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Tryg Investor Presentation 2017
3389_rns_2017-12-04_b4e0f3f5-77ba-4c4a-96db-8dde429ec070.pdf
Investor Presentation
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Tryg
Tryg acquisition of Alka
04th December 2017
alka A compelling opportunity for Tryg
Tryg
Acquiring a high-performing business in our core market
- Alka is a best-in-class operator within the Danish non-life market
- Attractive financial profile with average combined ratio over last five years of 84%
Strong accretion of earnings and dividends
- Alka’s technical result for the last 12 months (to Sept-2017) was DKK325m, run-rate merger benefits of DKK300m
- Earnings enhancement in the first full year following the acquisition, with high single digit earnings accretion by 2021
Continuing on a strong financial foundation
- DKK4bn fully underwritten equity placing to partly finance the transaction
- Extraordinary dividend of DKK1bn to be paid in Q1 2018 is confirmed
4 December 2017
Tryg
Unique opportunity, attractive financial profile
Purchase price
- DKK8.2bn - valuing operations of Alka at DKK5.7bn, with DKK2.5bn of excess capital
Financing sources
- Placing of DKK4bn through issuing up to 10% of current shares outstanding through an accelerated bookbuilding
- TryghedsGruppen will subscribe for 60% of placing at the bookbuild price – furthermore TryghedsGruppen has committed to underwrite all shares at DKK146 per share
- Issuance of DKK500m in Tier 1 to be executed during H1 2018
- Use of Tryg excess capital and other capital optimisation measures
Financial impact
- Earnings enhancement in the first full year following the acquisition, with high single digit earnings accretion by 2021
- Significant long term potential to increase ordinary dividends
- Pro forma Solvency II ratio of 170%
4 December 2017
Tryg
Strong strategic rationale
- Increased presence in Tryg's core market segment
- Results in market share for Tryg in Denmark of 22%
-
Alka adds market share in private lines of 6%*
-
Strong complementary market proposition
- Alka is a consistent top performer in terms of customer loyalty and satisfaction
-
Potential to leverage Alka’s strong presence in the online channel
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Significant opportunity to increase penetration rate across unions
- Tryg expects to continue successful partnership with unions
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Alka’s customers are eligible for TryghedsGruppen’s members bonus, which has been 8% of premiums per annum over the past two years
-
Alka has been highly successful in leveraging data analytics
- The combined entity will leverage the best practices in using data analytics for the purpose of pricing, lead generation and fraud detection
4 December 2017
*Estimated market share in Danish private lines
Tryg
2020 Targets
Earnings
| CMD 2017 | Post transaction | |
|---|---|---|
| Technical result | DKK2.8bn | DKK3.3bn |
| Combined ratio | ≤ 87% | ≤ 86% |
| Expense ratio | ~14% reaffirmed | ~14% reaffirmed |
| RoE | ≥ 23% | ≥ 21% |
Customers
| CMD 2017 | Post transaction | |
|---|---|---|
| TNPS | 70 | 70 |
| No. products per customer | +10% | +10% |
4 December 2017
Tryg
alka A success story in the Danish market
- 8th largest Danish non-life insurance company with a market share of 4.3%, with an estimated private lines market share of 6%
- ~380,000 customers, with a CAGR of 5% of policies over the last 5 years
- Strong relationships with unions developed over more than 100 years, complementary to Tryg's experience built up over more than 75 years with labour unions
- Consistently reported highly attractive combined ratio (84% average in last five years)
- Advanced digital platform with ~36% of premiums distributed online
- Strong brand awareness, supported by high-profile sponsorships
4 December 2017
alka Strong brand awareness in Denmark
Tryg
Unaided knowledge of the Alka brand (%)*
*As at Q2 2017
4 December 2017
alka Focused on private lines
Tryg
Gross premiums by business (DKK2.5bn in 2016)
- Non-life, Private
- Group life
- Non-life, Commercial
Gross premium, Non-life commercial (DKK0.2bn in 2016)
- Workers' compensation
- Fire and property
Gross premium, Non-life private (DKK1.9bn in 2016)
- Fire and property
- Motor
- Accident & health
- Other
Technical result (DKK288m in 9M 2017)
4 December 2017
alka Strong and profitable growth profile
Tryg
Alka vs. Danish non-life insurance market: indexed gross premiums (%)
Development in Alka's Danish non-life market share
4 December 2017
Tryg
Strengthens position in core Danish market
Market share (latest available)
Source: Forsikring & Pension.
4 December 2017
Tryg
Best-in-class combined ratio profile
4 December 2017
Tryg
Compelling merger benefits of DKK300m
DKK300m in run-rate merger benefits in combined entity
Commentary
- Full run-rate impact in 2021 of DKK300m
- 25% impact expected in 2019, 50% impact in 2020
- Drivers include:
- Claims procurement
- Fraud detection
- Data analytics
- Online
- Product and service innovation
- Reduction in overlapping labour costs will mostly be delivered through natural attrition across the combined entity
- DKK250m in one-off transaction costs and restructuring provision in 2018
4 December 2017
Tryg
Funding via a fully underwritten equity placing
Sources of funding to finance the transaction (DKKbn)
4 December 2017
Tryg
Combined Solvency II ratio of 170%
Solvency II ratio Q3' 17 pro forma
4 December 2017
Tryg
alka
Strengthening the core, while embracing the future
- Acquiring a high-performing business in our core market
- Strong accretion of earnings and dividends
- Continuing on a strong financial foundation
- Long term profitable growth and attractive shareholder value creation
4 December 2017
Tryg
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Q&A
4 December 2017
Contact details
Tryg
Gianandrea Roberti
Investor Relations Officer
+45 20 18 82 67
[email protected]
Peter Brondt
Investor Relations Manager
+45 22 75 89 04
[email protected]
Tanja Frederiksen
Head of Communications
+45 51 95 77 78
[email protected]
4 December 2017
Tryg
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APPENDIX
4 December 2017
Tryg
Alka: Very strong financial track record
| DKKm | 2012A | 2013A | 2014A | 2015A | 2016A | 9M 2017 |
|---|---|---|---|---|---|---|
| Non-life | ||||||
| Gross premiums | 1,854 | 1,938 | 2,006 | 2,035 | 2,078 | 1,624 |
| Technical result | 363 | 368 | 335 | 357 | 191 | 288 |
| Expense ratio | 16% | 15% | 16% | 18% | 18% | 16% |
| Combined ratio | 81% | 82% | 84% | 83% | 91% | 82% |
| Life insurance technical result | 12 | 5 | (3) | (5) | (2) | (0) |
| Investment income | 174 | 88 | 76 | 98 | 120 | 124 |
| Profit before tax | 550 | 461 | 408 | 454 | 295 | 412 |
| Net profit | 402 | 343 | 307 | 344 | 235 | 319 |
| Shareholders’ equity | 1,912 | 2,195 | 2,450 | 2,630 | 2,696 | 2,958 |
| Invested assets | 4,597 | 4,592 | 4,991 | 5,361 | 5,146 | 5,446 |
| Solvency ratio (standard model) | n.a. | n.a. | n.a. | 362% | 364% | 360% |
Source: Alka company filings for 2012-2016, 9M 2017 via due diligence process.
4 December 2017