Q1 2011 -press release
Clearly improved Tryg result
By reporting a pre-tax profit of DKK 361 million for the first quarter of 2011 against a result of DKK -113 million for the same period in 2010, Tryg has - as promised – delivered a result which is the beginning of clearly improved financial performance. The improvement is particularly due to the technical result which amounts to DKK 276 million in 2011 against DKK -354 million in 2010.
First of all, a more normal winter in the first quarter of 2011 had a positive effect on the result; however, somewhat adversely affected by a winter storm in Denmark. The price increases which were announced in 2010 and which have currently been notified to 75% of the customers are now beginning to show an effect.
Furthermore, very stringent cost control as well as focus on loss prevention and claims procurement has contributed to the positive result.
- In the first quarter, we have taken the first step in the right direction showing that the initiatives we took in 2010 are beginning to pay off and that our ambitions for the next 3 years are realistic, CEO Morten Hübbe says.
- We are aware that there is still much work awaiting us in relation to improved efficiency and cost consciousness when we help our customers in connection with claims. However, we are on the right track and with an improvement of the combined ratio of more than 12 points, we will maintain our objective delivering a combined ratio of 90 on a 3-year basis.
Morten Hübbe also notes a positive run-off result of DKK 182 million.
- This shows that Tryg’s provision level is very solid, and we will ensure that this is also the case in future.
Investment activities
The primary business still remains the most important focus area of Tryg. However, both in 2010 and in the first quarter of 2011, our investment activities contributed positively – and more than expected - to our business.
Tryg’s investment result in the first quarter was DKK 105 million. Return on investments in the free investment portfolio was DKK 188 million corresponding to an annual return of 8.5%.
- We have chosen an investment model where technical provisions are matched by investments in bonds – and this is, by far, the largest part of our investments. The investment strategy for the “free” funds is conservative. Both circumstances mean that, today, Tryg has a capital excess in comparison with the requirements which insurance companies must comply with in connection with Solvency II.
Premium growth
In the first quarter, Tryg’s premium growth was 5.4% when adjusted for exchange rate fluctuations. Tryg’s Nordic private business grew by 9%; both due to premium increases and influx in new customers in Sweden and Finland. Thus, the total earned premiums landed on DKK 5,038 million.
Morten Hübbe is also very satisfied with Tryg’s continued high customer retention rate which is 89% in Denmark and 86% in Norway.
- We have, of course, seen an effect of the necessary premium increases. However, the effect is limited and the customers who have left us are primarily persons with only one insurance product with Tryg. Customers with several products create more stability and improved earnings for Tryg, and Tryg generally focuses on attracting customers who collect all their insurance products with us.
Partner agreements constitute a significant part of Tryg's private market business. As for these agreements, Tryg renegotiated and renewed a series of agreements in the first quarter on terms and conditions that will improve profitability in future.
Commercial
The combined ratio of Tryg’s Nordic business within the commercial market improved by 32.4 points . This is party due to the more normal level of winter-related claims, but also that the prices are being adjusted to match the risk involved and that many agreements with customers have been reviewed, partly to improve consultancy services and partly to adjust the prices of customers with poor claims records.
- Despite the reduced loss in the Commercial business, we still have a long way to go when it comes to creating proper profitability. However, together with the initiatives we have already taken, maintaining a close dialogue with our customers will improve the results even more in future, Morten Hübbe says.
Corporate
Tryg’s Corporate business reported a technical result of DKK 151 million for the first quarter of 2011 against DKK 188 million in the same period of 2010.
- It is an area which has been characterised by strong competition during recent years. Tryg’s policy is unchanged. We will not compromise profitability when we make offers. Based on this, it is satisfactory that we are able to defend our portfolio and level of earnings. We do see some signs indicating that the market conditions have improved, however, we also see some players who disregard profitability when they make their offers, Morten Hübbe says.
New initiatives
During the latest period, Tryg has implemented new customer oriented initiatives. This applies, for example, to service improvements in Tryg's Alarm Centre offering assistance 24 hours a day throughout the entire year.
Furthermore, Tryg has launched a new Europe Insurance providing Nordic companies with uniform and transparent insurance schemes in all EU countries.
Continued progress
- The result of the first quarter 2011 is the first step in the process of improving Tryg's financial performance as we promised when we presented the annual accounts for 2010, Morten Hübbe says.
- In the coming years, we will maintain our focus on customer consultancy service, loss prevention and procurement cost reductions. Internally, we will focus both on small improvements related to our day-to-day work as well as investments in paperless and flexible processes. On a 10-year basis, we are aiming at an expense ratio of approx 10 compared with the current 16.6. This is an ambition that guides the direction for the entire company’s efforts, Morten Hübbe says.
Financial Highlights
DKK million Q1 2010 Q1 2011
Gross earned premiums 4,650 5,038
Gross claims incurred 4,135 3,816
Operating expenses 789 829
Technical result -354 276
Return on investment
after technical interest 204 105
Pre-tax result -113 361
Result after tax -102 271
Claims ratio 88.9 75.7
Expense ratio 17.2 16.6
Combined ratio 108.6 95.9
For further information, please contact:
CCO Troels Rasmussen, mobile +45 30 35 30 70 or
Investor Relations Director Ulrik Andersson, mobile +45 21 71 30 18