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 Pension Banking Pre-tax profit: DKK 105m Pre-tax profit: DKK 20m Pre-tax profit: DKK 31m • CR: 89.9 • Risk result: DKK 12m • Writedowns: DKK 3m • Expense ratio: 14.4% • Bonus potential: DKK 1.0bn • Growth in lending • Premium growth: -0.3% • Bonus rate: 10.7% • One-off income of DKK 17m Winding-up activities: Loss: DKK 77m • Writedowns: DKK 56m 2
G R O U P Comments on Q3 Financial highlights, Q1-Q3 Group Cloudbursts impacted profit in Non-life Pre-tax profit: DKK 318m Insurance Non-life Insurance Intensified competition impacting insurance Pre-tax profit: DKK 449m premiums • CR: 87.2 • Expense ratio: 15.7 One-off adjustment in the bank related to Life and Pension liquidation of Alm. Brand Formue Pre-tax profit: DKK 70m Lending to private customers increased Banking Pre-tax profit: DKK 75m Pre-tax profit outlook • 2014: Unchanged at DKK 250-350m Winding-up activities • 2015: DKK 200-300m Pre-tax loss: DKK 237m 3
G R O U P 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
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 638 70 Q3 pre-tax profit of DKK 105m • Technical result better than expected 449 • Negative investment return due to lower interest rates 266 568 228 29 487 Combined ratio of 89.9 in Q3 105 • Weather-related claims affected by 245 237 cloudbursts 39 130 • Major claims lower than expected 61 -17 -22 -25 • Positive impact from run-offs -38 • Lower expenses • Underlying CR worsened Y/Y to 77.2 2011 2012 2013 2014 2013 2014 Q3 9M – Fewer claims but higher average claims 5
N O N - L I F E I N S U R A N C E Premiums impacted by Premium income intensified competition DKKm Private Commercial 1,281 1,277 1,229 1,229 1,201 613 609 567 578 567 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% 662 668 668 651 634 • Commercial down by 0.7% – Higher average premiums due to ongoing rewriting of building insurances 2010 2011 2012 2013 2014 – Defection among customers receiving the highest premium increases Q3 6
N O N - L I F E I N S U R A N C E Retention rate Retention rate 2008 = index 100 remains high 102 100 98 96 • Competition still impacting retention rate negatively 94 • Competition is still most intense within motor 92 insurance • Customer satisfaction 90 Dec/08 Dec/09 Dec/10 Dec/11 Dec/12 Dec/13 measured as net promotion score increased to above 30 7
N O N - L I F E I N S U R A N C E Combined ratio still strong Combined ratio Claims ratio incl. reinsurance Gross expense ratio Underlying combined ratio 95.7 89.9 87.2 85.1 81.7 14.6 80.2 14.4 79.9 78.3 77.2 77.0 76.9 15.7 Combined ratio of 89.9 74.1 16.2 15.5 - Better than expected in spite of cloudbursts 15.1 • 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 81.0 75.5 Underlying combined ratio of 77.2 71.5 68.9 66.2 65.1 • Higher average claims in Q3 • Partly offset by fewer claims – down by 4 ppts – especially theft and cars Expense ratio down Y/Y 2011 2012 2013 2014 2013 2014 • Expenses lower than expected Q3 9M • Lower due to accrual of expenses 8
N O N - L I F E I N S U R A N C E Weather-related Major claims ratio and major claims 7.4 6.7 6.6 Major claims down by 0.7 ppt Y/Y 5.4 5.4 Below average annual expectation of 8% • Lower expenses than expected • Better than expected in both Private and Commercial 2011 2012 2013 2014 2014 Q3 9M Major claims ratio Average expectation (8%) Weather-related claims ratio Weather-related claims incl. reinstatement up by 6.5 ppts Y/Y Above-average annual expectation of 4% 5.4 • Cloudbursts in Q3 0.3 1.3 • Claims primarily related to cloudburst in 9.1 6.9 Copenhagen 4.9 2.9 0.7 • Significantly fewer claims compared with the cloudburst 2011 2012 2013 2014 2014 in July 2011 Q3 9M − Reinsurance and preventive work since 2011 Weather-related claims ratio reduced number of claims and the average claims Reinstatement size Average expectation (4%) 9
N O N - L I F E I N S U R A N C E Optimising investment Asset allocation DKKbn allocation Mortgage bonds Mortgage deeds Shares Other 0.2 0.2 0.2 0.2 100% 0.1 0.1 0.2 0.2 90% 1.9 80% 70% 9.8 9.7 Investment return challenged by low interest rate 10.1 • Shares increased 1.5% in Q3 60% 8.2 Higher-yielding mortgage deed portfolio acquired from the bank 50% • Low-interest mortgage bond portfolio reduced • Bank retains credit risk through option agreement 40% Q1 2014 Q2 2014 Q3 2014 New Net effect with the current interest rate level portfolio* DKK 20m in 2015 * Based on Q3 2014 adjusted for sale of 10 mortgage bonds and acquired mortgage deeds
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 38 Pre-tax profit of DKK 20m - Down by DKK 2m Y/Y 14 • Satisfactory risk result 24 22 1 • Growth in total pension premiums 0 20 • Regular premiums still negatively impacted by tax 2 reform Satisfactory return on policyholders’ funds 24 23 22 • Collective bonus potential down by DKK 25m 18 • 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 Q3 2011 Q3 2012 Q3 2013 Q3 2014 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 300 283 267 253 89 75 77 100 Total pension contributions up by 13% 85 97 72 16 Pension premiums up by 12% Y/Y • Single premiums up by 35% • Regular premiums down by 3% – Still negative impact from tax reform 137 123 118 114 • Inflow of new policyholders secured overall growth in premiums Unguaranteed investment schemes in the bank 2011 2012 2013 2014 up by 16% Q3 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 71 69 1 8 4 13 + Interest result increased 38 2 − Increased due to higher risk allowance in 2014 14 24 64 1 +Return on equity investments 2 53 22 3 – Lower interest rates lifted the return 2 19 2 5 28 24 ÷ Expense and risk results 21 12 – Lower risk result in the quarter -1 -2 – Satisfactory expense result achieved while -5 -5 -1 -2 offering some of the industry’s lowest costs to customers 2011 2012 2013 2014 2013 2014 Q3 9M * 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 10.7% Investment assets • Attractive bonus rate for new 0.1 4.7 1.9 1.2 4.4 12.3 (DKKbn) policyholders of 12.8% 12.8 19.4 8.7 4.2 10.7 Bonus rate (%) Return (% YTD) 4.7 10.7 6.9 9.1 8.5 Rate on policyholders’ savings 100% 58% 54% 76% 79% 67% Bonds • Highest rate on private 0% 25% 21% 8% 3% 15% Equities policyholders’ savings in 0% 17% 15% 12% 9% 13% Property Denmark 0% 0% 11% 4% 8% 5% Fixed-income derivatives *Portfolios without bonus – Continues in 2015 entitlement 14
B A N K I N G Pre-tax profit B ANKING DKKm Highlights Forward looking activities Winding-up activities 31 22 22 -4 -20 Pre-tax loss of DKK 46m Improved by DKK 7m Q/Q -75 -77 -85 Forward-looking activities -99 • Profit of DKK 31m -84 • Better than expected • One-off adjustment related to Alm. Brand Formue -53 -46 • Lower writedowns Q/Q -63 • Growth in full-service customers and lending -103 -104 Winding-up activities Q3 Q4 Q1 Q2 Q3 • Loss of DKK 77m 2013 2014 • Better than expected • Writedowns of DKK 56m 15
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