DELIVERING TOGETHER: BUILDING - Achmea · Strategy Update Capital Markets Day June 1, 2017 . Tekst...

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Titel dia

DELIVERING TOGETHER: BUILDING ON IMPROVED FUNDAMENTALS

Willem van Duin Chairman of the Executive Board

Strategy Update

Capital Markets Day June 1, 2017

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Achmea has cooperative roots. We balance the interests of our four stakeholders: customers first, next to employees, partners and capital providers

We have four unique competitive advantages:

1. Strong brands with leading positions in customer satisfaction ratings

2. Best in class distribution, mainly via the growing direct and banc assurance channels

3. A large customer base with leading positions in our core markets

4. Leading position in mobile and online services

Since 2008 we’ve consistently improved our business fundamentals with successful completion of two change programmes. We lowered costs, boosted innovation, developed new business models and made clear strategic choices.

With ‘Delivering Together’ we build on our improved business fundamentals and for 2020 we aim at:

Better products and services, supported by innovations

Lower cost base by €200 million and reduction of 2.000 FTE

Operational result ambition of €600 million

Key ratio’s in line with S&P IFS rating “A”

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PROGRAMME

3

Part 1: Achmea at a glance: A unique insurer in the Dutch market

Part 2: Strategy execution to date: Proven change capabilities

Part 3: Our strategic approach through 2020: Delivering Together

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OPERATIONAL RESULT 2016 AT APPROXIMATELY €230 MILLION NET OF EXCEPTIONAL ITEMS

Operational result 2016 strongly influenced by several exceptional items:

Exceptional weather such as the hail calamity in June

Reserve strengthening personal injury

Reorganisation provision for reduction 2,000 FTE and number of office locations

High income from investments as a result of:

Realisations in Non-Life due to change in investment mandate

Strong recovery of commodities and real estate prices in Pension & Life

Result in basic health, expected to be at a break-even level, was impacted by:

Loss provision premium setting 2017

Higher than expected health care expenses

Changes in portfolio composition

Operational result excluding Health is approximately €230 million

4

-323

-196

-127 170

178

100 90

~230

2016 (reported) Result Health 2016(ex-Health)

Exceptionalweather

Personal Injury Reorganisation Investmentresult

2016(Ex-health,

normalised)

Operational result 2016 Excluding health and exceptional items

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FIVE KEY INDICATORS DEFINING OUR FINANCIAL AMBITIONS

5

-323

~450

230 (normalised)

~150

2016 2020

Operational result (€ million)

~600

Health 2.328

~2.128

2016 2020

Operational expenses (€ million)

-216

~400

98 (normalised)

2016 2020

Free capital generation (€ million)

-0.9

>5.0

2.7 (normalised)

2016 2020

Fixed Charge Coverage (in x)

2016

S&P Capital

AA

S&P rating

Maintain S&P IFS rating at “A”

Alleen titel

STRATEGIC DIRECTION: CUSTOMER RELEVANT AND TREND SETTING

Customer driven

We balance the interests of our four stakeholders: customers first, next to

employees, partners and capital providers

We invest in innovations to improve the (digital) service

for our customers

We help our customers to achieve long term financial sustainability

We focus on P&C, income protection and health insurance

Delivered through the direct and bank-distribution channels

We service the existing (closed) books pension and life insurance

and grow in term life

We diversify our earnings capacity by investing in capital light

pension products, asset management and our international activities

While maintaining a prudent risk appetite in line with our

cooperative background

Profile

We provide more than just insurance products but also offer

services on prevention and advice

We set the trend with our expertise

We operate as a data- and technology-driven company

Our products and services make society safer, healthier

and more future proof

Strategic direction

6

Alleen titel

CORE ACTIVITIES: NON-LIFE, HEALTH, PENSION & LIFE AND ASSET MANAGEMENT

7 ¹ Source: the Dutch Association of Insurers 2016 (www. verzekeraarsinbeeld.nl). / ²Dutch Association of Insurers customer satisfaction research 2016. / ³ SAMR research 2016

GWP 2016: €19.5 billion

6% International

17% Non-Life

10% Pension & Life

67% Health

Non-life €3.2 billion

Health €13.1 billion

Pension & Life €1.8 billion

Assets under Management €116 billion

Achmea serves approximately 13 million customers

7.0

7.0

7.0

7.2

7.3

7.3

7.5

7.5

ASR

Aegon

Delta Lloyd

NN Group

Generali

FBTO

Centraal Beheer

Interpolis

P&C Retail Ø 7.2¹ P&C Wholesale Ø 7.4²

7.1

7.4

7.6

7.7

NN Group

ASR

Interpolis

Centraal Beheer

Health Ø 8.0³

7.7

7.7

7.9

8.0

8,0

8.1

8.2

8.2

VGZ

Zilveren Kruis

Interpolis

CZ

FBTO

Pro life

OZF Achmea

De Friesland

Life Retail Ø 6.8¹

6.2

6.4

6.5

6.9

7.0

ASR

Aegon

NN group

Interpolis

Centraal Beheer

Alleen titel

A large customer base with leading positions in our core markets

Leading in mobile, online; proven track record launching new concepts

Best in class distribution mainly via direct and bancassurance channels

ACHMEA HAS FOUR COMPETITIVE ADVANTAGES

8

70%

6% 3%

Direct Health

79%

14%

7%

Direct (total) Bancassurance Broker

Strong brands with leading positions in customer satisfaction ratings

Individual Life #2 Income Protection #2

VGZ

CZ Group

Menzis

Other

Achmea 31%

Health #1

ASR

NN/Delta Lloyd

Allianz

Other

Achmea 21%

Property & Casualty #1

Asset Management #5

ASR

Goudse

Other

Achmea 19%

Aegon

NN/Delta Lloyd NN/Delta Lloyd

Aegon

Other

Achmea 14%

ASR

Vivat

Other

Blackrock NL

APG

Achmea 6%

MN

PGGM Een initiatief

van Zilveren Kruis

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PROGRAMME

9




Alleen titel

FROM 2008 ONWARDS: TWO MAJOR CHANGE PROGRAMMES SUCCESSFULLY COMPLETED

10 Source: ¹ AFM KBC Score ² CB & Interpolis: Metrixlab brandtracer ³ Zilveren Kruis: SAMR Klantenmonitor zorgverzekeringen

2008 - 2013

House of Initiatives

Acceleration & Innovation

2014 - 2016

Customer satisfaction to above market average

Strong and improving NPS Scores (e.g.)²,³: CB P&C Retail: 2015: 5 2016: 6

Interpolis P&C Commercial: 2015: -4 2016: -3

Zilveren Kruis Health 2016: -5 2017: 0

Customer focus

Our ambitions What we realized Change programmes

Maintain market leadership

Speed up level of innovation and new business models

Lower costs and FTE

Focus on core activities

Reduce complexity

Market leader in Non-life and Health

More than 150 innovations launched

Capital light retirement services strategy implemented

Operating expense reduction of 22% since 2009

Overall reduction of 30% FTE (internal FTE)

Sold off or closed all loss making activities

Divested over seven international operations

Number of IT application reduced by ~30%

Number of offices reduced from 30 to 8

Alleen titel

Crossyn

Thuismeester FBTO UBI

ACTIFY

Roadguard

Homies

Neokidney

Ideation Discovery & Scoping Development Test & Validate MVP Commercialization

Gate 1 Gate 2 Gate 3 Gate 4

WE INVEST IN INNOVATIONS TO IMPROVE THE SERVICE FOR OUR CUSTOMERS

Inshared

Taloride

CB Smarthome

11

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FROM 2008: REDUCED COMPLEXITY, LOWER COST AND GREATER DIGITAL CAPABILITIES

12

2008

~1,800

2016

~1,250

2013

~1,400

2020

< 800

Number of IT applications

Three Phases in Development of IT-structure

Digital Insurer

House in order

Integrated insurer

low high process standardisation

low

h

igh

p

roce

ss in

tegr

atio

n

Replicated

Shared

Coordinated

2008 2017

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PROGRAMME

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ACTIVE IN CHANGING ENVIRONMENTS - FOUR MAIN MARKET TRENDS WITH IMPACT

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Technology Data and new technology can drive new services

New ways of customer interaction

Deeper insights into underwriting risks

Our approach Launch of retirement service strategy

Growth of Inshared, Independer

Invest in new services en propositions

Dynamic pricing, Big data

Creating economies of scale

Partnering with third parties

Digitization of customer contact

Optimize investment portfolio

Customer preferences Insurance as part of broader service offering

Vitality and lifestyle trending issues

More individual responsibility for pension

Politics and economy Low interest rate environment

Societal pressure and political decisions:

Potential new legislation for health insurers

Revision of pension scheme/legislation

Insurance market Changing risks: usage, cyber, climate

New (disruptive) market players

Consolidation in the market

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OUR STRATEGY FOR THE PLANNING PERIOD TO 2020

DELIVERING TOGETHER

15

International

Non-life

Health Retirement services

Pension & Life (Closed Book)

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STRATEGY FOR THE PLANNING PERIOD: 5 BUSINESS LINES WITH OWN ROLES

Non-life: Profit pillar and online distribution champion

Build on market leading positions, strong brands and distribution

Back on track with strong profitability after decisive remedial actions

Health: mid term a stable result contribution

Balancing volume, profit, solvency and solidarity

Manage short term market and political challenges (for two to three years).

Retirement services: Investing in a growing business

Grow in market with integrated capital light proposition

Develop into Centraal Beheer branded full service financial service provider

Pension & Life: servicing our closed book and growing term life

Optimize profit and value of Pension & Life as closed book while maintaining high customer satisfaction

International: Accelerate, Disrupt and Create

Leverage on the core capabilities (e.g. online) of the group in existing and new countries

16

Tekst & Grafiek 25%/75%

NON-LIFE: PROFIT PILLAR AND ONLINE DISTRIBUTION CHAMPION

17

90

95

100

105

110

115

Combined Ratio2

Property & Casualty

¹ GWP including Inshared, 2 Legal entity

Our position

Market leader P&C

Top 3 position income protection

High customer satisfaction and online capabilities

Our ambitions

Grow market share in retail Property & Casualty

Strengthen combined ratio P&C to less than 96%

Profit contribution in 2020 of €200 million

Our actions

Property & Casualty

Set profitable premiums as market leader

Lower claims by prevention and better underwriting

Income Protection

After re-pricing in previous years, focus is on shortening the time of re-integration

Combined ratio book year

Combined ratio underwriting year

Combined ratio underwriting year (excl. impact severe weather events)

2013 2015 2016 2012 2014

100


HEALTH: MID TERM A STABLE RESULT CONTRIBUTION

Our position

Market leader with around 30% of market share

Efficient distribution channel: over 70% online

Group benefits: cross sell, cost coverage, diversification

Competitive pressure will drive solvency ratios to 130%-140%

Our ambitions

Maintain current market share

Decrease expense levels further

Annual result contribution ~€150 million as of 2020

Our actions:

Balance volume, profit, solvency and solidarity

Use scale to strengthen purchasing capabilities

Focus on adding value from services

0%

5%

10%

15%

20%

25%

2008 2009 2010 2011 2012 2013 2014 2015

After gap is closed profitability will return to ‘normal’. 96% health care

reimbursement 3%

administrative expenses

1% margin to support business continuity

Financial buffers built

in period 2011-2013

Healthcare costs increase faster than premiums

Cumulative % increase/decrease in health care premium (basic insurance) compared to 2008 (base year)

Cumulative % increase/decrease in health care costs (basic insurance) compared to 2008 (base year)

18

Alleen titel

Current political situation and trajectory

The House of Representatives passed the bill on to the Senate for ratification or denial

The bill was passed despite serious objections from the Minister of Health and the Council of State

The Dutch Central Bank and the Netherlands Healthcare Authority see many issues around the law

Premium increases throughout are seen as probable

It is now up to the Senate to either accept the proposed law, or to send it back

The proposed new law

Is unclear on many fronts and leaves much room for interpretations

Is in direct contrast with earlier made agreements

Serves no specific goal and as such is unnecessary

PROPOSED LEGISLATION PERMANENTLY BANNING DISTRIBUTION OF HEALTH CAPITAL

19

Our expectations

We assume the Senate to conclude that the bill is not good for all insured and the Dutch health care system

We will not speculate on any specific outcome and next steps


The intention to build-up additional funds for retirement age has grown from 15% to 23% in last two years; growing awareness

40% of the boards of company pension funds find it (very) important that their participants can have overall insight in their pension, including the 3rd and 4th pillar

RETIREMENT SERVICES: INVESTING IN A GROWING PENSION BUSINESS

20

23%

7%

10%

10%

13%

23%

30%

53%

0% 10% 20% 30% 40% 50% 60%

Other

Fund is fit for the future

Join a PPI

Merge

Liquidation of fund

Join sector pension fund

Enter insurance contract

Join an APF

Corporate pension funds and employers consider APF as good alternative (survey March 2016)

Our position

We offer an integrated proposition in 2nd, 3rd and 4th pension pillar

We focus on:

Centraal Beheer APF and

company pension funds

Achmea Bank and Asset Management are integral parts of our strategy

Our ambitions

Grow AuM CB APF and sales in 3th and 4th pillar

Position Centraal Beheer as a full service provider for individual saving and investment products

Profit contribution ~€ 50 million in 2020

Our actions

Invest in 2nd/3th/4th pillar products

Improve profitability of Achmea Bank


PENSION & LIFE: SERVICING OUR CLOSED BOOKS AND GROWING IN TERM LIFE

21

Our position

Successful management of separate closed book life since 2013

Proven track record over the last years in cost reduction

Achmea stopped selling Pension insurance contracts

We continue selling term life and annuities insurance

Our ambitions

Pension & Life closed book will create value by lowering costs and optimizing its investment portfolio

Contribution to our profit ~€270 million in 2020

Our actions

We will implement further value enhancement options

296

224 202

175 150

0

50

100

150

200

250

300

350

2015 2016 2017 2019 2021

Total expenses Pensions & Life 2015-2021, in € million

Tekst & Beeld 50%/50%

INTERNATIONAL: ‘ACCELERATE, CREATE AND DISRUPT

22

Our position

A presence in a limited number of promising economies

Our ambitions

Accelerate: Accelerate growth in existing markets

Create: Exchange knowledge between the countries, especially digital capabilities

Disrupt: Become a disruptor in a limited number of large markets where online insurance penetration is still low

A profit contribution in the range of ~€40 million in 2020

Our actions

Implement the core capabilities of the group abroad

Focus on countries with (foreseeable) profitable growth and aligning the core capabilities of the group

Our current international presence

Grafiek 100%

FIVE KEY INDICATORS DEFINING OUR FINANCIAL AMBITIONS

23

-323

~450

230 (normalised)

~150

2016 2020

Operational result (€ million)

~600

Health 2.328

~2.128

2016 2020

Operational expenses (€ million)

-216

~400

98 (normalised)

2016 2020

Free capital generation (€ million)

-0.9

>5.0

2.7 (normalised)

2016 2020

Fixed Charge Coverage (in x)

2016

S&P Capital

AA

S&P rating

Maintain S&P IFS rating at “A”

Tekst 100%


Achmea has cooperative roots. We balance the interests of our four stakeholders: customers first, next to employees, partners and capital providers

We have four unique competitive advantages:

1. Strong brands with leading positions in customer satisfaction ratings

2. Best in class distribution, mainly via the growing direct and banc assurance channels

3. A large customer base with leading positions in our core markets

4. Leading position in mobile and online services

Since 2008 we’ve consistently improved our business fundamentals with successful completion of two change programmes. We lowered costs, boosted innovation, developed new business models and made clear strategic choices.

With ‘Delivering Together’ we build on our improved business fundamentals and for 2020 we aim at:

Better products and services, supported by innovations

Lower cost base by €200 million and reduction of 2.000 FTE

Operational result ambition of €600 million

Key ratio’s in line with S&P IFS rating “A”

24

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