3 Income overview 4 Introduction 5 Events in 2015 6 Targets and strategy 9 Financial targets and outlook 10 Tryg’s results 14 Private
Tryg is the second-largest non-life insurance company in the Nordic region. We are the largest player in Denmark and the third-largest in Norway. In Sweden, we are the fifth-largest company in the market.
Our 3,400 employees provide peace of mind for 2.8 million customers and handle approximately 950,000 claims on a yearly basis.
Editor Investor Relations | Publication 21 January 2016 | Layout amo design | Proofreading TextMinded 16 Commercial 20 Sweden 22 Investment activities 24 Capital and risk management 26 Shareholder information 28 Corporate governance 32 Supervisory Board 34 Executive Board 35 Corporate Social Responsibility in Tryg
Profit/loss on gross business 790 986 1,695 3,313 2,085 2,344 894 Profit/loss on ceded business -272 -220 710 -341 349 86 507 Insurance technical interest, net of reinsurance 4 9 18 60 62 62 171
Profit/loss on continuing business 715 633 1,932 2,547 2,373 2,180 1,148 Profit/loss on discontinued and divested business after tax 6 7 49 10 -4 28 -8
Return on equity after tax (%) 27.5 23.0 18.9 23.0 21.5 22.1 13.1 Number of shares at 31 December (1,000) 282,316 289,120 282,316 289,120 296,870 303,474 301,866
Premium growth in local currencies -1.6 -0.1 -0.8 -1.1 -2.7 -0.1 3.6
Run-off, net of reinsurance (%) -5.5 -7.3 -6.7 -6.1 -5.0 -5.0 -4.7 Large claims, net of reinsurance (%) 3.1 4.3 3.4 3.1 2.1 2.3 2.7 Weather claims, net of reinsurance (%) 5.4 2.6 3.4 2.4 3.2 1.8 3.6
Combined ratio on business areas Private 87.0 82.4 85.4 82.5 86.0 87.7 92.7 a) Dividend per share in 2015 includes dividend paid out in July of DKK 2.50 and proposed dividend of DKK 3.50.
In 2015, we continued our efforts to improve custo mer experience. Focus has most important ly been on improving our customer services, for example through the increased empowerment of front-line staff as a way of increasing first-contact resolution. We are continuously following up on our customers’ assessment of their contact with Tryg. We are therefore pleased to note a significant improvement in our NPS
Risk management is essential for an insurance company – spanning from the overall risk management of Tryg to the pricing of our products. A milestone in 2015 was the Danish Financial Supervisory Authority ’s approval of Tryg’s internal capital model, which means that Tryg is well-prepared for the implementation of the Solvency II regulatory regime from 2016.
DKK 6.00 per share. Tryg also assesses the relevance of extraordinary share buy backs as a way of increasing value creation for our shareholders. In 2015, we completed a DKK 1bn share buy back programme, and in 2016 we will execute a similar programme, while at the same time ensuring a solid capital base.
Annual report 2015 | Tryg A/S | | Contents – Management’s review 4
Moderna – insurance broker of the year For the third year running, Tryg’s branch in Sweden, Moderna, was named insurance broker of the year within the commercial and corporate segments.Tryg’s car insurance Best in Test
Tryg’s new car insurance product launched in March 2015 was recommended as ‘Best in Test’ by the Danish Consumer Council. The test also showed that Tryg is the company with the lowest number of complaints tried before the appeals board.
Flooding in parts of Norway The eastern parts of Norway were hit by severe floods. Tryg received approx. 500 claims.
Contents insurance ‘Best in Test’ Tryg’s contents insurance was named ‘Best in Test’ by the Danish Consumer Council’s magazine TÆNK. The criteria tested are coverage, customer satisfaction, number of appeals and price.
Internal capital model Tryg’s internal capital model in relation to Solvency II was approved by the Danish FSA.
CFO resigning Group CFO Tor Magne Lønnum is resigning to take up a position as CFO of Aimia Inc in Montreal, Canada. He will stay on as CFO of Tryg until the end of April 2016.
Tryg’s purpose is to create peace of mind and value for customers, employees and shareholders, and this must be at the core of everything we do.
Tryg’s ambition is to become the world’s best insurance company. This ambition lies at the heart of all the strategic measures implemented by Tryg. Tryg has identified its fundamental corporate values, which will help us meet our targets and support the company’s ambition.
Our customers are our most important asset. Tryg strives to continuously strengthen customer relations through our advisory services, products, concepts, claims handling procedures and claims prevention measures. In 2015, we had a strong focus on initiatives supporting the customer targets for 2017.
Our employees are our most important resource and key to realising our vision of becoming the world’s best insurance company. As an important step towards achieving this, all our employees must feel that they have an opportunity to be successful. Clear and ambitious targets must be set for each individual employee, and regular feedback must be provided.
Tryg’s retention rate was quite stable, indicating that customers are generally satisfied with their insurance company. In Denmark, the retention rate increased somewhat, while a slight drop was seen in Norway.
at the end of 2015. Total car sales were up 9.9%
in 2015 compared with 2014 and were characterised, in particular, by increased sales of small cars.
The Norwegian economy deteriorated in 2015 primarily due to the significant drop in oil prices although the Norwegian economy is generally very strong. The unemployment rate increased to around 4.4%. Car sales in Norway were up
• Expense ratio <15 strong focus on improving customer experience in all parts of the organisation.
Tryg has set up four strategic initiatives to support its financial and customer targets. The strategic initiatives for 2016 are unchanged from 2015.
Next level pricing (price differentiation) has been an ongoing initiative and Tryg’s most important initiative in recent years. By the end of 2015, Tryg had developed 33 new price-differentiated products, and it is estimated that 85% of Tryg’s tariffs are at peer level. This development supports the target of being ahead of peers for 25% of products and on a par with peers for the remaining products in 2017.
This creates clarity in terms of how the individual employee contributes to the overall corporate targets, which in turn leads to a more structured and continuous dialogue regarding the employee’s own personal development.
After having delivered on the previous efficiency programme targets, Tryg launched its new efficiency programme in 2015 with the aim of further reducing claims and direct costs by DKK 750m by the end of 2017, with DKK 500m relating to claims and
DKK 250m to expenses. As regards the claims costs, a further consolidation of Tryg’s Nordic procurement volume and the dedication of more resources to com batting fraud will be among the primary drivers, while outsourcing, digitalisation and process optimi sation will contribute positively to reducing
Tryg has a strong focus on both financials and customers, and targets have therefore been set for both areas. Financial and customer targets are inextricably linked. Loyal customers mean high retention rates, keeping the expenses associated with attracting new customers low, thereby contributing to a low expense ratio. With the financial results posted for 2015, Tryg is on track to meeting the financial targets for 2017.
The basic principle of the recommendation rate, the Net Promoter Score (NPS)®, is that each customer can be divided into three categories: Promoters, Passives and Detractors. The NPS is based on the following question: Would you recommend Tryg to a friend or colleague? The NPS is expressed as a value between -100 and 100. Example: If we ask 100 customers, and we score 9-10 with 50 customers and 1-6 with 40 customers, our NPS will be: 50-40 = 10
The potential of the out sourcing programme is deemed to be significant.
Financial targets and outlook tion through integration into Tryg's efficient and highly skilled organisation.
Tryg launched an efficiency programme aimed at realising savings of DKK 750m, with DKK 500m relating to the procurement of claims services and administration and DKK 250m relating to expenses. The target is DKK 225m for 2016 and
The return on bonds in the free portfolio will vary, but given current interest rate levels, a low return is expected. For shares, the expected return is around 7% with the MSCI world index as the benchmark, while the expected return for property is around 6%. Investment activities also include other types of investment income and expenses, especially the cost of managing investments, the cost of currency hedges and interest paid on loans.
Denmark, the tax rate was 23.5% in 2015 and will be reduced to 22% in 2016. The Norwegian tax rate was 27% in 2015 and will be reduced to 25%
in 2016, while the Swedish rate was 22%. When calculating the total tax payable, account should also be taken of the fact that gains and losses on shareholdings are not taxed in Norway. All in all, this causes the expected tax payable for an average year to be reduced from around 22-23%
The return on equity for 2015 was below target due to very low investment income and one-off costs. Tryg met the combined ratio and expense ratio targets for 2015 and is well positioned for meeting the targets for 2017.
The size of the motor market will generally be negatively impacted by technological developments, and Tryg has therefore announced that we will be taking a more active approach to acquiring smaller port folios and developing the market for products which are expected to see higher growth rates such as pet insurance and child insurance.
Reporting a return on equity of 18.9%, a combined ratio of 86.8 and an expense ratio of 15.3, Tryg met its combined ratio and expense ratio targets.
The target was a combined ratio below 90 and an expense ratio below 15, and adjusted for one-off costs of DKK 120m relating to the ongoing efficiency programme, an expense ratio of 14.9 was realised. Due to the above-mentioned one-off costs and the very low investment result, Tryg did not meet the target of the return on equity of 20%.
The one-off costs of DKK 120m incurred in Q3 2015 were in line with Tryg’s statement at the
In 2015, Tryg maintained a strong focus on the customer targets for 2017. The Net Promoter
Score (NPS) improved from 11 at the CMD to 22 by the end of 2015. Improving in all business areas in the course of the year, the NPS has proven to be a strong driver for improving customer loyalty. In 2015, the score improved very significantly, especially for Tryg’s Norwegian business. At the end of 2015, the NPS was also implemented by Corporate with very high scores, with a particularly high score of 63 being achieved by our Guarantee business.
At 88.1, the retention rate was up from 87.9 at the
• Investment return, after transfer to insurance, of DKK -5m (DKK 360m)
The share of customer with three or more products increased from 56.3% to 56.7%. Increasing the number of products per customer is an effective way of improving customer loyalty and has been a focus area in all parts of the organisation.
Tryg’s majority shareholder. Tryg expects the bonus scheme and the expected disbursement of bonus corresponding to 5-8% of the prior-year premium to support our customer targets and especially customer retention. The first bonus will be disbursed in spring 2016.
A result of DKK 1,981m affected by one-off costs and a low investment return. Proposed dividend of DKK 3.50 per share equivalent to a dividend of DKK 6 per share for 2015. A share buy back programme of DKK 1,000m is planned for 2016.
As part of Tryg’s customer focus, Commercial radically changed its structure in 2015 through increased empowerment of the front-line organisation and a reduction in back-office functions.
This change will support first-contact resolution by removing a lot of unnecessary stops in connection with the selling of insurance. In Q4, Commercial also introduced Tryg Plus for commercial customers with many customer advantages.
Norway, first-contact resolution stood at 75%, and with many initiatives in the pipeline for 2016.
In 2015, Tryg also had a strong focus on claims prevention. In 2014, Tryg was the first insurance company to start offering synthetic DNA marking in Denmark. The scheme was further rolled out in both Denmark and Norway in 2015 with good results, leading to a significant drop in break-ins in the targeted areas and also very positive customer responses, which attracted new customers to Tryg.
The development of price-differentiated products continued in 2015, and in March Tryg launched a new car insurance product in Denmark. This was the most important product launch since the start of Tryg’s strategic initiative to develop pricedifferentiated products in 2012. The new product improved Tryg’s competitive position in this very important market, and the Danish Consumer
Smart motor app, which from the start has received much attention from customers and generated very strong sales. The app records the driver’s driving style, and the car insurance price is then differentiated accordingly.
In 2015, a number of old products were converted to new and more up-to-date products. The conversion process was generally successful with a high hit rate. In 2016, the conversion of products will be a very im portant focus area. Tryg will convert almost 1 million insurance policies in 2016 primarily within the main areas of activity – motor, house and accident. This will contribute to increasing efficiency as old products can then be phased out. It also ensures that em ployees will only have one product to consider in their advisory and claims handling functions.
We know that many customers prefer self-service solutions, and we have therefore developed a selfservice solution for our most important product, motor, in both Denmark and Norway, which allows customers to register their current kilometre readings and yearly mileages.
when measured in local currencies. The development in premium income improved for Private and
(Norsk Familieøkonomi). In 2015, Tryg made an agreement to acquire Skandia’s child insurance portfolio.
The portfolio is worth around SEK 250m, and the transaction is expected to take effect in H1 2016. Tryg generally views child insurance as a future growth area.
control for certain types of claims such as, for example, claims relating to pipes. Tryg saw an increase in such claims in 2015. We also saw an increase in the level of travel insurance claims, highlighting the fact that the price increases introduced in August 2014 in connection with the extension of cover for health-related issues no longer covered under the public health insurance schemes were too low.
The claims-related measures implemented in 2015 included improved agreements on the procurement of claims services within contents insurance, including an agreement with Scalepoint and the gradual implementation of the IN4MO system for the management of all processes and deliveries in connection with building claims. Most agreements with claims service companies are based on a general model of fixed prices for specific tasks. This approach is easy to manage and encourages the swift handling of reported claims.
Tryg renewed a horizontal reinsurance agreement for the period from 1 July 2015 to 30 June 2016.
Large claims amounted to 3.4% (3.1%) in 2015 and weather claims to 3.4% (2.4%). Large claims and weather claims totalled DKK 1,227m, which is somewhat higher than the average level of
The expense ratio was 15.3 (14.6). Adjusted for one-off costs of DKK 120m relating to the efficiency programme, the expense ratio was 14.9 and in line with the target of an expense ratio below 15 in 2015.
The efficiency programme contributed DKK 60m in 2015, corresponding to an impact on the expense ratio of 0.3 percentage points. The initiatives comprised cuts in Finance and IT as part of the outsourcing programme, but the changed
DKK 28.1bn and is made up of bonds which match the insurance provisions so that fluctuations resulting from interest rate changes are offset to the greatest possible extent. At 31 December 2015, the value of the free portfolio totalled DKK 10.7bn.
(DKK 181m) after transfer to insurance tech nical interest. The return on the free investment portfolio was DKK 232m (DKK 548m). The return on the equity portfolio was positive at 3.4%, which was significantly lower than in 2014, which saw a return of 10% and was impacted by a volatile development for equities especially in Q3, which saw a significant drop leading to a negative return of 10.3%.
Bonds produced a negative return of 0.1% (2.1%), with the total return being impacted especially by a negative return of 0.6% on covered bonds.
Tryg’s property com panies, which meant that a tax deficit in one of Tryg’s properties could be utilised.
at the end of 2015. Tryg determines the individual solvency requirement according to the Danish
Tryg’s capital adequacy calculation includes approximately NOK 1.2bn after tax from the Norwegian
Pool (NNP) as an Own Funds item under the Solvency II scheme. The most important message in the consultation material is that the classification of the
Natural Perils Pool will be allowed as a Tier 2 capital item. Tryg expects a final solution to be announced in
• Large claims impacting the combined ratio by 3.1 percentage points (4.3)
• DKK 1bn share buy back completed and a new DKK 1bn programme planned in 2016
According to Tryg’s dividend policy, the aim is for the dividend to be steadily increased. For H2 2015, a dividend of DKK 3.5 per share is proposed, corres ponding to a total dividend per share based on the 2015 results of DKK 6 (DKK 5.8), representing total dividend payments of DKK 1,759 or 89%
In 2015, a DKK 1bn share buy back was completed, and Tryg has planned a DKK 1bn share buy back programme once approved by the Danish
The introduction of Solvency II will have a significant impact on Tryg’s capital position in various areas and will be taken in to account as of 1 January 2016. Read more on in the section Capital and risk management on pages 24-25 and Download the newsletter at Tryg.com
Premiums developed negatively by 1.6% (-0.1%) in local currencies. In Private, the positive development continued with growth of 1.1% (-0.2%) in local currencies, reflecting both a strong development in sales and stable retention rates. In Commercial, premiums dropped by 5.0% (-1.8%) in local currencies, reflecting a competitive Norwegian market which was also impacted by the economic situation, whereas Commercial in Denmark saw stable development but was impacted by the individual regulation of a number of large accounts.
In Corporate, premium growth was negative at 2.1% (1.5%) in local currencies, reflecting a more competitive Norwegian market. The Swedish business saw a drop in premium income of 6.1%
(1.6%) in local currencies following the termination of a large affinity agreement.
The expense ratio was 14.2 (14.9).The efficiency programme contributed DKK 15m in the quarter, corresponding to an impact on the expense ratio of 0.3 percentage points. Apart from the contribution from the efficiency programme, the low expense ratio was also due to the organisation’s efforts to meet the overall target for 2015 of an expense ratio below 15.
The number of employees was further reduced in the quarter by 66 full-time employees, leaving 3,359 full-time employees at the end of the year.
Key ratios Premium growth in local currencies 1.1 -0.2 0.3 0.0
Run-off, net of reinsurance (%) -2.3 -2.1 -3.7 -3.9 Large claims, net of reinsurance (%) 0.4 0.0 0.3 0.1 Weather claims, net of reinsurance (%) 7.6 2.6 4.5 2.5
(NPS) from 21 in 2014 to 26 in 2015. The development was significant in both Denmark and Norway.
The development in the NPS also supported a positive development in the retention rate in Denmark, which improved from 89.6 to 89.9. In Norway, the retention rate dropped from 87.0 to 86.4 due to the above-mentioned developments in the Norwegian economy and the competitive market situation.
Sales and customer numbers developed positively, which can also be ascribed to the increased cus tomer focus. Sales in Denmark were 7% higher than in 2014, and Norwegian sales were also slightly higher, especially due to strong sales via the franchise sales channel.
Tryg first carried out a trial in a residential district in the town of Sønderborg in southern
Studies show that synthetic DNA marking has a clearly preventive effect on burglary rates. Read more about Tryg’s DNA
ratio improved by 0.6 percentage points. This development was the result of a consistent focus on improving expense levels, and in 2015 outsourcing initiatives were implemented in Private. The initiatives centred on reducing expense levels in the back-office functions and improving sales efficiency through improved management and training.
The number of employees was reduced from 903 at the end of 2014 to 837 in 2015, mainly through job cuts in the administration.
Denmark and a slight reduction in Norway. Sales were high in both Denmark and Norway. In Denmark, all channels contributed positively to the development, and in Norway the franchise sales channel posted consistently high sales levels.
The gross claims ratio was 71.3 (65.3), and the claims ratio, net of ceded business, was 73.6 (67.4).
Denmark and Norway. A storm in Denmark resulted in more than 9,000 claims, and in Norway severe flooding caused damage of an estimated NOK 215m for the market as a whole, on top of which came the impact from winter claims. We saw a slight increase in property claims in Denmark, which underpins the importance of implementing both price and claims prevention initiatives from 2016.
The technical result totalled DKK 285m (DKK 400m), with a combined ratio of 87.0 (82.4), and was negatively affected by a significantly higher level of weather claims than in 2014. The expense level was very low at 13.4 (15.0).
Gross premiums increased by 1.1% (-0.2%) in local currencies. Premium growth in Denmark was 2.6%, partly due to a low level of bonus and premium rebates, while premium growth in Norway was negative at -0.7% in local currencies, still reflecting
Denmark and Norway. Sales are effected by Tryg’s own sales force, brokers, franchisees (Norway), customer centres and through group agreements.
The combined ratio was negatively affected by a higher level of weather and large claims and a higher level of claims from especially property lines of business. The development in premiums was negative with a reduction of 2.9% (-3.0%) and was more or less in line with the development in 2014.
Adjusted for the one-off effects of the Norwegian pension and IT costs in 2014, the expense ratio was at a slightly higher level.
The development in gross premium income was negative by 2.9% in local currencies, which was in line with the development in 2014, but at the same time an unsatisfactory development. Premiums decreased by around 2.6% in Denmark, due to a generally competitive market situation and selective price hikes. In Norway, premium income declined by 3.6% in local currencies due to the competitive situation and the weakened Norwegian economy.
Overall, the sales level was, however, too low to secure stable premium growth through the year.
The high level of property claims was, among other things, also due to an increase in fire-related claims, especially in Denmark and Norway. The agriculture segment also saw a high level of claims. Based on the development in property, selective price adjustments will be initiated.
The expense ratio was 17.1 (15.8). Adjusted for the one-off effects of the Norwegian pension scheme and the change of IT suppliers in 2014, the expense ratio increased slightly by 0.2 percentage points.
Run-off, net of reinsurance (%) -6.3 -12.0 -9.7 -7.4 Large claims, net of reinsurance (%) 1.9 4.2 6.7 4.3 Weather claims, net of reinsurance (%) 4.8 2.6 2.8 1.9
Herlev. In addition to covering the actual claims, Tryg handled the dialogue with the relevant parties and provided advice and guidance on the handling of the situation.
Fire at Copenhagen Experimentarium: Fast and professional handling. In April 2015, a fire broke out at one of the most popular tourist attractions in Denmark, Experimentarium in Copenhagen. The damage ran into tens of millions of Danish kroner.
This development was a result of a consistent focus on improving expense levels, which, however, could not fully make up for the drop in premium income.
The number of employees was reduced from 559 at the end of 2014 to 527 in 2015 following a restructuring move seeing greater empowerment of front-line staff and job cuts among the administrative personnel.
Q3. Sales were higher than in the prior-year quarter in both Denmark and Norway.
In Denmark, the increase was generated in particular by the partner channel, while sales via the franchise sales channel remained at a high level in Norway, whereas sales by agents were at a low level. However, the challenge is still that sales are too low to outweigh the decline in retention levels in Norway, which led to a drop in premium income.
The retention rate in Denmark increased to 87.9 (87.0), while the retention rate in Norway
In Denmark, the expense ratio was 17.2 (15.6), primarily due to reduced premiums. The number of employees was reduced by 21 to 527 in Q4.
Gross premiums dropped by 5.0% (-1.8%) in local currencies with a drop in Denmark of 5.8% and a drop in Norway of 2.8% in local currencies as a result of the competitive market situation in general
(1.1%), measured in local currencies. This was an acceptable development in a year impacted, among other things, by the weakened Norwegian economy.
In Denmark, the NPS was 15, and in Norway 20. In
Sweden, the NPS has not been implemented, but for the third year running, Swedish brokers ranked
Sales are effected both via Tryg’s own sales force and via insurance brokers. Moreover, customers with international insurance needs are served by
The result was negatively affected by a high level of large claims and a lower level of run-off. With a higher proportion of long-tailed business than the other business areas, Corporate is characterised
The gross claims ratio amounted to 102.4 (71.2), with a claims ratio, net of ceded business, of 79.9
(78.7). The high claims level was due to a high level of large claims, and claims relating to business interruption were generally at a high level. Because of this development, Corporate will be implementing price adjustments for the property business.
In Denmark, the motor line of business developed negatively, with a high claims frequency, which will also lead to the introduction of targeted initiatives such as higher excess and price increases.
Run-off, net of reinsurance (%) -6.8 -16.0 -9.0 -10.4 Large claims, net of reinsurance (%) 11.3 15.4 8.2 9.4 Weather claims, net of reinsurance (%) 2.0 2.9 2.2 3.0
In the Swedish business, profitability was improved through a number of initiatives. In 2015, a negative development was, however, also seen in the motor lines in Sweden where the portfolio of large trucks, in particular, showed an increasing claims trend. Substantial selected price hikes will therefore be introduced in this segment.
Corporate also started a number of outsourcing initiatives aimed reducing expense levels in the back-office functions.
The number of employees was reduced from 279 at the end of 2014 to 265 in 2015.
and a significantly lower level of run-off compared to Q4 2014. Premium growth was negative by 2.1% (1.5%). The expense level was very low at 9.7 (10.6), reflecting a strong cost focus.
The high level was primarily due to a high level of large and medium-sized claims. Claims level, were high for property in both Denmark and Norway, whereas in Sweden motor insurance claims were high.
The expense ratio was 9.7 (10.6), reflecting a strong focus on efficiency, and was achieved despite a drop in premium income. The number of employees was reduced by 5 in Q4.
Tryg. Premium income dropped by 3.1% (-7.4%), which was a significant improvement compared
In 2015, the new structure with only one call centre in Malmö was fully implemented, and the acquired company Securator, which insures electrical goods, and the pet insurance portfolio, which was also acquired in 2014, were fully integrated.
Premium income declined by 3.1% (-7.4%) in local currencies. The improved development was due to high sales, which were even higher than when Tryg had the partner agreement with Nordea. There was a strong performance by all sales channels
– inbound, web, aggregator and the niche sales channels. The strong sales performance has mitigated the effects of the reduction in the portfolio following the termination of the agreement with Nordea and Villaägerne. In Q4 2015, the portfolio was further impacted by the termination of the agreement with the ICA supermarket chain.
Sales of pet insurance were at a high level in 2015, this being a significant growth segment.
Key ratios Premium growth in local currencies -6.1 1.6 -3.1 -7.4
The technical result totalled DKK 85m (DKK 7m), with a combined ratio of 73.2 (98.3), and was positively impacted by the harmonisation of claims reserving models. The harmonisation led to a runoff of approximately DKK 70m. Weather claims were at a slightly higher level due to storm claims and a mild winter. Premium growth was negative by 6.1% (1.6%). The expense level improved to 21.1 (22.2) as a result of a strong cost focus.
Q2 and Q3. The premium income for Q4 2015 was also impacted by the above-mentioned Moderna
In August 2015, Tryg acquired Skandia’s child and adult insurance portfolio with a premium volume of approximately SEK 250m. The portfolio will be integrated into Tryg’s Swedish branch Moderna in H1 2016.
The low claims ratio was due to the harmonisa tion of the models used to calculate the claims reserves. Since Moderna has been included in
The expense ratio was 21.1 (22.2), reflecting a strong focus on efficiency, and was achieved despite a drop in premium growth. The number of employees was reduced by 3 in Q4 2015.
The purpose of Tryg’s investment activities is primarily to support its insurance business by creating an optimum and robust return on its capital in the long term. Through a relatively conservative and diversified approach to risk, the overall strategy is to minimise and match the impact from interest and exchange rate fluctuations on the balance sheet.
DKK 10.7bn. The match portfolio is composed of fixed income assets that match the insurance liabilities, so that fluctuations resulting from interest rate changes are offset to the greatest possible extent. The free portfolio is primarily the Group’s shareholders’ equity, which is invested in fixed income securities with a short duration, properties, equities and some high-yield bonds.
These worries became a reality in December when the FED increased its policy rate by 0.25 percentage points, while the ECB lowered rates by 0.10 percentage points in December.
The return of the match portfolio consists of a regulatory deviation of DKK 29m and a performance of DKK -28m. The positive regulatory deviation was caused by the previously discussed yield difference between the FSA and local swap rates.
The negative performance was due to the stressed covered bond market in Norway in Q3.
The state of the financial markets resulted in close to zero returns on the equity and bond index MSCI
DKK-hedged saw a return of -5.6%. By comparison, the free portfolio generated an equity return of
DKK 91m (3.4 %) and an interest and credit exposure return of DKK -10m (-0.1%). Investment properties provided a net return of DKK 151m (7.2%).
Other financial income and expenses amounted to DKK -238m in 2015, comprising a number of elements, the main ones being the expenses from the hedging of the foreign currency exposure on
Q4 was characterised by risk aversion and nervousness amongst investors, stemming from the terror attack in Paris in November as well as the continuing divergence among monetary policy makers. This has led to falls in commodity prices and the associated emerging-market currencies, while the US dollar appreciated by almost 3% in Q4, or 12% in total in 2015. Due to our low emergingmarkets exposure, this only had a limited impact on the investment result. Despite the risk aversion, the free portfolio made the most of the positive equity market. All in all, the free portfolio provided a gross return of DKK 201m (1.8%) in Q4.
In addition to the free portfolio return, the match portfolio generated a net return of DKK 44m, with
DKK -44m, the return on Tryg’s investment acti vities in Q4 was DKK 201m.
Tryg’s Supervisory Board defines the framework for the company’s target risk appetite and thereby the capital which must be available to cover any losses. The risk appetite is set out in Tryg’s policies in the form of a qualitative risk strategy and quantitative exposure limits for different types of risk.
The insurance risk is managed through limits for the size of single large commitments and via the use of reinsurance, thus curtailing the maximum cost of large claims. Furthermore, the insurance risk is managed through geographical limitations and by refraining from offering certain types of insurance such as aviation and marine hull insurance. Operating within these boundaries,
Tryg’s risk will depend on the company’s choice of exposure within different segments and industries in the insurance market. The impact from large claims and adverse weather events is mitigated through reinsurance.
The investment risk appetite is managed by means of exposure and capital consumption limits for different asset classes (shares, property etc.)
The Solvency II regime emphasises the need for sound risk management and introduces additional requirements concerning risk governance, consistency across the Group and top management reporting and involvement.
Tryg has worked towards the principles of Solvency II for years and has, among other things, carried out risk identification routines, written
Capital management is based on Tryg’s internal capital model, which was approved by the supervisory authorities in November 2015 for use going forward as Solvency II came into force as of 1 Janu ary 2016. The capital model is based on the risk profile, and thus takes account of the composition of Tryg’s insurance portfolio, geographical spread, provisions profile, reinsurance programme, investment portfolio and Tryg’s profitability in general. The model calculates the statutory capital requirement (Individual Solvency
The Solvency capital requirement will decrease by approximately DKK 1,200m due to the inclusion of the loss absorbency capacity of deferred tax.
Tryg’s capital base consists of equity and subordinate loan capital. The relative sizes of these two categories are subject to ongoing assessment with a view to maintaining an optimum structure which takes account of target return on equity, capital costs and maintaining the desired finan cial flexibility. In connection with this assessment, Tryg’s subordinate loan of EUR 150m was refinanced with a new subordinated loan of
The Supervisory Board regularly assesses the need for capital adjustments. In practice, extraordinary adjustments are made through share buy backs assessed in the company’s capital plan, in which the Individual Solvency Requirement is projected on the basis of Tryg’s forecasts. The projections are based partly on the need to accommodate the initiatives set out in the company’s strategy for the coming years, and also on the most significant risks identified by the company. The adequacy is measured in relation to
Tryg’s strategic targets, including return on equity, capital buffer and dividend policy.
In 2015, Tryg’s ‘A-’ rating from the credit rating agency Standard & Poor’s was confirmed, and
Investor Relations (IR) is responsible for Tryg’s communication with the capital markets. It is important that investors, analysts and other stakeholders are able to form a true and fair view of developments, including Tryg’s financial results. For this reason, we strive to be as open and transparent as possible to ensure that stakeholders’ information requirements are met at the highest possible level. IR is in charge of communications with equity investors, fixed-income investors and also rating agencies. Tryg’s IR policy is available at tryg.com/investor.
Asia. The Tryg share is followed by 21 analysts, who continuously update their expectations and views on the share. See a list of analysts and their recommendations at tryg.com/investor.
The Tryg share is listed on NASDAQ Copenhagen and is included in the C20 index (OMX C20 CAP), comprising the 20 most traded shares on the exchange. In accordance with the recommendations issued by NASDAQ Copenhagen, Tryg does not comment on the company’s financial results or outlook two weeks before the publication of interim reports and four weeks before the publication of the annual report. Company announcements, press releases and transaction statements are published in both Danish and English, whereas interims and annual report are published in
English. All financial information is published at tryg.com in English. It is possible to subscribe to the interim and annual reports and all financial information. It is also possible to follow @TrygIR
(annual and semi-annual) dividend of DKK 8.3, the share was up 5.7% during 2015, and including the effect of buy back, the share price increased by 8.3%. Especially during the first four months of 2015, the share price development was heavily impacted by European macroeconomic developments, and the ECB announcement in September 2014 of an asset-backed securities programme to fight deflation pushed share prices higher and generally led to an increased demand for highdividend shares like Tryg. During the period from 1 January to 14 April, the Tryg share rose by some 30% (Tryg share was up 58% between 1 September 2014 and 14 April 2015), while the share fell almost by the same amount in the two months from mid-April to mid-June due to the distribution of dividend and because the Q1 figures were burdened by relatively high winter claims in Norway. A
Copenhagen accounted for 50% of the turnover of the Tryg share. In addition, 15% of trading in 2015 was carried out on alternative exchanges (MTF
trades), led by BATS Chi-X as the largest alternative exchange. This means that NASDAQ and the alternative exchanges account for two thirds of the trading that impacts the liquidity of the share, thereby determining the price of the Tryg share.
Other trading platforms such as OTC (over-thecounter ) and dark pools account for a large share of the remaining trading of the share, but as this takes place outside of the established exchanges and MTFs, it does not directly impact the price and liquidity of the share. In 2015, a share buy back programme totalling DKK1bn, corresponding to 7 million shares, was completed. This had a positive impact on turnover of the Tryg share. Total turnover (including OTC trades) of the share was 280 million shares in 2015.
(289,559,550 shares with a nominal value of DKK 5), and all shares rank pari passu. The majority shareholder, TryghedsGruppen smba, Denmark, owns 60%
of the shares and is the only shareholder owning more than 5% of the share capital. TryghedsGruppen invests in peace-of-mind and healthcare providers in the Nordic region, and supports non-profit-making activities.
The members' bonus scheme will equate to around 5-8% of the annual price customers pay for their insurance products.
DKK 500m every year to projects that create peace of mind throughout Denmark.
Distribution a) Dividend per share includes dividend for H1 of DKK 2.50 paid out in July 2015 and dividend of DKK 3.50 proposed by the Supervisory Board for adoption by the annual general meeting.
At Tryg’s annual general meeting on 25 March 2015, a share split was approved, involving the splitting of each share of DKK 25 into five shares of
DKK 5. The reason for this was the positive development seen in the Tryg share, taking the price up to more than DKK 600 and making it the secondmost expensive share in the C20 index. In addition, the share split was intended to help increase the liquidity of the share. At the end of 2015, there was a free float of 40% of the shares, held by approximately 36,000 registered shareholders. The 200 largest shareholders owned 67% of the shares.
In connection with Tryg’s Capital Markets Day in November 2014, it was announced that the Supervisory Board had decided to pay out semi-annual dividend from H2 2015. The object of Tryg’s dividend policy is to ensure a stable distribution on a full-year basis. The dividend policy reflects our expectations of high earnings in the insurance business and a low risk profile for our investment activities, as well as the requirement of a solid capital position based on Tryg’s internal capital model (Individual Solvency). Tryg’s internal capital model, which constitutes the framework for calculating the company’s capital requirement, is calibrated on the Solvency II rules, which came into effect on 1 January 2016.
Financial calendar 2016 16 March 2016 Annual general meeting 17 March 2016 Tryg shares trade ex-dividend 21 March 2016 Payment of dividend based on
H2 2015 results 12 April 2016 Interim report for Q1 2016 12 July 2016 Half-year report 2016 13 July 2016 Tryg shares trade ex-dividend 15 July 2016 Payment of dividend based on
Financial Supervisory Authority. This decision was made against the background of Tryg’s solid capital position and expected earnings.
Small shareholders a) Shareholders holding more than 10,000 shares. Free float is exclusive of TryghedsGruppen.
February 2016 and will be sent to shareholders upon request. The annual general meeting will also be announced at tryg.com.
Tryg has adopted an IR policy, which states, among other things, that all company announcements are published in Danish and English. Tryg publishes interim reports each quarter, and reports are published in English. Furthermore, Tryg publishes an annual profile in Danish, English and Norwegian. The profile is addressed to Tryg’s private shareholders, customers, employees and other stakeholders. The purpose is to give a broad picture of what it is like being a customer, an employee and a shareholder in
IR contacts > IR policy, and the CSR policy at tryg.com > CSR > CSR strategy > CSR policy.
Tryg has adopted a capital plan and a contingency capital plan, which are reviewed annually by the
Depending on the development in results, each year the Supervisory Board proposes a dividend and possibly an extraordinary share buy back, if further adjustment of the capital structure is required.
on and/or adjust the Group’s strategy with a view to sustaining value creation in the company. The
Gruppen. See pages 32-33 for information on when the individual members joined the Supervisory
Sweden and Norway. See details about the independent board members in the section Supervisory Board on pages 32-33 and at tryg.com > Governance > Management > Supervisory Board.
Board and the Executive Board with relevant policies, guidelines and instructions describing reporting requirements and requirements for communication with the Executive Board. Financial legislation also requires the Executive Board to disclose all relevant information to the Super visory Board and report on compliance with limits defined by the Supervisory Board and in legislation.
Tryg has an Audit, a Risk, a Nomination and a Remuneration Committee. The framework of the committees ’ work is defined in their terms of reference.
The board committees’ terms of reference can be found at tryg.com > Governance > Management > Super visory Board > Board committees, including descrip tions of members, meeting frequency, responsibil ities and activities during the year.
See the tasks of the board committees in 2015 at tryg.com > Governance > Management > Supervisory Board > Board committees.
Ida Sofie Jensen 330,000 330,000 Bill-Owe Johansson 330,000 330,000 Lone Hansen 330,000 330,000
a) At time of allocation b) Tor Lønnum’s basic salery includes a non-pensionable relocation allowance of DKK 656,239.
Supervisory Board and the Executive Board, including general guidelines for incentive pay. The remuneration policy for 2015 was adopted by the Supervisory Board in December 2014 and by the annual general meeting on 25 March 2015.
Members of the Executive Board are employed on a contractual basis, and all terms of their remuneration are established by the Supervisory Board within the framework of the approved remuneration policy. Tryg wants to ensure an appropriate and balanced combination between management remuneration, predictable risk and value creation for the shareholders in the short and long term.
The Executive Board’s remuneration consists of a fixed pay element, a pension and a variable pay element. The fixed pay element must be competitive and appropriate for the market and provide sufficient motivation for all members of the Executive Board to do their best to achieve the company’s defined targets. The variable pay element constitutes only a limited part of the overall remuneration. The Supervisory Board can decide that the fixed pay be supplemented with a variable pay element of up to 12.5% of the fixed basic pay including pension at the time of allocation.
The purpose of the matching shares programme is both to retain members of the Executive Board, and to create a joint financial interest between the
Executive Board and the shareholders. Read more about the matching shares programme in the remuner ation policy at tryg.com > Governance > Remuneration.
Each member of the Executive Board is entitled to 12 months’ notice of termination and 12 months’ severance pay. However, the Group CEO
security. The Supervisory Board issues guidelines to the Executive Board. Risks associated with new financial reporting rules and accounting policies are monitored and considered by the Audit Committee, the finance management and the internal auditors.
Capital and risk management on pages 24-25 and in Note 1 Risk management on page 46.
Tryg engages in ongoing risk identification, mapping insurance risks and other risks which may endanger the realisation of the Group’s strategy or which may have a potentially substantial impact on the Group’s financial position. The process involves identifying and continually monitoring the risks identified. As in previous years, Tryg undertook an Own Risk and Solvency Assessment (ORSA) in 2015. The purpose of the ORSA is to link strategy, risk management and appetite and solvency, as the aim of the ORSA is to ensure a sensible correlation between the strategy for assuming risks and the available capital over the business planning period.
Supervisory Board checks that the company’s risk management and internal controls are effective.
Tryg has a whistleblower line, which allows employees, customers and business partners to report any serious wrongdoing or suspected irregularities.
Read more about Tryg’s whistleblower line at tryg.com > Governance > Whistleblower line
Tryg’s internal audit department regularly reviews the quality of the Group’s internal control systems and business procedures. It is responsible for planning, performing and reporting the audit work to the Supervisory Board.
The deviation is explained in Tryg’s statutory corporate governance report, which is available at tryg.com > Investor > Download.
Chairman Born in 1952. Joined: 2012. Danish citizen. Professional board member. Adjunct Pro fessor, CBS. Former CEO of the FLSmidth Group.
Education: Graduate Diploma in Organisation, MSc (Civ. Eng.) and PhD. Chairman: Tryg A/S, Tryg Forsik ring A/S, TryghedsGruppen smba, Lundbeckfonden and LundbeckFond Invest A/S. Deputy Chairman: Terma A/S, Rambøll Group A/S and Haldor Topsøe A/S. Board member: Bladt Industries A/S, Otto Mønsted A/S and Thomas B. Thriges Fond. Committee memberships: Chairman of Remuneration Committee, Nomination Committee and the Remuneration Committee in Haldor Topsøe A/S.
Education: MSc in political Science, business college teaching degree, certified IoD Board Programme. Board member: Tryg A/S and Tryg Forsikring A/S, TryghedsGruppen smba, California International Business University (CIBU), USA and Learn for Life (Egmont Fonden). Committee memberships: Remuneration Committee, member of Nykredits Regionsråd, Danish Chinese Business Forum, GSK coordinator apointed by minister and NOCA. Number of shares held: 250 Change in portfolio 2015: +250
Employee representative Born in 1955. Joined: 2012. Norwegian citizen. Employed since 1996.
Education: Educated in the area of agricultural mechanics. Chairman: Finansforbundet Tryg, Norway.
Board member: Tryg A/S and Tryg Forsikring A/S. Committee memberships: Remuneration Committee and lay judge in the District Court of Bergen. Number of shares held: 265 Change in portfolio 2015: +165
Employee representative Born in 1962. Joined: 2010. Danish citizen. Employed since 1987. Head of Section in Tryg’s staff association.
Born in 1959. Joined: 2010. Danish citizen. CEO of the Lundbeck Foundation and Lundbeckfond Invest A/S.
Lene Skole has experience from international companies, among other things through her previous work in Coloplast and The Maersk Company Ltd., UK. Lene Skole has skills within strategy, finance, financing and communication.
Education: MSc in Economics and Business Administration, Lieutenant-Colonel Royal in the Danish Air Force Reserve, pathfinder. Chairman: Association of Danish Energy and Distribution Compan- ies (DEA), Energi Danmark A/S, Fibia P/S, and SEAS-NVE Net A/S. Deputy Chairman: TryghedsGruppen smba.
Mari Thjømøe has experience from finance, investor relations, international management, strategy, branding and a special knowledge of the insurance market and special insights into Norwegian market conditions as a Norwegian citizen.
Chairman: Beyond Clean Water AB, Creador AB, Plus Bolån/ MA 2 AB, SFM Stockholm AB, PAUSE Foundation Board member: Tryg A/S, Tryg Forsikring A/S, Culture Vision and Organisation Sweden AB, Committee memberships: Remuneration Committee.
From a number of leading positions in listed as well as privately held companies, CarlViggo Östlund has experience from the packaging industry, logistics, insurance, finance and banking. As a Swedish citizen, Carl-Viggo Östlund has special knowledge of Swedish market conditions.
Education: MSc in Political Science, European Health Leadership Programme INSEAD, Executive Management Programme INSEAD, Executive Programme Columbia Business School. Board member: Tryg A/S and Tryg Forsikring A/S, TryghedsGruppen smba, Plougmann & Vingtoft A/S and Hans Knudsen Instituttet (business trust). Number of shares held: 1,175 Change in portfolio 2015: +310
Education: Insurance training, LL.M. Board member: Danish Employers’ Association for the Financial Sector, Tjenestemændenes Forsikring, Forsikringsakademiet, the Danish Insurance Association and Cphbusiness.
Education: State-authorised public accountant, Executive Master of Business and Administration from University of Bristol and Ecole Nationale des Ponts et Chaussées. Board member: Tryg Garantiforsikring A/S, Thermopylae AS (Chairman) and Finansnæringens Fellesorganisasjon, TGS Nopec ASA and P/f Bakkafrost.
On 1 January 2016, Tryg changed the daily management structure. The Nordic business areas are transferred to national business areas with new directors heading the areas. The new structure replaces the
Svestad, former Group Executive Vice President of Commercial, left Tryg in connection with the organisational change.
Social Responsibility (CSR) more closely to Tryg’s core business. Thus, the ambition for 2016 is for the
Prevention department to introduce new activities equally beneficial to society and to our customers.
Danish legislation, but our efforts are also based on the principles of the UN Global Compact, UN Guiding
policy Read more about Tryg’s CSR KPIs at tryg.com > CSR > CSR strategy > CSR KPIs.
In 2015, Tryg launched an SMS pilot which sent 10,000 text messages to customers living in areas in which cloudbursts were forecast. Customer feedback was extremely positive with 77% rating the service 9 or 10 on a scale of 0-10. In 2016, we will investigate the possibility of introducing a more permanent SMS solution.
At Tryg, we focus on the well-being of our employees and their right to a healthy and safe workplace. We welcome diversity and ensure non-discrimination through equal treatment of all our employees regardless of gender, age, disabilities, ethnic origin, sexual orientation and religion. We see our different perspectives as an asset that increases the quality of our services through a better understanding of our customer needs.
In Tryg, we attach importance to striking a healthy work/life balance and support our employees by offering flexible working hours and the option of working from home. Each year, we conduct an internal employee satisfaction survey. The result was index 74 in 2015 compared to 71 in 2014. Read more at tryg.com > CSR > Thematic area > People.
In Tryg, processes are in place to ensure that men and women enjoy equal treatment in terms of pay
Tryg’s tax policy is adopted by the Supervisory Board once a year and anchored in the Audit Committee.
In 2015, Tryg extended its offshoring programme to include accounting. In its choice of partners, Tryg has paid much attention to working conditions, wanting to ensure that our partners respect human and labour rights. At the same time, a risk analysis of each partner is performed before signing the contract. Tryg also wants to make sure that workers receive the necessary training, which is why our partners’ employees have been visiting Tryg to learn about our systems and processes. Tryg employees have also visited our partners to get a better understanding of their operations and to support them during the first few weeks after taking over the new processes. Partners are asked to submit an annual CSR report. Read more at tryg.com >
The offshoring programme has resulted in redundancies. Tryg has made a new-placement agreement with the stated object ive that at least 90%
of the affected employees must have found a new job, started studying or in some other way clarified their career path within 12 months of leaving Tryg.
of those made redundant in February 2015 have found new opportunities.
DNA marking compared to a 26% decline in the area in general. In 2016, we will be able to conclude on the long-term preventive effect of synthetic DNA
In 2015, Tryg celebrated the 20th anniversary collaboration with the Night Ravens in Norway. The
Night Ravens are volunteers who walk the streets at night to prevent violence and crime. To mark the anniversary, a conference was held in Bergen which was attended by the Norwegian Prime Minister
levels and career opportunities. To comply with section 99b of the Danish Financial Statements Act on equal gender representation at management level, our initiatives include an action plan aimed at ensuring the recruitment and promotion of more women in management roles. Internal recruiters as well as external agencies are instructed to work actively to present qualified candidates of both genders.
In 2015, our ambitious target of 38% or more women at management level was not achieved as the share of women in management positions stood at 35.4%. Not meeting our target can be ascribed to the fact that even though we want both genders to be represented in the recruitment process, we are at the same time interested in appointing the person best qualified for the job, whether a man or a woman. The result shows that we were not able to attract enough of the qualified women in 2015, an issue which we will strive to address in 2016. To qualify and motivate more women to apply for management jobs, we are maintaining our focus on the issue in 2016, and planning a number of events targeted at high-potential women in Tryg.
In Tryg, we respect human rights in everything we do, and we want to improve our preventive efforts to minimise the risk of human rights violations. To ensure that Tryg’s values are part of our suppliers’
mindset, all our suppliers have to comply with our CSR reporting guidelines. Therefore, we have introduced a new reporting system. Trialling the new
Annual report 2015 | Tryg A/S | | Menu – Financial statements
Morten Hübbe Tor Magne Lønnum Lars Bonde Group CEO Group CFO Group COO
In our opinion, the accounting policies applied are appropriate, and the annual report gives a true and fair view of the Group’s and the parent company’s assets, liabilities and financial position at 31
financial services companies as well as for the preparation of parent financial statements that give a true and fair view in accordance with the Danish
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatements of the consolidated and parent financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
Pursuant to the Danish Financial Business Act, we have read the management’s review. We have not performed any further procedures in addition to the audit of the consolidated and parent financial statements. On this basis, it is our opinion that the information provided in the management’s review is consistent with the consolidated and parent financial statements.
Other key ratios are calculated in accordance with ''Recommendations & Financial Ratios 2015'' 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’ definitions of expense ratio and combined ratio, involves the addition of a calculated expense (rent) in respect of owner-occupied property based on a calculated market rent and the deduction of actual depreciation and operating costs on owneroccupied property a) Profit/loss on discontinued and divested business after tax includes mainly Marine Hull insurance and the Finnish branch of Tryg Forsikring, which was sold in 2012.
Profit/loss on gross business 1,695 3,313 2,085 2,344 894 Profit/loss on ceded business 710 -341 349 86 507 Insurance technical interest, net of reinsurance 18 60 62 62 171
Profit/loss on continuing business 1,932 2,547 2,373 2,180 1,148 Profit/loss on discontinued and divested business after tax a) 49 10 -4 28 -8
Relative run-off gains/losses 4.8 4.8 3.9 4.1 4.0 Return on equity after tax (%) 18.9 23.0 21.5 22.1 13.1
Solvency ratio (Solvency I – ratio between base capital and weighted assets) 108 87 90 90 112
Note Investment activities 14 Income from associates 42 10 Income from investment property 94 94 7 Interest income and dividends 794 949
Note General insurance Gross premiums written 18,150 18,672 Ceded insurance premiums -1,165 -1,059 Change in premium provisions 61 268 Change in reinsurers' share of premium provisions 1 -57 3 Premium income, net of reinsurance 17,047 17,824 4 Insurance technical interest, net of reinsurance 18 60
Acquisition costs and administration expenses -2,720 -2,689 Reinsurance commissions and profit participation from reinsurers 102 102 6 Insurance operating costs, net of reinsurance -2,618 -2,587
Other comprehensive income which cannot subsequently be reclassified as profit or loss Change in equalisation provision and other provisions 21 26 Change in taxes on security provisions 141 0 Revaluation of owner-occupied property for the year 4 2 Tax on revaluation of owner-occupied property for the year 2 0 Actuarial gains/losses on defined-benefit pension plans -12 -46 Tax on actuarial gains/losses on defined-benefit pension plans 3 12
Other comprehensive income which can subsequently be reclassified as profit or loss Exchange rate adjustments of foreign entities for the year -89 -178 Hedging of currency risk in foreign entities for the year 86 191 Tax on hedging of currency risk in foreign entities for the year -21 -47
Operating equipment 62 97 Owner-occupied property 1,144 1,153 Assets under construction 2 11 12 Total property, plant and equipment 1,208 1,261 14 Equity investments in associates 229 225
Deposits with credit institutions 0 667 Derivative financial instruments 843 1,318
Total other financial investment assets 40,275 43,172 15 Total investment assets 42,342 45,225
Reinsurers' share of premium provisions 173 219 19 Reinsurers' share of claims provisions 3,003 1,719 16 Total reinsurers' share of provisions for insurance contracts 3,176 1,938
Total receivables in connection with direct insurance contracts 1,261 1,232 Receivables from insurance enterprises 199 208 Other receivables 871 222 17 Current tax assets 118 0 Cash at bank and in hand 471 505
Interest and rent receivable 281 337 Other prepayments and accrued income 316 312
Total provisions for insurance contracts 31,571 31,692 20 Pensions and similar obligations 264 342 21 Deferred tax liability 701 1,022
Reserve for Share Revaluation- exchange rate Equalisation- Other Retained Proposed DKKm capital reserves adjustment reserve reservesa) earnings dividend Total 2015 Profit/loss for the year 22 -104 304 1,759 1,981
Note Financing Exercise of share options/purchase of own shares (net) -1,031 -956 Subordinate loan capital 12 0 Dividend paid -2,380 -1,656 Change in amounts owed to credit institutions -53 110
Change in cash and cash equivalents, net -37 -37 Additions relating to purchase of subsidiaries 0 14 Exchange rate adjustment of cash and cash equivalents, 1 January 3 -25
Investments Purchase and refurbishment of property -46 -14 Sale of property 10 7 Purchase/sale of equity investments and unit trust units (net) 480 291 Purchase/sale of bonds (net) 1,070 -386 Deposits with credit institutions 641 630 Purchase/sale of operating equipment (net) 0 -17 Acquisition of intangible assets 0 -228 Hedging of currency risk 86 191
Tryg’s risk management is organised into three levels of control. The first level of control is handled in the business where the company’s policies are implemented, and day-to-day compliance is verified. This is supported by decentralised risk managers affiliated with the individual areas. The risk management function is the second level of control, and ensures a consistent approach across the organization, risk assessment at group level and reporting to the management and the Supervisory Board. This involves an ongoing identification and assessment of the most significant risks in the company. Furthermore, the function prepares specific recommendations in relation to capital management, reinsurance, investment risk management and more. Tryg’s risk management function is also responsible for determining the company’s capital.
• Support of a steadily rising nominal dividend per share, where 60-90% of the annual net profit is paid out in two instalments.
• Return on the average equity of at least 20% after tax. However 21% from 2017.
The capital base is continuously measured against the individual solvency requirement calculated on the basis of Tryg’s partial internal model, where insurance risks are modelled using an internal model, while other risks are described using the Solvency II standard model.
The introduction of Solvency II will have a major influence on Tryg’s capital position in various areas from 1 January 2016. The Solvency capital requirement will decrease by approximately DKK 1.200m due to the inclusion of the loss absorbency capacity of deferred tax. The capital base will increase by approximately DKK 400m due to the inclusion of expected future profits (DKK 600m) and the transition to a new Solvency II discounting curve (DKK -200m). The net effect form these new elements will result in a relative large increase in the capital buffer, where the core equity will constitute a lesser part of the capital base.
Read more about Tryg’s capitalisation after the introduction of Solvency II in the newsletter.
Reinsurance is used to reduce the underwriting risk in situations where this can not be achieved to a sufficient degree via ordinary diversification. In case of major events involving damage to buildings and contents, Tryg’s reinsurance programme provides protection for up to DKK 5.75bn, which statistically is sufficient to cover at least a 250-year event. Retention for such events is DKK 150m. In the event of a frequency of natural disasters, Tryg is covered for up to DKK 600m for, after total annual retention of DKK 300m. Tryg has also taken out reinsurance for the risk of large claims occurring in sectors with very large sums insured. Tryg’s largest individual building and contents risks are covered by up to DKK 2bn. Retention for large claims is DKK 100m, gradually dropping to DKK 25m. Single risks exceeding DKK 2bn are covered individually. Tryg has combined the minimum cover of other sectors into a joint cover with retention of DKK 100m for the first claim and DKK 25m for subsequent claims. For the individual sectors, individual cover has subsequently been taken out as needed.
For Tryg’s subsidiary Tryg Garantiforsikring A/S, the maximum retention is DKK 30m. The use of reinsurance creates a natural counterparty risk. This risk be handled by applying a wide range of reinsurers with at least an ‘A’ rating and USD 100m in capital.
Investment risk The overall framework for managing investment risk is defined by the Supervisory Board in Tryg’s investment policy. In overall terms, Tryg’s investment portfolio is divided into a match portfolio and a free portfolio. The match portfolio corresponds to the value of the discounted claims reserves and is designed to hedge the interest rate sensitivity of these as closely as possible. Tryg carries out daily monitoring, follow-up and risk management of the Group’s interest rate risk. The swap and bond portfolio is thus adjusted continuously to minimise the net interest rate risk.
Property investments are expected to be at a similar level in 2016. Tryg’s does not wish to speculate in foreign currency, but since Tryg invests and operates its insurance business in other currencies than Danish kroner, Tryg is exposed to currency risk. Tryg is primarily exposed to fluctuations in the other Scandinavian currencies due to its ongoing insurance activities.
Premiums earned and compensation paid in other currencies create a natural currency hedge, for which reason other risk mitigation measures are not required in this area. However, the part of equity held in other currencies than Danish kroner will be exposed to currency risk. This risk is hedged on an ongoing basis using currency swaps. In addition to the above-mentioned risks, Tryg is exposed to credit, counterparty and concentration risk. These risks primarily relate to exposures in high-yield bonds, emerging market debt exposures as well as Tryg’s investments in AAA-rated Nordic and European government and mortgage bonds. These risks are also managed through the investment policy and the framework for reinsurance defined in the insurance policy. For an insurance company like Tryg, liquidity risk is practically non-existent, as premium payments fall due before claims payments. The only significant assets on Tryg’s balance sheet, which by nature is somewhat illiquid, are the property portfolio.
Provisioning risk 1% change in inflation on person-related lines of business a) +/- 476 +/- 300 10% error in the assessment of long-tailed lines of business (workers' compensation, motor liability, liability, accident) +/- 1,671 +/- 1,752
Currency market Equity: 15 % decline in exposed currency (exclusive of EUR) relative to DKK -647 -835 Impact of derivatives 614 791 Net impact of exchange rate decline -33 -44 Technical result per year: Impact of 15% change in NOK and SEK exchange rates relative to DKK +/- 176 +/- 230 a) Including the effect of the zero coupon inflation swap.
deal with the eventuality that Tryg is hit by major crises. This comprises a Crisis Management Team at Group level, national contingency teams at country level and finally business contingency in the individual areas. Tryg has prepared contingency plans to address the most important areas. In addition, comprehensive IT contingency plans have been established, primarily focusing on the business-critical systems.
Estimated accumulated claims End of year 10,935 10,711 11,629 12,162 13,534 15,782 16,126 13,659 13,532 12,841 14,853 1 year later 10,825 10,972 12,199 13,500 14,189 15,884 16,516 13,644 13,845 13,188 2 year later 10,685 10,515 12,773 13,383 14,204 15,836 16,515 13,581 13,682 3 year later 10,315 10,743 12,752 13,396 14,002 15,718 16,466 13,431 4 year later 10,460 10,679 12,755 13,357 13,884 15,631 16,304 5 year later 10,405 10,671 12,661 13,262 13,787 15,567 6 year later 10,311 10,649 12,535 13,231 13,770 7 year later 10,323 10,612 12,529 12,981 8 year later 10,294 10,428 12,461 9 year later 10,189 10,361 10 year later 10,020 10,020 10,361 12,461 12,981 13,770 15,567 16,304 13,431 13,682 13,188 14,853 146,618
Reserves from 2004 and prior years 2,127 Other reserves 355 Gross provisions for claims, end of year 25,427
Provisions before discounting, end of year 12 8 14 7 10 60 95 40 300 88 2,027 2,660
Estimated accumulated claims End of year 10,020 10,439 11,131 12,007 13,250 15,115 14,677 13,432 12,982 12,591 12,786 1 year later 10,014 10,700 11,734 13,280 13,835 15,137 14,370 13,386 12,884 12,886 2 year later 9,869 10,256 12,293 13,194 13,872 15,098 14,248 13,284 12,740 3 year later 9,504 10,450 12,267 13,217 13,713 15,004 14,160 13,127 4 year later 9,619 10,386 12,250 13,178 13,592 14,907 14,033 5 year later 9,569 10,383 12,186 13,096 13,491 14,823 6 year later 9,489 10,362 12,030 13,059 13,477 7 year later 9,502 10,323 12,033 12,816 8 year later 9,481 10,142 11,965 9 year later 9,363 10,075 10 year later 9,196 9,196 10,075 11,965 12,816 13,477 14,823 14,033 13,127 12,740 12,886 12,786 137,924
Provisions before discounting, end of year 261 582 837 1,179 1,374 1,540 1,826 2,204 2,334 3,596 6,112 21,846
The amounts in foreign currency in the table are translated to Danish kroner using the exchange rate at 31 December 2015 to prevent the impact of exchange rate fluctuations.
Expected cash flow, not discounted DKKm 0-1 year 1-2 years 2-3 years > 3 years Other Total
Other comprises Tryg Garantiforsikring A/S and premium provisions in Securator A/S.
The option adjusted duration is used to measure duration. The option adjustment relates primarily to Danish mortgage bonds and reflects the expected duration-shortening effect of the borrower's option to cause the bond to be redeemed through the mortgage institution at any point in time.
Nordic countries 52 413 United Kingdom 90 207 Rest of Europe 501 674 United States 1,165 1,096 Asia etc. 516 563
The share portfolio includes exposure from share derivatives of DKK 47m (DKK 477m in 2014) Unlisted equity investments are based on an estimated market price.
Reinsurers' share of provisions for insurance contracts 3,176 1,938 1,238 -45 1,283
Credit risk 2015 2014 Bond portfolio by ratings DKKm % DKKm %
Amounts owed to credit institutions 64 0 0 64 Debt relating to unsettled funds transactions and repos 4,074 0 0 4,074
Subordinate loan capital Bond loan Bond loan Bond loan EUR 150m NOK 800m NOK 1,400
Loan terms: Lender Listed bonds Listed bonds Listed bonds Principal EUR 150m NOK 800m NOK 1,400m
Run-off gains/losses, net of reinsurance 324 388 351 149 0 1,212
Provisions for bonuses and premium discounts 457 54 50 12 0 573 Other liabilities 9,879 9,879
Run-off gains/losses, net of reinsurance 357 310 421 43 0 1,131
Equity investments in associates 225 225 Reinsurers' share of premium provisions 10 12 197 0 0 219 Reinsurers' share of claims provisions 154 346 1,181 38 0 1,719 Other assets 49,077 49,077
Provisions for bonuses and premium discounts 488 51 62 9 0 610 Other liabilities 9,413 9,413
Claims ratio, net of ceded business 71.3 69.0 72.5 70.9 75.2
Number of full-time employees 31 December 1,859 2,007 2,046 2,187 2,315
Claims ratio, net of ceded business 73.0 67.9 69.2 71.4 76.4
Number of full-time employees 31 Dec. 387 425 458 444 423
Claims ratio, net of ceded business 71.5 69.6 72.1 71.8 76.6
Gross claims ratio 63.0 72.9 80.7 71.0 9.5 16.0 59.3 72.9 68.5 61.8 64.7 80.0 Combined ratio 76.7 86.8 91.1 83.1 22.2 27.9 78.2 91.1 83.7 76.3 92.6 85.6
Profit/loss on ceded business - 117 22 1,438 - 113 0 0 - 67 - 10 - 392 - 188 - 2 - 2 Insurance tech. interest, net of reinsurance 2 12 2 7 0 0 1 3 0 1 1 2
Other Total exclusive of Norwegian Group Life DKKm insurance c) Norwegian Group Life one-year policies Total
Average claims DKK b) 392,147 59,818 Total claims 34 220 b) Average claims are total claims before run-off in the year relative to the number of claims in the year. c) Other insurance, gross claims and gross operating expenses include restructuring costs of DKK 40m and DKK 80m, respectively, in 2015.
Annual report 2015 | Tryg A/S | | Contents – Financial statements 3 Premium income, net of reinsurance Direct insurance 18,166 18,872 Indirect insurance 44 67
Gross Ceded Gross Ceded a) Mainly Norway 4 Insurance technical interest, net of reinsurance Return on insurance provisions 259 414 Discounting transferred from claims provisions -241 -354 5 Claims, net of reinsurance Claims -15,063 -13,376 Run-off previous years, gross 1,500 726
The fee is divided into: Statutory audit -3 -3 Tax advice -2 -1 Other services -2 -7
In the calculation of the expense ratio, costs are stated exclusive of depreciation and operating costs on the owner-occupied property but including a calculated rent concerning the owner-occupied property based on a calculated market rent of DKK 36m. (DKK 38m in 2014)
Total lease expenses amount to DKK 27m (DKK 26m in 2014)
Insurance operating costs and claims include the following staff expenses: Salaries and wages -2,108 -2,098
Allocated share options and matching shares -5 -3 Pension plans a) -300 143 Other social security costs -4 -5 Payroll tax -371 -351 a) In 2015 defined benefit plans were included with DKK 40m.
Average number of full-time employees during the year (continuing business) 3,472 3,639
Tryg did not allocate share options in 2015. At 31 December 2015, the share option plan comprised 15,770 share options (266,900 share options at 31 December 2014). Each share option entitles the holder to acquire one existing share with a nominal value of DKK 5 in Tryg A/S. The share option plan entitles the holders to buy 0.01 % of the share capital in Tryg A/S if all share options are exercised.
There are no resigned Group Executive Managers with outstanding options at 31 December 2015. Risk-takers are included under ‘Other senior employees’.
The following assumptions were applied in calculating the market value of outstanding share options at the time of allocation: The expected volatility is based on the average volatility of Tryg shares. The expected term is 4 years, corresponding to the average exercise period of 3 to 5 years.
64Annual report 2015 | Tryg A/S | | Contents – Financial statements
DKKm 6 Share option programmes Spec. of outstanding options: TOTAL NUMBERS a) FAIR VALUE
Per option Total value Total Other at time of at time of Per option value at Group Executive senior Other allocation allocation at 31 Dec. 31 Dec. 2015 Management employees employees Total DKK DKKm DKK DKKm
Outstanding options from 2009-2011 allocation 31 Dec. 2014 113,450 132,860 20,590 266,900 5 14
Matching shares allocated in 2014 at 31.12.14 17,355 30,055 47,410 103 5 138 1
Annual report 2015 | Tryg A/S | | Contents – Financial statements 7 Interest and dividends Interest income and dividends Dividends 47 39 Interest income, cash at bank and in hand 2 8 Interest income, bonds 742 893 Interest income, other 3 9
Value adjustments concerning assets or liabilities that cannot be attributed to IAS 39: Investment property 17 23 Owner-occupied property 0 -106
9 Tax Tax on accounting profit/loss -548 -809 Difference between Danish and foreign tax rates -26 -58 Tax adjustment, previous years 0 -8 Adjustment of non-taxable income and costs -15 140 Change in valuation of tax assets 129 -24 Change in tax rate 65 6 Other taxes 0 -2
Effective tax rate % % Tax on accounting profit/loss 23.5 24.5 Difference between Danish and foreign tax rates 1.0 1.5 Tax adjustment, previous years 0.0 0.5 Adjustment of non-taxable income and costs 1.0 -4.0 Change in valuation of tax assets -5.5 1.0 Change in tax rate -3.0 -0.5 10 Profit/loss on discontinued and divested business Gross premium income 3 -3 Gross claims 54 31 Total insurance operating costs 7 -14
Profit/loss on discontinued and divested business primarily relates to Marine Hull Insurance.
DKKm 11 Intangible assets Trademarks Assets and customer under conGoodwill relations Software a) struction a) Total
Amortisation and write-downs at 31 December -4 -129 -950 -92 -1,175
Impairment test Goodwill In 2014, Tryg acquired Securator A/S, Optimal Djurförsäkring i Norr AB and Codan's agricultural portfolio. The insurance activities were incorporated into the Tryg Group's business structure and merged into Tryg in 2015. At 31 December 2015, 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, which consists of Moderna and Securator, respectively.
The cash flows appearing from the latest prognosis approved by management for the next 6 quarters are used when calculating the value in use of Moderna. The cash flows in the latest budget period have been extrapolated for financial years after the budget periods (terminal period) and adjusted for expected growth rates determined on the basis of expectations for the general economic growth. The required return is based on an assessment of the risk profile of the tested business activities compared with the market's expectations for the Group.
The impairment test shows a calculated value in use of approximately DKK 1.3bn (1.4 bn) relative to a recognised goodwill of DKK 368m (358m) and Equity of DKK 0.6bn (0.5bn) and does not indicate any impairment in 2015.
Securator In 2014, Tryg acquired Securator A/S. The insurance activities were incorporated into the Tryg Group's business structure in 2014 and are reported under Sweden. In 2015, Securator was merged into Tryg Forsikring A/S and is reported as part of the Swedish affinity portfolio. Securator is a Danish market leader within the sale and brokering of multi-annual product insurance via dealers in the electronics and tele- communications sector and supermarket chains.
Annual report 2015 | Tryg A/S | | Contents – Financial statements - Earned premium assumed CAGR 0-10 years 13% 12% - Earned premium assumed CAGR >10 years 3% 3% - Required return before tax 11% 11% - Expected level of Combined ratio 83-91% 79-91 %
Trademarks and customer relations As at 31 December 2015, management performed a test of the carrying amounts of trademarks and customer relations as an integral part of the Moderna goodwill test. The impairment test of the acquired agricultural portfolio is based on renewal and retention rates, which are on the expected level.
Software and assets under construction As at 31 December 2015, management performed a test of the carrying amounts of software and assets under construction.
The impairment test compares the carrying amount with the estimated present value of future cash flows. The test did not indicate any impairment. Assets under construction are not depreciated but tested once a year for impairment or when there is any indication of a decrease in value. Software with a limited useful lifetime is amortised over 4 years using the straight-line method. Amortised software is assessed for impairment at the balance sheet date or when there are indications that the future cash flow cannot justify the carrying amount. In the event that the recoverable amount is lower than the carrying amount, the difference is recognised in the income statement. The recoverable amount is the higher of fair value less sales costs and value in use.
Transferred from assets under construction 0 11 -11 0 Additions for the year 0 15 2 17 Disposals for the year -4 0 0 -4
Accumulated depreciation and value adjustments Accumulated depreciation and value adjustments at 1 January -115 -434 -85 -634
Annual report 2015 | Tryg A/S | | Contents – Financial statements 12 Property, plant and equipment (continued) Sensitivity Tryg’s property valuations are based on the market-based rental income and operating expenses of the individual property relative to the required rate of return. The most important factors impacting the valuations are the applied rates of return, annual net rental income and occupancy rates. The average rates of return applied are stated above.
Total rental income for 2015 is DKK 120m (DKK 124m in 2014).
13 Investment property (continued) The following return percentages were used for each property category: Return percentages, weighted average Business property 7.0 7.0 Office property 6.5 6.5 Residential property 6.0 6.0
Increase in applied rate of return of 0.25% -77 -81 Decrease in applied rate of return of 0.25% 82 85 Decrease in net rental income of 3% -50 -61 Decrease in occupancy rate of 3% -9 -11 14 Equity investments in associates Cost Cost at 1 January 201 201
2015 Komplementarselskabet af 1. marts 2006 ApS, Denmark 0 0 0 0 0 50 2014 Komplementarselskabet af 1. marts 2006 ApS, Denmark 0 0 0 0 0 50
DKKm 15 Financial assets (Continued) Fair value hierarchy for financial instruments measured at fair value in the statement of financial position Non- Qouted Observable observable market price input input Total
Carrying amount at 1 January 129 150 Exchange rate adjustments -1 -4 Gains/losses in the income statement 3 -18
15 Financial assets Financial assets at fair value with value adjustments in the income statement 40,220 43,030 Derivative financial instruments at fair value used for hedge accounting with value adjustment in other comprehensive income 55 142 Receivables measured at amortised cost with value adjustment in the income statement 2,920 2,167
Financial liabilities Derivative financial instruments at fair value with value adjustments in the income statement 598 799 Derivative financial instruments at fair value with value adjustments in other comprehensive income 14 0 Financial liabilities at amortised cost with value adjustment in the income statement 8,127 7,121
DKKm 15 Financial assets (continued) Derivative financial instruments used in connection with hedging of foreign entities for accounting purposes Gains and losses on hedges charged to other comprehensive income: 2015 Gains Losses Net
Gains and losses at 31 December 2,496 -2,420 76 2014 Gains Losses Net
Total derivative financial instruments 32,836 -186 37,370 81 Due after less than 1 year 9,210 -56 16,592 86
Annual report 2015 | Tryg A/S | | Contents – Financial statements 17 Current tax Net current tax at 1 January -429 -264 Exchange rate adjustments 16 26 Current tax for the year -495 -632 Current tax on equity entries -96 -47 Adjustment of current tax in respect of previous years 0 -24 Tax paid for the year 765 512
Current tax is recognised in the statement of financial position as follows: Under assets, current tax 118 0 Under liabilities, current tax -357 -429
Net current tax -239 -429 18 Equity Number of shares Shares outstanding Own shares Number of shares of DKK 5 (1,000) 2015 2014 2015 2014
Number of shares at 1 January 289,120 296,870 9,358 9,711 Bought during the year -7,074 -8,963 7,074 8,963 Cancellation in connection with buyback programme 0 0 -8,919 -8,103 Used in connection with exercise of incentive programme 270 1,213 -270 -1,213
Number of shares as a percentage of issued shares at 31 December 97.50 96.86 2.50 3.14 Nominal value at 31 December (DKKm) 1,412 1,446 36 47
In May 2015 each share with a nominal value of DKK 25 was replaced by five new shares with a nominal value of DKK 5. The share split did not change the Group's share capital. Comparative figures have been restated to reflect the change in trading unit.
Specification of write-downs on receivables from insurance contracts: Write-downs at 1 January 107 112 Exchange rate adjustments -3 -4 Write-downs and reversed write-downs for the year 12 -1
Impairment test As at 31 December 2015, management performed a test of the carrying amount of total reinsurers' share of provisions for insurance contracts and receivables. The impairment test resulted in impairment charges totalling DKK 3m (DKK 20m in 2014). Write-downs for the year include reversed write-downs totalling DKK 30m (DKK 0m in 2014). There is no overdue reinsurers' share other than the share already provided for.
Change in claims in the financial year in respect of the current year 12,835 -251 12,584 Change in claims in the financial year in respect of prior years -638 -481 -1,119
19 Premium provisions Premium provision at 1 January 5,724 6,176 Adjustment regarding Norwegian Group life beginning of year -124 0 Value adjustments of provisions, beginning of year -53 -202 Paid in the financial year 17,311 17,692 Change in premiums in the financial year -17,416 -17,951 Exchange rate adjustments -13 9
Annual report 2015 | Tryg A/S | | Contents – Financial statements 20 Pensions and similar obligations (continued) Specification of pension cost for the year: Present value of pensions earned during the year 31 38 Interest expense on accrued pension obligation 30 39 Expected return on plan assets -26 -33 Accrued employer contributions 5 6 Effect associated with change in agreement 0 -421
The premium for the following financial years is estimated at: 53 53 Number of active persons 595 714 Number of pensioners 586 575 Average expected remaining service time (years) 7.81 8.09
Pension obligation, gross 1,192 1,290 Fair value of plan assets 978 1,010
Specification of change in recognised pension obligations: Recognised pension obligation at 1 January 1,290 1,756 Adjustment regarding plan changes not recognised in the income statement and expected estimate deviation a) -10 -421 Exchange rate adjustments -74 -123 Present value of pensions earned during the year 35 41 Capital cost of previously earned pensions 29 38 Acturial gains/losses -23 58 Paid during the period -55 -59
Total recognised obligation at 31 December 264 342 a) The change of the pension scheme in Norway is carried out in the same way as has been done for other major financial companies in Norway and causes a reduction in the provision.
Impact on equity from the following changes: Interest rate increase of 0.3 percentage point 46 27 Interest rate decrease of 0.3 percentage point -49 -30 Pay increase rate, increase of 1 percentage point -99 -55 Pay increase rate, decrease of 1 percentage point 83 45 Turnover, increase of 2 percentage point 25 49 Turnover, decrease of 2 percentage point -29 -61
The plans are based on the employees' expected final pay, providing the members of the plan with a guaranteed level of pension benefits throughout their lives. The pension benefits are determined by the employees' term of employment and salary at the time of retiring. Employees having made contributions for a full period of contribution are guaranteed a pension corresponding to 66% of their final pay. As of 2014, pensions being disbursed are no longer regulated in step with the basic amount of old-age pension paid in Norway (G regulation), but are subject to a minimum regulation.
Unsettled fund transactions include debt for bonds purchased in 2014 and 2015; however, with settlement in 2015 and 2016, respectively.
Average number of shares (1,000) 285,073 292,521 Diluted number of shares (1,000) 28 267
Earnings per share, continuing business 6.77 8.70 Diluted earnings per share, continuing business 6.77 8.70 Earnings per share 6.95 8.74 Diluted earnings per share 6.95 8.73 Earnings per share, discontinued and divested business 0.18 0.04 Diluted earnings per share, discontinued and divested business 0.18 0.03 21 Deferred tax Tax asset Operating equipment 8 11 Debt and provisions 35 60 Capitalised tax loss 1 1
The losses are not recognised as tax assets until it has been substantiated that the company can generate sufficient future taxable income to offset the tax loss. The total current and deferred tax relating to items recognised in equity is recognised in the statement of financial position in the amount of DKK 32m (DKK14m at 31 December 2014).
Tryg Forsikring A/S and Tryg Garantiforsikring A/S have registered the following assets as having been held as security for the insurance provisions: Equity investments in associates 14 15 Equity investments 138 128 Unit trust units 3,589 3,884
In august 2015 Tryg and Skandia have signed an agreement whereby Tryg will acquire Skandia’s activities within child and adult accident insurance and integrate them into its Swedish business, Moderna Forsäkringar. The transaction is subject to regulatory approvals and the parties expect it to be completed in second half 2016. Hereafter Tryg will take over the control of the portfolios. The acquisition has no effect on the financial statement for 2015.
Tryg has signed the following contracts with amounts above DKK 50m: Outsourcing agreement with TCS for DKK 156m for a 4 year period, which expires in 2017. Lease contracts on premises for DKK 265m. The contracts expire after 5 years.
Inflation derivatives, recognised in claims provisions 438 0 438 0 -448 -10
Annual report 2015 | Tryg A/S | | Contents – Financial statements 27 Acquisition of subsidiaries (continued) The determination of the pro forma amounts for premium income and profit for the period is based on the following significant assumptions: • Premiums and claims have been calculated on the basis of the fair values determined in the pre-acquisition balance sheets for premium and claims provisions, rather than the original carrying amounts.
Gruppen smba and the subsidiaries of TryghedsGruppen smba (other related parties). Related parties with significant influence include the Supervisory Board, the Executive Management and their members’ family.
Premium income - Parent company (TryghedsGruppen smba) 0.3 0.3 - Other related parties 1.9 2.5
In august 2015 Tryg and Skandia have signed an agreement whereby Tryg will acquire Skandia’s activities within child and adult accident insurance. See note 26 for further information.
Intangible assets 0 Equipment 1 Receivables, other assets and accrued income 65 Provisions for insurance contracts -37 Debt and accruals and deferred income -40
The Group has not incurred any significant acquisition costs in connection with the acquisition. The purchase price is final. In connection with the acquisitions, a sum was paid which exceeds the fair value of the identifiable acquired assets, liabilities and contingent liabilities. This positive balance is mainly attributable to expected synergies between the activities in the acquired enterprises and the Group’s existing activities, future growth opportunities as well as the staff of the acquired enterprises. These synergies have not been recognised separately from goodwill as they are not separately identifiable. Goodwill is not expected to be deductible for tax purposes.
DKKm 28 Related parties (continued) The members of the Supervisory Board in Tryg A/S are paid with a fixed remuneration and are not covered by the incentive schemes.
The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as per adopted by the EU on 31 December 2015 and in accordance with the Danish Statutory Order on Adoption of IFRS.
On the basis of the DFSA's partial supervisory review, Tryg has chosen to include the required information for 2015 and 2014 in the note on intangible asset, including goodwill, in the 2015 Annual Report.
Future orders, standards and interpretations that the group has not implemented and which have still not entered into force but could effect the group significantly: • Executive order on financial reports presented by insurance companies and lateral pension funds issued by the Danish FSA1)
1) enters into force for the accounting year commencing 1 January 2016.
The changes will be implemented going forward from the effective date
Claims provisions The executive order prescribes a change from applying a yield curve issued by the Danish Financial Supervisory Authority to applying a new yield curve published by EIOPA – the new yield curve is expected to be at a lower level. The change will amount to approx. DKK 240m.
Significant accounting estimates and assessments The preparation of financial statements under IFRS requires the use of certain critical accounting estimates and requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are: • Liabilities under insurance contracts • Valuation of defined benefit plans • Fair value of financial assets and liabilities • Valuation of property • Measurement of goodwill, Trademarks and
Several assumptions and estimates underlying the calculation of the claims provisions are mutually d ependent. This has the greatest impact on assumptions regarding interest rates and inflation.
Fair value of financial assets and liabilities Measurements of financial assets and liabilities for which prices are quoted in an active market or which are based on generally accepted models with observable market data are not subject to material estimates.
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 a current OTC price of a similar financial instrument or using a model calculation. The valuation models include the discounting of the instrument cash flow using an appropriate market interest rate with due consideration for credit and liquidity premiums.
Consolidated financial statements The consolidated financial statements comprise the financial statements of Tryg A/S (the parent company) and the enterprises (subsidiaries) controlled by the parent company. The parent company is regarded as controlling an enterprise when it i) exercises a controlling influence over the relevant activities in the enterprise in question, ii) is exposed to or has the right to a variable return on its investment, and iii) can exercise its controlling influence to affect the variable return.
Bonus and premium discounts Bonuses and premium discounts represent anticipated and refunded premiums to policyholders, where the amount refunded depends on the claims record, and for which the criteria for payment have been defined prior to the financial year or when the insurance was taken out.
Share option programme The share option programme was closed in 2012
Matching shares Members of Executive Management and risk takers have been allocated shares in accordance with the “Matching shares” scheme. Under Matching shares, the individual management member or risk takers is allocated one share in Tryg A/S for each share the Executive management member or risk taker acquires in Tryg A/S at the market rate for certain liquid cash at a contractually agreed sum in connection with the Matching share programme.
Depreciation of operating equipment is calculated using the straight-line method over its estimated economic lifetime as follows: • IT, 4 – 8 years • Vehicles, 5 years • Furniture, fittings and equipment, 5-10 years
Increases in the revalued carrying amounts of owneroccupied property are recognised in the revaluation reserve in equity. Decreases that offset previous revaluations of the same asset are charged against the revaluation reserves directly in equity; all other decreases are charged to the income statement.
Profit after tax from equity investments in associates is included as a separate line in the income statement. Income is made up after elimination of unrealised intra -group profits and losses.
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 products is also included.
The Norwegian contingency fund reserves include provisions for the Norwegian Natural Perils Pool and security reserve. The Danish and Swedish provisions comprise contingency fund provisions. Deferred tax on the Norwegian and Swedish contingency fund reserves is allocated.
Provisions for insurance contracts Premiums written are recognised in the income statement (premium income) 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 statement of financial position date is reported as premium provisions. Premium provisions are generally calculated according to a best estimate of expected payments throughout the agreed risk period; however, as a minimum as the part of the premium calculated using the pro rata temporis principle until the next payment date. Adjustments are made to reflect any risk variations. This applies to gross as well as ceded business.
Annual report 2015 | Tryg A/S | | Contents – Financial statements
Annual report 2015 | Tryg A/S | | Contents – Financial statements mated tax on the taxable income for the year, adjusted for change in tax on prior years’ taxable income and for tax paid under the on-account tax scheme.
Debt Debt comprises debt in connection with direct insurance and reinsurance, amounts owed to credit institutions, current tax obligations and other debt. Derivative financial instruments are assessed at fair value according to the same practice that applies to financial assets. Other liabilities are assessed at amortised cost based on the effective interest method.
Note Statement of comprehensive income Profit/loss for the year 1,981 2,557
Note Investment activities 1 Income from Group undertakings 2,044 2,600 Interest expenses 1 0 Administration expenses in connection with investment activities -7 -7
Total equity and liabilities 10,341 11,857 6 Deferred tax assets 7 Capital adequacy 8 Contractual obligations, contingent liabilities and collateral 9 Related parties 10 Reconciliation of profit/loss and equity 11 Accounting policies
Share Revaluation Retained Proposed DKKm capital reserves earnings dividend Total 2015 Profit/loss for the year -1,656 1,878 1,759 1,981 Other comprehensive income 135 135
Average number of full-time employees for the year 15 13 3 Tax Reconciliation of tax costs Tax on profit/loss for the year 19 14 Tax adjustments, previous years -1 1
Tax on profit/loss for the year 23.5 24.5 Tax adjustment, previous years -1.0 0.5 4 Equity investments in Group undertakings Cost Cost at 1 January 6,987 6,987
Revaluation and impairment to net asset value Revaluation and impairment at 1 January 4,856 4,753 Revaluations for the year 2,179 1,759 Dividend paid -3,700 -1,656
Name and registered office Ownership share in % Equity 2015 Tryg Forsikring A/S, Ballerup 100 10,322 2014 Tryg Forsikring A/S, Ballerup 100 11,843 5 Current tax assets Tax receivable at 1 January 14 14 Current tax for the year 18 14 Tax paid for the year -14 -14
9 Related parties Tryg A/S has no related parties with a controlling influence other than the parent company,
TryghedsGruppen smba. Related parties with a significant influence include the Supervisory Board, the Executive Management and their members’ related family. Related parties are the same as for the Tryg Group; please see Note 28 in the consolidated financial statements.
Intra-group trading involved - Providing and receiving services -13 -15 - Intra-group accounts -487 -718
Reconciliation of equity Equity – IFRS 9,831 11,119 Deferred tax provisions for contingency funds 15 15
Combined ratio exclusive of run-off 89.3 86.5 83.7 96.8 84.5 85.3 82.4 93.7 90.8
Key ratios Gross claims ratio 62.3 77.1 55.7 66.3 55.2 63.9 72.1 63.9 73.8
Claims ratio, net of reinsurance 67.8 70.3 60.9 67.2 58.9 64.8 66.5 64.2 67.9
Combined ratio exclusive of run-off 91.3 98.6 84.5 98.9 86.5 92.1 81.9 86.9 92.8
Key ratios Gross claims ratio 69.2 99.9 170.5 67.6 67.2 63.0 73.3 81.5 75.0
Claims ratio, net of reinsurance 89.7 69.8 79.3 81.0 79.8 76.0 73.4 86.1 82.6
Combined ratio exclusive of run-off 106.2 98.1 94.5 100.1 106.4 94.9 86.8 113.4 102.2
Claims ratio, net of reinsurance 52.1 73.7 61.1 71.3 76.1 77.0 69.0 68.8 68.9
Combined ratio exclusive of run-off 94.3 92.4 93.2 100.1 99.2 97.7 91.7 91.5 94.5
Key ratios Gross claims ratio 68.0 76.6 84.8 72.0 64.1 64.9 70.7 71.7 74.9
Other income and costs -19 -20 -91 -90 Profit/loss before tax 704 768 2,327 3,302 Run-off gains/losses, net of reinsurance 241 338 1,212 1,131
Diluted average number of shares (1,000) 285,101 292,788 301,295 303,571 302,003
Net asset value per share (DKK) 34.82 38.46 37.41 36.18 29.84 Market price/net asset value 4.0 3.6 2.8 2.4 2.1
Motor insurance Motor insurance accounts for 31% of total premium income and comprises mandatory third-party liability insurance providing cover for injuries to a third party or damage to a third party’s property, and a voluntary comprehensive insurance policy that provides cover for damage to the customer’s own vehicle from collision, fire or theft.
Tryg’s future operating results, financial position, cash flows, business strategy, plans and future objectives other than statements of historical fact can generally be identified by the use of words such as ‘targets’, ‘believes’, ‘expects’, ‘aims’,
Capital and risk management in the annual report on page 24-25, and in Note 1 on page 46, for a description of some of the factors which may affect the Group’s performance or the insurance industry.