After return and revaluation of non-life insurance provisions, the investment return in non-life insurance decreased by DKK 170m to DKK 155m (loss). The lower investment return is primarily due to a lower investment return on equities and Danish mortgage bonds.
The increase of the adjusted claims trend of 1.7pp can mainly be explained by a higher level of fire claims and burst pipes compared with Q4 2017.
Excluding run-off profits, the combined ratio was 88.0 in 2018 (2017: 87.0).
The combined ratio increased to 84.0 in 2018 (2017: 81.5). Excluding run-off profits, the combined ratio increased to 86.9 in 2018 (2017: 84.2).
The distribution agreement with Danske Bank represented less than 10% of Topdanmark’s new sales in 2018.
On its own, the termination of the distribution agreement with Danske Bank is expected to have an adverse impact of just below 0.5pp on Topdanmark’s total trend in premiums in 2019. However, Topdanmark has good sales momentum through its own sales channels and other distribution partners. Despite the termination of the Danske Bank agreement, Topdanmark assumes a higher premium growth in 2019 compared with 2018.
The volatility adjustment (VA) is a component in the national interest rate curve that EU based insurance companies use for the discounting of technical provisions. EIOPA had previously stated that the method for calculation of the VA for the Danish discounting curve would be changed in 2018. However, this has not yet taken place. The method for calculation of the VAcomponent will be changed as of Q1 2019. The calculation of the VA-component for Q1 2019 will take place at the end of Q1 2019. The total net impact of the trend in Q1 and the new method for calculation are unknown until the end of Q1 2019. Consequently, the change of the VA-component is not included in the profit forecast model for 2019. A change in the assumptions for the calculation of the VA-component will impact the accounting value of the technical provisions while the value of the assets will remain unchanged. Everything else being equal, by every basis point the VA-component is reduced, Topdanmark’s post-tax profit for 2019 will be reduced by around DKK 5m.
Topdanmark's Board of Directors has adopted policies on diversity. “Policy on diversity at Board level” and “Policy on diversity and the under-represented gender in the management body of Topdanmark” has been published on Topdanmark’s website. More information on diversity including “Women in management” is available in the CSR Report 2018.
Share options For 2019, Topdanmark has granted 158,682 share options to its Executive Board and a number of executives. The strike price of DKK 333 was fixed at 110% of the market price of Topdanmark's shares on 28 December 2018 (average of all trades).
The distribution of dividend will take place immediately after the AGM on 3 April 2019.
Independence: Annette Sadolin has been a member of Topdanmark’s Board of Directors for 12 years and consequently she no longer meets the definition of independence set out by the Committee on Corporate Governance.
Reinsurers' share of the provisions for unearned premiums 20 84 92 Reinsurers' share of the life insurance provisions 20 17 Reinsurers' share of the provisions for claims 21 470 527 Total reinsurers' share of provisions 574 635
Current tax assets 0 39 Deferred tax assets 22 14 17 Liquid funds 537 253
Cash and cash equivalents comprise: Liquid funds 537 253 Deposits with credit institutions 3,405 4,380
Life insurance Gross premiums written 10,111 10,111 Allocated investment return (2,326) (2,326) Pension return tax 28 28 Benefits and change in provisions (7,440) (7,440)
Run-off profits / (losses), net of reinsurance 98 210 (3) (15) (0) (2) Claims provisions, net of reinsurance 3,349 3,341 68 68 6,048 6,033
Revaluations of financial assets and liabilities at fair value through profit or loss 2,335 (4,086)
Note 11. Return and revaluations non-life insurance provisions Annual amortisation Provisions for unearned premiums and profit margin (13) (4) Reinsurers' share of provisions for unearned premiums 1 0 Provisions for claims and benefits (112) (108) Risk margin (1) (1) Reinsurers' share of the provisions for claims 3 2
Impairment and amortisation at 1 January 0 (218) (475) 0 (692)
Investment properties are included in the balance sheet as: Investment properties 3,643 3,830 Investment assets related to unit-linked products 140 307
Intra-group transfers 161 46 207 Retrospective provisions at 31 December 27,135 2,912 30,047 Profit margin at 31 December (141) (15) (156)
Note 45. Other disclosures The five-year summary, in accordance with Section 91(a) of the Danish Executive Order on Financial Reports for Insurance Companies and Multi-employer Occupational Pension Funds is shown on page 24. Sensitivity information according to Section 126 is part of "Risk Scenarios" in Management's review page 13.
The following description of risks in the Topdanmark Group elaborates on Risk management.
Topdanmark's Compliance Function exercises control and provides advice to ensure that the Group's divisions and administrative departments comply with relevant legislation and internal rules. The Compliance Function's work is part of Topdanmark's overall control environment, which covers the procedures, control and organisation ensuring observance of rules.
In life insurance, claims and benefits paid net of reinsurance comprise payments relating to claims, surrenders and cash bonuses.
Associates Associates are companies which are not subsidiaries, and over which the Group has substantial influence through a significant shareholding and representation on the board of the company.
The equity investments held are regularly tested for impairment and devalued to the recoverable amount if this is lower than the carrying amount.
Receivables at amortised cost At initial recognition receivables are measured at fair value, and subsequently at amortised cost. The receivables are regularly assessed for impairment and written down to their recoverable amount, as required. Such impairments are generally made collectively on the basis of a due date analysis. When an individual receivable is considered irrevocable, the impaired amount is transferred from the account for collective allowances.
Profit margin on non-life insurance contracts Profit margin is the expected profit during the remaining part of the period of cover for insurance contracts concluded.
Life insurance provisions are calculated as the sum of a best estimate for guaranteed benefits, best estimate for unguaranteed benefits and the allowance for risk.
Five-year summary In the five-year summary the following ratios are presented, which are not part of the financial highlights: Relative run-off profits, net of reinsurance (%) Run-off result on own account * 100________ Claims provisions on own account 1 January
Remuneration for the Board of Directors, the Executive Board and other significant risk takers appears from Note 33 to the financial statements for the Group. In Note 33 to the financial statement for th Group, information on the number of shares held by the Board of Directors and the Executive Board can be found.
Note 9. Own shares The number of own shares held by the parent company appears from note 41 to the financial statements for the Group.
All companies in the Topdanmark Group and other Danish companies and affiliates in the Sampo Group are jointly taxed with Topdanmark A/S being the management company. Pursuant to the specific rules on corporation taxes etc. in the Danish Companies Act, the companies are liable for the jointly taxed companies and for any obligations to withhold tax from interests, royalties and dividend for companies concerned.
Information on provisions for insurance and investments contracts is disclosed in notes 24 and 28 (provisions regarding non-life insurance contracts) and notes 25 and 26 (provisions regarding life insurance contracts).
Measurement of unlisted investments Unlisted investments include at 31 December 2018, among other things, investment properties, unlisted securities, loans and derivatives, with a total value corresponding to 20% of the Group’s investment assets.