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Edited Transcript of TOP.CO earnings conference call or presentation 24-Jan-19 11:00am GMT

Q4 2018 Topdanmark A/S Pre-Recorded Earnings Presentation

Ballerup Jan 28, 2019 (Thomson StreetEvents) -- Edited Transcript of Topdanmark A/S earnings conference call or presentation Thursday, January 24, 2019 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Steffen Heegaard

Topdanmark A/S - Group Communications, CSR & IR Director

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Presentation

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Steffen Heegaard, Topdanmark A/S - Group Communications, CSR & IR Director [1]

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Welcome to the presentation of Topdanmark's results for 2018.

Profit for 2018 was DKK 1,331,000,000, down from DKK 1,733,000,000 in 2017 but better than the between DKK 1.2 billion and DKK 1.3 billion which was assumed for 2018 in the Q3 report.

The combined ratio was 83.6% compared to 82.0% in 2017. Premiums increased by 1.7% in nonlife and by 18.6% in life. For 2019, the assumed combined ratio remains unchanged at between 89% and 90% excluding runoff. Despite the termination of the distribution agreement with Danske Bank, a higher premium growth is expected in 2019 compared to the 1.7% growth in 2018.

The profit forecast model for 2019 is between DKK 1 billion and DKK 1.1 billion, excluding run-off. Finally, the Board of Directors will recommend to the AGM that payment of dividends of DKK 1,350,000,000 for 2018 will be carried out. This corresponds to a payout ratio of 101.5, dividends per share of DKK 15 and a dividend yield of 5.2%.

These are the main points in my presentation.

Pretax earnings declined by DKK 533 million to DKK 1,702,000,000 in 2018.

The technical nonlife profit declined by DKK 123 million to DKK 1,499,000,000. The decline was primarily caused by the very low level of fire claims in 2017, which did not recur in 2018. The investment returns declined by DKK 367 million to minus DKK 79 million due to a lower investment return on equities and on Danish mortgage bonds.

Profit in life insurance declined by DKK 21 million to DKK 228 million primarily due to a lower risk result.

The claims trend increased by 1.7% to 67.5% in 2017. Adjusted for run-off gains, weather-related claims, large-scale claims and other positions, including change of risk margin, the claims trend increased by 1.1 percentage points to 70.2%. The deterioration of the adjusted claims trend of 1.1 percentage point was a consequence of an increased number of small-scale fire claims, primarily in Q2. Consequently, the level of fire claims increased, representing a 0.8 percentage points deterioration of the claims trend. Furthermore, the claims trend on burst pipes was higher when compared to 2017. On the other side, 2018 showed an improved claims trend on theft.

Premiums increased by 1.7% in nonlife. The premium growth was split between a 1.5% increase in personal segment and a 1.8% increase in the SME segment. The positive momentum and inflow of customers in the personal, the agricultural and in the SME markets continued during 2018, mainly due to a record-low churn rate.

The trend in premiums was impacted by the termination of the distribution agreement with Sydbank and Nykredit within life insurance, which affected the sale of illness and accident insurance, resulting in a negative effect of 0.6 percentage points in life in nonlife insurance. Furthermore, premiums were negatively impacted by accounting adjustments concerning unexpired risk corresponding to 0.7%. Consequently, the underlying growth was more like 3% in 2018.

In the autumn 2018, Topdanmark's distribution agreement with Danske Bank was terminated. On its own, we expect the termination of the distribution agreement with Danske Bank will have a negative impact of just below 0.5 percentage points of -- on Topdanmark's nonlife premiums in 2019. However, Topdanmark has a good sales momentum through its own sales channels and other distribution partners. Despite the termination of the Danske Bank agreement, we assume a higher premium growth in 2019 compared with a growth of 1.7% in 2018.

As stated, the combined ratio was 83.6% in 2018 compared to 82% in the year before. For 2019, we continue to assume a combined ratio of between 89% and 90%, excluding run-off. This still includes additional expenses of between 0.5 and 1 percentage point due to the investment in increased digital and automation.

Profits in life insurance declined by DKK 21 million to DKK 228 million primarily due to a lower risk result. For 2019, the assumed pretax profit in life insurance is between DKK 200 million and DKK 230 million. And life results for 2019 will be impacted by expenses related to a new IT system.

In life, the company holds a good competitive position. This was reflected in an 18.6% increase in premiums, split between 27.1% growth in single premiums and a 1.3% growth in regular premiums. The termination of the distribution agreement with Sydbank and Nykredit within life insurance had a negative impact on regular premiums of around 10 percentage points. For 2019, we assume a growth of -- in regular premiums of approximately 10%.

The investment return for the Topdanmark Group excluding life was DKK 16 million compared to DKK 396 million in 2017. The lower investment return in 2018 was due to a lower return on equities and on Danish mortgage bonds compared to previous year.

Based on a number of assumptions described in the Q4 report, the assumed post-tax profit for 2019 is between DKK 1 billion and DKK 1.1 billion, excluding run-off, representing earnings per share of DKK 12.1. Given Topdanmark's solid own funds, the Board of Directors will recommend to the AGM a dividend payment of DKK 1,350,000,000. The recommended dividend represents a payout ratio of 101.5, a dividend yield of 5.2 and a dividend per share of DKK 15.

Thank you for taking the time to watch this presentation of Topdanmark's Q4 report. If you want to learn more about Topdanmark, you are welcome to contact me. Following the announcement of the 2018 results, we will be hosting a conference call today at half past 3:00.

You can find more information on our road show schedule in the events calendar on our website.

Thank you, and goodbye.