Analyst Conference Full Year 2022
DFV Deutsche Familienversicherung AG
30th March 2023
Welcome
| Welcome |
Dr
Stefan Knoll |
Group result
2022 |
Karsten Paetzmann |
Review
2022 &
Outlook 2023 |
Dr
Stefan Knoll |
Karsten Paetzmann CFO
+34 % -12 % €1.7M
Revenue growth net
Opex (Cost cutting) net
Over-delivered on profitability target
Revenue (net earned premiums) and Opex: change year-over-year Opex: IFRS expenses from insurance operations
Growth trajectory in primary insurance
- Continued organic growth across all lines of business in primary insurance
- Highest absolute growth in Dental (+€7.2m), followed by Pet (+€2.2m)
- Dental remains the core of the business model – for both the back book and the new business stream
- New inwards reinsurance business (since 2021) contributes to the overall growth
First financial period with positive operating profit since IPO
Statement of comprehensive income
| €m |
2021 |
2022 |
Delta |
|
|
|
|
| Gross written premiums (GWP) |
155.2 |
183.5 |
+28.3 |
| Net earned premiums (NEP) |
87.4 |
117.0 |
+29.6 |
| Income from capital investments |
10.8 |
2.1 |
-8.7 |
| Other revenue |
1.0 |
0.6 |
-0.4 |
| Insurance benefits |
-58.3 |
-81.7 |
-23.4 |
| Expenses from insurance operations |
-37.6 |
-33.0 |
+4.6 |
| Other expenses |
-4.1 |
-3.5 |
+0.7 |
| Operating income |
-0.8 |
1.7 |
+2.5 |
|
|
|
|
| Financing expenses for leases |
0.0 |
0.0 |
+0.0 |
| Profit before tax |
-0.8 |
1.7 |
+2.5 |
| Income taxes |
-0.9 |
-0.7 |
+0.2 |
| Profit after tax |
-1.7 |
1.0 |
+2.7 |
|
|
|
|
| Unrealised gains and losses from capital investments |
-4.1 |
-19.0 |
-14.9 |
| Total comprehensive income |
-5.8 |
-18.0 |
-12.2 |
|
|
|
|
GWP per policy in € - annualised (primary insurance only)
Average # of staff |
240
178 |
254
184 |
|
|
|
|
|
Gross written premiums increased by 18 % in 2022, compared to a premium increase of 34 % on a net basis.
Insurance benefits increased by 40 % in 2022, slightly more than net earned premiums (NEP).
The net claims ratio including additions to the actuarial reserve and additions to the reserve for policyholder participations (RfB) was 69.8 % in 2022 (2021: 66.7 %).
Also positive operating profitability based on HGB
Bridge IFRS (Group) to HGB (AG)
| €m |
2021 |
2022 |
Delta |
|
|
|
|
| Profit before tax IFRS (Group) |
-0.8 |
1.7 |
+2.5 |
|
|
|
|
| IFRS income from capital investments |
-10.8 |
-2.1 |
+8.7 |
| HGB income from capital investments |
4.4 |
3.7 |
-0.6 |
| HGB equalisation reserve movements |
-0.2 |
-0.9 |
-0.7 |
| Other items |
-0.6 |
-0.1 |
+0.6 |
|
|
|
|
| Profit before tax HGB (AG) |
-8.1 |
2.3 |
+10.4 |
We strive for the ability to pay dividends so that shareholders can participate directly in the success of DFV
AG single entity level
(HGB profit before tax; in €m)
Focus on cost management
- A significant profitability driver: substantial cost reduction despite revenue increase
- Opex decreased by 12 % despite a 34 % revenue growth (net).
- Enhanced commitment to cost discipline.
- Initiatives to further automate processes add further momentum.
Health segment
Loss ratio (net before allocation to actuarial reserve) 54.0% 68.8% 57.6%
2020 2021 2022
RfB ratio (RfB as % of gross earned premiums Health nAdL) 3.9% 4.8% 4.5% 9.7% 10.8% 0% 5% 10% 15% 2018 2019 2020 2021 2022
- Growth and stable claims evolvement
- Continued, sustainable new business stream (NEP 2022: +16 % y-o-y).
- Following an extraordinary increase in 2021, the segment's loss ratio is again below 60 %.
- RfB ratio as a metric for resilience and customer-friendliness in the Health nAdL portfolio
CAGR: Compound annual growth rate RfB: reserve for policyholder participation (Rückstellung für Beitragsrückerstattung)
Property-Casualty segment
- Continued growth path
- NEP 2022: +16 % y-o-y.
- P/C growth mainly driven by Pet, distributed via established online channels.
- Loss ratios remain favourable.
Inwards reinsurance segment
- Stable returns from reinsurance segment
- Group long-term care (LTC) contracts agreed on by the social partners.
- DFV assuming a primary insurer's share in the group LTC contract since 2021.
- Conditions in line with actuarial calculation.
Investments
- Stabilised income from investments
- DFV's investment portfolio is dominated by fixed income assets.
- High volatility and interest rate increases in 2022, leading to unrealised fair value losses.
- The protection of customer funds remains a high priority
- Focus on current revenue
- The asset allocations implemented in DFV's master funds focus on current revenue.
- Real estate investments contribute to such stable current revenue.
Equity
Development of shareholders' equity of EU insurers
(relative reduction 31.12.2022 vs 31.12.2021)
-51% -50% -45% -38% -36% -36% -36% -32% -32% -31% -30% -23% -21% -19% -14% -11% -9%
Shareholders' equity: IFRS consolidated equity without non-controlling interests Source: (Preliminary) financial reports of selected insurers listed in the euro area • IFRS group equity decreased by 21 % in 2022 – a moderate reduction compared to DFV's peers
Share price
- Since mid-2021, DFV has successfully achieved to emancipate itself from the share price downturn of the Insurtech peer group
- While DFV's share price was stable recently, it is dissatisfying based on fundamentals
Sustainable finance
- DFV has published its second sustainability report
- Scope 1 und 2 emissions were again neutralised, by use of a blockchain-based system (PEFC-certified forest located in Bavaria).
- Scope 3 monitoring in accordance with the GHG protocol has been established.
- Further increase in taxonomy-eligible investments.
(input paper mail as % of all claims documents Pet)
FTE: Full-time equivalent GHG: GreenhouseGas PEFC: Programme for the Endorsement of Forest Certification Source: DFV 2022 sustainability report; GDV 2022 sustainability report
Sustainability reporting
Upcoming ESRS-Reporting
(DFV prepares to adopt on time)
- Sustainable finance regulation progresses
- DFV will have to apply the CSRD including the ESRS from 2025.
- Until then, two more voluntary sustainability reports will be published by DFV, each of them audited.
- The new European Sustainability Reporting Standards (ESRS) will replace the standards of the Global Reporting Initiative (GRI) at DFV.
IFRS 17/9 transition – preliminary takeaways
| IFRS 17 models |
−
DFV applies all three measurement models under IFRS 17, including VFA. |
| Product profitability |
−
Improved visibility on profit emergence from long-term contracts and on contribution from new business. |
| CSM |
−
Substantial CSM embedded in VFA business, albeit also high CSM attached to reinsurance contract assets (GMM). |
| PAA portfolios |
−
No circumstances indicate that a group of contracts might be onerous. |
| New IACF asset |
−
Recognition of insurance acquisition cash flows (IACF) for customer acquisition cost paid. |
| Equity |
−
Shareholders' equity increases, especially if the CSM carrying future profits is also considered. |
| Economic capital |
−
Under an economic view, the equity including CSM/RA is significantly above DFV's current market capitalisation. |
| Investments |
−
No impact on equity from the IFRS 9 adoption. |
| Earnings volatility |
−
The adoption of IFRS 17/9 will lead to an increased volatility of earnings (interest rate fluctuations, FVTPL). |
| Solvency |
−
No impact on DFV's solvency position from the IFRS 17/9 transition. |
CSM: Contractual Service Margin | ETF: Exchange-Traded Fund | FVTPL: Fair Value Through Profit or Loss |
IACF: Insurance Acquisition Cash Flow | GMM: General Measurement Model | PAA: Premium Allocation Approach |
RA: Risk Adjustment | VFA: Variable Fee Approach
Key messages
Strict cost management and continued revenue growth – focus on prudent product calculation 2
Priorities for 2023: transition to IFRS 17/9 and preparation of the next strategic plan 3
Review 2022 & Outlook 2023
Dr Stefan Knoll CEO
Review 2022
What we promised and achieved in 2022
Mission accomplished
Fulfillment profitability
On the way to dividends
Strong growth
Development of gross written premiums in €m, incl. reinsurance*
1Source Gesamtverbande der Deutschen Versicherer: https://www.gdv.de/gdv/events/jahresmedienkonferenz2023
Best customer rating in the industry
Significant increase in customer satisfaction in 2022
Automation is not only a product topic, but also a process topic
- More automation is not only in the interest of the company, but also in the interest of the customer.
- More automation has primarily to do with speed.
High automation in operation
Increasing the automation rates in the company
High automation in claims/performance
Example: Dental claim settlement
Degressive hiring policy with progressive automation
The translation of analog realities into binary codes
On-Demand Insurance
DFV Snap
Introducing DFV Snap as 24-hour accident insurance for 5 euros:
- No paperwork
- No waiting time
- No contract commitment
- Worldwide protection
Realignment sales
- Reduction of acquisition costs from 18 MP to 12 MP (monthly premiums)
- Change from DRTV to own-brand TV advertising
- Switch from external marketing to in-house marketing
What are we up to in 2023?
More leadership
We give the management team a new structure
Long-term restructuring for more efficient completion of tasks
• So that operational work and day-to-day business can function without a CEO.
• This will enable the CEO to focus on investors and share price development in the future.
Management Board
Dr. Stefan Knoll CEO
Dr. Karsten Paetzmann CFO
Marcus Wollny CCO
Executive Management Team
Ansgar Kaschel CSO
COO
Dr. Bettina Hornung CIO
New sales
New sales with the following focus
36
Focus 1: Direct marketing on TV
Direct marketing on TV
Increase brand awareness through own television advertising
- Further development of the successful cooperation with ProSiebenSat.1
- TV advertising with own spots and constantly changing content
- Since 1.1.2023 DFV-KombiSchutz, since 1.3. DFV Snap and from 1.4. DFV-ZahnSchutz
DFV-KombiSchutz
All-inclusive for the whole family
- Accident, household, glass, bicycle theft, liability and traffic legal protection in one policy
- These six important insurances for 39.90 € per month
- Standard price for singles and families
DFV Snap
Our most innovative product as a lever for brand communication
- Marketing campaign in Austrian ski resorts
- Integration into high-reach podcasts
- National social media campaigns
- Broadcast on TV in addition to DFV-KombiSchutz
DFV is the most innovative insurer in the industry
For insurance companies with up to 250 employees1
Focus 2: Targeted use of digital media
Targeted use of digital media
We are where the customers are
- 360° communication in the digital space
- Permanent presence within the customer journey
- Cross-platform digital-first campaigns
https://www.thinkwithgoogle.com/intl/dede/insights/customer-journey/kaufverhalten-undentscheidungsfindung-verstehen/
Focus 3: Eintracht Frankfurt as a sales channel
Eintracht Frankfurt as a sales channel
120.000 members are 120.000 potential DFV customers
- Exclusive insurance store for Eintracht members only
- Up to 25% discount on DFV insurance products with testwinning benefits
- Merging of DFV products with the Eintracht world
Integration of DFV Snap in mainaqila
Coming soon
- Integration of DFV Snap into the digital platform of Eintracht Frankfurt
- Expansion of the presence within the Eintracht ecosystem in addition to the Eintracht insurance shop
- Exclusive member benefit of 48h insurance coverage with DFV Snap
Focus 4: Setting up the CRM Factory
Direct Marketing forever
With €0.2m seed capital to €7.7m revenue in five years.
Pan-European M&A and further development into a group with 3,500 employees and revenues of €200m.
Consistent digitalisation of the insurance business and first IPO of an InsurTech in Europe.
114.7
155.2
183.5
Implementation of a CRM Factory
- Cross-selling, up-selling and cancellation recovery takes place selectively
-
CRM is quite successful, but not "factory-made"
-
Establishment of a CRM Factory with up to 30 employees
- Systematic campaigning already starts in 2023
More automation
Automation rates in operation and performance are already exceptionally high today
Rethinking automation
Project Warthog
- We want to rethink digitisation!
- It is not the technology that determines the processes, but only the products.
- Just as the Americans once built an airplane around a cannon, we are building the products and processes around the technology.
- That is our Warthog project.
Forget Alexa, ChatBot 2.0 is the future
We test the application fields of new technologies
- We were the first direct insurance company to demonstrate insurance underwriting via Alexa.
- Voice assistants have not penetrated the market, but the focus is on text-based applications like ChatGPT.
- We are testing and reviewing the applications of ChatGPT for insurance sales.
Claims payment 2.0
PayPal as a real-time payout platform
- Consequent continuation of automation
- Settlement of 70% of all dental claims in 10 minutes
- Processing at the bank takes 5 days therefore we want to pay out in real time
More profitability
Planning and Guidance 2023
Planning 2023 onwards
- 1. Linear new business of €15 million per year
- 2. Expected portfolio volume in primary insurance of €200 million by 2027
- 3. Permanent profitability
Benefits
- Linear marketing expenses
- Growth +4.1% CAGR
- Recoverable losses carried forward until 2026
- Ability to pay dividends from 2027
- No additional capitalization
Measures
- Organic growth
- Innovation leader in the relevant market
- Automated processes
- Compliance with the 12 MB rule
- More direct sales
Guidance 2023
Contribution volume total €194m
Combined Ratio primary insurance 99%
Group result before taxes €3-5M
What are we?
Deutsche Familienversicherung is an independent, listed digital direct insurer
The year 2023
• Solid growth
• Continuation of profitability
Thank you for your attention
DFV remains exciting
Our next IR appointments
March 30 Publication of Annual Financial Report 2022
May 12 Stifel German Corporate Conference
May 15-17 Equity Forum Frühjahrskonferenz
May 17 Publication Quarterly financial report (reporting date Q1)
May 24 Annual General Meeting