Investor Presentation • Jul 13, 2018
Investor Presentation
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13 July 2018
* Per cent relative to insurance premiums paid in 2017. Distributed by the Gjensidige Foundation to general insurance customers in Norway.
5 *Payable fully in cash at completion. Subject to certain adjustments based on the performance of the bank until closing. ** Gjensidige Forsikring Group. To be excluded from the basis for calculation dividend pay-out ratio for 2018.
| NOK m | Q2 2018 | Q2 2017 | YTD 2018 | YTD 2017 |
|---|---|---|---|---|
| Private | 371 | 645 | 715 | 1 164 |
| Commercial | 307 | 469 | 376 | 819 |
| Denmark | 64 | 71 | 149 | 60 |
| Sweden | 13 | (70) | 23 | ( 87) |
| Baltics | 11 | (19) | 20 | (31) |
| Corporate Centre/costs related to owner | (83) | (72) | (166) | (137) |
| Corporate Centre/reinsurance | 23 | (52) | (0) | (84) |
| Underwriting result | 707 | 972 | 1 118 | 1 705 |
| Pension | 38 | 23 | 70 | 54 |
| Retail Bank | 218 | 122 | 340 | 224 |
| Financial result from the investment portfolio | 371 | 470 | 626 | 1 036 |
| Amortisation and impairment losses of excess value | (69) | (66) | (139) | (126) |
| Other items | (12) | (19) | (34) | (26) |
| Profit/(loss) before tax expenses | 1 253 | 1 503 | 1 979 | 2 868 |
295 Q2 2017 Q2 2018 Expected Reported
NOK m NOK m
CC = corporate centre. Large losses: Losses > NOK 10m. Weather related large losses are included. Large losses in excess of NOK 30.0m are charged to the Corporate Centre while up to NOK 30m per claim is charged to the segment in which the large loss occurred. The Baltics segment has, as a main rule, a retention level of EUR 0.5m. The Sweden segment has a retention level of NOK 10m.
CC = corporate centre
| NOK m |
|||||||
|---|---|---|---|---|---|---|---|
| 891 | 13 | 10 | 4 | (16) 902 |
(4) | 11 898 |
909 |
| 7 01 2 2 Q |
e at v Pri |
al erci m m o C |
k ar m n e D |
n e d e w S |
cs alti B |
C C |
8 01 2 2 Q |
Gjensidige Bank ASA
| Q2 2018 | % |
|---|---|
| Fixed income |
0.3 |
| Current equities |
1.4 |
| PE funds | 2.3 |
| Property | 1.7 |
| Total free portfolio |
0.8 |
* Solvency margins when adjusting capital position to reflect best estimate reserves.
Figures as at 30.06.2018. The legal perspective is the regulatory approved version of the partial internal model. The Solvency II regulation is principle based. The figures are adjusted for a formulaic dividend pay-out ratio of 70 per cent of net profit.
| Return on equity | >15% |
|---|---|
| Combined ratio | 86-89%* |
| Cost ratio | ~15% |
| Dividends | Nominal high and stable (>70%) |
* Combined ratio target on an undiscounted basis, assuming ~4 pp run-off gains next 2.5-4.5 years and normalised large losses impact. Beyond this period, the target is 90-93 given 0 pp run-off.
| Date | Location | Participants | Event | Arranged by |
|---|---|---|---|---|
| 27 August | Oslo | CEO Helge Leiro Baastad CFO Jostein Amdal Head of IR, Mitra H. Negård |
Group lunch Roadshow |
DNB |
| 28 August | Bergen and Stavanger | CEO, Helge Leiro Baastad Head of IR Mitra H. Negård |
Roadshow | Arctic Securities |
| 30-31 August | Geneva and Zurich | CEO, Helge Leiro Baastad Head of IR Mitra H. Negård |
Roadshow | Danske Bank |
| 13 September | Edinburgh | EVP Group Staff and General Services, Janne Flessum Head of IR Mitra H. Negård |
Roadshow | Handelsbanken |
| 20 September | Stockholm | CFO Jostein Amdal EVP Group Staff and General Services, Janne Flessum |
Roadshow | Carnegie Investment Bank |
Assuming Solvency II regime
* Losses >NOK 10m. From and including 2012, the numbers include weather related large losses. 23
*Reported UW result for Q1 2016 was NOK 1,251m. Adjusted for a non-recurring income of NOK 477m related to the pension plans, the UW result was NOK 774m.
** Reported UW result for Q3 2016 was NOK 712m. Adjusted for a non-recurring NOK 120m restructuring cost the UW result was NOK 832m.
25 *** Reported UW result for Q4 2016 was NOK700m. Adjusted for a non-recurring NOK 44m increase in provision for restructuring cost and NOK23m provision for increased pay-roll tac the UW result was NOK 767m
| Asset class | Investments, key elements* | Benchmark |
|---|---|---|
| Match portfolio |
||
| Money market | Norwegian money market | ST1X index |
| Bonds at amortised cost | Government and corporate bonds |
Yield provided in quarterly reports |
| Current bonds | Mortgage, sovereign and corporate bonds, investment grade bond funds and loan funds containing secured debt |
IBOX COR 1-3 yrs QW5C index |
| Free portfolio | ||
| Money market | Norwegian money market |
ST1X index |
| Other bonds | IG bonds in internationally diversified funds externally managed and current bonds |
Global Agg Corp LGCPTRUH index |
| High Yield bonds | Internationally diversified funds externally managed | BOAML global HY HWIC index |
| Convertible bonds | Internationally diversified funds externally managed | BOAML global 300 conv VG00 index / Exogen factors |
| Current equities | Mainly internationally and domestic diversified funds externally managed |
MSCIAC NDUEACWF index |
| PE funds | Oil/ oil-service/ general (Norwegian and Nordic funds) | OSEBX index / oil price |
| Property | 50% of Oslo Areal | IPD index Norway / Exogen factors |
| Other | Miscellaneous |
*See quarterly report for a more detailed description
Average duration: 3.5 years
Carrying amount: NOK 17.6bn
| Split - Rating | Match portfolio | Free portfolio | ||
|---|---|---|---|---|
| NOK bn | % | NOK bn | % | |
| AAA | 10.9 | 31.4 | 1.1 | 14.1 |
| AA | 3.1 | 8.9 | 1.0 | 12.5 |
| A | 4.9 | 14.2 | 1.7 | 22.2 |
| BBB | 1.6 | 4.7 | 1.2 | 15.9 |
| BB | 0.4 | 1.0 | 0.3 | 4.5 |
| B | 2.3 | 6.7 | 0.3 | 3.8 |
| CCC or lower | 0.1 | 0.2 | 0.1 | 0.9 |
| Internal rating* | 7.7 | 22.2 | 1.2 | 15.6 |
| Unrated | 3.7 | 10.7 | 0.8 | 10.5 |
| Fixed income portfolio | 34.7 | 100.0 | 7.7 | 100.0 |
| Split - Counterparty | Match portfolio | Free portfolio | ||
| NOK bn | % | NOK bn | % | |
| Public sector | 4.9 | 14.2 | 1.9 | 24.0 |
| Bank/financial institutions | 16.1 | 46.4 | 2.9 | 38.2 |
| Corporates | 13.6 | 39.4 | 2.9 | 37.8 |
| Total | 34.7 | 100.0 | 7.7 | 100.0 |
| (NOK bn) | Legal perspective (Group) |
Legal perspective (general insurance) |
Own partial internal model (Group) |
Own partial internal model (general insurance) |
Gjensidige Pensjons forsikring |
Gjensidige Bank |
|---|---|---|---|---|---|---|
| Capital available | 21.7 | 15.1 | 21.7 | 15.1 | 1.9 | 4.6 |
| Capital requirement |
13.5 | 8.3 | 12.5 | 7.3 | 1.3 | 4.4 |
| Solvency margin |
160% | 181% | 173% | 206% | 143% | 105% |
Figures as at 30.6.2018. The legal perspective is the regulatory approved version of the partial internal model. The Solvency II regulation is principle based. The figures are adjusted for a formulaic dividend pay-out ratio of 70 per cent of net profit. Allocation of capital to Gjensidige Bank is based on 17,0 per cent capital adequacy ratio.
Figures as at 30.06.2018. GPF = Gjensidige Pensjonsforsikring. The Solvency II regulation is principle based. Deferred tax: All differences in valuation of assets and liabilities are adjusted for tax. No tax is assumed on the security provision. Miscellanious: Main effects are related to the guarantee scheme provision and different valuation of Oslo Areal.
| NOK bn |
Legal perspective (Group) |
Own Partial Internal Model (Group) |
|---|---|---|
| Capital available |
21,7 | 21,7 |
| Capital charge for non-life and health uw risk |
6,8 | 6,4 |
| Capital charge for life uw risk |
1,3 | 1,3 |
| Capital charge for market risk | 6,3 | 6,1 |
| Capital charge for counterparty risk |
0,4 | 0,4 |
| Diversification | (4,0) | (4,5) |
| Basic SCR | 10,9 | 9,7 |
| Operational risk |
1,0 | 1,0 |
| Adjustments (risk-reducing effect of deferred tax) |
(2,7) | (2,5) |
| Gjensidige Bank | 4,4 | 4,4 |
| Total capital requirement | 13,5 | 12,5 |
| Surplus | 8,2 | 9,2 |
| Solvency ratio | 160 % | 173 % |
Figures as at 30.06.31.03.2018 The legal perspective is the regulatory approved version of the partial internal model. The Solvency II regulation is principle based. The figures are adjusted for a formulaic dividend pay-out ratio of 70 per cent of net profit. Allocation of capital to Gjensidige Bank is based on 17.0 per cent capital adequacy ratio. The pie chart is based on allocated capital for the specified risk types within the Gjensidige Forsikring Group excl. Gjensidige Bank.
Figures as at 31.3.2018. The legal perspective is the regulatory approved version of the partial internal model. The Solvency II regulation is principle based. Total comprehensive income is included in the calculations, minus a formulaic dividend pay-out ratio of 70 per cent of net profit. UFR-sensitivity is very limited.
| Intermediate Equity Content | Constraint | ||
|---|---|---|---|
| S&P | 25% of TAC |
For the general insurance group, both Solvency II Tier 1 and Tier 2 instruments are classified as Intermediate Equity Content. Capital must be regulatory eligible in order to be included. |
|
| T1 | T2 | Constraint | |
| SII | Max 20% of Tier 1 capital |
Max 50% of SCR less other T2 capital items |
Must be satisfied at group and solo level |
Figures as at 30.6.2018. Legal perspective is the regulatory approved version of the partial internal model. The Solvency II regulation is principle based. The FSA's view on the Guarantee provision as a liability for solvency purposes has not been reflected in the debt capacity figures, as Gjensidige still assumes that the Guarantee provision will count as solvency capital. *Sub debt Gjensidige Forsikring ASA NOK 1.2bn, Gjensidige Pensjonsforsikring NOK 0.3bn
| Element | Solvency surplus effect (NOK bn) |
Comment |
|---|---|---|
| Guarantee scheme provision |
~ (0.1) – 0.5 |
Increase in provision suggested, no news regarding treatment in Solvency II |
| Tax effect on Solvency II balance sheet |
~ (1.3) - (0.7) |
New tax rules suggested, decision expected in 2018. Solvency margin effect most likely in the lower end at approximately 0.7 BNOK related to the security provision. The unlikely worst case in addition reflects deferred tax on the natural peril capital. |
| Risk-reducing effect of deferred tax |
~ 0 |
A decision that clarifies the rules regarding the risk-reducing effect suggested by EIOPA, is expected in 2018. Based on current balance sheet no effect is expected, but there could be a negative impact if the solvency margin adjusted for expected run-off gains were to drop. |
| Interest rate risk | ~ (0.6) – (0.3) |
New stress parameters suggested by Eiopa with transitional rules over a three year period, decision expected in 2018 |
37
Bridge shows main elements in equity development
14.2
Other
Sources Insurance Sweden, 1st quarter 2018 (Gjensidige including Vardia), The Danish Insurance Association 2nd quarter 2017 (Gjensidige including Mølholm). Baltics Insurance Supervisory Authorities of Latvia and Lithuania, Estonia Statistics, competitor reports, and manual calculations, 4th quarter 2017
41
Ownership
| No | Shareholder | Stake (%) |
|---|---|---|
| 1 | Gjensidigestiftelsen | 62.2 |
| 2 | Folketrygdfondet | 3.8 |
| 3 | Deutsche Bank | 3.7 |
| 4 | Caisse de Depot et Placement du Quebec |
3.7 |
| 5 | Danske Bank | 2.0 |
| 6 | Black Rock | 2.0 |
| 7 | The Vanguard Group | 0.9 |
| 8 | DNB | 0.8 |
| 9 | State Street Corporation | 0.8 |
| 10 | Nordea | 0.7 |
| Total 10 largest |
81.6 |
Gjensidige Foundation ownership policy:
This presentation and the information contained herein have been prepared by and is the sole responsibility of Gjensidige Forsikring ASA (the "Company"). Such information is being provided to you solely for your information and may not be reproduced, retransmitted, further distributed to any other person or published, in whole or in part, for any purpose. Failure to comply with this restriction may constitute a violation of applicable securities laws. The information and opinions presented herein are based on general information gathered at the time of writing and are therefore subject to change without notice. The Company assumes no obligations to update or correct any of the information set out herein.
These materials may contain statements about future events and expectations that are forward-looking statements. Any statement in these materials that is not a statement of historical fact including, without limitation, those regarding the Company's financial position, business strategy, plans and objectives of management for future operations is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future. The Company assumes no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.
This presentation does not constitute or form part of, and is not prepared or made in connection with, an offer or invitation to sell, or any solicitation of any offer to subscribe for or purchase any securities and nothing contained herein shall form the basis of any contract or commitment whatsoever. No reliance may be placed for any purposes whatsoever on the information contained in this presentation or on its completeness, accuracy or fairness. The information in this presentation is subject to verification, completion and change. The contents of this presentation have not been independently verified. While the Company relies on information obtained from sources believed to be reliable, it does not guarantee its accuracy or completeness. Accordingly, no representation or warranty, express or implied, is made or given by or on behalf of the Company or any of its owners, directors, officers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation. None of the Company, its affiliates or any of their respective advisors or representatives or any other person shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation. The Company's securities have not been and will not be registered under the US Securities Act of 1933, as amended (the "US Securities Act"), and are offered and sold only outside the United States in accordance with an exemption from registration provided by Regulation S of the US Securities Act.
This presentation should not form the basis of any investment decision. Investors and prospective investors in securities of any issuer mentioned herein are required to make their own independent investigation and appraisal of the business and financial condition of such company and the nature of the securities. Any decision to purchase securities in the context of a proposed offering of securities, if any, should be made solely on the basis of information contained in any offering documents published in relation to such an offering. For further information about the Company, reference is made public disclosures made by the Company, such as filings made with the Oslo Stock Exchange, periodic reports and other materials available on the Company's web pages.
In addition to the financial statements according to IFRS, Gjensidige uses different alternative performance measures (APM) to present the business in a more relevant way for its different stakeholders. The alternative performance measures have been used consistent over time, and relevant definitions have been disclosed in the quarterly reports. Comparable figures are provided for all alternative performance measures in the quarterly reports.
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