A Net writteN premiumS (£ m) 1,791 1,745 1,733 1,719 1,696 1,701 0707 0808 09 10 111112 12 combiNed operatiNg ratio (%) 91 • We are Scandinavia’s 4th largest insurer and hold number 3 positio ns in two main markets, Denmark and Sweden 88 87 • In Sweden we trade as Trygg-Hansa 85 85 85 and in Denmark and Norway as Codan • Our Personal Lines products are sold 07 08 09 10 11 12 predominantly in direct channels supported by an agent network and strong affinity relationships. uNderwritiNg reSuLtS (£ m) • Commercial distribution is based on a 272 mix between broker and direct but 264 256 237 with on the majority of products sold 217 through direct channels • We operate in highly profitable 144 markets with market leading performance • We have over 3,500 employees across 07 08 09 10 11 12 Scandinavia with a head office in Copenhagen and a significant presence in Stockholm 201 2 Net w ritteN pr emi umS (£ m) 9% 37% Denmark £1£1,791mm Sweden Norway 54% 1 A E E K ScaNdiNaviaN p&c iNduStry overview P&C insurance in Scandinavia, a region comprising three countries (Sweden, & ) &&&8& Denmark and Norway), is a £!16.7&&&&&&&& billion indu& str& y (20#12&). Al&l three m&arkets8 a& re mature and stable with a compound annual growth rate of approximately 4% across the region in 2010-12. ToTal premiums by counTry and segmenT (2012) £ £ £6.0bn £5.5bn £5.2bn PersonalPerrsosonal 58% 60% 58% F A E E K 4 CommercialCommercircial 42% 40% 42% & ) &&&8& ! &&&&&&&&& & # & & & 8& n r SSwedenwDeden DaDenmarkenmark NNorwayorway markeT concenTraTion (se and no Fy 2012, dk Q3 2012) 1100%=00%= £6.0bn £5.5bn £5.2bn The Scandinavian insura£nce ma rkets are £ highly concentrated, in particular Sweden £ OOtherther 20% 25% and Norway where the top four players 40% hold 60-80% of the premiums. 6 r Swedish incumbents are maintaining or even strengthening their positions, TTopop 4 80% 75% whereas in Norway and Denmark, new 60% entrants and challengers are very slowly gaining in impor tanc e. SSwedenwmaeden DDenmarkenmark NNorwayorwa y n r y 6 2 scandinavian proFiTabiliTy by counTry I P Y T Y Premiums, £bn COR Denmark #"#"'$'$ #"($#"($ #")$#")$ #"!$#"!$ #"#$#"#$ !"#$!"#$ !"%$!"%$ !!"&$"&$ &&*$ &#*$ &!*$ %%*$ &+*$ &)*$ &!*$ &+*$ 2005 2006 2007 2008 2009 2010 22011011 2012 SwedenSweden 5.9 6.0 5.1 5.3 5.4 5.3 5.4 5.6 &,*$ &'*$ &#*$ &'*$ &+*$ &+*$ &#*$ &#*$ 2005 2006 2007 2008 2009 2010 20112011 2012 Norway 5.2 4.5 4.7 5.0 3.8 3.9 4.0 4.2 &-*$ &'*$ &'*$ &)*$ &!*$ &(*$ &(*$ %,*$ 2005 2006 2007 2008 2009 2010 20112011 2012 Source:Sogurce: ForsikringF&orsikrin & PensionPension (DK),(DK), SvenskSvensk FörsäkringFörsä krikring (SE), Finans N)Norgeorg e ((NW)NW Note: DanishDRanish CORCO areare onon grossgross basisbasis aandnd SwedishSwedishshnets aandnd NorwegianNorwegian oonn net basisbasi 3 ScaNdiNaviaN p&c iNduStry The norwegian economy continues to grow outLook strongest among the three countries, with insurance market growth above GDP. The onshore P&C market growth in Scandinavia has been P&C market has been growing at a compound moderate in recent years following the European annual rate of 5-6% over the last 5 years. 2012 debt crisis, but is now expected to pick up again, was the most profitable year on record with a albeit at a slow rate. Profitability in 2012 was market COR of 87%, partly driven by favorable generally strong, with price increases, portfolio weather. Profitability levels are likely to be more rationalisation, and expense programmes being key normalised going forward in the mid/low 90s. parts of the major insurers’ strategies. The swedish P&C Commercial Market is still experiencing the effects of the slow economic recovery, and conditions are expected to remain challenging in the short-to-mid term. The Personal Lines market is delivering strong results (with the exception of household portfolios), and there are no clear signs of a softening market despite the high profit levels. Of the three countries, the danish economy and P&C industry has suffered the most from the economic crisis. The market is clearly polarized, with the Commercial Lines business still suffering from both the euro crisis and intensified competition from international insurance companies entering the market. Personal Lines portfolios are expected to continue driving the majority of the growth in the market, and the effects from the euro crisis have been less severe. 4 ScaNdiNaviaN ecoNomic petroleum exploration and production, overview hydroelectric power, and fisheries. Taken together, the scandinavian economies are The financial and euro crises affected the the 14th largest in the world, consisting of Sweden Scandinavian countries to varying degrees. Despite (21st), Norway (23rd) and Denmark (33rd). All being helped by a weaker euro (to which the three countries have high standards of living and Danish Krone is pegged), Denmark was hit the extensive welfare states, as well as some of the hardest following a sharp decline in real estate highest tax rates in the world. Sweden and values, while Sweden bounced back relatively Denmark are both members of the European quickly and Norway remained largely unscathed. Union, whereas Norway is not. The current international recovery is expected to help speed up growth in all of Scandinavia in 2014 sweden has a population of approximately and 2015, but the domestic driving forces differ 9.5 million, and a GDP per capita of approximately from one country to another. In Sweden, rising 55,000 USD (2012). It is an export-oriented employment and expansionary fiscal policy will mixed economy. Timber, hydropower and iron ore contribute to private consumption, which will constitute the resource base of an economy boost growth in 2014 and 2015. In Denmark, heavily oriented towards foreign trade. Sweden’s inflation has fallen and house prices have stabilised, engineering sector accounts for 50% of output and helping household confidence rise to a five-year exports. Telecommunications, the automotive high. In Norway, rapidly growing capital spending industry and the pharmaceutical industries are also will slow down in 2014, but exports and of great importance. household income increases will fuel growth. denmark has a population of approximately 5.6 million and a GDP per capita of approximately 56,000 USD (2012). Denmark has a diverse, mixed economy, featuring a high-tech agricultural sector, and world-leading firms in pharmaceuticals, maritime shipping and renewable energy, and a high dependence on foreign trade. Cooperatives form a large part of some sectors, be it in housing, agriculture or retail. Foundations play a large role as owners of private sector companies. norway has a population of approximately 5 million and a GDP per capita of approximately 100,000 USD (2012). The economy is a developed mixed economy with heavy state- ownership in strategic areas. Although sensitive to global business cycles, the economy of Norway has shown robust growth since the start of the industrial era. Shipping has long been a support of Norway’s export sector, but much of Norway’s economic growth has been fueled by an abundance of natural resources, including 5 rSa ScaNdiNavia At an overall industry level, 2012 was a good year from a profitability perspective in Danish denmark – commercial lines Commercial but with the main market players 2012 reporting a decline in premiums. First half 2013 reports from the main players show continued negative top line growth and adverse COR market rsa development from first half 2012. business size market line £m share The Danish FSA reports that the Commercial market has seen contraction of 7% from 2008 to Property 9 08 21% Motor 450 15% 2012 driven by a weak macro environment and Worker’s Comp 312 14% negative GDP growth. Unemployment has more Liability 182 21% than doubled since 2008, hitting the insurance Care 152 21% exposures negatively especially in Workers’ Other 174 NA Compensation, Health Care, Group Accident and Motor lines. However, there are some very early signs of improvement in the economic environment with a Note that mar ket size b y LOB an d market shares slight drop in unemployment during 2013, which are estimated would indicate that exposure growth development could recover from 2014. commercia l denm a rk by s egmenT The Danish Commercial market is a multi-policy 8% market with up to 75% of customers having all Property 14% lines of business with the same insurance company Liability 42% and hence all main competitors offers all lines of £401m Motor business – often in bundled solutions. 17% Marine The distribution split on the market is stable with Care roughly 2/3 of the distribution driven on a direct 19% basis (mainly Field Sales) and 1/3 through brokers and affinities. In Danish Commercial RSA is number 3 in the market and trades as Codan, which is a brand with CY UL COR* a strong reputation particularly in Commercial 445 Lines. Overall Codan holds a market share of 421 400 412 401 around 20% with particular strength in the upper SME market. We’re well known as a strong general insurer but 84% 82% have also managed to specialize in chosen 79% 79% 79% industries and hold market leading positions in industry segments like Transportation, 2008 2009 2010 2011 2012 * Excludes largee losseslosses, weather and claimss handling expenses Construction, Shipping and Lawyers. We’ve also built a leading position with leasing companies and 6 will continue to develop this business area as we see a growth opportunity in especially car leasing. Codan also operates as centre of excellence for insuring Renewable Energy in RSA Group. We are the market leader for insuring wind energy globally and continue to develop solutions for the renewable energy industry. As we migrate our portfolio to our new product and price platform during 2014 and 2015 we aim to continue to grow in targeted profitable industry segments and create more momentum in the lower SME market to further improve our portfolio mix and secure sustainable profitability.