About Tryg 1 Preface 4 Financial highlights 6 Outline of Tryg 7 Highlights of the year 8
Board and the Executive Management set a target of achieving a medium-term return on equity of 20%, corresponding to a combined ratio of 90. The financial result for 2011 supports the view that this target is ambitious yet realistic.
As stated, Tryg is focusing on profitability, and an essential prerequisite for this is that our customers are offered products of high quality at a risk-appropriate price. Tryg will therefore continue the work on further segmentation and appropriate pricing, as well as developing products that meet our customers’ needs.
Garanti is included in the financial results of Corporate Nordic. The business area represents 23% of Tryg’s total earned premiums.
Management, which is responsible for general management activities at Tryg. Morten Hübbe, Tor Magne Lønnum and
Tryg launches a target of achieving a medium-term return on equity of 20% after taxes, corresponding to a combined ratio of 90.
Tryg concludes partnership agreements with a number of selected, high-quality workshops and launches a new concept for customers with Tryg Caravan. Tryg Caravan gives customers more benefits in the form of high quality, safety checks and an extended waranty on repairs. Alongside these customer benefits, the concept reduces the costs of claims and supports
Tor Magne Lønnum takes up the position of CFO. Tor Magne
• The year was impacted by storm and cloudburst claims, which amounted to DKK 1.6bn, as against DKK 291m in 2010.
The general premium increases for buildings insurance already implemented also contribute to countering the anticipated development in terms of cloudburst claims.
Key ratios Gross claims ratio 76.9 77.0 80.8 79.2 Business ceded as percentage of gross premiums 1.0 0.3 -0.4 -2.3 Claims ratio, net of ceded business 77.9 77.3 80.4 76.9
Claim inflation is another focus area, where, in Norway in particular, there is evidence of a growing tendency in the area of house insurance due to higher repair costs for claims and their increased frequency. This is linked to the growth in the
Storms Berit and Dagmar respectively ravaged the Norwegian part of the business in particular, causing extensive damage, which had an overall impact on the quarter of DKK 74m, or 2.7 percentage points. Run-off gains amounted to DKK 47m in the fourth quarter 2011, compared to DKK 153m for the same period of 2010. The run-off from the previous year’s claims was less in the fourth quarter of 2011 and, taken in isolation, resulted in a rise in combined ratio of 4 percentage points.
The result was negatively affected by declining share prices, but positively affected by price gains on bonds due to a significant decline in interest rates and a property return which overall was also positively influenced by the slightly rising property market in Norway.
For the discounting of provisions, Tryg uses an yield curve set by the Danish Financial Supervisory Authority based on the interest rate level in the Euro area. Tryg matches most risk factors that influence the yield curve, but as the costs of matching precisely in
Tryg has an ambitious financial target of a return on equity of 20%. One necessary prerequisite for delivering profitability at this level is a strong focus on profitable operation of the insurance business.
Customer communication is increasingly taking place online and via mobile phones and social media. It is important that
Tryg therefore wants to be an attractive workplace and to be able to attract qualified employees.
Many of the Nordic countries, especially Denmark and Norway, were hit by extreme weather in 2011, including major cloudbursts and floods, resulting in large numbers of claims. Most insurance companies, especially Danish ones, have already implemented premium increases, but the high number of weather claims has contributed to continuing reflections about the price to risk relationship – especially in relation to possible future climate changes.
In 2011, the financial crisis hit Europe particularly hard, and had a negative impact on the general economic situation. However, the insurance industry – and in particular the very mature Nordic market – was not very vulnerable to economic fluctuations.
Professional liability insurance Professional liability insurance represents 4% of total premium income and covers various types of liability, including claims incurred by a company arising from the conduct of its business or in connection with its products and professional liability incurred by professionals.
In 2011, Tryg was the first company to launch a European insurance policy, which is offered primarily to businesses who have their main activities in Scandinavia, but with small subsidiaries abroad. This insurance meet the needs of small and medium-sized companies and is adapted according to local insurance conditions in each country.
Tryg’s capital target is currently determined in relation to the capital that is necessary to support the company’s ‘A-’ credit rating by Standard & Poor’s. Tryg also currently adds a target buffer of 5% as a minimum. At the end of 2011, Tryg had an actual buffer of 9% compared to the requirement for an ‘A-’ credit rating, and after the recommended dividend, the buffer will amount to 5%.
‘The Living House’ project appears to have borne fruit. This project was launched in 2008, and by 2011 the head offices in
Tryg places considerable emphasis on customer experience. It is therefore crucial that employees have the right skills, attitudes and framework to enable them to perform their jobs in the best way possible. To this end, we have implemented a new employee appraisal discussion concept. During the discussion, manager and employee review and evaluate the most important deliveries from the past year. This evaluation is conducted with reference to the results that have been achieved and the way in which they have been achieved. The right values, attitudes and conduct are crucial for Tryg to be a peace-of-mind provider.
Danish and English. At tryg.com, stakeholders have the option to order printed annual reports and to subscribe to news via e-mail and RSS feeds. Tryg has a number of in-house guidelines to ensure that disclosures of price-sensitive information are made in accordance with the stock exchange rules of ethics.
Two out of four members of the Audit Committee and the
able salary consists of a matching shares programme. Four years after a Director’s purchase of a subsequently defined number of shares, the Director is allocated a corresponding number of free shares in Tryg. The allocation of matching shares at the time of allocation is not dependent on results. The purpose of the matching shares programme is partly to make sure that the
The status of compliance with this is reported to the Supervisory
In at least one Audit Committee meeting each year, the internal and external auditors have a discussion without the presence of the Executive Management. The Audit Committee will deal with any matters that need to be reported to the Supervisory Board.
Tryg has set up an internal audit department in compliance with the Danish Financial Business Act. The internal audit department regularly reviews the quality of Tryg’s internal control systems and business procedures. The department is responsible for planning, performing and reporting the audit work to the Supervisory Board.
Read more about our climate accounts and initiatives in the climate area at tryg.com > CSR
standards is maintained. Tryg has been including a CSR clause in our contracts for many years, requiring compliance with Global
The target for 2012 is to cover all new contracts under marketing, consultancy services and cleaning, and to convert earlier CSR
OMX Copenhagen, Tryg does not comment on financial results or expectations four weeks before the publication of financial reports.
27.01.2011 7 Bodil Nyboe Andersen leaves Tryg’s Supervisory Board 08.02.2011 10 Tryg ends share buy back programme 01.03.2011 14 New IR Director at Tryg 17.03.2011 15 Notice of the annual general meeting 24.03.2011 16 TryghedsGruppen’s candidates for Tryg’s Supervisory Board 14.04.2011 17 Resolutions from Tryg’s AGM
Denmark. The notice will be advertised in the daily press in
11,012m. With earnings in 2011 of DKK 1,140m, The Supervisory Board proposes to distribute DKK 400m in the form of a cash dividend, equivalent to DKK 6.52 per share.
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.
EU and Danish disclosure requirements for listed financial services companies as well as for the preparation of parent financial statements that give a true and fair view in accordance with the Danish
Key ratios Gross claims ratio 64.2 67.6 72.1 80.2 79.2 Business ceded as a percentage of gross premiums 3.4 3.5 2.9 1.6 -2.5 Claims ratio, net of ceded business 67.6 71.1 75.0 81.8 76.7
Risk management principles Risk management is an integral part of Tryg’s business operations. Tryg continuously seeks to minimise the risk of unnecessary losses in order to optimise returns relative to the capital available in the company at any time. This requires the proactive identification and control of all significant risks.
Notes ment) and in Tryg’s ’Own Risk and Solvency Assessment’ (ORSA).
Cash in hand and at bank 777 0 0 777 0.8
The match portfolio and the free portfolio Denmark is one of the only countries in the world that requires insurance companies to discount their technical provisions using a discount (rate) curve specified by the Danish Financial Supervisory Authority.
Tryg has decided to commission an external credit rating by credit rating agency Standard & Poor’s, which conducts an annual interactive credit rating.
Profit/loss on business ceded 253 141 109 4 507 Technical interest, net of reinsurance 106 37 41 0 184
Number of full-time employees, end of period 2,221 2,356 2,293 2,342 2,308
Key ratios Gross claims ratio 88.9 95.1 80.6 84.6 82.0 Business ceded as % of gross premiums 0.0 0.9 1.8 0.8 2.6 Claims ratio, net of ceded business 88.9 96.0 82.4 85.4 84.6
Gross claims ratio 62.4 66.0 66.2 77.5 90.2 37.3 61.4 63.7 84.2 73.6 68.4 50.9 Combined ratio 77.0 81.6 76.8 86.4 105.1 58.5 78.8 82.4 101.3 89.8 94.8 80.4
6 Insurance operating expenses, net of reinsurance Commission regarding direct business -492 -460 Other acquisition costs -1,914 -2,001
Outstanding options from 2006-2009 allocation 31 Dec 2011 79,985 340,767 47,207 467,959 - 40 - 8
Total fair value Per Total fair Group Other Per option per option option at value at Executive senior Other at grant at grant 31 Dec. 31 Dec. Management employees employees Total date DKK date DKKm DKK DKKm 6 Share option programmes Spec. of outstanding options: Allocation 2006-2008 Allocated in 2006-2008, beginning of year 106,608 353,882 39,427 499,917 64/99/69 39 5/0/3 1
Effective tax rate % % Tax on profit for the year 25 25 Difference between Danish and foreign tax rate 3 1 Prior-year tax adjustment -1 -2 Adjustment non-taxable income and expenses -2 4 Change in valuation of tax assets 3 1 10 Profit/loss on discontinued and divested business Earned premiums, net of reinsurance 224 4 Claims incurred, net of reinsurance -291 30 Insurance operating expenses, net of reinsurance -44 0
Software The impairment charges are recognised in the income statement in total insurance operating expenses In the impairment test, the carrying amount is compared with the estimated present value of future cash flows.
External experts were involved in valuing some of the owner-occupied properties.
13 Investment property Fair value at the end of the previous financial year 2,364 2,158 Exchange rate adjustment 33 2 Additions during the year 23 29 Disposals during the year -261 -1 Value adjustment for the year 68 12 Reversed on sale -69 -1
Total financial liabilities at fair value with value adjustment in the income statement 376 35
Exchange rate adjustment Exchange rate adjustments of foreign entities recognised in other comprehensive income in the amount of: Balance at 1 January -23 307 Exchange rate adjustment during the year 330 30
Total, beginning of year 22,017 1,050 20,967 Market value adjustment of provisions, beginning of year 703 62 641
Claims paid - Parent company (TryghedsGruppen smba) 0.2 0.1 - Other related parties 0.1 1.4
Intra-group trading involved: 2010 2011 - Subordinated loan capital 499 464
change rates for the period. Exchange differences arising on translation are classified as other comprehensive income and transferred to the Group’s translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of. All other currency translation gains and losses are recognised in the income statement.
Bonus and premium rebates Bonus and premium rebates represent anticipated and reimbursed premiums to policy holders, where the amount reimbursed depends on the claims record, and for which the criteria for payment have been defined prior to the financial year or when the business was written.
Insurance operating expenses Insurance operating expenses represent acquisition costs and admini strative expenses less reinsurance commissions received. Expenses relating to acquiring and renewing the insurance portfolio are recognised at the time of writing the business. Underwriting commission is recognised when a legal obligation occurs and is accrued over the term of the policy. Administrative expenses are all other expenses attributable to the administration of the insurance portfolio. Administrative expenses are accrued to match the financial year.
The share options are exercisable exclusively during a 15 days period following the publication of full-year, half-year and quarterly reports and in accordance with Tryg’s in-house rules on trading in the Group’s shares. The options are settled in shares. A part of the Group’s holding of treasury shares is reserved for settlement of the options allocated.
Impairment test for intangible assets, property and operating equipment Operating equipment and intangible assets are assessed at least once per year to ensure that the depreciation method and the depreciation period that is used are connected to the expected economic lifetime. This also applies to the salvage value. Write-down is performed if depreciation has been demonstrated. A continuous assessment of owner-occupied property is performed using the same method as investment property.
Realized and unrealized profits and losses that may arise as a result of changes in the fair value for the category financial assets at fair value are recognised in the income statement in the period in which they arise.
In special instances the employee can enter a contract with the Group to receive compensation for loss in pension benefits caused by reduced working hours. The Group recognises this liability based on statistical models.
Remuneration of the Executive Management is paid by Tryg Forsikring A/S and Tryg Forsikring, norwegian branch of Tryg Forsikring A/S and is charged to Tryg A/S by the cost allocation. Remuneration for Supervisory Board, Group Executive Management and risk-takers appears in note 10 ‘Related parties’. Refer to note 6 in the Tryg Group for a specification of the audit fee.