Analyst Day19 June 2017 Follow us on Twitter: @TrygIR
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Introduction: Morten Hübbe, CEO
Recent financial development: Christian Baltzer, CFO
Cyber insurance: Ulrik Andersson, Special Risk Director
Innovation/The Camp: Lars Bonde, COO and Christian Visti Larsen, CEO of NewBanking
Tryg Garanti: Mads Løgstrup, Managing Director Tryg Garanti
Concluding remarks: Morten Hübbe, CEO
Agenda
Front page slide
Recent financial developmentChristian Baltzer, CFO
50
60
70
80
90
100
50
60
70
80
90
100
75.5
55
60
65
70
75
80
Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17
Underlying Claims ratio, net
50
55
60
65
70
75
Underlying claims ratio at same level as Q1 2016
4
Claims ratio, net (Commercial DK & NO)
Claims ratio, net (Sweden)
Group
Claims ratio, net (Corporate)
Private (DK & NO)
Underlying development is adjusted for large claims, weather claims, run-off and interest.
Q1-16: 76.4+3.4-0.0-4.5+0.2=75.5 Q1-17: 73.7+4.5-0.0-3.0+0.3=75.5
77.0
60
65
70
75
80
Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17
Underlying Claims ratio, net
77.0
Group underlying Claims ratio at 77.0% in line with Q1 2016
Private underlying Claims ratio at 75.5% also in line with Q1 2016
Corporate & Sweden underlying claims ratio developed favourably
“Expected FY 2017 underlying claims ratio better than FY 2016”
Underlying development is adjusted for run-off, large claims, weather claims and interest.
Q1-16: 72.0+8.6-1.0-3.3+0.7=77.0 Q1-17 72.9+6.4-1.1-2.3+1.1=77.0
75.5
4,076
3,913
3,703
3,599
3,3593,264 3,281
2011 2012 2013 2014 2015 2016 Q1 2017
313
171
9861
305
169107
61
Private Commercial Corporate Sweden
Q1 2017 Q1 2016
On track to meet the 2017 expense ratio target
5
FTE - Development
15.1
14.4
15.6 15.3
14.9
14.8
14.6
15.315.7
2013 2014 2015 2016 Q1 2016 Q1 2017
Expense ratio
Nominal costs in business areas
As reported Adjusted for one-offs
Efficiency programme up until 2017 (DKKm)
100 105150 145
250
45
175
388395
5060
7565
125
25
2012 2013 2014 Target2015
2015 Target2016
2016 Target2017
2017
Expense Claims
10,0379,850
605 -452-2 -49 86
5,800
6,800
7,800
8,800
9,800
10,800
11,800
Ow
n F
unds
Q4 '16
Results
Q1 '17
Cash d
ivid
end
Inta
ngib
le
assets
Subord
inate
d
debt
Mis
cellaneous
Ow
n F
unds
Q1 '17
Solvency position Q1 2017
6
• Solvency ratio based on the Partial Internal Model is 202 (Q4 2016: 194).
• Own Funds (OF) is primarily impacted by
• Result Q1 2017 of DKK 605m
• Dividends of DKK 452m (Q1 2017)
• SCR impacted by a lower market risk (down DKK 120m) as current properties exposure is still below targeted level following the properties transaction announced in December
• Based on Solvency II Standard Formula the solvency ratio is 162 (Q4 2016: 157).
Own funds walk
Solvency capital requirement walk
4,975
5,077
-120
46 0 -14-1 -12
-26 26
4,800
4,850
4,900
4,950
5,000
5,050
5,100
5,150
5,200
SC
R
Q4 '16
Mark
ed
Health
Life
Defa
ult
Non-L
ife
Opera
-
tional
Adju
st-
ment
Div
ers
i-
fication
SC
R
Q1 '17
60
12
15
13
Danishinstitutional
Non-Danishinstitutional
Smallershareholders
Tryg is an income stock
7
Shareholder breakdown 2016Shareholder remuneration since 2012
DKK
Percentage
5.2 5.4 5.8 6.0 6.2
1.6
2.63.2
3.43.5
0
1
2
3
4
5
6
7
8
9
10
2012 2013 2014 2015 2016 Q1 2017
Ordinary dividend Extraordinary buy back
Extraordinary dividend
3.5
Share price performance since IPO
0
50
100
150
200
250
300
350
400
450
500
It is important to know your investment case
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”Do you know the only thing that gives me pleasure?
It’s to see my dividends coming in.”
John D. Rockefeller
Front page slide
Cyber insurance
Ulrik Andersson, Special Risk Director
Agenda slide
1. Cyber risk – sign of the times
2. The criminals are going digital
3. Data breaches – regulatory development
4. Cyber Insurance and Tryg’s approach
5. Where will it go?
Agenda
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Cyber Risk - sign of the times
Cyber Risk - sign of the times
• Globalisation fueled by
technology
• Dramatic increases in flows of
goods and capital
• Fully automated and digitalised
production processes
• Connected devices
• Generation and hoarding of data
Opportunities
and vulnerabilities
Telegeography.com
12
13
In 2016 victims of cyber related crime reported to the Police incurred losses of more than DKK 180m
Threat from cyber crime against Danish authorities and businesses is Very High.
Cyber Risk - sign of the times
From security to Risk management
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15
DATACENTER 1
DATACENTER 2Outsourceddevelpoment
Connected world
Cyber threats 2017
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Ransomware
Virus
Trojans
Malware
CEO Fraud
Cyber
terrorism
Advanced
persistent
threats
Spear
Phishing
Drive by
attacks
Phishing
Crimeware
CaaS
Denial of
Service
(Ddos)
Internet
of
Things
Data breaches
Knowingly /unknowingly
EU-GDPR
Criminals are going digital….
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Phishing
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Physical phishing
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CEO fraud
20
21
Threats are real
Satan – a new business model
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Data breachesAn emerging regulatory environment
• Increased focus on data protection over last
decade
• Industry standards for payment cards including
fines in case of breaches
• Data Security Breach Notification Legislation in
California 2003 – now in place in 48 US states
• General Data Protection Regulation in EU 2018
- all information related to individuals
• Notification within 72h to authorities and all
affected by breach
• Introduce role of Data Protection Officer
• Fines for non-compliance up to 4% of global
revenue or €20m
• PII includes names, usernames, license
plates….
PCI DSS ~ Payment Card Industry Data Security Standards
PHI ~ Protected Health Information
PII ~ Personally Identifiable Information
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Cyber insurance market
Source AON
• US market frontrunner in development of cyber
insurance
• Increase in market closely connected with Data
Breach Protection Legislation
• European Market estimated at $0.1-0.2bn
• A similar development in Europe and Scandinavia
is expected following both the GDPR and
development in criminal activity
• Assuming similar growths rates as seen in the US
a European market in the range $0.3bn to $0.5bn
in 2020
• Scandinavian market estimated at around $10-
20m in 2015. This would grow in turn to approx.
$50m-$75m
Tryg estimates
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Cyber vs traditional insurance
First party Third party
Cyber insurance
Property damage
Business interruption
Data restoration
Fraud
Extortion
Privacy liability
Media liability
Notification
Forensics
Credit monitoring
Regulatory costs
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• Targets larger companies
• Launched in Sweden, Denmark and
Norway in 2017
• Claims handling by global loss
adjuster Charles Taylor
Tryg Cyber insurance
Forensics
Restoration of systems and data
Costs associated with extortion
Legal assistance
Third party liability
Regulatory and notification costs
PR-assistance
ID- og credit monitoring
Business interruption (up to 3 months)
Media liability
Network damage
Loss of Data
Media liability
Local product
Nordic product
• Targets smaller companies (turnover
< DKK 100mio)
• Launched in Denmark in 2017
possible transfer to Norway in 2017
• Focus on restoration costs
Network damage
Loss of Data
Forensics
Restoration of IT systems
Restoration of data
( )
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Tryg Cyber insurance
Nordic Product
• Coverage is provided from DKK 1m and up to DKK 20m
• Tryg is providing cover in cooperation with international reinsurer and
keeps 10% on a proportional basis
• Standard pricing up to a turnover of DKK 500m otherwise referral on a
case by case basis
Local Product
• Coverage is up to DKK 5m (typically 1m)
• Tryg keeps risk in own books and cooperates with local provider for
claims adjusting
• Excludes a number of sectors
• Possible to buy DNS service as add on
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Where will it go ?
Risk or Peril ?
Wannacry outbreak map
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Where will it go ?First
part
y
Third p
art
y
Cyber insurance
Stand alone or integration?
Property Liability
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Where will it go ?
Risk Management never goes out of style..!
Mitigate
Monitor
Identify
Evaluate
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Innovation Tryg
Lars Bonde, COO
Do we have a choice?
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The world is changing around us – our strategy needs to reflect this change
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Analysts predict that every thirdjob in the industry will disappear
and that the decisions that we takenow will determine our future and
will also impact the rest of our society
Morten Hübbe
The emergence of InsurTech has been a key driver for innovation within the insurance industry
Striking the right balance between short-term, predictable growth and long-term bets
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RadicalIncremental
Highimpact
Lowimpact
Substantial
90%
10%
Distribution of innovation focus 2016/2017
Initiatives with sufficient scale potential are important considering future challenges
Changing and stronger competition
Car and Home & Contents decline: due to
new tech and competition
I.e. Workers’ Comp.: Automation and robotics
will also reduce risk pools in Commercial/Corp.
…and why shouldn't Tryg be the one setting up kites, rather than building fences?
The market and technological development is
as much an opportunity, as it is a challenge
Average No. of yearlytouch points with
our customers
X 2Through a frequent and insights-driven
customer approach we will increase our
retention rate and ownership of the customer
$ $
By taking an entrepeneurial approach we
• Build further on New Business & Customer Innovation abilities to bring new products to market, fast
• Address the declining riskpools of current core products
• Acknowledge that the nature of insurance is if not changing, then evolving
• We partner to get access to the knowledge we need, and to reduce investment risk
An empirical process of try, fail, try, fail, try succeed at a
• Low cost
• Low risk
• Low distraction (it will not pull the organisation as a whole off focus)
• We use technology as a tool that accelerates success, technology alone cannot
create great results
Tryg a cautious entrepeneur
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• Startup mentality
• Exploring technology and new business models
• Time to market is key
Innovation in Tryg
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…?eProtect cyberinsurance
Ung Sjåfør & We Drive
Share economy – the next big thing?
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DKK 2,300bn expected global
turnover in 2025 – and growth of 25%yearly
Accenture
• Short term insurance
• Development of insurance solutions in cooperation with share service companies
• 13 partnerships in place
• Security – crucial for the success of shareeconomy?
Share economy
Will the disruptive insurtech- or the insurancecompanies win?
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Increased market andcustomer focus
End-to-end responsibilityand authority
Speed
Adaptation to the new environment –Tryg new organisation
1. Awareness of the need for a change
2. Desire to participate in and support the change
3. What can we bring to the table
Delivering peace of mind
and value to its customers,
employees and investors.
Front page slide
Tryg Garanti
Mads Løgstrup, Managing director, Tryg Garanti
Agenda slide
1. Tryg Garanti at a glance
2. Financial Performance
3. Business Model and Strategy
4. Competitors and market
5. Organisation
6. Reinsurance
7. Tryg Garanti and The Camp
Agenda
Tryg Garanti is about counterparty risk
“Tryg Garanti provides peace of mind
when commercial contracts are entered into”
2% of Tryg gross earned premium7% of technical result
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Tryg Garanti at a glance
Two content slide
Clients and product lines
• The main product line is surety bonds
• Trade credit is a developing product line
• Target client segments are contractors and contract producing companies
• The SME segment is preferred
• The client value proposition:
• Free financial capacity (surety)
• Protect balance sheet and professionalise credit risk management (trade)
• On time, high quality service (trade and surety)
Strength of TMG operation
• World class in:
• Meeting client expectations: NPS 63
• Operational efficiency: cost ratio 8.3
• Capital efficiency, ROE 136%
• Digitalised, internet based business model with full self-
service functionality
• Robust business model (‘Broker for reinsurance’)
• Combined ratio 2016 54.4 (55.2)
Tryg Garanti (TMG) is the largest provider of surety contract and supply bonds in the
Nordic area and has a developing position in trade credit insurance.
43
Text slide
TMG Business model
Seller BuyerContract
Reinsurance
TRADE SURETY
Tryg Commercial & Corporate
Surety:
Trade Credit:
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The story:
• Danish surety portfolio: +100 years old
• Surety launched:
• Norway in 2006
• Sweden in 2007
• Finland in 2008
• Trade credit launched:
• Denmark in 2010
• Norway, Sweden and Finland in 2015
• TMG is now established as the #1 surety
insurer in the Nordics
• TMG is now the fastest growing trade credit
insurer in the Nordics
The story
Norway
Sweden
Finland
Denmark
Strong financial performance
“TMG business is highly profitable”
Strong profitability across economic cycles
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0
100
200
300
400
2005 2007 2009 2011 2013 2015 2016 2017F
DKKm
Premium Tech. Result
TMG - Surety and Trade Credit Insurance
46
Premium & technical result
0%
10%
20%
30%
40%
2005 2009 2013 2016
Cost ratio
NO SE FI Trade,DK
0
100
2005 2007 2009 2011 2013 2015 2016 2017F
Combined ratio
Years of financial crisis
47
Efficiency gains by employee
Digitalised business model
“Efficiency is core to client satisfaction and TMG profit”
Further client process integration and development of clever 3rd party distribution
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49
TMG Strategy
How to create
more value:
• Product development• Solutions allowing TMG
product integration into
client processes and
thereby creating more
value for clients and
efficiency for TMG
• Efficiency • Continued automation of
internal processes via IT
• Clients increasingly to
take over TMG internal
processes
• Distribution• Taking advantage of the
Tryg Group distribution
network and Tryg brand
in the SME segment
Must-win battles:
• Trade Credit
introduction• Growth in Trade Credit is
the preferred balancing
factor in a ‘rate pressure’
surety scenario
• ‘One company’• A unified company culture
including shared pool of
resources /concepts is
vital to continued
efficiency improvement
Critical obstacles:
• Developing external
distribution channels
for Nordic Trade Credit• Outside DK, TMG must
develop strong external
(/group) distribution as
only limited internal
resources are available
Internal and external efficiency is seen as main driver of profitable growth and client satisfaction
Strong competitors are few
“TMG has critical mass in a market where critical mass is difficult to obtain”
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Many but small competitors in suretyLimited market size deter competition
• Few but large competitors in Trade Credit
• Many banks are competitors in Surety (but with little focus)
• International specialist insurers are main challengers (but do not yet match
TMG service offering or efficiency)
51
Competitors and market
52
Expense ratio in Nordic banking and insurance
TMG advantage over competitors increased further in 2016. The advantage is a key explanation for the high profit potential of the portfolio.
Source: 2016 Annual Reports
Nordic surety market
Rates are under pressure for large clients, whereas rates are stable for SME clients.
For 2017, an unchanged market premium volume is expected as increasing demand will level out reducing rates.
Market share split by insurance providersMarket share split by bank and insurance providers
53
Overall Nordic market premium is EUR 300m, split between banking and insurance providers.
Nordic trade credit market
Overall Nordic market premium is EUR 150m.
For 2017, an unchanged overall premium volume is expected as the benign macro economic environ-ment put pressure on rates due to lower claims levels.
Also self insurance is an issue in a positive part of the economic cycle
54
Market share split by insurance providers
55
International Surety and Trade Credit performance
Source: ICISA, homepage
The ICISA organisation publishes market data from its members once a year. Latest available numbers are for 2015.
Claims ratios remain very satisfactory for both Surety and Trade Credit
Premium growth is strong in the surety line, whereas a flattening trend is seen for Trade Credit. Pressure on rates and self insurance is seen as the main reasons.
56
Surety Market Potential
• Internationally, surety is a banking product
• Basel IV rules (capital floors) will improve
competitive advantage of insurance companies
Market split – banking and insurance
90%
30%
70%
35%
85%
65%
70%
50%
70%
80%
10%
70%
30%
65%
15%
35%
30%
50%
30%
20%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Belgium
Denmark
Germany
Ireland
Netherlands
Finland
Sweden
United Kingdom
Norway
Switzerland
Bank Insurance
Tryg Garanti is scalable
“Tryg organisation and infrastructure is scalable”
57
Matrix organisationDigitalised processes
58
Organisational chart
Unit manager
Country manager
CEO, Finance & central functions
Clie
nt R
ela
tion
s, T
rad
e c
red
it
Clie
nt C
en
tre
Ris
k m
an
ag
em
en
t
Clie
nt R
ela
tion
s, S
ure
ty
HES
MDL
Ma
rke
ts a
nd
pro
du
cts
NIE KIS MDLMIJ
TEP
LEF
DAA
The organisational chart reflects a matrix where unit managers are responsible for guidelines across countries (how things are done) and country managers are responsible for local allocation of resources (whodo things)
“We rely on shared values, goals and processes”
“We want to be perceived as local to local clients”
A risk carrier or a risk broker ?
”Tryg Garanti financial performance is leveraged by reinsurance – and risk
reduced”
59
Ceding +65% of gross premiumCeding +95% of peak risks
61
Managed peak risk and loss ratio
-100.0
-50.0
0.0
50.0
100.0
150.0
200.0
250.0
300.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Gross claims ratio Net claims ratio after reinsuranceFinancial crisis
Historic claims volatility is managed by reinsurance
Tryg Garanti and The Camp
The Camp provides new opportunities to Tryg Garanti product development:
• NewBanking (blockchain) could transform traditional whole turnover trade
credit policies into a single transaction market for privately funded
receivables
• UNICONTA could become first cloud based distribution partner for the new
Tryg Garanti application programmers interface (API)
• Continuous innovation could result in new, profitable, business venture
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