If P&C Insurance Year-end results 1999

IF P&C INSURANCE YEAR-END RESULTS 1999 * Group operating result of SEK 3,1 bn including SEK 1,2 bn from the sale of Vesta * Unsatisfactory technical result of insurance operations * Investment return very strong * Completion of If P&C Insurance between Skandia and Storebrand * Completion of Pohjola expected in the near future * Standard & Poor´s rating A, Moody´s A1. * Premium rate increases implemented at the end of 1999 in all Business Areas. Group results (MSEK) 19991 Full-year pro forma2 Premiums earned 15 325 20 111 Claims incurred -14 654 -18 962 Operating expenses -3 609 -4 830 Technical result before -2 938 -3 681 allocated interest Technical result life- -26 -26 reinsurance3 Investment result 4 898 3 454 Operating result 1 934 -253 Sale of Vesta 1 198 - Operating result before 3 132 -253 tax Claims ratio 95,6% 94,3% Expense ratio 23,5% 24,0% Combined ratio 119,1% 118,3% Comments from Bo Ingemarson, CEO of If "Based on the development in 1999, we have already in the fall of 1999 taken substantial actions to improve our technical result for 2000. Premium increases have now been put forward to the market. The technical results from insurance operations are unsatisfactory, however in line with the Nordic P&C insurance industry. Together with very strong investment returns an operating result of SEK 3,1 bn was achieved including SEK 1,2 bn from the sale of Vesta. We expect that the effects of the improvement programme that we have initiated in the core processes of underwriting, claims and distribution will start to become evident in the year 2000. 1 March - December 1999: property and casualty business contributed by Skandia and Storebrand, July - December 1999: includes property and casualty business contributed by Pohjola. 2 January - December 1999: all continuing business including Vesta Marine & Energy. Investment result based on historical index returns and assuming investment mix in line with future asset allocation of the Group (75% fixed-income, 25% equities). 3 Business in run-off. We have established a target combined ratio of 105/103 per cent which we believe can be achieved in the medium term when premium increases and adjusted underwriting guidelines start to take effect. Results deteriorated in the fourth quarter due to adverse claims developments in Motor and Property lines in particular which affected Private, Commercial and Industrial. During Q4 storms raged in Denmark and southern Sweden. Out of the total gross cost for the property and casualty market, If had only a minor share and the net effect after reinsurance was small. In 1999, reserves were strengthened in a net amount of MSEK 361 in particular relating to Motor lines in Business Areas Private and Commercial and Workers' compensation in Business Areas Commercial and Industrial. As at December 31, 1999, the overall reserve strength (claims reserves in relation to net premiums earned) was 162 per cent. We have initiated increases in premium rates and changes in underwriting guidelines across the four countries in which we operate. The premium increases will have full impact on net written premiums in 2000 but will take up to 24 months to flow fully into earnings as renewals are spread across the year. Furthermore, we are strongly focused on realising the identified merger benefits. The transfer from the pre merger phase into the new management structure has been successfully completed. I am optimistic that regulatory approval in Finland will be resolved in the near future in order to formally include the property and casualty business of Pohjola in the Group. If as a brand name will be launched to the general public in an extensive public relations campaign starting at the end of March this year. New products and services will be launched during the campaign. In 2000, we also plan to significantly enhance our existing Internet services." Group results Pro forma January - December (Skandia, Storebrand and Pohjola) On a pro forma basis from January 1, 1999, premiums earned were MSEK 20 111 (1998 MSEK 19 755)*. Claims incurred were MSEK -18 962 (MSEK -16 319) and expenses were MSEK -4 830 (MSEK -4 715). The operating result before tax was MSEK -253 (MSEK 3855). The claims ratio was 94 per cent (83) and the expense ratio was 24 per cent (24). The combined ratio was 118 per cent (107). The high cost of claims had significant negative impact on the results compared to 1998. If was specifically hit by negative results within Motor Norway, Property Norway and Sweden and Marine & Energy. Due to the development of claims incurred in prior years, the technical provisions for Motor and Workers' compensation in particular as well as for business in run-off have been strengthened to a total net amount for 1999 of MSEK 361. The combined ratio for Q4 was 132 per cent (9 months pro forma 114 per cent). The deterioration in the combined ratio was mainly attributable to claims in Motor and Property lines as well as reserve strengthening, bringing the claims ratio to 111 per cent for Q4 (9 months pro forma 89 per cent). Business area comments (pro forma full-year) Private had net premiums earned of MSEK 9 860 in 1999 (MSEK 9 517). The combined ratio was 116 per cent (110), with an expense ratio of 24 per cent (24). * Numbers in parenheses are comparitive numbers for 1998. Weak performance in 1999 compared to 1998 was mainly driven by an overall increase in the claims frequency and by a reserve strengthening in Motor and Personal accident lines during 1999 of MSEK 161. Private is implementing significant increases in premium rates of up to 15 per cent in different lines of business. Commercial had net premiums earned of MSEK 7 092 in 1999 (MSEK 7 157). The combined ratio was 120 per cent (105), with an expense ratio of 24 per cent (24). In 1999, Property in Norway and Sweden and Motor in Norway showed weak performance, as did Workers' Compensation in Denmark and Norway. Reserve strengthening accounted for 138 MSEK. Commercial is implementing significant increases in premium rates and product redesign as well as improvements in underwriting control. Industrial had net premiums earned of MSEK 2 046 in 1999 (MSEK 2 090). The combined ratio was 120 per cent (102), with an expense ratio of 24 per cent (23). The results for 1999 were particularly impacted by low price levels as well as an adverse run-off development in Accident Norway and adverse loss experience in the Property and Business interruption lines in Sweden. In addition, the frequency and average claim costs in Motor Norway increased. Substantial attention has therefore been given to improving price levels in the renewals for year 2000. Marine & Energy had net earned premiums of MSEK 773 in 1999 (MSEK 916). The combined ratio was 138 per cent (84), with an expense ratio of 30 per cent (23). After several years with few large claims, a number of large losses occurred in 1999. In merging the Marine & Energy businesses previously in Storebrand and Vesta, new underwriting guidelines are being implemented, drawing on the best practices identified in the two organisations. Underwriting will primarily be done in Bergen for Marine and in Oslo for Energy. Run-off Business If has business in run-off in 8 companies. Net reserves in run-off amount to SEK 2,7 bn. The net asset value of the run-off companies was SEK 1,4 bn as of December 31, 1999. Fiscal year results (Skandia and Storebrand March - December, Pohjola July - December (pro forma)) Premiums earned were MSEK 15 325. Claims incurred were MSEK -14 654 and expenses were MSEK -3 609. The technical result before investment income was MSEK -2 938. Investment result after allocation to insurance operations amounted to MSEK 3 489. The positive operating result before tax was MSEK 3 132 of which the sale of Vesta accounted for MSEK 1 198 . The claims ratio was 96 per cent and the expense ratio was 23 per cent. The combined ratio was 119 per cent. The tax for the year was MSEK 636 of which MSEK 156 was deferred. The profit for the year was MSEK 2 496. Investments The investment return from March to December (ten months Skandia and Storebrand, six months Pohjola) was MSEK 4 898. In the fourth quarter the investment return was MSEK 3 247. The high return in the fourth quarter was driven by very strong performance on the equity markets in general and in the Nordic region in particular. Outlook for 2000 To improve the technical result in 2000 the following actions have been undertaken: * Increases in premium rates in all business areas * Introduction of products targeted at small enterprises in Commercial * Individual product and pricing in Private * New reinsurance programme for the Group * Focus on the identified improvement programs including cost synergies. Solna, Sweden, 8 March 2000 Bo Ingemarson President and CEO For questions please call: Bo Ingemarson, CEO tel: +46 8 788 45 77 Tom Rathke, CFO tel: +46 8 788 32 25 Investor relations: Nils Henriksson tel: +46 8 788 12 82, e-mail: nils.henriksson@if- skadeforsakring.se Susanna Halse: tel: +46 8 788 24 28, e-mail: susanna.halse@if- skadeforsakring.se www.if-insurance.com Reports 2000 Q1 May 8 Q2 August 9 Q3 November 1 Appendices ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/03/08/20000308BIT00140/bit0001.doc http://www.bit.se/bitonline/2000/03/08/20000308BIT00140/bit0002.pdf http://www.bit.se/bitonline/2000/03/08/20000308BIT00140/bit0003.xls Tabeller