After a first quarter impacted by extraordinary winter claims due to an unusually severe winter, the second quarter has returned to a more normal level.
The insurance group reported gross earned premiums of DKK 4,890m in Q2 2010, equivalent to 3.6% growth in local currency (8.7% in DKK) compared to the same period in 2009.
The technical result amounted to DKK 394m compared to DKK 411m in the same period last year and was strongly impacted by a progress of 22% in Private Nordic. The result was affected by more large claims than expected. Large claims amounted to DKK 236m against DKK 125-150m in a normal quarter. The investment result of DKK -208m after transfer of technical interest was affected by weak financial markets, particularly fall in equities. The profit before tax was DKK 173m in the second quarter 2010 against DKK 896m in the same period in 2009. The decrease is mainly due to a difference of DKK 706m in the investment return between the two periods.
Combined ratio (the sum of claims and gross expenses) was 92.5 against 91.5 in the same period last year and was affected by 0.9 percentage points due to lower interest rate levels. The expense ratio fell from 17.6 to 17.3, particularly due to the development in Private Nordic where several efficiency improvement initiatives reduced the expense ratio from 17.2 to 15.5.
Satisfying growth
“We have put the winter behind us and are back at previous levels after a first quarter where extraordinary winter claims of DKK 700m caused a loss on the insurance business. We are pleased to record a growth that corresponds to our outlook”, said Group CEO Stine Bosse.
“On the earnings side, we are pleased to report a progress in earnings of 22% in Private Nordic that comprises half of our business. Declining return on investments and continued low interest rate levels underline the need for a solidly performing insurance business to withstand fluctuations in the financial markets.
Commercial, house and contents insurances in Denmark continued to record high claims levels. Previously implemented premium increases are starting to show a positive effect, but further specific premium increases supplemented by risk prevention activities are necessary to reach our target level of profitability. We will thus be implementing several premium increases in the fall, said Stine Bosse.
Water claims of approximately DKK 100m
The heavy downpour in the weekend on Sea Land (Sjælland) resulted in approximately 2000 claim forms to Tryg. A preliminary assessment indicates that total expenses for Tryg’s customers will surpass DKK 100m. Expenses above DKK 100m are covered by reinsurance.
“The climate has changed and as an insurance company, we have to take that into account. Cloud bursts can happen in every part of the country and we have to share that risk jointly. The standards that each municipality set for their sewerage systems can over time cause a considerable difference in risk. Today, few of the municipalities share information regarding the condition of the sewage systems. This will in the long term affect premiums if we can not get the necessary information from the municipalities”, said Stine Bosse.
Private Nordic
Premium income in Private Nordic increased by 7.6% (13.3% in DKK) to DKK 2,562m in the second quarter 2010. The development was impacted by strong growth in Sweden and Finland of 15% and 25% respectively and not least a premium growth of 7.7 % in Denmark compared to the same period last year. Finland is characterised by a fall in combined ratio from 108.4 to 94.9 as well as a strong growth. The technical result in Private Nordic increased 22.5% to DKK 240m, which is the best in several years.
Tryg expects to improve profitability further in the coming years especially within house and contents insurances. In Denmark, 90.1% of our private costumers renew their insurances and thus in average stay more than ten years with Tryg. In Norway, the retention rate increased from 85.1 to 85.5.
Commercial Nordic
Premium income in Commercial Nordic was up by 8.8% in local currency (14.5% in DKK) to DKK 1,084m attributable to customer influx in both Denmark and Norway. The increase was affected by a transfer of portfolio from both Private Nordic and Corporate Nordic. The technical result was DKK -44m, which is considered unsatisfactory.
As a consequence, Tryg will implement premium increases and risk reducing initiatives in the fall to improve profitability within both products and customer segments. Premium increases of 10-15% will be implemented on several products.
Corporate Nordic
Gross earned premiums in Corporate Nordic fell 7.6% in local currency (3.3% in DKK) to DKK 1,248m. In the Danish part of the corporate business, premiums declined by 13.6% following the economic downturn, which has reduced volume and intensified price competition. The technical result amounted to DKK 201m against DKK 212m in the second quarter of 2009.
“Tryg continues to face tough price competition in the corporate market on single products such as workers’ compensation insurances in Denmark and personal insurances in Norway. This has triggered a fall in premium income, but we do not want unhealthy price competition. We have previously seen new players in the corporate market compete primarily on price and subsequently increase prices to improve poor earnings. Tryg want to be a stable and long-term peace-of-mind provider. We believe we serve the business sector best through stable, predictable and long-term risk planning,” said Stine Bosse.
Outlook
Tryg maintains the outlook of premium growth in local currency of 3-4% in 2010. Premium growth is expected to originate from continued growth in Sweden and Finland and the implementation of premium increases in all four countries.
Tryg improves the outlook of combined ratio before run-off (reversal of reserved claims) and extraordinary winter claims to 93-95 against previously 94-96. Including winter claims, the combined ratio is now expected to be 96-98 before run-off for the rest of the year.
Technical result including winter claims and before run-off is expected to amount to DKK 0.4-0.8bn. The range has improved by DKK 0.1bn compared to the announcement after the first quarter 2010. The outlook of the return on investments is downgraded from DKK 0.3-0.4bn to DKK 0.1-0.2bn, primarily due to equity losses. Tryg maintains outlook of the profit before tax of DKK 0.6-1.0bn including winter claims.
Details of the second quarter and half-year 2010 performance are available in the interim report published on www.tryg.com.
For further information, please contact:
Troels Rasmussen, CCO, phone +45 30 35 30 70 or
Ole Søeberg, IRO, phone +45 40 30 00 04.
About Tryg
Tryg wants to be perceived as the leading peace-of-mind provider in the Nordic region. arbejder for, at bekymringer ikke skal stå i vejen for vores kunders hverdag. I 2009 sikrede vores godt 4.300 medarbejdere tryghed for over 2,7 millioner privatpersoner og mere end 140.000 virksomheder. Med bruttopræmieindtægter på 18,3 mia. DKK i 2009 er vi det næststørste skadeforsikringsselskab i Norden. I Danmark og Norge er vi henholdsvis den største og tredjestørste aktør, mens vi i Finland og Sverige, hvor vi har haft aktiviteter siden henholdsvis 2002 og 2006, oplever hastig vækst. See also www.tryg.com