financial results h1 2013 - alm. brand...financial results h1 2013 investor presentation danske bank...

1

Alm. Brand

Financial results H1 2013 Investor presentation Danske Bank 23 August 2013

2

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

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ife

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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

3

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

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


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

5

Underlying business


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)

6

Major claims

Note: Major claims are defined as claims in excess of DKK 1m


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


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%)

7

Weather-related claims


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


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%)

8

Expense ratio


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%)

9

2010

Note: Combined and expense ratios are stated at group level. Codan figures include Danish business only


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

10

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

11

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*

12

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

13

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

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


Agriculture Car finance Commercial lending

Property development

projects

Total mortgage deeds

DK

Km

15

278

203

125

30

53

35

80

-32

-13

-75


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


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

16

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%

17

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

18

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

19


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

20


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

21


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

22

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

23

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

24

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

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

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

27

Alm. Brand

Financial results H1 2013 Investor presentation Danske Bank 23 August 2013

financial results h1 2013 - alm. brand...financial results h1 2013 investor presentation danske bank...

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