financial results h1 2013 - alm. brand...financial results h1 2013 investor presentation danske bank...
TRANSCRIPT
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Alm. Brand
Financial results H1 2013 Investor presentation Danske Bank 23 August 2013
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Highlights of Q2 2013
G R O U P
Strong CR of 84.5
Few weather-related and major claims
Positive run-off result
Strong premium growth
Weakened underlying business
Net interest and fee income improved by lower funding costs and higher fee income
Lower return on bond portfolio due to rising interest rates
Losses and writedowns at DKK 91m
Regular premiums up by 5.0% Y/Y
Investment return negatively impacted by higher interest rates
Strong collective bonus rate of 6.6%
Profit of DKK 550m before losses and writedowns (unchanged)
Non-life Insurance up by DKK 55m, Banking down by DKK 55m
Estimated losses and writedowns maintained at DKK 300-400m
DKK 200m injected into Alm. Brand Bank to repay DKK 200m of hybrid capital
No
n-l
ife
Insu
ran
ce
B
an
kin
g
Lif
e a
nd
Pen
sio
n
Ou
tlo
ok
H1: Pre-tax profit of DKK 319m before and DKK 136m after losses and writedowns
Q2: Pre-tax profit of DKK 198m before and DKK 107m after losses and writedowns
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Non-life Insurance - Financial highlights in brief
Results Q2 2013
Profit of DKK 229m
Higher Investment return
Premiums up by 4.3%
CR better than expected due to:
Run-off gains (6.8ppts of CR)
Weather-related claims
Major claims
÷ Claims frequency
÷ Discounting effect
Results H1 2013
Profit of DKK 372m
High investment return
Premiums up by 3.4%
N O N - L I F E I N S U R A N C E
Key figures/ratios (DKKm) Q2 H1
2012 2013 2012 2013
Gross premiums 1.206 1.258 2.401 2.483
Investment income 4 2 9 5
Claims expenses -744 -789 -1.715 -1.620
Expenses -202 -207 -389 -413
Reinsurance -47 -66 50 -124
Technical result 217 198 356 331
Investments return after
technical interest -3 31 22 41
Profit before tax 214 229 378 372
Combined Ratio 82.3 84.5 85.5 86.8
Underlying Combined Ratio 78.6 83.6 80.2 82.7
67.5%
DKK
2,483m
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4
93
94
95
96
97
98
99
100
101
dec-08 jun-09 dec-09 jun-10 dec-10 jun-11 dec-11 jun-12 dec-12 jun-13
Index
N O N - L I F E I N S U R A N C E
Trend in premium income
Q2 premiums up by 4.3% y/y
Private premiums up by 2.8%
Commercial premiums up by 6.0%
Retention rate improved since 2011
Restored after notifications of
premium increases initiated in
2009/2010
631 640 651 657 638 658
564 566 578 579 587 600
1,195 1,206 1,229 1,236 1,225 1,258
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013
Gro
ss p
rem
ium
s (
DK
Km
)
Private Commercial
Retention rate - Private
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5
Underlying business
N O N - L I F E I N S U R A N C E
Higher underlying CR Y/Y
+ Higher premiums
÷ More claims
÷ Discounting effect
÷ Higher reinsurance costs
More claims in Q2
Increase in especially in April and May
Approx. half related to delayed
claims relating to Q1
Glass claims on motor
insurances up by 32% Y/Y
First half of 2013 on level with 2011
Note: Excluding workers’ compensation
86.9
88.4
82.5
78.6
83.6
Q2 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013
80
85
90
95
100
105
110
115
2011 2012 2013 2011 2012 2013
Q2 H1
Number (index) Avg. claim (index) Claims (index)
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Major claims
Note: Major claims are defined as claims in excess of DKK 1m
N O N - L I F E I N S U R A N C E
Major claims lower than
expected in Q2
As expected for H1 since Q1
performance was impacted by
fire claims
Major claims up Y/Y
Number of major claims
higher …
…but average claims lower
0
20
40
60
80
100
120
140
160
Q2 2011 Q2 2012 Q2 2013
Number (index) Avg. claim (index) Claims (index)
8.7
8.9
6.7
4.7
6.0
8.1
Q2 Q2 Q2 Q2 Q2 H1
2009 2010 2011 2012 2013 2013
Major claims ratio Average expectation (8%)
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Weather-related claims
N O N - L I F E I N S U R A N C E
Note: Figures stated net of reinsurance recoveries
Weather-related claims still below
normal
All segments
Weather-related claims still low
Average claims dropped
significantly compared to 2012
Mild weather
No cloudbursts
Few lightning claims 0
100
200
Q2 2011 Q2 2012 Q2 2013
Number (index) Avg. claim (index) Claims (index)
2.1
-3.6
2.4 2.1 1.7 1.5
Q2 Q2 Q2 Q2 Q2 H1
2009 2010 2011 2012 2013 2013
Weather-related claims ratio Average expectation (4%)
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Expense ratio
N O N - L I F E I N S U R A N C E
Expenses higher
than 2012
Investments in
digitalisation
19.5%
18.9%
18.3%
17.6%
15.6%
16.3%
15.7% 15.9%
15.7%
16.2%
15.7%
16.2%
16.8% 16.6%
12%
14%
16%
18%
20%
Q1 H1 Q1-Q3 FY Q1 H1 Q1-Q3 FY Q1 H1 Q1-Q3 FY Q1 H1
2010 2011 2012 2013
Target 2016 (15%)
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2010
Note: Combined and expense ratios are stated at group level. Codan figures include Danish business only
N O N - L I F E I N S U R A N C E
Alm. Brand among top performers - Peer group comparison
Exp
en
se R
ati
o
Co
mb
ined
Rati
o
2011
2012
H1 2013
17.6
15.4 17.0
20.3
15.9 15.7 16.8
21.3
16.2 15.8 16.4
22.3
16.6 16.6 15.8
98.2 93.3
98.8 101.4 92.3 90.3 93.5
102.3
83.3 88.0 88.2
93.8 86.8 88.2 88.6
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Alm. Brand Bank - Financial highlights
B A N K I N G
Results Q2 2013
Loss of DKK 44m before losses and writedowns
Operating profit before value adjustments up by DKK 18m
Lower funding costs
Higher fee income
÷ Negative value adjustments on bonds, shares and derivatives
÷ Expenses related to properties taken over temporarily
Loan book
Winding-up portfolio down by DKK 153m excluding losses and writedowns
Losses and writedowns in line with Q1 2013 and within expectations
Results H1 2013
Loss of DKK 79m before losses and writedowns
Continuing activities: Loss of DKK 18m
Discontinued activities: Loss of DKK 61m
Key figures/ratios (DKKm) Q2 Q3 Q4 Q1 Q2 H1
2012 2012 2012 2013 2013 2013
Interest receivable 179 177 164 152 145 297
Net interest and fee income 92 105 92 86 108 194
Value adjustments* 24 -11 14 -9 -36 -45
Losses and writedowns* -81 -166 -148 -92 -91 -183
Profit/loss before tax -107 -176 -146 -127 -135 -262
Profit/loss before tax and
excl. losses and writedowns -26 -10 2 -35 -44 -79
Interest margin 1.3% 1.6% 1.4% 1.3% 1.7% 1.5%
*Credit related value adjustments included under
losses and writedowns
10.2%
DKK
379m
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B A N K I N G
Income
Interest income declined
Reduction of loan book
Higher net fees in Financial
Markets
Inflow of new customers
More business per
customer
Return on bond portfolio
negatively impacted by higher
interest rate and lower
portefolio
Negative value adjustments on
shares and derivatives
* Value adjustments of shares, mortgage deeds and derivatives
140 139 126 118 107 105
32 31 30
32 32 43
32 45
43 55
36 13
38 19
-3
5
0
-9
242 234
196 210
175
152
Q1 Q2 Q3 Q4 Q1 Q2
2012 2013
DK
Km
Interest on loans Net fees Return on bonds Other value adjustments*
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B A N K I N G
Funding and interest margin
Funding costs down by
DKK 18m Q/Q
Repayment of bonds and
hybrid capital: DKK 14m
Deposits: DKK 4m
DKK 200m of hybrid capital to
be repaid in Q3
Improved interest margin in Q2
Reduction of funding costs has
improved margin
1.9% 1.7% 1.7%
1.3% 1.4% 1.3%
1.6% 1.4% 1.3%
1.7%
0,0%
0,5%
1,0%
1,5%
2,0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2011 2012 2013
Interest margin
128 118
102 104 98
80
Q1 Q2 Q3 Q4 Q1 Q2
2012 2013
DK
Km
Deposits and other payables Total subordinated debt
Bonds issued Credit institutions and central banks
Interest expenses
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Deposits and loan book
B A N K I N G
Reduction of loans and
advances
Deposit surplus reduced to
DKK 2.8bn
Discontinued loan portfolio of
DKK 5.3bn
Now mainly composed of
Mortgage deeds
Agriculture
Commercial lending
Loan book
1.0
0.2 1.1
0.3
2.8
2.4
5.3
Continuing portfolio
Agriculture Car finance Commercial lending
Property development
projects
Mortgage deeds
Discontinued loan portfolio
DKKbn
10.2 9.6 9.2 8.7 8.5 8.3
10.1 10.5 10.6 11.3 11.4 11.1
Q1 Q2 Q3 Q4 Q1 Q2
2012 2013
DK
Kb
n
Loans and advances Deposits
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14
Losses and writedowns still high
B A N K I N G
Reversal of writedowns on commercial
lending again in Q2
Real estate market continues to impact
private customers and mortgage deeds
Still high writedowns on agriculture
20 20
29 27
78
19
26
18
0 0 0 0
27 32
-18
-7 -2
2 2 0
43
75
53 52
-25
0
25
50
75
100
Q3 '1
2
Q4 '1
2
Q1 '1
3
Q2 '1
3
Q3 '1
2
Q4 '1
2
Q1 '1
3
Q2 '1
3
Q3 '1
2
Q4 '1
2
Q1 '1
3
Q2 '1
3
Q3 '1
2
Q4 '1
2
Q1 '1
3
Q2 '1
3
Q3 '1
2
Q4 '1
2
Q1 '1
3
Q2 '1
3
Q3 '1
2
Q4 '1
2
Q1 '1
3
Q2 '1
3
Continuing portfolio
Agriculture Car finance Commercial lending
Property development
projects
Total mortgage deeds
DK
Km
-
15
278
203
125
30
53
35
80
-32
-13
-75
Continuing portfolio
Agriculture
Car finance
Commercial lending
Property development projects
Mortgage deed financing
Mortgage deeds
Total, loan book
Reversals and intra-group transactions
Total, group
DKKm
426
375
166
60
109
41
133
-60
-23
-51
Continuing portfolio
Agriculture
Car finance
Commercial lending
Property development projects
Mortgage deed financing
Mortgage deeds
Total, loan book
Reversals and intra-group transactions
Total, group
DKKm
Loan book reductions - Excl. losses and writedowns
B A N K I N G
H1 2013 Q2 2013 Loan book reduced by DKK 278m
in Q2
Continuing portfolio DKK 125m
lower
Private lending reduced by
DKK 21m
Stable repayment in car finance
and commercial lending
Funding to agriculture and project
development
Net mortgage deeds declined by
DKK 115m
Higher repayment Q/Q
Equal to repayment of
approx. 7% p.a. in H1
Total loan book reduction in H1:
DKK 426m
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Loan portfolio and credit losses
B A N K I N G
Loans Losses and writedowns
31.12 31.03 30.06 Share of FY Q1 Q2 H1 Loss
DKKm 2012 2013 2013 portfolio 2012 2013 2013 2013 ratio
Continuing portfolio 2.647 2.577 2.425 29,.4% 57 29 27 56 2.2%
Lending to private customers 2.442 2.379 2.328 28.2% 57 28 30 58 2.4%
Other loans and advances 205 198 97 1.2% 0 1 -3 -2 -1.3%
Discontinued activities 5.642 5.472 5.256 63.5% 423 63 64 127 2.3%
Agriculture 955 957 971 11.7% 156 26 18 44 4.6%
Car finance 230 200 170 2.1% -1 0 0 0 0.0%
Commercial lending 1.158 1.120 1.074 13.0% 73 -18 -7 -25 -2.2%
Property development projects 254 262 275 3.3% 1 2 0 2 0.8%
Mortgage deed financing 115 106 66 0.8% 23 3 5 8 8.8%
Mortgage deeds 2.930 2.827 2.700 32.6% 155 50 47 97 3.4%
Equities 0 0 0 0.0% 16 0 1 1 -
Total - excl. reverse transactions 8.289 8.049 7.681 92.9% 480 92 91 183 2.3%
Reverse transactions including
intra-group transactions 107 83 158 1.9% 0 0 0 0 -
Total, group lending 8.396 8.132 7.839 94.8% 480 92 91 183 2.3%
Minority interests 302 376 427 5.2% 0 0 0 0 -
Total, pro rata 8.698 8.508 8.266 100.0% 480 92 91 183 2.2%
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B A N K I N G
Solvency
Credit risk reduced by DKK
45m Q/Q and DKK 135m Y/Y
Excess solvency
4.9ppts above bank
parent company solvency
need
Excess solvency lower:
Result for Q2
Reduction of
supplementary capital
Capital injection of DKK 200m
in Q3 to be used to repay
state-funded hybrid capital
No immediate solvency
effects
1,342 1,266
1,226 1,213 1,176 1,131
349
225 297 261 165
180
101
100 97 85
124 122
1,792
1,591 1,620 1,559
1,465 1,433
3.5%
4.3%
3.6% 3.7%
6.4%
4.9%
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013
DKKm
Credit risk Market risk Operational and other risks Excess solvency, Parent
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Life and Pension - Financial highlights and key ratios
Results Q2 2013
Satisfactory profit before tax of DKK 22m
Strong expense and risk results
Return on policyholders’ funds impacted by
rising interest rates in June
Compared to the benchmark the return
was satisfactory
More than half of customers with capital
pension schemes have responded, almost all of
whom have decided to continue payments on
the new retirement pension (Alderspension)
Results H1 2013
Very satisfactory profit of DKK 49m
DKK 2m transferred to shadow accounts
L I F E A N D P E N S I O N
DKKm Q2 H1
2012 2013 2012 2013
Return on investments
allocated to equity 6 0 8 1
Result of portfolios without
bonus entitlement -2 0 -3 1
Risk premium 3 3 6 6
Expense and risk results 18 20 37 43 Calculated return on
equity 25 23 48 51
Change to shadow account 2 -1 -2 -2
Profit before tax 27 22 46 49
Shadow account balance 8 12 8 12
12.6%
DKK
465m
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L I F E A N D P E N S I O N
Premium income
Income Q2 2013
Total pension contributions stable Y/Y
Regular premiums up by 5.5% Y/Y
Lower single premiums in Q2
Large single payments in 2012
Higher payments to investment schemes
Income H1 2013
Total pension contributions up by 4.1%
Growth in both regular and single
premiums
Growth target for regular premiums
Regular premiums in H1 2013 up
by 5.3% Y/Y
Target of a 12% increase between
2012 and 2016 on top of inflation Note: Investment schemes are reported in the banking segment
128 135
304 320 78 56
131 145
96 110
171 166
302 301
606 631
2012 2013 2012 2013
Q2 H1
DK
Km
Regular premiums Single premiums Investment schemes
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L I F E A N D P E N S I O N
Results
Expense and risk results
remain strong
Stable risk premium
Return on equity impacted by
low interest rate level
DKK 1m transferred to
shadow accounts in Q2 2013
Relating to disability
19 18
28
16
23 20
3 3
2
3
3
3 2
6
1
3
1
0
-1 -2 -5
-1
1
0
-4
2
-2
-1 -1 -1
19
27
24
20
27
22
Q1 Q2 Q3 Q4 Q1 Q2
2012 2013
DK
Km
Expense and risk results Risk premium
Return on investments allocated to equity Result of portfolios without bonus entitlement
Change to shadow account
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L I F E A N D P E N S I O N
Investment returns
Competitive rate on policy-
holders’ funds
Strong bonus potential
Average bonus rate of 6.6%
Bonus rate for new policy-
holders of 10%
Rising interest rates in June
resulted in a negative return of
1.5% in Q2
Return H1 2013 of -0.2%
Bonds -1.8% (-3.6% p.a.)
Shares 8.3% (16.6% p.a.)
Property 2.7% (6.4% p.a.)
U74*
Interest rate group Total
0 1 2 3
Investment assets (DKKbn) 0.1 3.7 2.0 1.3 4.6 11.7
Rate on policyholders’ funds (%) 3.00 3.00 3.75 4.75
Bonus rate (%) 10.0 11.9 6.4 0.5 6.6
Bonds 100% 55% 55% 77% 83% 74%
Shares 0% 26% 23% 8% 3% 12%
Real estate 0% 19% 17% 12% 10% 12%
Interest derivatives 0% 0% 5% 3% 4% 2%
*Portfolio without bonus entitlement
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Capital target
DKKm Target
30 June 2013
Non-life Insurance
(40% of premiums) 2,012
Life and Pension
(8.75% of provisions for insurance contracts) 935
Banking
(17.1% of risk-weighted assets)* 1,738
Alm. Brand Bank subsidiaries 46
Diversification effects -300
Total capital target 4,431
G R O U P
*Calculated as the individual solvency requirement as at 30 June 2013 plus 3ppts
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Capital model
DKKm Capital base
31 Dec 2012
Capital base
31 Mar 2013
Capital base
30 Jun 2013
Consolidated equity 4,506 4,538 4,517
Tax assets -665 -657 -573
Supplementary capital 1,654 1,225 1,175
Total capital base for the group 5,495 5,106 5,119
Statutory capital requirement for the group, end
of period 3,085 3,089 2,990
Excess relative to statutory capital
requirement 2,410 2,017 2,129
Internal capital target 4,609 4,517 4,431
Excess relative to internal capital target 886 589 688
G R O U P
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Outlook for 2013
G R O U P
Profit of DKK 615m Lifted by DKK 55m
CR of 89 (unchanged) Expense ratio of approx. 16.5
(unchanged) Growth of approx. 3%
(unchanged)
Profit of DKK 75m Unchanged
Modest growth in continuing pension premiums
Low return on investments allocated to equity
Loss of DKK 100m before losses and writedowns Lowered by DKK 55m
Negative value adjustments Loan book reduction net of
losses and writedowns of DKK 0.6bn
Losses and writedowns of DKK 300-400m
Non-life Insurance Life and Pension Banking
Full-year pre-tax profit of DKK 550m before losses and writedowns
(unchanged)
Other activities Expected cost of DKK 40m
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25
Alm. Brand
Highlights Non-life Insurance: Still strong profitability and good
investment results
Life and Pension: Good result and growth in regular
premiums
Banking: Still weak earnings
An additional DKK 200m of state-funded hybrid capital to be
repaid
Unchanged outlook for 2013 of DKK 550m profit before
losses and writedowns
G R O U P
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26
Disclaimer
“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.”
G R O U P
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Alm. Brand
Financial results H1 2013 Investor presentation Danske Bank 23 August 2013