The result of the parent company etc. increased DKK 45m due to higher earnings in Topdanmark Kapitalforvaltning (asset management).
Profit of DKK 350m in Q4 2011 Post-tax profit was DKK 350m in Q4 2011 (Q4 2010: DKK 488m) which was somewhat better than assumed in the profit forecast model for 2011 in the Q1-Q3 2011 report (Q4 2011: DKK 227-327m). As described above, the improvement was due to both the technical result and the life insurance result being better than assumed.
Sales through Topdanmark's own sales channels increased 5.2% from 2010 even though H2 was adversely affected by the change in the decentralised sales organisation from insurance outlets to larger sales centres - a change which is expected to increase market pressure in the future.
The return on funds owned by customers, before pension return tax, was a 0.2% loss in Life I and 11.2% in Life V.
Regular premiums declined 10.1% to DKK 2,312m in 2011 as per the forecast of around 10% (in the Q1-Q3 2011 interim report).
Developments in Q4 2011 The decline in profit to DKK 69m in Q4 2011 (Q4 2010: DKK 190m) was due to the recognition as income of DKK 144m from the shadow account in 2010 whereas DKK
Overall premiums increased 16.4% to DKK 968m in Q4 while regular premiums declined 12.5% to DKK 562m.
Financing Up to now the goal of Topdanmark's capital structure has been to ensure that its capital base (shareholders' equity and hybrid capital) is sufficient to support its current operations. Equity in excess of this amount has been distributed to shareholders by way of regular share buybacks throughout the year. As a result of this approach to capital structure Topdanmark is financing part of the investment in the insurance group with loans.
The claims trend in 2011 was affected by both storm and rainstorm claims exceeding the normal level. If the level of weather-related claims will be normal in 2012, the claims trend will improve around 1.5pp.
• A normal year for weather with weather-related claims corresponding to a level of DKK 170m, broken down by quarters: Q1: DKK 50m Q2: DKK 25m Q3: DKK 45m Q4: DKK 50m
The elements of the overall risk profile are brought together in the central risk management function which is responsible for ensuring that the data for and processes of risk calculations and profiling are of a high quality. The risk management function reports to the Risk Committee which is responsible for the SCR (solvency capital requirements) calculation, internal model, use test, risk limits, risk policies, standard calculation and ORSA (own risk and solvency assessment). The members of the Risk Committee are the CFO of the Group, a representative from the board of management of the life insurance company and the heads of the primary risk areas: Asset Management, Statistical Services, Life Actuarial Services, Group Finance, Life Finance and Reinsurance. The Risk Committee reports, recommends and proposes to the Board of Directors via the Board of Management.
A proportion of the customers’ accumulated value comprises both collective and individual bonus potential. The collective bonus potential is an undistributed reserve acting as a buffer against fluctuations in the value of the customers’ share of assets and liabilities. At 31 December 2011 the overall collective bonus potential for the interest rate, risk and cost groups was DKK 24m in Life I and DKK 516m in Life V.
Topdanmark's investment risk is the inability of bond, loan or financial contract counter-parties to meet their obligations. Most of Topdanmark's interest-bearing assets comprise Danish mortgage bonds and debt issued or
Provisions for claims and benefits a 130.4 364.2 472.9 9.6 35.5
The current European solvency rules and the traffic light rule have been used for many years while the individual solvency requirement was reported on for the first time at the beginning of 2008.
Risk management is coordinated by a risk committee comprising those responsible of the primary risk areas. The risk committee reports to the Board of Management who reports to the Board of Directors.
Topdanmark → Board of Management and Board of Directors and Board of Directors and Board of Management in this Annual Report.
Annually evaluate the skills, knowledge and experience of the individual members of the governing bodies and report such details to the supreme governing body.
The cost of the issue of employee shares was DKK 46m in 2011 compensated by a corresponding reduction in salaries. The cost has been calculated at fair value according to the IFRS 2 on share-based payments.
• There is a high level of knowledge of and confidence in Topdanmark's shares.
Change in the provisions for unit-linked contracts (529) (61) (851) (968) (294)
PROFIT / (LOSS) FOR THE YEAR 1,271 (189) 1,446 1,168 1,023
Interest charges (81) (113) Expenses on investment business (41) (35) Total investment return 3,607 1,463
Collective bonus potential 28 554 540 Provisions for bonuses and rebates 128 89 Provisions for unit-linked contracts 29 3,826 3,737 TOTAL PROVISIONS FOR INSURANCE AND INVESTMENT CONTRACTS 46,305 46,846
Gross premiums written 3,366 3,374 Claims and benefits (2,891) (3,704) Expenses paid (282) (315) Reinsurance ceded 19 19 Cash flow from life insurance 212 (626)
Claims incurred include revaluation of inflation swaps hedging the inflation risk in workers' compensation and illness / accident insurance (44) 103
Run-off profits 204 148 Claims provisions, net of reinsurance 11,697 12,382 Number of claims incurred ('000) 422 434 Average value of claim (DKK '000) 16 16 Annual frequency of claims 115 120 The annual frequency of claims has been calculated as a per thousand value. The loss ratio and the combined ratio have been calculated before elimination of internal rent.
Guaranteed benefits 2,804 3,632 Bonus potential on future premiums (1,468) (2,113) Bonus potential on paid-up benefits (436) (1,954) Change in life insurance provisions 900 (435)
Non-capitalised balance of equity losses that can be carried forward 408 411
Borrower Topdanmark A/S Principal EUR 55m DKK 350m DKK 400m Date of issue July 2007 June 2010 June 2011 Maturity Bullet 18 June 2018 24 June 2019 If permitted by the DFSA, the borrower can give notice of termination from 15 Sep 2017 18 June 2015 24 June 2016 Interest rate EURIBOR 3 months+1.90% to 2017 7.150% to 2015 6.633% to 2016 Subsequently EURIBOR 3 months+2.90% Cibor 3 months+625bp Cibor 3 months+525bp
Insurance technical result before bonus 1,181 441 1,622 (223) 287 64
Note 33. Auditors' fee Fee to the auditors elected by the Annual General Meeting Deloitte: Fee for statutory audit of the annual accounts 5 4 Fee for other assurance engagements 0 0 Fee for services, other than audit work 0 1
The Group has an internal audit department which carries out most of the audit work.
Inputs based Inputs not based 2010 Quoted on observable on observable Financial assets recorded at fair value prices market data market data Total Held for trading: Non-life insurance: Government bonds 0.5 0.5
Investment assets related to unit-linked contracts 2.8 0.5 0.0 3.3 Total financial assets at fair value 36.4 14.9 0.0 51.3 *) Assets valued in life insurance by reference to inputs not based on observable market data include an exposure of DKK 0.1bn (2010: DKK 0.2bn) hedged by a total return swap with non-life insurance.
Financial liabilities measured at amortised cost Subordinated loan capital 752 1,150 Deposits with ceding undertakings 90 116 Creditors arising out of direct insurance operations 69 89 Creditors arising out of reinsurance operations 59 61 Bond loans 71 72 Amounts due to associated companies 11 0 Current tax liabilities 5 3 Other creditors 1,052 952 Total financial liabilities measured at amortised cost 2,108 2,471 Total financial liabilities 6,115 9,005
Investment properties The initial recognition of investment properties is made at cost and subsequent recognitions are made at fair value with revaluations in the profit and loss account. A value has been calculated for each property on the basis of an expected future return on its operations and a rate of return (required yield). This value is adjusted for any special conditions having a temporary effect on the earning capacity of the property as well as the level of maintenance required on each property. The yield has been fixed taking into account the relevant market conditions for each type of property, its position, use, tenure of lease etc. The properties are reviewed and assessed annually by the Group's own valuation experts.
In Life I, for everyone aged up to 80, the mortality rate used is lower than the DFSA's population mortality rate plus the DFSA's assessed improvement in future life expectancy. After 80, it reverts to being at the same level. For example, remaining life expectancy for a 60 year old man is 24 years and for a 60 year old woman 27 years.
Share of loan included in capital base 404 404 Interest charges 11 13
Note 10. Related parties - continued Remuneration of the Board of Management The Company has paid no remuneration to the Board of Management but an adminstration agreement provides that it pays a share of the overall remuneration paid to the Board of Management.
Note 11. Core capital and capital base Shareholders' equity 4,900 4,915 Deferred tax assets (1) (0) Hybrid core capital 404 404 Capital adequacy requirements for insurance companies – 50% (1,549) (1,540) Core capital 3,754 3,779 Capital adequacy requirements for insurance companies – 50% (1,549) (1,540) Capital base 2,205 2,240
The net asset value of affiliated companies is calculated without providing for deferred tax on security funds unless it is probable that a situation creating such a tax liability will arise within the foreseeable future.
In our opinion, the consolidated accounts and annual accounts give a true and fair view of the Group’s and the Company's assets, liabilities and financial position at 31 December 2011 as well as of the Group’s and the Company’s financial performance and the Group’s cash flow for the financial year 1 January to 31 December 2011.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated accounts and annual accounts. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatements of the consolidated accounts and annual accounts, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated accounts and annual accounts that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as the overall presentation of the consolidated accounts and annual accounts
- A n n u al R e p o rt 2