.7 points reduction in large loss ratio • 1.9 points improvement in Danish • loss propensity tool to predict following underwriting discipline actions CL attritional ratio driven by rating frequency of losses in Property (circa £18m of NWP exited) actions, portfolio pruning and claims savings initiatives 4.2 points improvement in large loss • Active portfolio management • ratio versus H1 2017 - 1.9 points -4.7 points -4.2 points 62% 18% 26% 60% 22% 14% H1’17 H1’18 H1’17 H1’18 H1’17 H1’18 Expand Personal Lines Combat inflationary pressure in 2 2 Improve profitability in Motor 2 profitably Personal Lines Rate actions continue given pressure • Encouraging growth in Sweden, Improved Household attritional loss ratio • • on claims inflation and challenging (-3.2 points versus FY 2017) following both new business (+14%) and market conditions rating and claims indemnity actions policy counts (+2%) > 10% rate applied; effects will earn • Rate increase of +13% in Motor in the last Positive trend growth mainly • • through in H2 2018 and 2019 12 months driven by Motor Claims initiatives include ‘Auto • Volume sacrifice expected to moderate • Danish Personal Lines premiums • Express’ process which fast-tracks in 2019 +3% high volume low value claims 12
Costs COST EFFECTIVENESS REMAINS A PRIMARY STRATEGY Goal is controllable cost ratios below 20% in every business Scandinavia Group -0.7 points -1.7 points 22.2 24.2 21.5 22.5 H1’17 H1’18 H1 17 H1 18 UK & International Canada -0.2 points +0.1 points 19.3 19.1 21.4 21.5 H1 17 H1 18 H1 17 H1 18 13 Note: Cost ratios shown on an earned basis and at constant FX
REGIONAL UPDATE
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