Business Review and Outlook
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(2) Introduction. John Napier, Chairman. Business Review and Outlook. Andy Haste, CEO. Financials. George Culmer, CFO. Question & Answers. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. AGENDA.
(3) Introduction. Business Review. Outlook. FInancials. INTRODUCTION • A successful year for the Group. • Full year dividend increased by 7% to 8.25p (2008: 7.71p). WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. • Maintained focus on technical and operational excellence.
(4) Introduction. Business Review. Outlook. Financials. Introduction. John Napier, Chairman. Business Review and Outlook. Andy Haste, CEO. Financials. George Culmer, CFO. Question & Answers. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. AGENDA.
(5) Introduction. Business Review. Outlook. Financials. A STRONG AND HIGH PERFORMING BUSINESS • Driving the business forward. • Maintained strong financial position. • Realising the Group’s potential; confident in outlook. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. • Delivering sustainable profitable performance.
(6) Introduction. Business Review. Outlook. Financials. A STRONG FINANCIAL PERFORMANCE (£m). Net written premiums. • Net written premium growth of 4% FY 2009 FY 2008. 6,737. 6,462. Mvt.. +4%. • Impact of downturn offset by targeted growth, rate and FX • Underwriting result of £386m. Combined operating ratio. 386. 384. +1%. • COR remains strong at 94.6% 94.6%. 94.5%. (0.1)pts. • Investment result of £523m. Investment result. 523. 594. (12)%. Operating result. 777. 867. (10)%. Reorganisation costs. 75. -. -. Profit before tax. 554. 759. (27)%. • Income of £595m in line with guidance • Gains driven by commercial property • Profit before tax of £554m • UK re-organisation costs of £75m. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. Underwriting result.
(7) Introduction. Business Review. Outlook. Financials. INTERNATIONAL: CONTINUING TO DRIVE THE GROUP FORWARD International Growth in NWP* (£bn). • Other Europe • COR of 105% reflects strong result in Ireland offset by Italy. 3.4 CAGR = 10% 2.4. • Scandinavia. • Underwriting result up 27% to £242m with excellent COR of 86.2% • Canada • NWP up 5% to £1bn driven by rate, strong retention and acquisitions • Underwriting result of £63m; COR of 93.5% despite severe weather • One of the most profitable insurers in Scandinavia, Canada and Ireland. 1.4. 0.4 2005. 2006. 2007. 2008. 2009. * Reported. International U/W Result (£m) and COR (%) 100. 300 CAGR = 23% 200. 95. 100. 90. 0. 2005. 2006 2007 Underwriting Result. 2008. 2009 COR %. 85. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. • NWP of £1.7bn, with strong growth in Personal Lines and Norway.
(8) Introduction. Business Review. Outlook. Financials. INTERNATIONAL: CONTINUING TO DRIVE THE GROUP FORWARD International Growth in NWP* (£bn). • Other Europe • COR of 105% reflects strong result in Ireland offset by Italy. 3.4 CAGR = 10% 2.4. • Scandinavia. • Underwriting result up 27% to £242m with excellent COR of 86.2% • Canada • NWP up 5% to £1bn driven by rate, strong retention and acquisitions • Underwriting result of £63m; COR of 93.5% despite severe weather • One of the most profitable insurers in Scandinavia, Canada and Ireland. 1.4. 0.4 2005. 2006. 2007. 2008. 2009. * Reported. International U/W Result (£m) and COR (%) 100. 300 CAGR = 23% 200. 95. 100. 90. 0. 2005. 2006 2007 Underwriting Result. 2008. 2009 COR %. 85. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. • NWP of £1.7bn, with strong growth in Personal Lines and Norway.
(9) Business Review. Introduction. Outlook. Financials. INTERNATIONAL: CONTINUING TO DRIVE THE GROUP FORWARD Scandinavia Growth in NWP 2009 (%). • Other Europe. • Scandinavia • NWP of £1.7bn, with strong growth in Personal Lines and Norway. Swedish PA Bancassurance DK Norway Commercial Norway Affinity Nordic Care Renewables DK 0%. • Underwriting result up 27% to £242m with excellent COR of 86.2% • Canada • NWP up 5% to £1bn driven by rate, strong retention and acquisitions • Underwriting result of £63m; COR of 93.5% despite severe weather • One of the most profitable insurers in Scandinavia, Canada and Ireland. 10%. 20%. 30%. Constant Exchange. 40%. 50%. Reported. Scandinavia U/W Result (£m) and COR (%) 300. 100 CAGR = 41%. 200. 95. 100. 90. 0. 2005. 2006 2007 Underwriting Result. 2008. 2009 COR %. 85. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. • COR of 105% reflects strong result in Ireland offset by Italy.
(10) Introduction. Business Review. Outlook. Financials. INTERNATIONAL: CONTINUING TO DRIVE THE GROUP FORWARD Canada Growth in NWP* (£bn). • Other Europe. • Scandinavia • NWP of £1.7bn, with strong growth in Personal Lines and Norway • Underwriting result up 27% to £242m with excellent COR of 86.2% • Canada • NWP up 5% to £1bn driven by rate, strong retention and acquisitions • Underwriting result of £63m; COR of 93.5% despite severe weather • One of the most profitable insurers in Scandinavia, Canada and Ireland. 1.2 CAGR = 15%. 1.0 0.8 0.6 0.4. 2005. 2006. 2007. 2008. 2009. * Reported. Canada U/W Result (£m) and COR (%) 105. 80 CAGR = 25%. 60. 100. 40. 95. 20. 90. 0 2005. 2006 2007 Underwriting Result. 2008. 2009 COR %. 85. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. • COR of 105% reflects strong result in Ireland offset by Italy.
(11) Introduction. Business Review. Outlook. Financials. INTERNATIONAL: CONTINUING TO DRIVE THE GROUP FORWARD Canada Growth in NWP* (£bn). • Other Europe. • Scandinavia • NWP of £1.7bn, with strong growth in Personal Lines and Norway • Underwriting result up 27% to £242m with excellent COR of 86.2% • Canada • NWP up 5% to £1bn driven by rate, strong retention and acquisitions • Underwriting result of £63m; COR of 93.5% despite severe weather • One of the most profitable insurers in Scandinavia, Canada and Ireland. 1.2 CAGR = 15%. 1.0 0.8 0.6 0.4. 2005. 2006. 2007. 2008. 2009. * Reported. Canada U/W Result (£m) and COR (%) 105. 80 CAGR = 25%. 60. 100. 40. 95. 20. 90. 0 2005. 2006 2007 Underwriting Result. 2008. 2009 COR %. 85. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. • COR of 105% reflects strong result in Ireland offset by Italy.
(12) Business Review. Introduction. Outlook. Financials. UK: TAKING THE RIGHT ACTION • NWP stable at £2.6bn. • Personal in line with 2008, Commercial down 5% • Underwriting result of £75m; COR of 98%. 17%. Pet. 21%. Marine Personal Broker. • Achieved headcount reduction of 1,200 • Good start to 2010; growth Specialty lines and new business wins. 11%. Affinity. 9%. Rating (%) Commercial. 10. Personal 8%. 6% 5. • Delivered run rate savings of £64m. 47%. European Risk Solutions. • No systemic claims trends relating to the downturn • Cost savings programme on track. 5%. Personal Motor. 7% 3%. 3%. 0 -5 -10. Motor Property Liability 2006 2007. Motor 2008. Household 2009. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. • Capacity withdrawal and downturn offset by targeted growth and rate. UK Growth in NWP 2009 (%).
(13) Introduction. Business Review. Outlook. Financials. UK: TAKING THE RIGHT ACTION • NWP stable at £2.6bn. UK COR (%) 105. • Personal in line with 2008, Commercial down 5% • Underwriting result of £75m; COR of 98% • No systemic claims trends relating to the downturn. 100 95 90 85. H1 05. H2 05. H2 06. H1 07. H2 07. H1 08. H2 08. H1 09. UK FTE 14,000. • Cost savings programme on track • Delivered run rate savings of £64m. H1 06. 41% down 11,000. • Achieved headcount reduction of 1,200. 8,000. • Good start to 2010; growth in Specialty lines and new business wins. 5,000. 2003. 2005. 2007. 2009. H2 09 WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. • Capacity withdrawal and downturn offset by targeted growth and rate.
(14) Introduction. Business Review. Outlook. Financials. UK: TAKING THE RIGHT ACTION • NWP stable at £2.6bn. UK COR (%) 105. • Personal in line with 2008, Commercial down 5% • Underwriting result of £75m; COR of 98% • No systemic claims trends relating to the downturn. 100 95 90 85. H1 05. H2 05. H2 06. H1 07. H2 07. H1 08. H2 08. H1 09. UK FTE 14,000. • Cost savings programme on track • Delivered run rate savings of £64m. H1 06. 41% down 11,000. • Achieved headcount reduction of 1,200. 8,000. • Good start to 2010; growth in Specialty lines and new business wins. 5,000. 2003. 2005. 2007. 2009. H2 09 WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. • Capacity withdrawal and downturn offset by targeted growth and rate.
(15) Business Review. Introduction. Outlook. Financials. EMERGING MARKETS: REALISING THE POTENTIAL Emerging Markets Growth in NWP* (£m) 1000. • Including India NWP is £954m. 750. • Affinity growing with 13 new deals signed in Latin America. 500. • Construction and Engineering driving 24% growth in AME. CAGR = 21%. 250 0. 2005 Latin America. 2006 2007 Asia & Middle East. 2008 CEE. 2009 Associates. * Reported. • Baltics stabilising; Intouch continues to grow • Underwriting result up 26% to £29m; COR 95.1% • Emerging Markets have huge potential and will return to double digit growth. Emerging Markets U/W (£m) and COR (%) 30. 105. 20. 100. 10. 95. 0. • Continue to invest in the region. 2005. 2006. 2007. Underwriting Result. 2008. 2009 COR %. 90. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. • NWP of £833m, up 13% as reported and 2% at constant exchange.
(16) Business Review. Introduction. Outlook. Financials. EMERGING MARKETS: REALISING THE POTENTIAL Emerging Markets Growth in NWP* (£m) 1000. • Including India NWP is £954m. 750. • Affinity growing with 13 new deals signed in Latin America. 500. • Construction and Engineering driving 24% growth in AME. CAGR = 21%. 250 0. 2005 Latin America. 2006 2007 Asia & Middle East. 2008 CEE. 2009 Associates. * Reported. • Baltics stabilising; Intouch continues to grow • Underwriting result up 26% to £29m; COR 95.1% • Emerging Markets have huge potential and will return to double digit growth. Emerging Markets U/W (£m) and COR (%) 30. 105. 20. 100. 10. 95. 0. • Continue to invest in the region. 2005. 2006. 2007. Underwriting Result. 2008. 2009 COR %. 90. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. • NWP of £833m, up 13% as reported and 2% at constant exchange.
(17) Business Review. Introduction. Outlook. Financials. STRONG PORTFOLIO AND CONFIDENT OUTLOOK • Great businesses with strong market positions delivering excellent results. NWP and U/W Result (%) Net Written Premiums (%). • Driving the top line forward. Underwriting Result (%) 8%. 12% 19%. • Mid single digit growth in International. 49%. 39%. 73%. • UK moving to positive territory. • Active deal pipeline • Continue to deliver sustainable profitable performance • Confidence in future reflected in: • 2010 COR guidance of around 95% • 7% increase in the dividend to 8.25p. International. UK. Emerging Markets. Group U/W Result (£m) and COR (%). Group NWP (£bn) 7.0. 400. 100. 5.0. 300. 95. 3.0. 200. 90. 1.0. 05. 06. 07 08 NWP. 09. 100. 05. 06. 07. U/W Result. 08. 09. 85. COR %. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. • Emerging Markets will return to double digit growth.
(18) Introduction. Business Review. Outlook. Financials. Introduction. John Napier, Chairman. Business Review and Outlook. Andy Haste, CEO. Financials. George Culmer, CFO. Question & Answers. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. AGENDA.
(19) Introduction. Business Review. Outlook. Financials. (£m). 2009. 2008. Mvt.. Net written premiums. 6,737. 6,462. +4%. Underwriting result. 386. 384. +1%. Operating result. 777. 867. (10)%. Profit before tax. 554. 759. (27)%. Profit after tax. 419. 586. (28)%. Underlying return on opening equity. 12.7%. 18.5%. (5.8)pts. Underlying return on average equity. 13.4%. 16.4%. (3.0)pts. Net asset value per share excluding IAS 19. 106p. 101p. +5%. Net asset value per share. 99p. 112p. (12)%. (p). WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. RESULTS SUMMARY.
(20) Introduction. Business Review. Outlook. Financials. OPERATING RESULT • Underwriting result includes current year profit of £100m and prior year of £286m. (£m). 2009. 2008. Mvt.. Underwriting result. 386. 384. +1%. • Reserves remain significantly to the right side of best estimate. Investment income. 595. 654. (9)%. • Underlying yield on investments is 3.9%. Total gains. 28. 32. (13)%. (100). (92). (9)%. • £69m of realised gains and £7m of property mark to market gains • £28m of unrealised losses on derivatives and £24m of impairments. 523. 594. (12)%. Other activities. (132). (111). (19)%. Operating result. 777. 867. (10)%. Investment result. • Expect 2010 investment income to be £540m and gains to be at 2009 levels • Other activities include investment in Intouch of £29m, expect similar in 2010. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. Discount unwind. • Total gains of £28m:.
(21) Introduction. Business Review. Outlook. Financials. INCOME STATEMENT (£m) Operating result. 2009 777. 2008 867. Mvt. (10)%. • Operating result of £777m • Interest costs impacted by Sterling bond issue in May • UK reorganisation costs of £75m. (141). (126). (12)%. Reorganisation costs. (75). -. -. (Loss)/profit on disposal. (7). Profit before tax. 554. 759. (27)%. (135). (173). +22%. Tax. 18. (138)%. • Loss on disposal relates to the sale of the British Engine legacy business • Removes over £100m of net insurance liabilities from balance sheet • Tax charge of £135m • Effective tax rate of 24% • Irish domestication gives 1% benefit • Irish reinsurance company set up on track. Profit after tax. 419. 586. (28)%. • Profit after tax of £419m. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. Interest and other.
(22) Introduction. Business Review. Outlook. Financials. CASHFLOW 2008. Mvt.. Italy. (57). 34. (267)%. UK reorganisation. (55). -. -. -. 109. -. 602. 637. (5)%. 490. 780. (37)%. Tax paid. (180). (101). (78)%. Interest paid. (96). (107). +10%. Dividends paid. (199). (189). (5)%. 15. 383. (96)%. (40). (37). (8)%. 33. 17. 94%. Corporate activity. (101). (101). -. Cash movement. (93). 262. (135)%. Property sales Underlying Operating Cashflow. Net cashflow Pension funding Net financing activity. • Operating cash flow impacted by • Direct Indemnification in Italy • UK reorganisation costs • 2008 includes benefit of property sales in Scandinavia • Increase in tax paid follows lower 2008 allocation to Swedish Security Fund • Interest paid reduced as first coupon of new Sterling bond is due in May 2010 • Net financing activity is Sterling issue in May offset by Euro bond call in October • Corporate activity in Emerging Markets and International. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. 2009. (£m).
(23) Introduction. Business Review. Outlook. Financials. INVESTMENT PORTFOLIO Investment Portfolio (%). • Total investment portfolio of £14.3bn • High quality fixed income portfolio. 3%. 3%. Bonds. 7% Cash. • 99% investment grade. 7%. Equities. • 80% rated AA or above. 80%. Property. • Duration 3.0 years • Minimal exposure to government bonds in Greece, Ireland, Portugal and Spain • Taking action to mitigate falling yields. Bond Portfolio Credit Quality (%) 3%. • Non government bonds now 54% compared to 48% at 2008 year end. 1%. 16%. 50%. 16%. 64% 40%. • Measured increase in equities and property • Reduction in cash balances held. Corporate Bonds (%) 60%. AAA A. AA BBB. 30% <BBB. 2007. 2008. 2009. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. Other incl. prefs and CIVs.
(24) Introduction. Business Review. Outlook. Financials. SHAREHOLDERS FUNDS & CAPITAL POSITION Movement in Shareholders’ Funds (£bn). • Shareholders’ funds of £3.5bn. 4.5. • Growth of 5% excluding pension fund. 4.0. • Movement in pension reflects de-risking of UK schemes and assumption changes. 3.5 3.0. • De-risking of schemes continues: 01/01/09 After Tax Pension Dividends FX Profits Fund. MtM & 31/12/09 Other. • First to move to CARE in Ireland • Further changes made to UK schemes in February 2010. IGD Capital Surplus (£bn) 1.8. 3x. 1.2. 2x. • IGD surplus of £1.7bn; 2.4x requirement and Economic capital surplus of £1.8bn • Preparing for Solvency II. 0.6. 1x. • At forefront of implementation 0. 2005. 2006 2007 IGD Surplus. 2008 2009 Coverage Ratio. • Believe that eventual outcome will be a sensible one. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. 2.5.
(25) Introduction. Business Review. Outlook. Financials. SHAREHOLDERS FUNDS & CAPITAL POSITION Movement in Shareholders’ Funds (£bn). • Shareholders’ funds of £3.5bn. 4.5. • Growth of 5% excluding pension fund. 4.0. • Movement in pension reflects de-risking of UK schemes and assumption changes. 3.5 3.0. • De-risking of schemes continues: 01/01/09 After Tax Pension Dividends FX Profits Fund. MtM & 31/12/09 Other. • First to move to CARE in Ireland • Further changes made to UK schemes in February 2010. IGD Capital Surplus (£bn) 1.8. 3x. 1.2. 2x. • IGD surplus of £1.7bn; 2.4x requirement and Economic capital surplus of £1.8bn • Preparing for Solvency II. 0.6. 1x. • At forefront of implementation 0. 2005. 2006 2007 IGD Surplus. 2008 2009 Coverage Ratio. • Believe that eventual outcome will be a sensible one. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. 2.5.
(26) Introduction. Business Review. Outlook. Financials. STRONG PORTFOLIO AND CONFIDENT OUTLOOK • Great businesses with strong market positions delivering excellent results. NWP and U/W Result (%) Net Written Premiums (%). Underwriting Result (%) 8%. 12%. • Driving the top line forward. 19%. • Mid single digit growth in International. 49%. 39%. 73%. • UK moving to positive territory. • Active deal pipeline • Continue to deliver sustainable profitable performance • Confidence in future reflected in: • 2010 COR guidance of around 95% • 7% increase in the dividend to 8.25p. International. UK. Emerging Markets. Group U/W Result (£m) and COR (%). Group NWP (£bn) 7.0. 400. 100. 5.0. 300. 95. 3.0. 200. 90. 1.0. 05. 06. 07 08 NWP. 09. 100. 05. 06. 07. U/W Result. 08. 09. 85. COR %. WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. • Emerging Markets will return to double digit growth.
(27) WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. This presentation may contain ‘forward-looking statements’ with respect to certain of the Group’s plans and its current goals and expectations relating to its future financial condition, performance, results, strategic initiatives and objectives. Generally, words such as “may” “could”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “aim”, “outlook”, “believe”, “plan”, “seek”, “continue” or similar expressions identify forward-looking statements. These forwardlooking statements are not guarantees of future performance. By their nature, all forwardlooking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the Group’s control, including amongst other things, UK domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation and other regulations in the jurisdictions in which the Group and its affiliates operate. As a result, the Group’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in the Group’s forward-looking statements. Forward-looking statements in this presentation are current only as of the date on which such statements are made. The Group undertakes no obligation to update any forwardlooking statements, save in respect of any requirement under applicable law or regulation. Nothing in this presentation shall be construed as a profit forecast..
(28) 2009 Full Year Results Presentation WorldReginfo - 3e638ba7-5e2f-4a40-be1d-44c024e64a1c. 25 February 2010.
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