Key features 2014 • Post-tax profit of DKK 1,558m (2013: DKK 1,468m) • This profit is higher than the profit forecast of DKK
Combined ratio excl. run-off profits 95.7 92.0 90.3 95.0 89.8 104.9 87.5 *) Shareholders' equity and loan capital
Expense ratio The expense ratio declined to 15.7% (2013: 16.2%) due to lower commission payments than in 2013 following generally lower sales of new business. In addition, there was the effect of the ongoing initiatives to improve efficiency such as digitalisation and outsourcing of IT mainframe system.
Combined ratio The overall combined ratio was 83.6% in Q4 2014 (Q4 2013: 100.4%). Excluding run-off profits it was 87.5% in Q4 2014 (Q4 2013: 104.9%).
Segment reporting Personal The personal segment offers policies for individual households in Denmark.
170m, broken by quarter: • Q1: DKK 50m • Q2: DKK 25m • Q3: DKK 45m • Q4: DKK 50m
In the profit forecast model for 2015 it is assumed that investment return will be sufficiently high to include a risk return of DKK 125-135m in income (2014: DKK 145m).
The DFSA has announced that the concept of shadow account will be changed. Previously, the change was expected to take effect on 1 January 2015. Now the DFSA expects it to be on 1 January 2016.
To date in 2015 Topdanmark has bought back own shares of DKK 153m (742,000 shares), which leaves a balance of DKK 1,647m of the 2015 programme. If Topdanmark buys back own shares for less than DKK 1.8bn in 2015, the balance will be transferred to the buyback programme for 2016.
Review Topdanmark believes that the Group's most important risks relate to the following main areas: • Non-life insurance • Life insurance • Market • Credit and counterparty • Operational • Strategic.
Individual solvency requirement Individual solvency requirement is a set of Danish rules in force until the Solvency II rules take effect on 1 January 2016. Each insurance company is to calculate a solvency requirement representing their minimum required capital based on the risks they accept. Additionally, the companies are required to provide documentation for how they identify, manage, limit and calculate risks.
Shareholders At 31 December 2014 Topdanmark had 45,577 shareholders registered by name.
Besides salary policy, the remuneration policy also includes Topdanmark's general guidelines for performance-related pay, its pension policy and its guidelines for the granting of severance pay. The remuneration policy covers Topdanmark's Board of Directors, Executive Board, significant risk takers and, as provided by legislation, employees involved in control functions and audit work. If specifically stated, Topdanmark's remuneration policy also covers its executive team, comprising a number of the heads of business sectors and administrative departments ("the Friday Team") and certain other employees, at the discretion of the Board of Directors. The remuneration policy etc., as adopted by the AGM, is available on www.topdanmark.com → Investor Relations → Corporate Governance → Remuneration structure.
2006-2015: Group CEO of Scandinavian Tobacco Group A/S (Resigned on 28 February 2015)
Shares in associated companies 19 892 340 Loans to associated companies 20 416 488 Total investment in associated companies 1,309 828
Cash and cash equivalents at 1 January 2,025 1,467 Revaluation of cash and cash equivalents (20) 1 Purchase of associated company 15 0 Cash and cash equivalents at 31 December 1,467 2,590
Technical profit on non-life insurance 778 510 1 1,289 32 1,321
Shares in associated companies 58 834 0 892 Loans to associated companies 0 416 0 416 Other financial investment assets 15,545 28,925 1 44,471 Investment assets related to unit-linked contracts 0 6,673 0 6,673 Reinsurers' share of provisions 1,424 34 0 1,458 Amounts due from affiliated companies 2,505 3 16 (2,524) 0
Note 6. Technical result - non-life insurance Gross premiums written 9,018 9,121 Gross premiums earned 8,963 9,167 Gross claims incurred (7,132) (6,308) Bonuses and rebates (74) (52) Gross operating expenses (1,415) (1,408) Net reinsurance 445 (88) Technical interest, net of reinsurance 14 8 Technical profit 801 1,321
Impairment and amortisation at 31 December 0 (189) (406) 0 (595)
Life insurance provisions at 1 January 26,941 24,982 Accumulated revaluation at 1 January (1,803) (1,445) Retrospective provisions at 1 January 25,138 23,537 Gross premiums written 1,630 1,293 Accrued interest 563 557 Claims and benefits (3,279) (3,442) Expense loading inclusive of expense bonus (142) (131) Risk gain after allocating policyholders' risk bonus (95) (77)
Claims paid relating to previous years (3,130) (3,738) Change in expected claims payments relating to previous years (387) (253)
Shadow account by interest rate, risk and cost groups: Expected future Maximum value recognition as income
Note 36. Related parties The Group has no related parties with controlling influence. Related parties with significant influence comprise If P&C Insurance Holding Ltd (publ), the Board of Directors, the Executive Board and their families.
Quoted Observable observable 2014 prices inputs inputs Financial assets recorded at fair value Level 1 Level 2 Level 3 Total
The return percentages are calculated as the return on derivatives as a percentage of the size of the exposure in the underlying asset. The exposure in foreign shares is adjusted by means of derivatives. After including derivatives the exposure in foreign shares on 31 December 2014 was DKK 4,532m (2013: DKK 4,679m).
Note 42. Shares analysed by industry and region (%) - life insurance Other North South Other Other Not 2014 Denmark Europe America America Japan Far East countries analysed Total
Topdanmark's pricing has been aligned with the individual markets and types of customers. In the personal and commercial markets, prices are mostly based on standardised rates while major commercial and industrial customers are offered more individualised charges.
Extra costs due to longer lifetimes will be partially covered by collective bonus potential and bonus potential on paidup benefits. The remainder affects profit / loss for the year and consequently shareholders' equity.
In order to reduce the risk of inflation within workers' compensation and illness / accident insurance Topdanmark uses index-linked bonds and derivatives hedging a significant proportion of the expected cash flows
Further financing requirements are covered by shortterm money market loans, typically with a maturity of one month or less
Reinsurance Within insurance the reinsurance companies' ability to pay is the most important risk factor. Topdanmark minimises this risk by spreading and primarily buying reinsurance cover from reinsurance companies with a minimum rating of A-. Accordingly almost all of its storm cover has been placed with such reinsurance companies.
Risk assessment Risk assessments of each operational IT risk are made regularly. Group IT Security reports quarterly on risks and events to the Executive Board.
Future accounting regulation The IASB has issued a number of new and revised standards and interpretations, which have not yet taken effect.
Share-based payments Share options The Executive Board and Senior Executives participate in a share option scheme.
Topdanmark conducts insurance business only in Denmark and, therefore, no specific geographical segmental information is provided.
The future payments to be received and made have been based on the assumed incidents of death, disability and resumption of work. The risk of death and disability is dependent on the age, sex and health of the policyholder and is based on the company's experience. This rate is calculated by considering the DFSA's population mortality rate, Topdanmark's own observed mortality rate and the DFSA's assessed improvement in future life expectancy.
Remaining life expectancy for a 60 year old man and a 60 year old woman is as follows: Announcement No. 05/2015 from Topdanmark A/S Page 74 of 88
Provisions for claims and benefits are assessed for each line of business, either on a claim by claim basis (individual provisions), or by using statistical methods (collective as well as incurred but not reported (IBNR) and incurred but not enough reported (IBNER) provisions). Claims exceeding a fixed amount, dependent on the line of business, are assessed individually and provisions for smaller claims are assessed collectively. IBNR provisions cover expenses on post-notified large claims. IBNER provisions cover extra expenses on already reported claims for which the individually assessed provisions are not sufficient due to, for example, inadequate information at the time of assessment. The collective provisions are calculated using de Vylder's credibility model adjusted for each line of business. The IBNR and IBNER provisions are calculated using in-house developed models. In agricultural and commercial lines claims are assessed individually. IBNR and IBNER provisions are also included in the total provision. In personal lines, claims not exceeding DKK 100,000 are assessed collectively while larger claims and all claims on change of ownership policies are assessed individually. IBNR and IBNER provisions are also included in the total provision. In motor and accident lines total provisions comprise the sum of the collective and individual provisions. Individual provisions are the result of an assessment where the claims handler has assessed the total claim payment to exceed DKK 1.5m, and the case is estimated to exceed the amount paid out. Large claims and claims relating to previous years are individually assessed within personal liability in motor insurance.
Machinery and equipment 5 3 3 TOTAL TANGIBLE ASSETS 3 3
Total other financial investment assets 1 0 TOTAL INVESTMENT ASSETS 6,323 6,034
We believe that the management review contains a fair review of the development of the Group’s and parent company’s activities and financial position, together with a description of the most material risks and uncertainties by which the Group and the parent company can be affected.
Further, in our opinion, the annual financial statements give a true and fair view of the parent company's assets, liabilities and financial position at 31 December 2014, and of the results of its activities for the financial year 1 January to 31 December 2014 in accordance with the Danish Financial Business Act.