If P&C developmentsIf P&C developments
Torbjörn Magnusson, CEONordic Insurance Seminar, October 2011
Agenda
If P&C’s performancep
Nordic marketNordic market
UW excellence
2
Performance over time
24.3%24.0%
23.7% 23.7%24.1%
23.7%
Cost ratio
23.4%Combined ratio
90 5% 90 6%91.8% 92.1% 92.8% 92.7%
2005 2006 2007 2008* 2009 2010 6M-2011
G W itt P i (MEUR)
90.5% 89.9% 90.6%
3962 4019 4085 4057 38884189 4326
Gross Written Premiums (MEUR)
2005 2006 2007 2008 2009 2010 6M 20112005 2006 2007 2008 2009 2010 6M-2011
2005 2006 2007 2008 2009 2010 R12 Q2-2011
* Cost ratio affected by the acquisition of Region, Russia 3
Highlights 6M 2011
MSEK 6M-11 6M-10 % changeGWP 23 709 24 719 -4.1%Technical result 2 037 2 056 -0.9%Technical result 2 037 2 056 0.9%Investment result 2 745 2 607 5.3%Operating result 3 762 3 288 14.4%Result for the period 2 780 2 431 14.4%
Risk ratio 69.4% 70.6% -1.3%-pCost ratio 23.4% 23.5% -0.1%-pCombined ratio 92.7% 94.1% -1.4%-pInsurance margin 11.1% 10.9% 0.2%-p
RoE full tax 14.8% 24.8% -10.0%
FTE net 6 352 6 381
Inv result, marked to market 1 737 3 271Reversal of fair value changes *) -803 0
•Strong financial performance well in line with long-term targets•Associated company Topdanmark had EUR 3 million positive effect on profitSt bl lt
4
Reversal of fair value changes ) -803 0Inv result, marked to market, net 934 3 271
*) Related to reclassified holdings as an effect of extended holdings in Topdanmark
•Stable results vs. peers•Continued focus on business initiatives
Results by Business Area
93.5% 94.6%92.1%
93.0%
88 4%
91.4%93.0%
88 4%
91.4%
Private Commercial
88.4%88.4%
2010 Q2-2010 Q2-20112010 Q2-2010 Q2-20112010 Q2-2010 Q2-2011
90.6%
87.0%
90.8%93.4%
90.6%
87.0%
90.8%93.4%
Industrial Baltic & Russia
84.0%
80.8%
84.0%
80.8%
2010 Q2-2010 Q2-2011 2010 Q2-2010 Q2-20112010 Q2-2010 Q2-2011 2010 Q2-2010 Q2-2011
5
Business Initiatives
Personal risk and health
Digitalization Partnerships
6
Digitalization in focus
Di it l ki i t O I t t
If’s internal processes Customer view on digital If
Digital working environment• Nordic production systems
• Nordic internet systems
Di it l i ti
Open Internet• Find information
• Buy an insurance
R t l i• Digital communication
with partners/customers
• Modern technology
• Report a claim
• Learn about If
• Network with If
Digital processes• Automated claims
• E-health declaration
If Login• See, manage & buy
insurancesE health declaration
• Automatic renewals
• Payment handling
• Partner access to databases
insurances
• Report a claim
• Update personal
information
7
• Customer communication • Communicate with If
E-Customership
Agenda
If P&C’s performancep
Nordic marketNordic market
UW excellence
8
Market growth
Growth Nordic P&C markets 2005-2010 Total Nordic P&C market growth
115
125 Norway CAGR: 4.1%
Growth Nordic P&C markets 2005 2010 Total Nordic P&C market growthIndex (2005 = 100) Index (2005 = 100)
105
110
110
115
120
Denmark CAGR*: 2.9%
Finland CAGR: 2.5%
95
100
95
100
105 Sweden CAGR: 1.6%
95
2005 2006 2007 2008 20092005 2006 2007 2008 2009 2010
Sweden Norway Finland Denmark
9
Source: National insurance associations. Danish market figures available until 2009 *Note: CAGR 2005-2010 for all countries except Denmark where CAGR 2005-2009 is shown. Growth based on total premium indexed with base year 2005 Total Nordic premium has been calculated using constant 2005 exchange rates to eliminate currency effects
Nordic P&C market 21B EUR
10Source: National insurance associations statisticsGWP, average exchange rates for 2010 applied; Danish market statistics from 2009
Nordic market developments
Changes in competition Consolidation
17% 21%7%
17% 17% 18%
40% 37%
83% 79%93%
83% 83% 82%
60% 63%
2002 2002 2002 20022010 2010 2010 2009
Total market share – top four Market share – smaller pcompanies companies
Solvency ratio
Solvency ratio for selected Nordic P&C companies(Calculated according to If’s solvency ratio principles)
Source: Annual reports 12
Agenda
If P&C’s performancep
Nordic marketNordic market
UW excellence
13
Underwriting excellence
If P&C’s long term financial targets Quarterly combined ratios over time
100%
financial targets
Combined ratio
y
90%
95%
< 95 %
80%
85%
Return on EquityQ1 ‐ 05
Q2 ‐ 05
Q3 ‐ 05
Q4 ‐ 05
Q1 ‐ 06
Q2 ‐ 06
Q3 ‐ 06
Q4 ‐ 06
Q1 ‐ 07
Q2 ‐ 07
Q3 ‐ 07
Q4 ‐ 07
Q1 ‐ 08
Q2 ‐ 08
Q3 ‐ 08
Q4 ‐ 08
Q1 ‐ 09
Q2 ‐ 09
Q3 ‐ 09
Q4 ‐ 09
Q1 ‐ 10
Q2 ‐ 10
Q3 ‐ 10
Q4 ‐ 10
Q1 ‐ 11
Q2 ‐ 11> 17.5 %
14
Leveraging on Nordic synergies
Expense ratio improvements
• Economy of scale through unrivalled critical mass on a Nordic basis
• Centralized IT and support functions18 5%
19.0%
19.5%
• Centralized IT and support functions
• Capacity to invest:
• Automation of claims process17.5%
18.0%
18.5%
• Nordic production system
• Nordic payment system
16 0%
16.5%
17.0%
16.0%2004 2005 2006 2007 2008 2009 2010
Expense ratio If
Note: Weighted average of leading P&C companies in the NordicsSource: Company reports
Expense ratio (Nordic average excl. If)
15
Strong diversification benefits
Sources of diversification Standard deviation of combined ratio
2.6%If• Business segments
• Large claims
Standard deviation of quarterly combined ratios* (%-points)
5 6%
5.3%
P hj l
Gjensidige
Large claims
• Weather effects / Events
5.6%
5.6%
TopDK
Pohjola
5.7%
0% 2% 4% 6%
Tryg
* Average combined ratio calculated based on quarterly stand-alone figures for Q1 2005 – Q4 2010 Source: Company reports 16
Solvency capital and ratio
* Solvency ratio, (IFRS) % = + solvency capital+ premiums earned from 12 months
x 100%
17
Investments
Mark-to-Market Investment ReturnsInvestment Allocation of Total EUR 11bn
Duration 1.6 yearsFixed income running yield 3.9%
% H1/11 H1/10M-t-m return 1.7 3.1
18
If is well prepared for Solvency II
• Internal model pre application process is on-going• A Risk Data Storage (DWH) in placeA Risk Data Storage (DWH) in place• A Reporting Tool is being developed• ORSA draft to be presented to boards in 2012
• We aim for an approved partial internal model in 2013
• Issues:• Uncertainties in and late changes of Solvency II Level 2Uncertainties in and late changes of Solvency II Level 2
and 3 requirements • Extremely onerous reporting requirements• Key resources dependency
19
If well positioned for Solvency II
–Capital base in relation to NWP (Q4 2010)
58%
71%
79%
34%
58%
17%
Solvency I Capital requirement -"internal model"
QIS 5 (Solvency II) S&P - diversified target capital
Actual Solvency ratio/ Regulatory
irequirements)
requirementsrequirements requirements
20
Capital ratios If group Q2 2011
80%90% Key ratios:
59%
68%
80%
60%
70%
80% • Solvency I: Solvency requirement/NWP = 20%
35%
30%
40%
50%• Internal model:
Economic capital/NWP = 35%
• QIS 5 as of Q4 2010 (Solvency II) :
20%
10%
20%
30% (Solvency II) : SCR/NWP = 59%
• Actual Solvency ratio: Solvency capital/NWP = 80%
0%
Solvency I Economic Capital ‐
"internal model"
QIS 5 (Solvency II)
S&P Div cap req/NWP
Actual Solvency ratio
21
Strong underwriting and risk control
S&P upgraded If’s Enterprise Risk Management (ERM) grade to “Strong“ in Feb 2011
Some examples of ERM-rating
Excellent No companies
If AXA Hannover Re Munich
The decision was based on If’s
• Strong underwriting control
G d i k lStrong If, AXA, Hannover Re, Munich Re, RSA
Adequate with positive trend Gjensidige, Aviva
Adequate with strong risk
• Good risk control
• Good risk management culture
• Good risk governanceAdequate with strong risk controls Tryg, Storebrand (Liv)
Adequate Länsförsäkringar
Weak Unity Re
• Good risk appetite statement
• Well established planning process
• Handling of deviations in a good wayWeak Unity Re
Not Rated Folksam and TopDanmark
Handling of deviations in a good way
Note: Date for data 22.9.2011 22
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