The technical result we produced for 2007 was DKK 2.8bn, an improvement of some 12% on 2006 and DKK 770m higher than our expectations at the beginning of 2007.
Technical result 2,820 2,512 2,047 1,707 1,456 376 Return on investment activites after transfer to Insurance activities 340 1,228 894 371 517 685 Other income 121 118 126 121 121 115 Other expenses -172 -149 -154 -147 -147 -131
to 3.3% and supplemented the profit distribution policy with share buybacks.
We intend to secure the right balance between growth and earnings in all our initiatives.
We intend to ensure that skills are developed on a regular basis through in-house and external training courses, experience sharing and networking groups. We intend to focus on management and employee development and strengthen dialogue across the organisation, including by using theme packages that build on our values and by continuing to use the balanced scorecard (BSC) as a tool for benchmarking and dialogue throughout the Group.
We use the balanced scorecard to implement our strategy and retain our strategic focus areas.
The overall claims ratio, net of ceded business, for 2007 was 69.4, which was an improvement relative to 2006 despite many large claims. Large claims amounted to DKK
The return on investment activities after transfer to technical interest was DKK 888m lower than in 2006. Besides the lower return on equities, the performance was negatively affected by a larger transfer to technical interest.
The renewal rate was 1 percentage point higher at 91, meaning that out of every 100 private customers, 91 elected to renew their policies with us in 2007. The high renewal rate also contributed to the positive results because it is important with respect to the performance of premiums and expenses: selling and administrative expenses are relatively lower when more customers renew their policies.
We began implementing the LEAN principle in parts of our organisation in 2007 with a view to making our processes even more efficient and create added value for customers and employees alike. We will continue to implement LEAN over the next few years.
We have defined ambitious growth targets, and we will focus strongly on sales in 2008. We intend to implement a range of sales activities in 2008, introduce customer benefits and relaunch several products in more attractive versions. Our focus in 2008 also includes sustaining the significant growth in Health Care, including launching new products.
Gross earned premiums in Corporate were 7.4% higher than in 2006, and the portfolio passed the DKK 5bn mark in 2007. The Norwegian part of the Corporate business was a major growth driver, contributing 9.3% in local currency. The Danish business also generated strong growth
Gross claims ratio 73.9 67.5 70.6 Business ceded as % of gross premiums 3.3 6.4 9.0
In order to ensure sustained growth, we also intend to specialise further in relation to international customers, and we intend to develop our products further to create an even better match to customer requirements.
In 2008, the Swedish business will focus on sustained growth and on developing the rapidly growing branch further. Due to our high ambitions a special key area in 2008 will be to increase the number of qualified and motivated employees in order to keep up with the strong development in sales.
The return was 4.9% including changes in provisions for claims due to higher interest rates. This performance was better than had been expected at the beginning of 2007 despite the unstable financial markets but lower than the guidance provided in our Q3 2007 interim report.
Earned premium growth of 5% will originate from organic growth in Finland and Sweden, which together are expected to contribute 1.5%, while Denmark and Norway contribute 3.5% equal to about 0.5% real growth.
The outlook assumes no run-off gains or losses in 2008 on the provisions for claims established.
The outlook regarding gross expenses reflects the projected number of employees during 2008 and the related costs. The projected number of employees incorporates the effect of measures launched to improve efficiency and recruitment of new employees in Finland and Sweden.
TrygVesta has the capital resources necessary to operate and develop the Group. We refer to this as our capital requirement.
In practice, we determine dividends by comparing the capital requirement of Standard & Poor’s capital model with our goal of a rating of A-. Any capital in excess of this amount will be distributed to shareholders in the form of cash dividends and share buybacks.
To manage underwriting risk we use tariffs as well as business procedures and authorities for risks not covered by a tariff. We use reinsurance to hedge large fluctuations resulting from single events. Inadequate premiums may
We use reinsurance as an important element of our dayto -day risk management supported by the internal model, which we use for assessing the impact of different reinsurance alternatives.
Our catastrophe reinsurance programme also covers other catastrophe events, including terrorist-related events, for up to DKK 3.75bn, with terrorist events being covered for buildings, building contents and consequential loss for risks with a total insured value of up to DKK 500m. We have bought catastrophe reinsurance up to DKK 1.5bn for our personal accident and workers’ compensation policies with a retention of DKK 50m, covering the risk of multiple injuries from the same cause, including terror.
Strategic risk is managed through a strategic planning process. The Supervisory Board defines the overall strategy in the middle of the year within the framework of the Group’s corporate vision, and the Group Executive
In 2007, TrygVesta’s Supervisory Board focused on creating more room for forward-looking activities at Board meetings and at the annual Board seminar. This was done without neglecting the Board’s follow-up and supervisory duties. In its work, the Group Executive Management focused on involving the Group’s other management staff in the strategic efforts to ensure quality and ownership and to facilitate implementation of the strategy at an even faster pace.
The Supervisory Board regularly considers the adequacy of TrygVesta’s capital structure to align it with the interests of the Group and of our shareholders and to ensure compliance with the requirements applicable to TrygVesta as a financial undertaking. The Supervisory Board optimises our capitalisation on an ongoing basis while duly safeguarding the interests of our policyholders and shareholders and leaving the Group sufficient scope in which to develop and grow.
The audit committee meets at least four times a year and reports to the Supervisory Board on a regular basis. The committee makes an annual assessment of the preceding year’s work to assess if any changes should be made to its areas of responsibility.
Bosse, Morten Hübbe and Peter Falkenham. The guidelines for incentive pay comprise only these persons.
TrygVesta are offered a performance-related bonus of up to three months’ salary. Executives may elect to receive the bonus as shares at a discount to the market price or in cash.
Mr Brinch has experience and knowledge within the areas of strategic development, branding, distribution and consulting services, including with respect to board work.
The Danish Management Society, Danfoss Universe, Foss A/S, Business Minds, Danfoss Distribution Services A/S, Danfoss Drives A/S, Danfoss Ejendomsselskab A/S, Danfoss innovation
Stig Ellkier-Pedersen Member of the Group Executive Management in charge of New Markets Born 1947 Joined TrygVesta in 1999 Joined the Group Executive Management in 2001
In Norway, we scored second highest among our peers, and we were the only large company that improved customer satisfaction significantly from 2006. In particular, customers rated us better in the ‘value for money’ category. Our actual loyalty as measured in terms of renewal rates increased steeply, while loyalty in the EPSI survey decreased slightly compared with 2006.
Group. Features of the new website include more detailed information about the Group’s performance, strategy and business areas and make it easier for users to stay updated.
The Group Executive Management and our Investor Relations department hold meetings with investors and equity analysts in Europe and the USA on a quarterly
As well as recruiting employees with new skills, TrygVesta is also using new methods for developing products. When you take a different approach, you get results that are different to those reached using traditional investigative methods: “We normally use focus groups, surveys, and statistics, but we’ve invited youngsters in from various fields, including the theatre. We have not asked them what they want from us, but have discovered how they view themselves.”
TrygVesta always strives to make a positive contribution to society. Naturally, this also applies to the environment and climate. TrygVesta is a member of the Council for
TrygVesta has joined a new Nordic project to support and develop the business potential of small and medium sized businesses.
TrygVesta, the Nordic Innovation Centre and Region Zealand. The aim is to support and develop the business potential of Nordic small and mediumsized businesses.
Notes Page Statement by the Supervisory Board and the Executive Management 95 Independent auditors’ report 96
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the EU, and the financial statements of the parent company have been prepared in accordance with the Danish Financial Business Act. In addition, the annual report has been presented in accordance with additional Danish disclosure requirements for the annual reports of listed financial enterprises.
Profit/loss for the year 2,266 3,211 27 Earnings per share – continuing business 33.5 45.5 Earnings per share 33.5 47.3
Liabilities for unpaid claims are estimates that involve actuarial and statistical projections of the claims and the administration of the claims. The projections are based on the TrygVesta Group’s knowledge of historical developments, payment patterns, reporting delays, duration of the claims settlement process and other effects that might influence the future development of the liabilities.
TrygVesta Group hedges the risk of changes in future wage and price figures for provisions for workers’ compensation and annuities for accident and health insurance. For 90-100% of this risk, TrygVesta Group uses swaps specifically acquired with a view to hedging the inflation risk. Value adjustment of these swaps are included in claims incurred, thereby reducing the effect of changes to inflation expectations under claims incurred.
Prepayments and accrued income Prepayments include expenses paid in respect of subsequent financial years and interest receivable.
The expected maturity is 4 years, corresponding to the average of the exercise period of 3 to 5 years. The risk-free interest rate is based on a bullet loan with the same maturity as the expected maturity for the options at the time of allocation. The calculation is based on the strike price as set out in the option agreement and the average share price at the time of grant. The dividend payout ratio is not included in the calculation as the strike price is reduced by dividends paid in order to prevent recipients of option payments from being penalised for the company’s dividend payments. The assumptions for calculating the market value at the end of the period are based on the same principles as for the market value at the time of allocation.
Maturity of the group’s interest-bearing financial assets and debt Effective Adjusted 2006 Total 0-1 year 1-5 years > 5 years interest rate duration
Current tax is recognised in the balance sheet as follows: Under assets, current tax 93 43 Under liabilities, current tax 336 229
Profit/loss for the period from continuing business 2,267 3,085 Average number of shares 67,648 67,824 Basic earnings per share of DKK 25 34 45
Total liabilities and equity 10,761 10,649 11 Capital adequacy, etc. 12 Contractual obligations, contingent liabilities and collateral 13 Related parties
TrygVesta Forsikring, the Norwegian branch of TrygVesta Forsikring A/S, has in its branch financial statements included provisions for contingency funds in the amount of NOK 2,564m (2006: NOK 2,251m) under provisions for insurance contracts. In TrygVesta Forsikring A/S, these provisions, due to their nature as additional provisions, are included in shareholders’ equity, net of deferred tax. TrygVesta Forsikring A/S’ option to pay dividend to TrygVesta A/S is influenced by this amount. The dividend payment is also affected by a contingency fund provision of DKK 670m, which is included in shareholders’ equity in TrygVesta Forsikring A/S. TrygVesta Garanti forsikring A/S has a similar contingency amounting to DKK 139m, which is also included in the company’s shareholders’ equity.
Members of the Supervisory Board of TrygVesta A/S do not receive bonuses and are not participants in any severance plans. The Group Executive Management has a bonus scheme for up to 3 months’ salary and participate ind the share option programme as mentioned in Corporate governance. Other than that, there are no incentive plans for the Supervisory Board and Group Executive Management.
Key ratios Gross claims ratio 88.9 144.9 - - - Business ceded as % of gross premiums 0.0 0.4 - - - -
The comparative figures for Danish general insurance have been restated, and the activities of TrygVesta IT A/S