TrygVesta wants to be perceived as the leading peace-of–mind provider in the Nordic region and our aim is to prevent concerns from overshadowing our customers’ lives. Throughout 2008, our 4,000 employees used our products and services to provide peace of mind on a daily basis to more than 2.2 million private customers and more than 100,000 businesses.
We are the second-largest general insurer in the Nordic region with activities in Denmark, Norway, Finland and Sweden. We are the largest player in Denmark and Norway’s third largest player.
Management’s report Page Introduction to TrygVesta 1 Group overview 5 Preface by Mikael Olufsen and Stine Bosse 6 Financial highlights and key ratios of TrygVesta 8 Highlights of 2008 10
Markets and strategy 12 The insurance industry in the Nordic region 14 The Nordic insurance markets 17 Our products 20 Strategy 22 Strategic themes 25 Key performance indicators 26 Financial outlook for 2009 28
Insurance to corporate customers. Corporate customers are customers paying annual premiums of more than DKK 900,000 or having more than 50 employees. TrygVesta Garanti, the leading provider of guarantee insurance, is included in Corporate.
TrygVesta’s focus on profitable insurance operations, strong market positions, conservative investment approach, strong ownership structure and high competence level, our business model proved its worth in difficult times, thereby enabling TrygVesta to help provide peace of mind for customers, employees and shareholders alike.
The management and leadership development programmes we introduced in 2008 set the framework for even better qualifications and good business performance.
You can read more about TrygVesta’s strategy and strategic focus areas in the section on Strategy on page 22.
Earned premiums at DKK 17,323m were 4.9% higher in local currency terms, and the technical result was DKK 2,384m.
DKK 246m as set out in TrygVesta’s third quarter interim report. Based on our 2008 performance and the Group’s policy to distribute 50% of the profit for the year as cash dividend, the Supervisory Board recommends that dividends be paid at the rate of DKK 6.50 per share. No share buy backs are planned based on the 2008 results.
Growth in 2008 was strengthened by continuing solid performances in Finland and Sweden and the introduction of a new customer system to promote sales in Norway.
Like in 2007, claims expenses continued to increase in 2008, particularly with respect to buildings and health care. Consequently, we have implemented initiatives to ensure sustained profitability. Changed climate conditions impacted the 2008 performance less than had been expected. However, TrygVesta believes that the number of claims caused by changed precipitation and windstorm patterns will rise in the future.
The OMX C20 index including dividends fell by 46% and the
IT systems and underwriting. Our intention is for the new structure to contribute increased efficiency, innovation and earnings, thereby enhancing our market position.
“The Living Organisation” and “The Living House” create an environment for producing new ideas and developing them into profitable products and services supporting our pan-Nordic peace-of-mind delivery and translatable into our handshake – Dynamic, Compassionate and Innovative.
However, we are cautious about new recruitments in order to avoid subsequent dismissals. As far as climate issues are concerned, we have subscribed to the UN Global
Compact and the Carbon Disclosure Project. Our target is to reduce our CO2 emissions by 10% over two years.
TrygVesta’s managers have a special duty to ensure that we continuously work towards our vision. In 2008 we continued to work with corporate governance and our management profile. Among other initiatives, 192 managers attended in-house development courses such as ‘Leading the Brand’ and ‘Managing with BSC’. We promote management behaviour supporting our corporate vision, strategy and handshake, and going forward the management profile will be implemented through “The
TrygVesta’s general management is described in the section on Corporate governance on page 80.
For 2009, we expect 4% premium growth in local currency terms as compared with the previous outlook of around 5%
due to the adverse economic trends. On the earnings side, we expect a combined ratio of 92 before run-off, a profit after tax of DKK 1.3bn, and a return on equity of 14-16%.
We base this outlook on a number of assumptions with respect to equity returns and interest rate levels. Due to the volatile financial markets, the impact on profit of these fluctuations is subject to great uncertainty. The outlook for 2009 and the related assumptions are described in greater detail in the section on Financial outlook for 2009 on page 28.
Profit/loss for the year before tax 2,052 2,913 3,709 3,109 1,347
Run-off gains/losses, net of reinsurance -71 283 555 743 793 Relative run-off gains/losses -0.5 1.8 3.0 3.6 4.0
Balance sheet Total provisions for insurance contracts * 25,212 26,757 25,957 26,916 25,193 Total reinsurers’ share of provisions for insurance contracts 3,292 2,630 1,561 1,587 1,036
Other data Return on equity before tax and discontinued and divested business (%) 33 39 41 31 15 Return on equity after tax and discontinued and divested business (%) 23 28 35 23 9 Earnings per share, continuing business (DKK) 22.0 31.3 45.5 33.5 12.8 Net asset value per share (DKK) 100 121 147 148 128
Number of full-time employees, end of period Continuing business 3,728 3,694 3,808 3,814 4,091 * The reduction from 2007 to 2008 is mainly caused by the decline in NOK versus DKK.
** In the calculation of the gross expense ratio with adjustment pursuant to the order issued by the Danish FSA, costs are stated exclusive of depreciation and operating costs on the owner-occupied property but including a calculated cost (rent) concerning the owner-occupied property based on a calculated market rent.
TrygVesta in European top league Consulting firm Arthur D. Little concluded in a survey that Nordic insurance companies are the most cost- efficient in Europe. TrygVesta ranked four out of fifty companies.
The top-fifteen companies in Europe include nine Nordic-based companies. When comparing countries, Denmark came in one, Sweden two and Norway three.
Nordea partnership extended TrygVesta and Nordea have extended the successful partnership, operated since 1999, to 2013.
an ordinary bank account, to which public authorities and businesses may transfer money. All Danish citizens have a NemKonto.
Customers who do not want money paid into their NemKonto may still opt to receive a cheque.
Oslo achieves milestone Efforts to lift TrygVesta’s market share in Oslo were on track. TrygVesta’s shares of the private market in Oslo have been below those recorded in the rest of Norway. The goal is to lift TrygVesta’s share of the private market in Oslo to the level of the rest of Norway by the end of 2011.
Corporate in Sweden As a natural extension of the Group’s Nordic commitment TrygVesta set up a Swedish corporate business, initially with an office in Stockholm. The Stockholm office will collaborate with already established underwriting teams in Denmark and Norway to sell insurance to large customers in the Swedish business sector through insurance brokers.
Products initially offered to Swedish corporate customers include liability, consequential loss, building (property) and commercial cargo policies.
Our partnership with Nordea, developing our own sales channels and entering into partnership agreements with affinity groups and others enable us to reach wider circles of the Danish, Finnish,
The Nordic market is characterised by direct sales of insurances to private and commercial customers. Large corporate customers are approached either directly by the insurer or through an insurance broker. Customer contacts are based on telephone sales, insurers, insurance brokers, bancassurance and, on a smaller scale, via the Internet.
The price of an insurance product is determined on the basis of estimated claims expenses, selling costs and administrative expenses, and the desired level of profitability.
The Nordic insurance industry generated aggregate estimated earned premiums of around DKK 140bn in 2008 and accounted for some 1.8% of the region’s total GDP. The market is characterised by a few large companies holding relatively large market shares compared with other countries. The four largest companies in each country thus accounted for a total market share of between 64% and 87%. As the large companies also work on a pan-Nordic scale, the four largest insurers account for a total market share of around 46% in the Nordic region. In 2008, the large companies of the Nordic insurance industry reported sustained good core earnings from their insurance operations, although they were adversely impacted by the financial market turmoil.
The insurance industry is characterised by a robust underlying business because consumers and businesses buy peace of mind by agreement or because insurance is required by law.
All the large Nordic insurance groups focus on operating their insurance business in a profitable and financially healthy way, and for the industry as a whole the past few years have therefore represented a stable and profitable period. Competition can roughly be classified as price competition and service competition. Small insurers have in recent years chosen to apply lower prices as a means of attracting customers,
Nordic insurance companies in 2008 clearly demonstrated the adverse impact which losses on securities have on a company’s investment performance and capitalisation.
The poor investment performance and in many cases lower equity will in the years ahead force players with inadequate financial strength to increase their earnings from insurance operations considerably, which will mainly be from prices.
(ALM), which is used for calculating the individual solvency needs, and has establish its own risk environment.
In the years up to 2008, the entire Nordic region was challenged by a shortage of labour, partly due to wage pressure and partly due to difficulties in attracting and retaining labour. However, 2008 marked a shift towards rising unemployment and, probably, lower rates of wage increases.
In the longer term, however, businesses face a number of challenges with the large post-war generation retiring from the labour market and being replaced by the much smaller number of young people born in the 1980s and 1990s. This is one of the reasons why governments in the Nordic countries seek to increase the supply of labour, for example by enhancing integration and lifting employment rates among immigrants from non-Western countries. Read about a new integration initiative and other initiatives on page 59.
Recent years’ strong economic activity has increased claims expenses due to higher wages and higher costs of materials. The weaker economic activity in 2009 will probably improve procurement conditions for companies focusing on procurement management. For many suppliers, insurance companies are a stable and attractive business partner due to the steady procurement of goods and services in connection with claims. This applies especially in periods of slowing economic activity.
The market for private health care insurance has grown strongly in the Nordic region in recent years, and particularly in Denmark. The Nordic welfare model is well developed, but as far as health care is concerned, an increased strain on public hospitals and the desire for shorter treatment times have triggered a requirement for private treatment, and private health care insurance is one way to meet this.
TrygVesta has in recent years prepared for the new EU Solvency II regime, which will impact the capital structure of insurance companies and impose stricter requirements with respect to risk management and risk control skills. TrygVesta has applied an internal capital model (ALM) since 2002 as the basis for calculating the individual solvency need, supplemented by qualitative assessments of selected risk scenarios from the Group’s in-house risk management environment.
The Nordic insurance markets are characterised by the customer’s direct contact to the insurance company and large market players, and by large insurers focusing on profitability. Insurers compete on price as well as on content and service.
Competition in Denmark from 2005 to 2008 was dominated by aggressive price-driven behaviour by a number of small and medium-sized companies. Claims expenses were low in those years, permitting market players to use increased earnings for competitive purposes. Rising claims expenses and losses on securities caused price competition to subside during 2008. Several companies announced premium increases during 2008 as earnings came under pressure. For many Danish insurers, rising claims expenses and declining premiums triggered an adverse combined ratio performance in 2008.
The small players can be divided into two groups: 1) companies offering a full product portfolio to the private market; and 2) niche companies focusing on specific insurances to a segment or specific geographical areas.
New insurers in the market originate from the banking sector, but the challenges facing financial institutions in 2008 are assumed to impact those competitor’s capital requirements, hence reducing their incentive to expand unprofitably into new areas in the short and medium term.
Finland, and TrygVesta/Nordea has two competitors where the insurance company is part of a banking group.
TrygVesta has been an active player in the Finnish market since 2001, and has built a portfolio of DKK 432m
Like in 2008, players are expected to see a good deal of change in 2009. TrygVesta began offering corporate insurance to the Swedish market in 2008. A business partnership with AXA Corporate Solutions meets Nordic customers’ insurance requirements outside the Nordic region and AXA customers’ insurance needs in the Nordic region. Furthermore, Allianz has announced a partnership with Topdanmark for selling workers’ compensation insurance in Denmark, and Zürich Versicherung intends to offer direct and broker-based insurance to large corporate customers throughout the Nordic region. Finally, the financial turmoil seen in 2008 should be expected to induce some of the international groups experiencing challenges in respect of their capital strength to reconsider the value of having a presence in the Nordic market.
Being the second-largest insurance group in the Nordic region, TrygVesta has in-depth knowledge of and closely follows up on developments in the market. As described earlier, an economic downturn and declining investment portfolio values are likely to cause a number of players in the Nordic markets to change their behaviour in various respects. As things stand early in 2009 it is still too early to draw conclusions about the consequences the developments might have on market shares, but TrygVesta intends to seize any opportunities that contribute to profitable growth.
In the Danish and Norwegian markets, TrygVesta aims to retain and develop our market position through our behaviour, by striking a good balance between price and risk, and by offering dynamic, compassionate and innovative service to our customers, in claims situations as well as the ongoing follow-up.
TrygVesta introduced a new, extended building insurance policy in Denmark in November 2008, designed to provide enhanced peace of mind to customers. It includes, among other features, a new and extended water damage coverage. The price of the new, enhanced building insurance is higher than previously and differentiated relative to customers ’ risk profiles based on strong statistical material.
House contents insurance accounts for 6% of total premiums earned by the Group. A contents insurance policy provides cover for the loss of, or damage to, the contents of private dwellings with a range of additional features, such as cover for valuables temporarily located away from the home, legal expenses and liability arising from occupancy of a building.
TrygVesta therefore intends to make a special effort in 2009 to market this policy to parents. Profitability in the personal accident business will furthermore be enhanced by various initiatives in 2009.
Commercial insurance comprises Property and accounts for 14% of total premiums earned by the Group. A commercial insurance policy provides cover for the loss of, or damage to, the buildings, inventory or equipment of commercial customers. In addition, TrygVesta provides cover for financial loss due to business interruption resulting from covered claims.
Professional liability insurance accounts for 4% of total premiums earned by the Group. A professional liability insurance policy provides cover for various types of liability, such as claims incurred by a company arising from the conduct of its business or in connection with its products, professional liability incurred by professionals such as lawyers and engineers arising from negligence, and directors ’ and officers’ liability with respect to claims against board members and key personnel arising from negligent conduct.
Other products include coverage in connection with change of home ownership, unemployment insurance, health care insurance, travel insurance, insurance for summer cottages and pleasure boats, and insurance for pets.
TrygVesta’s vision is supported by our ongoing assessment and adaptation of our strategy, and it is implemented through our activities and action plans.
All sub-targets, activities and action plans contributing to the general strategic target and the strategic themes are typically based on meeting customer requirements and expectations. In practice, the strategy is pursued by means of improving day-to-day operations, increasing productivity, enhancing the quality of our customer service with respect to sales and claims, simplifying processes and making our communications with customers more understandable. The strategic efforts are planned and managed centrally, but with clearly defined ownership of current improvements in the relevant areas.
We generated 4.9% growth in local currency terms in 2008 with a combined ratio of 89.1 (93.7 before run-off).
We intend to enhance our sales power by adapting our sales channels and insurance terms and conditions and by creating entirely new solutions to specific geographical areas with a market potential, such as the so-called Oslo project. Our core focus will be on insurance operations and capital utilisation in our general efforts with respect to value creation, including knowing the value of individual customers and the financial performance of our distribution channels and claims handling centres.
Sales costs and administrative expenses in all business areas and staff functions are regularly reviewed in order to reduce unnecessary processes and costs, thereby gradually reduce relative costs over time. A number of our strategic action plans are also intended to contribute to this area.
Segmentation or structured and consistent use of customer data will enable us to prioritise and adapt products and service efforts to individual customer needs. We are in the process of refining our segmentation. When fully implemented, it will provide tools for enhanced customer loyalty and satisfaction and generate good opportunities for additional sales, thereby supporting profitable growth.
needs are met in the best possible way before, during and after they have a claim. Our insurance products and concepts build on advice intended to help prevent claims events from arising. Should an event nevertheless occur, the customer has a sudden need for coverage and service such as repairs or replacement purchases.
In 2008, the results of our strategic efforts with respect to the peace-of-mind delivery included that we simplified our communications with customers, written as well as oral. Our corporate values – Compassionate, Dynamic and
Our values are based on quality and simplicity. Online self-service options will meet many customers’ needs and wishes to deal with insurance matters at their own pace
Online self-service means that customers handle their own business, and that the underlying processes and products automatically generate policies with the desired contents, or that claims handling is automated. Selfservice options include policy changes, service, advice, claims handling and purchase of insurances.
Customers currently have online access to an overview of their policies in Denmark. Further to this, e-mail and text messages will become natural communication platforms with customers together with a personal space on our website, to be accessed by mobile or via the Internet.
The transition to more self-service options will contribute to the ongoing adjustment of costs of sales, administrative expenses and claims handling costs as well as to enhancing customer loyalty and satisfaction.
Group’s corporate values. A total of 192 managers attended development training in 2008. Systematic follow-up and development of the Group’s managers will be implemented in 2009, making them ambassadors for our corporate values in relation to employees and the external community.
Organisational change in 2009 Effective as at 1 January 2009, the organisational change helps embed the four strategic themes more clearly as ownership to the work processes and routines that support each strategic theme is more clearly defined. The organisational change will facilitate better utilisation of pan-Nordic synergies within efficient sales processes, customer service, product development, risk selection and procurement/service in claims handling.
Initiatives and results in 2008 • e-boks & Net ID/Digital signature • new intranet • pipeline of new web initiatives • efficiency improvements through Lean and new IT systems
Our customers should be confirmed in their choice of insurer on an ongoing basis.
Goals and projects for 2009-10 • to reduce CO2 consumption by 5% annually • to be the most attractive workplace in the financial sector in the Nordic region • to increase the proportion of employees with an ethnic background
Retained in Denmark as expected, higherthan -expected increase in Norway due to for example improved customer loyalty in the Oslo region
A ratio of 89.1 was achieved for the year due to lowerthan -expected claims expenses
The relatively low achievement level was attributable to capital losses on securities
We use the balanced scorecard (BSC) to implement the Group’s strategy and retain our strategic focus areas.
The 2008 survey has too few answers to give an accurate result
Due to the exceptional circumstances, TrygVesta has elected to update the outlook to include interest rate and exchange rate levels at mid-February 2009. Other assumptions remain unchanged.
Due to the greater uncertainty and large fluctuations in the financial markets we have elected to present a more detailed picture of our expectations, also adding a number of sensitivity calculations. This is intended to illustrate the impact of falling interest rates and the substantial depreciation of NOK against DKK.
Earned premium growth is expected to originate from organic growth and measures already implemented with respect to premiums. Finland and Sweden together are expected to contribute 1.8%, while Denmark and Norway will contribute 2.2%.
Expectations for expected growth in earned premiums in 2009 have been lowered relative to the 4.9% gross increase achieved in 2008. This is a consequence of the economic downturn which is expected to affect our business in several areas; lower sales of new cars, fewer new single-family houses being built and rising unemployment, reducing the requirement for workers’ compensation insurance. An overall assessment of the various factors has caused us to reduce the original growth forecast for 2009 from 5% to 4%.
Based on the interest rate level prevailing at mid-February 2009, the combined ratio for 2009 before run-off is estimated to be at the level of 91-93 with an expectation of 92. The past three years had run-offs of 1.8–4.6% of the combined ratio, for example, with a combined ratio in 2008 of 89.1 after run-off and 93.7 before run-off.
The technical result is expected to be DKK 1.5bn for the full-year 2009 relative to DKK 1,591m in 2008 and before run-off. The interest rate used for discounting has risen and fallen considerably again since the summer of 2008.
The outlook for the technical result for 2009 is therefore subject to uncertainty due to uncertainty with respect to interest rates. See also the sensitivity analysis in the section on Risk management on page 69.
Assumptions for sales and loss of policies are based on historical levels, planned initiatives and the market situation. Assumptions for price adjustments are primarily based on agreements relating to adjustments of individual insurance policies. The outlook is expressed in local currency terms.
trends generally being weighted stronger than those of prior years. Trends in the pricing of our insurance premiums, claims frequencies and the discount rate applied are the most important factors that may affect our overall performance. Assumptions for storm events and large claims are based on historical experience for not less than ten years, with recent years’ trends being weighted stronger than those of prior years. In addition, we incorporate the effect of profitability initiatives and the effect of any legislative measures in the anticipated claims level.
The outlook regarding gross expenses reflects the projected number of employees during 2009 and the related costs. The projected number of employees incorporates the effect of measures launched to improve efficiency.
The result of business ceded is based on contracts made with reinsurers to cover claims events and events such as storms and large claims. The expected result of business ceded is calculated on the basis of such contracts and historical data.
The outlook for the return on investments for 2009 is based on the following assumptions with respect to investment assets. An equity proportion of 3.6% and a return of 7% including dividend are assumed. Bonds are expected to account for around 86% of total investment assets and to yield a return of 3.93% based on interest rates mid-February 2009. Finally, the real estate portfolio, which accounts for 10% of assets including owner-occupied properties, is expected to yield a return of 6.1% exclusive of any value adjustments. In 2008, bonds, equities and real estate yielded returns of 6.1%, minus 32.8% and 8.4%, respectively. The investment result after transfer of technical interest for 2009 is expected to be a profit of
NOK is hedged. The table shows the impact on premium growth and the result of insurance operations of different
Development is the future “Meeting customers on their own terms is another strategic focus area. Our experience is that customers feel greater accessibility and peace of mind when they have an online self-service option. This focus produced a number of benefits for customers in 2008 and will continue to have a major influence on our communications with customers in the years ahead.”
TrygVesta’s focus on profitable growth in the insurance operations was once again the foundation that sustained the company throughout 2008, which was otherwise a challenging year for the insurance industry.
and a changed claims mix. However, claims inflation subsided in the second half-year of 2008 due to the economic slowdown. Premium increases and other measures were introduced in both Denmark and Norway in 2008 to strike a profitable balance between price and claims expenses
Investment activities generated a profit of DKK 440m before transfer of technical interest in 2008 compared with DKK 1,740m in 2007. The reduction was primarily attributable to capital losses on equities amounting to
DKK 3,109m in 2007. This was DKK 247m more than the full-year forecast announced in the third quarter 2008 interim report.
TrygVesta recorded gross earned premiums of DKK 17,323m in 2008, which was DKK 717m, or 4.9% in local currency terms (4.3% in DKK terms), more than in 2007. Premium growth was in line with expectations. It should be noted, in particular, that Sweden and Finland recorded aggregate growth of 69%, contributing DKK 234m of the DKK 717m.
Private & Commercial Denmark reported 1.8% growth in gross earned premiums over 2007. This was less than expected, and was affected in 2008 by relatively fierce competition from smaller companies. More existing customers chose to stay on with TrygVesta in Norway. The combined effect of this, a fair inflow of new customers and a large number of premium increases was to lift premium growth in Private & Commercial Norway to an annualised 4.8% in local currency terms, thereby exceeding expectations.
TrygVesta expanded its position within health care in 2008. The heavy demand for health care insurance
combined with good market timing of the launch of new product initiatives produced portfolio growth of more than 70% in Denmark.
Increasing average claims and high wage increases were the primary cause of the higher combined ratio, although in a historic and, in particular, European perspective 89.1 reflected a continued good and sound insurance operations performance.
Large claims – defined as claims of more than DKK 10m
– were a gross amount of DKK 586m in 2008 against a gross amount of DKK 1,042m in 2007. After reinsurer contributions, large claims amounted to DKK 490m net against DKK 637m in 2007. The most widely covered large claim in 2008 related to a fire on Bryggen in Bergen, Norway in September, which destroyed several of that city’s historic timber built houses. The level of fires in single-family houses in Norway amounted to NOK 264m in 2008, significantly above 2007, which amounted to NOK 209m.
Claims in 2008 were positively impacted by gains on prior year claims. The favourable run-off performance contributed a net amount of DKK 793m (gross amount of DKK 868m)
around 21 percentage points higher, driven by higher prices of labour and materials and by a changed claims mix towards a larger number of more expensive piping claims and reserve strengthening. To counter the effect of these factors on the
Costs impacted by investments in New Markets and the workplace of the future
DKK 37.3bn at 1 January 2008. The gross return on investment assets totalled DKK 1,258m in 2008 against
TrygVesta with certain immediate financial benefits as the annual rent exceeded the yield on bonds sold to fund the acquisition. Acquiring the head office also facilitates “The Living House” refurbishment project described in the preface to this annual report.
Total assets decreased from DKK 43,830m to DKK 38,453m in 2008, primarily due to the depreciation of NOK against
TrygVesta generated a cash inflow from operating activities of DKK 1.8m 2008 compared with DKK 2.7bn in 2007.
Investments amounted to a total of DKK 0.5bn in 2008, and there was a cash outflow for financing activities of
1.6bn and share buy back of own shares of DKK 1.2bn.
The change was attributable to cash dividends paid out in the amount of DKK 1,156m, purchases of own shares in the amount of DKK 1,197m, profit for the year and other adjustments.
Försäkringar Sak in Sweden for DKK 427m in transaction goodwill and a total amount of SEK 1,256m (DKK 810m).
DKK 164m lower in 2008 than in 2007, and high claims inflation at the beginning of 2008, which subsided towards the end of 2008.
Claims ratio, net of ceded business 69.1 63.6 68.6 Gross expense ratio 17.4 16.7 17.5
The technical result amounted to DKK 1,098m in 2008, which was DKK 342m lower than in 2007, but around
Private & Commercial Denmark also recorded strong growth within so-called industry agreements with the business sector as a result of recent years’ efforts to target selected segments of the business sector. These agreements are characterised by a high degree of customer loyalty and good profitability.
The implementation of the changed tariff parameters for motor insurance in Denmark resulted in a decline in the average motor premium throughout 2008. However, it stabilised towards the end of the year. Although the implementation of the new tariff parameters began in late 2006, it takes time before the entire portfolio has been transferred. The new parameters are based on the age of the car, the annual mileage and the age and gender of the driver, all of which facilitates a better risk assessment. The level of average motor insurance premiums is expected to remain largely unchanged in 2009. Average premiums will be favourably affected by the general increase in prices
As a result, Tryg Vejhjælp was added to the motor insurance coverage of some 300,000 concept customers as a customer benefit at no additional cost. The extended
Tryg Vejhjælp provides additional peace-of-mind services, such as changing of winter and summer tyres, taxi and hotel service and safety checks on the car. Sales of the extended Tryg Vejhjælp have exceeded expectations, thereby confirming that customers welcome the Group’s ambition to continuously improve the quality and service it provides.
The increase in 2008 was primarily attributable to higher building and health insurance claims and significantly reduced run-off gains as compared with 2007.
TrygVesta recording a higher number of costly claims, which gave rise to run-off losses in 2008, primarily attributable to increased provisions for cloudburst claims from 2007.
The claims frequency for building policies dropped by 5 percentage points in 2008, mainly as a result of fewer weather related claims. Due to the higher claims expenses, premium increases of approximately 11% were implemented on building policies at the end of 2008. The time lag from implementation of a price increase until it feeds through as a gross earned premium is up to two years, and the effect of such price increases will therefore only begin to
Expenses for weather related claims fell, as 2008 saw fewer cloudburst and storm claims as compared with previous years. Large claims totalled DKK 83m in 2008 compared with DKK 78m in 2007.
Run-off gains from prior-year claims positively impacted the 2008 performance by a gross amount of DKK 391m
(DKK 578m net) in 2007. Motor and workers’ compensation recorded positive run-off gains, whereas reserves for building policies were strengthened. Run-off gains had a favourable impact on the combined ratio of 6.3 percentage points compared with 8.9 percentage points in 2007.
Expenses rose to DKK 1,155m in 2008 from DKK 1,086m in 2007 due to high wage inflation, increased initiation of
IT projects and expenses of DKK 24m incurred in connection with “The Living House” in the fourth quarter of 2008. Excluding the expense in connection with “The
Living House”, the expense ratio was 17.1 against 16.7 the year before.
Gross claims ratio 63.6 66.0 72.7 Business ceded as % of gross premiums 1.7 1.8 1.5
In 2008, the net number of policies rose by 58,000. All
TrygVesta’s franchise and sales offices have applied a new customer system, ‘Salgsnøkkelen’, since the spring of 2008, which has significantly eased the administrative selling routines. Moreover, the growth in sales has entailed an increase in sales and commission expenses.
As a percentage of gross earned premiums, large claims thus amounted to 2.8% compared with 2.7% in 2007.
The claims frequency for building policies rose by approximately 2 percentage points in 2008, and the average claim was up by 7 percentage points, driven by higher payroll and material costs. The index for construction costs in Norway declined in the second half-year of 2008, and this development is expected to impact the performance of average claims in the upcoming quarters. The provisions for claims increased by a net amount of DKK 32m in 2008 as compared with a DKK 81m run-off gain in 2007.
This corresponds to an adverse impact on the combined ratio of 0.7% in 2008 relative to a favourable impact of 1.8% in 2007. In particular, provisions for building and group life insurances were strengthened.
Expenses rose by 7.3% or DKK 68m (6% or DKK 56m excluding expenses relating to “The Living House”) to DKK 1,004m, and, as a result, the expense ratio was up from 20.8 to 21.7.
Gross earned premiums 198 251 354 Gross claims incurred -155 -188 -258
Gross claims ratio 78.1 74.9 72.9 Business ceded as % of gross premiums 0.2 0.4 0.3
DKK 103m, to DKK 354m driven by an increase in sales.
The portfolio totalled DKK 432m at 31 December 2008 and grew by 45% in 2008 from DKK 299m at 31 Decem-
The market share was 4.4% at 31 December 2008 in terms of households, as compared with 3.6% at
The strong growth in the Finnish business and the plans for continued growth give rise to an ongoing requirement for attracting qualified employees. The number of employees rose in 2008 from 127 to around 150. To this number should be added 40 independent insurance agents.
The high sales level added pressure to expenses, which rose from DKK 125m in 2007 to DKK 154m in 2008.
In the private business, the combined ratio was 101.5 against 106.6 for 2007. Looking ahead, the private business, which is now well balanced, will focus on reducing the combined ratio and thus on good profitability.
Gross claims ratio 144.9 88.9 96.8 Business ceded as % of gross premiums 0.4 0.0 0.0
Swedish business was affected by a number of mediumsized fire claims on holiday and single-family houses in 2008, which had a relatively severe impact on ratios and
The Swedish business had not raised its premiums since being launched in mid-2006, and automatic annual premium indexation is not used in the Swedish market in the way it is done in Denmark. As a result, Vesta Skadeförsäkring is planning a number of premium related measures in 2009. The effects of these price increases will begin to materialise from the second half of 2009, but will not feed through fully until 2011.
The rapid growth entailed a need to strengthen human resources, and the number of full-time employees was just over 100 at 31 December 2008 relative to 60 at
Gross earned premiums 4,921 5,285 5,512 Gross claims incurred -3,322 -3,904 -3,489
Corporate is a Nordic business area which sells insurances to corporate customers under the TrygVesta brand. Corporate ’s products are sold through its own sales force and through insurance brokers. The Corporate business area has some 3,000 customers each paying annual premiums of more than DKK 900,000 or having more than 50 employees, and around 75 customers each paying annual premiums of more than DKK 10m. Corporate has 535 employees.
TrygVesta Garantiforsikring is included in the financial re sults of Corporate. TrygVesta Garantiforsikring is a subsidiary whose principal activity is to guarantee, in relation to third parties, its customers’ performance under agreements made, such as construction contracts where guarantee is provided in respect of risks during the construction period and remedying of defects after the project has been handed over.
In 2008, Corporate retained previous years’ overall focus on generating profitable growth, which resulted in price increases in the marine segment due to unsatisfactory earnings. This increase led to a customer outflow in the segment.
The gross claims ratio was 63.3 in 2008, as compared with 73.9 in 2007. The relatively low level of the gross claims ratio in 2008 resulted in higher payments to reinsurers, which naturally caused the reinsurance ratio to increase from 3.3 in 2007 to 9.4 in 2008. Overall, this was reflected in an improvement of the claims ratio, net of ceded business from 77.2 in 2007 to 72.7 in 2008.
Transferred to technical interest -1,031 -1,400 -1,428 Return on investment activities 1,228 340 -988 *) DKK 67m sold on futures contracts has been deducted from the equity portfolio **) Return on properties includes a calculated return on owner-occupied property (excl. cost concerning ’’The Living House’’). The balancing item is recognised in ’’Other financial income and expenses’’ to the effect that the total return shown corresponds to the investment return according to the income statement which does not include return on owner-occupied property.
TrygVesta’s investment activities comprise any placement of the Group’s funds in investment assets, such as bonds, equity investments, land and buildings or cash. Funds are placed pursuant to guidelines defined by legislation, regulators and our Supervisory Board.
Lehman Brothers and AIG. Equity markets dropped by an aggregate 40%–50%. The proportion of equities in the investment portfolio was reduced from DKK 5.4bn in mid-2007 to DKK 1.7bn in mid-January 2008.
In 2008, the return on TrygVesta’s investment activities before transfer to technical interest totalled DKK 1,258m, equivalent to 3.5%. This was less than in 2007, mainly due to lower returns on the equity portfolio. Capital losses on equities would have been DKK 1.2bn higher
Other financial income and expenses were DKK 259m lower. The change was attributable to a number of individual items, none of them particularly dominant, and the most important being non-recurring interest income in 2007, higher currency hedging expenses, lower return due to the acquisition of the head office in Ballerup, and the net result of inflation hedging related to workers’
The bond portfolio increased during 2008 to account for 86.1% of total investment assets against 81.2% at 1 January 2008. The higher proportion of bonds was a result of new investments and a switch-over from equities to bonds despite the head office acquisition. The proportion of equities fell from 11.9% to 3.4%, or by DKK 3,273m.
The real estate proportion was 10.5% in 2008 against the previous 6.9%, primarily attributable to the acquisition of the head office at Ballerup. The head office accounted for 3.9% of total investment assets.
Net investments in the year made up at the exchange rates ruling at 31 December 2008 amounted to about
DKK 156m, of which DKK 918m was invested in bonds, while net investments in equities (excluding hedging)
were negative at DKK 1,833m and net investments in real estate amounted to DKK 1,070m. For security and rating considerations, TrygVesta’s investment portfolio has a high proportion of highly liquid securities carrying low interest rate and credit risk. TrygVesta does not invest in structured fixed income products such as CDOs, CLOs, hedge funds or the like.
Interest rate sensitivity measures changes in the value of the bond portfolio and the provisions for claims, respectively, at a parallel yield increase of 1 percentage point.
Group’s total bond portfolio was 1.7 years at 31 December 2008 compared to 1.9 years at 31 December 2007.
DKK 887m, or minus 32.8%, for the financial year. The financial crisis and the resulting global economic recession have triggered equity market drops over the past year in line with those seen in previous severe recessions.
TrygVesta seeks to constantly create added value for our customers, confirming them in their choice of peace-ofmind provider. Rather than just providing a financial solution in claims situations, our wish is to provide peace of mind by eliminating concerns in everyday life and preventing injury or damage.
We have defined ambitious targets of enhancing our already good customer loyalty. The peace-of-mind delivery to customers, one of our strategic focus areas, plays an important part in our efforts to enhance customer loyalty. The peace-of-mind delivery is embedded in our handshake: Compassionate, Dynamic and Innovative.
Customer loyalty is measured on a scale from 1-100 and the survey is performed by EPSI, an independent nonprofit organisation. Customer loyalty and satisfaction rates in the insurance sector are generally high in the
Our customer loyalty rating in Norway increased by 5.8 points in 2008 to 74.1, above the industry average. Customer satisfaction was at a level with the industry average, but dropped 0.7 point to 68.8. Our actual customer loyalty, measured in terms of retention rates, improved significantly.
We believe this is a result of our transparent communication of prices and terms and conditions.
In Sweden, TrygVesta was included in the survey for the second time. The survey ranked us second in the market in terms of customer loyalty and above average in terms of customer satisfaction.
Hansa and If. TrygVesta continued to record the highest overall customer satisfaction score among the Nordic companies.
In 2007, TrygVesta launched a Nordic communication project intended to simplify the Group’s written customer communications. The language of our insurance terms and conditions is now more customer-friendly and plain with a clear layout, giving an easy overview of what is and what is not included in the policy.
TrygVesta intends to increase benefits offered to our customers on an ongoing basis. Our new initiatives in 2008 included: SundPuls. In 2008, TrygVesta added SundPuls to its offering of health care products. The philosophy behind
We intend to expand the electronic communication with customers further in 2009, emphasising simplicity and accessibility. In 2009, it will also be possible for Danish customers to buy the Group’s four other core products
AXA Corporate Solutions. AXA is one of the world’s largest insurers with a network extending to more than 90 countries and with geographical coverage of 95% of the inhabited world. TrygVesta’s partnership with AXA enables us to provide insurance solutions through AXA’s international network to customers requiring insurance for foreign subsidiaries and production units. The partnership also permits us to benefit from AXA’s specialist knowledge within certain areas. We intend to continue to strengthen our international competencies in the years ahead, and in 2009 we expect to provide international solutions to our
(EPSI is an independent non-profit organisation for measuring customer satisfaction in the Nordic region).
In order to identify areas where we can improve, we conduct bi-annual anonymous employee surveys on topics that include the working environment, satisfaction and well-being. In the intermediate years, we perform measurements on a smaller scale, taking stock of the working climate and the activities that have been launched.
Nordic companies in general with respect to all areas included in the survey. Compared with the financial sector in the Nordic region, TrygVesta managers had a particularly high score, and our ability to provide opportunities for professional and personal development was assessed to be stronger than for the industry in general.
Denmark and Bergen, Norway into modern workplaces facilitating innovation, knowledge sharing and a motivating working environment started in 2008. The conversion will be very important for the individual employees, who will have improved facilities in the form of innovation, meeting and quiet rooms as well as recreational and café environments. Individual workplaces will also be improved with new equipment and modern design. More than 100 employees and managers were involved in developing the project in 2008, and the first pilot projects were implemented. The large conversion projects will start in 2009.
They will be supported by the roll-out of new IT tools and training in readiness to change for all employees. The project is scheduled for completion by the end of 2010.
We drafted a Nordic recruitment concept in 2008 to be used on print, the Internet and exhibition stands. We also enhanced the Group’s visibility at career fairs and educational institutions throughout the Nordic region in order to raise our profile in relation to recent graduates. Furthermore, for the second time we introduced a Nordic management trainee programme comprising eight trainees in the Nordic region. We worked together with various associations and organisations in order strengthen diversity in the Group’s recruitment process. In this context, our Group
We are aware that development is necessary if we want to continue to be perceived as the leading peace-of-mind provider in the Nordic region. It is therefore important for us to make training and development tools available to enable employees and managers to update and develop their skills at all times. Training and development activities are handled by Corporate Learning and TrygVesta Management Academy. The responsibilities of our Corporate
Learning training unit include employee training and quality assurance of all in-house and external courses.
TrygVesta’s new talent development programme, which focuses on accelerating the development of a defined group of talented, ambitious employees. In relation to our strategic focus areas we intend to develop talent to ensure we have competencies in disciplines that are particularly important for adding value to the Group in the years ahead. In early 2009 we will complete a programme for talents with management potential and junior project managers with the potential to drive major projects in
Read more about TrygVesta’s employees on the insert ”Learning and personal development at TrygVesta”
Risk management is the future “We consider strategic risk and insurance risk to be the most important types of risk, both of them closely related to our business as a general insurer. Our current investment strategy keeps investment risk at a satisfactory level. We consider operational risk to be less important than the other risk types.”
• TrygVesta distributes 50% of the profit for the year as ordinary cash dividends.
Profit after tax amounted to DKK 846m in 2008. Pursuant to our profit distribution policy, this entails a cash distribution of dividends totalling DKK 423m or DKK 6.50 per share.
December 2008, and the capital base was DKK 3,926m calculated in accordance with legislative requirements.
The actual capital as calculated in the Standard & Poor’s capital model (TAC) was DKK 8,952m at 31 December 2008. The major differences in the calculation of actual capital are the treatment of subordinate loan capital which is included in the capital base at DKK 685m and in TAC at DKK 1,102m, as well as the recognition of the discounting effect on provisions. The latter reduced the capital base by DKK 721m at 31 December 2008.
TrygVesta’s capital contingency plan describes measures that can be applied in the short term to improve the
Risk management is therefore at the core of the business, and it is only natural that TrygVesta also focuses in-house on managing the risks that the operations expose the
Group’s risk management (see the section on Corporate governance). The Supervisory Board defines the risk management framework, including risk appetite, in the Supervisory Board’s capital and risk management instructions.
Group CEO and the Group CFO, consists of the chairmen of the respective risk committees. In order to support the risk management environment in the best possible way, an Enterprise Risk Management (ERM) department has been set up as a body anchoring and supporting risk management in TrygVesta.
underwriting risk The risk related to entering into insurance contracts. The risk that claims at the end of an insurance contract deviate significantly from our assumptions when pricing at inception of the contract. Handled by the Underwriting reinsurance committee
Strategic risk The risk of changes to the conditions under which we operate, including changed legislation, competition, partnerships or market conditions. Handled by the Risk management committee
The risk management committee is directly responsible for strategic risk management and capital management.
All committees focus on risk management and have no business responsibility.
The individual risks are grouped into five risk types: underwriting/reinsurance risk, provisioning risk, investment risk, strategic risk and operational risk. All risk types are treated in the risk identification process and described in the following. The three charts show a simplified representation of some of these risks.
The mapping process shows that insurance risk and strategic risk are the most dominanting risks followed by investment risk. Operational risk is less important than the other risk types.
Underwriting risk is the risk related to entering into insurance contracts and thus the risk that premiums charged do not adequately cover the liabilities TrygVesta has assumed. The risk may materialise as losses either as a result of single events or over a period of time due to a general adverse trend in the performance of claims or to premiums that are too low. Conversely, there is also a risk that premiums charged are too high, resulting in a loss of competitiveness. TrygVesta manages underwriting risk through tariffs and by monitoring profitability on an ongoing basis as well as through business procedures, acceptance policies and authorities. Single events are controlled and protected, primarily through reinsurance.
The risk related to underlying trends is controlled through close follow-up and extensive reporting on the most important key ratios of the individual insurance areas.
The charts show the distribution of risk types (and individual risks) in a risk map representing risk according to assessed probability and potential impact.
Reinsurance is an important element of the day-to-day risk management. The ongoing risk management is supported by TrygVesta’s internal ALM model, which is also used for assessing the impact of different reinsurance alternatives.
For property risks, major events in 2009 are protected by catastrophe reinsurance of DKK 5bn with a retention up to a maximum of DKK 105m in Denmark and NOK 105m in
TrygVesta’s exposure to natural disasters in Norway is furthermore limited through participation in the
The catastrophe reinsurance programme also covers other catastrophe events, including terrorist-related events, for up to DKK 3.75bn, with terrorist events being covered for buildings, building contents and consequential loss for risks with a total insured value of up to DKK 500m. TrygVesta has bought catastrophe reinsurance up to DKK 1.5bn for the personal accident and workers’ compensation policies with a retention of DKK 50m, covering the risk of multiple injuries from the same cause, including terror.
50m for subsequent claims. For property risks exceeding the upper level, facultative reinsurance is bought. Other lines covered by reinsurance include liability and motor, marine, fish farms and guarantee insurance.
Exposure to terrorist losses of a biological, chemical or radioactive character can be covered only partly by reinsurance today. TrygVesta has for several years played an active role under the Danish Insurance Association in the work to establish a national arrangement to address this issue. The work was finalised in 2008 with the Danish
In the event of a major insurance event comprised by the reinsurance programme TrygVesta may have large balances outstanding with reinsurers, and thus be exposed to credit risk. TrygVesta manages this risk by defining requirements to reinsurers’ ratings and spreading the reinsurance on
several reinsurers. In addition, TrygVesta has set up a security committee focusing specifically on managing credit risk in connection with reinsurance receivables.
EXPECTED CASH FLOWS FROM PROVISIONS FOR CLAIMS IN DENMARK AND NORWAY, DKK
The calculation of provisions for claims will always be subject to considerable uncertainty. TrygVesta manages this risk through a provisioning policy, model analysis, control calculations, follow-up and reviews in order to obtain the best possible match between provisions and claims payments. Historically, many insurers have experienced substantial negative as well as positive impacts on profit (run-off) resulting from provisioning risk, and that may also happen in future. Provisions for claims relating to annuities in Danish workers’ compensation insurance are discounted using the current market rate and are also revalued by the wage inflation rate each year. This exposes
INSuRANCE RISK underwriting risk DKKm Increase in claims expenses of 1% -129 Decrease in premium rates by 1% -176 Weather related claims of DKK 5.5bn (reinsurance coverage DKK 5bn) -600
Equity market Decrease of equity markets of 15% -186 Impact arising from derivatives 10
Investment risk is the risk that volatility in the financial markets will impact the results of operations and thus the financial position. TrygVesta defines the asset mix based on the investment policies approved by the Supervisory Board, including limits on types of assets and the geographic distribution and risk profile of bonds, equities and real estate for each company in the Group. The asset mix and investment activities focus mainly on interest rate risk, security and liquidity.
The portfolio of fixed-interest securities stood at DKK 29.5bn at 31 December 2008, while the provisions for claims discounted using a market rate amounted to DKK 19.7bn, net of reinsurance. The respective durations were 1.7 and 3.3 years. The difference in duration is attributable to the bond portfolio being significantly larger than the discounted provisions. A parallel shift of interest rates of 1% would reduce the market value of the securities by DKK 512m, while the opposite impact on provisions would be DKK 562m, triggering a net impact of DKK 50m.
TrygVesta intends to minimise the net interest rate exposure, and will therefore in 2009 start dividing total investment assets into a hedge portfolio and an active portfolio.
The hedge portfolio will consist exclusively of interest-bearing assets, as far as possible matching the expected cash flow from the discounted provisions. Accordingly, the net interest rate exposure of the hedge portfolio together with the provisions would be approximately nil to a random change in the yield curve.
October 2008 revised the methodology for calculating the yield curve for discounting the provisions of Danish insurance companies. The calculation now considers developments in Danish mortgage bonds to a much greater extent. Using the new methodology, TrygVesta’s internal model shows a significant reduction in the net interest rate risk to a level where fluctuations would in 90% of the cases be within a range of +/- DKK 120m.
The equity and real estate portfolios are exposed to changes in equity markets and real estate markets, respectively. TrygVesta manages such risk through investment limits for various asset classes. In certain circumstances, TrygVesta also uses interest rate and equity derivatives in the investment activities.
TrygVesta reduced its proportion of equities significantly in January 2008. The equity proportion accounted for 3.4% at 31 December 2008 against 11.9% at the end of 2007 and 15.4% in May 2007. This reduction has limited the Group’s equity losses significantly. Overall, the financial crisis triggered equity losses of DKK 887m. In 2008,
TrygVesta bought the head office in Ballerup, thereby increasing the proportion of real estate significantly. The proportion is expected to be reduced over time.
DKK in 2008. This was the main reason for the year’s negative DKK 640m exchange rate adjustment of the value of the foreign entities. Under the hedge policy, this
TrygVesta has prepared contingency plans to handle the most important areas, such as the contingency plans in the individual parts of the business to handle an event of a prolonged IT breakdown. The Group has also set up a crisis management structure should TrygVesta be hit by a major crisis.
Strategic risk relates to TrygVesta’s choice of strategic position, including IT strategy, time-to-market, business partners and reputation as well as changed market conditions, including the competitive environment, falling premium rates and developments in New Markets.
(underwriting and provisions) to be the most important types of risk TrygVesta is exposed to. Both types of risk are closely related to the operations as a general insurer.
Mikael Olufsen Chairman of the Supervisory Board and chairman of the remuneration committee Born 1943. Joined the Supervisory Board in 2002
Ms Nyboe Andersen has competencies within the areas of management, strategy, treasury and financial business from her former positions as Chairman of the Board of Governors of
Mr Wendel Andersen has experience in international management, strategy, finance, treasury, IT and project management from his current position as CFO of Arla Foods.
Paul Bergqvist Member of the remuneration committee. Born 1946. Joined the Supervisory Board in 2006
Mr Bergqvist has international management experience in strategic development, complex transactions, development of new markets, marketing, sales and financial management.
Peter Wagner Mollerup Elected by the employees. Born 1966. Joined the Supervisory Board in 2002
Birthe Petersen Elected by the employees and member of the remuneration committee. Born 1949. Joined the Supervisory Board in 1996
John R. Frederiksen Member of the remuneration committee. Born 1948. Joined the Supervisory Board in 2002
A/S, Freja Ejendomme A/S (Statens Ejendomssalg A/S), Højgård Ejendomme A/S, Oak Property
Mr Frederiksen has experience within management, strategy and finance from serving as a CEO and most recently as a board member of a number of companies, including property companies.
Christine (Stine) Bosse Group CEO. Born 1960. Joined TrygVesta in 1987. Joined the Group Executive Management in 1999
Hjertebarnsfonden, Tryg Ejendomme A/S and Ejendomsselskabet af 8. maj 2008 A/S.
Board member of Nordea Bank, Amlin Plc, Grundfos Management A/S and Poul Due Jensens Fond.
Morten Hübbe Group CFO. Born 1972. Joined TrygVesta in 2002. Joined the Group Executive Management in 2003
Member of the Executive Management of TrygVesta A/S. Member of the Executive
Trade), MSc (Engineering) and management training programmes, including St. Gallen and Wharton.
Kjerstin Fyllingen Member of the Group Executive Management in charge of Private & Commercial Norway. Born 1958. Joined TrygVesta in 2006. Joined the Group Executive Management in 2006
Board member of Enter Forsikring AS, Finansnæringens Hovedorganisation, TSS Marine ASA
Stig Ellkier-Pedersen Member of the Group Executive Management in charge of New Markets. Born 1947. Joined TrygVesta in 1999. Member of the Group Executive Management 2001-2008
President, Customer Service & Sales Partners and Country Manager in Norway, 50 years old.
Stig Ellkier-Pedersen stepped down from his position to retire on 31 December 2008.
Mr Ellkier-Pedersen has been with TrygVesta since 1999 and has been a member of the
The Supervisory Board monitors that TrygVesta’s capital structure is in line with the interests of the Group and our shareholders, and that the capital structure is in compliance with the requirements applicable to TrygVesta as a financial undertaking. The Supervisory Board optimises our capitalisation on an ongoing basis while duly safeguarding the interests of policyholders and shareholders and leaving the Group sufficient scope for development and growth.
The annual general meeting in 2008 decided to initiate a share buy back programme.
decided to extend the share buy back programme, originally scheduled for completion on the day before the release of the annual report 2008, until the day before the annual general meeting, which will be held on 22 April 2009.
• Adoption of a resolution as to the distribution of profit or covering of loss, as the case may be, according to the annual report as approved, including proposed payment of dividend for the past financial year
All shareholders are urged to attend the annual general meeting, and shareholders may vote in person at the general meeting or appoint the Supervisory Board or a third party as their proxy. The proxy form will be available at www.trygvesta.com from 1 April 2009.
Executive Management. In addition, the Supervisory Board reviews and approves the rules of procedures of the
Supervisory Board and the Executive Management each year to ensure they are aligned with TrygVesta’s requirements. Under the rules of procedure, the Supervisory
Board has defined an evaluation procedure for assessing the work and results of the Supervisory Board, the Chairman of the Supervisory Board and the other individual members as well as the composition of the Supervisory
Board and evaluating the work of the Supervisory Board and the cooperation with the Executive Management. The
Chairman and the Deputy Chairman also plans the future composition of and replacement in the Supervisory Board.
Board has the required competencies, or whether the competencies and expertise of its members need to be updated in some respects. A balanced distribution with respect to gender and age is sought in the composition of the Supervisory Board. The Supervisory Board has eight members elected by the shareholders. They are aged between 43 and 68 years, and there is one female member.
Supervisory Board deems that the number of members is adequate to ensure a constructive debate and an efficient decision-making process.
To ensure replacement on the Supervisory Board, members elected by the shareholders may hold office for a maximum of nine years. Furthermore, members of the
Board prepares a description of the candidates’ background, professional qualifications and experience, and the notice convening the general meeting makes reference to this description. Information about the Supervisory Board members’ profiles and the number of TrygVesta shares held is set out in the section on Members of the Supervisory
Board considers that each member has adequate time and resources to serve as a member of the Supervisory Board of TrygVesta in a satisfactory manner.
TrygVesta is also committed to working with CSR through the Group’s participation in the Danish Council for Sustainable Business Development and the UN Global Compact.
Group’s employees had a foreign ethnic background, slightly less than this population group’s proportion of the Nordic population.
At the end of 2008, TrygVesta had seven women at senior management level. At 1 January 2009, the Group Executive
Being an insurance business, TrygVesta is subject to the requirements of the Danish Financial Business Act on risk management. In capital and risk management instructions, the Supervisory Board defines the framework for risk management in TrygVesta with respect to insurance risk/reinsurance, investment risk and operational risk, including
Read more about CSR at TrygVesta on the insert ”We acknowledge our corporate social responsibility”
The audit committee has three members elected by the Supervisory Board and is chaired by a non-affiliated member of the Supervisory Board. The committee held four meetings in 2008, and it reports to the Supervisory Board on a regular basis. The audit committee made an assessment of the preceding year’s work in August 2008, evaluating the need for changes to its areas of responsibility. The audit committee works with historical data, and it is not involved in forward-looking events such as outlook and budgets.
Responsibilities • To monitor the financial reporting process, including the application of accounting policies, and to assess the adequacy of any changes thereto.
• To ensure that the Group’s internal and external auditors are independent.
Responsibilities • To support the Supervisory Board in considerations and decisions with respect to issues of remuneration to the Supervisory Board, Board committees and the Executive Management, and to discuss the framework for the Group Executive Management’s remuneration in consultation with the Group CEO.
• To keep the Supervisory Board informed of the market level and forms of remuneration paid to members of the supervisory boards and executive managements of the company’s peers.
Activities in 2008 • The remuneration committee was set up in May 2008 and held one meeting in the second half of 2008 to define the strategy and terms of reference for its work.
Members of the Supervisory Board receive a fixed fee and are not covered by incentive programmes or severance schemes.
Their remuneration is fixed on the basis of trends in the company ’s peer group, taking into account competencies and efforts as well as the scope of the Board work. The Chairman receives triple the amount of the other members, and the
In addition, members of the Supervisory Board who participate in the audit and remuneration committee receive remuneration for these duties. The chairmen receive one and a half times the amount of other members. The shareholders approve the remuneration of the Supervisory
Board for the current financial year and the remuneration was unchanged from 2007 to 2008.
Chairman 37,500 Other members, each 25,000 Total, remuneration committee 112,500 * In 2008 members recieved remuneration for six months.
on OMX Copenhagen Stock Exchange on 22 February 2008 plus 10%, equal to an strike price of DKK 416.06.
TrygVesta emphasises openness, transparency and an understanding of stakeholder information requirements.
Information that may influence the pricing of TrygVesta shares is published in accordance with the rules applicable to distribution of news in the EU. The Group’s website, www.trygvesta.com, is updated simultaneously. In addition, TrygVesta distributes information directly to the
London Stock Exchange, the press, equity analysts, investors and other stakeholders. In accordance with the recommendations issued by OMX Nordic Exchange Copenhagen,
44m in 2008. The total volume of TrygVesta shares traded on OMX Nordic Exchange Copenhagen was DKK
On 4 April 2008, TrygVesta launched a share buy back programme in a maximum amount of DKK 1,405m. At 31
December 2008, an aggregate of approximately 3.0m shares worth a total amount of DKK 1,053m had been bought.
FINANCIAL CALENDAR 2009 22 April 2009 at 14:00 Annual general meeting 2009 23 April 2009 TrygVesta shares trade ex-dividend 28 April 2009 Payment of dividend 12 May 2009 at 7:30 Interim report for Q1 2009 18 August 2009 at 7:30 Interim report for the first half of 2009 10 November 2009 at 7:30 Interim report for Q1-Q3 2009
At 31 December 2008, the 40% free float was distributed among 28,828 registered shareholders. The 200 largest shareholders held 57% of the free float. At 31 December 2008, TrygVesta held own shares corresponding to 5.3%
Relations and the Executive Management meet with institutional investors and equity analysts. In 2008, TrygVesta held 250 investor meetings and participated in 15 investor conferences. TrygVesta also participated in five events for private shareholders in Denmark and Sweden. The Group’s performance is followed by 18 equity analysts, three of whom are based in London. The equity analysts’ recommendations with respect to TrygVesta shares are available at www.trygvesta.com.
Group’s performance to prospective investors. A Danish version of the website was launched in February 2009, making it more user-friendly for all Danish shareholders.
TrygVesta’s annual general meeting will be held on 22 April 2009 at Falconer Center, Falkoner Allé 9, 2000
Frederiksberg, Denmark. The invitation to attend the meeting will be advertised in the daily press and will be sent to shareholders who so request. Notice of the meeting will also be posted at www.trygvesta.com.
Any queries relating to the annual general meeting may be addressed to: Bjarne Lau Pedersen, Chief Group Legal Adviser, telephone +45 4420 3065, e-mail bjarne.lau@tryg.dk
Reference > Read about dividends for 2008 in the section on Capital and profit distribution.
ANNOuNCEMENTS PuBLISHED IN 2008 21.01.2008 TrygVesta has reduced the exposure to equities 25.02.2008 Annual report 2007 13.03.2008 Notice of the annual general meeting 03.04.2008 Resolutions from the annual general meeting 03.04.2008 TrygVesta initiates share buy back programme 05.05.2008 First quarter 2008 report 27.06.2008 Revised financial calendar 2008 19.08.2008 Half-year 2008 report 27.10.2008 TrygVesta organises towards innovation and development 11.11.2008 Interim report for the first nine months of 2008 11.11.2008 Fincial calendar 2009 11.11.2008 T rygVesta and Nordea extend partnership to 2013 24.11.2008 TrygVesta owns 5.0% of own shares
Notes Page Statement by the Supervisory Board and the Executive Management 91 Independent Auditor’s Report 92
Notes – TrygVesta Group 1 Accounting policies 99 2 Earned premiums, net of reinsurance 109 3 Technical interest, net of reinsurance 109 4 Claims incurred, net of insurance 109 5 Insurance operating expenses, net of reinsurance 109 6 Technical result, net of reinsurance, by line of business 116 7 Interest and dividends 118 8 Market value adjustment 118 10 Profit/loss on discontinued and divested business 119 11 Intangible assets 119 12 Operating equipment 119 13 Owner-occupied property 120 14 Assets under construction 121 15 Investment property 121 16 Investments in associates 122 17 Other financial investment assets 123 18 Reinsurers’ share 126 19 Current tax 126 20 Shareholders’ equity 126 21 Subordinated loan capital 127 22 Provisions for claims 128 23 Pensions and similar obligations 131 24 Deferred tax 133 25 Other provisions 134 26 Debt to credit institutions 134 27 Other debt 134 28 Earnings per share 134 29 Contractual obligations, contingent liabilities and collateral 135 30 Acquisition of subsidiary 136 31 Related parties 136
Management’s responsibility for the annual report Management is responsible for preparing and presenting an annual report that gives a true and fair view in accordance with the International Financial Reporting Standards as adopted by the EU in respect of the consolidated financial statements and in accordance with the Danish Financial Business Act in respect of the parent company’s financial statements and in accordance with additional Danish disclosure requirements for annual reports of listed financial enterprises.
This responsibility includes; designing, implementing and maintaining internal control relevant to the preparation and fair presentation of an annual report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
In making those risk assessments, the auditor considers internal controls relevant to the preparation and fair presentation of the annual report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the annual report.
Opinion In our opinion, the annual report gives a true and fair view of the Group’s assets, liabilities and financial position at December 31, 2008, and of the results of the Group’s operations and the Group’s cash flows for the financial year starting on January 1 and ending on December 31, 2008 in accordance with International Financial Reporting Standards as adopted by the EU and in accordance with additional Danish disclosure requirements for annual reports of listed financial enterprises.
Furthermore in our opinion, the annual report gives a true and fair view of the parent company’s assets, liabilities and financial position at December 31, 2008, and of the results of the parent company’s operations for the financial year starting on January 1 and ending on December 31, 2008 in accordance with the Danish Financial Business Act and in accordance with additional Danish disclosure requirements for annual reports of listed financial enterprises.
Lars Kronow Leif Zilmer State Authorised State Authorised Public Accountant Public Accountant
Notes General insurance Gross premiums written 16,959 17,629 Ceded insurance premiums -893 -926 Change in provisions for unearned premiums -130 -134 Change in reinsurers’ share of provisions for unearned premiums -46 66 2 Earned premiums, net of reinsurance 15,890 16,635 3 Technical interest, net of reinsurance 501 499
Total return on investment activities 1,740 440 3 Interest on insurance provisions -1,400 -1,428
Profit/loss for the year 2,266 846 28 Earnings per share – continuing business of DKK 25 33.5 12.8 Earnings per share of DKK 25 33.5 12.8
TrygVesta Annual Report 2008 l Income statement – TrygVesta Group l
Notes Liabilities 21 Subordinated loan capital 1,101 1,102 22 Provisions for unearned premiums 5,403 5,100 22 Provisions for claims 21,104 19,715 Provisions for bonuses and premium rebates 409 378
Debt related to direct insurance 358 311 Debt related to reinsurance 253 172 26 Debt to credit institutions 599 709 19 Current tax liabilities 336 248
Total liabilities and equity 43,830 38,445 1 Accounting policies 20 Capital adequacy 28 Earnings per share 29 Contractual obligations, contingent liabilities and collateral 30 Acquisition of subsidiary 31 Related parties
Reserve Revalua- for Equali- Share tion exchange sation Other Retained Proposed capital reserves rate adj. reserve reserves earnings dividends Total
The financial statements of the parent company are prepared in accordance with executive order no. 1266 dated 26 October 2007 issued by the Danish FSA on the presentation of financial reports by insurance companies and profession-specific pension funds. The deviations from the recognition and measurement requirements of IFRS are: • Investments in subsidiaries are valued according to the equity method, whereas under IFRS valuation is made at cost or fair value. Furthermore the requirements regarding presentation and disclosure are less comprehensive than under IFRS.
Changes in accounting policies Accounting policies are unchanged from the annual report 2007.
Gross claims incurred -5 0 Interest on insurance provisions -6 -8 Technical result -11 -8 Return on investment activities after transfer to insurance activities 57 78
Liabilities under insurance contracts Estimates of provisions for insurance contracts represent the Group’s most critical accounting estimates, as these provisions involve a number of uncertainty factors.
Assets are recognised in the balance sheet when it is probable that future economic benefits will flow to the group and the value of the asset can be reliably measured. Liabilities are recognised in the balance sheet when the group has a legal or constructive obligation as a result of a prior event, and it is probable that future economic benefits will flow out of the group, and the value of the liabilities can be measured reliably.
Business combinations Newly acquired companies are recognised in the consolidated financial statements from the date of acquisition. Comparative figures are not restated to reflect acquisitions.
The date of acquisition is the date on which control of the acquired company actually passes to the TrygVesta Group.
The cost of a company is the fair value of the agreed consideration paid plus costs directly attributable to the acquisition. If the final amount of the consideration is conditional on one or more future events, these adjustments are only recognised in cost if the event in question is likely to occur and its effect on cost can be reliably measured.
Any excess of the cost of acquisition over the fair value of the acquired identifiable assets, liabilities and contingent liabilities is recognised as goodwill under intangible assets. Goodwill is tested for impairment at least once a year. If the carrying amount of an asset exceeds its recoverable amount, the asset is written down to the lower recoverable amount.
Intra-group transactions Intra-group transactions are settled on market terms. Intra-group balances carry interest on market terms.
Segment reporting Segment information is based on the group’s management and internal financial reporting system and is prepared in accordance with the group’s accounting policies.
Insurance operating expenses Insurance operating expenses represent acquisition costs and administrative expenses less reinsurance commissions received. Expenses relating to acquiring and renewing the insurance portfolio are recognised at the time of writing the business. Underwriting commission is accrued over the term of the policy when a legal obligation occurs. Administrative expenses are all other expenses attributable to the administration of the insurance portfolio. Administrative expenses are accrued to match the financial year.
In accordance with Danish law, the shares are held in restricted accounts until expiry of the seventh calendar year after they were subscribed. Employees cannot sell or otherwise dispose of the shares during the period they are subject to selling restrictions, but the shares will be released in case of the employee shareholder’s death or disability.
Interest, dividends, etc. represent interest earned, dividends received, etc. during the financial year.
Realised and unrealised investment gains and losses, including gains and losses on derivative financial instruments, value adjustment of land and buildings, exchange rate adjustments and the effect of movements in the yield curve used for discounting, are recognised as value adjustments.
Other income and expenses Other income and expenses includes income and expenses which cannot be ascribed to TrygVesta’s insurance portfolio or investment assets, including the sale of products for Nordea Liv og Pension.
Recognition of the balance sheet items in respect of the discontinued activities remains unchanged in the respective items whereas assets and liabilities from divested activities are consolidated in one line as “assets concerning divested business” and “liabilities concerning divested business”, respectively.
The comparative figures, including financial highlights and key ratios, have been restated to reflect discontinued business. Discontinued and divested activities in the income statement include the post-tax profit of TrygVesta’s business in run-off as well as divested enterprises. Business in run-off comprises the results of the business in run-off in Tryg Forsikring A/S. Divested subsidiaries comprise the activities in Chevanstell Ltd. UK (2006), Poland (2004), Nordicum Kindlustus (2004) and Tryg Baltica International A/S (2004).
Intangible assets Software Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on the basis of the expected useful life (four years).
Owner-occupied property Owner-occupied properties are measured in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment writedowns. Revaluations are performed regularly to avoid the carrying amount differing materially from the owner-occupied property’s fair value at the balance sheet date. The fair value is calculated on the basis of market-specific rental income per property and typical operating expenses for the upcoming year. The resulting operating income is divided by the percentage return requirement of the property, which has been adjusted to reflect market interest rates and property characteristics, corresponding to the present value of a perpetual annuity.
Owner-occupied property is depreciated using the straight-line method over its expected useful life up to 50 years. Land is not depreciated.
Assets under construction In connection with the refurbishment of the owner-occupied properties, part of the costs is recognised at cost under owner-occupied property. On completion of the project, depreciation will be made on a straight-line basis over the expected useful life, up to the number of years stated under the individual categories.
The fair value is calculated on the basis of market-specific rental income per property and typical operating expenses for the upcoming year. The resulting operating income is divided by the percentage return requirement of the property, which has been adjusted to reflect
market interest rates and property characteristics, corresponding to the present value of a perpetual annuity. The value is subsequently adjusted with the value in use of the return on prepayments and deposits and adjustment for specific property issues such as vacant premises or special tenant terms and conditions.
Investments Investments include financial assets at fair value through the income statement. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments on initial recognition and re-evaluates this at every reporting date.
Other assets Other assets include current tax assets and cash in hand and at bank. Current tax assets are receivables concerning tax for the year adjusted for on-account payments and any prior-year adjustments. Cash is recognised at nominal value at the balance sheet date.
The proprietary collective model is based exclusively on actual payments and is therefore only used for provisions for small claims, below DKK 364,000 for motor, or DKK 200,000, for contents and DKK 100,000 for other. The model is so dynamic that, to the greatest extent possible, it captures changes in the run-off pattern. It consists of two modules, with the first module estimating on a daily basis with due consideration to days off and special high-frequency days such as New Year’s Eve or days with slippery roads. The model also takes the season into consideration, both in terms of claims performance and in claims handling intensity. In the second module, estimates are on a more aggregate level, and the calculations are based on a generalised hierarchic De Vylder model. The provision for annuities in workers’ compensation insurance is calculated on the basis of a mortality corresponding to the G82 calculation basis (official mortality table).
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses and past service costs. Expectations of returns on plan assets are based on the return within each asset class and the current allocation thereof. Market expectations of future returns are taken into consideration.
Income tax and deferred tax The group provides current tax expense according to the tax law of each jurisdiction in which it operates. Current tax liabilities and current tax receivables are recognised in the balance sheet as estimated tax on the taxable income for the year, adjusted for change in tax on prior years’ taxable income and for tax paid under the on-account tax scheme.
financial liabilities Bond loans, debt to credit institutions, etc. are recognised at the raising of the loan as the proceeds received less transaction costs. In the subsequent periods, financial liabilities are measured at amortised cost, applying the ‘effective interest rate method’, to the effect that the difference between the proceeds and the nominal value is recognised in the income statement under financial expenses over the term of the loan. Transaction costs in connection with floating-rate loans or floating-rate credit facilities are amortised over the loan period using straight-line amortisation.
5 Insurance operating expenses, net of reinsurance Commission regarding direct business -406 -429 Other acquisition costs -1,415 -1,818
Insurance operating expenses, gross -2,769 -3,003 Commission from reinsurers 95 72
Notes 5 Insurance operating expenses, gross, classified by type Commision -406 -429 Staff expenses -1,594 -1,658 Other staff expenses -198 -232 Office expenses and fees, headquarter expenses -462 -557 Operating and maintenance costs IT, software expenses -198 -208 Depreciation, amortisation and impairment writedowns -102 -111 Other income 191 192
Total lease expenses amount to DKK 66m (in 2007 DKK 106m).
Insurance operating expenses and claims include the following staff expenditure: Salaries and wages -1,832 -1,972
Remuneration for the Supervisory Board and Group Executive Management is disclosed in note 31 ‘Related parties’.
The share option programmes are classified as equity-settled and recognised directly in equity. Treasury shares are acquired for use and hedging purposes, se note 20. Specification of outstanding options: Share options TOTAL NUMBERS fAIR VALUE
Outstanding options from 2006 allocation 31 Dec 2008 35,370 145,410 0 180,780 - 12 - 15
Outstanding options from 2008 allocation 31 Dec 2008 52,088 167,203 28,700 247,991 - 17 - 20
In 2008, the fair value of share options for the Group amounted to DKK 13.5m. The fair value in 2008 for the programme allocated in 2006, 20007 and 2008 is DKK 24m. Fair values at the time of allocation are based on the Black & Scholes option pricing formula.
The expected volatility is based on the average volatility of TrygVesta shares in 2008.
For outstanding options at 31 December 2008, the average term to maturity is 1.2 years for the 2006 programme, 2.2 years for the 2007 programme and 3.2 years for the 2008 programme.
DKKm 5 Employee shares In 2008, TrygVesta granted employee shares at a discount to the market price to employees at all levels in the Group. Employees of non-
In 2008, TrygVesta offered its employees employee shares at a discount to the market price equal to DKK 25 per share subject to achievement of specific financial benchmarks for 2008. Employees of non-Danish branches were offered employee shares or an alternative cash consideration. Senior executives of TrygVesta may elect to receive part of their bonus for 2008 in the form of shares at a discount to the market price. Bonus will be granted in early 2009. Provisions have been made for the above obligations in 2008.
6 Operating segments P&C P&C 2007 Denmark Norway Corporate finland Sweden Other Total
Reinsurers’ share of provision for unearned premiums 13 0 146 0 0 0 159 Reinsurers’ share of provision for claims 62 139 1,227 0 0 0 1,428 Other assets 42,224 42,224
Description of segments Please refer to ‘Our business areas’ in the Annual Report 2008 for a description of our operating segments. Amounts relating to
Costs are allocated according to specific keys, which are believed to provide the best estimate of assessed resource consumption. A presentation of segments broken down by geography is provided in ‘Financial highlights and key ratios by geography.’
Profit on continuing business 846 Profit/loss on discontinued and divested business 0
Reinsurers’ share of provision for unearned premiums 0 0 176 0 0 0 176 Reinsurers’ share of provision for claims 49 99 712 0 0 0 860 Other assets 37,395 37,395
DKKm 6 Technical result, net of reinsurance, by line of business Accident Worker’s Motor Motor Marine aviation and health health care compensation TPL comprehensive and cargo
Average claims DKK ** 22,582 21,871 20,942 10,495 70,177 68,748 20,817 16,290 10,759 10,623 81,703 70,555 Total claims 74,723 81,213 5,294 20,139 15,688 17,109 75,637 83,569 186,909 212,185 6,781 7,105 fire & contents fire and contents Change Credit & guarantee Tourist assistance (Private) (Commercial) of ownership Liability insurance insurance
Gross premiums earned 146 121 16,046 16,763 560 560 Gross claims - 327 - 26 - 10,762 - 11,232 - 413 - 534 Gross operating expenses - 8 4 - 2,703 - 2,931 - 66 - 72 Profit/loss on ceded business - 5 3 - 340 - 667 - 3 - 2 Technical interest, net of reinsurance 0 - 1 478 472 23 27
Claims frequency * - Average claims DKK ** 377,446 15,660 Total claims 834 919 * The claims frequency is calculated as the number of claims incurred in proportion to the average number of insurance contracts. ** Average claims are total claims before run-off relative to total number of claims incurred.
Profit/loss on ceded business - 102 - 102 - 280 - 321 0 0 - 88 - 50 - 32 - 31 - 1 - 1 Technical interest, net of reinsurance 113 78 61 61 9 10 21 25 4 4 7 7
Interest expenses Interest expenses subordinated loan capital and credit institutions -76 -83 Interest expenses other -12 -17 8 Market value adjustment Market value adjustments concerning financial assets or liabilities at fair value with value adjustment in the income statement: Equity investments 99 -521 Unit trust units -80 -549 Share derivatives 0 98
Exchange rate adjustments recognised in the income statement concerning assets and liabilities not measured at fair value total DKK
129m (in 2007 DKK 73m). Under market value adjustment the adjustment of inflation swaps totals DKK -46m (in 2007 DKK 4m.)
9 Tax Reconciliation of tax Tax on profit for the year -777 -337 Diffrence between Danish and foreign tax rate -39 1 Prior-year tax adjustment 13 72 Change tax rate 20 0 Tax on non-taxable income and expenses, and tax concerning limitation of deductibility -2 -203 Change in valuation of tax assets -42 -26 Other taxes -15 -8
Intangible assets under development amount to a total of DKK 198m (in 2007 DKK 220m). Additions for internally generated expenses amount to DKK 21m (in 2007 DKK 22m). Amortisation is recognised in the income statement under insurance operating expenses and claims incurred.
12 Operating equipment Cost Balance 1 January 243 229 Exchange rate adjustment 1 -9 Transferred from intangible assets 1 1 Additions during the year 43 3 Disposals during the year -59 -39
Balance at revalued amount at 31 December 306 1,315 * Additions during the year include the purchase of owner-occupied property in Ejendomsselskabet af 8. maj totalling DKK 1,085m.
Accumulated value adjustments Balance 1 January 0 0 Value adjustment for the year at revalued amount in profit and loss 0 -54
15 Investment property Fair value 1 January 2,127 2,263 Exchange rate adjustment 13 -96 Additions during the year 23 80 Disposals during the year -5 -66 Value adjustment for the year 105 65 fair value 31 December 2,263 2,246
Total rental income for 2008 amounts to DKK 168m (DKK 159m in 2007).
In establishing the market value of the properties, the following return percentages were used for each property category. Lowest Average highest percentage percentage percentage
Shares in associates according to the lastest financial statements: 2008 Shareholders’ Profit/loss Ownership Name and registered office Assets Liabilities equity Revenue for the year share in %
Komplementarselskabet af 1. marts 2006 ApS, DK 0 0 0 0 0 50 2007 Shareholders’ Profit/loss Ownership Name and registered office Assets Liabilities equity Revenue for the year share in %
17 Other financial investment assets Financial assets at fair value with value adjustment in the income statement, cf. IAS 39 35,844 30,754 Total receivables 2,555 1,689 financial assets at fair value with value adjustment in the income statement Trading porfolio: Bonds 30,294 29,417 Consisting of: Cash allocated to portfolio management -246 -71 Unsettled securities trading 1,063 -101 Deposits, derivatives -302 -388
Duration 1 year or less 12,112 17,990 Duration 1 year through 5 years 15,293 8,535 Duration 5 years through 10 years 3,386 2,316 Duration more than 10 years 18 16
DKKm 17 Maturity of the Group’s interest-bearing financial assets and debt Effective Adjusted 2008 Total 0-1 year 1-5 years > 5 years interest rate duration
Cash in hand and at bank 672 672 0 0 4.4 0.0
Cash in hand and at bank 601 601 0 0 4.2 0,0
Listed shares Scandinavia 975 195 United Kingdom 718 103 Rest of Europe 1,160 298 United States 828 244 Asien etc. 527 152
Exposure to exchange rate risk 2008 Properties Bonds Shares Insurance hedge Exposure
Exposure to exchange rate risk 2007 Properties Bonds Shares Insurance hedge Exposure
17 Sensitivity information Impact on shareholders’ equity from the following changes: Interest rate increase of 0.7-1.0 pct. point 2 23 Interest rate fall of 0.7-1.0 pct. point -27 -57 Equity price fall of 12% -533 -141 Fall in property prices of 8% -214 -315 Exchange rate risk (VaR 99.5) -8 -4 Loss on counterparties of 8% -220 -219
Derivatives with value adjustment in the income statement according to IAS 39: Fair value: Gross Net Gross Net Interest derivatives 3,659 -7 3,124 27
Derivative financial instruments used in connection with hedging of foreign entities for accounting purposes: Gains Losses Net Gains and losses on hedges charged to equity at 1 January 144 -254 -110 Gains and losses on hedges charged to equity in the period 615 0 615
Gains and losses on hedges charged to equity at 31 December 759 -254 505
Exchange rate adjustment Exchange rate adjustments of foreign entities recognised in equity in the amount of: Balance at 1 January -9 75 Exchange rate adjustment during the year 120 -585 Exchange rate adjustment during the year recognised in profit and loss -36 0
Receivables Receivables from insurance enterprises 1,410 1,088 Exchange rate and inflation derivatives 190 383 Unsettled transactions 794 136 Other receivables 161 82
Specification of writedowns on receivables from insurance enterprises Balance at 1 January 129 106 Exchange rate adjustment 0 -8 Writedowns and reversed writedowns for the year -23 22
Notes 17 Receivables Receivables in connection with insurance include overdue receivables totalling: Falling due: Within 90 days 336 259
Writedowns during the year include reversed writedowns totalling DKK 7m (in 2007 DKK 12m). Please refer to the section on ‘Reinsurance’ in ‘Risk management’ in the ‘Management’s report’.
Net current tax, end of year 243 137 20 Shareholders’ equity Share capital 2007 2008
Nominal Nominal No. of value No. of value Issued shares shares (DKK’000) shares (DKK’000)
Used in connection with issue of employee shares -69,677 -1,742 -0.10 -85,815 -2,145 -0.13
Pursuant to the authorisation granted by the shareholders in general meeting, TrygVesta may acquire up to a maximum of nom. DKK
Reserves from 1999 and prior years 2,115 Other reserves 444 Gross provisions for claims, end of year 19,715
Reserves from 1999 and prior years 200 Other reserves 66 Provisions for claims, end of year 860
Reserves from 1999 and prior years 1,915 Other reserves 378 Provisions for claims, net of reinsurance, end of the year 18,855
The amounts in foreign currency in the table are translated to Danish kroner using the exchange rate at 31 December to prevent the impact of exchange rate fluctuation.
DKKm 22 Provisions for claims The accident-year 2000 is influenced by Chevanstell, which at that time operated under the name TBi UK in the London market. The impact derives from the stop-loss agreement between TrygVesta Forsikring A/S and Chevanstell Ltd. in 2000 to cover business written before 2000, and which was terminated after the divestment of Chevanstell. Until 2005, there was an increase in claims incurred, and in 2006 the final settelment had a positive impact.
The inclusion of the Zurich portfolio acquired in 2002 and, to a minor extent, the Norwegian Allianz portfolio acquired in 2001, has an impact on the figures. When the liabilities of these portfolios appear in the triangulation the ultimate liability for the preceding accident years is increased with effect from the financial year in question, whereas already existing liabilities concerning previous financial years remain unchanged. The combined impact of the two acquisitions amounts to DKK 210m gross and DKK 200m net of reinsurance.
After the introduction of variable interest rate discounting of Danish Worker’s Compensation annuities, inflation explicitly influences claims from 2007 onwards. In previous calender years the inflation element is partially offset by the use of discounting with a real rate of interest. Hence undiscounted claims amounts are adversely affected in 2007 by a total of DKK 1,271m.
Total, beginning of period 20,761 1,366 19,395 Market value adjustment of provisions, beginning of period -1,619 -171 -1,448
Change in claims in the financial year in respect of the current year 11,178 145 11,033 Change in claims in the financial year in respect of prior years -787 -55 -732
Paid in the financial year in respect of the current year 5,786 -139 -5,647 Paid in the financial year in respect of prior years -5,343 -348 -4,995
Carrying amount Expected cash flow 2007 Total 0-1 years 1-2 years 2-3 years > 3 years
Provisions for unearned premiums, gross 5,303 5,100 68 41 94 Provisions for unearned premiums, ceded -158 -158 0 0 0
The note should be seen in connection with the maturity of the Group’s interest-bearing financial assets and liabilities, see note 17. Please refer to the section on ’Risk management’ for an elaboration of risk management and risk exposure.
23 Pensions and similar obligations Jubilees, shemes for older employees etc. 43 28
Present value of pension obligations funded through operations 129 120 Present value of pension obligations funded through establishment of funds 1,163 1,003
Gross pension obligation 1,292 1,123 Fair value of plan assets 932 628
The premium for the following financial year is estimated at: 103 53
Notes 23 Pensions and similar obligations Assumptions used % % Discount rate 5.2 4.0 Estimated return on pension funds 6.2 6.0 Salary adjustment 4.5 4.0 Pension adjustment 4.3 3.8
Employers’ nat. ins. contribution 14.1 14.1 Take up of the AFP Early Retirement Plan 20.0 20.0 Mortality table Adjusted K1963 Adjusted K2005
The pension liability related to participation by the Norwegian member of the Group Executive Management in the Norwegian defined benefit pension plan is DKK 2.2m 31. december 2008.
The premium paid to FPK in 2008 amounted to DKK 1m, which is less than 1% of the annual premium in FPK (2007). FPK writes in its half-year report for 2008 that it had a collective consolidation ratio of 119 at 30 June 2008 (131 at 30 June 2007). The collective consolidation ratio is defined as the market value of the plan assets relative to the total collective pension obligations.
Unaccrued assets or liabiliaties of equity investments 102 126 Unaccrued assets or liabiliaties of balance sheets items 6 1
Reconciliation of deferred tax Deferred tax, beginning of year 959 1,109 Exchange rate adjustment 27 -164 Change in deferred tax beginning of year 0 -51 Change in tax rate in Denmark -20 0 Change in deferred tax taken to the income statement 119 122 Change in deferred tax taken to equity 24 -67
The total current and deferred tax relating to items recognised in equity is recognised in the balance sheet in the amount of DKK 101m (in 2007 DKK -4m).
27 Other debt Unsettled transactions 1,857 66 Interest derivatives 8 0 Exchange and inflation rate derivatives 0 31 Other debt 732 774
Debt falling due within one year 2,597 871 28 Earnings per share Basic earnings per share are calculated by dividing the profit for the year and the profit/loss from discontinued and divested activities by the total average number of shares. The company has not issued warrants, convertible debt instruments or the like. The issued share options will not be exercised before 2009, therefore, there is no difference between basic EPS and diluted EPS as per 31 December 2008. During a two-year period commencing at the end of February 2009 180,780 share options from the 2006 share option programmes are exercisable. This could potentially dilute the earnings per share.
Payment due by period 2008 < 1 years 1-3 years 3-5 years > 5 years Total
TrygVesta Forsikring A/S has signed a portfolio management contract for DKK 126m. The contract expires in 2013. TrygVesta Forsikring A/S has signed a car leasing contract with NF Fleet for DKK 37m. The contract expires in 2013. TrygVesta Forsikring A/S has signed on IT leasing contract with IBM for DKK 27m. The contract expires in 2011.
Management believes that it is unlikely that these guarantees will result in a financial loss for TrygVesta Forsikring A/S.
Carrying amount fair value prior to at date of Acquired net assets acquisition acquisition
The acquisition of Ejendomsselskabet af 8. maj 2008 A/S replaces the existing lease with Danica from 1995, which would expire in 2025. The purchase enhances the framework for modernising and refurbishing workplaces. See the section ‘Our employees’ for further details.’
Ejendomsselskabet af 8. maj 2008 A/S Amounts relating to the period since the acquisition on 8 May 2008 2008
31 Related parties Supervisory Board and Executive Management Premium income - Parent company (TryghedsGruppen smba) 0.2 0.3 - Other related parties 17.3 115.3
Claims paid - Parent company (TryghedsGruppen smba) 0.2 0.0 - Other related parties 43.6 9.6
Guarantee agreements with related parties - Utilised, end of year 885 726
Members of the Supervisory Board of TrygVesta A/S do not receive bonuses and are not participants in any severance plans. The Executive Management has a bonus scheme for up to 3 months’ salary (Group CEO up to 4 months’ salary) and participate ind the share option programme as mentioned in Corporate governance. Other than that, there are no incentive plans for the Supervisory Board and Executive Management.
If a member of the Executive Management is given notice of termination by TrygVesta and such termination is not due to breach on the part of the member of the Executive Management, such member is entitled to cash severance pay equal to 12 to 18 months’ fixed salary inclusive of pension contribution and taxed benefits. Severance pay is paid at expiry of the period of notice. Members of the Executive Management can raise no further claims in this respect, including claims for compensation pursuant to sections 2a and/or 2b of the Salaried Employees Act, as such claims are included in the severance pay.
Parent company TryghedsGruppen smba TryghedsGruppen smba controls 60% of the shares in TrygVesta A/S.
Insurance products are purchased and sold on market terms Assets are transferred on market terms
Notes Investment activities 2 Income from subsidiaries 2,396 757 Interest income 0 22 Value adjustment -1 0 Interest expenses -30 -32 Investment management charges -4 -6
Profit on continuing business 2,334 703 5 Profit/loss on discontinued and divested business -1 0
Proposed distribution for the year: Dividend 1,156 423 Transferred to Reserve for net revaluation as per equity method 79 -2,007 Transferred to Retained profits 1,098 2,287 l Income statement for TrygVesta A/S (parent company) l TrygVesta Annual Report 2008
Liabilities Shareholders’ equity 10,031 8,265 9 Debt to credit institutions 599 602 Debt to subsidiaries 131 0 Other debt 0 15
Total liabilities and equity 10,761 8,882 1 Accounting policies 10 Capital adequacy 11 Contractual obligations, contingent liabilities and collateral 12 Related parties
NOK 2,743m (2007: NOK 2,564m). In TrygVesta Forsikring A/S, these provisions, due to their nature as additional provisions, are included in shareholders’ equity (retained earnings), net of deferred tax. TrygVesta Forsikring A/S’ option to pay dividend to TrygVesta A/S is influenced by this amount. The dividend payment is also affected by a contingency fund provision of DKK 670m, which is included in shareholders ’ equity in TrygVesta Forsikring A/S. TrygVesta Garantiforsikring has a similar contingency amounting to DKK 139m, which is also included in the company’s shareholders’ equity.
Remuneration of the Executive Management is paid by TrygVesta Forsikring A/S and TrygVesta Forsikring, Norwegian branch of TrygVesta Forsikring A/S and is charged to TrygVesta A/S by the cost allocation.
In addition, expenses have been incurred for the Group’s Internal Audit Department.
Effective tax rate % % Tax on financial loss 25 25
Revaluations and impairment writedowns at net asset value Balance 1 January 3,656 3,745 Revaluations during the year 2,407 575 Dividend paid -2,318 -2,761
9 Debt to credit institutions Bank loans 597 598 Overdraft facility 2 4
In 2005, a consortium of banks granted TrygVesta A/S a loan facility for DKK 2,000m, of which DKK
10 Capital adequacy Shareholders’ equity according to annual report 10,031 8,265 Subordinate loan capital 637 685 Proposed dividend -1,156 -423 Solvency requirements to subsidiary undertakings -3,824 -4,601
Solvency ratio 81 100 11 Contractual obligations, contingent liabilities and collateral The Danish companies in TrygVesta Group are jointly taxed with TryghedsGruppen smba.
Companies of the TrygVesta Group are part of certain disputes the outcome of which is not estimated to affect the financial position of the Group. Management believes that the outcome of these legal proceedings will not affect the Group’s financial position beyond those receivables and obligations recognised in the balance sheetat 31 December 2008.
Guarantee agreements with related parties - Commitment 1,950 1,200 - Utilesed, end of year 885 726
Members of the Supervisory Board of TrygVesta A/S do not receive bonuses and are not participants in any severance plans. The Executive Management has a bonus scheme for up to 3 months’ salary (Group CEO up to 4 months’ salary) and participate in the share option programme as mentioned in Corporate governance. Other than that, there are no incentive plans for the Supervisory Board and Executive Management.
Claims ratio, net of ceded business 68.3 68.2 67.9 68.9 74.8
Number of full-time employess, end of period 1,454 1,431 1,460 1,384 1,455 finnish general insurance Gross premiums earned 97 140 198 251 354
Key ratios Gross claims ratio 75.3 80.9 78.1 74.9 72.9 Business ceded as % of gross premiums 0.2 0.2 0.2 0.4 0.3
Claims ratio, net of ceded business 75.5 81.1 78.3 75.3 73.2
Key ratios Gross claims ratio - - 144.9 88.9 95.1 Business ceded as % of gross premiums - - 0.4 0.0 0.9
Claims ratio, net of ceded business - - 145.3 88.9 96.0
Key ratios Gross claims ratio 68.3 71.1 65.9 67.3 67.9 Business ceded as % of gross premiums 4.6 0.1 3.7 2.1 3.9
Number of full-time employess, end of period 3,762 3,718 3,808 3,814 4,091 * Amounts relating to TrygVesta A/S, Tryg Ejendomme A/S, Ejendomsselskabet af 8. maj and eliminations are included in ’Other’.
The financial highlights and key ratios of TrygVesta have been prepared in accordance with the executive order issued by the Danish Financial Supervisory Authority on the presentation of financial reports by insurance companies and profession-specific pension funds and also comply with “Recommendations & Financial Ratios 2005” issued by the Danish Society of Financial Analysts.
Adjusted gross expense ratio Calculated as the ratio of gross insurance operating expenses including adjustment to gross earned premiums. The adjustment involves the deduction of depreciation and operating costs on the owner-occupied property and the addition of a calculated cost (rent) concerning the owner-occupied property based on a calculated market rent.
Gross insurance operating expenses incl. adjustment x 100 Gross earned premiums
Dividends per share Calculated as the total dividend proposed divided by the average number of shares.
finnish general insurance Comprises TrygVesta Forsikring A/S, Finnish branch and the Finnish branch of TrygVesta Garantiforsikring A/S.
TrygVesta’s future results of operations, financial condition, cash flows, business strategy, plans and future objectives other than statements of historical fact can generally be identified by terminology such as ”targets”, ”believes”, ”expects”, ”aims”, ”intends”,
This is a translation of the Danish Annual Report 2008. In case of any discrepency between the Danish and the English version of the Annual Report 2008, the Danish version shall apply.