primarily due to lower weather-related claims • Combined ratio excluding run-off profits improved to 90.3% (2011: 92.0%) • Premiums increased 1.1% in non-life insurance and declined 4.3% in life insurance • Investment return increased to DKK 1,336m (2011: DKK 652m) • Result of life insurance increased to DKK 210m
The run-off profits are estimated to have had a favourable effect of around 3pp on the combined ratio. The run-off profits, which are estimated to be slightly higher than normally, are typically in long-tail lines such as workers' compensation, accident and motor liability.
Most of the customers are spread across Life I, Life V and Topdanmark Link. Policies written since 1 July 1994 with guaranteed pension benefits of 2.5%, 1.5% and 0.5% are placed in Life I which is also the company for new customers with guaranteed benefits. Schemes written before 1 July 1994 with guaranteed pension benefits of 4.5% are placed in Life V. Unit-linked schemes are written by Topdanmark Link.
Due to the improvement in the investment return the rate of interest on policyholders' savings has been increased with effect from 1 January 2013. In the interest rate group writing new business in Life I, the rate of interest on policyholders' savings was increased from 1.8% to 2.0% before pension return tax and in all of the interest rate groups of Life V from 2.0% to 4.35% before pension return tax.
The property portfolio comprises mainly owner-occupied property (DKK 861m), rental property (DKK 367m), rental office property (DKK 68m) and property rented for hotel use (DKK 96m). The tenancies for the residential and hotel properties are subject to a short termination notice. Re-letting of the residential properties is not considered to be a problem, but any re-letting of the hotels could be affected by the state of the market and local conditions. In this connection Topdanmark has chosen to write down a property by DKK 25m. The office property is rented under contracts with no option to terminate prior to 2015. Over 99% of the property portfolio is currently let. The properties are valued in accordance with the rules of the DFSA i.e. at market value taking into account the level of rent and the terms of the tenancy agreements.
In the profit forecast model for 2013 it is assumed that the investment return will be sufficiently high to include in income an allowance for risk of DKK 160-170m and around DKK 140m from the shadow account. Consequently, the balance of the shadow account including interest will be around DKK 105m at the end of 2013.
The actual buy-back for 2012 was DKK 1,200m representing a buy-back yield of 9.4%.
The Risk Committee has set up the Model Committee, which is responsible for developing and operating Topdanmark's internal model for calculation of the risk of the non-life insurance portfolio based on random simulation. In 2012 the internal model was replaced by a new version in which the greatest improvement is the calculation of correlations between premium and provisioning risk and between the lines of insurance business. The model is used for, among other things, optimising the reinsurance programme and calculating capital requirements.
Additionally, Topdanmark Forsikring has already issued subordinated loan capital of DKK 500m. This amount is not included in the necessary capital but is a safety margin to the DKK 4,700m.
• There is low price volatility in Topdanmark's shares secured through the provision of uniform and consistent information.
2006-2009: Group CFO and member of Group Executive Board, A.P. Møller-Mærsk A/S
Member of the Boards of Directors of: • Forsikringsakademiet A/S (Danish Insurance Academy) • Bornholms Brandforsikring A/S
Claims and benefits paid 9 (3,702) (3,248) Reinsurance cover received 5 7 Change in the provisions for claims and benefits 11 (3) Claims and benefits paid, net of reinsurance (3,686) (3,244)
Technical profit on non-life insurance 945 1,092 Technical profit on life insurance 38 7
Segment information income statement 2 Segment information balance sheet 3 Gross premiums earned - non-life insurance 4 Technical interest, net of reinsurance - non-life insurance 5 Claims incurred, net of reinsurance - non-life insurance 6 Technical result - non-life insurance 7 Gross premiums written - life insurance 8 Claims and benefits paid - life insurance 9 Change in life insurance provisions 10 Income from investment properties 11 Revaluations 12 Pension return tax 13 Other income 14 Other expenses 15 Taxation 16 Profit per share 17 Intangible assets 18 Tangible assets 19 Investment properties 20 Shares in associated companies 21 Loans to associated companies 22 Investment assets related to unit-linked contracts 23 Reinsurers' share of the provisions for unearned premiums 24 Reinsurers' share of the provisions for claims 25 Deferred ta
The limits for these financial risks are fixed by Topdanmark's Board of Directors. In practice, Topdanmark Kapitalforvaltning (asset management) handles the investment, finance and risk alignment processes. Compliance with the limits set by the Board of Directors is regularly controlled. The result of this is reported to the Board of Directors.
Recognised as: Deferred tax assets 19 12 20 Deferred tax liabilities (94) (121) (109)
Increase in guaranteed benefits as life insurance provisions must not be lower than the guaranteed surrender value 3 5
y 0.7-1.0 pp increase in interest rates (35) (157) 0.7-1.0 pp decline in interest rates (3) 173 12% decline in equity prices (122) (137) 8% decline in property prices (100) (103) Exchange rate exposure (VaR 99.0%) (11) (10) Loss on counterparties of 8% (180) (186)
Segment information Topdanmark has divided its non-life insurance business into the following two business segments: Personal includes policies for individual households sold by Topdanmark's own sales channels and its distribution partners.
Announcement No. 03/2013 from Topdanmark A/S Page 83 of 101 gross premiums for the year adjusted for changes in the provisions for unearned premiums and net of reinsurance. Effectively, this means the premiums are being recognised in line with the distribution of risk over the period of cover.
Deferred tax on security funds comprises deferred tax on untaxed amounts transferred to the security funds under shareholders' equity. The security funds will be taxed in the proportion of 10% for every 10pp decline in technical provisions net of reinsurance from the level at 31 December 1994. A decline of 10% from the 1994 level is considered improbable as long as Topdanmark Forsikring, in which the transfers were made, continues its current operations. Therefore the security funds will only be taxed if the insurance portfolio is transferred or the company ceases to conduct insurance business.
Current tax 14 13 Change in deferred tax (1) 1 Prior year adjustment 1 39
Average effective interest rate on balances is 0.13% (2011: 0.90%). Shares are disclosed in the balance sheet and specified in the note on Shares in affiliated companies. Balances are disclosed in the balance sheet.
We believe that the management review contains a fair review of the development of the Group’s and Company’s activities and financial position, together with a description of the most material risks and uncertainties by which the Group and the Company can be affected.