Vátryggingafelag Íslands : In­vestor Presentati­on Q2 2020

Investor Presentation

6M - 2020

August 21st 2020

• Highlights

Good results in

investments

• Highest investment income and returns since the Company's listing.
• All asset classes performed well, with the exception of unlisted equities.

Large losses but positive

development in loss frequency

• Large losses impacted the quarter.
• Foreign reinsurance had a negative impact of 5.1% on the combined ratio.
• We are seeing a positive development in the frequency of losses.

• 1. breakthrough innovation
• We are developing a breakthrough new product: Ökuvísir (Driving Indicator)
• Customers can influence what they pay
• • always.
• Our goal is for our customers to have fewer losses.

• Highlights- Q2 2020

Premiums

5.641 m.kr.

Q2 2019 || 5.655 m.kr

ROI

4,4%

Q2 2019 || 4,2%

Profit

916 m.kr.

Q2 2019 || 1.256 m.kr

ROE

6,7%

Q2 2019 || 6,5%

Combined Ratio

103,5%

Q2 2019 || 93,8%

Solvency Ratio

1,57

Q2 2019 || 1,56

• Highlights - 6M 2020

Premiums

11.198 m.kr.

6M 2019 || 11.190 m.kr

ROI

4,0%

6M 2019 || 8,2%

Loss

-1.047 m.kr.

6M 2019 || 2.192 m.kr

ROE

-7,4%

6M 2019 || 15,0%

Combined Ratio

114,9%

6M 2019 || 96,3%

Solvency Ratio

1,57

6M 2019 || 1,56

/ Income Statement

	Q2 2020	Q2 2019	Br.	Br. %	6M 2020	6M 2019	Var	Var %
Premiums earned		5.655	-14	-0,3%		11.190	9	0,1%
Premiums earned, reinsurers' share		-207	-4	1,8%		-391	-7	1,7%
Premiums earned, net of reinsurance		5.448	-18	-0,3%		10.798	2	0,0%
Investment income		1.434	178	12,4%		2.800	-1.350	-48,2%
Other income		19	-8	-39,9%		39	-13	-31,9%
Total income		6.902	153	2,2%		13.638	-1.360	-10,0%
Claims incurred		-3.916	-491	12,5%		-7.967	-2.071	26,0%
Claims incurred, reinsurers' share		79	12	14,8%		129	16	12,1%
Claims incurred, net of reinsurance		-3.837	-479	12,5%		-7.838	-2.055	26,2%
Technical interest rates and exchange rate changes of technical provisions		-124	-103	82,8%		-263	-387	147,3%
Operating expenses		-1.405	-12	0,9%		-2.835	44	-1,5%
Interest expences & impairment of acc. receivables		-104	6	-5,8%		-195	12	-6,2%
Total expenses		-5.469	-588	10,8%		-11.131	-2.386	21,4%
Profit (loss) before income taxes		1.432	-436	-30,4%		2.507	-3.746	-149,4%
Income taxes		-176	95	-54,1%		-315	507	-161,0%
Profit (loss) for the period		1.256	-340	-27,1%		2.192	-3.239	-147,8%
Claims & reinsurance cost ratio		71,5%				73,5%
Expense ratio		22,3%				22,8%
Combined ratio		93,8%				96,3%
Return on equity		6,5%				15,0%
Return on investments		4,2%				8,2%

/ Changes in Premiums

Premiums							Non-Life Premium Development	5.029
						5.019			39	37
	Q2 20	Q2 19	Q2 20 vs 19	Q2 19 vs 18
					-67
Non-life insurance	5.029	5.019	0,2%	1,6%
Life insurance	369	352	4,8%	6,1%
Foreign reinsurance	243	285	-14,5%	28,1%
Total	5.641	5.655	-0,3%	2,9%
						Premiums Q2 19	Motor		Property		Other	Premiums Q2 20

12 months rolling premium Development - In millions

20.000

15.000

10.000

5.000

0

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

/ Changes in Claims

Claims incurred						Claims provisions
						20.166
									18.603
	Q2 20	Q2 19	Q2 20 vs 19	Q2 19 vs 18
Non-life insurance	3.774	3.556	6,1%	-22,7%
						19.495	17.677
Life insurance	170	253	-32,7%	81,4%
Foreign reinsurance	463	107	332,4%	-46,5%
Total	4.407	3.916	12,5%	-20,7%		30.06.2020	31.12.2019
								Claims provision, net of reins.		Claims provision, reins.' share

Development in claims ratio

/ Pre-taxProfit

Operating segments

1.500		9			500			1.171			902	984				1.155
1.000										574
		550	704				460
500	228											119
				-211							-710
0		1.089			435		224
-53		-53			-91	172	448		240		-158
-500		-113
		-735								-539
-1.000													-700
-1.500
-2.000
-2.500															-826
	Q1 17	Q2 17	Q3 17	Q4 17	Q1 18		Q2 18	Q3 18		Q4 18	Q1 19	Q2 19	Q3 19	Q4 19	Q1 20	Q2 20
							Insurance operations		Financial operations

• Combined Ratio

Combined Ratio 12 months rolling

Acc. to new FSA guidelines

110%

105%

100%

95%

90%

Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
2016	2016	2016	2016	2017	2017	2017	2017	2018	2018	2018	2018	2019	2019	2019	2019	2020	2020

Operating expenses
1.600
1.400
1.200
1.000
800
600
400
200
0
Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
2017	2017	2017	2017	2018	2018	2018	2018	2019	2019	2019	2019	2020	2020
		Financial op. exp.	Insurance op. exp.		Four quarters average

Quarterly Development

	Expense ratio		Claims & reinsurance ratio		Reassessment of older claims

140,0%

120,0%

100,0%

80,0%

60,0%

40,0%

20,0%

0,0%

Q1 2017

Q1 2018

Q1 2019

Q1 2020

Q2 2017

Q2 2018

Q2 2019

Q2 2020

Q3 2017

Q3 2018

Q3 2019

Q4 2017

Q4 2018

Q4 2019

/ Balance Sheet

Assets	30.6.2020	31.12.2019
Operating assets		606	670
Goodwill and other intangible assets		1.464	1.360
Right-of-use assets		848	899
Tax assets		57	0
Financial assets at fair value through profit or loss		35.410	32.338
Bonds and other long-term receivables		1.596	1.843
Investments where investment risk is borne by life-ins. policy holders		1.602	1.530
Accounts receivables		9.234	7.424
Reinsurance assets		1.045	1.074
Other receivables		998	1.286
Cash and cash equivalents		1.311	1.930
Total assets		54.172	50.354
Equity
Share capital		1.894	1.894
Statutory reserve		626	626
Restricted reserve		3.781	2.793
Retained earnings		7.846	9.881
Total equity		14.147	15.194
Liabilities
Subordinated bonds		2.831	2.788
Tax liability		0	136
Lease liability		875	917
Technical provision		31.825	27.577
Technical provision for life-insurance policies where investment risk is borne		1.602	1.530
by the policy holders
Accounts payable and other liabilities		2.892	2.212
Total liabilities		40.025	35.160
Total equity and liabilities	54.172	50.354

Technical Provision

Risk premium	965	906	Risk premium
Unearned	10.694	11.051	Unearned
premiums		premiums

Claim resrves	20.166	17.723	Claim resrves

30.6.202030.6.2019

Equity Ratio

		29,2%
27,3%
26,1%		28,7%

30.6.2020			30.6.2019
Equity Ratio		Subordinated Debt	Equity Ratio TTM

/ Investments - Income and Return

Investment Income Q2 2020 in ISK m.

- Highest investment income and return since listing

- Highest resturn from Listed equities - good return also other bonds and government bonds

- Foreign credit funds have positive effect on investment income from other bonds

- Income from other equities negative due to lower value on unlisted equities and private equity funds

- Duration 4,2 years og 34% of the fixed income portfolio is index linked at end of Q2 2020

Investment Assets - Breakdown								Return on Investments
															8,2%
			40,1%			30.6.2020			301.3.2020
			37,2%
	27,2%	28,5%									4,4%
										4,2%
				20,4%					4,0%
				18,9%
							10,0%	11,1%
2,4%	4,3%
Cash	Gov Bonds	Other Bonds	Listed Equities		Other Equities				6M 2019
	Q2 2019	6M 2020
	Q2 2020

• Investment Assets

Investment Assets 38 ISK BN.

Matching Portfolio	Cash
4%
ISK 21 bn.

Gov Bonds

Other Bonds 45%

51%

Matching Portfolio - Largest investments in ISK m.

LSS150434
RIKB 25 0612
RIKB 28 1115		1.270
RIKB 31 0124		1.254
ARION CB 24	937
ARION CB 22	892
ISLA CB 23	866
LBANK CB 23	847
RVKN 35 1	784			30.06.2020
RIKB 22 1026	774			31.03.2020

2.086

1.930

Free Portfolio

Free Portfolio

ISK 17 bn.		FESTI
	KVIKA
Other
	HAGA
Bonds
	SIMINN
25%	Listed
ICESEA
	Equities
	47%	ARION
		CORIPHARMA
Other Equities		JÚPÍTER IFIF
28%		EIK
		AKTA HS1

- Largest Investments in ISK m.

	936
	935
	919
	813
698
682
664
652	30.06.2020

582 31.03.2020

572

• Solvency

Solvency Ratio

1,8

1,7

1,6

1,5

1,4

1,3

1,2

1,1

1,0

1,57

• Own funds increases due to the quarter's profit
• Market risk increases due to the increase of the equity portfolio as well as the increase of the symmetric adjustment
• Solvency capital requirements decreases due to seasonal decreases of risks and in addition changes in the loss absorbing capacity of deferred taxes.

2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2020 Q1 2020 Q2

Solvency Ratio

Lower Limit

Upper Limit

Eligible Own Funds							Changes in SCR
18.000										12.000			755	78
			975	-46				10.042			9.920
16.000
14.666								10.000
											-954
14.000										8.000
12.000
10.000										6.000
8.000
6.000										4.000
4.000										2.000
2.000
0										0
30.03.2020	Profit		Other	30.06.2020
		30.03.2020	Market Risk	Insurance Risk	Other	30.06.2020

• Shareholders

Payments to Shareholders

4,0												18%
3,5		16,4%										16%
3,0								14,0%			14%
2,5					11,9%					11,6%	12%
									10%
2,0
8,8%											8%
1,5
				5,8%					6%
1,0
											4%
0,5												2%
0,0												0%
2014	2015	2016	2017	2018		2019
				Dividend s			Share bu yback	% of mcap

Share price since listing

14
13
12
11
10
9
8
7
6					VÍS	OMXI vísitalan
5
2013	2014	2015	2016	2017	2018	2019	2020

Shareholders 14.8.2020

11%
8%		Pension Funds		Other Entities
8%		Foreign Funds		Domestic Funds
		Individuals		Banks
59%		Own Shares
14%

10 largest shareholders 14.8.2020

	Lífeyrissjóður verslunarmanna	9,2%
	Frjálsi lífeyrissjóðurinn	9,1%
	Gildi lífeyrissjóður	8,0%
	Arion banki hf.	7,7%
	Lífeyrissjóður starfsmanna ríkisins A-deild	7,2%
	Sjávarsýn ehf.	5,3%
	Stapi lífeyrissjóður	4,9%
	Birta lífeyrissjóður	4,4%
	Brú lífeyrissjóður	3,6%
	Lífsverk lífeyrissjóður	2,7%

/ Updated Earnings Forecast

Our updated earnings forecast for the full year 2020 is for a combined ratio of 105.3%, investment returns of 7.3% and pre-tax earnings of ISK 164 million. Our guidance for the next 12 months is for a combined ratio of 97.3%, investment returns of 5.9% and pre-tax earnings of just over ISK 2.2 billion.

The VIS investment strategy aims to maximise returns through asset allocation based on the Company's established risk tolerance. VIS has defined the Company's risk tolerance based on maintaining a solvency ratio between 1.35 - 1.70.

The Company will generally issue a special notification if earnings for FY 2020 are expected to deviate from those forecast by more than ISK 300 million.

The earnings forecast will be updated on a quarterly basis, published in earnings reports and presented in the Company's investor presentation material.

/Positive signs

• Investments

• Investment returns of 0.8% in July and 4.8% for the year so far.

• Operation

• Challenging first half of 2020.
• We are seeing fewer losses.
• Combined ratio in July was 89.9%
• Decrease in FTEs during the quarter.
• We are there for our customers during COVID-19.
• An experienced actuary will join us on 1 September.
• Our guidance for the next 12 months is for a combined ratio of 97.3%

/ Digitalization

• We have overhauled our services. We are a digital service company.
• The Ökuvísir (Driving Indicator) represents a breakthrough in the insurance market.
• This is an exciting new product - and we wish to collaborate with our customers.

• Disclaimer

Information in this presentation is based on sources that VÍS considers reliable at any given time, but cannot be guaranteed to be infallible.

All information in this presentation is the property of VÍS. Information contained therein or the presentation may not be copied, modified or distributed in any way, in whole or in part.

This presentation is intended solely for the purpose of information disclosure, but not as part of or the basis of the decision making of the parties that receive it. The recipients shall not in any way interpret the content of the presentation as a promise or instruction.

VÍS is not obliged in any way to provide the recipients of this presentation with any further information about the company or make changes or adjustments to it if the underlying information changes.

The company's future prospects are dependent on a number of risk and uncertainty factors, which may mean that actual performance in the future will be significantly different from what is described in this presentation. External factors such as the availability of capital, law coming into force, the influence of regulators and others can therefore have a significant impact. VÍS reiterates that the recipients of this presentation should not rely on the presentation's assertions going forwad as they apply solely on the date of the release. All statements about the company's future prospects are valid in its entirety with respect to these reservations.

Upon receipt of this presentation, the person confirms that he/she is bound by the aforementioned reservations and limitations.

Thank You