acquisition of codan (dk) & privatsikringbetween dk, no and se headquartered in copenhagen with...
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Confidential
Alm. Brand’s acquisition of Codan (DK) & Privatsikring
11 JUNE 2021
Confidential
Contents
Transaction overview and financing 3
Investment highlights 9
Concluding remarks 24
Confidential
1 In addition, the consideration will be adjusted on a capital neutral basis in order to account for any changes in Codan’s own funds post the de-merger and to account for the earnings generated between the de-merger date and completion 33
Agreement to acquire Codan (DK) & Privatsikring
(“Codan”) from Tryg/Intact
Transaction
Significant run-rate expenses and claims
synergies of DKK ~600m per annum to be fully
realised by 2025
Synergies
DKK 12.586bn (c. EUR 1.69bn) in cash1
Consideration
Closing expected in H1 2022
Timetable
Transaction overview
Confidential
44
Indicative timeline
Public announcement
Public announcement
of agreement to buy Codan
Rights issue
Rights Issue
Prospectus publication
Exp. deal closing
Completion following
regulatory approvals
Shareholder vote
Alm. Brand shareholders to
vote on transaction before
rights issue
Separation expected to be
complete
Separation of RSA DK
from RSA Scandinavia
H2 2021
H1 2022
H1 2022
H2 2021
11/6 2021
Confidential
Financing of the transaction with support from the Association
Note: Alm. Brand af 1792 fmba (”The Association”) 5
~11.6
~2.0
Financing
~13.6
33%
67%
Underwritten by
banks
Fully committed
by the Association
Ambition of a long-
term shareholding
above 50%
The Association will
decrease its
ownership stake to
below 50%
Irrevocable
commitment by the
Association of DKK
3.8bn
Underwritten rights issue
(including Association participation)
Subordinated bonds &
other financing sources
~13.6
~12.6
~1.0
Investment
Consideration
Restructuring & transaction costs
after tax
Total investment (DKKbn) Financing of the investment (DKKbn) The Association is highly supportive of the transaction
Confidential
6Note: 1) Based on gross earned premiums for non-life; 2) Percent of gross earned premiums in 2020; last 3% comprise of other insurances; 3) Percentage of new sales in 2020
Headquartered in
Copenhagen with
~1,400 employees
Established in 1792 and
third largest insurance
company in DK with a
market share of ~9%
Non-life insurance assists around
320,000 households and 90,000
corporate customers. Life insurance
around 70,000 customers
5,365
202020192018
5,274 5,471
Combined ratio1
40%
39%
21%
Non-life (private) Life insuranceNon-life (commercial)
Product offering2 Distribution3
Workers’ compensation(8%)
Motor(28%)
Fire & content(44%)
Liability(3%)
Customer service centres(33%)
Insurance agents(58%)
Brokers(9%)
Non-life insurance(79%)
Personal accident(12%)
Gross earned premiums, non-life (DKKm)
Alm. Brand today
Alm. Brand at a glanceProvides non-life and life insurance products in Denmark
87% 89% 85%
Non-life insurance
Tourist assistance(2%)
Confidential
60%
40%
7Note: 1) Based on gross earned premiums; 2) Percent of gross earned premiums in 2020; last 4% comprise of other insurances and rounding; 3) Hereof ~750 in Denmark and ~250 employed on DK contracts with shared salary allocated between DK, NO and SE
Headquartered in
Copenhagen with
~1,0003 employees
Established in 1916 and
fourth largest insurance
company in DK with a
market share of ~9%
Assists around
240,000 households
and 50,000
corporate customers
5,415
2018 2019
5,825
2020
5,916
Non-life (Commercial) Non-life (Private)
Codan(~85%)
Product offering2 Distribution within personal lines
Direct channels(61%)
Bancassurance(39%)
Privatsikring(~15%)
Health Insurance(2%)
Workers’ compensation
(9%)
Motor(19%)
Fire and content(49%)
Liability(2%)
Tourist assistance(2%)
Marine, aviation & cargo(4%)
Personal accident(9%)
Distribution within commercial lines
Direct channels(42%)
Broker channels(53%)
Affinity partners(5%)
Gross earned premiums (DKKm)
Codan is a traditional non-life insurer operating under two brands (Codan and Privatsikring) Codan at a glance
Introduction to Codan
99% 89%
Non-life insurance
103%
Combined ratio1
Confidential
Contents
Transaction overview and financing 3
Investment highlights 9
Concluding remarks 24
Confidential
Unique strategic combination in the attractive Danish non-life insurance market
9
Transformation of Alm. Brand into a Tier 1 non-life insurance player in Denmark 11
12
13
14
Economies of scale to drive benefits and value creation for customers, investors, employees and partners
Substantial synergy potential with manageable execution risk
Attractive shareholder value creation and financial impact
Confidential
10Note: Market shares based on Q1 2020; Forsikring & Pension
22.5%
8.9%
17.5%
15.6%
6.7%
8.6%
5.5%
+
23.1%23.8%
18.0%
6.1%
11.7% 11.5%
7.8%
+
Segment % and # placing
relative to total DK
general insurance market
35%
#1
Motor insurance
6.7%
15.3%
26.0%
7.2%
17.7%
10.5%8.0%
+
23%
#2
Fire & content insurance
Segment % and # placing
relative to total DK
general insurance market
The proposed transaction creates the 2nd largest non-life insurance company in Denmark…
…with close to market leading position in the largest segment, fire & content insurance
1. TRANSFORMATION OF ALM. BRAND 11
The acquisition creates the second largest player in the attractive Danish non-life insurance market
Confidential
11Note: GEP = Gross earned premiums
40%
39%
21%
40%
60%
40%
48%
12%
Non-life Commercial
Non-life Private
Life insurance Greater differentiation of the
portfolio due to a wider segment
and complementary product
range
+ =Privatsikring adds further strength
to Alm. Brand’s ambition to grow
through bancassurance
Large Corporates and
Specialised segments are
significant parts of the Codan
portfolio, which will support a more
balanced portfolio
GEP
DKK 1.5bn
GEPDKK 2.7bn
GEP
DKK 2.8bn
GEPDKK 2.2bn
GEPDKK 3.2bn
GEPDKK 1.5bn
GEPDKK 6.0bn
GEPDKK 4.9bn
Segments
Share of non-life GEP
Total non-life GEP
DKK
100% ~88%~79%
5.4bn 10.9bn5.5bn
1. TRANSFORMATION OF ALM. BRAND
Acquisition brings a step change in scale and a further significant shift in business mix towards non-life insurance
Alm. Brand Codan NewCo Key portfolio changes
11
Confidential
Direct sales
In-market transaction with a great strategic fit
12
HQ
IT platform
Strategic partnerships
Home market
Dis
trib
ution
Segm
ents
Partnerships
Broker
SME
Large corp. & spec.
Copenhagen
TIA Technology TIA Technology (ongoing)
Copenhagen Copenhagen
+
TIA Technology
=
In-market nature of the
transaction
Strong complementarity across
distribution channels and
commercial segments
Similar IT platforms enable a
less complex integrationAgriculture
Similar culture and no
language barriers
Private
Alm. Brand Codan NewCo Supportive similarities
100% 100% 100%
High priority High priority High priority
1. TRANSFORMATION OF ALM. BRAND 11
Com
merc
ial
Confidential
13Source: Annual reports and market statistics
Headquarter
Jutland Funen Zealand
~35% addressable market share from current partnership banks exceeding
NewCo’s combined market share in the general insurance market
Increase share of wallet via cross selling
Key initiatives to capture market potential
Target
Improved digital solutions for easy customer access
Improved offering and services leading to increased
attractiveness
Strategic partnerships will
continue to be a high priority (Selected strategic partnerships)
Partnerships drive new
positioning, improved customer
experience and growth
Approximate market shares
30%
15%
50%
5%
Wide distribution through partnership banks with ample opportunities…
…to penetrate private non-life market by deploying key initiatives in bancassurance
Partnerships are an integral part of the strategy
Large untapped growth potential through attractive partnerships and wider product offering
Large independent
banks
Other selected
Totalkredit members
Selected Privatsikring
members (Codan)
Sydbank
(Alm. Brand)
1. TRANSFORMATION OF ALM. BRAND 11
Confidential
14
2. SIGNIFICANT SCALE
Customers
Customers gain from large scale via improved product offering and services
Employees
Employees gain from an attractive and evolving workplace with a broader opportunity set
Investors
Investors gain from economies of scale and improved market positioning
Partners
Partners gain from an increased customer base and attractive customer solutions
1
Secure high service and good customer
experiences through new and improved solutions
Solutions and services
Value creation for all stakeholdersEnable
underwriting
efficiency
Secure
procurement
efficiency
Retain and
attract talent
Leverage
data insights
Secure a
strong value
proposition
Room for
ambitious
R&D
projects
2
Scale to enable new investments and initiatives
to the benefit of stakeholders
Economies of scale 3
More attractive return on investment on digital
solutions and scalable initiatives
Return on investment
Future proof platform to provide superior stakeholder value
12
Confidential
15Note: COR = Combined ratio; GEP= Gross earned premiums
Increasing attractiveness
as a Tier 1 non-life
insurance player
Larger company size
More diversification
Improved profitability
70%
75%
80%
85%
90%
95%
100%
105%
0 5 10 15 20 25 30 35
CO
R
GEP (DKKbn)
Expected movement in Alm.
Brand’s COR/GEP relation
Clear correlation between scale and underwriting performance in Nordic non-life insurance
COR vs. GEP among Nordic non-life insurers (3Y average, 2018-2020) Value-adding effects
2. SIGNIFICANT SCALE 12
Confidential
20202018 2019
4,237 4,279
3,285…resulting in optimised claims
ratios demonstrating the strong
profitability uptake from
historical levels
12 month rolling Claims (%)
Gross earned
premiums
Codan is successfully pruning
portfolios by terminating
agreements with
unremunerative customers…
16Note: 1) Calculated based on gross earned premiums
2018 2019 2020
5,4155,916 5,825
Pruning is in progress and the full
effects have yet to be achieved
Strong organic growth driven by
Privatsikring and Technical Lines
Legacy implications are currently
being handled to improve
price/risk assessment
Net incurred claims
Gross earned premiums (DKKm) YoY growth (%)
Net incurred claims (DKKm)
71.6% 73.5%60.7%
Claims ratio (%)1
3. SUBSTANTIAL SYNERGY POTENTIAL
Significant value upside from improved standalone performance in Codan
Financial factors going forward
-1.5% -7.0%
Codan is on track improving standalone performance1
-0.4%
13
Confidential
17
DKKm
1 2 3
~63%
IT and infrastructure
~38%
Claims
~25%
Administration Expense levers
~38% ~225
~375
Total synergies
~600
ExpensesClaims
IT and
infrastructure
▪ IT and infrastructure synergies related
to integration of critical IT
systems, platforms and
applications
▪ Further synergies from sharing best
practices on digitalisation
Claims
▪ Claims synergies related to
indemnity spend, procurement,
fraud detection improvements and
improved claims processes
Administration
(non-IT)
1▪ Administration (non-IT) synergies
expected to be realized through FTE
reductions, rent savings from
combining offices and sharing of
best practices
Revenues
▪ Over time, the transaction is
expected to generate net revenue
synergies from cross-selling and
other initiatives
▪ Net revenue synergies excluded from
the financial analysis
Considerable upside from tangible, in-market synergies
Key synergy drivers Potential pre-tax synergies of DKK ~600m to be realised post-transaction
2
3
3. SUBSTANTIAL SYNERGY POTENTIAL 13
Confidential
18
DKKm
~600
20242022
~240
2023 2025
~90
~450
Synergies Share phased-in of total synergies
Pre-tax synergies of DKK ~600m
to be fully realised by 2025
IT synergies expected to be subject
to the longest phase-in period
High confidence in synergy realisation due
to the in-market nature of the transaction and
intimate familiarity with target
Closing expected in
H1 2022
Cost synergies to be fully realised by 2025
15% 40% 75% 100%
High confidence in realising cost synergies Pre-tax cost synergies of DKK ~600m to be realised by 2025
3. SUBSTANTIAL SYNERGY POTENTIAL 13
Confidential
19
Entering new strategic partnerships with key
accounts (e.g. Volkswagen Financial Services) by
improving customer experience via digital solutions
Increasing profitability bytransforming the group into a
largely non-life insurance focused company
I.
Structure
III.
Profitable growth
New and more agile organisation with a holistic
approach to the customer experience
New management structure to drive process of
change
IV.
Ambitious goals
II.
Costs
Focused and swift execution of the sale of the bank, while securing a
competitive sales price
Reduction in FTEs across all business areas and
shared services
Improved customer experience for both private and
commercial customers
Increased focus on dynamic pricing and efficient
interface to digital workflow
Profitability is prioritised above growth
Specific strategic goals for key value creating factors
Full transparency about the business plan going
forward and how the full potential of the strategy is
achieved
Rasmus Werner
Nielsen
CEO
Mikael Toke
Hvolgaard
Executive VP,
Private
Kim Bai Wadstrøm
Executive VP,
Commercial
Andreas Ruben
Madsen
CFO
Kristian Hjort-
Madsen
Executive VP,
BD and digitalisation
Strong management team with a relentless focus on execution
Management team with execution experience… … delivering on key strategic areas
The Alm. Brand management team has a proven execution track record and is ready to transform the company into a Danish Tier 1 non-life insurance player
3. SUBSTANTIAL SYNERGY POTENTIAL 13
Confidential
Total consideration
of DKK ~12.6bn
20
4. ATTRACTIVE SHAREHOLDER VALUE CREATION AND FINANCIAL IMPACT
Investment
~12.6
~1.0
~13.6
ROI
~7% by 2024
High teens EPS accretion
expected by 2024
The transaction represents an attractive return on investment and will be highly accretive to EPS
Total investment (DKKbn) Strong ROI Attractive EPS accretion
Total restructuring
and transaction
costs after tax of
DKK ~1.0bn
EPS accretion driven by synergiesSubstantial value creation with a
ROI of ~7% by 2024
14
Confidential
Impact on own funds Impact on SCR
Non-life insurance
Target SII ratio (post-transaction)
Life insurance
21Note: 1) The deviation of DKK ~0.1bn is from AB PIA and AB A/S mother
~170%
~600%
Group
~200%
Robust solvency position maintained post transaction
Financing of the investment (DKKbn) Solvency II ratio overview based on Alm. Brand internal model (estimated pro-forma)
Group SCR
Standard model: DKK 2.1bn1
Internal model: DKK 1.0bn
Total: DKK 3.1bn
Non-life SCR
Standard model: DKK 2.0bn
Internal model: DKK 0.9bn
Total: DKK 2.9bn
Life SCR
Standard model: DKK 0.1bn
Internal model:
Total: DKK 0.1bn
Rights issue
Subordinated
bonds and other
financing
Intangibles as well
as transaction,
restructuring and
integration costs
Increased
insurance exposure
(premiums and
reserves)
SCR in Codan is
based on standard
model
4. ATTRACTIVE SHAREHOLDER VALUE CREATION AND FINANCIAL IMPACT14
~2.0
~11.6
Financing
~13.6
Underwritten rights issue
(including Association participation)
Subordinated bonds &
other financing sources
Confidential
0.0
Dividend paid to shareholders, DKK per share
Profit before tax, continuing activities, DKKm
22
Note: 1) Alm. Brand paid out DKK 1.2bn in January 2021 equalling an extraordinary dividend of DKK 8 per share due to the divestment of the bank, 2) Including estimated pre-tax synergies
1.5
2017
1.5
2018
1.51.31.2
1.5
2019 2020
8.01
2021
4.2 4.33.0
4.0
Ordinary dividend Extraordinary dividend Share buyback
2021E Post-transaction
(medium term)2
600-650
Alm. Brand has a ordinary dividend
target equalling a pay-out ratio of
min. 70% of the group’s profit after tax
Pay-out ratio
High teens EPS accretion
expected by 2024
Original guidance
February 2021
Significant increase in dividend capacity through earnings growth and strong capital position
In previous years, Alm. Brand has paid out a stable dividend to shareholders…
…where dividend capacity will increase as pro-forma profit is expected to grow considerably
118% 102% 100%84%
~3.0x increase
4. ATTRACTIVE SHAREHOLDER VALUE CREATION AND FINANCIAL IMPACT14
Confidential
Contents
Transaction overview and financing 3
Investment highlights 9
Concluding remarks 24
Confidential
24
Unique strategic acquisition in the attractive Danish non-life insurance market
Transformation of Alm. Brand
into a Tier 1 non-life insurance
player in Denmark
11 12 13 14
Economies of scale to drive
benefits and value creation
for customers, investors,
employees and partners
Substantial synergy potential
(DKK ~600m) with
manageable execution risk
Attractive shareholder value
creation and financial impact
Confidential10 June 2021
Q&A
Confidential
Appendix
Confidential
27
Support a strong
management team
Rasmus Werner Nielsen appointed as CEO of
Alm. Brand to lead new strategy for Alm. Brand A/S
The principal shareholder, Alm. Brand af 1792 fmba has participated proportionally in all the share buyback programmes since 2015 to maintain ownership of around 58%
58.0%of the share capital is held by the Association
…all of whom are customers of Alm. Brand Forsikring
Share buyback programme
Competitive insurance company
The Foundations long-term interest is to ensure Alm.
Brand A/S is a competitive insurance company in the
Danish market
Contribution to members of
the Foundation
The foundation furthermore aims to contribute to its
members by investing in preventive measures and
services or via direct payout to policyholders
Alm. Brand af 1972 fmba
Foundation / governance Foundation objectives
400,000 members
…elected by the shareholders, are nominated by fmba
5 out of 8 board members
Confidential
Irevocable commitment to support the
transaction with available funds
The Association is following the sale of
the bank treated as an Insurance HoldCo
under the Solvency II regime
28
>50%
58%
Current
shareholding
Future
shareholding
Shareholding
at closing
<50%
Irrevocable commitment to support the transaction with available funds
The Association’s irrevocable commitment
Board of Representatives is in favour of the transaction with all approvals obtained
Irrevocable commitment to support the capital raise
Irrevocable undertaking to commit capital in the rights issue
Following the sale of Alm. Brand Bank A/S, the Association reclassified as an Insurance HoldCo
Irrevocable undertaking to:
Commit DKK 3.8bn in the rights issue
Subscribe for further new shares in the rights issue (in addition to the DKK 3.8bn) on a cash neutral basis
Sale of Alm. Brand shares / pre-emptive rights expected to fund participation in rights issue
The Association has the sole purpose of supporting Alm. Brand
The Association has the intention to use anticipated future dividend pay-outs from Alm. Brand to increase its shareholding in Alm. Brand
The Association is an insurance HoldCo Intention to increase future shareholding
Confidential
Note: 1) Forward looking statements are not to be read as implying or gauranteeing actual future performance. For information only
29
Return / nominator would include1:
• Expected earnings when synergies are fully phased-in
Investment / denominator would include:
• Consideration which in total equals DKK 12.586bn
• After-tax restructuring and transaction costs
Pro-forma earnings would be based on1:
• Acquired expected earnings in 2024
• Run-rate synergies
• EPS accretion is calculated before any impact from intangible amortisation
and such impact would not affect the company’s dividend capacity
Pro-forma share count:
• Rights Issue discount to TERP will be irrelevant from a shareholder
perspective given the nature of the pro-rata allocation of pre-emptive
rights to shareholder’s existing holding
• Standalone EPS will need to be adjusted by the bonus factor (IAS 33),
offsetting the discount to TERP of the rights issue
ROI and EPS accretion calculations
ROI EPS accretion
Confidential
30
Alm. Brand A/S
Alm. Brand PIA A/SAlm. Brand Forsikring A/S
Forsikringsselskabet Alm. Brand Liv og Pension A/S
Codan Forsikring A/S
ForsikringsselskabetPrivatsikring A/S
New company structure
Company structure
Confidential
31
Disclaimer
FORWARD LOOKING STATEMENTS
The statements made in this presentation are based on current expectations, estimates and projections made by management. All statements
about future financial performance are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in
or implied by the statements. All statements about future financial performance made in this presentation are solely based on information known
at the time of the preparation of the last published financial report, and the company assumes no obligation to update these statements, whether
as a result of new information, future events, or otherwise.