Alm Brand Results for 2014 Webcast presentation 25 February 2015
G R O U P Financial highlights of 2014 Pre-tax profit: DKK 401m Proposed dividend: DKK 0.50 per share Forward-looking activities: Pre-tax profit: DKK 737m Non-life Insurance Life and Pension Banking Pre-tax profit: DKK 651m Pre-tax profit: DKK 78m Pre-tax profit: DKK 61m • CR: 85.5 • Risk result: DKK 64m • Writedowns: DKK 17m • Expense ratio: 15.6% • Bonus potential: DKK 0.9bn • Growth in lending • Premium growth: 0.5% • Bonus rate: 9.8% • Growth in full-service customers Winding-up activities: Loss: DKK 336m • Writedowns: DKK 260m 2
G R O U P Comments on Q4 Financial highlights, Q4 Group Pre-tax profit: DKK 83m Completion of mortgage deed transaction in December Non-life Insurance Pre-tax profit: DKK 202m Benign winter with very few weather-related • CR: 79.9 claims • Expense ratio: 15.1 Life and Pension Very satisfactory underlying combined ratio Pre-tax profit: DKK 8m Interest rate drop to all-time low impacted all Banking business areas negatively Pre-tax loss: DKK 14m Tax asset increased, resulting in positive tax for Winding-up activities the period Pre-tax loss: DKK 99m 3
N O N - L I F E I N S U R A N C E Pre-tax profit N ON - LIFE I NSURANCE DKKm Highlights Technical result Investment return after technical interest 853 30 763 651 121 460 Pre-tax profit of DKK 651m 49 823 744 • Technical result better than expected 642 202 – Combined ratio of 85.5 411 125 257 51 • Negative investment return due to lower 74 -55 interest rates -93 – Investment return not satisfactory 2011 2012 2013 2014 2013 2014 FY Q4 4
N O N - L I F E I N S U R A N C E Combined ratio better than Combined ratio expected Claims ratio incl. reinsurance Gross expense ratio Underlying combined ratio 94.2 92.3 Combined ratio of 85.5 87.4 15.9 85.5 83.3 - Better than expected 79.9 15.1 80.2 79.7 78.8 77.0 75.8 16.0 • Weather-related and major down by 0.9 ppt Y/Y 15.6 72.8 16.2 15.1 • 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 79.1 76.4 71.4 69.9 67.1 64.8 • Claims down by 4% – Approx. 5% fewer claims – Especially theft and motor claims – Rewriting policies and increasing deductibles – Advising on preventive measures 2011 2012 2013 2014 2013 2014 Expense ratio down Y/Y Q4 • Lower sales resulted in lower acquisition costs 5
N O N - L I F E I N S U R A N C E Weather-related Major claims ratio and major claims 7.2 7.0 6.8 Major claims down by 1.4 ppt Y/Y 6.2 5.8 Below average annual expectation of 8% • Unusually few claims 2011 2012 2013 2014 2014 • Claims increased in Q4 FY Q4 Major claims ratio Average expectation (8%) Weather-related claims ratio Weather-related claims excl. reinstatement up by 0.5 ppt Y/Y In line with normal expectation of 4% 1.6 1.1 1.8 6.9 • Reinstatement costs related to storms in Q4 2013 0.2 0.4 4.2 3.7 • Benign winters but offset by cloudbursts in May 2.1 2.0 and August 2011 2012 2013 2014 2014 • Claims at a normal level adjusted for FY Q4 reinstatement Weather-related claims ratio Reinstatement Average expectation (4%) 6
N O N - L I F E I N S U R A N C E Premiums impacted by Premium income stronger competition DKKm Private Commercial 5,058 5,031 4,866 4,762 4,772 2,416 2,405 Premium income up by 0.5% Y/Y 2,287 2,232 2,258 • 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 2,626 2,642 2,579 2,540 2,504 • 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 2010 2011 2012 2013 2014 increases FY 7
N O N - L I F E I N S U R A N C E Private Combined ratio - Very satisfactory results Claims ratio incl. reinsurance Gross expense ratio 101.0 95.9 20.1 86.5 85.3 85.2 84.8 18.8 15.3 17.8 17.7 17.4 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 80.9 77.1 – Combined ratio improved by 1 ppt 70.0 68.7 67.5 67.4 • 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 of extended coverage 2009 2010 2011 2012 2013 2014 8
N O N - L I F E I N S U R A N C E Commercial Combined ratio - Very satisfactory results Claims ratio incl. reinsurance Gross expense ratio 100.9 100.2 94.8 16.3 16.6 88.4 86.0 16.8 81.3 14.0 13.6 Combined ratio of 86.0 14.6 - Improved by 2.4 ppts Y/Y Improved claims trend • Strong trend in major claims – Positive effects from preventive work 84.6 83.6 • Weather-related impacted by cloudbursts 78.0 74.4 72.4 – Claims increased to 6.2 ppts from 5.7 in 2013 66.7 • 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 2009 2010 2011 2012 2013 2014 • Always considering the growing competition 9
N O N - L I F E I N S U R A N C E Investment return Investment assets DKK 9.7bn - Loss of DKK 93m Equities 2% Mortgage deeds 19% 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 Bonds 79% 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 10
L I F E A N D P E N S I O N Pre-tax profit L IFE AND P ENSION DKKm Highlights Underwriting profit/loss Return on investments allocated to equity 137 21 Pre-tax profit of DKK 78m - Down by DKK 8m Y/Y 90 86 3 78 12 • Satisfactory risk result 2 • Growth in total pension premiums 116 • Regular premiums still negatively impacted by tax reform 83 78 76 Satisfactory return on policyholders’ funds 15 8 2 • Collective bonus potential up by DKK 85m 13 10 -2 • Bonus rate improved Y/Y to 9.8% – The discount rate of the Danish FSA declined Y/Y 2011 2012 2013 2014 2013 2014 from 2.24% to 0.99% (10-year yield) Q4 • Rate on policyholders ’ savings for new customers maintained at 4% for 2015 11
L I F E A N D P E N S I O N Pension contributions Total pension contributions DKKm Regular premiums Single premiums Investment schemes 1,645 402 1,273 1,235 1,082 345 332 611 358 Total pension contributions up by 29% 302 285 121 Pension premiums up by 34% Y/Y 485 • Single premiums up by 102% 375 121 • Regular premiums up by 1% 102 632 618 626 603 163 85 – Still negative impact from tax reform 201 188 Unguaranteed investment schemes in the bank 2011 2012 2013 2014 2013 2014 up by 17% Q4 12
L I F E A N D P E N S I O N Profit impacted by lower risk result Profit split* DKKm Expense and risk results Interest result Return on investments allocated to equity Result of portfolios without bonus entitlement Change to shadow account 137 24 90 21 + Interest result increased 12 86 11 11 3 77 − Increased due to higher risk allowance in 2014 11 2 16 +Return on equity investments – Return impacted by the low level of interest rates 86 81 74 62 ÷ Expense and risk results – Lower risk result -3 – Satisfactory expense result -5 -9 -2 -5 – Offering some of the industry’s lowest costs to customers 2011 2012 2013 2014 * Profit before tax of the parent company Alm. Brand Liv og 13 Pension A/S, which includes post-tax return on investment in the EMD Local Currency investment fund
L I F E A N D P E N S I O N Investment return - Very satisfactory return and improved bonus rate Interest rate group U74* Total 0 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’ 4.00 4.50 5.00 6.00 savings, 2014 Strong bonus potential Rate on policyholders’ 4.00 5.00 5.00 6.00 savings, 2015 • Average bonus rate of 9.8% Investment assets • Attractive bonus rate for new 0.1 4.8 1.9 1.2 4.4 12.5 (DKKbn) policyholders of 11.6% 11.6 19.3 7.6 3.3 9.8 Bonus rate (%) Return (% YTD) 5.4 13.7 8.0 11.0 10.0 Rate on policyholders’ savings 100% 59% 53% 77% 78% 67% Bonds • Highest rate on private 0% 24% 20% 8% 3% 14% Equities policyholders’ savings in 0% 17% 14% 11% 9% 13% Property Denmark 0% 0% 13% 4% 10% 6% Fixed-income derivatives *Portfolios without bonus – Maintained in 2015 entitlement 14
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