Topdanmark A/S

CSE:TOP

Earnings Call Transcript 2020-Q2

[Steffen Heegaard, Group Communications & IR Director]

Welcome to the presentation of Topdanmark's results for the first half of 2020. Profit in the first half of 2020 was DKK 196 million compared with an DKK 831 million in the first half of last year. This is primarily due to a lower investment result. The combined ratio was 85.5% compared to 80.7% in the first 6 months last year, mostly caused by lower runoff profits. Premium increased by 2.7% in non-life and by 20.7% in life. For the full year 2020, the assumed combined ratio is improved by 1.5 percentage points to between 88% and 89%, excluding runoff in the second half of the year. The profit forecast for 2020 has been improved by DKK 100 million to between DKK 550 million and DKK 750 million, excluding runoff in the remainder of the year. Following the Danish FSA's recommendation, Topdanmark has decided to postpone the payout of the remaining dividend for 2019 until the AGM on the 25th of March 2021. These are the main points in my presentation. Pretax earnings decreased by DKK 804 million to DKK 262 million. The technical non-life profit decreased by DKK 207 million to DKK 697 million. The decrease was primarily due to a lower runoff profit, a higher level of weather-related claims and the impact of lower interest rates. Investment return decreased by DKK 352 million to a loss of DKK 427 million. Investment return was impacted by the turmoil in the Danish mortgage market during Q1, resulting in a substantial spread widening impacting the portfolio of Danish mortgage bonds, which is used for hedging the provisions. Property and life insurance decreased by DKK 244 million to a loss of DKK 25 million, primarily due to lower investment return. The claims trend deteriorated by 4.6 percentage points to 68.7%. The claims trend was negatively impacted by lower runoff profits of 3.1 percentage points, a higher level of weather-related claims of 1 percentage point and the discounting effect due to lower interest rates of 0.5 percentage point. The underlying claims trend, which is the claim trend adjusted for runoff profits, weather-related claims, large-scale claims, discounting and COVID-19-related claims were 68.7%, and thus, almost at the same level as in the first half of 2019. In Q2, the claims trend improved by 0.3 percentage points to 65%. For 2020, the assumed negative impact on the combined ratio from COVID-19 has been reduced from between 0.5% to 1% to between 0 and 0.5%. Premiums decreased by 2.7% in non-life. The premium growth was split between a 1.7% increase in the private segment and a 3.9% increase in the SME segment. So Denmark continues to see a net inflow of customers in the Topdanmark brand. The good start of -- to the distribution agreement with Nordea continued into Q2, and the number of customers has already, by the end of Q2, reached the goal for 2020. We still expect a negative impact on premium growth in 2020 of approximately 0.5 percentage points due to the switch of distribution partner from Danske Bank to Nordea. And in 2021, the premium income from the inflow of customers from Nordea is expected to fully compensate for the terminated distribution agreement with Danske Bank. As stated, the combined ratio was 85.5% in the first half of 2020, up from 80.7% in the same period in 2019. Despite a negative assumed impact of discounting of 0.2 percentage points, the assumed combined ratio for 2020 has improved from around 90% to between 88% and 89, excluding runoff in the second half of the year. The assumed combined ratio for 2020 is affected by the improved impact from COVID-19 of 0.5 percentage points. Profit on life insurance decreased by DKK 244 million to a loss of DKK 25 million. A low result was primarily due to a decrease in the investment return of DKK 210 million but also due to a lower sales and administration result as well as a lower result of -- on insurance risk. For 2020, the assumed profit in life insurance is unchanged between 0 and DKK 50 million. And life company holds a good, competitive position. This was reflected in a 20.7% increase in premiums, split between a 29.2% growth in single premiums and a 3.5% increase in regular premiums. We continue to assume growth in regular premiums of about 0% in 2020. Investment return for the Topdanmark group was a loss of DKK 387 million. This includes the result of Topdanmark's asset management company of DKK 43 million. The investment return was impacted by losses on Danish government bonds, hedging the provisions of DKK 250 million, a loss on the portfolio of CLOs of DKK 99 million and a loss of equities of DKK 62 million. Based on a number of assumptions described in the Q2 report, the assumed forecast profit for 2020 has been improved from between DKK 450 million and DKK 650 million to between DKK 550 million and DKK 750 million, excluding runoff in the second half of the year, representing earnings per share of DKK 7.5. As a consequence of COVID-19 -- of the COVID-19 situation, only DKK 8.5 of the previously announced dividend of DKK 17 per share for 2019 was paid out in connection with the AGM on the 2nd of April. In the Q1 report, we stated that when the situation is back to normal, the Board of Directors has the option to distribute in part or in full the remaining DKK 8.5 of the previously announced dividend of DKK 17 per share as extraordinary dividend. If so, this extraordinary dividend would be paid out later in 2020 or at the AGM in 2021. On the 26th of June, the Danish FSA decided to recommend that Danish financial companies not to complete capital distribution for the remainder of 2020. Following the Danish FSA's recommendation, Topdanmark's Board of Directors has discussed the Danish FSA's recommendation and has decided to postpone payout of the remaining dividend for 2019 until the AGM on the 25th of March 2021. It is still the intention to distribute in part or in full the remaining DKK 8.5 of the previously announced dividend of DKK 17 per share. Thank you for taking the time to watch this presentation of Topdanmark's Q2 report. If you want to learn more about Topdanmark, you are welcome to contact me. In August, we will host a number of online investor meetings. Today, we'll be hosting a conference call at half past 3 CET, and the dial-in information is available on our website. You will find more information on our road show schedule in the events calendar on our website. Thank you and goodbye.