Annual report 2019 | Tryg A/S | 6Contents – Management’s review
Digitalisation Good progresses were made in 2019 when it comes to liaising with customers via digital communication. Around 60% of all inquiries to Tryg were through self-service, 45% of all claims were submitted online, whereas 30% of claims were processed without the involvement of Tryg employees.
Annual report 2019 | Tryg A/S | 8Contents – Management’s review
New partnership with NITO On 1 January, Tryg Norway initiated the partner agreement with members of the Norwegian Society of Engineers and Technology (NITO). NITO has approximately 90,000 members.
New agreements between Alka and HK Alka and HK, Denmark's largest union for salaried employees, entered into a new agreement about salary insurance for HK's members. With the salary insurance the members are guaranteed up to 80% of their current salary after an unanticipated dismissal.
In June, Tryg’s majority shareholder, TryghedsGruppen, paid out a member bonus for the fourth year running. The bonus corresponds to 8% of the premiums paid to Tryg in 2018, or the payout of DKK 925m in total to TryghedsGruppen’s members, Tryg’s Danish customers and for the very first time Alka’s customers.
Claims excellence is the most important strategic initiative for improving the technical result. The target is to reduce claims costs by DKK 600m in 2020, and in 2018 and 2019 accumulated savings of DKK 350m were achieved. One of the main initiatives is to further leverage Tryg’s procurement power, and in 2019 cost savings of more than DKK 200m were realised. Initiatives in 2019 included the renewal of a contract for windscreen services, a new five-year contract with Recover Nordic (the largest Nordic claims service group) and a claims agreement for electronic products in Norway and have helped to lower average claim costs in Tryg.
Claims inflation is monitored continuously using internal and external parameters, and price adjustments are pushed through accordingly. Motor insurance is one of the largest and most profitable business segments for Tryg, and claims developments are therefore carefully scrutinised. Approximately half of all new cars sold in Norway are electric/hybrid, and some of these carry different risks compared to normal vehicles, making it particularly important to monitor claims inflation and adjust prices accordingly. More recently, the building index in Norway has reported higher than previously observed inflation, and prices have been adjusted accordingly.
Annual report 2019 | Tryg A/S | 23Contents – Management’s review
Claims The gross claims ratio was 86.1 (92.7), and the claims ratio, net of ceded business, 80.4 (101.5). The improved claims ratio was primarily due to a much higher run-off level compared to last year. Further initiatives aimed at improving profitability were introduced in the quarter with price hikes of 14% in Norway, which was the main reason for the improved underlying profitability.
Claims The gross claims ratio was 53.1 (71.7) and net of ceded business 53.8 (72.0). The much lower claims level was due to a higher level of run-off gains.
Results Q4 2019 Gross premium income for Q4 2019 was DKK 364m (DKK 361m). The technical result was DKK 90m (DKK 38m), with an expense ratio of 21.5 (17.2) and a combined ratio of 75.3 (89.2).
Investment risk Invested assets are split into a match portfolio (DKK 29bn) and a free portfolio (DKK 11bn). The objective is for the return on the match portfolio to be as close as possible to zero as capital gains and losses on the assets side should be mirrored by corresponding developments on the liabilities side. The free portfolio is intended to produce the maximum risk-adjusted return. The investment risk associated with the free portfolio is managed through limits on exposure within single asset classes.
DKKm while all intangibles are deducted in the calculation. The debt capacity has been fully utilised, and at the end of 2019 some DKK 142m of Tier 2 instruments are not included in the own funds as they exceed the 50% SCR limit. Own funds totalled DKK 8,119m at the end of 2019 vs DKK 8,058m at the end of 2018, the primary drivers of the own funds being profits and dividends.
Annual report 2019 | Tryg A/S | 30Contents – Management’s review
The Supervisory Board is informed about the dialogue with investors and other stakeholders on a regular basis. Tryg has an IR policy, which states, among other things, that all company announcements are published in Danish and English. Tryg publishes quarterly interim reports in English. Furthermore, Tryg publishes an Annual Profile in Danish, English and Norwegian. The profile is ad- dressed to Tryg’s private shareholders, customers, employees and other stakeholders and will be published on 5 February 2020.
Born in 1966. Employee representative. Joined the Supervisory Board in 2012. Danish citizen. Employed since 1990. Career: Chairman of the Association for Tied Agents and Key Account Managers in Tryg. Education: Certified commercial insurance agent. Various insurance and sales courses and negotiation training. Board member: Tryg A/S and Tryg Forsikring A/S. Chairman of the Association for Tied Agents and Key Account Managers in Tryg. Committee memberships: IT-Data Committee in Tryg. Experience: Many years of insurance experience as insurance agent and Chairman of the Association for Tied Agents and Key Account Managers. Competencies: Business know-how and judgement, especially within insurance, commercial and product and customerhandling as well as interaction from many years of experience in the industry. Problem-solving abilities and understanding of HR-related issues. Number of shares held: 1,037 Change in portfolio 2019: +139
Board member: Tryg A/S, Tryg Forsikring A/S, Syddjurs udviklingspark, Lyngfeldt A/S, Lyngfeldt Finansiering A/S, Lyngfeldt Maskinudlejning ApS, K/S Prinz Carl Anlage l, Rosenfeldt Gods, Sidelmann Holding ApS, Houmarken A/S, I/S Torntoft and TryghedsGruppen smba. Experience: Top management experience from operating an own business for 35 years.
Contents – Financial statements 2019 Tryg’s Group consolidated financial statements are prepared in accordance with IFRS
We were appointed auditors of Tryg A/S on 28 January 2002 for the financial year 2002 as part of the formation of the Company. However, we have been the appointed auditors of the underlying subsidiaries since before 1995. We have been reappointed annually by decision of the general meeting for a total contiguous engagement period of more than 18 years up to and including the financial year 2019.
Total other financial investment assets 44,239 41,753 15 Total investment assets 45,390 43,340
Financing Issue of new shares 0 0 Exercise of share options/purchase of own shares (net) -43 -17 Subordinate loan capital 0 502 Dividend paid -2,040 -2,980 Change in lease liabilities -147 -135 Change in amounts owed to credit institutions 217 188
Tryg’s risk management is organised into three levels of control. The first level of control is handled in the business where the company’s policies are implemented, and day-to-day compliance is verified. The risk management function is the second level of control, supported by decentralised risk managers affiliated with the individual business areas. The risk management function ensures a consistent approach across the organisation, risk assessment at Group level and reporting to the management and the Supervisory Board. This involves an ongoing identification and assessment of the most significant risks in the company. Furthermore, the function prepares specific recommendations in relation to capital management, reinsurance, investment risk management and more. Tryg’s risk management function is also responsible for determining the company’s capital requirement.
Reserves from 2008 and prior years 131 Provisions for claims, end of year 1,285 a) The diagonal for 2018 and 2019 is affected by the Alka acquisition.
The share portfolio includes property funds and exposure from share derivatives of DKK 167m (DKK 240m in 2018). Unlisted equity investments are based on an estimated market price.
65Contents – Financial statements Annual report 2019 | Tryg A/S |
Claims ratio, net of ceded business 70.9 70.7 70.4 71.0 71.5
Profit/loss on ceded business - 15 - 11 - 1 - 1 - 14 - 13 - 12 - 42 - 44 - 4 4 - 55 Insurance technical interest, net of reinsurance - 1 - 2 0 0 0 0 1 - 1 1 - 2 0 0
Other Total exclusive of Group Life DKKm insurance Group Life one-year policies a) Total
Allocated share options and matching shares -27 -10 Pension plans a) -351 -301 Other social security costs -6 -6 Payroll tax -491 -470 a) In 2019 defined benefit plans were included with DKK 35m (DKK 35m in 2018).
Amortisation and write-downs Amortisation and write-downs at 1 January -104 -199 -1,458 -102 -1,863
Software and assets under construction As at 31 December 2019 management performed a test of the carrying amounts of software and assets under construction.
82Contents – Financial statements Annual report 2019 | Tryg A/S |
15 Financial assets (Continued) Receivables Total receivables in connection with direct insurance contracts 1,727 1,476 Receivables from insurance enterprises 240 144 Unsettled transactions 401 611 Other receivables 187 192
18 Solvency II – Own funds Equity according to annual report 12,085 11,334 Proposed dividend -1,013 -499 Intangible assets -7,364 -7,236 Profit margin, solvency purpose 1,408 1,408
The loss in Tryg A/S cannot be utilised in the Danish joint taxation scheme. The loss can be carried forward indefinitely. Loss determined according to Swedish and Finnish rules can be carried forward indefinitely.
22 Other provisions Other provisions at 1 January 111 111 Exchange rate adjustment 0 -1 Change in provisions -26 1
Inflation derivatives, recognised in claims provisions 3 0 3 0 -3 0
The transactions between TryghedsGruppen smba and Tryg A/S is conducted on an arm's length basis.
Leasing Right-of-use assets At inception of a contract, Tryg assesses whether a contract is, or contains, a lease. It has the following prerequisites: • The underlying asset is identifiable • The Group has the right to obtain substantially all the economic benefits from use of the asset throughout the period of use
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired, or if they have been transferred, and the Group has also transferred substantially all risks and rewards of ownership. Financial assets are recognised and derecognised on a trade date basis, the date on which the Group commits to purchase or sell the asset.
Own insurance is included under Other provisions. The provisions apply to the Group’s own insurance claims and are reported when the damage occurs according to the same principle as the Group’s other claims provisions.
Other comprehensive income which cannot subsequently be reclassified as profit or loss Actuarial gains/losses on defined-benefit pension plans -76 -5 Tax on actuarial gains/losses on defined-benefit pension plans 19 1
Note Investment activities 1 Income from Group undertakings 2,903 1,783 Administration expenses in connection with investment activities -5 -1
Revaluation and impairment to net asset value Revaluation and impairment at 1 January 2,412 2,081 Revaluations for the year 2,866 1,768 Dividend paid -2,039 -1,437
11 Reconciliation of profit/loss and equity The executive order on application of International Financial Reporting Standards for companies subject to the Danish Financial Business Act issued by the Danish FSA requires disclosure of differences between the format of the annual report under International Financial Reporting Standards and the rules issued by the Danish FSA.
Key ratios Gross claims ratio 70.3 67.8 63.6 71.8 69.0 69.9 61.3 69.4 68.5
Claims ratio, net of ceded business Gross claims ratio + net reinsurance ratio.