financial results fy 2012 - alm. brand

1

Alm. Brand

Financial results FY 2012 Webcast presentation 26 February 2013

2

Highlights of FY 2012

Pre-tax profit of DKK 860m before and DKK 380m after losses and writedowns

Non-life Insurance:

Strong underlying business

Strong CR of 83.3 and 82.1 in Q4

Few weather-related and major claims

Positive run-off result

Banking:

Lower net interest and fee income; Reduced loan book and lower interest rate level

Losses and writedowns; Down to DKK 480m from DKK 994m in 2011

Loan book reduced by DKK 1.3bn net of losses and writedowns

Life and Pension:

25% growth in pension premiums

Good investment results - collective bonus potential of 5.8% up by 1.3ppts

Outlook for 2013

Profit of DKK 440m before losses and writedowns

Losses and writedowns estimated at DKK 300-400m given the current economic

environment

DKK 700m injected into Alm. Brand Bank to repay DKK 430m of hybrid capital

G R O U P

3

Non-life Insurance - Financial highlights in brief Results FY 2012

Profit of DKK 853m

Premiums up by 2%

CR improved:

Premiums

Underlying business

Weather-related and major claims

Run-off gains (4.9ppts of CR)

÷ Discounting effect

Results Q4

Profit of DKK 247m

Premiums up by 2.6%

CR improved:

Premiums

Weather-related and major claims

Run-off gains (6.2ppts of CR)

÷ Expenses

N O N - L I F E I N S U R A N C E

Key figures/ratios (DKKm) Q4 FY

2012 2011 2012 2011

Gross premiums 1,236 1,205 4,866 4,772

Investment income 2 5 13 40

Claims expenses -710 -947 -3,180 -3,851

Expenses -220 -196 -790 -757

Reinsurance -86 60 -86 207

Technical result 222 127 823 411

Investments return after

technical interest 25 50 30 49

Profit before tax 247 177 853 460

Combined Ratio 82.1 89.9 83.3 92.3

Underlying

Combined Ratio 81.5 77.0 79.7 80.2

66.2%

DKK

4.8bn

4

Premium income


Trend in premium income

Premiums FY 2012 up by 2.0% y/y

Private premiums up by 1.5%

(2.5% adjusted for non-recurring income

in 2011)

Commercial premiums up by 2.5%

Premiums up by 2.6% in Q4

Private premiums up by 2.5%

Commercial premiums up by 2.7%

Premium growth

Customer defection rate declined

2,504 2,540 2,579

641 657

2,258 2,232 2,287

564 579

4,762 4,772 4,866

1,205 1,236

2010 2011 2012 Q4 2011 Q4 2012

Gro

ss p

rem

ium

s (

DK

Km

)

Private Commercial

5

Positive trend in underlying business


Underlying CR continues to develop

favourably

Limited snowfall caused motor

claims to decline

Fewer burglaries

Good development in private

property insurances

÷ Commercial property insurances

still underperforming

Fewer claims

Development with fewer claims

continued in 2012

Average claims decreased for the

year

Higher average claims in Q4

primarily related to property

Note: Excluding workers’ compensation

80

85

90

95

100

105

110

115

2008 2009 2010 2011 2012 2011 2012

Q4

Number (index) Avg. claim (index) Claims (index)

84.8

88.8

85.5

80.2 79.7

2008 2009 2010 2011 2012

6

Positive trend in major claims

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


Major claims lower than

expected

Major claims have remained low

in all quarters of 2012

Fewer claims but higher average

claims in 2012

Average claims impacted

by a few major events

Preventive measures

Risk reduction team

Fixed-sum insurance

Always a matter of chance

9.1

7.8 7.1 6.8

6.2 7.1

4.7

6.6 6.5

8.0

FY FY FY FY FY Q1 Q2 Q3 Q4

2008 2009 2010 2011 2012 2012

Major claims ratio Average expectation

0

20

40

60

80

100

120

140

160

2009 2010 2011 2012 Q4 2011 Q4 2012


7

Weather-related claims


Note: Figures stated net of reinsurance recoveries

Weather-related claims below expected

level

Significantly lower than in 2010 and 2011

Very few weather-related claims

Mild winter

No significant storms

Very few water damage claims in

spite of wet summer

Claims in Q4 significantly below 2011

2011 impacted by storms in

November and adjusted estimate

of July cloudburst

Weather related claims

0

100

200

300

400

2008 2009 2010 2011 2012 Q4 2011 Q4 2012


950

1.9 3.1

8.5 6.9

2.1 2.9 2.1 2.9 0.5

4.0

FY FY FY FY FY Q1 Q2 Q3 Q4

2008 2009 2010 2011 2012 2012

Weather-related claims ratio Average expectation

8

Expense ratio target for 2012 reached


Expense ratio at the lower end of the targeted range

16.2 in 2012

Higher expenses in Q4 due to

Acquisition costs

Expenses for system development due to the non-life insurance tax

Bonuses

19.0%

18.5%

17.6%

15.9%

16.2%

12%

14%

16%

18%

20%

2008 2009 2010 2011 2012

Target 2009 to 2012

9

A very favourable year - but not a new normal


Normal expectation

Zero in run-offs

4ppts in weather-related claims

8ppts in major claims

83.3

91.9

4.9

1.9

1.8

Combined Ratio FY 2012

Run-offs compared to expectations

Weather-related claims compared to expectations

Major claims compared to expectations

Normalised Combined Ratio

10

2009

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

2010

2011

2012

98.0 91.1 92.2

99.5 98.2 93.3

98.8 101.4 92.3 90.3 93.5

102.3

83.3 88.2

18.5

14.9

17.2

20.4

17.6

15.4 17.0

20.3

15.9 15.7 16.8

21.3

16.2 16.4

11

Alm. Brand Bank - Financial highlights

B A N K I N G

Results 2012

Loss of DKK 39m before losses and writedowns

Lower funding

Value adjustments of bonds and shares

÷ Lower interest rate level

÷ Reduction of loan book

Loan book 2012

Loan reductions of DKK 1.3bn adjusted for

losses and writedowns

Losses and writedowns still high, mainly due to

Agriculture – deteriorated economic

conditions for dairy farmers

Mortgage deeds and commercial lending

due to commercial property vacancies

Key figures/ratios (DKKm) Q1 Q2 Q3 Q4 FY FY

2012 2012 2012 2012 2011 2012

Interest receivable 200 179 177 164 867 720

Net interest and fee income 104 92 105 92 493 393

Value adjustments* 10 24 -11 14 -173 37

Losses and writedowns* -85 -81 -166 -148 -994 -480

Profit/loss before tax -90 -107 -176 -146 -1,154 -519

Profit/loss before tax and

excl. losses and

writedowns -5 -26 -10 2 -160 -39

Interest margin 1.4% 1.3% 1.6% 1.4% 1.6% 1.4%

*Credit related value adjustments included under

losses and writedowns

11.6%

DKK

852m

12

Deposits and lending

B A N K I N G

Reduction of loans and advances

Increased deposits

Deposit surplus of DKK 2.6bn, up

from a deficit of DKK 2.4bn

Deposit surplus

12.1 11.6 11.2 10.4 10.2

9.6 9.2 8.7 8.0 7.9 7.7 8.0

10.1 10.5 10.6 11.3

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2011 2012

DK

Kb

n

Loans and advances Deposits

-4.1 -3.7 -3.5

-2.4

-0.1

0.9 1.4

2.6

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2011 2012

DK

Kb

n

13

B A N K I N G

Net interest and fee income

Interest income lower due to

Low interest rates

Reduction of loan book

Interest expenses in 2012 down due

to repayment of funding

Partly offset by interests on

new deposits

Lower customer activity reduced net

fees in Financial Markets

Interest margin target

Margin to be increased towards

2016 by 1ppt from 2012 level by

Repaying of hybrid capital

Reducing costs for deposits

Improving average loan quality

2.2% 2.5% 2.4%

2.2% 1.9%

1.7% 1.7%

1.3% 1.4% 1.3% 1.6%

1.4%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2010 2011 2012

Interest margin

226 221 222

198 200

179 177 164

120 125 131 130 128 118

102 104

39 35 28 30 32 31 30 32

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2011 2012

DK

Km

Interest receivable Interest payable Net fees and commissions etc.

14

Losses and writedowns still high

B A N K I N G

Large writedowns on agriculture

Dairy farmers hit by deteriorated

contribution margins in Q3

Commercial lending impacted by large non-

recuring writedowns

Commercial property vacancies impacted

commercial lending and mortgage deeds

10 7

20 20

29 30

78

19

-1

0 0 0

19

-5

27 32

0 1

-2

2

28 32

43

75

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Continuing portfolio Agriculture Car finance Commercial lending

Property development

projects

Total mortgage deeds

DKKm

15

Loan book reductions - Excl. losses and writedowns

B A N K I N G

371

418

27

38

40

176

113

47

-7

-16

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

1,289

1,357

279

189

382

176

267

69

68

-73

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

FY 2012 Q4 2012 Total loan book reduction of

DKK 1.3bn in 2012

Decrease in continuing portfolio

due to savings and loan

repayment

Funding to agriculture

Necessary investments and

operations

Declined by DKK 38m in Q4

Successful winding-up of

commercial loans

Net mortgage deeds declined by

DKK 336m (DKK 97m in Q4)

Equal to repayment of

approx. 9% p.a.

16

Loan portfolio and credit losses

B A N K I N G

Loans Losses and writedowns

31.12 30.09 31.12 Share of FY Q1 Q2 Q3 Q4 FY Loss

DKKm 2011 2012 2012 portfolio 2011 2012 2012 2012 2012 2012 ratio

Continuing portfolio 2,983 2,694 2,647 30.5% 105 10 7 20 20 57 2.0%

Lending to private customers 2,848 2,493 2,442 28.1% 104 10 7 19 21 57 2.2%

Other loans and advances 135 201 205 2.4% 1 0 0 1 -1 0 0.0%

Winding-up portfolio 7,059 6,114 5,642 64.8% 888 75 74 146 128 423 6.7%

Agriculture 1,038 1,012 955 11.0% 227 29 30 78 19 156 15.7%

Car finance 418 270 230 2.6% 2 -1 0 0 0 -1 -0.3%

Commercial lending 1,613 1,366 1,158 13.3% 308 19 -5 27 32 73 5.3%

Property development projects 431 249 254 2.9% 13 0 1 -2 2 1 0.3%

Mortgage deed financing 405 226 115 1.3% 112 8 5 12 -2 23 8.8%

Mortgage deeds 3,154 2,991 2,930 33.7% 226 20 27 31 77 155 5.1%

Equities 0 0 0 0.0% 0 0 16 0 0 16 0.0%

Bank packages etc. 0 0 0 - 1 0 0 0 0 0 -

Total - excl. reverse transactions 10,042 8,808 8,289 95.3% 994 85 81 166 148 480 5.2%

Reverse transactions including

intra-group transactions 175 154 107 1.2% 0 0 0 0 0 0 -

Total, group lending 10,217 8,962 8,396 96.5% 994 85 81 166 148 480 5.2%

Minority interests 176 207 302 3.5% 0 0 0 0 0 0 -

Total, pro rata 10,393 9,169 8,698 100.0% 994 85 81 166 148 480 5.0%

17

CAPITAL RESERVATION 31.12.2012 31.12.2011

DKKm

Gross

loans

Book

value

Accum.

writedowns

Required

capital

Total

reservation

Reservation/

gross loans

Total

reservation

Reservation/

gross loans

Continuing portfolio 2,834 2,647 187 328 515 18% 426 14%

Winding-up portfolio 7,727 5,642 2,085 867 2,952 38% 3,439 37%

Bank packages etc. - - - - - - 23 -

Total - excl reverse transactions 10,561 8,289 2,272 1,195 3,467 33% 3,888 31%

Reverse transactions and intra-group

transactions 107 107 - 11 11 10% 28 16%

Total group 10,668 8,396 2,272 1,206 3,478 33% 3,916 31%

Capital reservations

B A N K I N G

Continuing portfolio up by 4ppts

More conservative approach to exposures

Winding-up portfolio up by 1ppt

Affected by writedowns in agriculture

18

Deposits DKK 11.3bn

Other debt DKK 1.1bn

Supplementary capital

DKK 0.4bn

Issued bonds DKK 2.0bn

Hybrid capital DKK 1.0bn

DKK 7.7bn repaid in 2012

DKK 2.5bn to be repaid in 2013

DKK 2.0bn in issued bonds

DKK 0.1bn in supplementary

capital

DKK 430m in hybrid capital

Funding developing according to

plan

Excess liquidity of

DKK 4.1bn

B A N K I N G

Funding - At 31 December 2012

Note: Hybrid capital of DKK 856m is perpetual. DKK 430m to be repaid in 2013

2,530

100

1,201

175

2013 2014 2015 2016

DK

Km

Interbank funding Issued bonds Supplementary capital

Hybrid capital Other debt

19

B A N K I N G

Individual solvency need

Credit risk reduced by DKK

220m

Total risk reduced by approx.

DKK 250m in 2012

Excess solvency

3.7ppts above solvency

need

Further strengthened by

DKK 270m in capital

injection

1,443 1,342 1,266 1,226 1,213

259 349 225 297 261

101 101

100 97 85

1,803 1,792

1,591 1,620 1,559

Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012

DK

Km

Credit risk Market risk Operational and other risks

1.4%

3.5%

4.3%

3.6% 3.7%

Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012

Excess solvency

20

Life and pension - Financial highlights and key ratios

Profit before tax of DKK 90m in line with

expectations

Investment result generating 8.6% return on

policyholders’ funds

Positive impact from value adjustments

Positive equity market

Collective bonus potential of 5.8%

Up 1.3ppts

Strong risk and expense results

Growth

25% in gross pension premiums

2.5% in regular premiums

14% in total pension contributions*

L I F E A N D P E N S I O N

* Including investment schemes in the bank

DKKm Q4

2010 2011 2012 2011 2012

Return on investments allocated

to equity 30 21 12 3 3

Result of portfolios without bonus

entitlement 13 24 -9 4 -1

Risk premium 54 11 11 3 3

Share of expense and risk

results 27 86 81 25 16

Calculated return on equity 124 142 95 35 21

Reversed from/transferred to

shadow account 57 -5 -5 3 -1

Profit before tax 181 137 90 38 20

Shadow account balance 0 5 10 5 10

12,3%

DKK

903m

21


Premium income

Total pension contributions up by 14%

Premiums in Life and Pension up by

25%

Transfer of pension schemes of

new customers

Reduction in investment schemes

payments

Large single payments in 2011

Growth target for regular premiums

Lifted by 2.5% in 2012

Target of 12% increase on top of

inflation by 2016

Note: Investment schemes are reported in the banking segment

658 652 629 603 618

89 58 90 121

285

237

166 186

358

332 984

876 905

1,082

1,235

2008 2009 2010 2011 2012

DK

Km

Regular premiums Single premiums Investment schemes

22


Results

Return on investments

impacted by low interest rate

level

DKKm Q4

2010 2011 2012 2011 2012

Return on investments allocated to

equity 30 21 12 3 3

Result of portfolios without bonus

entitlement 13 24 -9 4 -1

Risk premium 54 11 11 3 3

Share of expense and risk results 27 86 81 25 16

Calculated return on equity 124 142 95 35 21

Reversed from/transferred to shadow

account 57 -5 -5 3 -1

Profit before tax 181 137 90 38 20

Shadow account balance 0 5 10 5 10

23


Provisions and bonus potential

Successful increase in bonus

potential

Competitive rate on policy-

holders’ funds

Technical provisions up

primarily due to falling interest

rate level

10,758 10,994 10,931 11,332 11,832

0 225 517 454

586 10,801 11,263 11,493 11,829

12,463

2008 2009 2010 2011 2012

DK

Km

Life insurance provisions Collective bonus potential Outstanding claims provisions

225

517

454

586

3.00%

3.50% 3.65%

3.00%

2009 2010 2011 2012

Bonus potential Interest group (new agreements)

24

Capital target

DKKm Target

31 Dec 2012

Non-life Insurance

(40% of premiums) 1,946

Life and Pension

(9% of provisions for insurance contracts) 1,065

Banking

(18.7% of risk-weighted assets)* 1,858

Alm. Brand Bank subsidiaries 40

Diversification effects -300

Total capital target 4,609

G R O U P

*Calculated as the individual solvency requirement as at 31 December 2012 plus 3 percentage points

New capital target of Non-life

Insurance

Using Alm. Brand's own

partial internal capital

model

Target reduced from 45%

to 40% of premiums

25

Capital model - Significant increase in excess capital

DKKm Capital base

31 Dec 2011

Capital base

30 Sep 2012

Capital base

31 Dec 2012

Consolidated equity 4,206 4,426 4,506

Tax assets -758 -692 -665

Supplementary capital 1,753 1,704 1,654

Total capital base for the group 5,201 5,438 5,495

Statutory capital requirement for the group, end

of period 3,376 3,041 3,085

Excess relative to statutory capital

requirement 1,825 2,397 2,410

Internal capital target 5,041 4,917 4,609

Excess relative to internal capital target 160 521 886

G R O U P

26

Outlook for 2013

G R O U P

Profit of DKK 400m

Assumptions CR of 92 Expense ratio of approx. 16.5 Growth of approx. 2% Low return on investments

Profit of DKK 75m

Assumptions Modest growth in continuing

pension premiums Low return on investments

allocated to equity

Profit of DKK 5m before losses and writedowns

Assumptions Repayment of DKK 430m

hybrid capital end Q1 2013 Loan reduction net of losses

and writedowns of DKK 0.6bn Losses and writedowns of

DKK 300-400m

Equity injection of DKK 700m

Non-life Insurance Life and Pension Banking

Full-year pre-tax profit of DKK 440m before losses and writedowns

Other activities Expected cost of DKK 40m

27

Alm. Brand

Highlights

Very strong year for Non-life Insurance

Good result and strong premium growth in Life and Pension

Weak core earnings in Banking

Repayment of DKK 430m of hybrid capital in 2013

Losses and writedowns still high

Outlook for 2013 of DKK 440m profit before losses and

writedowns

Losses and writedowns in 2013 estimated at DKK 300-400m

G R O U P

28

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

29

Alm. Brand

Financial results FY 2012 Webcast presentation 26 February 2013

financial results fy 2012 - alm. brand

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