Investment activities 32 our customers 36 our processes 38 our employees and values 39 our investors 40
Income statement and balance sheet for TrygVesta A/S (Parent company) 115
on Nordic synergies through tight cost management and improvements in all business areas to strengthen our sales power and service vis-à-vis our customers.
We completed a systematic follow-up on our concept customers in Denmark in 2005, enhancing customer loyalty in the process, and we are introducing the same procedure vis-à-vis our Norwegian customers. In the service provided to our large corporate customers, general risk consultancy and engineering reviews of risks are becoming increasingly important to our operations. We therefore used 2005 to create new, tailored solutions to our biggest customers.
These initiatives, and many others, ran concurrently with TrygVesta’s IPO. This naturally imposed a big extra workload on large parts of our organisation, but it will allow us to maintain and further develop the process of professionalising our business which has already come a long way.
The Nordic cooperation is becoming increasingly important in everyday work at TrygVesta.
We are strongly positioned in Norway and Denmark, our Finnish business continues to develop at a sound pace, and we have carefully prepared our imminent entry into the Swedish market, which will reuse the Finnish business model and IT solutions. One of the biggest advantages of the Nordic collaboration is that it allows us to learn from each other and leverage synergies when developing our business.
Thus, 2005 was a year of progress and change. It was also a year in which our new level of earnings was confirmed. We intend to work towards continuing and strengthening the Group’s positive performance in the years ahead. I hope you will enjoy reading our annual report.
• Customer surveys indicate increasing satisfaction and loyalty. In Norway, we advanced one step to rank second among large companies on customer satisfaction
• Proposed dividend payout ratio of 68% of the profit for the year, equal to DKK 21 per share
Figures for 2001 and 2002 are pro forma figures as if the Nordea AB activities were owned as of the beginning of each period. Figures for 2001 through 2004 are made up in accordance with the Danish Financial Supervisory Authority's accounting rules in force at the time. Figures for 2004 and 2005 are made up in accordance with IFRS.
Technical interest, net of reinsurance 92 76 323 335 537 595 832 715
Run-off gains/losses, net of reinsurance 181 -161 3 -516 -458 -283 balance sheet Total provisions for insurance contracts 26,757 25,212 26,599 25,955 26,238 22,740 Total reinsurers' share of provisions for insurance contracts 2,630 3,292 3,132 3,480 4,632 5,067
Quoted price/net asset value 2.6 - - - - number of full-time employees, end of period: Continuing business 3,694 3,728 3,728 3,750 3,739 3,744
1) Share data is based on 68,000,000 shares as though such number of shares was outstanding during the periods presented. The 68,000,000 shares reflect the number of outstanding shares after giving effect to the four-toone share split set forth in the company's amended articles of association approved by the company's shareholders on 21 September 2005.
The comparative figures for 2004 have been restated to IFRS, but in addition to IFRS restatements, the figures for 2004 are net of divested business, which is henceforth included in “Profit/loss on discontinued and divested business”.
TrygVesta maintains and develops its position as a key player in the Nordic insurance market, being the second largest general insurer in the Nordic region and the largest and third largest general insurer in the Danish and Norwegian markets, respectively. Most players continue to enjoy good profitability in the Nordic market, and there are no signs of a return to the unsatisfactory performance we used to see due to a unilateral focus on market share.
The insurance industry has a historically cyclical nature, but at TrygVesta we believe that prospects of sustained low interest rates and more unpredictable investment returns will keep the industry focused on earnings ahead of investment returns. Underwriting discipline is also here to stay, backed by a hardening reinsurance market and a growing number of weather-related claims.
In addition to causing immediate damage to humans and property, major terrorist acts may have a significant effect on the insurance industry. At TrygVesta, we acknowledge each company’s duty to buy reinsurance in order to maximise our robustness against such events. This does not, however, change the fact that it ought to be possible for companies in the Nordic countries to safeguard their capital, even where no reinsurance is available. Otherwise, policyholders may be left to pay the price as insurers exclude cover of such claims in their policies.
With all non-Nordic business finally divested or discontinued, we have focused our efforts on the Nordic market. Based on providing products that offer peace of mind, we consolidated our market position in the
In Norway, we introduced the Vesta Trygghetsavtale, a concept designed to create customer loyalty by safeguarding all aspects of the everyday lives of individual customers and their families, and guaranteeing that the cover that has been taken out covers the family ’s requirements. Many of the ideas of this concept were developed in the Danish market, but the work in
Concurrently with investing in IT development, continuing to upgrade our employees and preparing to establish operations in the Swedish market, we succeeded in retaining our fixed gross expenses at an unchanged level. This was attributable to continued tight cost management and the reaping of some already identified Nordic synergies.
We want to be perceived as the leading peace of mind supplier of the Nordic region on the markets and within the business areas chosen by us.
iFrs iFrs selected balanced scorecard-benchmarks for trygvesta 2005 2004 2003 2002 2001
Return of equity after tax (%) 27.9 23.1 15.4 -47.4 1.2
Portfolio (nominal prices) per full-time employee 133 129 124 116 100
Customer, processes and employee perspective benchmarks are based on data for the Danish and Norwegian activities *) Index for retention rates 2005 adjusted for effect of short cancellation notice on the Danish business **) Employee satisfaction survey to be carried out in 2006 closely together in 2005 in order to allow customers and the market to gradually get used to our new common Nordic identity. Furthermore, all TrygVesta managers participated in communicating our values during 2005 by rolling out “theme packages” with turning words into results
This annual report is therefore structured around the four perspectives of the balanced scorecard
TrygVesta A/S and our subsidiaries are regulated by local supervisory authorities, which also monitor the companies ’ solvency. In practice, the regulatory capital requirement is below the current target for an A- rating. We closely monitor developments in the European Union’s efforts to promote new uniform capital requirements, the so-called Solvency II project, and play an active role in the work in both national and international fora.
The pre-tax performance was an increase of DKK 861m over 2004, primarily comprising a DKK 353m improvement of the technical result and a substantial improvement of DKK 510m of the return on investment activities.
Earnings from Norwegian and Danish general insurance remained well balanced in 2005 and our three principal business areas all made positive contributions to the financial results.
The combined ratio improved over the year because claims frequencies were lower and because the effect of claims procurement initiatives materialised sooner than anticipated. Run-off gains also pushed up the forecast profit. TrygVesta’s provisioning policy assumes that run-off gains are more likely than run-off losses in a normal year.
TrygVesta posted profit before tax of DKK 678m in the fourth quarter. Gross earned premiums were 3.7%
higher than in 2004, 0.8 percentage points more than the year-to-date increase. The gross claims ratio was 2.0 percentage points over the year-to-date level, and was still better than expected even with the reporting period being autumn and winter months.
The gross claims ratio was 5.1 percentage points lower than in the fourth quarter of 2004, but the comparative period was adversely affected by the fire at a fireworks factory in Seest, Denmark, and the tsunami in Asia. The fourth quarter expense ratio was below the level for the full year 2005.
Gross earned premiums rose by 2.9% relative to 2004, composed of satisfactory growth of 5.6% in Private &
Denmark in January. Gross claims related to the storm amounted to DKK 830m in 2005, of which the share payable by TrygVesta was DKK 100m, while the remainder was recovered through reinsurance. TrygVesta also paid DKK 64m in reinstatement fees in respect of the storm, which had a gross impact of 5.7 percentage points on TrygVesta’s combined ratio. Thanks to our effective reinsurance cover for this event, the total net expense for storm and weather-related claims was in line with expectations for a normal year, and the net effect was 1 percentage point.
Claims frequencies for, in particular, buildings in Denmark and Norway and motor in Norway were lower than in a normal year. The average claim developed favourably due to TrygVesta’s arrangements with repairers and builders.
Gross expenses were unchanged from 2004 when expressed net of currency movements despite 2.5%
The expense ratio for 2005 includes 0,3 percentage points with respect to employee bonus and issue of employee shares.
The improvement was made up of a substantial increase in the return on shares, while the return on bonds fell slightly due to the rise in bond yields during the year.
The performance equals a 5.5% return on investment activities, which was satisfactory considering the
Tax on the profit for the year amounted to DKK 788m against DKK 556m in 2004. The effective tax rate of 27% was unchanged from 2004. The tax expense included a current tax charge of DKK 628m and a DKK
DKK 28m. The improvement of DKK 47m over 2004 relates mainly to Chevanstell Ltd. We had a stable claims experience and small commutation gains in 2005. The main reason for reporting a loss was that we strengthened the provision for administrative expenses in connection with running off the portfolio as this process has been delayed relative to what we anticipated. At 31
TrygVesta generated a cash inflow from operating activities in 2005 of DKK 4,298m compared with DKK
Shareholders’ equity increased by DKK 1,413m to stand at DKK 8,215m at 31 December 2005. The increase was made up of the profit for the year less dividends paid, and including adjustments for actuarial gains and losses on the pension provision under IAS 19 and other minor adjustments.
Private & Commercial Denmark reported 5.6% growth in gross earned premiums relative to 2004. Allowing for some 2.4% indexation and 1.2% other price increases, volume growth was thus 2.0%, and TrygVesta is winning market shares. The increase was primarily attributable to customer loyalty and thus higher renewal rates within most segments, and to the effect of the refocused sales organisation, which resulted in more customer contacts for all employees.
The Danish operations began using the Norwegian call centre technology at the end of 2005, resulting in a more systematic distribution of work between our customer service staff and our own sales agents, thereby enhancing quality, productivity and quick service to our customers.
The significant enhancement of the technical result is reflected in the combined ratio, which improved 3.4 percentage points relative to 2004. The storm in JanuiFrs danish gaap
Technical interest, net of reinsurance 52 44 113 116 164 147 219 233 key ratios
ary had an impact on the gross combined ratio of 12.2 percentage points and an impact of 2.2 percentage points on the combined ratio, net of reinsurance.
The gross claims ratio was 5.8 percentage points higher than in 2004. Disregarding the storm in January, the gross claims ratio was 68.2, equivalent to a fall of 5.5 percentage points relative to last year. All primary products are generally performing well with the exception of personal accident insurance, which continued to record an unsatisfactory claims experience.
January had a limited impact on the performance, net of reinsurance, and the overall figure for storm and weather-related claims was only slightly higher than in a normal year.
Tryg Reparation for cars, which was introduced in 2003, and Tryg Bygning from 2004 also had a positive effect on claims expenses. The new approach to claims handling resulted in a decrease in the average claim.
The claims frequency for building insurance continued to fall throughout 2005. In motor insurance, the frequency rose marginally from 2004 to 2005, mainly due to the snowfall between Christmas and New Year 2005, but it remained satisfactory.
Most of our motor claims handling was further automated in early 2005, resulting in substantial administrative savings. At the same time, the process was prepared for further automation. These savings are reflected in the claims ratio as future savings will also be.
Private & Commercial Norway increased gross earned premiums by 4.5% relative to 2004. In local currency, gross premiums were up 1% over 2004. Allowing for some 1.1% indexation and other price increases of 0.6%, volume growth was thus a negative 0.8%, The renewal rate was 83.7%, up from 83.0%. The improvement took place gradually over the year, reflecting the launch of our Vesta Trygghetsavtale customer concept. Furthermore, developing from a low starting level, sales through Nordea were 60% higher than in 2004.
The development in earned premiums was attributable to our continued focus on profitable business. We expect that the revised price structure and the launch of a new customer concept will strengthen our position among private customers in Norway further. The performance reflects a year with an unsatisfactory balance between customer inflow and customer outflow during the first six months, and an improvement during the last six months following initiatives relating to the new customer concept and the strengthened sales organisation.
Stronger focus on additional sales to existing customers helped strengthen the trend in the latter half of 2005.
Large claims, comprising three property claims, were at a slightly higher level than in a normal year but were more than offset by run-off gains of DKK 164m.
Building insurance saw an extremely favourable claims frequency in 2004 and 2005 due to the very mild winters. Motor insurance also saw a lower frequency, which we expect to sustain going forward.
We recorded a significantly lower claims frequency among new customers due to a much better risk selection, and this supported the favourable claims performance.
Private & Commercial Norway reduced its gross expense ratio to 20.4% in 2005. We have invested in more selling power throughout the year while reducing costs by implementing planned sales offices closures and efficiency-enhancements of workflows and processes as part of our strategy to combine sales in larger sales offices with a powerful selling environment.
Corporate, our Nordic business area, continued the positive trend from 2004, improving profitability in the personal accident lines in general and in Norway, in particular.
Corporate recorded a 2.8% fall in gross earned premiums from 2004 to 2005.
Gross earned premiums in Denmark were 3.8% lower, of which the transfer of the aviation portfolio to an independent company and the full effect of the introduction of net pricing to customers served by brokers accounted for almost 2%. In Norway, the reduction was 6.2% in local currency. The premium performance was linked to our continued focus on profitable business, which implies that we have opted to stay away from certain customer groups in the past few years or required that they provide improved safeguarding measures and hold higher deductibles.
Towards the end of the year, we saw a strong increase in sales and satisfactory renewal rates.
The gross claims ratio was 0.5 percentage points higher than in 2004 and affected by the storm in Denmark in
DKK/NOK, rate, quarterly, annual average 94.61 90.71 92.85 88.79 88.79 93.68 98.46 92.16 profit/loss on gross business 187 152 771 809 680 762 -94 341 profit/loss on ceded business -150 -75 -421 -549 -570 -801 -363 -495
Technical interest. net of reinsurance 14 4 114 130 190 209 314 251 key ratios
Claims ratio, net of ceded business 85.1 82.3 81.0 82.9 83.3 83.9 92.4 86.2
January. Its effect on gross claims was DKK 120m. Our retention was DKK 15m and we paid reinstatement premiums of DKK 9m. The gross claims ratio was 69.5 net of the January storm. The favourable performance of, in particular, the Norwegian part of the portfolio was mainly driven by our initiatives in the personal accident business.
We continuously focus on working systematically with risk selection and sound underwriting. We measure the quality of our portfolio relative to customers who choose other insurers to ensure we select risk and set prices correctly.
DKK 50m brought our claims expenses for large losses, net of reinsurance, slightly higher than in a normal year.
Corporate reduced its gross expense ratio by 0.3 percentage point relative to 2004 despite lower gross earned premiums. The favourable expense ratio performance was primarily attributable to absolute costs being lower in 2005 than in 2004 due to such measures as changed principles for settlement with brokers, our continued efforts throughout 2005 to make selling more efficient and the general cost constraint.
Nordea Vahinkovakuutus, TrygVesta’s Finnish business, generated 44% growth in gross earned premiums in 2005. The improvement was primarily achieved because we strengthened the partnership with Nordea, which sells insurance through its branches, and launched our own new channels.
During their short life-span, the Finnish operations have succeeded in growing the business volume in line with our ambitious plans. Nordea’s around 3 million private customers in Finland offer a large sales potential.
The gross claims ratio was 5.6 percentage points higher than in 2004 mainly due to the payment into the
Finnish motor third party liability insurance pool, which covers death and disability.
DKK/EUR, rate, quarterly, annual average 745.95 743.43 745.07 743.99 743.99 742.92 743.08 745.74 profit/loss on gross business -11 -11 -43 -47 -47 -49 -63 -28 profit/loss on ceded business -1 1 -1 0 0 0 -4 -1
Technical interest, net of reinsurance 1 0 3 2 2 1 1 0 key ratios
Claims ratio, net of ceded business 84.7 67.8 81.1 75.5 68.7 78.5 103.5 91.1
Higher payroll costs, office operation expenses and commissions in line with increased sales were offset by lower IT related depreciation charges.
aCCuMulated weekly sales Number of policies Finland gross preMiuMs earned DKKm
TrygVesta’s return on investment activities before transfer to insurance activities and before other financial income and expenses was DKK 1,681m in 2005, or 5.5%, which was better than the 2004 return of DKK
86m among other things because higher interest rates changed the discounting effect from minus DKK 109m to a gain of DKK 43m. Technical interest transferred to insurance activities was DKK 69m higher, increasing the total return on investment activities by DKK 510m.
Throughout 2005, we maintained a high proportion of highly liquid bonds in our portfolio for security and rating considerations. Net investments and rising equity prices increased our equity portfolio by DKK 1,622m in 2005, lifting the proportion of equities from just under 11% to almost 14%. We only added DKK 55m to our portfolio of real property, reducing the proportion it constitutes of the overall investment portfolio.
Our overall bond portfolio including cash yielded a return of 2.7% or DKK 687m in 2005. Short-term bond yields rose 0.3-0.8 percentage points during 2005, which had an adverse impact on value adjustments and thus on the return.
Other financial income and expenses *) -86 -187 total investments activities 1,595 1,016
investment assets 31-12-05 bonds in return investdkkm shares etc. property total dkkm in % ments
Other financial income and expenses -86 bond portFolio by geography 31-12-05return on asset Classes %
Group’s total bond portfolio was 1.6 years at 31 December 2005 compared to 1.3 years at 31 December 2004. The short, but slightly higher duration was primarily due to a higher duration on the Danish portfolio and an increased portfolio of foreign bonds in Vesta.
The total return on investments for the financial year was DKK 819m, equivalent to 22.3%. The strong return was driven by sound returns in the large international equity markets, exceptionally large returns in the
The investment return on real property was DKK 175m, equivalent to a total return of 9.4%. The Group sold investment properties worth DKK 19m in 2005. The occupancy rate was 94.4% at 31 December 2005 compared to 95.6% at 31 December 2004.
December 2005 2. TrygVesta extended its credit facility on 5 July 2005
In December 2005, Tryg Forsikring A/S issued a subordinated bond loan listed on the London Stock Exchange in a nominal amount of EUR 150m. This loan is included in the calculation of the Group’s capital base.
The 20-year loan is subject to a prepayment option after ten years. It was subscribed at 1.10% above the swap rate, which was 3.53% when the price was determined. The coupon is 4.50% p.a. for the first ten years and will then become variable. The bonds, heavily oversubscribed, had been taken up in advance by a group of Danish and international professional investors and were rated BBB by Standard & Poors and BAA
mark smba was repaid in connection with the bond issue, as were the subordinated intercompany loans.
The higher volume of loan finance raised our annual interest expense on subordinate loans to DKK 50.6m from DKK 43.75m. Our earnings in 2005 covered the total interest expense 43 times.
Including subordinate loan capital and the amount drawn under the credit facility, debt finance accounted for 18.1% of our capital base, rising to 27.4% on full utilisation of the credit facility.
Group’s capitalisation, but we do not anticipate increasing the utilisation rate of the facility significantly in the short term.
In 2005 Moody's upgraded its outlook for Tryg Forsikring and Vesta Forsikring from stable to positive.
At TrygVesta, we fundamentally believe that our customers ’ requirements are best covered when we provide solutions rather than mere financial compensation in case they report a claim.
As a consequense we work with concepts where we pro-actively provide peace of mind to customers, private as well as corporate. Examples include when customers needs a garage to repair damage to their car, when their house or flat has been damaged by water or otherwise, when customers need help to return to the labour market after an accident, or when large or small businesses need help to maintain or restore production after a large claim.
We also carry out surveys if many customers have required TrygVesta’s expertise due to particular events.
Denmark, and the results of the survey caused us to implement major changes to our IT systems and business procedures. We were therefore able to handle the severe storm in Denmark in 2005 quickly and efficiently. Likewise, we performed a survey among affected customers after all the work involved in handling the consequences of the fireworks explosion at Seest,
Other customer surveys in the year also produced many positive responses.
TrygVesta ranks first among the big players in Denmark, and we recorded progress in both customer loyalty and satisfaction. Continuous claims handling improvements and our focus on the ongoing contact to our customers also when they do not have a claim or need to renew their policies helped us retain the very high rating.
This is a performance achieved by a new small, but highly dedicated organisation.
Only three companies have a presence in more than one market in the Nordic region. Our advance in Norway, our top ranking in Denmark and the efforts in
CustoMer rating, norway 2005 satisFaCtion and loyalty - private CustoMers 1)
CustuMer rating denMark 2005 satisFaCtion and loyalty - private CustoMers 1)
CustoMer rating, Finland 2005 satisFaCtion and loyalty - private CustoMers 1)
CustoMer rating, nordiC Countries 2005 satisFaCtion and loyalty - private CustoMers 1) 2)
1) Satisfaction and loyalty is measured on a scale from 0-100 Line of business = average for all companies surveyed Source: EPSI Rating (EPSI is an independent non-profit organisation for measuring customer satisfaction in the Nordic countries)
2) The benchmarks in the Nordic comparison are simple averages of official EPSI country results for companies with a presence in more than one Nordic market
We introduced a new process for handling motor claims in Denmark in 2005 based on straight through processing and claims handling automation. As a result, most loss adjustments can be handled in a single routine.
In 2005, we extended our cooperation with suppliers in claims situations with respect to Tryg Reparation for cars and Tryg Bygning, under which we cooperate with plumbers and carpenters to have damage reported by our customers repaired fast, professionally and correctly. Such arrangements will be extended on an ongoing basis, helping us improve claims handling in relation to custo-mers and reducing claims expenses for TrygVesta. Also in Norway this cooperation has been further deve-loped both regarding the building and the motor insu-rance area.
This procedure allows Corporate to get a good idea of the customer’s risk profile and other relevant matters, while also giving the customer a better understanding of TrygVesta’s assessments and price.
Beginning in 2006, our franchisees in the Norwegian market will have new technical potential for selling products to small and medium-sized businesses. We expect these initiatives to strengthen sales in this area significantly.
It is up to our employees to handle the day-to-day provision of products and services that offer peace of mind to our customers. We therefore depend on our ability to continue to attract and retain the best employees by being an attractive workplace offering employees freedom to act, thrive and develop.
It is important to us that all our employees see their own efforts relative to an overall target, and we use an employee bonus programme as a natural tool in this connection.
We want our everyday work in TrygVesta to reflect the corporate values we have worked with over the past two years.
We provide peace of mind because: • We show people respect, openness and trust
In 2005, we arranged for managers and employees to meet to make a joint effort to ensure that our corporate values are understood, followed and embedded in our everyday work.
Employee bonus benchmarks were combined ratio and growth in 2005, and our performance triggered a bonus of DKK 4,000 to each employee. In addition, the Supervisory Board has decided to distribute employee shares worth DKK 6,000 to all employees to further strengthen links between the employees and the company. For tax reasons, our Norwegian and Finnish staff may receive the corresponding amount in cash.
The substantial profit increase we have seen in the entire TrygVesta Group over the past few years is very much attributable to the dedicated efforts of managers at many levels in our organisation. The results of the work to enhance our management development programmes in 2005 will be implemented in 2006. The
Supervisory Board has launched an option scheme for management and senior management employees as an extension of the existing incentive scheme, which is described in the section Corporate governance.
We live in a world with an accelerating pace of change and under growing pressure to perform, the effect of which lowers our basic stress thresholds. At TrygVesta, a steadily developing business characterised by growth and ambitious employees, we are aware that stress may become a factor in the workplace, adversely affecting employee well-being, job satisfaction and the quality of the products and services we provide. We intend to focus on workplace stress in 2006.
Openness, transparency and a fundamental understanding of investor information requirements are key to creating and maintaining good relations to investors.
We maintain a high level of information to analysts and investors by
We make information that may influence the pricing of our shares available to all stakeholders through the Copenhagen Stock Exchange with a view to global distribution.
OMXC20 index comprising the 20 most traded shares on the Copenhagen Stock Exchange. The share closed the year at DKK 319.2, equal to a market capitalisation for the Group of DKK 21.7bn and marking a price increase of 39% since the listing where the share was quoted at a price of DKK 230.
TrygVesta has one class of shares, and all shares rank pari passu. Tryg i Danmark smba holds 60% of the shares in TrygVesta and is the only shareholder with a holding of more than 5%. There was heavy demand for the offer shares. Danish retail investors oversubscribed their allotment four times, while institutional investors’
allotment was 16 times oversubscribed. The pie chart illustrates the share allocation.
The financial forecast for TrygVesta for 2006 is composed of the main areas insurance activities, investment activities and tax. The basis for determining the assumptions for each of these areas will be discussed briefly below.
Assumptions for price adjustments are primarily based on agreements relating to individual insurance policies.
The forecast is expressed in Danish kroner and assumes an exchange rate equivalent to the rate prevailing at 31
Expectations regarding claims are generally based on assumptions for the various products in the individual business areas and companies. We base our expectations regarding claims ratios on historical performance in the form of average claims ratios for the past five years, with recent years’ trends generally being weighted stronger than those of prior years. Trends in claims frequencies and, in particular, the average claims ratio for motor and building, which was significantly lower in 2005 as compared with expectations for a normal year, are major factors that may affect the overall performance.
Assumptions for storm and large losses are generally based on historical experience for not less than ten years. In addition, we incorporate the effect of
The forecast generally assumes no run-off gains or losses in 2006 on the provisions for claims established in the 2005 financial statements. This should be seen in the context of gross run-off gains totalling DKK 263m in 2005.
The forecast further includes other costs such as IT operating expenses and headquarter expenses, which are predominantly based on agreements that are known to us.
The result of business ceded is based on contracts made with reinsurers to cover claims and events such as storm and large losses. The expected result of business ceded is calculated on the basis of such contracts and TrygVesta’s historical data.
Return on investment activities for 2006 is based on the following assumptions with respect to investment assets: Bonds are expected to account for around 81%
Shares are expected to account for around 13% of assets and to yield a return of 7.1%, while real property is expected to account for 6% and yield a return of 6.5%.
This should be viewed against corresponding returns of 2.7%, 22.3% and 9.4% generated on bonds, shares and property, respectively, in 2005.
The tax rate is 28% in both Denmark and Norway. The effective tax rate is primarily attributable to gains or losses on shares which are tax-exempt or non-deductible. We assume an effective tax rate of 25% for 2006 based on the above assumptions for the return on shares.
We base our outlook for 2006 on the above description of main elements included in the financial results.
TrygVesta expects to report strong financial results also for 2006, with a projected low combined ratio and a return on equity of just over 25% before tax and around 19% after tax based on the dividend policy described in the annual report. The Group forecasts a profit on ordinary activities before tax of DKK 2,200m for the full year 2006 compared with the full-year profit for 2005 of DKK 2,913m.
Expectations for the combined ratio in the medium term are at the level of 91-93, corresponding to a return on equity after tax of 18-20%.
Profit before tax 2,913 2,200 result after tax divided percentage divided per share dkkm 50 60 70 80
The information on TrygVesta contained in this annual report is based exclusively on the information available when the annual report was prepared. It should be emphasised that the forwardlooking statements provided in this annual report are subject to uncertainty. Accordingly, there can be no assurance that the targets for the future will be achieved.
We recommend investors to carefully consider TrygVesta in the context of their own circumstances.
As early as in 2004, TrygVesta’s Supervisory Board decided to generally comply with the recommendations published by the Copenhagen Stock Exchange Committee on Corporate Governance in December 2003.
the Committee’s recommendations include the following eight main areas 1. The role of the shareholders and their interaction with the management of the company 2. The role of the stakeholders and their importance to the company 3. Openness and transparency 4. The tasks and responsibilities of the Supervisory Board 5. The composition of the Supervisory Board 6. Remuneration to the members of the Supervisory
The Supervisory Board of Tryg i Danmark smba, the company’s former owner, and the present Supervisory
The Supervisory Board has the following comments on each of the main areas: 1. the role of the shareholders and their interaction with the management of the company
TrygVesta’s articles of association do not contain provisions on differentiated voting rights or other special rules.
The Supervisory Board is responsible for the overall management and financial and managerial control of
Board applies target and framework management based, among other things, on regular and systematic discussions of the company’s strategy and policies for the relevant main areas with subsequent follow-up.
The Supervisory Board will comprise 12 members after the Annual General Meeting, including four representatives elected by the shareholders, who shall be recommended by and among the members of the Supervisory Board of Tryg i Danmark, four representatives elected by the shareholders, who shall be non-affiliated with Tryg i Danmark smba and the management of TrygVesta A/S, and four employee representatives, who according to agreement between the Danish and
Norwegian employee associations will include two representatives of the Danish employees and two representatives of the Norwegian employees. The chairman of the Supervisory Board of Tryg i Danmark smba is chairman of the Supervisory Board of TrygVesta A/S.
Members of the audit committee will receive a special remuneration to be determined.
Management reflects a wish to secure a good and stable performance for the company in the short term as well as in the longer term. The remuneration includes a large element of performance-related bonus and incentives to focus on share price performance.
Management and certain senior management employees. In 2006, the grant comprises up to 179,500 stock options, including around 48,500 stock options to members of the Executive Management and around 131,000 stock options to some 53 senior management employees. Options granted in 2006 entitle the holder to acquire shares at the average price of
The Supervisory Board of TrygVesta has furthermore resolved to offer up to 26,200 stock options to employees to reward outstanding performance. The grant will be made during the year, and the stock options will be subject to terms identical to those described above.
Based on the average price (all trades) on 15 February 2006, the total option value for 2006 is approximately
5m being attributable to senior management employees, and DKK 1m being attributable to employees for outstanding performance. The value has been calculated based on the Black & Scholes formula.
security, IT resources and our own insurance matters is managed through policies defined by the Executive
Risk is measured and managed centrally at Group level for all the Group’s companies. See also se the section
business philosophy. When a customer takes out a policy with us or investors buy our shares, it is because they are confident that TrygVesta has risk management procedures in place that ensure we are able to meet our obligations with respect to paying claims for insurance events and to creating value for our owners.
Our risk management structure is based on a number of policies that are reviewed and approved annually by our Supervisory Board.
The risk relating to pricing insurance products and the run-off of technical provisions.
The risk of errors or failures in internal procedures, systems and processes, and other risks that are not covered by the financial and strategic risks.
asset/liability management or ALM. We have for some years worked on developing a financial ALM model to assess the impact of fluctuations in specific factors and describe the consequences. The ALM model is an important tool in managing financial risk in TrygVesta.
solvency requirements (Solvency 2) which are expected to be implemented during the next five years.
Insurance risk is assessed in connection with underwriting, generally using tariffs based on statistical risk type analyses. As part of the Nordic integration, TrygVesta has placed the responsibility for making tariff analysis with a pan-Nordic analysis function. This work focuses on enabling the Group to assess risk on a consistent and transparent basis by using uniform methods and tools in Denmark and Norway.
When the period of cover of the policies has expired, insurance risk relates to the provisions for claims made to cover future payments on claims already incurred.
The size of the provisions is determined both through individual assessments of each claim and actuarial calculations. TrygVesta has a pan-Nordic actuarial function to handle such actuarial calculations and ensure that all assessments comply with our provisioning policy and apply uniform principles. When possible, we also implement the same models and methods for calculating provisions in Denmark and Norway. In order to ensure coordination between the actuarial function and the claims handling departments, TrygVesta has established a Claims Provisioning Committee, consisting of representatives from both the claims handling and the actuarial function to allow early recognition of any change in circumstances.
The framework for TrygVesta’s use of reinsurance is defined in our reinsurance and credit management policy, which is subject to annual reviews and approval by the Supervisory Board. Our credit management policy defines credit rating requirements that reinsurers must meet prior to entering into a reinsurance contract with
TrygVesta’s main exposure to catastrophes is the risk of natural disasters and, to a lesser extent, large fires and terrorist-related events.
TrygVesta’s catastrophe reinsurance programme also covers other catastrophe events, including terroristrelated events, up to DKK 1.75bn, with terrorist events
being covered for buildings, building contents and consequential loss for risks with a total insured value of up to DKK 370m. TrygVesta has bought catastrophe reinsurance up to DKK 1.5bn for our personal accident and workers’ compensation policies with a retention of
In addition to reinsuring catastrophe events, we also buy protection for certain lines where experience has shown that claims vary considerably.
Our corporate portfolio includes a number of very large property risks in both Denmark and Norway. We have bought reinsurance in the Danish and Norwegian markets for these policies with a retention on a single claim of DKK/NOK 50m and with cover up to a maximum of DKK/NOK 900m. For property risks exceeding the upper level, we buy facultative reinsurance. Other lines covered by reinsurance include liability and motor, marine, fish farms and bond insurance.
Our main exposure to market risk relates to our investments in financial asset. TrygVesta’s provisions for claims are, however, also exposed to interest rate risk due to discounting. TrygVesta has adopted full discounting of all material provisions for claims beginning in 2005. The reason for this decision was partly that the Danish Financial Supervisory Authority requires general insurance companies as from 2005 to discount provisions if such discounting is material, and partly that the implementation of IFRS stage 2 is expected to make discounting of all provisions mandatory.
In case of a disaster, such as a storm, our catastrophe reinsurance provides for TrygVesta to pay the first DKK 100m, and for our reinsurers in 2006 to cover amounts in excess thereof up to a maximum loss of DKK 4.5bn. It is common for reinsurance contracts to state that cover has to be reinstated after an event for which the cover has come into force. It is agreed beforehand whether the direct insurer (the ceding company) can renew the cover, the number of times the cover can be renewed, and the price. If the insurer reinstates the existing cover, the total cost of a storm is the sum of the retention and the reinstatement premium. Windstorm Erwin hit Denmark and, to a lesser extent, Norway on 8 January 2005. As at 31 December 2005 we expected to receive a total of DKK 830m in claims relating to this storm.
Based on the investment policies, we define the appropriate asset mix, including limits on types of assets and the geographic distribution and risk profile of bonds, shares and real property for each of company of the
The value of the discounted provisions for claims depends on their settlement profile, as is the case for bonds. Provisions that are paid out over a long period of time, such as personal injury claims, are more sensitive to interest rate changes than provisions that are paid out over shorter periods.
The figure to the left on the next page illustrates three different yield curves. The red curve is the yield curve used for discounting provisions for claims in Denmark. The blue curve indicates an upwards parallel shift of 1%. The yellow curve illustrates a situation where rates for durations in excess of three years rise 1% while short rates rise 0.5%. The green curve indicates a situation where rates for durations in excess of three years only rise 0.5%, while short rates rise 1%.
109m, while the impact is smaller in the other scenarios. TrygVesta uses the ALM model on an ongoing basis to assess the impact which various changes in interest rates would have on profits.
We generally manage currency risk by matching a liability in a given currency with an asset in the same currency. We generally hedge exchange risk through forward currency contracts. In certain circumstances, we also use interest rate and equity derivatives to manage investment risk.
We are exposed to credit risk in connection with our insurance business and in our investment business.
We face credit risk in connection with reinsurance because we remain liable to the claimant if a reinsurer is unwilling or unable to fulfil its obligations, and we may therefore incur a loss. Our credit management policy requires a credit rating for reinsurers of at least BBB
effect on equity of market changes at 31 december 2005 dkkm interest rate market — increase in interest rates of 100 basic points
Impact arising from derivatives 917 1) The impact is calculated on the basis of the option adjusted duration without correction for convexity. 2) Excluding impact on provisions in Finland and provisions for annuities for workers’ compensation. The provisions for annuities are discounted using a fixed rate of 1%, which is only changed in case of anticipated long-term changes in interest rates. The provision would decrease by some DKK 200m if the discounting rate increased to 2%.
We use the balanced scorecard as a tool in this work to ensure coherence in the strategy and the initiatives we implement. During the year, our strategy is managed in Executive Management meetings and meetings to follow up on the balanced scorecard performance by business areas and staff functions. We also continuously monitor the market to ensure that we have an up-to-date basis for our assessment of external conditions, be it our competitors’ market initiatives, new legislation or other external factors that may impact
In our opinion, the accounting policies applied are appropriate, and the annual report gives a true and fair view of the Group’s and the parent company’s assets, liabilities, and financial position at 31 December 2005 and of the results of The Group’s and the parent company ’s operations and the cash flow of the Group for the financial year ended 31 December 2005.
International Financial Reporting Standards as adopted by the EU, and the parent financial statements 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.
As described in Accounting policies on page 73, the annual report contains proforma financial figures for the Group for the financial years 2001 and 2002. The
International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance that the annual report is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the annual report. An audit also includes assessing the accounting policies applied and significant estimates made by the Executive and Supervisory
Boards, as well as evaluating the overall annual report presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the annual report gives a true and fair view of the Group’s financial position at 31 December 2005 and of the results of its operations and cash flows for the financial year 2005 in accordance with International Financial Reporting Standards as adopted by the
EU and additional Danish disclosure requirements for the annual reports of listed financial enterprises.
Danish Financial Business Act and additional Danish disclosure requirements for the annual reports of listed financial enterprises.
As described in Accounting policies on page 73, the annual report contains pro forma figures for the Group for the financial years 2001 and 2002. The TrygVesta
Group was established on 28 June 2002 by way of a non-cash contribution from the Nordea AB Group’s general insurance activities in TrygVesta A/S.
a) general information accounting policies applied for the consolidated financial statements
The financial statements of the parent company are presented in accordance with the executive order issued by the Danish Financial Supervisory Authority on financial reports presented by insurance companies and profession-specific pension funds. The executive order has been prepared with a view to making the accounting rules as consistent with the international accounting standards as possible. The Copenhagen Stock
Exchange has announced that, as a result of the above, listed financial enterprises are not required to comply with the existing Danish accounting standards issued by the Institute of State-Authorised Public Accountants in Denmark. Accordingly, the financial statements of the parent company have not been prepared in accordance with the Danish accounting standards
Danish Financial Supervisory Authority on financial reports presented by insurance companies and professionspecific pension funds dated 13 December 2005 (the
IFRS 4 was implemented on 1 January 2004. As permitted under IFRS 4.42, the presentation requirements have not been implemented for comparative figures for 2004.
The effect of the changes below is described in note 27
The principal changes in recognition and measurement on adoption of IFRS are presented below. The effect on equity of changes in accounting policy is specified in the notes according to IFRS 1.
The executive order on application of international financial reporting standards for companies subject to the Danish Financial Business
Act issued by the Danish Financial Supervisory Authority requires disclosure of differences between the format of the annual report under international financial reporting standards and the rules issued by the Danish Financial Supervisory Authority. The following is a reconciliation of differences in the profit for the year and shareholders' equity.
Profit for the year ended 31 December - IFRS 2,097 1,421
Current-year effect of actuarial gains and losses on pension obligation after tax -86 -80
Change in deferred tax relating to contingency funds -2 0 profit for the year ended 31 december - danish fSa executive order 2,009 1,341 equity reconciliation
Change in deferred tax relating to contingency funds -2 0 equity at 31 december - danish fSa executive order 8,242 6,831
IFRS prohibits recognition of equalisation provisions, and the existing equalisation provisions have therefore been eliminated. Equalisation provisions have so far represented amounts included to equalise future claims, net of reinsurance, in areas where experience has shown that claims vary. Earlier equalisation provisions in TrygVesta comprised
• Equalisation provisions in credit and guarantee insurance calculated in accordance with rules laid down by the Danish Financial Supervisory Authority’s provisions on equalisation provisions
Denmark made up at discount rates of 2.00% and 2.75%, respectively
Claims incurred include direct and indirect claims handling costs contrary to the previous practice, under which only the costs of claims assessors were included in this financial statement item.
TrygVesta has applied IAS 19 retrospective from 1 January 2004 regarding the pension liability towards the
Under IFRS the pension plan is treated as a defined benefit plan and assets and liabilities are measured based on an actuarial calculation of the value in use of future benefits payable under the plan which has been
IFRS requires provisions to be established for shortterm as well as long-term employee benefits. In addition to the pension liability referred to above,
TrygVesta recognises anniversary awards and pension benefits. Such costs were previously expensed as incurred.
In compliance with IAS 12, TrygVesta recognises deferred tax on contingency fund provisions in Norway and Denmark. Previously, no deferred tax was provided in respect of such provisions. According to Danish tax regulation, a tax liability will only crystallise on contingency fund provisions if the net insurance provisions are reduced below the booked net insurance provisions at 31 December 1994. Provisions for deferred tax and tax assets are recognised on an undiscounted basis.
In prior years, owner-occupied properties were measured at market value in accordance with the Danish FSA’s executive order. Previously, increases and decreases in market value were taken through the income statement.
TrygVesta owns the headquarter property in Norway as well as a few headquarter properties in Denmark relating to the decentralised organisation.
Investments are recognised and derecognised on a trade date basis – the date on which the Group commits to purchase or sell the asset. Previously, investments were recognised on the settlement date, and the fair value of the unsettled commitment was recognised in the balance sheet.
87m net of reinsurance has been taken as an income in
In our Danish business, we have changed the accounting estimate for discounting regarding other provisions for claims for workers’ compensation from an implicit discounting to the use of a yield curve. The change results in an increase of the discounted gross provisions of DKK 36m. In the income statement this amount has been expensed under Value adjustment.
The annual report has been prepared under the historical cost convention, as modified by the revaluation of owner-occupied properties, where increases are credited to equity and revaluation of investment property, financial assets held for trading and financial assets and financial liabilities (including derivative instruments ) at fair value through the income statement.
Assets are recognised in the balance sheet when it is probable that future economic benefits will flow to the Group and the value of the asset can be reliably measured.
Group has a legal or constructive obligation as a result of a prior event, and it is probable that future economic benefits will flow out of the Group, and the value of the liabilities can be measured reliably.
Income is recognised in the income statement as earned, whereas costs are recognised by the amounts attributable to this financial year. Value adjustments of financial assets and liabilities are recorded in the income statement unless otherwise described below
The consolidated financial statements are prepared on the basis of the financial statements of the parent company and its subsidiaries by adding items of a uniform nature.
Translation differences are recognised as income or as expenses in the period in which the operation is disposed of. All other currrency translation of gains and losses are recognised in the income statement.
Under IFRS 1 TrygVesta has elected not to apply IFRS 3 retrospectively to past business combinations (business combinations that occurred before the date of transition to IFRS).
Commercial (Norway) segment, the Corporate segment and the General Insurance (Finland) segment.
business segments operating in a particular economic environment. In TrygVesta, these areas are Denmark,
The portion of premiums paid to reinsurers that relates to unexpired risks at the balance sheet date is reported as the reinsurers’ share of provisions for unearned premiums.
Claims incurred represent claims paid during the year adjusted for changes in provisions for claims less the reinsurers’ share. In addition, the item includes run-off results regarding previous years. The portion of the increase in provisions which can be ascribed to unwinding is transferred to technical interest.
Income from investment properties before fair value adjustment represents the profit from property operations less property management expenses.
Realised and unrealised investment gains and losses, including gains and losses on derivative financial instruments, value adjustment of land and buildings, exchange rate adjustments and the effect in movements in the yield curve used for discounting, are recognised as value adjustments.
The comparative figures, including financial highlights and key ratios, have been restated to reflect discontinued business. Discontinued and divested activities in the income statement include the post-tax profit of TrygVesta’s business in run-off as well as divested enterprises. Business in run-off comprises the results of the wholly-owned subsidiary Chevanstell Ltd. UK
Owner-occupied properties are measured in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment writedowns. Revaluations are performed
ally from the owner-occupied property’s fair value at the balance sheet date.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, when it is probable that future economic benefits associated with the item will flow to the Group, and the cost of the item can be reliably measured. Ordinary repair and maintenance costs are charged to the income statement during the financial period in which they are incurred.
The assets’ residual values and useful lives are reviewed at each balance sheet date and adjusted if appropriate.
Gains and losses on disposals and retirements are determined by comparing proceeds with carrying amount. These are included in the income statement.
When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings.
The carrying amount of intangible assets, operating equipment, owner-occupied properties and investment properties are tested at least once a year for impairment in the cash-generating unit to which the asset belongs, and the asset is written down to the recoverable amount through the income statement if the carrying amount is higher. The recoverable amount is generally calculated as the present value of the future cash flows expected to be derived from the activity to which the asset belongs.
Net revaluation of investments in subsidiaries is taken to reserve for net revaluation under equity if the carrying amount exceeds cost.
Associates are enterprises over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are measured according to the equity method of accounting so that the carrying amount of the investment represents the Group’s proportionate share of the enterprises’ net assets.
Associates with negative equity value are measured at zero value. If the Group has a legal or constructive obligation to cover the associate’s negative balance, such obligation is recognised under liabilities.
Financial assets measured at fair value with recognition of value changes in the income statement comprise assets that form part of a trading portfolio and financial assets which the company upon initial recognition resolves to attribute to this category (fair value option).
None of the Group's financial assets are included in the latter category.
Financial assets are derecognised when the rights to receive cash flows from the financial asset have expired, or if they have been transferred, and the Group has also transferred substantially all risks and rewards of ownership. Financial assets are recognised and derecognised on a trade date basis – the date on which the Group commits to purchase or sell the asset. Financial assets are initially recognised at fair value.
Contracts that do not meet these classification requirements are classified as financial assets.
The Group assesses continuously its reinsurance assets for impairment. If there is objective evidence that the reinsurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in the income statement receivables
Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than receivables that the Group intends to sell in the short term. Receivables arising from insurance contracts are classified in this category and are reviewed for impairment as part of the impairment review of receivables.
On initial recognition, receivables are measured at fair value, and they are subsequently measured at amortised cost. Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the asset is impaired. The allowance recognised is measured
at the difference between the asset’s carrying amount and the present value of estimated future cash flows.
Shares are classified as equity when there is no obligation to transfer cash or other assets. Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds, net of tax.
Proposed dividend is recognised as a liability at the time of adoption by the shareholders at the annual general meeting (the date of declaration). Dividends expected to be paid in respect of the year are stated as a separate line item under equity.
(premium income) proportionally over the period of coverage and, where necessary, adjusted to reflect any variation in the incidence of risk. The portion of premium received on in-force contracts that relates to unexpired risks at the balance sheet date is reported as provisions for unearned premiums. Unearned premium provisions are generally calculated according to a best estimate of expected payments throughout the agreed risk period. However, as a minimum to the part of the premium calculated using the pro rata temporis principle until the next payment date. Adjustments are made to reflect any variations in the incidence of risk. This applies to gross as well as ceded business.
Provisions for claims are discounted. Discounting is based on a yield curve reflecting duration applied to the expected future payments from the provision. Discounting affects the motor liability, professional liability, workers’
compensation insurance in Denmark, which is settled by payment of annuities. The provisions are calculated using the fixed-rate method at the present value by discounting expected future payments. Provisions for annuities in workers’ compensation are discounted using a fixed-rate method.
Provisions for claims are determined for each product line based on actuarial methods. In cases where product
lines encompass more than one business unit, the claims reserves are distributed, as a main rule, based on reported number of claims in Denmark and individual claims in Norway. The models currently used are
• Provisions in respect of Chevanstell are assessed by external actuaries, and TrygVesta allocates provisions in accordance with these assessments.
In some instances, the historic data used in the actuarial models is not necessarily predictive of the future development of claims. Specifically, this is the case with legislative changes where in each specific case an estimate used for premium increases related to the relevant risk increase is derived. For the legislative changes mentioned below this estimate is used also in determining the level of claims – and hence reserves.
Tests are continuously performed to ensure the adequacy of the technical provisions. In performing these tests, current best estimates (without margins for adverse deviation) of future cash flows of claims, gains and direct and indirect claims handling costs are used.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by a duration that matches the conditions of the underlying pension obligation.
The Group provides current tax expense according to the tax law of each jurisdiction in which it operates.
Group’s cash and cash equivalents at the beginning and the end of the financial year. No separate cash flow statement has been prepared for the parent company because it is included in the consolidated cash flow statement.
The financial statements for 2002 and 2001 present pro forma comparative figures prior to the formation of
TrygVesta A/S as at 28 January 2002 and the company’s subsequent acquisition of the general insurance activities of Nordea AB as at 28 June 2002.
Change in the reinsurers' share of provisions for unearned premiums -74 -50 1 earned premiums, net of reinsurance 14,900 13,782 2 technical interest, net of reinsurance 323 335
Investment management charges -63 -55 total return on investment activities 1,595 1,016 2 Interest on insurance provisions -707 -638 total return on investment activities after technical interest 888 378
Other expenses -154 -147 profit/loss before tax 2,913 2,052 profit/loss on continuing business 2,125 1,496 9 Profit/loss on discontinued and divested business -28 -75 profit/loss for the year 2,097 1,421
Reinsurers' share of provisions for claims 2,484 3,080 16 total reinsurers' share of provisions for insurance contracts 2,630 3,292
Other insurance provisions 0 1 total provisions for insurance contracts 26,757 25,212 19 Pensions and similar obligations 669 543 20 Deferred tax liability 939 792
24 earnings per share 25 contingent liabilities and collateral 26 related parties 27 Significant changes upon transition to ifrS
Vesta Forsikring AS has in its consolidated financial statements included provisions for contingency funds of NOK 2,251m under provisions for insurance contracts. In the consolidation, these provisions, due to their nature as additional provisions, are included in shareholders' equity
Change in other payables and other amounts receivable 95 1,428 cash flow from insurance operations 3,500 5,085
Purchase/sale og associated undertakings 0 -14 total investments -4,051 -5,152 funding
Change in debt to credit institutions 177 54 total funding -197 4 change in cash and cash equivalents, net 50 28
Price adjustment of cash and cash equivalents, beginning of year 14 -11
Total funding -10 130 change in cash and cash equivalents, net -11 -80
In respect of provisions for unearned premiums, the return under the item technical interest is calculated as the provision from time to time plus an average interest rate that corresponds to the estimated settlement period of the provision.
Provisions for bonuses and premium rebates 191 168 0 0 122 92 0 0 0 0 313 260
Private & Commercial Denmark provides general insurance products for private households and small and medium-sized enterprises in Denmark under the brand name “Tryg”. TrygVesta's products in
Denmark are distributed principally through our proprietary distribution networks consisting of five regional customer centers and 16 local service centers staffed by our own customer advisors and sales agents. We also distribute our products through other channels, including affinity groups and Nordea’s 344 bank branches.
Private & Commercial Norway provides general insurance products for private households and small and medium-sized enterprises in
TrygVesta's Corporate business unit currently provides general insurance products for larger businesses under the brands “Tryg” in
Denmark and “Vesta” in Norway, but commencing in late 2005 will also be providing them under the combined name “TrygVesta”. We service our corporate customers with our direct sales force, consisting of 35 account managers in Denmark and 30 account managers in
Technical interest, net of reinsurance 78 54 51 96 88 45 35 31 marine, aviation fire & contents fire & contents and cargo (private) (commercial) liability
Profit/loss on ceded business -18 -26 -47 -113 -9 -718 -7 -1
dKKm 9 the techinical result of discontinued and divested business is specified by lines of business as follows accident motor marine, aviation and health motor tpl comprehensive and cargo
Profit/loss on ceded business 4 5 0 0 0 1 27 131
Profit/loss on ceded business 0 0 0 -10 0 -4 0 1
Technical interest, net of reinsurance 0 0 0 1 0 1 0 0 other insurance 1) total
lowest average highest percentage percentage percentage lowest average highest percentage percentage percentage
Fair value at the end of the previous financial year 1,727 1,750
Additions during the year 0 14 revaluations at net asset value Balance 1 January 14 0
The company was established at the end of 2004 - - 50 - - 28 15 other financial investment assets Bonds 27,572 23,762
In addition, the amounts include liquid assets allocated to the portfolio manager, money market deposits and debt and receivables from unsettled investment transactions.
Other bonds 3,921 1,502 effective interest rate % % Danish bonds 4.2 5.3
The portfolio of unlisted shares totals 225 160 bond portfolio by maturity
exposure to exchange rate risk insurance, properties bonds Shares etc. hedge exposure
The exchange rate adjustment for the period for foreign entities and the hedging of currency risk will be handled according to the rules of hedge accounting and will be an entry on shareholders'
equity. The net asset value of investments in the subsidiaries Vesta Forsikring AS and Chevanstell
Gains and losses on hedges charged to equity at 1 January 2005 0 0 0
Gains and losses on hedges charged to equity at 31 December 2005 0 -119 -119
The loan is an interest-only loan, and the lender has no option to call the loan or otherwise terminate the loan agreement with TrygVesta A/S. The loan is automatically accelerated upon the liquidation or bankruptcy of TrygVesta A/S.
Provisions for claims, net of reinsurance, end of the year -18,777
Paid in the financial year in respect of prior years -4,811 -4,485
Change in claims in the financial year in respect of the current year 11,329 10,563
Change in claims in the financial year in respect of prior years -203 80
Paid in the financial year in respect of prior years -4,006 -3,873
Change in claims in the financial year in respect of the current year 10,404 9,686
Change in claims in the financial year in respect of prior years -137 179
Chevanstell Ltd. The provision for Chevanstell Ltd. includes an offset of the stop-loss treaty between Tryg Forsikring A/S and Chevanstell Ltd.
Specification of change in recognised pension obligations: Recognised pension obligation, beginning of year 1,119 960
Change in recognised employers' nat. ins. contribution -2 0 recognised pension obligation, end of year 1,362 1,119
Paid during the period -31 -27 carrying amount of plan assets, end of year 727 606 total pensions and similar obligations, end of year 635 513 total recognised obligation, end of year 669 543
The premium for the 2005 financial year is estimated at: 103 61
Intellectual property rights 18 0 deferred tax, end of year 939 792 reconciliation of deferred tax, beginning of year
Change in deferred tax taken to equity -13 -18 non-capitalised tax loss
The loss in TrygVesta A/S cannot be utilised in the Danish joint taxation scheme.
The temporary difference between the accounting and tax values of investments in subsidiaries, etc. amounts to DKK 1.3bn.
Tryg Vesta A/S had three floating-rate loans totalling DKK 600m, which were repaid in 2005.
Basic earnings per share is calculated by dividing the profit for the year and the profit/loss from discontinued and divested business by the total average number of shares. The company has not issued options, warrants, convertible debt instruments or the like. Therefore, there is no difference between basic EPS and diluted EPS.
Basic earnings per share of DKK 25 0 dividends per share
Dividends per share is calculated as the total dividend proposed by the Supervisory Board after the balance sheet date divided by the total number of shares (68,000,000). The dividend is not paid until approved by the shareholders at the Annual General Meeting of the following year.
The amounts include the following: Tryg Forsikring A/S and Vesta Forsikring AS have signed an operating agreement with CSC for an amount of DKK 513m for a period of 4 years.
The Danish companies in TrygVesta are jointly taxed with Tryg i Danmark smba.
Until 2004, the companies were jointly and severally liable for payment of imposed corporation tax.
Premium income: • Parent company (Tryg i Danmark smba) 0.1 0.1
Outstanding guarantees cover the policyholders' financial obligations pursuant to the contract.
Transactions with related parties also comprise rental income as premises are being let to a member of management on market terms.
Under IFRS 4 insurers may continue to use their local GAAP for their insurance contracts, subject to the following adjustments: • Prohibition of provisions for possible claims under contracts that are not in existence as of the reporting date, such as equalisation provisions for future claims
• Gross presentation of insurance liabilities without offsetting them against related reinsurance assets
Danish statutory rules to an accounting system for insurers that is more in line with the recognition and measurement regulations inherent in the IFRS Framework. The new rules are applicable to all insurance companies and include approximated fair value measurements for insurance contracts but do not include the recognition and measurement options available in IFRS. The new Danish FSA accounting rules regarding approximated fair value measurement are supported by changed regulations for insurance contracts, such as the requirement to discount reserves if discounting constitutes a material amount.
TrygVesta has adopted the new Danish FSA rules as local GAAP for the recognition and measurement of insurance contracts as required by
IFRS 4 which had the following effects: • Eliminated equalisation provisions
In addition, TrygVesta has changed accounting policies to discount all provisions for claims and claims handling costs and the related reinsurers’ share of these liabilities to reflect the economic reality of the business and so provide more relevant information as permitted by IFRS 4. For all provisions except for annuity provisions in Denmark, TrygVesta also uses a yield curve rather than a fixed rate to reflect a more relevant market interest rate.
IFRS data and information, including explanation of the main differences and reclassifications that arise.
The implementation of IFRS has resulted in certain reclassifications as well as adjustments to amounts recognised under Danish GAAP.
dKKm 2004 profit for the year ended 31 december – danish gaap 1,407
B) Change in provision for defined benefit pension plan in Vesta 47
F) Other, net -6 profit for the year ended 31 december – ifrS 1,421 dKKm 2004
A) Equalisation provisions represent amounts reserved to equalise fluctuations in future profits for areas which historically have been subject to substantial random fluctuations. For the majority of these provisions, their use to offset claims can only occur if the relevant losses exceed a predetermined size. In periods where such claims occur, the reserves are utilized as claims are made. Under Danish
B) The measurement of TrygVestas defined benefit pension plan in Vesta under Danish GAAP was based on an actuarial calculation of the value of future benefits payable under the scheme using assumptions related to long-term economic developments. According to IFRS, the benefit plan liabilities are measured based on current discount rate assumptions relevant on the balance sheet date. According to
C) Under Danish GAAP, claims handling costs were expensed as incurred and no provision for handling the claims related to the claims reserves were made. Under IFRS, the provision for claims include a provision to cover direct and indirect claims handling costs in connection with servicing claims outstanding at the balance sheet date.
Because TrygVesta under Danish GAAP measured all investment assets at fair value, no differences in 2004 profits or shareholders’ equity were recognised when implementing IFRS.
Notes income statement 2 Earned premiums, net of reinsurance 13,777 5 13,782 3 Technical interest, net of reinsurance 495 -160 335 4 Claims incurred, net of reinsurance -9,645 -215 -9,860 5 Change in other insurance provisions, net of reinsurance -25 25 6 Bonus and premium rebates -151 -11 -162 7 Total insurance operating expenses, net of reinsurance -2,894 499 -2,395 8 Change in the equalisation provisions -92 92 0 investment activities 9 Income from investment assets 1,046 -25 1,021 10 Unrealized gains or losses on investment assets 235 -108 127
Exchange rate adjustments -7 3 -4 return on investment activities before transfer to insurance activities 1,146 -130 1,016 technical interest transferred to insurance activities -634 -4 -638
Other ordinary expenses -26 - -26 profit before tax 1,951 101 2,052 profit on continued business 1,471 25 1,496
Loss on discontinued and divested business -64 -11 -75 profit for the period 1,407 14 1,421
Certain income statement activity under Danish GAAP is classified differently under IFRS. See “Presentational Differences” for a reconciliation of these income statement items.
Under Danish GAAP, gross earned premiums included gross premiums written adjusted for provisions (earned premiums), reduced by bonus and premium rebates. The basis for the amount of gross premiums written recognised in any accounting period varies by the volume and type of contacts TrygVesta write. Earned premiums were recorded in accordance with the terms of the underlying policies and according to various estimates that TrygVesta were required to make. Gross earned premiums under Danish GAAP also includes self-insurance contracts covering assets of TrygVesta.
Under IFRS, gross earned premiums are the same as under Danish GAAP except that: • premiums from self-insurance contracts are not recognised; • bonus and premium rebates to affinity groups are recognised as a provision and expensed based on the current years’
The total effect on gross earned premiums as a result of implementing IFRS amounts to a DKK 7m reduction, as follows: dKKm
Reclassification of change in provision for unexpired risk *) 11 *) As a result of a provision for risk not yet run off in Vesta recorded as an equalisation reserve of DKK 36m, the net effect of DKK 11m is booked to premium.
Under IFRS, earned premiums, net of reinsurance, are treated the same as under Danish GAAP, except that: • premiums from self-insurance contracts are not recognised
Reclassification of change in provision for unexpired risk *) 11 *) As a result of a provision for risk not yet run off in Vesta recorded as equalisation reserve of DKK 36m, the net effect of DKK 11m is booked to premium.
Under Danish GAAP, technical interest, net of reinsurance partially consisted of a calculated return on the average provisions on insurance contracts (the “Technical provisions”), partially offset by the accretion over the relevant period of discounted technical provisions for insurance contracts. Technical interest, net of reinsurance, was calculated by applying an interest rate equal to the pre-tax yield to maturity on bonds with a term to maturity of less than three years. The interest rate was determined by the
Danish FSA. The amount resulting from this calculation was transferred from the aggregate return on investment activities to the technical result.
Under Danish GAAP, the Danish FSA allowed, but did not require, discounting of provision for claims with long duration
The movement in provisions for claims related to the effect of discounting is recognised in three separate line items in the income statement. The change due to the accretion of the discount is recognised as a cost in technical interest. The movement due to change in yield curve is recognised as a cost in “unrealized gains or losses on investment assets” (value adjustments in the IFRS
The effect of discounting of provisions (unwinding) for insurance contracts can be disaggregated, as follows: dKKm
Movement in yield curve recognised in investment activities -108 4 Claims incurred, net of reinsurance
Under Danish GAAP, claims incurred, net of reinsurance represented claims paid during the year and adjusted for changes in provisions for unpaid claims and changes in case reserve provisions less the portion of the reinsurance claims paid that TrygVesta ceded to reinsurers. Under Danish GAAP, no provision for claims handling costs was made.
The total effect of implementing IFRS on the claims incurred, net of reinsurance amounts to DKK 215m. This includes the net effect of the reclassification of claims handling costs of DKK 440m to claims incurred, net of reinsurance from total insurance operating expenses, net of reinsurance (see below), as well as DKK 52m in accrued provisions, partially offset by the effect of discounting as described above, plus certain other less material changes.
Under Danish GAAP, bonus and premium rebates represented anticipated and reimbursed premiums mainly related to arrangements
Under IFRS, a provision has been made regarding a liability towards certain affinity groups, and changes to this liability are reflected in the bonus and premium rebates of DKK 11m. This difference is also reflected in the calculation of gross earned premiums.
“internal rent” on owner-occupied properties was reclassified as total insurance operating expense, net of reinsurance.
Under IFRS, principally as a result of the reclassification of claims handling costs, total insurance operating expenses, net of reinsurance are DKK 499m lower than under Danish GAAP, which mainly consists of a reclassification to claims regarding direct and indirect claims handling costs of DKK 440m. The total change of DKK 499m is disaggregated as follows: dKKm
Under IFRS, internal rent is not recognised. Under IFRS as a result of the reversal of this reclassification, total insurance operating expenses, net of reinsurance were reduced by DKK 25m.
of DKK 25m reclassified to total insurance operating expenses, net of reinsurance under Danish GAAP.
Under Danish GAAP, this item is primarily income related to investment assets which are fixed rate instruments. Therefore, as interest rates move, the marking to market of investment assets creates gains and losses.
Unrealized gains and losses on investment assets decreased by DKK 108m due to the differences arising from discounting using a yield curve. See note 3 “Technical interest, net of reinsurance”.
The transition from Danish GAAP to IFRS does not impact TrygVestas income taxes payable. However, due to changes in accounting policies deferred tax is impacted as follows: dKKm
A) Previously TrygVestas did not provide deferred tax for equalisation provisions under Danish GAAP. Under IFRS deferred tax has been provided for. The deferred tax expense of DKK 34m is the tax effect from the change in equalisation provisions in 2004.
B) Previously TrygVesta did not provide deferred tax for contingency funds under Danish GAAP. Under IFRS deferred tax has been provided for. The deferred tax expense of DKK 31m is the tax effect from the change in contingency funds during 2004.
C) Under Danish GAAP, claims handling costs were expensed when incurred. Under IFRS, estimated claims handling costs are accrued as part of the claims provision. For tax purposes these costs are expensed when incurred. Due to the change in claims handling cost accrued, deferred tax varies accordingly. Based on the 2004 change in accrued claims handling costs, deferred tax decreased by DKK 17m.
D) Under Danish GAAP, deferred taxes were discounted, if material. Under IFRS, discounting of deferred taxes is not permitted. The 2004 change in discounting effect on deferred taxes under Danish GAAP amounting to DKK 28m has been reversed under IFRS.
Accruals and deferred income 250 0 250 total liabilities and shareholders’ equity 33,553 4,271 37,824 12 Investment assets
Under IFRS, purchases and sales of investments are recognised on the trade date and measured by the closing quoted market price on the balance sheet date.
Under IFRS, netting is not allowed. Therefore, the reinsures’ share of technical provisions of DKK 3,292m is reclassified from technical provisions, net of reinsurance to an asset on the balance sheet under “reinsurers' share of technical provisions”.
The total effect of implementing IFRS on the technical provisions, net of reinsurance is an increase of DKK 1,745m, and is detailed as follows: dKKm
Each of the provisions affected by the implementation of IFRS and the related effect are described below.
Under Danish GAAP, discounting of provision for claims with long duration (i.e., greater than four years) was allowed but not required. Under Danish GAAP TrygVesta only discounted provisions for workers compensation.
As a result of the transition to IFRS, the difference in technical provision, net of reinsurance due to discounting amounted to
Claims handling costs are discounted using the same methodology and yield curve as for claims provisions.
• Credit and guarantee provisions calculated according to rules issued by the Danish FSA
Under IFRS, netting is not allowed. Therefore, the reinsures’ share of technical provisions of DKK 3,292m is reclassified from technical provisions, net of reinsurance to an asset on the balance sheet under “Reinsurers' share of technical provisions”.
The total effect of implementing IFRS on the provisions for other risks and charges amounts to DKK 1,203m. The effect on the current year is disaggregated as follows: dKKm
Under Danish GAAP, TrygVesta did not recognise deferred tax on contingency funds. Additionally, under DanishGAAP, deferred taxassets and liabilities are presented separately in the balance sheet. Under Danish GAAP de ferred taxes were discounted, if material.
Under IFRS, TrygVesta recognise deferred taxes on contingency fund provisions in Norway and Denmark in our Consolidated
Financial Statements. Under IFRS, deferred tax assets and liabilities are netted in the balance sheet. Also, discounting of deferred taxes is not permitted.
The effect of changes in assumptions under IFRS results in a DKK 347m increase in TrygVesta's pension liability.
The total effect of implementing IFRS on debt amounts to an increase of DKK 638m. The effect on the current year is disaggregated as follows: dKKm
Under Danish GAAP, debt associated with the acquisition of bonds was recognised on settlement date and purchases and sales not yet settled were off-balance sheet items until the settlement date. Under Danish GAAP, investments were measured at fair value at the balance sheet date based on the average quoted market price on that date.
Due to the change in recognition from settlement date under Danish GAAP to trade date under IFRS, TrygVesta recognised DKK
Under IFRS, dividends are not recognised as a liability until approved by the Annual General Meeting.
As a result of the implementation of IFRS, DKK 650m of proposed dividends have been reclassified from liabilities to shareholders’
Under IFRS, income taxes payable are presented net with prepaid income taxes.
As a result of the implementation of IFRS, TrygVesta recognised additional provisions of DKK 38m for holiday allowances.
danish gaap presentation reclassi- ifrS presentation dKKm amounts on an ifrS basis fication amounts on an ifrS basis
Income from investment assets 1 Income from investment property 90 90 Income from investment property 2 Interest and dividends etc. 834 834 Interest and dividends, etc.
2 “Interest and dividends etc.” under Danish GAAP is included in “Income from investment assets”, whereas under IFRS it is shown separately.
5 “Value adjustments” under IFRS; see notes 3, 4 and 8.
6 “Interest expenses” under Danish GAAP is included in “Income from investment assets”, whereas under IFRS it is shown separately.
8 “Exchange rate adjustments” under Danish GAAP is shown separately, whereas under IFRS
Notes assets 6 Investments in subsidiaries 8,804 7,359 6 Investments in subsidiaries in respect of discontinued business 121 105
Accrued interest and rent earned 0 2 total prepayments and accrued income 0 2 total assets 8,990 8,177 liabilities and equity
Shareholders' equity 8,242 6,831 8 Subordinate loan capital 0 700 10 Debt to credit institutions 710 601
Share Share equity retained proposed capital premium method earnings dividends total
Change in accounting policies 130 50 180 adjusted equity equity entries in 2004
(retained earnings), net of deferred tax. When assessing Vesta Forsikring AS’ option to pay dividend to the parent company Tryg Forsikring this amount should be considered. Tryg Forsikring’s option to pay dividend to TrygVesta is influenced by this amount and a contingency fund provision of DKK 670m, which is included in shareholders’ equity in Tryg Forsikring A/S. Dansk Kaution has a similar contingency amounting to DKK 139m, which is also included in the company’s shareholders’ equity.
Tryg Forsikring A/S 2,086 1,480 profit on continuing business 2,086 1,480
Loss on discontinued business after tax -28 -75 2 interest and dividends, etc.
Members of the Supervisory Board of TrygVesta A/S do not receive bonuses and are not participants in any severance plans. The Executive Management has a bonus scheme for up to 3 months’ salary. Other than that, there are no incentive plans for the Supervisory Board and Group Executive Management.
Tax on financial loss before profit/loss in subsidiaries and tax 19 18
Dividend paid -650 -50 carrying amount 31 december 8,925 7,464 ownership Shareshare profit/ holders'
Additions during the year 0 14 revaluations and impairment writedowns at net asset value: carrying amount 31 december 14 14
Shareholders' revenue profit/loss ownership name and registered office assets liabilities equity for the year for the year share in %
Debt and provisions 0 3 deferred tax, end of year 0 3 reconciliation of deferred tax, beginning of year
In 2005, a consortium of banks granted Tryg Vesta A/S a loan facility for DKK 2,000m, of which
Deferred tax assets 0 -3 capital base 4,651 4,419 weighted assets 6,431 5,616 12 contingent liabilities and collateral
Most of the Danish companies in TrygVesta are commonly registered for VAT and payroll tax with Tryg i Danmark smba and are jointly and severally liable for payment of all such direct and indirect taxes. Tryg i Danmark smba left the joint taxation following the listing of
The company is part of some disputes the outcome of which is not estimated to affect the financial position of the company. Management believes that the outcome of these legal proceedings will not affect the company's financial position beyond those receivables and obligations recognised in the balance sheet at 31 December 2005.
Following an individual assessment, all guarantees are issued without additional security. The company has full recourse against the individual companies.
Transactions with related parties also comprise rental income with premises being let to a member of management on market terms.
Intra-group trading involved the following: • Providing and receiving services 4
Intra-group trading involved: • Buying and selling of other assets 37
Business ceded as a percentage of gross premiums 3.6 2.0 -3.9 3.5 3.5 6.1 1.6 1.6
Number of full-time employees, at the end of the period 2,215 2,223 2,223 2,248 2,330 2,458 norwegian general insurance
Profit/loss for the period before tax 284 326 1,494 1,058 817 359 -331 160
Claims ratio, net of ceded business 75.3 66.7 69.2 69.9 69.6 80.7 85.0 79.2
Loss for the period before tax -12 -11 -43 -47 -47 -49 -67 -29
This overview shows the directorships held by the members of TrygVesta A/S’ Supervisory Board.
The Danish Rheumatism Association mogenS JacobSen, deputy chairman, born 1944 chairman of the Supervisory board of
JØrn wendel anderSen, born 1951 chairman of the Supervisory board of
John r. frederiKSen, born 1948 chairman of the Supervisory board of
Tryg i Danmark smba hÅKon J. huSeKlepp, employee repreSentative, born 1955 board member of
Tryg i Danmark smba peter wagner mollerup, employee repreSentative, born 1966 chairman of the Supervisory board of
“The English text in this document is a translation of the Danish original. In the event of any inconsistencies the Danish version shall apply”.
Gross earned premiums gross expense ratio is calculated as the ratio of gross insurance operating expenses to gross earned premiums.
Gross earned premiums combined ratio is calculated as the sum of the gross claims ratio, the gross expense ratio and the result of business ceded as a percentage of gross earned premiums.
Average shareholders’ equity net asset value per share is calculated as year-end shareholders’ equity divided by the average number of shares.
Average number of shares dividends per share is calculated as the total dividend proposed divided by the average number of shares.
Average number of shares price/net asset value is calculated as the quoted price of the share divided by the net asset value per share.
Danish GAAP means that the annual report has been prepared in accordance with the Danish Financial Services Act and the executive order issued by the Danish
Financial Supervisory Authority on the presentation of financial reports by insurance companies and professionspecific pension funds.
With just over one week into 2005, the forces of nature struck and Denmark was hit by a violent storm. Tryg’s claims centres received reports that roofs had been completely or partially blown off and trees had fallen onto houses.
The first claims assessors arrived from Norway to assist in the hardest hit areas.
Tryg receives 110,000 calls. In December 2004, Tryg received a total of 120,000 calls.
Claims assessor Tor Carlstedt from TrygVesta in Norway inspects the damage after the storm at a stud farm in Mid-Jutland.
You cannot control the forces of nature. But you can be prepared. Tryg prepared by listening to the weather forecast. Extra staff had been called in already before the storm hit – and was badly needed. 30,000 claims were recorded within the first five days. Staff from many departments stepped in, using their weekends and days off to help our claims handlers. Tryg used the experience from the hurricane in 1999 to make contingency plans for the 2005 storm.
A total of 52,343 claims involving an aggregate expected cost of DKK 830m were reported, leaving many people without a roof over their heads or with a business operating on a reduced scale. Tryg therefore gives good advice on how to minimise damage and subsequently provides consulting on how to prevent any future storm claims.
Early in the morning, Vesta held the first meeting with the affected families. Vesta’s representative gave customers the necessary information and provided practical assistance.
The mudslide was still blocking access to many houses. Five houses had been destroyed, and another 12 were in peril.
A decision was made to demolish 11 severely damaged and threatened houses in the area. Five of the families involved were Vesta customers, and agreements were made with respect to compensation. People living in another three houses above the affected area decided to move due to the risk of new mudslides. Vesta had insured two of the houses and compensated the occupants for their losses.
A total of 222 claims were reported to Vesta. 45% had been settled. Total costs are expected to exceed NOK 40m when all claims have been finally settled.
Claims handlers and assessors were informed of special aspects of the event early in the first day.
In a situation such as this where many people had lost their homes, it is vital that both claims assessors and claims handlers get a quick overview of the extent of the damage in order to handle claims fast and to give customers precise answers of what to expect, and how long it will take before their claim has been finally made up. We use the knowledge gathered to enhance our contingency plans for any future similar events.
Claims assessors working with settlement of contents claims met with colleagues from our Corporate large claims settlement department at the scene of the fire early in the morning to make an initial assessment and interview the residents affected by the fire.
Tryg arranged “permanent” rehousing for all residents of the building. Scaffolding had been put up, and temporary covers were mounted on the building. Plans for dehumidification were prepared, and all flats were emptied.
The police reported that the cause of the fire was unknown. The Danish Institute of Fire
The demolition works progressed as planned, and dehumidification was set up. All residents rehoused in flats in Copenhagen. The work to restore the property is expected to take about 12 months.
Not all people living in the property were Tryg customers. Several of them were not insured at all.
In a situation such as this, people feel lost and don’t really know what to do. It is therefore important for Tryg staff to be on site, already during fire fighting. They meet with the residents, who get a chance to vent frustration and get an answer to many of their questions. Tryg staff also attended a meeting with the residents to inform them of their possibility for getting compensation.