Results 24 The Group’s financial performance 26 Private Nordic 30 Commercial Nordic 33 Corporate Nordic 35 Investment activities 38
Annual report 2010 | Tryg wants to be perceived as the leading peace-of-mind provider in the Nordic region and is dedicated to providing peace of mind to our customers on a daily basis. Our products include contents, house, motor, building, workers’ compensation, transport, health and personal accident insurances. In 2010, our 4,300 employees ensured peace of mind for more than 2.7 million private customers and more than 140,000 businesses.
Our 2010 performance was affected by winter claims, a considerable number of large claims, cloudbursts during the summer and a decision by the Danish Supreme Court, all of which had an adverse impact on the Group’s performance.
Throughout the economic downturn, the Supervisory Board has been committed to maintaining the Group’s strong capitalisation. The Group has implemented initiatives to reduce claims as well as premium increases in 2009 and 2010, which are expected to improve profitability significantly going forward.
Backed by these initiatives and our focus on stable insurance earnings, Tryg still has a solid basis for strong earnings, competitive equity returns and high dividends.
Stine, would you provide a brief review of the year’s performance?
Stine Bosse: Our 2010 performance was unsatisfactory and affected by winter claims, a considerable number of large claims, cloudbursts during the summer and a decision by the Danish
Supreme Court that changes the terms of workers’ compensation claims, all of which had an adverse impact on the Group’s performance.
2010 was a year in which we launched a number of initiatives that will improve our performance in the years ahead, and in which we focused even more on cost reductions. In-house rotation was a key priority, we optimised a number of processes, reduced the number of offices and improved sales efficiency, all of which is expected to provide for a lower expense ratio.
Furthermore, 2010 was impacted by claims that were DKK 1.4bn higher than in a normal year due to the events described above.
For many years, it has been a key concern for me to align our branding landscapes in the Nordic region as this provides the basis for our Nordic strength. We achieved that in 2010 when we changed our name from TrygVesta to Tryg and followed up with comprehensive branding activities in all four Nordic countries.
Denmark, where the Tryg brand enjoys strong awareness. With the new common Nordic branding strategy, Tryg is even better equipped to support our pan-Nordic organisation.
Mikael Olufsen: The Supervisory Board is focused primarily on Tryg’s financial and market position, development and strategy as the key areas. We have monitored our performance in Denmark, which deviated negatively from expectations, particularly close. The Supervisory Board believes that the Group’s scheduled action will pave the way for improved profitability and continually ensure satisfied customers in the years ahead.
The Supervisory Board finds it important that Tryg is a transparent company and that the skills necessary to facilitate corporate governance and essential for the Group’s value creation are represented on the Supervisory Board.
Stine, let me take this opportunity to thank you for your efforts during the 23 years you have been with Tryg, and in particular your last eight years as Group CEO. It has been a pleasure working with you, and I wish you all the best in the future.
Morten Hübbe: As the newly appointed Group CEO I first and foremost represent continuity. I am in charge of a company whose management has launched a number of initiatives in recent years to strengthen the Group and maintain Tryg’s strong customer satisfaction going forward. My focus will also be on further enhancing efficiency and reducing selling and marketing costs and administrative expenses. In recent years, our costs in
Denmark and Norway have fallen if we exclude activities such as
The Living House and branding activities in 2010. Furthermore, we have introduced paperless processes, we mainly recruit new staff by in-house rotation, and we have rationalised our distribution by increasing the use of the Internet and call centres.
Looking further ahead, Tryg’s ambition is to have an expense ratio of 10 in 2020. We intend to achieve this, among other things, through Tryg Transition, a multi-year process and IT efficiency enhancement project. We intend to invest around DKK
200m in this project each year, which is necessary for paving the way for achieving our 2020 ambition.
On the management, we are very much aware of external events that may impact customers’ purchasing power and claims inflation, and thus the Group’s profitability and growth. The general economic trends in the Nordic region improved in 2010, but were impacted by economic cycles in other regions in which public debt burdens and the need for structural adjustments of public spending dampened the economic progress at times.
The historically low level of interest rates has in recent years resulted in lower returns on the bond portfolio, thereby affecting our
Denmark is the country in the Nordic region which was the hardest hit by the economic downturn, as reflected in a comparison of developments in private consumption and the number of bankruptcies across the Nordic region. A common feature for all countries is that irrespective of the economic situation, we consider the claims put forward by our customers on a constructive basis. Post-crisis developments in Denmark have revealed a need to review internal processes, underwriting criteria, premium levels and claims procurement to enable us to bring profitability to the targeted levels.
I look forward to meeting the target of improved profitability and strengthening Tryg’s market position. From the Supervisory
In addition, we intend to ensure that each product area produces a return that matches the cash outflow reflected by the risk.
In order to generate sustained, robust technical results, we must maintain high customer retention and satisfaction rates. The identity which a company presents to its customers is to a large extent based on the experience customers have when they contact the company. Therefore, it is important to optimise all processes and be at the forefront of product developments while also developing the level of skills of the Group’s employees. These are areas that will ensure Tryg’s ability to create value and be perceived as the leading peace-of-mind provider in the Nordic region.
Return on investments after technical interest 1,228 340 -988 1,086 570
Key ratios Gross claims ratio 65.5 64.2 67.6 72.1 80.2 Business ceded as a percentage of gross premiums 3.5 3.4 3.5 2.9 1.6 Claims ratio, net of ceded business 69.0 67.6 71.1 75.0 81.8
Number of shares, end of peiod (1,000) 67,790 67,638 64,378 63,228 60,634
See page 140 for a more detailed list of key ratios.
Insurances for businesses. Insurances for corporate customers. Corporate customers are customers who pay annual premiums of more than DKK 900,000 or have more than 50 employees or are served by brokers.
The Ballerup head office celebrated the opening of The Living House. The Living House is a change project for the Group’s offices, replacing cubicle offices with open-plan office environments, common and quiet zones and café environments. The change project is the Group’s new basis for learning, innovation and collaboration.
The right to renew marine insurance was sold to Codan for DKK
This position is based on good products, high customer satisfaction and stronger collaboration between operations and sales.
Tryg was the first insurer to launch health insurances to people aged 60 and over. Under the motto ’at Tryg, health has no age’, we now offer health insurance to all customers irrespective of age.
Tryg scored high in a customer loyalty and satisfaction survey in
Finland. Tryg focuses primarily on the private market in Finland and has 150,000 Finnish customers.
Kjerstin Fyllingen went trekking with Danish and Norwegian second-generation immigrants, respectively, for five days in the Norwegian mountains under primitive conditions, focusing on collaboration and introspection. The trek was part of Tryg’s management development concept the Trek and CSR efforts.
Read about the trek on page 26 in the Stakeholder magazine.
To strengthen the position as the leading peace-of-mind provider in the Nordic region, the Group changed its name to Tryg in
Moderna in Sweden. Tryg introduced the new common name and a new logo in an extensive branding campaign throughout the Nordic region.
Facebook, where Tryg answers general questions and offers good advice about prevention and insurance matters.
From 10 August, Tryg’s Danish customers were able to log on to their owns pages on tryg.dk using the digital signature, NemID.
News‘, a campaign launched by the UN, Danida and the Danish development organisations to eradicate poverty in developing countries.
Increased productivity means a better relationship between earnings, costs and the number of employees. For example, we have to improve sales per employee and the portfolio per employee by at least 2% annually.
(see box to the left). A strong Nordic brand will strengthen our position and competitive strength, and we expect that our customers will experience a stronger presence and recognisability. We intend to continue our pan-Nordic marketing of the Group’s new brand and to enhance our communication with customers, thereby increasing the
We must appreciate that our customers require peace of mind from the first contact, and if they experience major changes in
The Group changed its name from TrygVesta to Tryg. The new logo was based on the familiar Tryg name from Denmark and the Norwegian lifebuoy, which will be the Group’s future mark in Denmark, Norway and Finland. Due to the coincidence of name with Trygg-Hansa, Tryg’s products and solutions are marketed in Sweden under the name Moderna.
life and we must ensure that they remain loyal. By ’remain loyal’
Tryg intends to reduce claims by urging customers to prevent claims through guidance and attractive agreements, as preventive measures can help reduce risk and thus premium levels.
We wish to preserve our market-leading skills within niche concepts as demonstrated by our activities in Enter Forsikring,
In order to preserve our position in the Nordic market, we must continuously make our business more efficient and focus on customers ’ purchase and use of insurance. In 2010, the Group took the initial steps in Tryg Transition, a project designed to create pan-
We wish to generate profitability in all segments through cost reductions, premium adjustments and by defining the right price per risk. We intend to reduce the Group’s selling costs by focusing on partnership agreements, geographic representation, outsourcing and online sales. Distribution costs will be reduced through the introduction of additional self-service solutions in Private Nordic and Commercial Nordic including our partnership agreements.
A strong branding platform is important with respect to customer loyalty and retention and it supports the potential for increasing the Group’s market position and Nordic market share.
We focus on our employees’ well-being and development, and we strive to continuously develop as an attractive workplace. Our ambition is to be perceived as the most attractive workplace in the Nordic financial sector.
The Group intends to ensure that the skills of managers and employees are developed in step with the competency requirements of a developing organisation – an area that is closely linked to the Tryg Transition project.
Furthermore, Tryg intends to maintain employee satisfaction, which is above the financial sector average, and to have diversity as a competitive advantage.
The retention rate remained at a high, stable level in 2010.
Expense ratio 2006: 16.9 2007: 16.8 2008: 17.1 2009: 17.2 2010: 17.0
Index showing the proportion of our private customers having made a multiple product/concept agreement.
The number of customers with a concept agreement increased in 2010 as a result of an increase in the average number of products per customer.
In 2010, Tryg had the highest customer satisfaction among the Danish companies and among the best placed of the Norwegian companies progressing 2 percentage points.
The positive development was due to shorter processing time and higher telephone availability.
Increase in step with productivity, that is about 2% per year.
A decrease of employees in Denmark and Norway and an increased number in Sweden and Finland ensured a higher portfolio per employee.
In 2010, Tryg expanded the scope of questions to obtain a more varied picture of employee satisfaction.
Group’s CO2 emissions from air transport in 2008 and 2009, the emissions in 2010 fell due to a stricter travel policy and expansion of the Group’s video conference facilities.
The Nordic insurance industry is characterised by few companies holding relatively large market shares and having a presence in several markets in the Nordic region. The four largest companies have an aggregate Nordic market share of around 47%, and the four largest companies in each of the four Nordic countries cover an aggregate of between 63% and 81% of the respective markets between them.
In 2010, the Nordic insurance industry generated aggregate earned premiums of around DKK 150bn, accounting for some 2.1% of the region’s GDP.
The corporate market is characterised by medium-sized and large businesses served directly by an insurer or through an insurance broker. Large customers in particular may see international insurance groups as an alternative to the Nordic insurance companies. In a historical perspective, however, international players have only to a small extent been able to build market positions in the Nordic region. In 2010, several large international insurers once again showed an interest in setting up in the Nordic market and submitted bids in insurance programmes tendered by brokers for several large companies. Tryg does not compromise on profitability, and accordingly had to see several corporate customers leave the company during the year. Historically, however, many such customers return as it is difficult for the foreign insurers to match our service and quality in claims handling.
Recent years’ challenges in the financial markets have resulted in stronger focus on capitalisation and risk management. The upcoming Solvency II rules are expected to affect the insurance companies’ risk behaviour including capital requirements compared to investment risk.
Being the second-largest insurance company in the Nordic region, Tryg helps shape developments in the Nordic insurance industry.
Financial market volatility and the focus on risk, the lower earnings in 2010 and upcoming stricter solvency requirements are likely to cause the insurance industry to change its behaviour.
Developments would indicate better pricing relative to the risk which insurers assume from their customers. It is difficult to predict how these developments will affect the distribution of market shares and the behaviour of individual competitors, but
Tryg intends to exploit any opportunities that may contribute to profitable growth. Tryg’s overall market share in the Nordic region is expected to increase in the years ahead, primarily due to growing market shares in Finland and Sweden. In addition to the partnership with Nordea, Tryg is continuously developing and streamlining the Group’s own sales channels and other business partnerships, thereby covering more parts of the Finnish and Swedish insurance markets. For Denmark and Norway, the main target is to improve profitability, which may cause a loss of market shares in the short term.
Like the rest of the industry, Tryg increased premiums in 2010.
The premium increase will continue to have an impact in the years ahead. Likewise, initiatives have been implemented to reduce claims. These initiatives are designed to improve overall earnings while also making for a better distribution in earnings between the individual insurance products.
However, improvements will not be created by higher insurance premiums alone, but through a sound balance with claims reducing initiatives and process enhancements. Targeted investments in process enhancements such as digitalisation, IT
systems and self-service are expected to improve the Group’s earnings and are important longer-term drivers for ensuring the
In 2011, Tryg will focus on further strengthening the balance between price and risk, and on dynamic, compassionate and innovative servicing of customers – in relation to regular consultancy as well as in a claims situation.
a) Estimated market share of the private market is above 5%.
Tryg sells insurances through own sales channels and through partners such as Nordea. Tryg offers a broad range of insurances, and continuously expands the Group’s peace-of-mind solutions.
Read more about the new health insurance on page 32 in the Stakeholder magazine.
Knowing the segment a customer belongs to allows us to target products, services, claims handling and sales campaigns in a much better way. This enables us to advise and service customers based on their own requirements, giving us much more satisfied customers and improving our potential for sales.
We began working on customer commitments in late 2009 where Tryg’s employees suggested more than 700 ideas for commitments. In the spring of 2010, we interviewed 1,200
Danish and Norwegian private customers, narrowing down the number of commitments based on their responses. The internal implementation of commitments to private customers began in the autumn of 2010. The customer commitments were clearly anchored in Tryg and became an integral part of day-to-day work processes, allowing managers and employees to familiarise themselves with them. In 2011, we will launch the customer commitments on the private markets in Denmark and Norway, while Sweden and Finland will await the experience gained in
Motor insurances Motor insurances account for 33% of the Group’s total premium income and comprise a mandatory third party liability insurance providing cover for injuries to a third party or damage to a third party’s property and a voluntary own vehicle insurance providing cover for damage to the customer’s own vehicle from collision, fire or theft.
Transport insurances Transport insurances account for 2% of the Group’s premium income and cover damage to goods in transit due to collision, capsizing or crash of the means of transport.
Health insurances Health insurances account for 2% of the Group’s premium income and is a relatively new product in the market attracting great demand. Health insurances cover expenses involved in examination, treatment, medicine, surgery and rehabilitation in a private health care facility. Increasing health care costs and waiting times in the public system, citizens’ higher requirements have generated substantial demand for health insurances, and this demand is expected to continue in the years ahead. The greater number of insured persons and the increased use of private health insurances will combine to generate significant growth potential within health insurance.
Based on the most recent experience, the level of both weather claims and large claims is expected to increase in 2011 compared with previous forecast for a normal year. The increase in weather claims is in particular attributable to the more frequent and more violent cloudbursts. In addition, winter claims in 2010 triggered an upgrade of forecasts. The level of large claims was higher than expected in 2010, resulting in the higher expectations going forward. It should be noted in this context that the divestment of the marine portfolio reduced the exposure to large claims significantly.
Despite a lower expense ratio in 2011, expenses involved in the multi-year process and IT efficiency project Tryg Transition will increase by around DKK 200m annually. Tryg Transition is a multi-year process and IT efficiency project. Expenses related to Tryg Transition will support Tryg’s ambition of an expense ratio of 10 by 2020, achieved in particular through extensive restructuring of processes and IT infrastructure and increased use of self-service.
– a match portfolio exclusively intended to match the technical provisions and a free investment portfolio for actively investing the Group’s capital.
Price fluctuations on the match portfolio resulting from interest rate changes are offset by an opposite interest rate effect on the discounted provisions, thereby neutralising any immediate effect on the financial results. On the other hand, higher interest rates produce higher, current earnings.
As in prior years, Tryg’s capitalisation in 2011 is expected to exceed the capital requirements to be imposed on the insurance industry by the upcoming Solvency II rules by a substantial margin. The Group’s own capital requirement target is currently based on Standard & Poor’s ’A-’ rating, to which Tryg has added a safety margin of 5%.
Norway and Finland and an incipient improvement in the Danish private market. Profitability remains unsatisfactory relative to the target of a combined ratio at the level of 90, and additional initiatives are therefore underway to improve profitability in 2011 and 2012.
The combined ratio increased to 98.8 in 2010 from 92.2 in 2009 including the events referred to above. The combined ratio was impacted by a positive run-off result of DKK 824m in 2010 against DKK 683m in 2009. The relative run-off result relating provisions was almost unchanged in 2010 compared with 2009.
Tryg generated high growth in gross earned premiums in a challenging market, recording an increase of 4.5% (9% in DKK
Tryg continued to expand in Sweden and Finland in 2010. To this should be added increased costs of branding activities due to a new Nordic name and logo as well as costs related to the multi-year process and IT project named Tryg Transition. Despite increased branding costs, Tryg managed to reduce the expense ratio from 17.2 to 17.0, which was better than expected.
Most of Tryg’s customers are private households with a fairly stable purchasing power and insurance requirements.
At the end of 2010, Commercial Nordic was characterised by increasing average premiums, reduced insurance need and a slightly higher customer outflow. Gross earned premiums increased by
Nordic transferred a portfolio to Commercial Nordic, which had a 3% negative impact on the performance.
Geographically, growth rates remained high in Sweden and Finland at 43.8% and 23.4%, respectively. Growth in Sweden was impacted by the acquisition of Moderna, which was consolidated from the second quarter of 2009. Adjusted growth in Sweden was 19.6%.
Gross earned premiums in Norway increased by 1.4% to DKK 7.5bn, and premiums income in Denmark increased by 1.2% to DKK 9.6bn.
Like Norway, the Danish market has generally been characterised by premium increases since 2008, which is reflected in the growth.
The Group’s premium growth was adversely affected by an increase in unearned premium provisions for change of ownership insurances. According to accounting rules, provisions must be made with respect to loss-making insurance products for the expected future loss until the product is profitable, which is recognised as a reduction in earned premiums. This accounting policy reduced earned premiums for the full year by DKK 106m, corresponding to a reduction of 0.6 percentage point of premium growth for the year.
0.9bn at 31 December 2010, cloudburst claims DKK 0.3bn, large claims DKK 0.8bn, and a decision by the Danish Supreme
Total expenses for extraordinary claims amounted to DKK 2.2bn or DKK 1.4bn more than in a normal year.
The winter in January 2010 was the coldest in Denmark in 14 years, December the second coldest and August was the 10th wettest month in weather history. January was the 8th coldest month in Norway in weather history. Based on the Group’s experience from cloudburst and snow load claims, a number of initiatives have been launched, and more will be made to improve the risk balance going forward (read more in the section Private Nordic).
While Denmark, Norway and Sweden were all affected by the winter weather, especially Denmark was also impacted by the economic downturn and the severe effects this had in Denmark.
In Finland, claims in the private business developed satisfactorily as reflected in an improvement of the claims ratio from 84.2 in 2009 to 80.9 in 2010. The claims ratio in Sweden was 84.6 in 2010 against 80.6 in 2009 and, like in Denmark and Norway, it was adversely impacted by winter claims.
70m with a 0.4 percentage point impact on the gross expense ratio.
The Group made sales distribution more efficient in 2009 and 2010.
In Denmark, this resulted in 8 out of 22 sales offices being closed and the employees relocated to larger sales offices or call centres.
In Norway, the number of franchise offices was reduced from 85 to 70, and the remuneration structure for franchisees was changed to focus more on sale to new customers and less to existing customers. Tryg’s own sales force in the Norwegian private business was relocated to customer service centres, leaving the franchise part with direct physical sales.
At 31 December 2010, the Group employed 4,291 full-time employees, which was 19 employees fewer from the year-earlier date.
This development is a combination of natural wastage in Denmark and Norway with 80 employees leaving the Group since 2008, and an increase of employees in Sweden and Finland, where the Group is expanding rapidly. In the past few years, Tryg has focused on in-house rotation to fill vacant positions, particularly in the Danish and Norwegian parts of the organisation.
Greater efficiency in operations and processes based on the Lean principles contributed to reducing staff costs in 2010. This has been achieved with enhanced quality to customers and greater employee satisfaction. For example, the work load has been evened out between the claims departments, and employee involvement
Motor claims Case processing time: 22 days Case processing time: 4 days
In addition to cost reductions, Tryg invests in a multi-year improvement of business processes and IT systems, which will increase costs in the short term. This is the Group’s transition programme, designed to ensure common business processes and systems and support the ambition of achieving an expense ratio of 10 by 2020. Finally, increased expenses will be incurred in connection with the implementation of Solvency II. Focus on costs and investments in processes provide a strong foundation and help secure Tryg’s longer-term growth and value creation.
Overall, divested business reported a loss of DKK 83m against DKK
The equity proportion was increased slightly in 2010, while the proportion of bonds was reduced accordingly. The equity and real estate investments in particular made positive contributions to the return. The total investment return (free investment and match portfolios) was DKK 570m against DKK 1,086m in 2009.
Tax on continuing business was DKK 265m in 2010 against DKK
Tryg since 1987 and has served as Group CEO since 2003. The
Board had regularly considered the question of continuity and succession in the company’s senior management and announced on 12 January 2011 that Group CFO Morten Hübbe would assume the position as Group CEO of Tryg on 1 February 2011. Simultaneously with the appointment of Morten Hübbe as Group CEO and upon consultation with Morten Hübbe, the Supervisory Board appointed
Profit/loss on ceded business -85 -87 38 Technical interest, net of reinsurance 210 85 77
The lower profit was in particular attributable to weather losses, which stood at an unusually high level in 2010. The harsh winter impacted particularly the Danish and Norwegian parts of the business, while the Finnish business was only to a limited extent affected by winter claims despite a longer period of frost and snow. With a 5 percentage point fall in the combined ratio, the Finnish business was a positive contributor to the overall profit, illustrating the earnings advantage of geographic diversification.
As in Denmark and Norway, the Swedish part of Private Nordic was also greatly impacted by the winter. In 2010, the Swedish business focused on integrating the Group’s original Swedish business in Malmø with the acquired company, Moderna, and on setting up a single Swedish organisation and business platform.
Combined ratio was 96.4 relative to 92.8 in 2009. The combined ratio in Finland of 101.7 was only to a limited extent impacted by winter claims. The Finnish combined ratio reflects the achievement of the most important targets in relation to restoring profitability.
Moderna, which was included with one quarter more in 2010 than in 2009. Premium initiatives in the Danish, Norwegian and Finnish parts of the business made a major contribution to the positive performance.
The Danish private business implemented in particular premium increases for contents, holiday home and change of ownership insurances and, to a lesser extent, for house insurances. These initiatives had an impact of almost DKK 150m. The higher premiums increased the premium volume. To this should be added higher sales through partners, and several partnership agreements were renewed.
Read about a new cooperation agreement to prevent snow pressure claims in the Stakeholder magazine page 16.
Developments in change of ownership insurances were unsatisfactory despite premium increases of 40% from the beginning of 2010. Due to the negative performance, Private Nordic will implement further premium increases of 50% from 2011 and also adopt a more restrictive underwriting policy.
Unemployment insurances were considered an increased risk already in 2008, and since 2009 Tryg has to a large extent withdrawn from this market. We introduced large premium increases in 2010, which resulted in an outflow of business and a major reduction of the business volume. As was expected, the general premium increases resulted in a higher outflow of customers, and the retention rate in Denmark decreased during 2010 from 91 to 90, remaining, however, at a satisfactory, high level.
DKK 100m. Unlike in Denmark, the Norwegian private business improved its retention rate from around 85 at the beginning of the year to around 86 at the end of 2010.
In August, Denmark was hit by a cloudburst that produced claims of around DKK 200m with a 2 percentage point impact on the combined ratio. Tryg provides consultancy to customers on how to best protect their homes from cloudbursts, including on how to prevent basement flooding. In addition, the Group intends to differentiate prices which will be higher in areas with the greatest risk of flooding, and to combine these measures with requirements for preventive measures and higher deductibles.
Tryg recorded, among other things, a steep increase in the number of reported thefts of jewellery, and has introduced stricter documentation requirements for this type of claim. Tryg has previously expressed concern about police efforts in relation to theft, and we are pleased to note that the police have scaled up their efforts against burglaries and similar crimes since the first quarter of 2010.
The claims ratio in Finland improved by 3.4 percentage points, attributable to minor premium increases for all products, emphasising that the Finnish business now contributes to the Group’s overall profitability and will continue to do so in future.
Key ratios Gross claims ratio 69.0 74.1 88.4 Business ceded as percentage of gross premiums 2.0 2.6 -0.9 Claims ratio, net of ceded business 71.0 76.7 87.5 Gross expense ratio 22.2 24.5 24.1
Commercial Nordic sells insurances to small and mediumsized enterprises, mainly in Denmark and Norway. In Sweden, most of the commercial business is written through brokers and forms a part of Corporate Nordic. The commercial business in Finland remains in a start-up phase.
The underlying development was unsatisfactory, necessitating premium increases and cost adjustments. With a view to improving profitability, the Danish part of the commercial business implemented premium increases for agricultural insurances in an average of 10%. In the autumn, premium increases were implemented for contents insurances.
In 2009, we recorded profitability challenges in the commercial market. Following up on this, we increased premiums for agricultural insurances by an average of 10% effective from the beginning of 2010, and in the autumn we increased premiums for contents insurances. In addition to general premium measures, Tryg made overhauls based on individual customer performances. In the great majority of cases, premiums were adjusted or deducti-
The claims ratio increased from 74.1 in 2009 to 88.4 in 2010, corresponding to 14.3 percentage points. The development in claims was affected by an above-average number of claims in an average year.
One of the year’s largest claims was a fire event in central Copenhagen, which is expected to total a gross amount of DKK 170m and DKK 114m net of reinsurance.
Costs amounted to DKK 1,029m, and the expense ratio was reduced from 24.5 to 24.1, which is still not satisfactory. The level was explained by the continued large number of manual processes and significantly higher distribution costs than in the private business. Reducing costs will be an important focus area for the
Group in 2011, and total costs are expected to be reduced in the years ahead due to lower distribution costs and more internal processes being automated.
Profit/loss on ceded business -446 -325 -399 Technical interest, net of reinsurance 164 34 27
Corporate Nordic sells insurances to corporate customers under the brands ’Tryg’ in Denmark and Norway and
The technical result amounted to DKK 394m in 2010 compared with DKK 878m in 2009. The performance was affected by one-off events with an adverse impact of around DKK 250m.
Tryg Garanti is mainly involved in guarantee insurance, providing guarantees to contractors, but also to contract manufacturers and public authorities. Tryg Garanti had earned premiums of DKK 203m in 2010, an increase of 14% relative to 2009.
A higher number of claims in the building and construction industry triggered an increase in the claims ratio. The claims ratio was 45.8 against 43.7 in 2009, and Tryg Garanti reported a combined ratio for the year of 71.9 against 75.3 in 2009, supported by an improved cost level. In the second half of 2010,
This was particularly related to renewals at 1 January 2010 when several large customers left the Group, reducing the opening portfolio. In 2010, the Norwegian part of the corporate business implemented general premium increases of 5-7%.
435m at 31 December 2010, increasing by around 40% in 2010.
In Sweden, insurances offered by Corporate Nordic include building, loss of profits, liability, transport and motor. Workers’
Corporate Solutions has therefore supported Tryg’s expansion in the Swedish market for corporate insurances. Given the current action plans and distribution strategy, this part of the portfolio is expected to see further growth in the years ahead.
Consultancy is provided by dedicated customer teams, with Tryg’s employees ensuring a high level of service with respect to risk consultancy as well as in a claims situation. We focus on developing areas with sensible risk, in which pricing, product adjustment and development, and profitability are aligned with the Group’s targets.
DKK 282m to DKK 3,630m. The claims ratio, net of ceded business was 79.9 in 2010 against 71.6 in 2009.
August 2010, which made it possible for part-time employees to increase their compensation retroactively. The decision triggered a need to strengthen provisions for prior year claims and increasing provisions for claims with respect to the current year of around DKK 200m, DKK 120m of which related to Corporate
Read about new initiatives for corporate customers to prevent claims in the Stakeholder magazine page 6, 9 and 12.
In addition to the Supreme Court decision, workers’ compensation insurances were also affected by the economic downturn.
The cost level of Corporate Nordic was under pressure in 2010 due to the adverse portfolio development. The expense ratio increased from 11.9 in 2009 to 12.8 in 2010. This level is not satisfactory, and initiatives have been implemented to restore the low level seen in prior years. Targets for 2010 and 2011 include reducing the number of employees in Denmark and Norway by around 10%, mainly by natural wastage. Conversely, the investment in the Swedish part of the corporate business has triggered an overall increase in the cost level.
The performance was favourably impacted by developments in the equity markets. The equity portfolio produced a return of 15.5% or DKK 261m.
In 2010, Tryg restructured the Group’s investment portfolio, dividing it into a match portfolio matching the technical, discounted provisions, and a free portfolio comprising active investments and corresponding to the Group’s equity. The principles of this division are described in more detail on page 40. As a result of the division, the below table has been extended to include return and other movements for the
The free portfolio is invested in equities, real estate and bonds and generated a total gross return of DKK 772m in 2010, corresponding to 7.4% of average invested capital. The investment portfolio amounted to around DKK 9.5bn at 31 December 2010.
261m or 15.5%, mainly due to increases in global equity markets.
The real estate portfolio, comprising Danish and Norwegian properties, produced a return of DKK 300m or 8.0%. The return on real estate is calculated on the basis of the properties’ current net rental income, sales gains and revaluation, if any. A return is calculated for the head office buildings based on market rents for similar buildings, but this amount is deducted in the item ’Other financial income and expenses’. The bond portfolio produced a return of DKK
211m, corresponding to 3.8%. The duration of bonds in the investment portfolio was around 1 year at 31 December 2010.
The item ’Other financial income and expenses’ comprises various elements included in the investment result. Some of these elements are fairly predictable, such as interest expenses on the loan portfolio. Including rent from head office properties and interest received on operating assets, this is expected to amount to an annual net expense of around DKK 250m. For 2010, this part of the item was calculated at an expense of DKK 197m, including an expense of DKK 98m relating to ’Reversal of rent’ and an expense of DKK 86m relating to interest on loans. To this should be added a number of less predictable items such as exchange rate adjustments, mismatch of inflation hedging of workers’ compensation provisions, and other items. Tryg expects a deviation in these items in the range of plus/minus DKK 100m per year and plus/
minus DKK 50m per quarter. In 2010, the less predictable part amounted to a net income of DKK 42m, including DKK 27m attributable to inflation hedging of workers’ compensation provisions.
c) The item comprises interest on operating assets, bank debt and reinsurance deposits, exchange rate adjustment of insurance items, costs of investment activities and offsetting of return on owner-occupied property.
Other financial income and expenses, investment c) -181 -45 Other financial income and expenses, non-investment c) -107 -152
Equities companies often structure their active portfolios differently and independently of the liabilities side (the technical provisions).
Under the current solvency rules and in countries that do not use discounting, an insurance company will typically have more volatile asset portfolios and thus greater earnings fluctuations.
Under the upcoming Solvency II rules, high earnings fluctuations will require a stronger capital base. Discounting of provisions brings out deviations between the return on assets and liabilities. In order to reduce fluctuations and risk in the overall results, insurance companies are expected to have to match assets and liabilities over time or to consider why they have chosen different risk profiles for assets and liabilities.
and financial strength for the Group to assume risks from customers.
• a standard model currently being developed within the EU in connection with the implementation of Solvency II in 2013 and
All three models present the capital required to match Tryg’s current risk profile. The capital requirement is estimated subject to a 99.5% confidence level, which means that statistically the defined capital level would be insufficient once in a 200-year period.
Tryg had a buffer of 5% relative to the capital required for an ‘A’
rating. In 2010, Standard & Poor’s increased the capital requirements with respect to equities, bonds and real estate in its capital model. This increase was partly offset by the possibility of including discounting of provisions for unearned premiums.
Tryg has taken part in the test calculations for a standard model under Solvency II since 2005. Under QIS5, the latest official
Tryg will use a partially internal model for capital planning rather than the standard model referred to above. The partially internal model will thus be based on the insurance module of Tryg’s existing model supplemented by the other modules (investment, operational risk, etc.) from the standard model.
In addition to changes in the way of calculating capital, the future Solvency II rules will also change regulatory capitalisation requirements. Solvency II will classify capital under Tiers (1-3), reflecting the quality of the company’s capital. Tryg believes that 72% of its capital will be approved as Tier 1 capital, while the remainder, being subordinated loan capital and parts of the Norwegian Pool, will be classified under Tier 2. Tryg follows developments closely, taking account thereof when determining dividends for the year.
In 2005, Tryg raised a 20-year EUR 150m subordinated bond loan, which is listed on the London Stock Exchange. In connection with the acquisition of Moderna in 2009, Tryg raised a 20-year
The financial flexibility must take into account strategic considerations and ensure the possibility of additional contributions of
Total buy back 1,405 799a) 0 Buy back per share (DKK) 21 12.5 0 Total distribution per share (DKK) 33 38 6.5 28 4 a) The share buy back programme was based on the profit for 2009, amounted to DKK 799m and was initiated on 16 April 2010 with completion on 7 February 2011.
Supervisory Board, but out of the total distribution at least 50%
The introduction of Solvency II in 2013 will impose stricter requirements with respect to the way in which insurance companies work with and control risk, including the Supervisory
Tryg has for a number of years worked to align the company to such requirements. This involves the Supervisory Board actively defining risk appetite and risk management limits and regularly assessing the overall risk in the company and the resulting capital requirement.
The assessment of selected risk scenarios based on this work is incorporated directly in the Group’s calculation of the necessary solvency need (individual solvency need).
Underwriting risk is the risk related to entering into insurance contracts and thus the risk that premiums charged do not adequately cover the claims which Tryg has to pay when a claim has been reported. The risk can be divided into random variation in relation to estimated payments and the systematic trend of the underlying claims level. Random variation is, for example, a greater-than-expected number of large losses, while a systematic trend could be attributable to an increased frequency of cloudbursts during summer periods or a falling frequency of personal injuries in motor insurances due to safer cars.
With respect to property risks, major events in 2011 are protected by catastrophe reinsurance of DKK 5.5bn with a maximum retention of DKK 100m. The primary risk of oneoff events is storm, and the level of cover has been defined using simulation models to the effect that protection would statistically be inadequate less than once every 250 years.
We have bought catastrophe reinsurance up to DKK 1.5bn for personal accident and workers’ compensation policies with a retention of DKK 50m, covering the risk of multiple injuries from the same cause, including terror.
5bn through reinsurance cover of DKK 4.5bn. Tryg’s share of a market claim of DKK 20bn would thus be around DKK 100m, equal to Tryg’s market share of the pool’s DKK 0.5bn retention.
In case of a major insurance event comprised by the reinsurance programme, we may have major receivables from reinsurers and thus be exposed to credit risk. This risk is managed through requirements to reinsurers’ ratings and by spreading reinsurance on several reinsurers.
After the period of the policy’s cover expires, insurance risk relates to the provisions for claims made to cover future payments on claims already incurred. Customers report claims at a certain delay. Depending on the complexity of the claim, a shorter or longer period of time may pass until the amount of the claim has
The size of the provisions for claims is determined both through individual assessments and actuarial calculations. At 31 December 2010, the provisions for claims amounted to DKK 24,883m.
Read more about the discount rate in the section Investment and interest rate risk.
The calculation of provisions for claims will always be subject to considerable uncertainty. Historically, many insurers have experienced substantial positive as well as negative impacts on profit (run-off) resulting from reserving risk, and that may also be expected to happen in future. Tryg manages reserving risk by pursuing a reserving policy to ensure a uniform process for determining provisions across national borders and insurance lines at all times. This implies that it is based on an underlying model analysis, and that internal control calculations and evaluations are made.
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 Tryg to explicit inflation risk in case of changes in Danish wage inflation. Tryg hedges such risk using an inflation swap.
Reserving risk We make technical provisions at the end of a financial period to cover expected future payments for claims already incurred. Reserving risk is the risk that future payments deviate significantly from our assumptions when making the provisions.
Tryg aims to match the disbursement profile for discounted provisions for claims with corresponding interest-bearing assets as closely as possible. If interest rates fall, this structure would cause a similar increase in the provisions for claims and the value of the bond portfolio, thereby reducing Tryg’s overall exposure to changes in interest rates considerably.
The equity and real estate portfolios are exposed to changes in equity markets and real estate markets, respectively. At 31
December 2010, the equity portfolio accounted for 5.4% of the total investment assets. In 2008, Tryg bought the head office in Ballerup, thereby increasing the proportion of real estate significantly. This proportion is expected to be reduced over time. In addition to the owner-occupied properties,
Tryg’s real estate portfolio consists of office and rental properties, which account for 9.6% of total investment assets.
Credit risk is the risk of incurring a loss if counterparties fail to meet their obligations. In connection with the investment activities, the primary counterparties are bond issuers and counterparties in other financial instruments. Tryg uses limits and rating requirements to manage credit risk and concentration risk.
See the section Investment activities for an overview of the bond portfolio by rating.
Many businesses, in particular financial businesses, have had their access to liquidity significantly impaired during the financial crisis. Tryg is not exposed to the same risk of a lack of liquidity since premiums are due for payment before claims have to be paid out. Most of the payments received are placed in cash accounts or liquid securities ensuring that Tryg will be able to procure the necessary liquidity at all times.
Tryg has prepared contingency plans to handle the most important areas, such as the contingency plans in the individual parts
Total 24,255 a) The provisions for claims are excluding Finland and Tryg Garanti.
Tryg considers strategic risk and insurance risk (underwriting and provisions) to be the most important types of risk exposure. Both types of risk are closely related to Tryg’s operations as a general insurer. Investment risk is at a satisfactory level due to the current investment strategy. Operational risk is considered to be less important than the other risk types.
Underwriting risk DKKm Increase in claims expenses of 1% -156 Decrease in premium rates of 1% -195 Weather claims of DKK 5.5bn -254 (Retention plus reinstatement fee)
Equity market 15% decline in equity markets -290 Effect arising from derivatives 37
strong results by communicating clearly, sharing knowledge and having a readiness to change.
Mikael Olufsen Bodil Nyboe Andersen Jørn Wendel Andersen Paul Bergqvist Christian Brinch
Committee memberships: Audit committee of Tryg A/S (chairman), Risk committee of Tryg
Ms Nyboe Andersen has special skills within the areas of management, governance, treasury, financial business and risk management from her former positions as Chairman of the
Board of Governors of Danmarks Nationalbank and Managing Director of Andelsbanken.
Born 1946. Joined the Supervisory Board in 2006. Nationality: Swedish. Professional board member. Former CEO of Carlsberg A/S.
Mr Bergqvist has international management and board experience in M&A, strategic development, marketing, branding and financial management. Being a Swedish citizen,
Mr Brinch has experience in the areas of M&A, treasury, communication and business development. Being a Norwegian citizen,
Tina Snejbjerg John R. FrederiksenBill-Owe Johansen Rune Torgeir JoensenJesper Hjulmand Lene Skole Berit Torm af 1898, Rådgivningsselskabet af 1. september 2009 A/S, SBS Byfornyelse smba, Sjælsø Gruppen
Invista European Real Estate Trust Sicaf, Audit committee of Sjælsø Gruppen A/S and European
Mr Hjulmand has experience within M&A, strategy, organisational development, communication and business development.
Born 1959. Joined the Supervisory Board in 2010. Nationality: Swedish. Claims handler with Atlantica/Moderna (Swedish subsidiary).
Born 1959. Joined the Supervisory Board in 2010. Nationality: Danish. Executive Vice
Born 1956. Joined the Supervisory Board in 2008. Nationality: Norwegian. Project worker with Tryg. Employed since 1984.
a) Dependent board member; that is, affiliated with the principal shareholder, TryghedsGruppen.
b) Independent board member; that is, without any affiliation with Tryg or the principal shareholder,
Lars Bonde Group Executive Vice President, Customer Service & Sales –
Number of shares held: 619. Change in portfolio in 2010: 0
Number of shares held: 17. Change in portfolio in 2010: 0
Board and the Executive Management will participate in general meetings where possible, and this has a high priority.
The Group has a number of in-house guidelines to ensure that disclosures of price-sensitive information are made in accordance with the stock exchange rules of ethics.
Furthermore, the Supervisory Board performs an annual review of dividend distribution and share buy back. In 2010, the shareholders at the annual general meeting authorised the Supervisory
Board to let Tryg acquire own shares within 10% of the share capital in the period up to 14 April 2015.
Furthermore, the Supervisory Board receives regular reports about Tryg’s largest investors and employee and customer satisfaction reports.
The Group has a number of policies adopted by the Supervisory
The Group is committed to corporate social responsibility, and the Supervisory Board adopted the latest CSR policy on 5 October 2010. In addition, Tryg has an Investor Relations policy and a
or adjust the Group’s strategy. The Supervisory Board cooperates with the Executive Management to ensure follow-up on and development of the Group’s strategies. The Supervisory Board ensures that the required skills and financial resources are available for the Group to achieve its strategic targets. The framework is discussed at the Supervisory Board’s annual strategy seminar and budget meeting. The activities of the Supervisory Board are defined in the Group’s rules of procedure and annual cycle as approved by the Supervisory Board.
The Supervisory Board makes an annual review of and approves rules of procedure for the Supervisory Board and the Executive
Chairman. The Deputy Chairman will act in the Chairman’s absence and has the role as a sparring partner for the Chairman.
Group Executive Management. The Chairman also acts as spokesman for the Supervisory Board for external purposes.
The Chairman and Deputy Chairman hold preparatory meetings with the Executive Management before all Board meetings and before
According to the rules of procedure for the Supervisory Board, no
Board member may perform work for Tryg without a prior decision to that effect by the Supervisory Board. Furthermore, such task must be of a one-off nature.
The Supervisory Board makes an annual assessment of the skills required for the Supervisory Board to perform its duties in the best possible way. The Group focuses on skills within financial business, IT, marketing and management.
Supervisory Board of TryghedsGruppen smba should also act as Chairman of the Supervisory Board of Tryg A/S. In addition, the Supervisory Board of TryghedsGruppen smba elects three members to the Supervisory Board of Tryg A/S from among the members of TryghedsGruppen smba’s Supervisory Board.
This is also described in the notice convening the annual general meeting, including in connection with election of new Supervisory
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 Supervisory Board must retire at the first general meeting following their 70th birthday.
Board members elected by the shareholders at the annual general meeting are elected for terms of one year.
Chairman of the Supervisory Board perform the duties generally handled by a Nomination committee.
Information about the Board committees includes descriptions of members, meeting frequency, responsibilities and the activities of the committee during the year. Furthermore, the special qualifications of each Supervisory Board member are described separately on the website.
Deputy Chairman in their joint role as Nomination committee is independent.
Board committee members are primarily elected on the basis of their special skills. It is also considered important to involve the employee representatives in the committees. The committees solely prepare matters for decision by the entire Supervisory
The Supervisory Board has defined an evaluation procedure for assessing the composition of the Supervisory Board and the work and results of the Supervisory Board and its individual members.
The Chairman is in charge of the evaluation and holds individual assessment interviews with each member of the Supervisory
The Supervisory Board carries out an annual evaluation of the work and results of the Executive Management according to clearly defined criteria determined in advance and of the cooperation between the Supervisory Board and the Executive
Audit committee Tryg set up an Audit committee in 2006 covering Tryg A/S and its subsidiaries Tryg Forsikring A/S and Tryg Garantiforsikring A/S. The committee has four members and is chaired by an independent Supervisory Board member who is also Deputy Chairman of the Supervisory Board.
The framework for the Audit committee’s work is defined in terms of reference. The committee is solely a preparatory body, supporting the Supervisory Board in its work. The Audit committee has knowledge of and experience in financial matters as well as accounting and audit matters in listed companies.
The Audit committee held four meetings in 2010, reporting to the Supervisory Board on a regular basis. The Audit committee made an assessment of the preceding year’s work in August 2010, evaluating the need for changes to its terms of reference.
• Ensure compliance with the adopted remuneration policy (including guidelines for incentive pay).
• Monitor that the information in the annual report on remuneration of the Supervisory Board, the Executive Management and risk- takers is correct, true and adequate.
• Monitor the company’s risk management systems. • Review the Group’s risk assessment. • Assess and monitor the efficiency of the risk management environment. • Monitor the implementation of Solvency II in the Group.
Tryg intends to present a new remuneration policy and new guidelines for incentive pay at the upcoming annual general meeting to be held on 14 April 2011 based, among other things, on legislation changes.
Members of the Executive Management are employed under service contracts, and all terms of their remuneration are fixed by the Supervisory Board. The Supervisory Board reviews the remuneration of the members of the Executive Management annually based on the requirements for attracting and retaining the best qualified Executive Management members.
In order to build loyalty and motivation, Tryg had a share option programme in 2010 for the Executive Management, Group Executive Management, senior executives and employees to reward outstanding performance. The options, which entitle the holders to buy one share per option, cannot be exercised earlier than three years and not later than five years after grant. The strike price is the market price on grant plus 10%. The exercise price is the strike price less dividend payouts in the period. Options can only be exercised during the open trading windows in connection with profit announcements. Own shares are bought to cover the share option programme.
Total remuneration of the Supervisory Board in 2010 Audit Remuneration DKK Fee committee committee Total
Bodil Nyboe Andersen 600,000 225,000 825,000 Jørn Wendel Andersen 300,000 150,000 450,000 Christian Brinch 300,000 300,000 John Rene Frederiksen 300,000 50,000 350,000
Tina Snejbjerg 300,000 300,000 Bill-Owe Johansson 300,000 300,000 Rune Torgeir Joensen 300,000 150,000 450,000
In 2010, the share options entitled the holders to acquire shares at the average price of Tryg shares (all trades) as quoted on OMX
Copenhagen on 23 February 2010 plus a 10% premium, equal to a strike price of DKK 352.04.
Being an insurance business, Tryg is subject to the risk management requirements of the Danish Financial Business Act. In its capital and risk management instructions, the Supervisory Board defines the framework for risk management in Tryg with respect to insurance risk/reinsurance, investment risk and operational risk, including IT security. This framework is then implemented in risk policies that define detailed guidelines for the Group’s risk management. A Risk committee comprising the Group CEO,
Group’s strategy or which may have a potential substantial impact on the Group’s financial position. In this process, identified risks are recorded and quantified. The risk mapping is included in the annual risk reporting to the Supervisory Board, and the quarterly quantification of identified risks is included in the calculation of the individual solvency need.
Total no. of outstanding share options 82,530 138,690 235,091 175,834 226,899 859,044
The Group’s internal control systems are based, among other things, on clear organisational structures and guidelines, general
IT controls and segregation of duties, which are supervised by the internal auditors.
Tryg is in the process of setting up an Ethical Line through which employees, customers or business partners may report on serious matters related to breach of law or internal guidelines. The line will come into effect when it has been approved by the Danish data protection agency.
Risk management is an integral part of Tryg’s business operations. The Group continuously seeks to minimise the risk of unnecessary losses in order to optimise return relative to the company’s capital.
Read more about the Group’s risk management in the section Risk management.
Supervisory Board’s review of the annual report, it discusses the accounting policies, among other issues. The results of the audit are discussed with the Audit committee and in Supervisory Board meetings for the purpose of assessing the auditors’ observations and conclusions. The internal and external auditors’ long-form reports are reviewed by the Supervisory Board.
The audit agreement with the external auditors, including the auditors’ fees, is concluded between the Audit committee and the auditors. The Audit committee reviews the limits for the external auditors’ performance of non-audit services each year.
The Supervisory Board believes that Tryg complies with the recommendations apart from: Recommendation 5.10.2 in that a majority of the members of the board committees cannot be considered to be independent members. Board committee members are primarily elected on the basis of their special skills. It is also considered important to involve the employee representatives in the committees.
Tryg emphasises openness, transparency and accommodation of stakeholder information requirements, thereby providing investors, equity analysts and other stakeholders with a good basis for forming a correct picture of the Group’s financial position, its performance and its opportunities and risks.
The Group’s Investor Relations strive to maintain a high level of information by
• being available and proactive, and answering queries from investors and other stakeholders as promptly as possible
• having in-depth insight into and knowledge of the Group as well as relevant external trends
Tryg shares opened 2010 at DKK 351.5 and ended the year at
The performance of Tryg shares in 2010 was affected by a lowerthan -expected earnings level. This was to a large extent attributable to several extraordinary events as described earlier in the sections on performance, which reduced earnings by DKK 1.4bn.
Tryg shares had an average daily turnover of DKK 43.1m in 2010 compared with DKK 27m in 2009. The total turnover of Tryg shares for all of 2010 on Nasdaq OMX Copenhagen
compared with DKK 6.7bn in 2009. New trading platforms such as Chi-X, Turqouise and Burgundy accounted for around 5% of all trades in Tryg shares in 2010. In addition MTF transactions accounted for DKK 4.4bn. MTF transactions account for 22% of all
The total number of shares is 63,931,573. The acquired shares will be cancelled in June 2011.
TryghedsGruppen is the only shareholder besides Tryg with an ownership of more than 5%. TryghedsGruppen invests in Nordic businesses that promote peace of mind and health, and supports benevolent activities.
25.03.2010 7 TryghedsGruppen’s candidates for TrygVesta’s Supervisory Board 29.03.2010 8 Election of Swedish employee representative 09.04.2010 9 Effect of winter claims in Q1 2010 15.04.2010 10 Resolutions from annual general meeting 16.04.2010 11 TrygVesta initiates share buy back programme 29.04.2010 13 Sale of marine hull business completed 01.07.2010 24 Moderna becomes a branch of Tryg 10.08.2010 30 Historical financial data in new reporting structure 15.10.2010 43 Market update prior to Q3 2010 report 10.11.2010 48 Revised financial calendar for 2010 and 2011 15.11.2010 50 Interim report for Q1-Q3 2010 a) After implementing the share buy back programme on 16 April 2010, Tryg issued a company announcement on the weekly share buy backs each week in 2010 until
are prepared in accordance with IFRS and published in Danish and English.
Tryg A/S (parent company) Income statement (parent company) 130 Statement of financial position (parent company) 131 Statement of changes in equity (parent company) 133 Notes (parent company) 133
Geographical segments 138 Other key figures 140 Glossary 141 Disclaimer 143 Group chart 144
In our opinion, the accounting policies applied are appropriate, and the annual report gives a true and fair view of the Group’s
Bestyrelse and the parent company’s assets, liabilities and financial position at 31 December 2010 and of the results of the Group’s and the parent company’s operations and the cash flows of the
Furthermore, in our opinion the Management’s report gives a true and fair view of developments in the activities and financial position of the Group and the parent company, the results for the year and of the Group’s and the parent company’s financial position in general and describes significant risk and uncertainty factors that may affect the Group and the parent company.
Management is responsible for the preparation and fair presentation of consolidated and parent financial statements in accordance with International Financial Reporting Standards as adopted by the
EU in respect of the consolidated financial statements, in accordance with the Danish Financial Business Act in respect of the parent financial statements, as well as in accordance with additional Danish disclosure requirements for listed companies, and for the preparation of a management’s report that contains a fair review in accordance with the Danish Financial Business Act. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated and parent financial statements and a management’s report that are 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 our opinion, the consolidated financial statements give a true and fair view of the Group’s financial position at 31 December 2010, and of its financial performance and its cash flows for the financial year 1 January to 31 December 2010 in accordance with International
Danish disclosure requirements for listed companies. Furthermore, in our opinion, the parent financial statements give a true and fair view of the Parent’s financial position at 31 December 2010, and of its financial performance for the financial year 1 January to 31 December 2010 in accordance with the Danish Financial Business Act and additional Danish disclosure requirements for listed companies.
Moreover, in our opinion, the management’s report contains a fair review in accordance with the Danish Financial Business Act.
Notes General insurance Gross premiums written 17,883 19,939 Ceded insurance premiums -824 -1,054 Change in provisions for unearned premiums 91 -382 Change in reinsurers’ share of provisions for unearned premiums -62 47 2 Earned premiums, net of reinsurance 17,088 18,550 3 Technical interest, net of reinsurance 158 134
Claims paid -13,148 -14,809 Reinsurance recoveries 253 391 Change in provisions for claims 266 -808 Change in the reinsurers’ share of provisions for claims 32 211 4 Claims incurred, net of reinsurance -12,597 -15,015
Total return on investment activities 1,931 1,322 3 Interest on insurance provisions -845 -752
Profit/loss for the year 2,008 593 27 Earnings per share - continuing business of DKK 25 31.3 10.8 Earnings per share of DKK 25 31.7 9.5 Diluted earnings per share of DKK 25 31.7 9.5
Notes Adjustment beginning of year cf note 1 -35 0 Change in equalisation provision 0 1 Revaluation of owner-occupied properties for the year 9 19 Tax on owner-occupied properties for the year -2 -5 Exchange rate adjustment of foreign entities for the year 505 330 Hedging of currency exposure in foreign entities for the year -474 -328 Tax on hedging of currency exposure in foreign entities for the year 119 82 Deferred tax on provision for contingency funds 0 68 Actuarial gains/losses on defined benefit pension plans 28 -228 Tax on actuarial gains/losses on defined benefit pension plans -7 63
Deposits with ceding undertakings, receivable 15 15 15 Total investment assets 37,268 42,036 16 Reinsurers’ share of provisions for unearned premiums 195 154 21 Reinsurers’ share of provisions for claims 1,125 1,434 16 Total reinsurers’ share of provisions for insurance contracts 1,320 1,588
Total receivables in relation to direct insurance contracts 967 1,110 Receivables from insurance enterprises 271 211 Other receivables 1,190 862 17 Current tax assets 0 196 23 Deferred tax assets 86 104 15 Cash in hand and at bank 512 857
Accrued interest and rent earned 417 609 Other prepayments and accrued income 158 173
Notes Liabilities 18 Shareholders’ equity 9,631 8,458 20 Subordinate loan capital 1,586 1,591 21 Provisions for unearned premiums 6,208 6,819 21 Provisions for claims 22,470 24,883 Provisions for bonuses and premium rebates 364 329
Total liabilities and equity 44,740 50,591 1 Accounting policies 19 Capital adequacy 27 Earnings per share 28 Contractual obligations, contingent liabilities and collateral 29 Acquisition of subsidiary 30 Related parties 31 Financial highlights
Change in equalisation provision 1 1 Revaluation of owner-occupied properties 19 19 Exchange rate adjustment of foreign entities 330 330 Hedge of foreign currency risk in foreign entities -328 -328 Actuarial gains and losses on pension obligation -228 -228 Tax on equity entries -5 82 131 208
Tryg Forsikring A/S’ Norwegian branch, has in its branch financial statements included provisions for contingency funds in the amount of DKK 2,887m (in 2009 DKK 2,599m) Tryg Forsikring A/S’ Swedish branch, has in its branch financial statements included provisions for contingency funds in the amount of DKK 194m (in 2009 DKK 369m). In Tryg Forsikring A/S, these provisions, due to their nature as additional provisions, are included in shareholders’ equity (retained earnings), net of deferred tax. Tryg Forsikring A/S’ option to pay dividend to Tryg 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 Tryg Forsikring A/S. Tryg Garantiforsikring A/S has a similar contingency amounting to DKK 139m, which is also included in the company’s shareholders’ equity.
Notes Cash generated from operations Premiums 18,011 19,911 Claims paid -13,170 -14,801 Ceded business -529 -552
Investments Acquisition and refurbishment of real property -203 -210 Sale of real property 1 339 Acquisition of equity investments and unit trust units (net) 14 441 Purchase/Sale of bonds (net) 1,411 593 Deposits in Credit institutions -1,850 265 Purchase/sale of operating equipment (net) -166 -31 29 Acquisition of subsidiares -939 0 29 Acquisition of subsidiares, cash and cash equivalents 605 0 Foreign currency hedging -474 -328
Funding Purchase of own shares -334 -807 Subordinated loan capital 485 0 Dividend paid -442 -991 Change in debt to credit institutions -98 -581
Change in cash and cash equivalents, net 206 301 Price adjustment of cash and cash equivalents, beginning of year 24 44
The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU on 31 December 2010 and in accordance with the Danish Statutory Order on Adoption of IFRS.
Corrections The method to calculate holiday-pay obligations, etc., under IFRS has been adjusted over the recent years and Tryg has decided to adopt the latest and most generally accepted method. This has resulted in a DKK 35m increase in holiday-pay obligations and recognised in equity.
The comparative figures are restated to reflect the disposal of the renewal rights of the Marine Hull portfolio. The total result of the Marine Hull portfolio is presented in Profit/loss on discontinued and divested business.
Implementation of accounting standards in 2010 In 2010, the Group implemented the following standards and interpretations: • Amendments to IFRS 2 ’Share-based Payments’ • Amendments to IFRS 3 ’Business Combinations’ • Amendments to IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’
• Amendments to IFRS 8 ’Operating Segments’ • Amendments to IAS 1 ’Presentation of Financial Statements’ • Amendments to IAS 7 ’Statement of Cashflow’ • Amendments to IAS 17 ’Leases’ • Amendments to IAS 31 ’Interests in Joint Ventures: consequential amendments arising from amendments to IFRS 3’ • Amendments to IAS 32 ‘Financial Instruments: Presentation –classification of right issues’ • Amendments to IAS 36 ’Impairment of Assets’ • Amendments to IAS 39 ‘Financial Instruments: recognition and measurement – Embedded derivatives when reclassifying financial instruments’ Amendments to IFRIC 16 ‘Hedges of a net Investment in a foreign Operation’
The implementation of the new standards and interpretations has not affected recognition and measurement in 2010, but solely affected the disclosures to be included in the annual report.
• Amendments to IFRS 7 ’Financial Instruments: Disclosure’ • Amendments to IAS 1 ’Presentation of Financial Statements’ • Amendments to IAS 24 ‘Related Party Disclosures: Revised definition of related parties’ • Amendments to IAS 27 ‘Consolidated and separate financial statements’ • Amendments to IAS 34 ‘Interim Financial Reporting’ • Amendments to IFRIC 13 ‘Customer Loyalty Programmes’,
The projection for claims provisions is therefore inherently uncertain and, by necessity, relies upon the making of certain assumptions as to factors such as court decisions, changes in law, social inflation and other economic trends, including inflation. The Tryg Group’s actual liability for losses may therefore be subject to material positive or negative deviations relative to the initially estimated provisions for claims.
Defined benefit pension schemes The Group operates a defined benefit plan in Norway. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, depending on age, years of service and compensation.
The net obligation with respect to the defined benefit plan is based on actuarial calculations involving a number of assumptions. These assumptions include discount rate, salary adjustment and mortality.’
Recognition and measurement The annual report has been prepared under the historical cost convention, as modified by the revaluation of owner-occupied properties, where increases are credited to equity and revaluation of investment property, financial assets held for trading and financial assets and financial liabilities (including derivative instruments) at fair value through the income statement.
Assets are recognised in the statement of financial position 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 statement of financial position 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.
Investments in joint ventures are recognised using the pro rata consolidation method. Using pro rata consolidation, the Group’s share of joint venture assets and liabilities is recognised in the statement of financial position. The share of income and expenses and assets and liabilities are presented on a line by line basis in the consolidated financial statements.
The operational business segments in the Tryg Group are Private Nordic, Commercial Nordic and Corporate Nordic.
Assets held under operating leases are not recognised in the statement of financial position, but the lease payments are recognised in the income statement over the term of the lease, corresponding to the economic life of the asset, while assets held under finance leases are recognised at fair value and depreciated according to the same accounting policy as the Group applies for similar owned assets. For assets held under finance leases, a lease liability is recognised at amortised cost.
The share options are exercisable exclusively during a two-week period following the publication of full-year, half-year and quarterly reports and in accordance with Tryg’s in-house rules on trading in the Group’s shares. The options are settled in shares. A part of the Group’s holding of treasury shares is reserved for settlement of the options allocated.
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.
Investment management charges represent expenses relating to the management of investments.
The comparative figures, including five-year financial highlights and key ratios, have been restated to reflect discontinued business. Discontinued and divested business in the income statement includes the profit/loss after tax of the sale of the right to renew the marine hull business in 2010. Discontinued business also comprises the Tryg Forsikring A/S run-off business and the divestment of the subsidiary Chevanstell Ltd. UK (2006).
Depreciation on owner-occupied property is calculated using straight-line method using the estimated useful lives up to 50 years. Land is not depreciated.
Assets under construction In connection with the refurbishment of the owner-occupied properties, costs to be capitalised are recognised at cost under owneroccupied 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.
Balance sheet items of foreign subsidiaries are translated at the exchange rate ruling at the balance sheet date.
Associates with a negative net asset value are measured at zero value. If the Group has a legal or constructive obligation to cover the associate’s negative balance, such obligation is recognised under liabilities.
Financial assets at fair value through income Financial assets are classified as financial assets available for trading at inception if acquired principally for the purpose of selling in the short term, or if they form part of a portfolio of financial assets in which there is evidence of short-term profit-taking. Derivatives are also classified as financial assets available for trading unless they are designated as hedges.
Financial assets are derecognised when the rights to receive cash flows from the financial asset have expired, or if they have been transferred, and the Group has also transferred substantially all risks and rewards of ownership. Financial assets are recognised and derecognised on a trade date basis – the date on which the Group commits to purchase or sell the asset.
The fair values of quoted investments are based on stock exchange prices at the balance sheet date. For securities that are not listed on a stock exchange, or for which no stock exchange price is quoted that reflects the fair value of the instrument, the fair value is determined using valuation techniques or using OTC prices. These include the use of similar recent arm’s length transactions, reference to other instruments that are substantially the same and a discounted cash flow analysis.
Derivatives are recognised from the trade date and measured at fair value in the statement of financial position. Positive fair values of derivatives are recognised as bonds and shares or other receivables if they cannot unambiguously be attributed to the former. Negative fair values of derivatives are recognised under other payables. Positive and negative values are only offset when the company is entitled or intends to make net settlement of more financial instruments.
Recognition of the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of investments in foreign operations. Changes in the fair value of derivatives that are designated and qualify as net investment hedges in foreign entities and which provide effective currency hedging of the net investment are recognised directly in equity. The net asset value of the foreign entities estimated at the beginning of the financial year is hedged 90-100% by entering into short-term forward exchange contracts according to the requirements of hedge accounting. Changes in the fair value relating to the ineffective portion are recognised in the income statement. Gains and losses accumulated in equity are included in the income statement on disposal of the foreign operation.
The Group assesses continuously its reinsurance assets for impairment. If there is objective evidence that the reinsurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset to its recoverable amount. Impairment write-downs are recognised in the income statement.
Prepayments and accrued income Prepayments include expenses paid in respect of subsequent financial years and interest receivable. Accrued underwriting commission relating to the sale of insurance is also included.
Equity Share capital Shares are classified as equity when there is no obligation to transfer cash or other assets. Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds, net of tax.
Dividends Proposed dividend is recognised as a liability at the time of adoption by the shareholders at the annual general meeting (the date of declaration).
Treasury shares The purchase and sale sums of treasury shares and dividends thereon are taken directly to retained earnings under equity. Treasury shares include shares acquired for employee shares and the share option programmes and share buyback programme.
Provisions for insurance contracts Premiums are recognised in the income statement (earned premiums ) proportionally over the period of coverage and, where necessary, adjusted to reflect any time variation of the risk. The portion of premiums received on in-force contracts that relates to unexpired risks at the balance sheet date is reported as unearned premium provisions. Unearned premium provisions are generally calculated according to a best estimate of expected payments throughout the agreed risk period. However, as a minimum to the part of the premium calculated using the pro rata temporis principle until the next payment date. Adjustments are made to reflect any variations in the risk. This applies to gross as well as ceded business.
Provisions for claims are determined for each line of business based on actuarial methods. Where such business lines encompass more than one business area, short-tail provisions for claims are distributed based on number of claims reported while long-tail provisions for claims are distributed based on premiums earned. The models currently used are Chain-Ladder, Bornhuetter-Fergu-
Other employee benefits Employees of the Group are entitled to a fixed payment when they reach retirement and when they have been employed with the Group for 25 and for 40 years. The Group recognises this liability as soon as the employment begins.
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.
2 Earned premiums, net of reinsurance Direct insurance 17,925 19,627 Indirect insurance 31 36
Reinsurance recoveries 254 661 Run-off previous years, reinsurers’ share 31 -59
Under claims incurred, the value adjustment of inflation swaps to hedge the inflation risk concerning annuities on workers’ compensation insurance totals DKK -83m (2009 DKK 62m).
Insurance operating expenses, gross -3,056 -3,304 Commission from reinsurers 81 92
In adddition, expenses have been incurred for the Group´s Internal Audit Department.
Staff expenses -1,750 -1,827 Other staff expenses -274 -269 Office expenses and fees, headquarter expenses -453 -682 Operating and maintenance costs IT, software expenses -228 -255 Depreciation, amortisation and impairment writedowns -140 -163 Other income 237 384
Insurance operating expenses and claims include the following staff expenditure: Salaries and wages -2,026 -2,211
(38 persons). At 31 December 2010, the share option plan comprised 859,044 share options (at 31 December 2009 681,861 share options). Each share option entitles the holder to acquire one existing share of DKK 25 nominal value in the company. The share option plan entitles the holders to buy 1.4 % of the share capital in Tryg A/S if all share options are exercised.
In 2010, the fair value of share options recognised in the consolidated income statement amounted to DKK 16m (2009: DKK
Total fair value Per Total fair Group Other Per option per option option at value at Executive senior Other at grant at grant 31 Dec. 31 Dec. Management employees employees Total date DKK date DKKm DKK DKKm 5 Share option programmes Spec. of outstanding options: Allocation 2006-2008 Allocated in 2006-2008, beginning of year 106,608 353,882 39,427 499,917 64/99/69 39 5/0/3 1
Number of options exercisable end of 2010 54,520 166,700 0 221,220 64/99 19 5/0 0
Outstanding options from 2006-2007 allocation 31 Dec 2009 54,520 190,999 11,427 256,946 - 22 - 11
Allocation 2008 Allocated in 2008, beginning of year 52,088 167,203 28,700 247,991 69 17 45 11
Outstanding options from 2009 allocation 31 Dec 2009 38,258 123,016 20,670 181,944 - 17 - 15
Total return on investment activities after technical interest 570 Other income and expenses -4
Total return on investment activities after technical interest 1,086 Other income and expenses -38
Profit on continuing business 1,985 Profit/loss on discontinued and divested business 23
DKKm 6 Technical result, net of reinsurance, by line of business
Claims Frequency a) Average claims DKK b) 17,897 11,315 Total claims 1,306 1,329 a) The claims frequency is calculated as the number of claims incurred in proportion to the average number of insurance contracts.
Average claims DKK b) 9,973 13,150 45,981 62,951 18,193 22,919 51,511 55,335 843,571 1,567,033 6,876 8,059 Total claims 319,222 310,832 40,925 40,462 6,186 6,141 9,422 9,252 45 58 50,274 49,862
Under market value adjustment the adjustment of inflation swaps totals DKK 27m (in 2009 DKK 13m).
Effective tax rate % % Tax on profit for the year 25 25 Difference between Danish and foreign tax rate 2 3 Prior-year tax adjustment 0 -1 Adjustment non-taxable income and expenses -2 -2 Change in valuation of tax assets -2 3 Change in valuation of tax loss carried forward 1 0
See ‘The Group’s financial performance in 2010’ in the Management report for further information regarding the tax expense.
10 Profit/loss on discontinued and divested business Earned premiums, net of reinsurance 333 224 Claims incurred, net of reinsurance -265 -291 Insurance operating expenses, net of reinsurance -37 -44
Trademarks and customer DKKm Goodwill relations Software Total 11 Intangible assets
Addition on acquisition of subsidiary a) 310 139 17 466 Additions during the year 0 0 143 143 Disposals during the year 0 0 -19 -19
Amortisation for the year 0 -12 -121 -133 Impairment writedowns for the year 0 0 -10 -10 a) Addition on acquisition of subsidiary relates to the acquisition of Moderna Försäkringar, see note 29
DKKm 11 Intangible assets (continued) Impairment test Goodwill As at 31 December 2010, management performed an impairment test of the carrying amount of goodwill based on the allocation of the cost of goodwill to the cash-generating unit. Assumptions for impairment test: The Value-in-use method is used. Return Assumed require- annual growth ment 2010 > 5 years before tax
Moderna Försäkringar 2.5% 14.9% MF Bilsport & MC Specialförsäkringar 2.5% 14.9%
Moderna Försäkringar Sak AB 2.5% 15.4% MF Bilsport & MC Specialförsäkringar AB 2.5% 15.4%
Software The impairment charges are recognised in the income statement in total insurance operating expenses . In the impairment test, the carrying amount is compared with the estimated present value of future cash flows.
Value adjustment for the year at revalued amount in profit and loss 0 0 0 0 Value adjustment for the year at revalued amount in equity 0 19 0 19
The value of the owner-occupied properties was assessed in connection with The Living House and the improvements made to those properties. The impairment charges on assets under construction are recognised in the income statement in total insurance operating expenses. The impairment test performed for operating equipment and assets under construction did not indicate any impairment. In establishing the market value of the owner-occupied properties, the following return percentages were used for each property category.
13 Investment property Fair value at the end of the previous financial year 2,246 2,364 Exchange rate adjustment 76 33 Additions during the year 32 23 Disposals during the year -2 -261 Value adjustment for the year 17 68 Reversed on sale -5 -69
Total rental income for 2010 is DKK 166m (DKK 173m in 2009).
Total expenses for 2010 are DKK 37.8m (DKK 37.3m in 2009). Of this amount, not-hired property is DKK 0.9m.
(DKK 0.8m in 2009) why the total expenses at the income leading investment property are DKK 36.9m (DKK 36.5m in 2009).
In establishing the market value of the properties, the following return percentages were used for each property category: Return percentages Lowest Average Highest 2010 percentage percentage percentage
Revaluations at net asset value Balance 1 January 14 17 Exchange rate adjustment 3 1 Reversel of additions 0 -5
Shares in associates according to the latest financial statements: Profit/Loss Ownership Name and registered office Assets Liabilities Equity Revenue of the year share in %
Cash in hand and deposits in credit institutions 3,612 0 0 3,612
Financial assets at fair value with value adjustment in the income statement Bonds 16,337 12,947 126 29,410
The risk of the non-observable input group is moderate since the inflation derivatives aim at hedging the by market conditions such as inflation risk of the technical provisions 100 percent, while the unquoted shares and bonds, which are influenced the development in interest rates and expected earnings, is a limited amount.
Investment assets according to balance sheet 34,643 184 2,158 36,985 Unit trust units 2,268 Deposits 2,755
Investment assets according to balance sheet 29,410 381 2,363 32,154 Unit trust units 2,143 Deposits, Derivatives etc. 2,939
Notes 15 Adjusted duration of Bond portfolio Bond portfolio Duration 1 year or less 19,198 15,143 Duration 1 year through 5 years 11,875 16,645 Duration 5 years through 10 years 2,869 1,904 Duration more than 10 years 306 625
Maturity of the Group’s interest-bearing financial assets and debt Effective Adjusted 2010 0-1 year 1-5 years > 5 years Total interest rate duration
United Kingdom 134 83 Rest of Europe 336 579 United States 354 647 Asia etc. 219 336
The impact on the income statement is similar to the impact on shareholders’ equity. The calculation is made in accordance with the disclosure requirements of the executive order issued by the Danish FSA on the presentation of financial reports by insurance companies and profession-specific pension funds.
Please refer to the section on ‘Capitalisation and risk mangement’ for an elaboration of risk management and risk exposure.
2009 2010 DKKm Gross Net Gross Net 15 Derivative financial instruments Derivatives with value adjustment in the income statement according to IAS 39 at fair value: Interest derivatives 3,659 7 25,373 13
Derivative financial instruments used in connection with hedging of foreign entities for accounting purposes: Gains and losses on hedges charged to equity at 1 January 850 -819 31 Gains and losses on hedges charged to equity during the year 133 -461 -328
Gains and losses on hedges charged to equity at 31 December 983 -1,280 -297
Exchange rate adjustment Exchange rate adjustments of foreign entities recognised in equity in the amount of: Balance at 1 January -510 -23 Exchange rate adjustment during the year 487 330
Receivables Receivables from insurance enterprises 1,238 1,321 Exchangerate and inflation derivatives 27 305 Unsettled transactions 1,051 0 Other receivables 112 557
Reversed impairment losses are estimated at around DKK 45m annually, but may vary due to major cases/disputes. Please refer to the section on ‘Credit risk’ in ‘Capitalisation and risk mangement’ in the ‘Management’s report’.
Receivables in connection with insurance contracts include overdue recievables totalling: Falling due: Within 90 days 271 197
Writedowns during the year include reversed writedowns totalling DKK 1m (DKK 3m in 2009). Please refer to the section on ‘Reinsurance’ in ‘Capitalisation and risk mangement’ in the ‘Management´s report’.
DKKm 20 Subordinated loan capital Loan terms: Subordinated bond loan a) Subordinated loan capital b)
Estimated accumulated claims End of year 1,453 1,467 2,059 953 874 948 296 514 182 304 711 1 year later 1,570 1,480 2,169 913 888 841 295 479 250 379 2 year later 1,533 1,487 2,050 909 930 847 281 492 213 3 year later 1,559 1,503 2,043 970 928 840 313 498 4 year later 1,593 1,476 2,041 886 912 863 313 5 year later 1,588 1,462 2,055 881 920 858 6 year later 1,584 1,470 2,062 891 919 7 year later 1,591 1,450 1,991 889 8 year later 1,594 1,476 1,988 9 year later 1,670 1,565 10 year later 1,638 1,638 1,565 1,988 889 919 858 313 498 213 379 711 9,972 Cumulative pay-
Estimated accu- mulated claims End of year 7,158 7,785 9,276 9,805 10,218 10,881 11,331 12,057 13,067 14,387 16,318 1 year later 7,368 8,010 9,527 9,950 10,208 10,887 11,588 12,717 14,379 14,983 2 year later 7,615 8,201 9,646 9,615 10,022 10,707 11,110 13,276 14,307 3 year later 7,795 8,298 9,709 9,552 9,909 10,318 11,302 13,274 4 year later 7,849 8,254 9,702 9,662 9,658 10,431 11,233 5 year later 7,985 8,258 9,596 9,638 9,725 10,304 6 year later 7,742 8,464 9,575 9,551 9,521 7 year later 7,852 8,458 9,514 9,422 8 year later 7,835 8,484 9,505 9 year later 7,838 8,325 10 year later 8,108 8,108 8,325 9,505 9,422 9,521 10,304 11,233 13,274 14,307 14,983 16,318 125,299 Cumulative pay- ments to date -7,407 -7,795 -8,886 -8,624 -8,597 -9,204 -9,621 -10,956 -11,087 -10,855 -8,069 -101,101
Reserves from 1999 and prior years 1,468 Other reserves 622 Provisions for claims, net of reinsurance, end of the year 23,449
The amounts in foreign currency in the table are translated to Danish kroner using the exchange rate at 31 December 2010 to prevent the impact of exchange rate fluctuation.
Total, beginning of year 19,355 794 18,561 Market value adjustment of provisions, beginning of year 1,330 113 1,217 Addition on acquisition of subsidiary c) 648 69 579
Change in claims in the financial year in respect of the current year 13,742 355 13,387 Change in claims in the financial year in respect of prior years -683 35 -718
Provisions for claims, end of year a) 22,017 1,050 20,967 a) The table consists of figures for Tryg Forsikring A/S, Tryg Forsikring, Norwegian branch of Tryg Forsikring A/S, Enter Forsikring AS
Expected cashflow Carrying amount DKKm 0-1 year 1-2 years 2-3 years > 3 years Total 21 Provisions for claims
and Moderna Försäkringer, branch of Tryg Forsikring A/S. The note should be seen in connection with the maturity of the Group’s interest-bearing financial assets and liabilities, see note 15.
22 Pensions and similar obligations Jubilees, schemes for elderly employees etc. 48 50
Defined benefit persion plans: Present value of pension obligations funded through operations 144 108 Present value of pension obligations funded through establishment of funds 1,160 1,464
Employers’ nat. ins. contribution 14.1 14.1 Take up of the AFP Early Retirement Plan 20.0 0.0 Mortality table Adj. K2005 Adj. K2005
Actuarial gains/losses associated with the pension obligation 90 104 -23 70 -181 Actuarial gains/losses associated with pension assets 26 -10 -173 -42 -47
23 Deferred tax Tax asset Operating equipment 56 37 Debt and provisions 161 213 Capitalised tax loss 91 70
Non-capitalised tax loss Denmark 72 72 a) Addition on acquisition of subsidiary relates to the acquisition of Moderna Försäkringar, see note 29
Under Finnish rules, losses may be carried forward for ten years and according to the rules in Sweden, losses may be carried forward indefinitely.
Losses are not recognised as tax assets until it is likely that there will be sufficient future taxable income for the loss to be utilised.
The total current and deferred tax relating to items recognised in equity is recognised in the balance sheet in the amount of DKK -208m. (DKK 110m in 2009).
No deferred tax is associated with investments in subsidiaries (DKK 0m in 2009)
Average number of shares (1,000 shares) 63,334 62,362 Diluted number of shares (1,000) 114 82
Earnings per share - continuing business of DKK 25 31.3 10.8 Basic earnings per share of DKK 25 31.7 9.5 Diluted earnings per share (DKK) 31.7 9.5
Payment due by period DKKm <1 year 1-3 years 3-5 years > 5 years Total 28 Contractual obligations, contingent liabilities and collateral
CSC for an amount of DKK 374m for a period of 5 years which cannot be cancelled within a year. The contract expires in 2011.
Ejendomsselskaber af 8. Maj 2008 A/S has signed agreements for reburbishment of the property at Klausdalsbrovej 601, Ballerup.
Vesta Eiendom A/S has signed agreements for refurbishment of the property at Folke Bernadottesvei 50, Bergen.
The Danish companies in Tryg group are jointly taxed with TryghedsGruppen smba.
Assets to cover the technical provisions in Tryg Forsikring A/S have been registered in the total amount of 32,275 36,923
Assets to cover the technical provisions in Tryg Garantiforsikring A/S have been registered in the total amount of 223 311
In connection with the sale of Chevanstell Limited, Tryg Forsikring A/S issued few specific guarantees towards the buyer. Management believes that it is unlikely that these guarantees will result in a financial loss for Tryg Forsikring A/S.
Moderna Försäkringar Sak AB 100% Non life insurance 2 April 2009 Modern Re S.A. 100% Intra group insurance 2 April 2009 Netviq AB 100% Agency for Moderna 2 April 2009 MF Bilsport & MC Specialförsäkring AB 100% Agency for Moderna 2 April 2009
Debt, accruals and deferred income -259 -259 Shareholders’ equity 526 629 Goodwill on acquisitions 310 Cost 939 Adjustment of cash and cash equivalents -605 Cash acquisition cost 334
Elements of cash acquisition cost Cash 350 Direct acquisition costs -16 Cash acquisition cost 334 a) The carrying amount prior to acquisition has been made up in accordance with the Tryg Group’s accounting policies.
Premium income - Parent company (TryghedsGruppen smba) 0.3 0.3 - Other related parties 115.8 8.8
Claims paid - Parent company (TryghedsGruppen smba) 0.7 0.2 - Other related parties 6.2 2.6
Remuneration includes pension contributions Supervisory Board 0 0 Executive Management -3 -3
Total receivables 65 63 6 Current tax assets 17 17 7 Deferred tax assets 1 1
Total liabilities and equity 10,260 8,475 1 Accounting policies 9 Capital adequacy 10 Contractual obligations, contingent liabilities and collateral 11 Related parties 12 Reconciliation of differences in the profit and the shareholders’ equity
Revalua- Share tion Retained Proposed DKKm capital reserves earnings dividends Total
Adjustment beginning of year cf note 1 -35 -35 Profit for the year 1,470 -432 991 2,029 Revaluation of owner-occupied properties 9 9 Exchange rate adjustment of foreign entities 505 505 Hedge of foreign currency risk in foreign entities -474 -474 Tax on equity entries 117 117
Nullification of own shares -102 102 0 Dividend paid -442 -442 Dividend own shares 32 32 Purchase of own shares -418 -418 Exercise of shareoptions 19 19 Issue of employee shares 30 30 Issue of share options 15 15
Profit for the year -1,965 2,134 256 425 Change in equalisation provision 1 1 Revaluation of owner-occupied properties 19 19 Exchange rate adjustment of foreign entities 330 330 Hedge of foreign currency risk in foreign entities -328 -328 Tax on equity entries 144 144
Dividend paid -991 -991 Dividend own shares 14 14 Purchase of own shares -816 -816 Exercise of share options 9 9 Issue of share options 16 16
Proposed dividend per share DKK 4.00 (DKK 15.50 in 2009) . Dividend per share is calculated as the total dividend proposed by the Supervisory Board after the end of the financial year divided by the number of shares, year end (63,931,573). The dividend is not paid until approved by the shareholders at the annual general meeting of the subsequent year.
Tryg Forsikring A/S’ Norwegian branch, has in its branch financial statements included provisions for contingency funds in the amount of DKK 2,887m (in 2009 DKK 2,599m) . In Tryg Forsikring A/S, these provisions, due to their nature as additional provisions, are included in shareholders’ equity (retained earnings), net of deferred tax. Tryg Forsikring A/S’ option to pay dividend to Tryg 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 Tryg Forsikring A/S. Tryg Garantiforsikring A/S 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 Tryg Forsikring A/S and Tryg Forsikring, norwegian branch of Tryg Forsikring A/S and is charged to Tryg A/S by the cost allocation. Remuneration for Supervisory Board and Group Executive Management appears in note 11 ‘Related parties’.
Administrative expenses include fee to the auditors appointed by the Annual General meeting: Deloitte -0.7 -1.1
Refer to the section ‘The Groups Financial performance 2010’ in the management report for further mention of the tax.’
Tryg Forsikring A/S, Ballerup 100 100 6 Current tax assets Current tax, beginning of year 18 17 Current tax for the year 17 17 Tax paid durring the year -18 -17 7 Deferred tax assets Capitalised tax loss Tryg A/S 1 1
9 Capital adequacy, etc. Shareholders’ equity according to annual report 9,687 8,475 Subordinate loan capital 732 804 Proposed dividend -991 -256 Solvency requirements to subsidiary undertakings -4,579 -5,031
Solvency ptc. 97 121 10 Contractual obligations, contingent liabilities and collateral The Danish companies in Tryg group are jointly taxed with TryghedsGruppen smba.
Companies of the Tryg Group are part of some disputes. 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 sheet at 31 December 2010.
Guarantee agreements with related parties - Account 1,470 1,965 - Exercised, end of year 538 865
Outstanding guarantees cover the policyholders’ financial obligations pursuant to the contract.
Following an individual assessment, all guarantees are issued without additional security with some exceptions. The company has full recourse against the individual companies.
Leases with related parties There are no leases with related parties.
Intra-group trading involved - Providing and receiving services -49 -61 - Intra-group account 65 76
Key ratios Gross claims ratio 144.9 88.9 95.1 80.6 84.6 Business ceded as % of gross premiums 0.4 0.0 0.9 1.8 0.8 Claims ratio, net of ceded business 145.3 88.9 96.0 82.4 85.4
Number of full-time employees, end of period 40 61 105 425 414
Number of full-time employees, end of period 77 127 154 194 197
Quoted price/net asset value 3.0 2.6 2.6 2.3 1.8 a) There has been no dilution of earnings or equity in the period 2006-2008
The expense ratio, net without adjustment is calculated as the ratio of actual insurance operating expenses, net of reinsurance to earned premiums, net of reinsurance. Other key ratios are calculated in accordance with ‘’Recommendations & Financial Ratios 2010’’ issued by the Danish Society of Financial Analysts.
The adjustment, which is made pursuant to the Danish Financial Supervisory Authority’s and the Danish Society of Financial Analysts’ definition of expense ratio and combined ratio, involves the addition of a calculated expense (rent) concerning owner-occupied property based on a calculated market rent and the deduction of actual depreciation and operating costs on owner-occupied property.
Discounting Expresses recognition in the financial statements of expected future payments at a value below the nominal amount, as the recognised amount carries interest until payment. The size of the discount depends on the market based discount rate applied and the expected time to payment.
Operating ratio Calculated like the combined ratio but adding technical interest in the denominator.
Run-off result The difference between provisions for claims at the beginning of the financial year (adjusted for currency translation differences and discounting effects) and the sum of claims paid in the financial year plus the part of the provisions for claims at the end of the financial year that relates to claims incurred in prior financial years.
Solvency II New solvency requirements for insurance companies issued by EU Commission. The new rules are expected to come into effect in 2012.