su pp ly in g pe ac e of m in d It is our vision to be the leading peace-of-mind supplier of the Nordic region on the markets and within the business areas chosen by us.
We believe that we play a significant role in society and for the people and companies we serve.
We create stability and foresight for the individual and for the community, because insurance counteracts and alleviates the consequences when forces of nature and human beings turn from being friends and helpers to being enemies and destroyers.
Water is the very foundation of life. Deserts bloom when touched by the life force of water. A thundering waterfall can be tamed and its power can be harnessed for the benefit of us all.
Just as we value water, it also demands our respect and humility.
We are constantly surprised by our ability to develop new ideas.
There is no greater force of nature than the human brain. It is a vehicle for both good and evil. In fact, humans are the only beings who have the capacity to be consciously cruel.
the history of humanity. Fire provides warmth. Fire provides light. Fire is an important ally.
any other being on earth. A year is very likely to pass before a human baby can stand and toddle hesitantly into the arms of mum or dad.
However, wind is also capricious and violent. A breeze becomes a storm. A storm becomes a hurricane. Everything can be turned upside down.
Review of TrygVesta’s financial performance . . . . . . . . . . . . . . . . . . . . . . . 43
Statement by the Supervisory Board and the Executive Management . . . . . . . . 70
New accounting rules as from 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Income statement, balance sheet and cash flow statement for TrygVesta . . . . . 86
Glossary of technical terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .120an nu al re po rt
And we are getting ready for the third wave, which we begin by strengthening our service and sales power vis-à-vis our customers.
We laid the foundation for a shared identity and shared values throughout the Group. And we seriously began offering products in the form of concepts based on the stages our customers go through in their lifetime.
We have every reason to be pleased with our performance. We have come a long way in a short time, and we have a clear strategy for our next step: We intend to stay focused on our Nordic customers and develop by taking care of our employees and their potential.
*) Throughout this annual report, figures for 2000, 2001 and 2002 are pro forma figures, as TrygVesta was established on 28 June 2002.
Reference is also made to Financial highlights and key ratios for TrygVesta
• TrygVesta improved its financial results considerably in 2004, generating a profit on ordinary activities before tax of DKK 1,947m against DKK 1,045m in 2003.
• The improvement materialised more quickly and strongly than we had expected. The combined ratio, net of reinsurance, of 93.1 and the return on equity of 33.9% before tax far outperformed the Group’s long-term target of a return on equity of 18-20%.
• The Group’s earnings are well balanced. The technical result was a profit of DKK 722m for the Norwegian business and DKK 790m for the Danish business.
• The three primary business areas improved their financial results strongly in 2004. The combined ratio, net of reinsurance, was 93.4 for Personal & Commercial Denmark, 84.3 for Personal & Commercial Norway, and 97.1 for the Nordic corporate business.
• TrygVesta’s Finnish operations generated premium growth of almost 60% in 2004, winning more than 1.5% of the
• The divestment of the Polish and Estonian subsidiaries and the reinsurance company TBi focused operations even more in 2004. The divested companies reported a total loss on ordinary activities before tax of DKK 172m for 2002-2004, and the divestment is expected to improve the Group’s long-term earnings.
• TrygVesta estimates that the combined ratio, net of reinsurance, for 2005 will be at the level of 92-96 with an expectation of 94 and a profit on ordinary activities before tax of DKK 1,600m.
• TrygVesta established a Nordic organisation, introducing shared staff functions across national borders, two dedicated local business areas for personal and commercial customers, one in Norway and one in Denmark, and one dedicated
• TrygVesta launched its value process and adopted the name of ‘TrygVesta’ rather than the ‘Tryg Vesta Group’.
• TrygVesta moved into the market for unemployment insurance in Denmark.
‘flex job ruling’ by the Supreme Court. Provisions in the workmen’s compensation and industrial diseases area in
• TrygVesta set up a common intranet and introduced an employee magazine across national borders.
Asia cost TrygVesta DKK 28m after taking into account the reinsurers’ share.
• The storm that hit all of Denmark on 8 January is expected to result in claims payments of between DKK 750m and
DKK 1bn to TrygVesta’s customers. Net of reinsurance, the storm will entail expenses for TrygVesta of DKK 100m plus
Not least the major natural disasters in 2004 weighed heavily on US and international insurance companies. This has motivated the industry to stay focused on profitability, thereby reducing the risk of competition on prices in the Nordic market.
This forces businesses to maintain a better correlation between premiums and claims as compared with only a few years ago. TrygVesta expects fluctuations in insurance profitability in the future as well. However, there is reason to be optimistic about earnings in the next few years, and we have reason to be confident that the insurance industry generally wishes to maintain stable earnings.
The market is currently moving towards the use of multiple tariff criteria, thereby establishing a sharper division of customers into risk classes. We find it disturbing when large parts of the market expect to increase their earnings by introducing additional tariff criteria. Depending on how aggressively insurers intend to use these new criteria, there is a risk of allowing price competition to slip in by the back door.
Danes are comprised by some form of private health insurance. Growing private wealth has already spurred the need for new insurance products, for example unemployment insurance and health insurance. It is not uncommon for businesses to protect employee groups against illness, and in Norway health and unemployment insurance is being introduced in the market. Both the Danish and Norwegian insurance industries support initiatives that supplement traditional public areas. TrygVesta considers this to be a growth area, and we will participate actively in developing our role in society.
The global markets focus increasingly on risk, and risk management has become a much greater priority for large and medium-sized enterprises over the past couple of years. For businesses it is not simply a question of hedging risk in relation to fire, terrorist attacks, management scandals or bad weather.
It is also a question of taking a more professional approach to risk in order to better control costs and hence reduce the risk of a loss. As a direct consequence of this, corporate customers are tightening their requirements to insurers’ financial strength.
The beginning of 2004 was characterised by strong economic growth, but also by a series of unfavourable US unemployment figures and doubt as to the sustainability of the economic recovery. As appears from the chart, these factors contributed to dampening the financial markets and gave rise to falling interest rates on both sides of the Atlantic. The uncertainty following the bombings in Madrid on 11 March 2004 and speculations in a coming ECB rate cut also contributed to falling interest rates in the first quarter.
In the early spring, the market refocused on a more positive growth scenario for the global economy. At the same time, the key industrial and retail indicators gained momentum, thereby shifting focus from fear of deflation to an inflation scenario offering fair economic growth. This spurred expectations of a tighter US monetary policy, and in June 2004 interest rates were hiked for the first time in four years.
New view of insurance and prevention after large fi re Paul Edvin Bersaas, Haugesund Customer with TrygVesta, Norway to limit payments, within reasonable limits, of course. In our dialogue with Vesta, it was a little bit of give and take from both parties, but we ended up with a result that was satisfactory to everybody,’ says Paul Edvin Bersaas.
‘Everybody knows the importance of safeguarding yourself against fi re and similar events. Nevertheless, you often ‘forget’
to do something about it. Very few people remember to consult their insurer for advice and guidance, but we actually have a common interest in this respect: to prevent and minimise the risk of fi re, and – if it happens anyway – to limit the damage as much as possible,’ emphasises Paul Edvin Bersaas.
‘You get a more varied view of insurance when you’ve gone through something like this. We used to save on our cover and terms and conditions to minimise the monthly premium.
‘In such a situation, both parties naturally seek to maximise benefi ts for themselves. As a customer, you’re naturally interested in getting maximum cover, while the insurer will seek
We have reaped the benefits of our first wave of Nordic synergies through shared staff functions, claims procurement, reinsurance and IT operations, and today we have adequate capital resources, restored profitability and a strong strategic platform. We will be reaping the benefits of the second wave of Nordic synergies through efficiency improving and cost-saving measures, in particular within staff functions, while at the same time making investments in growth and development.
TrygVesta’s strategic focus areas for 2005 include: • Focus on direct Nordic insurance
TrygVesta launched a wide variety of initiatives in 2004, including: • Establishment of a restructured Nordic organisation and implementation of the first wave of Nordic synergies
TrygVesta aims to further strengthen its core business. The reinsurance company TBi was divested in October 2004, and in December the Polish and Estonian subsidiaries followed suit.
The needs to secure oneself, one’s family and company change over time. TrygVesta intends to meet the needs of our customers by pooling products and service benefits in concepts targeted at specific life stages and customer groups.
More than eight out of ten personal and commercial customers renewed their insurance policies with us in 2004, which is not quite up to our long-term goal of achieving renewal from nine out of ten customers. Increased customer focus in the coming years will support the attainment of this goal.
We intend to continue the growth trend in 2005, and we are confident that even more Danish, Norwegian and Finnish customers will take out insurances with us.
In the long term, we expect to gain market shares by combining our concepts with strong distribution channels. We intend to strengthen sales of new policies through our partnership with Nordea and through our other sales channels.
Denmark, from 19% to 21% in Norway and from over 1.5% of the personal market in Finland to 8% by 2010.
The organisational changes carried out in 2004 completed the platform for achieving our strategic goals for the coming years.
Norway, and one Nordic business area for corporate customers in Norway and Denmark. In addition, we have introduced pan-Nordic staff functions.
• Formation of TrygVesta • Contribution of capital • Loss of DKK 1.1 bn before tax
In 2004, we brought down total costs by DKK 225m and when disregrading the activities divested, the total number of employees was reduced by 29.
efforts also focused on making the individual BSCs accessible to all employees of the Group on our shared intranet. We strive to obtain the greatest possible degree of openness and transparency in our activities.
Creating a common identity and shared values across national borders is an important prerequisite for the continued success of our Nordic integration and strategy. 2004 was characterised by efforts to improve TrygVesta’s value process. As part of these efforts we carried out a survey asking several hundred
We supply peace of mind because: • We show people respect, openness and trust
TrygVesta’s ambition is to have the highest level of customer loyalty in the Nordic region.
We have now created profitability. Therefore, our forwardlooking strategic focus area is our commitment to our existing customers and generation of growth in the personal and commercial portfolios. Our goal is that nine out of ten customers renew their insurance policies with us.
One of TrygVesta’s characteristics as a supplier of products and services that offer peace of mind are concepts that target customer needs. We want to offer customers a comprehensive insurance package comprising products, service guarantees and related services.
More than 280,000 Danes have already chosen the Tryg Familie concept which was launched in 1998. Another two life-stage oriented concepts for personal customers were added in 2004, when TrygVesta launched Tryg Ung and Tryg Senior.
TrygVesta intends to launch new concepts in Norway in 2005, involving, among other things, a new pricing system. In further developing the concept philosophy we will, of course, draw on the experience we have gained from the Danish and Norwegian markets.
TrygVesta has strong brands in the Danish and Norwegian markets, built up over many years. We therefore not only intend to maintain the branding of Tryg in Denmark and of
Vesta in Norway, but will aim to position the brands even more strongly and make the values embedded in the brands common to both.
The Tryg and Vesta brands will be visible in the marketplaces, while TrygVesta as a brand will be used to designate the
Tryg’s longstanding focus on concepts has induced an increasing number of Danish customers to take out more than one policy with the company.
Customers who take out all their policies with TrygVesta get added security as well as cash benefits.
Tryg Ung is for customers under the age of 29, who do not own a home or holiday home. In addition to cash benefits, policyholders are offered courses in driving technique, antivirus software, free psychological crisis therapy and social counselling.
Tryg Familie is for the 29 to 59 year olds. In addition to the cash benefits on, for example, policies and private alarms, Tryg Familie customers are covered by free psychological crisis therapy and an under-insurance guarantee. They can also take out a motor insurance with a slightly increased deductible, which ensures that the premium vill not rise if they report a claim.
Tryg Senior offers cash benefits and added security to people over 50 years old, including health check-ups at a special price and cover in the event of theft by deception.
Nordea’s customers are offered TrygVesta’s general insurance policies through the banks in Denmark, Norway and Finland.
We set up a branch in Finland in 2001 to sell insurance through
Nordea’s Norwegian branches began selling TrygVesta’s Norwegian policies in 2003, and bank distribution now accounts for 3% of our sales to Norwegian personal customers. There is still a very great potential in Norway.
TrygVesta launched unemployment insurance in Denmark in early 2004. During the year, members of seven unemployment insurance funds were offered to take out unemployment insurance to supplement their benefits. The new type of insurance has been subject to great interest since it was launched on 1 April 2004. In January 2005, TrygVesta furthermore began selling unemployment insurance in Denmark that does not require membership of specific unemployment insurance funds.
S A L E S O F N E W P O L I C I E S T H R O U G H B A N K D I S T R I B U T I O N
The survey, made by market research firm Norstat for Vesta in 2004, asked parents about their insurance priorities.
S AT I S FA C T I O N A N D L O YA LT Y I N N O R W AY 2 0 0 4
Each year we survey how customers perceive TrygVesta. The results of the surveys are used to ensure that the Group’s services match customer requirements. The more satisfied and loyal customers are, the longer they keep their policies with the
Tryg tops the score among the four biggest insurance companies in Denmark as far as customer satisfaction and loyalty are concerned. Loyalty scores unchanged, while satisfaction scores slightly lower than in 2003. We have addressed this challenge by boosting customer advisory services. The survey, conducted by Dansk KundeIndex, also shows that the small companies have the most satisfied and loyal customers – a phenomenon which is also known from the banking world.
In this section, we focus on our Nordic integration and exploitation of synergies, and on our work processes, in particular in claims situations.
As an extension of our Nordic strategy, TrygVesta changed its organisational structure at the beginning of 2004 in order to build a stronger foundation for improved efficiency and profitable growth. TrygVesta now has shared staff functions, two local, dedicated business areas for personal and commercial customers, one in Denmark and one in Norway, and one Nordic business area dedicated to the corporate market in Denmark and Norway. Companies with more than 50 employees or paying more than DKK 500,000 in annual premiums as well as guarantee insurance customers belong to the Corporate business area.
We have launched initiatives to further reduce costs and reap the benefits from the next wave of Nordic synergies, such as investments in shared, modern IT systems. We have also focused sharply on making our in-house work processes more efficient based on the best practice principle, which involves making the best method in either Denmark or Norway the one to be used in both countries in the future.
We are also making targeted efforts to generate Nordic synergies in the IT area. The outsourcing to CSC, which has handled all the Group’s IT operations since 1 June 2004, has yielded the planned, important benefits on the cost side, but also in the quality of our IT operations in the form of increased accessibility and speed. For example, in 2004 we migrated to the latest version of the Windows operating system for all workplaces in Denmark, while reducing the total number of IT products significantly.
Based on TrygVesta’s common IT strategy, we are aiming to introduce common developments and common IT systems where this is relevant. We introduced a shared intranet in the autumn 2004 and prepared migrating to a common SAP
departments and functions, giving all employees, who serve customers in TrygVesta, direct access to updated information.
The customer service systems also provide access to viewing the customer’s products and documents the dialogue with the customer. This provides a sound basis for a good dialogue with and efficient servicing of the customer. As planned in the implementation of the IT strategy, systems are gradually becoming more and more integrated, generating development synergy and helping to keep costs down: IT staff with identical competencies work together on solving shared problems in
In 2003, we introduced Tryg Reparation in Denmark, which involves that customers are offered to have their car repaired at one of the garages we cooperate with. In 2004, we launched
Due to the system’s efficiency, we expect that 40% of all motor claims can be finalised after the telephone conversation with the customer. In the longer term, the system holds potential for a larger degree of self-service when customers report claims.
When a fire broke out at the North Sea Museum at Hirtshals,
Denmark in December 2003, TrygVesta immediately sent staff to the site. TrygVesta had written the buildings, contents and business interruption policies, and it was vital to get an early over-view of the extent of the damage and do whatever could be done to limit further damage.
DKK 100m, including DKK 20m in business interruption losses, primarily due to the lower visitor volumes. Damage to buildings totalled DKK 57m, damage to contents DKK 22m, and the cost of catching new fish was DKK 1m.
Vesta’s crisis team of psychologists and doctors was deployed to help survivors in the distressed areas.
The violent storm that hit Denmark on Saturday, 8 January 2005, also hit TrygVesta’s telephones. TrygVesta immediately deployed its emergency resources, increasing the number of staff handling telephone calls in Denmark many times over. On the Monday alone, TrygVesta received 110,000 telephone calls
– the total number for all of December 2004 being 120,000.
Staff from all departments answered the calls, temporary staff was called in, and retired employees lent a hand. Our customer service system and teamwork stood their test: Five days after the storm, 30,000 new claims had been entered in the system.
There was no longer any queuing on the phones and no delay in replying to e-mails.
The consequences of the storm have not been finally calculated yet, but we estimate that a total of 46.000 customers were hit.
In January we estimated that the storm would entail claims payments of between DKK 750m and DKK 1bn to our customers.
The estimate is based on daily measurements of the number of claims entered in the IT system and the frequency with which they are received. We also look at the initial estimate of the extent of the loss, which our experienced claims handlers typically make during their first talk with the customer. The figure above shows some of these measurements. Finally, we compare these data with similar experience from previous storms and our experience with the claims handlers’ initial estimate of the claims expense relative to the payment our customer ultimately received.
The figures are a long way from those of the December 1999 hurricane, when TrygVesta recorded a little more than 80,000 claims totalling DKK 2.1bn.
TrygVesta’s ambition is to be an attractive workplace, offering employees manoeuvring space and responsibility, and focusing on learning and knowledge sharing. Our strategic focus area in 2004 with respect to our employees was to create a common identity and establish shared values. This focus area will remain unchanged for 2005, and the value process launched in 2004 will continue unabated.
A team of 19 Danish and Norwegian employees were appointed as value scouts. Their task was to conduct interviews with a total of 200 colleagues in Denmark, Norway and Finland in order to expose and document real examples of how values and rules of conduct are reflected in different companies, departments and functions. The value scouts subsequently took part in the work of uniting Tryg’s and Vesta’s mission, vision, values and rules of conduct, and defining a common basis for the Group.
Vesta’s brands, among other things to enhance our insight into the customers’ requirements and how they perceive insurance.
The results showed that both Tryg and Vesta are strong brands thoroughly founded in tradition. Customers meet the brands through our employees, and we are therefore now focusing our efforts to live by our new values and position the Tryg and
Executive Management had an opportunity to meet all employees in person and present the Group’s targets, ambitions and results. The direct contact between management and employees is important in a big company with many communication channels such as TrygVesta. In addition, the large-scale meetings were used as part of the value process to enhance the visibility of TrygVesta’s stakeholders – customers, employees, owners, politicians, financial analysts, partners and suppliers –
Group. The shared media are intended to enhance the framework for internal communication in TrygVesta. Both media are naturally focusing on the work involving our values, allowing all employees to monitor and participate in the process on an ongoing basis.
The rapid speed of change is here to stay. An attractive workplace needs to provide managers and employees with tools and techniques to cope with change, among other things by training and enhancing employees’ competencies on an ongoing basis. We dedicate substantial funds each year to training, which we regard as an investment in the future.
We achieved this target and set a new one of 94 for 2005.
This section focuses on customer profitability, cost savings, the results of our strategic focus, and our credit ratings with rating agencies. It also describes our strategic focus area of focusing on direct Nordic general insurance.
Vesta’s efforts over the past few years to improve profitability have been successful: our insurance operations have become profitable.
The model permits us to take into account the different characteristics of both the business areas and the products (such as risks of major fluctuations, reinsurance and distribution and administrative expenses) when defining financial targets. In this way, we ensure that relevant activities are implemented within the right product and customer areas. Our use of this model is an example of our increasing involvement of well-proven financial models in our considerations, both in the overall management of the Group and as a basis for specific initiatives in relation to individual products and, thus, individual customers.
TrygVesta launched a ‘personal injury project’ in Norway in the summer of 2004 aimed at improving profitability in the areas of workmen’s compensation and industrial diseases. The project is carried out across the business areas for corporate customers and commercial customers, and also draws on experience and knowledge from Danish colleagues, who have previously made a similar effort.
Generally, we have increasingly focused on the workmen’s compensation area in the past few years. It is difficult to forecast the cost of workmen’s compensation claims as claims may be filed long after a policy has expired, and old cases often develop contrary to the insurance companies’ expectations due to new judgments and changes in practice. This is an unfortunate development with significant financial consequences for the insurance industry as it is impossible to foresee changes with retroactive effect. Along with the rest of the insurance industry, TrygVesta is therefore anxious to have progressive and forward-looking legislation.
January 2004. Under the new act, more claims are required to be covered under workmen’s compensation policies. As a consequence, premiums for customers in the Danish market increased by more than 50% on average in 2004, solely because of the changed legislation.
On 1 January 2005, TrygVesta and most other Danish insurance companies began using a new index for adjusting prices for workmen’s compensation insurance in Denmark. We have done this in order to avoid, to the extent possible, future extraordinary premium increases due to changes in the practice of the National Board of Industrial Injuries and court decisions.
Board of Industrial Injuries, and developments in the practice applied by the National Board of Industrial Injuries in awarding occupational disability. As a result of the new method, premiums will increase by 7.95% in 2005, as opposed to 3.34% that would have resulted from the ordinary wage index.
This will be done through a closer dialogue with commercial and corporate customers holding workmen’s compensation policies on how they safeguard their staff by working actively in relation to the working environment, introducing a policy for sickness and similar efforts.
Subrogation means that TrygVesta will claim indemnification for its expenses from the party responsible for the damage. If, for example, a fire in a thatched house, insured with TrygVesta, has been set off by a worker using open fire nearby, the worker ’s liability insurer or the worker himself must pay instead of
Recent years’ systematic efforts have enabled TrygVesta to substantially reduce the average claims expense for personal and commercial customers in Denmark without jeopardising quality.
Danish customers fell from DKK 13,200 to DKK 12,900. TrygVesta ’s annual motor claims expenses in Denmark amount to approximately DKK 1.2bn.
TrygVesta’s personal accident business in Denmark has performed with a negative balance between premiums and claims over several years. Accordingly, we notified Danish personal policyholders of average premium increases of around 25% on their personal accident policies in the summer of 2004. However, we gave each customer the opportunity to get a lower increase by accepting reduced cover to the effect that the policy will cover if the customer suffers 8% permanent disability, while it previously covered at 5%.
So far, less than 1% of our customers have chosen to switch from the 5% to the 8% limit.
In 2004, TrygVesta intensified the efforts to identify additional savings and reduce costs. As a result, both staff functions and business areas identified substantial savings. This has already materialised in a 2.1 point reduction of TrygVesta’s expense ratio in 2004. The effect will be even stronger in the years ahead.
The fall in costs was also attributable to the first wave of Nordic synergies, shared IT outsourcing and distribution efficiency enhancements, including a reduction of the number of offices in Denmark. Total costs were DKK 225m lower in 2004. In addition, we reduced the number of employees by 29 by leaving vacant positions unfilled and by focusing on redeploying employees. The Group’s divested activities reduced the total number of employees by an additional 629.
operating agreement with CSC involves that all Norwegian insurance contracts are now printed in Copenhagen, which generates additional savings.
We finalised combining local offices in Denmark in 2004 and early in 2005. This finalised the implementation of the distribution strategy we launched in 2000 and which has contributed greatly to TrygVesta’s cost savings.
Kindlustus, in 2004 was consistent with the Group’s strategy to focus on its core business, which is direct Nordic insurance.
The three companies generated a loss on ordinary operations before tax of DKK 172m from 2002-2004. The divestments complete TrygVesta’s strategic adjustment and enable us to devote all our efforts to the Nordic marketplace. In the longer term, having a presence in Sweden would be natural for Tryg-
Good ratings are vital for TrygVesta. Brokers and corporate customers expect us to be rated, and a rating gives us easier and less expensive access to capital. We were therefore encouraged to see our ratings improve in 2004. Standard & Poor’s
(Moody’s) assigned an A3 rating with stable outlook to Vesta and confirmed Tryg’s A3 rating with stable outlook. All of these are interactive ratings, based on the rating agencies having been able to assess TrygVesta’s financial strength, risk management, senior management and prospects in a thorough review.
BBB(pi) by S&P, and Tryg was also rated A3 by Moody’s in 2003.
Dansk Kaution, was assigned an A- rating with stable outlook from S&P in May 2004. The rating was based primarily on
Dansk Kaution’s strong market position, capitalisation and good operating results over a number of years.
Vesta have similar trains of thought and action in many respects.
Lisbeth Sjursen was one of the 19 value scouts. She works in
Market Support in Bergen, Norway: ‘I was positively surprised by the sincerity, honesty and commitment my colleagues put into the project – both by telling very personal stories and in the form of well-founded pride and criticism,’ says Lisbeth Sjursen.
The value process also identifi ed weaknesses and requirements for enhancement of the organisation. One such area is uncertainty resulting from the growing requirements from our external environment and the continuous need to become better and more effi cient.
Bent Lundorf is one TrygVesta employee, who has felt the increased work pressure. Bent Lundorf assesses claims under contents policies in Denmark. Over the past few years, damage control service providers have been charged with assessing small claims, leaving scope for TrygVesta’s own assessors to deal with large claims in depth.
‘We consider ourselves the employees’ mouthpiece. It’s important that the values are visible in the day-to-day management, and the problems, such as stress, we have identifi ed must be addressed,’ according to Lisbeth Sjursen.
1,947m. The forecast assumes an unchanged level of interest rates and stable equity markets from 31 December 2004.
TrygVesta estimates that the combined ratio, net of reinsurance, for 2005 will be at the level of 92-96 with an expectation of 94 compared with the 93.1 achieved for 2004. The forecast for 2005 assumes a normal claims performance for TrygVesta.
The effect of TrygVesta’s strategic initiatives launched in 2003 and 2004 was quicker and stronger than was expected at the beginning of 2004. However, we maintain our programme for reaping the benefits of the second wave of Nordic synergies through efficiency enhancements and savings. At the same time, we intend to advance investments in customer-oriented initiatives that are part of the third wave of Nordic synergies.
The investment result is the profit on investment activities after transfer of technical interest. The forecast investment result assumes annual yields of 7.0% on shares, 2.9% on bonds and 7.1% on real property.
TrygVesta’s pension commitment in Norway is affected by interest rate fluctuations. Changes in this commitment are recognised as an expense, and accordingly, an interest rate increase of 1 percentage point would decrease the combined ratio, net of reinsurance, by 0.7 point.
The section Risk management contains a more detailed description of the operational and financial sensitivity in terms of risk management. The section New accounting rules as from 2005 describes the changed interest rate sensitivity. In the following, we describe the basis for our financial forecast for 2005.
The financial forecast for 2005 is based, among other things, on the Group’s portfolio model. The model uses historical data to project developments in the claims ratio, including probable variation factors such as claims frequency in the personal market, average expense per claim, frequency of large losses and the extent of catastrophe and storm events.
Other things being equal, the divestment of the Polish and Estonian activities and TBi will reduce the combined ratio by 0.6 point relative to a normal level for 2002-2004, when the three companies contributed a loss of DKK 172m to the consolidated profit before tax. Gross earned premiums in these companies amounted to DKK 1,035m in the 2004 financial statements.
A number of initiatives were introduced in the autumn of 2004 to further enhance profitability within the personal accident areas of Norwegian corporate business. These measures are expected to have a positive effect on the Group’s combined ratio for 2005.
The overall forecast and probable fluctuations are illustrated in the figure above, and the overall probable fluctuation of the combined ratio, net of reinsurance, is estimated to be in the range of 92-96.
The continuing activities of TrygVesta reported gross earned premiums of DKK 15,281m in 2004.
Vesta’s business philosophy, and competency in this area is an important success criterion. Risk management is very important, not only to TrygVesta, but also to the Group’s owner, the supervisory authorities and in particular to TrygVesta’s customers.
Customers who choose to take out policies with TrygVesta do it because they trust that TrygVesta will be able to meet its obligations of any kind, be it claims in connection with a industrial property burnt down or damage caused by storms.
Risk management in an insurance company involves assessing a large number of risks affecting various parts of the company’s activities (see fact box). In respect of financial types of risk,
This trend will continue in the years ahead, partly due to the work with the new EU solvency rules for insurance companies
The commercial part of risk management is carried out daily in each business area in connection with the writing of policies, payment of claims and individual underwriting of large corporate customers. Such risks are primarily managed through tariffs, policies, business procedures and structured follow-up.
Policies have been laid down for the most important areas of
The most important risk factor for TrygVesta is the risk involved in the insurance operations. A key element in the efforts to manage insurance risk is analysing risk on the different insurance types.
Insurance risk connected with writing insurance is generally assessed by means of tariffs based on statistical analyses of the risk type. TrygVesta’s pan-Nordic analysis function is responsible for making tariff analyses.
TrygVesta’s provisioning policy defines the framework for managing insurance risk related to provisions for claims. According to the provisioning policy, TrygVesta makes provisions that ensure that the likelihood of run-off gains exceeds the likelihood of run-off losses at any time. The actual calculation and monitoring is carried out by TrygVesta’s provisioning department, which is responsible for TrygVesta’s provisions in both Norway and Denmark. Provisions for claims are calculated by means of a number of statistical methods as well as assessments based on knowledge in the business areas. A reserve committee is responsible for coordinating across the organisation. The committee consists of representatives from claims handling and the provisioning department to allow early recording of any changing circumstances. Close follow-up on claims permits
TrygVesta to take swift action as and when the risk situation changes, for example in the personal accident area.
In a financial group such as TrygVesta, part of the financial risk is related to the relationship between the Group’s liabilities and the assets available to cover these liabilities. Interest rate risk is a case in point, currently affecting almost exclusively the value of investments in interest-bearing instruments such as bonds. In connection with TrygVesta adopting IFRS standards effective from the 2005 financial year, provisions for claims will also be affected more by interest rate fluctuations due to increased discounting, and the interaction of assets and liabilities will have a greater impact on the financial statements. Management of interest rate risk and other risks impacting both assets and liabilities is referred to as ‘Asset Liability Management’ (ALM).
In order to support this part of our risk management, TrygVesta has for several years made targeted efforts to develop a financial ALM model with which to calculate risk in the various parts of our activities and illustrate the consequences.
• calculation of TrygVesta’s internal risk equalisation and a related calculation of a limit for TrygVesta’s retention in connection with reinsurance
• assessment of the risk of TrygVesta’s rating being affected in connection with alternative investment strategies.
The ALM model is an important tool for TrygVesta’s internal risk management, and it ensures that impact analyses are made within a common calculation framework.
We will continue developing the ALM model in 2005 and intend to use it also for assessing the impact of longer-term strategic decisions.
Accordingly, the reinsurance programme is as far as possible organised in joint treaties comprising the entire Group, and the treaties are assessed and analysed at Group level.
TrygVesta. The practical aspects of TrygVesta’s reinsurance are handled in a close collaboration with the business areas.
Schematic illustration of TrygVesta’s ALM model. The individual elements are subject to several thousand computer simulations, making it possible to measure the aggregate effect of, for example, changes in investment strategy, business mix or reinsurance.
Over the past couple of years, an increasing number of Tryg and Vesta’s reinsurance treaties have been combined into joint treaties, generating annual synergies in the range of DKK 40m.
In 2003, TrygVesta changed its reinsurance from proportional to non-proportional cover. Thanks to a healthier gross business, this change generated savings of DKK 30m in 2003 and additional savings of DKK 140m in 2004.
TrygVesta has bought joint reinsurance for natural disasters, which also covers the part of Norwegian natural disasters that is not covered by the Norwegian Pool of Natural Perils. The cover is up to DKK 3.5bn with retentions of DKK 100m in Denmark and NOK 70m in Norway. The cover has been determined based on the risk to which the portfolio is exposed. The risk exposure has been analysed using market-based simulation models and has been determined on the assumption that a loss of more than DKK 3.5bn occurs less often than once every one hundred years. Should a terrorist event occur in Denmark or Norway, the joint reinsurance cover for natural disasters and terrorist events is up to DKK 1.5bn for buildings, contents and business interuption policies (the so-called property policies)
The investment activities are managed by the Group Investments department, which is responsible for investments on behalf of all companies in TrygVesta.
Based on a general, overall investment strategy, Group Investments draws up investment policies for each company in the
Group. This is done taking into consideration the characteristics of each company and the legislative framework for its operations.
International credit rating agency Standard & Poor’s rates borrowers’ ability to honour their obligations. Ratings are awarded in accordance with the following scale: AAA Extremely strong AA Very strong A Strong BBB Good BB Marginal B Weak C Very weak
In rating insurance companies, Standard & Poor’s uses a publicly accessible rating model that measures the company’s capital relative to its risk profile.
Vesta’s bond portfolio, while the value of TrygVesta’s liabilities will only decrease to the extent they are discounted. At present, as only provisions for workmen’s compensation in Denmark and Norway are discounted, an increase in interest rates would trigger an accounting loss for TrygVesta. As described elsewhere in this annual report, the adoption of IFRS accounting standards will entail increased discounting of provisions for claims, reducing the effect of interest rate changes on future financial results.
To be in the green scenario, the company’s core capital must cover both the traffic light scenario and the company’s solvency requirement, which is calculated in proportion to the insurance risk. TrygVesta was rated green at 31 December 2004 with an excess of DKK 3bn relative to a yellow rating and DKK 3.6bn relative to a red rating.
The investment policy aims to maximise return, taking into account the composition and duration of liabilities and the
Group’s risk profile, solvency and rating. Overall, TrygVesta’s liabilities have a duration of about two years, which dictates an asset mix focused on a high degree of security and strong liquidity. Therefore, liquid listed bonds with low credit risk and short duration will continue to constitute the major part of the investment portfolio.
TrygVesta is exposed to currency risk through its investments in securities outside Denmark and Norway. The Group generally hedges this risk relating to investments in shares and bonds denominated in foreign currency. Equity investments in subsidiaries outside Denmark have been hedged in 2004.
E X C E S S C O R E C A P I TA L R E L AT I V E T O R E D - A N D Y E L L O W - L I G H T S C E N A R I O S
TrygVesta’s investment portfolio. It also shows that only a small proportion of the Group’s accumulated profits is allocated to equity investments.
Natural for the bank to sell insurance Seija Korre and Taina Kujanen, Helsinki Customer with TrygVesta, Finland, and banking consultant with Nordea
‘For me, it’s a natural thing to discuss insurance with my banking adviser because she knows me well and I feel safe about her handling it,’ says Seija Korre of Helsinki, Finland.
Taina Kujanen, her banking adviser. Seija Korre is happy she accepted the offer of being insured with TrygVesta through
‘I was very frightened and worried and did not know what to do. When I called TrygVesta’s Finnish branch, Nordea Vahinkovakuutus, and told about the damage, they calmed me down and gave good advice.’
Profit/loss on investments after transfer to insurance activities 314 192 517 685 -170 4 711
Profit/loss on ordinary activities before tax 584 258 1,947 1,045 -774 109 423
Extraordinary items and minority interests 0 0 0 1 -1,256 7 0
Balance sheet Technical provisions, net of reinsurance 23,467 22,475 21,606 17,673 15,826
Key ratios, net of reinsurance Claims ratio, net of reinsurance 74.5 79.5 70.9 76.6 83.4 80.1 83.5 Expense ratio. net of reinsurance 21.4 23.5 22.2 24.3 25.8 25.3 26.8
Combined ratio. net of reinsurance 95.9 103.0 93.1 100.9 109.2 105.4 110.3
Number of full-time employees at the end of the period 3,762 4,420 4,411 4,316 4,264
The strong profit growth was primarily attributable to a significant improvement of the operating profit. Insurance operations reported an increase of DKK 1,080m relative to 2003 and DKK
Through targeted efforts since the Group’s establishment in 2002, TrygVesta has reduced its combined ratio by 16.1 points
DKK 662m, respectively. In addition, the Corporate business area continued the positive trend from 2003, recording a technical result of DKK 246m in 2004, despite large claims and a considerable strengthening of reserves within personal accident insurance.
In 2004, TrygVesta divested its activities in Poland and Estonia and its reinsurance activities, which were operated through
Finnish market in 2001, TrygVesta has reached a market share of just over 1.5% of the personal insurance market in Finland at 31 December 2004. Nordea Bank Finland, which is TrygVesta’s primary distribution channel in the Finnish market, has a share of some 40% of the personal market, and the potential for continuing this growth rate is hence significant.
T E C H N I C A L R E S U LT
1,783m in 2004, and we expect a further reduction of the reinsurance premium in 2005.
The technical result of DKK 1,456m in 2004 was to a large extent attributable to recent years’ efforts to ensure a healthier correlation between risk and price.
Personal & Commercial Norway), general price adjustments were implemented during 2003, within contents and house insurance. In 2004, TrygVesta worked proactively to reduce claims expenses and improve the overall customer package, for example by entering into agreements with garages and craftsmen. These efforts resulted in lower average claims and improved customer packages in the form of, for example, a replacement car during the repair period and a guarantee for a high standard of workmanship in repairing building damage.
In the corporate market, general price adjustments were implemented over the course of 2002 and 2003 within property and personal accident insurance in particular, while adjustments during 2004 were fewer in number and of a more specific nature. Initiatives to adjust prices and to provide more active risk advice to customers in the property area have been successful, hence restoring profitability in this business area.
Results within personal accident insurance were affected by a doubling of average claims over the past five years, and despite a falling claims frequency, this area was still not profitable in 2004. The implementation of the so-called ‘Social Inflation
Index’ in Denmark in 2005 will, however, contribute to also making this product area profitable.
However, the claims performance was also adversely affected in 2004 by events such as the blaze at a fireworks factory in the
On the positive side, the general underlying improvement which characterised 2003 and 2004 contributed favourably to
TrygVesta’s performance in 2004. In the mass markets in particular, the 2004 claims performance was favourably affected by a lower-than-average claims frequency, especially within house insurance in Norway and motor insurance in Denmark.
Improved risk selection, improved security and higher deductibles combined with generally milder-than-average winters resulted in a lower claims ratio in the mass markets. These markets have generally been characterised by declining claims frequencies in recent years. The claims frequency for house insurance in
Norway declined from index 100 to index 77 during the period from 2000 to 2004, which bears witness to a particularly low claims frequency in 2004 as compared with a normal year.
Claims incurred, net of reinsurance, totalled DKK 10,296m, corresponding to a decline of DKK 570m relative to 2003.
Over the course of 2003 and 2004, TrygVesta made targeted efforts to reduce costs in the short term as well as in the long term.
The savings were achieved through the first wave of pan-Nordic synergies. In particular, the integration of Group staff functions, including joint IT sourcing and outsourcing of IT operations, had a significant impact. In addition, efficiency improvements in the distribution network and increased focus on costs throughout the organisation contributed to reducing the cost level.
G R O S S D I S A S T E R A N D W I N D S TO R M E X P E N S E S , I N C L U D I N G T H E N O R W E G I A N P O O L O F N AT U R A L P E R I L S
In the longer term, TrygVesta expects to further reduce its cost level. This will continue to be a focus area, and in 2004
Profit on investments before transfer to insurance activities, but after payment of costs, totalled DKK 1,192m, corresponding to a reduction of DKK 226m relative to 2003.
DKK 595m in 2003. The decline in the amount transferred can be attributed to the generally lower level of interest rates in 2004 as compared with 2003.
DKK 87m in 2003. The effective tax rate was 25 as compared with 6 in 2003. This increase was due to the 2003 tax rate being affected by tax losses carried forward from prior years and offset against the taxable income and by tax-exempt unrealised capital gains.
The tax expense included a current tax charge of DKK 289m and a reduction of DKK 174m of TrygVesta’s tax assets.
equity of DKK 6,117m and technical provisions in the amount of DKK 23,467m.
Tryg i Danmark smba is the sole shareholder of TrygVesta A/S.
The profit for the year was DKK 1,407m. It is proposed that a dividend of DKK 650m be declared and that the remaining amount of DKK 757m be carried forward to next year.
B A L A N C E S H E E T
Performance was positively affected by the general price adjustments within household insurance in 2003 and within personal accident insurance in 2004. In 2004, TrygVesta succeeded in improving quality as perceived by customers in claims situations, while reducing average claim expenses through claims procurement projects, such as Tryg Reparation and Tryg Bygning.
Profit/loss on gross business 7 51 485 179 -73 -360 -779
Technical interest, net of reinsurance 42 41 164 147 219 233 274
Expense ratio. net of reinsurance 18.3 24.0 20.9 23.5 24.1 25.6 28.1
Combined ratio, net of expenses to reinsurance 100.9 99.2 93.6 99.8 104.9 108.0 113.0
relative to 2003, including index regulations totalling approximately 2.5%, which was satisfactory in a competitive market.
It is particularly satisfactory that sales through Nordea’s branches continued to generate significant net growth in 2004. Likewise, sales of group insurance were highly satisfactory. Over the course of 2004, TrygVesta was successful in increasing the volume of business with individual customers to the effect that customers have increasingly pooled their insurance policies with one insurer. This is the result of dedicated efforts to meet the entire range of needs a customer may have with concepts adapted to that specific customer’s stage in life.
Within personal insurance, TrygVesta launched a new product in 2004, unemployment insurance, which was well-received by the customers.
A new Danish act on workmen’s compensation took effect on 1 January 2004. This act widely expanded insurance coverage, thereby entailing increased claims expenses. Among other things, the new act introduced damages for back injuries which were not previously covered by workmen’s compensation insurance. The legislative amendment resulted in substantial premium increases of 50% on average.
Since 2000, the combined ratio, net of reinsurance, has been reduced from 113.2 to 93.4 through proactive efforts to reduce our claims and expense ratios.
Claims related to the tsunami disaster in Asia in December 2004 affected Personal & Commercial Denmark’s profit adversely by
The reduction of the overall claims ratio in spite of these events was attributable, among other things, to the introduction of
In addition, Personal & Commercial Denmark experienced a continuation of the favourable trend in the claims frequency for motor and house insurance from 2004. The claims frequency for house insurance increased significantly in 2002, only to return to a more normal level in 2004. The frequency for motor insurance has been declining in recent years and was lower than expected in 2004.
Supreme Court stipulating that no set-off can be made against claims related to flex jobs.
In 2004, equalisation provisions were applied in connection with the fireworks factory blaze in Kolding. Furthermore,
Personal & Commercial Denmark has implemented a comprehensive project entitled ‘Decentralised Policy Issuance’ (DPI)
During 2005, the DPI project will be followed by efficiency improvements within claims handling processes, starting with motor claims – an area characterised by particularly heavy case loads and substantial correspondence.
Explosions and fi re blazes at Kolding Henning Holluf Nielsen, Svendborg, Claims assessor with TrygVesta, Denmark
Tryg set up an emergency team at the claims centre at Kolding immediately after the blaze, which remained open until late in the evening and over the weekend. Tryg also had claims assessors at the school to which people had been evacuated, providing advice and guidance to customers. All affected customers were offered psychological crisis therapy, and the deductible and bonus loss on their policies were suspended for claims related to the blaze.
The technical result of Personal & Commercial Norway improved by DKK 453m relative to 2003, reflecting a combined ratio, net of reinsurance, of 84.3 and a particularly profitable mass market in Norway.
In general, this business area has performed satisfactorily over the past five years. The improvements achieved over the course of 2003 and 2004 were highly encouraging and can be attributed to price adjustments particularly within house and motor insurance in 2003, improved risk selection, improved claims procurement and an unusually low claims frequency for house insurance in Norway in 2004.
Profit/loss on ceded business -20 -16 -86 -93 -228 240 125
Technical interest, net of reinsurance 33 45 140 204 263 197 198
Combined ratio, net of reinsurance 89.4 86.6 84.3 98.4 105.3 97.3 94.8
Gross earned premiums were DKK 4,421m in 2004. Expressed in the local currency this was an increase of 2.1% relative to 2003, which was slightly below the earnings target. This reflects a year in which the relationship between customer inflow and customer outflow was unsatisfactory during the first six months, but improved during the last six months following the implementation of a restructured sales organisation.
NOK depreciated relative to DKK in 2004. All things being equal, earnings in Norway will therefore show a falling trend when expressed in Danish kroner. Exchange differences had an adverse effect of approximately DKK 36m on the financial results in 2004 as compared with 2003.
The claims ratio, net of reinsurance, was 58.4 in 2004, an improvement of 13.7 points over 2003.
C O M B I N E D R AT I O , N E T O F R E I N S U R A N C E
In general, the performance in commercial customer operations was satisfactory, composed of a slightly less than satisfactory performance within personal accident insurance and a very satisfactory performance in other areas.
The expense ratio, net of reinsurance, was 25.9 in 2004, up 0.4 point relative to 2003.
Personal & Commercial Norway was positively affected by the first wave of cost synergies prompting cost reductions relative to 2003 from staff functions in particular.
In the years ahead, the expense ratio in this business area will be positively affected by the second wave of Nordic synergies.
Likewise, experience gained from the implementation in Norway of ‘Decentralised Policy Issuance’, which reduced distribution costs in Denmark substantially, will contribute to a reduction of the expense ratio.
Quick help when the tsunami hit Gunhild Horn, Tønsberg, Customer adviser with TrygVesta, Norway
Thailand. The party comprised two adults, two daughters aged 13 and 18, and a friend aged 18.
‘We were among the fi rst to be evacuated to the mountains in trucks.
Alarm, who updated me on the latest news and reassured that they would take care of all the practical matters and cover the costs so we could go home as soon as possible. That was exactly what we needed the most. The travel agency was useless. We really learnt that a good travel insurance policy is invaluable!’
‘We were lucky despite the abrupt end to our holiday. We got all our luggage, tickets and passports out, and we could return to Norway after a couple of days. It is still diffi cult to comprehend the scale of this disaster’.
Profit/loss on ceded business -102 -128 -570 -801 -363 -495 201
Technical interest, net of reinsurance 46 40 190 209 314 251 251
Combined ratio, net of reinsurance 91.3 113.8 97.1 101.1 114.4 105.8 119.0
The Nordic business area Corporate continued on the growth track from 2003, improving the 2004 technical result by DKK
91m to DKK 246m in spite of increased expenses related to large claims totalling DKK 140m and considerable expenses incurred within personal accident insurance as a result of a Danish Supreme Court ruling and the implementation of a broader definition of industrial disease in Norway.
There is still a need to make minor price adjustments within
Norwegian personal accident insurance in order for the Corporate business area to meet TrygVesta’s internal targets. However, the Norwegian Corporate business area showed rapid improvements over the course of the last six months of 2004 in particular and now contributes positively to the technical result.
Moreover, a limited number of customers, especially within the group of customers served by brokers, left TrygVesta.
The claims ratio, net of reinsurance, was 81.9, an improvement of 0.6 point over 2003.
The claims ratio was composed of a generally good claims performance in traditional corporate insurance – property, liability, motor, cargo, etc. On the other hand, the claims performance in the marine and personal accident businesses remained unsatisfactory.
2004 was characterised by an above-average number of large marine claims. We do not see this as a reflection of a general trend but rather as individual claims events. In particular two large claims, which in aggregate represented claims totalling some DKK 100m, had a negative impact on the financial results: the tanker Panam Serena, which exploded in January 2004 near Sardinia, and the suction dredger Thor, which sank in September 2004 after a collision.
Denmark and the implementation of a broader definition of industrial disease in Norway resulted in a DKK 265m increase of reserves. Moreover, developments within the personal accident business were generally not satisfactory.
The expense ratio, net of reinsurance, was 15.2, an improvement of 3.4 points over 2003.
The Stokke’s home burnt down on 1 April 2004. It was an explosive fi re, and the family had to get out in a hurry. The house was so damaged by fi re, smoke, soot and water that it could not be saved. It was just before Easter, and the family initially took refuge in their cottage in the Norwegian mountains. The family’s members took comfort in the fact that ‘we may have a much poorer home, but we’re all here.’ They now live in a temporary home in Oslo, not far from the site of the fi re.
Thanks to excellent work on the part of damage control service provider Polygon, which Vesta hired, a few of our treasures can luckily be saved.’
‘The claims statement as such is only the tip of an iceberg. Below the surface lurks a lot of worry and concern, you’re unhappy about all the things you’ve lost and concerned about the future.
‘We had to listen to a lot of horror stories about diffi cult insurers, and this was one of the reasons we chose to engage a lawyer.
DKK/EUR rate, quartely/annual average 743.43 743.30 743.99 742.92 743.08 745.74 -
Profit/loss on ceded business 1 1 0 0 -4 -1 -
Technical interest, net of reinsurance 1 0 2 1 1 0 -
Gross claims ratio, net of ceded business 63.3 70.7 68.7 78.5 103.5 91.1 -
Combined ratio. net of expenses to reinsurance 134.2 151.0 148.5 181.3 419.8 1,886.2 -
TrygVesta’s Finnish business, Nordea Vahinkovakuutus, generated growth in gross earned premiums of almost 60% in 2004, corresponding to earned premiums of DKK 97m as compared with earned premiums of just DKK 2m in 2001.
The claims ratio, net of reinsurance, was 68.6, a highly satisfactory improvement of 9.6 points over 2003. This is remarkable considering the size and age of the portfolio. And it supports the assertion that a banking customer who buys insurance typically has a satisfactory claims performance.
TrygVesta is endeavouring to implement a solvent scheme of arrangement for Chevanstell Ltd. in late 2005, which would accelerate the final winding up of the business in Chevanstell Ltd.
Chevanstell Ltd. and its creditors, but is subject to UK court approval.
In line with TrygVesta’s focused Nordic strategy, the Group divested the activities of the reinsurer Tryg-Baltica International
But I’m actually quite content with TrygVesta. It’s especially a big advantage that TrygVesta discloses segmented and country -specifi c fi nancial information. Many of its competitors tend to go the opposite direction.’
Net investments amounted to approximately DKK 5.6bn in 2004. Seen in isolation, the divested activities Tryg-Baltica International and Tryg Polska reduce the balance sheet by approximately DKK 900m.
The return on the overall bond portfolio in TrygVesta including cash and cash equivalents was DKK 692m, equal to 3.2% for the full year 2004, while bonds in the Danish companies and in
– comprises Danish mortgage bonds, placements in the Norwegian money market and government bonds. The remaining part is invested in other corporate bonds, primarily of investment grade credit quality. High yielding and emerging market bonds account for less than 1% of the overall portfolio.
The investment return on real property was DKK 146m, equivalent to a total return of 7.8%. The Group sold investment properties worth DKK 50m in 2004. At 31 December 2004, the occupancy rate was 95.6% against 95.5% at 31 December 2003.
The portfolio is well-diversified and consists of quality property, typically in prime locations in major cities in Denmark and
Norway. The portfolio mainly comprises office premises, but also a small proportion of other commercial property and residential property.
Danish and Norwegian shares, accounting for approximately 15% of the portfolio of listed shares at 31 December 2004.
406m, equivalent to 15.9%. The healthy performance was driven by fair returns in the big international equity markets and extraordinarily high returns in the Danish and Norwegian equity markets. Danish shares yielded 22.5%, while Norwegian shares yielded no less than 39.2% compared with 23.2% for the
and 10.1% for MSCI Europe and MSCI US, respectively. Unlisted shares amounted to a total of DKK 159m at 31 December 2004.
The Supervisory Board and the Executive Management have today considered and the Supervisory Board has adopted the annual report for 2004 of TrygVesta A/S and the TrygVesta Group.
Authority’s executive orders. We consider the accounting policies adopted to be appropriate to the effect that the annual report gives a true and fair view of the Group’s and the parent company’s assets and liabilities, financial position, results of operations and cash flows.
As described in Accounting policies on page 73, the annual report contains pro forma financial figures for the Group for the 2000, 2001 and 2002 financial years. The TrygVesta
Group was established on 28 June 2002 by a non-cash contribution of the Nordea AB Group’s general insurance activities to TrygVesta A/S.
In our opinion, the annual report gives a true and fair view of the Group’s and the parent company’s assets, liabilities and equity and financial position at 31 December 2004 and of the results of the Group’s and the parent company’s operations and of the Group’s cash flows for the financial year 2004 in accordance with the Danish Insurance Business Act.
As described in Accounting policies on page 73, the annual report contains pro forma financial figures for the Group for the 2000, 2001 and 2002 financial years. The TrygVesta Group was established on 28 June 2002 by a non-cash contribution of the Nordea AB Group’s general insurance activities to
Therefore, the pro forma figures represent a period during which the Group did not exist as a legal entity. Reference is made to Management’s description of the basis for stating the pro forma figures.
January 2002 and the company’s subsequent acquisition of the general insurance activities of Nordea AB as at 28 June 2002.
Tryg Ejendomme I A/S, which was divested on 31 December 2003, is included in the pro forma figures for the full period.
A/S and the Nordea Group, respectively, until the date they were divested, these being 1 December and 17 December 2004, respectively.
Where the accounting policies have been changed during the period, the comparative figures of each company have to the extent possible been adjusted on consolidation to comply with the current accounting policies. Such adjustments only have a minor impact on the pro forma figures.
On consolidation, intragroup income and expenses, intragroup accounts and dividends, and gains and losses arising on transactions between the consolidated undertakings are eliminated.
Equity investments in subsidiary undertakings are eliminated by the parent company’s proportionate share of the undertakings ’ shareholders’ equity at 31 December.
Goodwill arising on acquisition represents the difference at the time of acquisition between the acquisition price and the proportionate share of shareholders’ equity of the acquired undertaking made up in accordance with the accounting policies applied by TrygVesta A/S. Any difference (goodwill) is recognised in the item ‘Intangible assets’ and amortised on a straight-line basis over the expected useful life.
Assets and liabilities denominated in foreign currency are translated at the exchange rate at year-end.
All currency translation gains and losses are included in the income statement under the item ‘Exchange rate adjustment’.
Intragroup services are settled on a cost-covering basis or on market terms.
Earned premiums and claims incurred represent general insurance and simple types of death cover (Group Life in
Norway) related to general insurance policies written by general insurance companies.
Claims incurred represent claims paid during the year adjusted for changes in provisions for claims less the reinsurers’ share.
Depreciation is charged on a straight-line basis over three to five years. Minor acquisitions costing less than DKK 100,000 are recognised as an expense in the year of acquisition, except for assets acquired as part of a specific project. Computer equipment held under finance leases is recognised and depreciated as if purchased by the company.
Profit from group undertakings includes the parent company’s share of the profit on ordinary activities of the subsidiary undertakings before tax. Tax relating to group undertakings is included in the item ‘Tax’. Exchange differences arising on the translation of the net asset value of foreign subsidiary undertakings at the beginning of the year are included under the item ‘Currency translation adjustment’.
Income from associated undertakings includes the parent company’s share of the profit on ordinary activities of the associated undertakings.
Interest, dividends etc. represent interest earned, dividends received etc. during the financial year. In addition, the item includes gains and losses on bonds drawn for redemption.
Other items include the parent company’s administrative expenses and income and expenses related to the sale of products for Nordea Liv og Pension.
Extraordinary items include amounts which by their nature are unusual for the company and which are clearly different from the ordinary operations.
The item ‘Tax’ represents estimated Danish and foreign corporation taxes for the year and movements in deferred tax or tax assets. Tax on the profit for the year is calculated based on the pre-tax profit for the year adjusted for non-taxable income and expenses. Tax relating to discontinued activities is included in the item ‘Discontinued activities’.
Development costs and capitalised software are measured at cost less amortisation. The assets are amortised on a straightline basis over four years from the date they are taken into use.
Goodwill acquired after 1 January 2003 is measured as the difference at the time of acquisition between the cost and the proportionate share of the acquired undertaking’s shareholders ’ equity made up in accordance with the accounting policies applied by TrygVesta A/S. Goodwill is amortised on a straight-line basis over the expected useful life.
Equity investments in group undertakings are measured at the parent company’s proportionate share of the subsidiary undertakings ’ shareholders’ equity at 31 December made up in accordance with the Group’s accounting policies.
Listed shares, unit trust units, bonds etc. are measured at the prices quoted at the end of the year. Unlisted shares, fixedinterest loans etc. are measured at a conservatively estimated market value at the end of the year based on the companies’
Derivative financial instruments are measured at market value at the end of the year. Derivative financial instruments are used to the extent they enable the Group to manage its assets and liabilities more efficiently, thereby reducing risk or causing only a small increase in risk.
Operating equipment is measured at cost less accumulated depreciation. Operating equipment is depreciated on a straight-line basis over the estimated useful economic lives of the assets, which are three to five years.
The tax asset comprises deferred net tax assets calculated as 30% of the present value of net positive timing differences between accounting and taxable values, plus tax losses to the extent they are expected to be offset against future taxable income.
Proposed dividends are recognised as a liability when adopted by the shareholders at the general meeting. Dividends expected to be declared for the year are shown in the profit allocation.
Unearned premium provisions represent the proportion of premiums and reinsurance premiums collected which relates to subsequent financial years.
Equalisation provisions in credit and guarantee insurance are calculated in accordance with rules laid down by the Danish
The rules governing the setting up and application of equalisation provisions are laid down by the regulatory authorities of the relevant countries.
Other technical provisions represent provisions for risk not yet run off. The provisions represent the amounts deemed necessary, in addition to unearned premium provisions and future premium rates, to cover future, anticipated expenses and settlement of claims not yet incurred within the period of cover of the policies.
Forsikring AS, which is a defined benefit plan, is stated at an estimated market value using Norwegian assumptions relating to long-term economic developments, pension and mortality.
Provisions for tax comprise deferred net tax amounts calculated as 30% of the present value of net positive timing differences between accounting and taxable values less tax losses to the extent that they are expected to be offset against future positive taxable income.
The cash flow statement is presented in accordance with the direct method based on premiums.
TrygVesta intends to adopt IFRS because we wish to contribute to greater transparency in the market, as most of TrygVesta’s competitors are listed companies and therefore required to adopt IFRS standards. TrygVesta furthermore wishes that rating agencies, banks and other stakeholder groups treat the
TrygVesta has decided to provide the additional information required by IFRS, enhancing the level of detail for certain items.
The principal aspects that are IFRS inconsistent relate to the presentation of the income statement and balance sheet. For the time being, TrygVesta will comply with the Danish Financial Supervisory Authority’s executive order in this respect.
On transition to IFRS, the present accounting policies will be changed in a number of respects, partly with respect to recognition and measurement, partly with respect to the presentation in annual and interim reports.
Below is a statement of opening equity at 1 January 2005 made up in accordance with IFRS standards adopted at
TrygVesta already applies discounting of provisions relating to compulsory workmen’s compensation insurance, but has decided to discount all provisions for claims.
Discounting will affect the motor liability, professional liability and personal accident classes, in particular.
TrygVesta has previously recognised a commitment in respect of the pension scheme in Vesta Forsikring AS. The scheme is a defined benefit plan, which was previously measured at an estimated market value using assumptions relating to longterm economic developments. IFRS requires the liability to be stated at market value based on the economic factors ruling on the balance sheet date.
Under IFRS, dividend will not reduce equity until the time of payment.
IFRS prohibits the recognition of provisions for deferred tax and tax assets on a discounted basis. Under the previous accounting rules, TrygVesta’s tax asset was recognised on a discounted basis. On transition to IFRS, the tax asset will be adjusted for the recognised effect of discounting.
Gross key ratios Gross claims ratio 72.0 75.4 67.6 71.5 78.1 77.5 87.9 Ceded business as percentage of gross premiums 3.4 4.9 5.0 6.8 5.5 2.6 -5.0
Danish general insurance Gross earned premiums 2,128 2,104 8,570 8,242 7,411 6,467 6,197
Combined ratio, net of reinsurance 101.2 98.8 93.7 96.6 105.5 106.8 110.5
Gross key ratios Gross claims ratio 81.7 73.2 71.6 70.4 82.0 80.5 89.6 Ceded business as percentage of gross premiums 2.0 4.7 3.5 6.1 1.6 1.6 -5.7
Gross claims ratio, net of ceded business 83.7 77.9 75.1 76.5 83.6 82.1 83.9
Number of full-time employees at the end of the period 2,223 2,248 2,330 2,458 2,552
Combined ratio, net of reinsurance 86.3 100.4 89.0 103.9 110.6 101.6 108.8
Number of full-time employees at the end of the period 1,454 1,460 1,374 1,272 1,141
Finnish general insurance Gross earned premiums 28 19 97 61 21 2 -
Loss on ordinary activities before tax -9 -9 -47 -49 -67 -29 -
Gross key ratios Gross claims ratio 63.1 69.9 68.5 77.5 84.8 91.1 Ceded business as percentage of gross premiums 0.2 0.8 0.2 1.0 18.7 0.0 -
Number of full-time employees at the end of the period 51 42 35 14 -
Key ratios, net of reinsurance Claims ratio, net of reinsurance - 116.8 69.3 75.6 78.3 72.2 81.0 Expense ratio, net of reinsurance - 22.8 30.4 30.2 42.0 38.0 34.5
Combined ratio, net of reinsurance - 139.6 99.7 105.8 120.3 110.2 115.5
Gross key ratios Gross claims ratio - 115.0 60.6 72.9 70.7 71.0 90.1 Ceded business as percentage of gross premiums - 0.8 9.0 4.9 9.8 5.8 -7.5
Gross claims ratio. net of ceded business - 115.8 69.6 77.8 80.5 76.8 82.6
Number of full-time employees at the end of the period 0 30 32 28 28
Profit/loss on ordinary activities before tax -9 -34 -29 -45 4 -9 -10
Key ratios, net of reinsurance Claims ratio, net of reinsurance 75.0 82.2 70.4 69.7 64.0 62.8 73.8 Expense ratio, net of reinsurance 41.9 58.7 42.2 49.5 47.7 43.5 46.7
Gross claims ratio, net of ceded business 75.9 92.9 71.7 74.5 67.7 67.1 72.1
Combined ratio, net of expenses to reinsurance 115.5 128.9 110.5 112.8 107.5 104.0 112.0
Estonian general insurance Gross earned premiums 7 10 36 39 41 - -
Loss on ordinary activities before tax -2 0 -2 -1 -13 - -
Key ratios, net of reinsurance Claims ratio, net of reinsurance 71.7 78.1 56.5 67.2 81.4 - Expense ratio, net of reinsurance 74.7 40.6 49.2 38.9 55.1 - -
Combined ratio, net of reinsurance 146.4 118.7 105.7 106.1 136.5 - -
Gross key ratios Gross claims ratio 67.3 79.7 54.0 73.2 90.8 - Ceded business as percentage of gross premiums 13.0 -1.0 12.6 -4.2 -8.7 - -
Combined ratio, net of expenses to reinsurance 126.2 116.0 103.6 105.4 133.4 - -
TrygVesta A/S (parent company) Profit/loss on investments (excluding subsidiaries) -8 -7 -29 -37 -20 - -
Loss on ordinary activities before tax -18 -19 -61 -59 -72 - -
Loss on ordinary activities before tax -12 -116 -65 -256 -304 -21 -12
Note General insurance Earned premiums Gross premiums written 16,274 16,613 Ceded reinsurance premiums -1,697 -2,375 Change in the gross provisions for unearned premiums 185 145 Change in the reinsurers’ share of the provisions for unearned premiums -86 -137 1 Earned premiums, net of reinsurance 14,676 14,246 2 Technical interest, net of reinsurance 537 595
Charges relating to investment assets Investment management charges -52 -53 Interest expenses -74 -70
Return on investment activities before transfer to insurance activities 1,192 1,418 2 Technical interest transferred to insurance activities -675 -733
Profit on continuing business 1,462 958 9 Loss on discontinued business -55 -217
Other financial investment assets 13 Capital participation 3,104 2,309 Unit trust units 246 18
Total amounts owing in relation to direct insurance business 936 1,281 Amounts owing from insurance companies 960 1,474 Amounts owing from subsidiary undertakings 0 51 Other amounts owing 708 1,788
Prepayments and accrued income Accrued interest and rent earned 383 262 Prepaid acquisition costs 0 41 Other prepayments and accrued income 58 72
Note Liabilities 16 Shareholders’ equity Share capital 1,700 1,700 Share premium account 0 2,968 Retained profits 4,417 692
Insurance provisions Provisions for unearned premiums Gross provisions 4,989 5,239 Reinsurers’ share -212 -393
Provisions for claims 17 Gross provisions 18,611 17,975 Reinsurers’ share -2,920 -3,087
Provisions for annuities by workmen’s compensation Gross provisions 1,267 1,159 18 Provisions for annuities, net of reinsurance 1,267 1,159
Provisions for bonuses and premium rebates, net of reinsurance 153 76 20 Other insurance provisions, net of reinsurance 49 82
Investments Acquisition/sale of real property (net) 69 22 Acquisition/sale of equity investments and unit trust units (net) -710 -394 Purchase/sale of bonds (net) -5,276 -3,672 Purchase/sale of secured loans and other loans (net) 70 210 Purchase/sale of operating equipment (net) -81 -56 Acquisition of subsidiaries 517 -6 Purchase/sale of associated undertakings -14 0
Total cash generated from operations -257 -148 Total investments 87 208 Total funding 95 -14
1 Earned premiums, net of reinsurance Direct insurance 15,887 15,992 Indirect insurance 572 766
Direct insurance, by location of the risks Denmark 8,546 8,110 Other EU countries 659 115 Other countries 6,682 7,767 2 Technical interest, net of reinsurance Transferred from investment activities 675 733
Technical interest in respect of discontinued activities -10 -6 3 Claims incurred, net of reinsurance Direct business -10,636 -11,390 Indirect business -359 -565
Run-off gains/losses previous years, net of reinsurance Run-off previous years, gross 169 -589 Run-off previous years, reinsurers’ share -166 73
Insurance operating expenses, gross -3,462 -3,745 Commission, etc. from reinsurers 245 303
Gross insurance operating expenses, including the following staff expenditure: Salaries and wages -1,634 -1,626
Other expenses to social security -119 -117 Payroll tax, etc. -92 -97
Administrative expenses include fee to the auditors appointed by the Annual General Meeting Deloitte -12.2 -11.6 Grant Thornton -0.9 -1.0
Other ordinary items Other ordinary income 121 115 Other ordinary expenses -147 -131
No share-based incentive schemes have been made with the Executive Management.
DKKm 5 Balance on the technical account, net of reinsurance, by line of business
Technical interest, net of reinsurance 66 78 54 74 40 45 6 7 28 42
Balance on the technical account 646 171 345 324 109 -42 75 80 20 3
Gross earned premiums 16,459 16,758 728 618 Gross claims -10,995 -11,955 -660 -508 Change in other insurance provisions -25 15 0 0 Bonuses and premium rebates -151 -56 0 0 Gross operating expenses -3,462 -3,745 -160 -140 Profit/loss on business ceded -814 -1,135 -1 -10 Change in equalisation provisions -93 -101 0 0 Technical interest, net of reinsurance 537 595 0 0
6 Interest and dividends, etc. Dividends on capital participation 85 52 Interest on securities, etc. 791 856 Capital gains by drawing and servicing of securities, etc. -48 -86 7 Realised and unrealised gains/losses on investment assets Land and buildings 31 21 Other capital participation 329 252 Bonds listed on the stock exchange exclusive of index-linked bonds -40 385 Mortgage loans 0 7 Divestment of subsidiaries 63 0
Allocated to the following items Net realised gains/losses on investment assets 143 176 Net unrealised gains/losses on investment assets 240 489 8 Tax Tax regarding previous years -24 13 Current tax -233 -29 Dividend tax foreign equities -6 -3 Change in deferred tax assets -222 -68
Amortisation and write-downs Balance 1 January -23 -19 Amortisation during the year -22 -4
Write-ups Balance 1 January 192 357 Write-ups during the year 38 77 Reversal of revaluation -16 -19 Revaluation, real property disposed of -11 -223
Book value by type of property: Business property 120 121 Office property 1,677 1,694 Residential property 203 194
In establishing the market value of the properties, the following return percentages were used for each property category Lowest Average Highest
Tryg / Vesta Tryg / Vesta Tryg / Vesta 12 Equity investments in associated undertakings Acquisition sum Balance 1 January 0 0 Additions during the year 14 0
Write-ups Balance 1 January 14 14 Write-ups during the year 0 0
Share premium account Balance 1 January 2,968 2,968 Transferred to Retained profits -2,968 0
Vesta Forsikring AS and Dansk Kautionsforsikrings-Aktieselskab have untaxed provisions for contingency funds of NOK 2,104m and DKK 139m, respectively, which are included in shareholders’ equity.
Settlement period 4.1 years 4.3 years Discounting interest rate 2.2% 3.2%
Settlement period 4.4 years 4.2 years Discounting interest rate 3.0% 3.5%
Settlement period 11.3 years 11.5 years Discounting interest rate 2.75% 2.75%
DKK 179m of the provision was applied in the year in connection with the sale of the subsidiaries Tryg-Baltica Forsikring, internationalt forsikringsselskab A/S and Nordicum Kindlustuse Eesti AS.
Of which debt falling due after more than 5 years 0 0
23 Capital adequacy Shareholders’ equity according to the annual report 6,117 5,360 Capitalised tax assets -3 -6 Solvency requirements to subsidiary undertakings -2,447 -2,610 Supplementary capital 700 700
Tryg Ejendomme A/S is jointly and severally liable with the demerged company Nordea Pension Danmark, ejendomsselskab IV A/S for the liabilities existing at the time of publication of the demerger, up to a maximum of the reversed value of DKK 382m.
Most of the companies of the TrygVesta Group are jointly taxed and jointly and severally liable for payment of imposed corporation tax.
Most of the Danish companies within the TrygVesta Group are commonly registered for VAT and payroll tax, and are jointly and severally liable for payment of all such direct and indirect taxes.
An amount of DKK 8m has been recognised in the item Gross claims paid in 2004, which is attributable to the fact that Tryg i Danmark smba (the owner of TrygVesta A/S, which is the parent company of Tryg Forsikring A/S) has guaranteed and thus committed itself to paying to Tryg Forsikring A/S the amount of any loss suffered by Tryg Forsikring in relation to one specific court case, the AON 77. The corresponding amount in 2003 was DKK 50m. The AON 77 is hereby concluded.
Profit before tax on continuing activities 1,462 959 5 Loss on discontinued activities after tax -55 -217
Accounts Income statement and balance sheet for Tryg Vesta A/S (parent company)
Other assets Cash in hand and at bank 1 50 9 Deferred tax assets 3 5
Prepayments and accrued income Accrued interest and rent earned 2 0
Liabilities 10 Shareholders’ equity Share capital 1,700 1,700 Share premium account 0 2,968 Retained profits 4,417 692
Profit before tax on continuing activities 2,009 1,104 Tax in subsidiary undertakings 483 -92 Loss on discontinued activities after tax -55 -217 2 Interest and dividends, etc. Interest on securities, etc. 38 43 3 Other ordinary expenses Administrative expenses -32 -22
Administrative expenses include fee to the auditors appointed by the General Meeting: Deloitte -3.3 -2.1 Grant Thornton -0.2 -0.3
4 Tax Change in deferred tax asset -2 5 Tax in subsidiary undertakings -483 -92 5 Loss on discountinued activities Earned premiums, net of reinsurance 25 376 Technical interest, net of reinsurance 37 46 Claims incurred, net of reinsurance -79 -479 Total insurance operating expenses, net of reinsurance -43 -189 Change in the equalisation provisions 6 0
Shares in associated undertakings according to latest annual accounts Shareholders’ equity Ownership share in %
Nordisk Flyforsikring A/S, Copenhagen, Insurance The company was established at the end of 2004. 50 28 8 Other financial investment assets Book value Bonds 92 0
Note 10 Shareholders’ equity Share capital Balance 1 January 1,700 1,300 Capital increase 0 400
Retained profits Balance 1 January 692 0 Transferred from Share premium account 2,968 0 Transferred cf, Distribution of profit 757 692
The company is jointly registered for VAT and payroll tax purposes with Tryg i Danmark smba and most of its Danish subsidiaries, and is jointly and severally liable with these companies for the payment of such taxes.
The companies of the TrygVesta Group have concluded reinsurance treaties and agreements about interest payment on current accounts based on market terms.
Profit/loss Share Shareholders’ Registered for Ownership capital equity DKKm office Country 2004 share, % 31.12.2004 31.12.2004
Mergers Tryg Forsikring II A/S and Tryg Forsikring, Rejse og Sundhed A/S merged into Tryg Forsikring A/S as at 1 January 2004.
Financial results for the three months ending 31 March 2005: 18 May 2005 Financial results for the six months ending 30 June 2005: 25 August 2005 Financial results for the nine months ending 30 September 2005: 16 November 2005
The tabel presents the result and selected balance sheet items together with key ratios for the Vesta Forsikring AS Group. The information is presented in accordance with generally accepted accounting principles in Norway, which correspond to the policies described in the annual report of Vesta Forsikring AS for 2004.
TrygVesta’s distribution strategy is based on marketing one brand in each country, offering the same product, price and quality through all sales channels. TrygVesta pursues a multiple channel distribution strategy. The most important channels are large customer centres, service centres or franchisees,
TrygVesta’s own insurance agents and sales through real estate agents, car dealers and Nordea’s branches. In addition,
TrygVesta has signed agreements with a number of trade unions and professional groups to offer their members personal insurance. Likewise, TrygVesta has industry agreements and agreements with insurance brokers in the commercial market.
TrygVesta owes its history to a number of mergers and acquisitions. The oldest component is the Danish insurance company Kjøbenhavns Brand which was established by Royal
Decree of 1731 after the great Copenhagen fire of 1728. The name Tryg first emerged in 1911.
At the end of 1999, Vesta, which had formed part of Skandia since 1989, became part of the family. Vesta’s history also includes a merger between Æolus and Bergens Brand in 1962, the acquisition of Cornhill’s Norwegian activities in 1997 and the acquisition of Aktiv Forsikring in 1998. In 2001, Vesta took over the Norwegian company Allianz.
In 1991, Vesta established a subsidiary by the name of Dial, which name was changed to Enter in 2000. Enter is a whollyowned subsidiary of Vesta and sells insurance through selected business partners, including car dealers.
Later that year, Tryg i Danmark smba acquired the general insurance activities of Nordea, thereby forming TrygVesta.
In 2004, TrygVesta divested the reinsurance company TBi, the Polish subsidiary Tryg Polska and the Estonian subsidiary
The sole business of TrygVesta’s branch in Finland is to sell insurance to personal customers through Nordea’s Finnish branches.
TrygVesta’s Estonian subsidiary was sold to the Australian insurance group QBE International in December 2004. The agreement is subject to the usual regulatory approvals, which are expected to be in place by the end of the first quarter of 2005.
Overview of the TrygVesta Group, simplified legal structure. Tryg Forsikring A/S’ subsidiaries TrygVesta IT A/S, Tryg Ejendomme A/S and Chevanstell Ltd. in run-off have been left out.
Being the owner of TrygVesta, Tryg i Danmark has a special interest in promoting the development of the insurance business. Tryg i Danmark does not carry out insurance operations itself, but supports TrygVesta by making capital resources available to and being represented on the
‘Report on Corporate Governance in Denmark’, which had been published in December 2003 by the Copenhagen Stock
The Supervisory Board considered each of the Committee’s recommendations and assessed their relevance to TrygVesta.
TrygVesta already complies with certain of the recommendations, while in certain areas, discussions are ongoing and initiatives have been launched with a view to implementing the recommendations.
Finally, the Supervisory Board finds it appropriate to deviate from the recommendations in one respect due to TrygVesta’s circumstances. This deviation relates to the size of the Supervisory
Board, where the number of members elected by the shareholders reflects that Tryg i Danmark is the sole owner and the wish to have a total duality of membership on the supervisory boards.
It should furthermore be noted that the Supervisory Board has considered setting up an audit committee. However, the
Supervisory Board finds that such a committee should not be set up at present as the Supervisory Board is comfortable with the internal and external auditors’ review and discussion with the entire Supervisory Board.
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 voting rights differentiation or other special rules.
2. The role of the stakeholders and their importance to the company
The Supervisory Board implements the consideration for stakeholders in TrygVesta’s corporate values, strategic basis and monitoring of the Group’s balanced scorecard, including reviewing the TrygVesta Group’s benchmarks for customers, processes, employees and financial position. Where relevant, the Supervisory Board has adopted policies and drafted guidelines for the Group’s activities in each dimension, such as the traditional risk areas. In addition, the Group has drawn up policies for claims handling, customer servicing, procurement, HR
During the year, TrygVesta has drawn up a compliance policy in relation to competition law. New, relevant policy areas are being considered on an ongoing basis, and applicable policies are followed up by such means as systematic customer and employee surveys, which are also included in the Group’s balanced scorecard.
TrygVesta’s external and internal financial communication is structured to the level of the requirements applicable to a listed company, and its interim reporting complies with the rules of the Copenhagen Stock Exchange. It contains financial reporting for material business areas and geographical segments and follows up on the Group’s strategic focus areas. The interim reports are published in Danish and English, and the annual report is also available in Norwegian. Furthermore, the
Group Executive Management meets regularly with analysts and other interest parties.
The Supervisory Board is responsible for the overall strategic management and the financial and managerial control of the
TrygVesta Group. To perform this task, the Supervisory Board uses management of targets and limits based, among other
The Supervisory Board of TrygVesta A/S held nine meetings and a two-day seminar in 2004. The agenda of the Board meetings follows events and themes of current interest to
TrygVesta, thus ensuring that the Supervisory Board deals with all relevant issues over the year. The Supervisory Board has scheduled six ordinary meetings for 2005 and will furthermore meet as and when required.
The Supervisory Board has not set up any permanent subcommittees or committees.
6. Remuneration to the members of the Supervisory Board and the Executive Management
In areas such as investment, reinsurance, underwriting and acceptance policies, IT security, IT resources and own insurance matters, risk is managed by way of regular discussions of policies with subsequent follow-up.
Being a financial holding company, TrygVesta is subject to the rules of the Danish Financial Supervisory Authority. TrygVesta therefore also has an internal audit covering the company as well as the insurance operations and Tryg i Danmark.
The Supervisory Board of TrygVesta A/S held nine meetings and a two-day seminar in 2004. The agenda of the Board meetings follow events and themes of current interest to
The remuneration to the Supervisory Board does not include variable salaries, company car schemes or severance plans.
Chairman of the Supervisory Board of - Tryg i Danmark smba - Tryg Forsikring A/S
Chairman of the Board of Directors of - Malaplast Co. Ltd. Bangkok
Member of Board of Representatives of - Tryg i Danmark smba - the Danish Rheumatism Association
Chairman of the Board of Directors of - A/S Kollektivhuset Hellebo - Ejendomsselskabet Storken A/S
- The Finance Sector Union of Vesta - The Finance Sector Union of Norway
Member of the Board of Representatives of - Tryg i Danmark smba
Deputy Chairman of the Supervisory Board of - TrygVesta IT A/S
Member of the Board of - Representatives of Nordea Liv AS
Chairman of the Board of Directors of - Dansk Kautionsforsikrings-Aktieselskab - SafeExIT A/S
The financial highlights and key ratios of TrygVesta have been prepared in accordance with the Danish Financial Supervisory
Authority’s executive order on the presentation of financial statements by general insurance companies. The section
Gross earned premiums include gross premiums adjusted for reserves (earned premiums ) reduced by bonus and premium rebates.
Net of reinsurance means that the amount is stated net of reinsurers’ share.
Expense ratio, net of reinsurance expresses the ratio of insurance operating expenses, net of reinsurance, to earned premiums, net of reinsurance.
Insurance operating expenses, net of reinsurance x 100 Earned premiums, net of reinsurance
Combined ratio, net of reinsurance is the sum of the claims ratio, net of reinsurance, and the expense ratio, net of reinsurance.
Provisions ratio is the ratio of provisions for claims, net of reinsurance, to earned premiums, net of reinsurance.
Return on equity in per cent is the ratio of the profit for the year to the average shareholders ’ equity in the year.
Gross key ratios refer to the fact that the key ratios in TrygVesta’s annual report are calculated in accordance with the rules stipulated by the
Danish Financial Supervisory Authority, according to which the combined ratio, net of reinsurance, is stated as the sum of the claims ratio, net of reinsurance, and the expense ratio, net of reinsurance, but that the key ratios may also be stated on a gross basis. According to the gross method, the 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 premiums. This method makes the actual cost of reinsurance more transparent.
The English text in this document is a translation of the Danish original. In the event of any inconsistencies the Danish version shall apply.