Profit/loss before tax 467 638 1,603 3,017 Profit/loss on continuing business 338 394 1,148 2,180
Key figures Total equity 9,007 10,979 Return on equity after tax (%) 13.1 22.1 Number of shares, year-end (1,000) 60,373 60,695 Earnings per share of 25 DKK 18.9 36.5 Net asset value per share (DKK) 149.2 180.9 Dividend per share (DKK) 6.52 26.0a)
Combined ratio by business area Private 92.6 86.8 92.7 87.7 a) Proposed dividend.
In 2012, a focus area for the Supervisory Board was creating a basis for stable results and stable dividends for shareholders, while at the same time maintaining a solid capital base which is deemed key to customer confidence. According to the new dividend policy, adopted by the
Super visory Board and announced in December 2012, the aim is to distribute 60-90% of the profit after tax, while at the same time aspiring for a steady increase in dividend in nominal terms. It is important that the new dividend policy is competitive and on a par with the policies of Tryg’s competitors in the Nordic region. For 2012, the Supervisory
Board proposes a dividend of DKK 26 per share or the distribution of total dividend of DKK 1,594m, corresponding to 72% of the profit for the year. In 2012, there was a lot of focus on the tax payments of Danish companies and their corporate social responsibility. Tryg contributes
800m, to repay the existing loan of EUR 65m and to initiate the extraordinary buyback of treasury shares totalling DKK 800m. The purpose is a capital reduction, and a corresponding reduction in equity.
Sweden and Finland, the agreement has been terminated by mutual agreement. As regards pensions, Tryg will continue to sell Nordea’s pension products in Denmark and Norway.
After 16 years on the Supervisory Board and seven years as Chairman of
All three elements are fundamental to creating peace of mind and value for our customers, employees and shareholders. In 2012, we further specified our financial targets, which must, among other things, be achieved through increased price differentiation, increased segmentation, claims prevention and improved procurement of claims services.
The phase which Tryg is now entering will focus on improvements through hard internal work.
The profit before tax was up at DKK 3,017m in 2012 from DKK 1,603m in 2011, while the combined ratio totalled 88.2 against 93.2 in 2011.
The improved results were strongly aided by a small number of weather claims and an unusually high investment return. Also, we achieved the targets for 2012 set out in our cost-cutting programme, which must reduce costs and claims costs by DKK 1bn in the period leading up to 2015.
The targets must be achieved by strengthening our competitiveness and striking a better balance between price and risk. With regard to
Despite the enduringly uncertain macroeconomic situation in Europe, the considerable changes intro duced internally in Tryg contributed to the return of markedly improved results for 2012 with a profit before tax of DKK 3,017m.
In 2011, Commercial was established as a separate business area with a view to directing particular focus on profitability. Profitability is improved through risk-based pricing, optimised sales channels and improved processes. In Sweden, we are continuing our work to strike a better balance between growth and profitability by optimising sales and streamlining business processes.
which is represented on the Group Executive Management. The new area will ensure a strong focus on employee activities by the Group
Strongest insurance brand in Denmark Tryg is the strongest insurance brand in Denmark according to the 2012 brand index for the financial sector prepared for FinansWatch. The survey looks into brand perception based on the following parameters: quality, impression, value for money, willingness to recommend the brand to others, reputation and customer satisfaction. Tryg was also the secondstrongest financial brand, surpassed only by ATP.
Capital Markets Day in London and specified targets On Tryg’s Capital Markets Day in London, which was attended by international investors, analysts and financial journalists, the management presented specified financial targets, with a combined ratio of 90 or below from Q3 2013 and an expense ratio below 15 in 2015 by cutting expenses and reducing claims costs by a total of DKK 1bn.
Renewed agreement with Nordea Tryg’s strategic partnership with Nordea was strengthened with the renewal of our agreement for another five-year term for Denmark and Norway. The partnership agreement was amended to better accommodate Tryg’s profitability focus. As regards pensions, Tryg will continue to sell Nordea pension products in Denmark and Norway. There was consensus that the agreement would not be renewed in Sweden.
Finnish business sold In 2012, the Group’s Finnish business was subjected to a strategic audit, as the business had not attained the expected size and business volume required to operate profitably after 10 years on the market. In November, Tryg sold the Finnish business to If for EUR 15m.
Carsten Kristoffersen was injured in a skiing accident in Canazei, Italy. He first contacted Tryg on Monday, was informed which plane would take him home on Tuesday, and was flown back to
‘I don’t think it could have been done any quicker,’ Carsten says, ‘but I wish I had known how my insurance policy worked before I went on holiday. It would have saved me a lot of worry and hassle if I had looked into how the social insurance card covers and where cover is provided under my own insurance.’
All three elements are fundamental to creating peace of mind and value for our customers, employees and shareholders.
We create peace of mind and value for customers, employees and shareholders.
Commercial was set up as an independent business area in Tryg in 2011, increasing focus on commercial customers as well as internal process optimisation. The purpose was to considerably improve the profitability of Commercial activities via targeted initiatives. Commercial improved its profitability significantly in 2012. Focus areas in 2012 and in the years to come will be improved risk-based pricing, increased segmentation, cost cuts, optimisation of distribution channels and automated processes.
In Sweden, Tryg is focusing on striking a better balance between growth and profitability. In order to achieve this, the coming years will see the implementation of three strategic phases: Establishing our position, producing results and creating profitable growth. Tryg focuses on the optimisation of sales and claims, improved risk-based pricing and increasing business process efficiency.
Tryg has determined a number of KPIs which are used to measure and follow up on the objectives and targets laid down in the company strategy. Tryg has defined a number of ambitious financial targets to be met by 2015, but to achieve this, KPIs have also been determined for customers and employees, as there is a clear link between customer and employee satisfaction and the financial results.
achieved from Q3 2013. A necessary precondition for achieving this degree of profitability is a strong focus on the profitability of operations. Cost-efficiency is crucial to the company’s long-term competitiveness, and Tryg wants to achieve an expense ratio below 15 in 2015 and a DKK 1bn reduction in expenses and claims costs in 2015.
This entails cost cuts of DKK 400m across business areas and staff functions. Tryg has launched a programme aimed at reducing claims costs by DKK 600m, primarily through the improved procurement of claims services and improved processes. The financial KPIs, return on equity, combined ratio and expense ratio are described under results on page 16.
Tryg must provide peace of mind for customers from day one and in such a way that they continue to prefer Tryg as their peace-of-mind
Focus must be on customer experience, and customers must be guaranteed a correct premium based on risk factors. Continued focus must be on claims handling, claims prevention and high product and service standards. Tryg meets customers on their terms by increasingly communicating digitally and by supplying services which are available to customers wherever they are. The KPIs, which are used to assess how satisfied customers are with Tryg, include customer satisfaction and customer retention.
Employee satisfaction is measured both externally and internally based on regular surveys. In 2012, Tryg maintained a high level of employee satisfaction, and once again did better than the financial sector as a whole, which was very positive. The high level of employee satisfaction was maintained during a period marked by a number of restructurings which involved job cuts.
As a peace-of-mind provider, Tryg wants to supply comprehensive solutions characterised by simplicity. Being available to customers as and when required is an important part of Tryg’s distribution strategy, as is a desire for most of the distribution to take place via the company’s own sales channels. Tryg’s business areas are divided into Private,
Sales to and the servicing of private customers in Denmark are handled via call centres and the Internet, via Tryg’s own agents, group agreements, car dealers, estate agents and Nordea’s branches.
In Norway, sales and services are handled in the same way as in
Corporate segment. Corporate is Tryg’s second-largest business area and generated revenue of DKK 5,258m in 2012.
With a view to improving profitability and increasing transparency for customers, focus is on the sharper pricing of risk based on the inclusion of a number of relevant pricing parameters. Consequently, price diffe r entiation is a continuous focus area for Tryg. In 2012, Tryg launched a new contents insurance product with tariffs which more accurately reflect the risks involved. The result is improved competitiveness in relation to customers. The new contents insurance product has no maximum sum insured. The customer therefore no longer has to assess the total value of household contents, which very few customers are able to do reliably. To obtain cover, customers only have to indicate items worth more than DKK 50,000. Everything else is gene rally covered. This provides peace of mind, and in future the customer only has to actively and specifically consider items of special value.
The many initiatives within pricing and product development and the streamlining of operations are helping Tryg to maintain its strong position in the Nordic market. People’s insurance needs change in the course of their lives. Consequently, private customers are treated differently depending on which stage of life they are at. Life stages are characterised by differences in activity levels, form of cohabitation, working life, financial position and required level of peace of mind. Focus on this means that Tryg can offer advice and solutions which are tailored to the customers’ specific requirements, and to suit the different stages of life and situations. At the same time, the company’s targeted advice and individual service increase customer satisfaction and improve the scope of sales. Customers need to know that it pays to have all your insurance policies with Tryg. Customers who bundle their insurance agreements with Tryg enjoy special benefits.
These include: • Discounts when several policies are taken out with Tryg.
• Benefits such as Tryg Roadside Assistance, psychological crisis assistance and under-insurance guarantee.
Tryg has established initiatives whereby buildings are inspected and thermography is performed of electrical panels which are often the seat of fire in farm buildings.
Tryg has also introduced a safety pack aimed at reducing fire damage in the home, which often occurs in December and January. The safety pack consists, for example, of fire retardant and smoke alarms and can be purchased via the Tryg website. An offer has been sent out by email to Danish customers, and this is yet another step aimed at minimising claims. Moreover, Tryg runs the two sites tryghedsraadgiveren.dk and trygghetsraadgiveren.no, where customers and others can find advice on how to protect their homes against burglary, water damage and fire. The sites also provide guidance on travel insurance, family insurance and checklists which can help prevent or limit damage or injury.
2012 was characterised by continued economic uncertainty. Despite a large number of initiatives on the part of the EU and the European
Central Bank aimed at ensuring economic stability in the EU, uncertainty is still hampering the budding signs of recovery seen in the healthier
European markets. This translates into low growth rates which impact the insurance companies’ premium income, especially within the commercial and corporate segments.
The atmosphere of economic uncertainty is expected to continue in 2013 and will thus dominate the markets for some time to come.
In the insurance market, 2012 was a good year as most insurance companies in the Nordic region saw a relatively low level of claims.
This is true, in particular, as regards weather claims due to favourable weather conditions throughout the year. Moreover, several companies are beginning to see the effects of the price adjustments introduced in recent years, and many companies are reporting general profitability improvements. In recent years, continued focus has been directed at the correlation between price and risk, and this focus on profitability is expected to continue. This also applies to costs, as efficiency increases and cost reductions have been on the agenda of many companies for a long time.
Furthermore, legislative changes were also introduced in Denmark in 2012 which have an impact on workers’ compensation. The change in the statutory retirement age from 65 to 67 years meant that provisions for workers’ compensation insurance were increased in 2012. A bill on a new workers’ compensation tax was introduced, which would mean that the insurance companies would have to increase their premiums for this product by 14%. However, the tax on workers’ compensation payments was changed so that, from 1 January 2013, it will be levied via the Labour Market Occupational Diseases Fund and not via the insurance companies.
compensation payments. This is due to the fact that pay under subsi dised flexible employment schemes is offset against workers’
Norway and Sweden have not seen major changes in legislation in these areas, and the market was affected by no major structural changes in 2012. In Norway, the small insurance companies have won market shares from the larger firms, but are struggling to combine growth and profitability. Sweden has seen a number of mergers and acquisitions among the smaller market players, but this does not change the general picture of a strongly consolidated market with a small number of large players. In Finland, market consolidation became even more pronounced in 2012 following the merger of the second-largest company, Tapiola, with the fifth-largest player in the market, making it the largest insurance company in Finland. Following the merger, the four largest insurance companies in Finland will account for almost 90% of premium income.
If. In the strongly consolidated and also very competitive Finnish market, Tryg has not been able to achieve the size necessary for pro fitable insurance operations. The transaction was therefore the right solution for all parties, but especially for customers and the Finnish employees, who will now be part of a larger Finnish organisation. The divestment also means that Tryg can now focus on running a profitable insurance business in those markets where Tryg has a solid position and a good foundation for developing its business in Denmark,
Prevention in agriculture In March 2012, Tryg published a study which confirmed the importance of informing our customers of claims prevention. The study showed that there is a significant risk of fire at 10% of all agricultural establishments. For this reason, thermography of electrical panels is provided under Tryg policies to uncover any potentially serious defects that might cause severe and very costly damage.
Every year, fires in electrical panels cause devastating fires at agricultural establishments. This results in declining revenues and a lot of extra work until normal operations can be resumed. With thermography, the systems are measured when active to identify the peak loads. Thermography shows differences in temperature and thus pinpoints major fire hazards. It typically costs DKK 2-3,000 to repair the defects identified by means of thermography.
We also ask our agricultural customers to install firetrace in their harvesters. This technology can be used to prevent fire in, for example, the engine compartment of combine or forage harvesters. Installation and equipment cost DKK 10-15,000, and it is a requirement for new large harvesters and is recommended for existing harvesters. We are sure that this is a worthwhile investment for our customers, as it will enable them to repair their harvesters quickly and bring in the harvest.
After a couple of challenging years in 2010 and 2011, when weatherrelated claims in particular impacted results, 2012 was in many ways a good year for Tryg. The most important profitability measures which have been implemented in recent years had a positive impact on results, while the main strategic challenges – the business in Finland and renewing the Nordea partnership agreement – were resolved.
It was also positive that all business areas contributed to the overall profit, in particular Commercial and Sweden, which saw marked improvements in results. At the same time, many initiatives saw good progress and will improve results in the coming years. These include, for example, a DKK 1bn cost-savings programme, and price differentiation which, in 2012, was manifested through the launch of a new contents insurance product on the Danish market.
Tryg’s profit after tax totalled DKK 2,208m (DKK 1,140m), which corresponds to a return on equity of 22.1% (13.1%). The improvement in profit stems from an increase in the technical result of DKK 920m and a higher investment return of DKK 524m. The technical result was improved from DKK 1,572m to DKK 2,492m and is attributable to profitability measures, a significantly lower level of weather claims and the positive effect of a reinsurance agreement based on the frequency of weather claims. The combined ratio totalled 88.2
Premium income totalled DKK 20,314m (DKK 19,948m), which in local currencies corresponds to basically unchanged premium income.
• Lower level of large claims, net DKK 471m (DKK 546m), and weather claims, gross of DKK 356 (DKK 721m).
• High investment return, after transfer to insurance, of DKK 585m (DKK 61m).
The price increases were introduced as a result of an increasing number of burglaries, increasing prices from tradesmen and a higher level of weather claims. Subsequently, Tryg has introduced price increases in the Commercial area. In future, there will be less need for price increases beyond normal adjustment for inflation.
100m. The greatest effect of the initiatives can be seen within motor insurance. In the coming years, a bigger effect will be seen within the building area. An important initiative has been the signing of an agreement on using Scalepoint, a purchasing system which is more flexible for customers while ensuring more accurate pricing of an item’s value.
expect any proceeds from this agreement, as it is primarily intended to provide cover in the event of a high frequency of weather-related events which do not follow the normal weather patterns.
It is positive that the expense ratio in 2012 was reduced considerably despite a growth in premiums below the rate of inflation and despite non-recurring restructuring costs of approximately DKK 100m in connection with the restructurings which have been implemented in Tryg.
The initiatives for reducing costs by DKK 300m by 2015 are divided into annual effects. For 2013, the goal is to implement initiatives corresponding to DKK 125m. For 2012, the effect was DKK 55m, and covers in particular a reduction in the number of employees in staff functions. Tryg is simplifying its processes through having a flatter organisation and assessing value creation in relation to customers. The process will continue in 2013 to ensure the goal is achieved.
The number of employees, exclusive of the Finnish business, was reduced from 4,076 to 3,912, which reflects the implemented streamlining measures.
In recent years, the cost level has been impacted by increases in payroll taxes in Denmark, and it will increase further in 2013 from 10.5% to 10.9%. Also, from 2013, the payroll tax will gradually increase, so that by 2021 it will total 12.3%, corresponding to a increase of approximately DKK 30m.
Tryg’s investment portfolio is divided into a match portfolio and a free portfolio. The match portfolio totalled DKK 34.9bn (DKK 32.6bn)
and was made up of bonds which match the insurance provisions so that fluctuations resulting from interest rate changes are offset to the greatest possible extent. The remaining part of the assets, the free portfolio, is a diversified portfolio of real estate, equities and bonds which reflect the company’s total equity. At 31 December 2012, the value of the free portfolio totalled DKK 10.8bn. In general, the division of the investment portfolio entails a low financial risk and reflects
In 2012, the return on the match portfolio was, after transfer to insurance technical interest, DKK 109m (DKK 95m), and was impacted by changes in the Danish Supervisory Authority’s interest curve which had a positive effect on the return on the match portfolio.
DKK 200m, respectively, were based on a re-evaluation of rent levels and a higher return requirement to ensure a higher degree of flexi bility in connection with possible future restructurings. Including other finan cial income and expenses as well as investment return from discon tin ued and divested activities, the investment return totalled DKK 585m.
Tax on profit for the year totalled DKK 837m, or 28%. In 2012, Tryg paid corporate income tax of DKK 425m and in addition various payroll
Tryg’s equity totalled DKK 10,979m (DKK 9,007m) at the end of 2012. Tryg determines an individual solvency need according to the
Tryg has arranged subordinate loans of DKK 1,597m. In 2009, in connection with the acquisition of Moderna, Tryg took out a sub ordinate loan of EUR 65m with TryghedsGruppen, which is expected to be repaid in Q1 2013. In this connection, it has been decided to make the most of the favourable capital markets and optimise the capital structure by arranging a subordinate loan of
The new subordinated loan will be for a perpetual term, and the full amount of DKK 800m can therefore be included in the capital base, which thus increases by DKK 800m, all else being equal. Against this background, Tryg will acquire treasury shares worth DKK 800m as part of an extraordinary distribution, which all in all will result in an unchanged capital base, but with a lower proportion of equity, leading to a higher future return on equity for the benefit of Tryg’s shareholders. Moreover, the new subordinated loan is expected to qualify for inclusion as Tier 2 capital under the new Solvency II
Tryg presented a new dividend policy in December 2012. The policy is based on the distribution of 60-90% of the profit for the year, the aim being a steadily increasing dividend. On the basis of this new dividend policy, the Supervisory Board proposes that DKK 1,594m be disbursed as a cash dividend. In addition, an extraordinary share buyback of DKK 800m is proposed.
• Large claims impacted the combined ratio by 4.3 percentage points (6.2).
• Combined ratio improved by 5.0 percentage points to 87.7 (92.7).
• Significant reduction in the expense ratio from 16.4 to 15.7.
The technical result for 2012 was DKK 1,233m (DKK 767m), with a combined ratio of 87.7 (92.7).
The improvement is due to both the effect of profitability measures and significantly better weather conditions in 2012. Due to previous price increases, the need for extraordinary increases, apart from general inflation adjustments, was less pronounced in 2012.
Key ratios Premium growth in local currencies 2.1 0.6 6.1 1.5
One of Private’s most important distribution channels is the bank insurance partnership with Nordea. In 2012, the agreement with
All in all, gross premiums increased by 1.5% (6.1%) in local currencies.
The growth was made up of a slightly negative growth in Denmark of 0.3% and growth in Norway of 3.5%.
In 2012, Tryg renewed its agreement with garages on car repairs, and repair costs remain significantly lower than for the market as a whole.
In the Norwegian part of Private, particular focus is on claims inflation as wage inflation is at a considerably higher level than in Denmark.
Gross premiums increased by 0.6% in Q4 which, as expected, was slightly lower than for the year as a whole. The retention rate in
The gross claims ratio was 70.1 (76.0), and the claims ratio, net of ceded business, was 71.2% (76.3%).
The expense ratio was 15.6 (16.3). The considerable fall is due, in particular, to the reduced employee numbers and a streamlining of the staff functions.
• The gross premiums were reduced by 2.0% (0.2%) as a result of profitability measures and the economic situation for businesses in Denmark.
contents insurance. The measures include price increases and changed terms, especially for valuables in basements. Commercial also focused on claims prevention, for example in the agricultural sector, with a view to reducing fire damage as a result of shortcircuiting. Product differentiation is also important within the
In 2012, the expense ratio was 20.3 (20.3), which is explained by a reduction in nominal expenses of approximately 1%, achieved primarily through organisational adjustments. To improve cost levels,
Tryg restructured the area significantly in Q4, mainly back-office functions, which cut staff by approximately 30. As mentioned above, with a view to increasing sales efficiency, Commercial set up a new sales channel at the end of 2012 which will focus on small businesses in the Commercial segment. Reducing costs will remain an important focus area, calling for further automation and simplification of processes.
Another cost-cutting measure will be a transfer to digital communication. Therefore, in 2013, customers will be able to access their insurance details and documents via the Internet before Tryg stops sending physical documents and makes a complete transfer to digital communication.
Denmark Norway bankruptcies. In Norway, sustained macro-economic growth supported growth for small and medium-sized businesses.
At the end of 2012, both the Danish and the Norwegian part of
Commercial set up new sales channels focusing on new sales to small businesses in the Commercial segment.
Q4 Commercial was affected by favourable weather conditions and an unusually low level of medium-sized claims.
Gross premiums fell by 3.3% in Q4, which was in line with expectations and the developments which generally characterised the year. The retention rate for Denmark was 84.6 (85.5), a level which was still affected by the profitability measures introduced, while the retention rate in Norway was 87.4 (88.4).
The gross claims ratio was 59.8 (64.2), and the claims ratio, net of ceded business, was 62.6 (66.3).
The expense ratio was 20.0 (19.4), which was lower than for the full year.
Combined ratio, exclusive of run-off 112.9 103.4 103.2 97.3 Run-off, net of reinsurance (%) -14.4 -12.7 -12.0 -9.6 Large claims, net of reinsurance (%) 17.3 11.8 7.9 7.6 Weather claims, net of reinsurance (%) 4.3 0.8 3.2 0.6
Private and Commercial. For Corporate, it is therefore important to ensure profitable business, while at the same time being able to adjust cost levels to major fluctuations in premium income.
Tryg has a solid market position in Denmark and Norway, while the
Corporate business in Sweden is still in a start-up phase characterised by consciously limited growth, the focus being on the profit-
• Technical result improved by DKK 141m to DKK 650m (DKK 509m).
• Gross premiums reduced by 2.0% (0.8%) after intro duction of profitability measures, including the pruning of customers.
The expense ratio was 12.3 (12.8 ) in 2012, which represented a satisfactory reduction concurrently with a reduction in premium levels. The reduction is due to the tailoring of the business to a lower level of activity and general measures aimed at ensuring a reduction in cost levels.
The combined ratio was 90.7 (98.5), the considerable fall being attributable to developments in claims.
A profit of DKK 102m (DKK -14m) was posted. The positive develop ment is based on a continued high level of profitability within the niche areas, which comprise the insurance of leisure boats, motorcycles and product insurance in connection with electronics purchases. Moreover, the profitability measures introduced in the business which was originally started up in Malmö based on
The market situation in Sweden is generally impacted by the global economic situation which put a dampener on private consumption. For Moderna, this has been particularly true of the market for leisure boats and motorcycles where sales have been low.
Profitability measures have improved results and will continue to do so in the coming years
• Gross premiums were up 0.7% (9.2%) as a result of profitability measures and a conscious reduction in sales.
Profit/loss on gross business -48 47 -36 81 Profit/loss on ceded business -2 3 -9 -3 Technical interest, net of reinsurance 6 4 31 24
All in all, premium income was up 0.7% against growth of 9.2% in 2011. The low growth is due to Tryg’s focus on profitability, which has resulted in considerable price increases within the Private segment, which was originally established on the basis of bank distribution. Price increases have been introduced for all main products. The motor insurance portfolio has been pruned as it comprised too many expensive cars at too low a price, and new tariffs with a markedly better correlation between risk and price have been implemented.
The gross claims ratio amounted to 76.6 (83.2), and the claims ratio, net of ceded business, which includes the profit/loss from reinsurance, was 76.8 (83.8). The improved claims ratio, net of ceded business, can be ascribed to price increases and reduced growth within un pro fitable customer groups. Moreover, considerably improved tariffs have been developed within both motor and house insurance, ensuring signifi cantly better price differentiation. The claims ratio is positively affected by major efficiency increases in claims handling. This is illustrated for example by the fact that approximately 50% of claims in
Stockholm were registered and processed on the same day. A conversion from two IT systems to one in 2013 will further increase claims handling efficiency.
The claims ratio was 67.2 (88.1), and the claims ratio, net of ceded business, was 66.4 (88.6). The lower level of claims is attributable to the positive development in claims costs recognised in the financial statements for Q2 and Q3, which improved the claims ratio in Q4.
Tryg’s investment activities include investing in investment assets such as bonds, equities and property and managing Tryg’s liquidity.
The investment activities are regulated by legislation and by the policies and guidelines adopted and issued by the Supervisory Board.
The purpose of the match portfolio is to hedge fluctuations in the discounting of insurance provisions by means of interest rate swaps in local currencies. By entering into Danish, Norwegian and Swedish a) The item comprises interest on operating assets, bank debt and reinsurance deposits, foreign currency translation adjustment of insurance items, costs of investment activities.
Key figures for the year – Investments Return Return 2012 Investment assets DKKm 2011 Total Match Free 31.12.11 31.12.12
Value adjustments, changed discount rate -760 -477 -477 Transferred to insurance technical interest -851 -528 -528
• Very high return on free portfolio of DKK 1,129m (DKK 184m).
fixed-rate swaps, Tryg avoids fluctuations in the fair value of its long-term liabilities in the respective countries, and this eliminates most of the interest rate risk of Tryg’s claims provisions. As fluctuations in swap rates are sometimes greater or smaller than the Danish
Financial Supervisory Authority’s interest rates, a mismatch will arise in addition to a mismatch from the other risks which are not interest rate risks and which cannot be hedged accurately.
In practice, Tryg seeks to put together bond portfolios which are most likely to achieve the discounting curve yield given by the Danish
Hedging of the interest rate risk and developments in the FSA rate and the swap rate has resulted in a mismatch of DKK 109m. The mismatch is primarily attributable to the implementation of the Solvency II curve in June, on the initiative of the Danish Ministry of Business and Growth.
DKK 150m. Without this write-down, Tryg would have had a negative mismatch of approximately DKK 40m.
The free portfolio yielded a gross return of DKK 1,129m (DKK 184m), corresponding to 11.4% (3.4%) of the average invested capital. The portfolio grew from approximately DKK 8.1bn at the end of 2011 to
In 2012, the free bond portfolio yielded a total return of DKK 656m
(DKK 152m), due to an overweight of bonds with credit exposure.
a) The item comprises interest on operating assets, bank debt and reinsurance deposits, foreign currency translation adjustment of insurance items, costs of investment activities.
Key figures for investments Q4 Return Investment Q4 Return Q4 2012 assets DKKm 2011 Total Match Free 31.12.12
Total investment return before other financial items 188 283 27 256 Other financial income and expenses, investment a) -16 -20
Total investment return 172 263 Other financial income and expenses, non-investment a) -29 -251
Investment return 143 12 Of which investment return on discontinued and divested business -1 7
(DKK -225m), due, among other things, to the write-down of Tryg’s owner-occupied properties by DKK 350m. The write-down resulted partly from the effect of a reassessment of the rent level in Q2 2012 by an amount of DKK 150m, and partly from a higher return requirement, the effect being DKK 200m. Other major elements included Tryg’s interest expenses in respect of subordinate loans and the costs of hedging Tryg’s equity in Norway and Sweden. The costs of hedging currency exposure totalled approximately DKK 110m
(DKK 87m) in 2012, primarily from the hedging of foreign branches due to the higher interest rate level in Norwegian kroner. Interest on subordinate loans amounted to approximately DKK 79m in 2012.
(DKK -7m) and thus fulfilled the targets for this part of the portfolio.
Moreover, the return was impacted by the above-mentioned writedown of owner-occupied property of DKK 200m due to a higher return requirement with the aim to ensure a higher degree of flexibility in connection with possible future restructurings.
Efficiency increases and simplification will be essential to reducing costs in the coming years.
Price increases have lifted the top line in recent years. Given Tryg’s focus on profitability, it will be necessary to say goodbye to unprofitable customers, and Tryg therefore expects only a modest increase in premium income in the coming years.
For equities and real estate, the same expectations are applied as for earlier years of 7% and 6%, respectively.
An anti-flooding valve at the floor drain and a water tank connected to the gutter are some of the measures implemented by the family to prevent future damage. ‘We really want to avoid any more damage. We are the ones who suffer, and it is such a hassle sorting everything out, especially with water damage,’ Tove and Leif say. The specialist who performed the House Check inspection was satisfied with the family’s preventive measures.
Group being able to take over risks from customers. For this to be possible, capital planning must be tailored to the Group’s risk and growth profile. Tryg wants to have the necessary capital, while at the same time being able to distribute stable dividend corresponding to 60-90% of the earnings for the year. Read more about dividend policy in the chapter on the Tryg share and dividend policy on page 41.
Through capital and risk management, Tryg aims to secure financial strength and flexibility. Capital management is based on Tryg’s internal capital model, and the capital requirement is determined on the basis of Tryg’s current risk profile with a 99.5% level of certainty.
An external credit rating is obtained from Standard & Poor’s, and
The Danish authorities demand active capital management based on quarterly calculations of an individual solvency need. These requirements are precursors of the future Solvency II rules. Tryg’s calculation of its individual solvency need is based on the Group’s internal capital model. The individual solvency need was DKK
DKK 10,400m, calculated according to the Solvency II rules – equates to a surplus cover of DKK 2,239m. The introduction of the Solvency II
Once a year, a so-called ORSA (Own Risk and Solvency Assessment)
is carried out, which is a systematic and comprehensive assessment of the Group’s risk and solvency. ORSA also comprises a capital plan and a capital contingency plan illustrating the implications of the company ’s business plan and documenting the adequacy of the capital base, even in a selection of stressed situations. Such an assessment will be a statutory requirement under Solvency II.
The Executive Management’s responsibility for all risk and capital man a gement is exercised on a daily basis through a risk management environment in which underwriting and reinsurance, provisions, investment risk and operational risk are managed by separate subcommittees.
Tryg’s capital base consists of equity and subordinate loans. The relative sizes of these two categories are subject to ongoing assessment with a view to maintaining an optimum structure which takes account of the return on equity, capital costs and flexibility. Different models are used to calculate the actual capital under the various regimes, but regardless of the model applied, Tryg has a high level of internal financing (low gearing). In 2005, Tryg took out a 20-year subordinated bond loan of
EUR 150m listed on the London Stock Exchange. In connection with the acquisition of Moderna in Sweden in 2009, Tryg took out a sub ordinated loan with expiry in 2032 of EUR 65m from TryghedsGruppen. Tryg’s
total subordinated debt subsequently amounted to EUR 215m. All in all, debt amounted to 15% of equity at the end of 2012, corresponding to 10% of the capital base. Interest expenses on the subordinated loan capital totalled DKK 80m in 2012. For further details on loan terms and capital mangement in Tryg, see note 2, pages 88-89.
DKK 800m. The current capital requirement rules limit the amount of fixed-term subordinated loan capital which can be included in the capital base, which has meant that the existing subordinated loan from TryghedsGruppen of EUR 65m cannot be included in Tryg’s capital base. The new subordinated loan will be of a perpetual term, which means that the loan can be included in the capital base in full, which thus increases by DKK 800m. Against the background of the above, treasury shares worth DKK 800m will be acquired as part of an extraordinary distribution. Together with the new subordinated loan, the distribution will result in an unchanged capital base, but with a lower proportion of equity, which in isolation will contribute positively to the future return on equity for the benefit of Tryg’s share holders.
Moreover, the new subordinated loan is expected to be included as
Tier 2 capital under the new Solvency II capital adequacy rules.
Reinsurance is an important tool when it comes to protecting Tryg’s capital base. The need for reinsurance is assessed on an ongoing basis using Tryg’s internal capital model, in which the reinsurance premium is compared with the reduction in the capital requirement that can be achieved. Tryg’s reinsurance programme comprises single claims (large claims), and events which may impact several policies at the same time (catastrophe cover). The most important programmes covering large claims include buildings, contents, motor, goods transport, liability and fish farming. catastrophe cover has been taken out for buildings, contents and risks in respect of which frequency protection has been arranged which limits the aggregate annual deductible in the event of, for example, hurricanes and cloudbursts.
The reinsurance programme also comprises catastrophe cover for accidents and workers’ compensation. For a detailed description of Tryg’s reinsurance programme, see Note 1 on page 77.
Solvency II allows for the use of full or partial internal models. Tryg’s plan is to use the existing internal model in areas where the risk deviates from the risk assessed using the standard model. Within the area of insurance risk, Tryg is of the opinion that it will be able to model its own risk more correctly. For example, the standard model does not take account of geographical diversification between the
Nordic countries, which is an aspect of Tryg’s exposure. On the other hand, the existing internal model’s treatment of investment risks is very like the standard model, which must be seen in light of the homogeneous investment risk which is generally hedged across national borders based on efficient financial markets. The aim is that, under Solvency II, Tryg will in future use a partial internal model in its capital planning consisting of the insurance module in Tryg’s existing model, supplemented with the other modules (investment, operational risk etc.) from the standard model.
Tryg engages in ongoing dialogue with the Danish Financial Supervisory Authority on requirements for the development of a partial internal model. The plan is for Tryg to submit an application which the Financial Supervisory Authority will then consider for approval.
a) Shareholders holding more than 10,000 shares. Free float is exclusive TryghedsGruppen.
For this reason, we emphasise openness, transparency and the accommodation of stakeholder information requirements. The
The Tryg share is covered by 21 investment analysts. See a list of analysts and their recommendations of Tryg at tryg.com > Investor.
In 2011, the Tryg share ended at a price of 319, and during 2012 it increased, reaching 426.50 at the end of the year. Including a dividend of DKK 6.52, the share rose by 33.7% during 2012 (31.7% excluding dividend). By comparison, the OMXC20 index rose by 27.2% in 2012.
Chi-X and Turquoise), as other trading platforms are gaining ground in step with the increased focus of the major investment funds on trading costs. OTC (over-the-counter) and dark pools (non-transparent tradings)
From 2011 to 2012, the total annual turnover (including OTC trades)
Capital and dividend distribution a) Proposed by the Supervisory Board for adoption by the annual general meeting.
• Aspiration to distribute a dividend which is steadily increasing in nominal terms.
• The capital level may extraordinarily be adjusted through a share buyback.
At the 2013 annual general meeting, the Supervisory Board will propose the payment of a cash dividend of DKK 1,594m, corresponding to DKK 26 per share.
Tryg has decided to take out an irredeemable subordinate loan, and for that purpose purchase treasury shares of DKK 800m in order to reduce equity by a corresponding amount. Read more in the chapter Capital and risk management on page 38.
Tryg’s annual general meeting will be held on 18 April 2013 at 14:00 at Falkoner Centret, Falkoner Allé 9, 2000 Frederiksberg, Denmark.
The notice will be advertised in the daily press in March 2013 and will be sent to shareholders, if requested. The annual general meeting will also be announced on tryg.com, where shareholders not able to attend can follow the proceedings live via webcast.
Innovative claims prevention Many corporate customers in the Copenhagen area remember the cloudburst on 2 July 2011. The cloudburst flooded many basements and destroyed millions of kroner’s worth of electronics. Thanks to an innovative idea, our customers can now install a sensor which makes the lift in a building stop before it reaches the water in the basement.
Tryg holds its annual general meeting each year before the end of April.
As required by the Danish Companies Act and the Articles of Association, the annual general meeting is convened via a company announcement and at tryg.com subject to at least three weeks’ notice. Shareholders may also opt to receive the notice by post or email. The notice contains information about time and venue as well as an agenda for the meeting, which as a minimum includes the following items: • Report by the Supervisory Board on the company’s activities during the past financial year.
• Resolution concerning the appropriation of profits or the cover of losses in accordance with the annual report.
The annual general meeting is held by personal attendance as the
Supervisory Board values personal contact with the Group’s shareholders. The Supervisory Board and the Group Executive Management attend the annual general meeting whenever possible, and this has high priority.
See the Investor Relations policy at tryg.com > Investor > IR contacts > IR policy and the CSR policy at tryg.com > CSR
Group’s strategy is developed and monitored. The Supervisory Board ensures that the necessary competencies and financial resources are available for Tryg to achieve its strategic targets. The framework is discussed at the strategy seminar and at an annual budget meeting.
The Supervisory Board specifies its activities in the company’s rules of procedure and annual cycle.
Tryg aims to increase the total number of women in management by 2% by 2014. See the action plan at tryg.com > CSR.
Each year, the Supervisory Board reviews the rules of procedures for the Supervisory Board and the Executive Management with relevant guidelines and instructions describing reporting requirements and requirements for communication with the Executive Management.
Financial legislation also requires the Executive Management to disclose all relevant information to the Supervisory Board and report on compliance with limits defined by the Supervisory Board and in legislation.
The Supervisory Board is headed by a Chairman and a Deputy Chairman. The Deputy Chairman will act in the Chairman’s absence and serves as a discussion partner for the Chairman.
Supervisory Board’s rules of procedure. The tasks of the Chairman include chairing and assessing the work of the Supervisory Board, organising, convening and chairing board meetings and being in charge of the cooperation with the Executive Management. The
Board to carry out a further self-evaluation in October. The Supervisory Board focuses, in particular, on competencies in the fields of insurance, economics, accounting, financial knowledge and experience, manage ment experience, M&A experience, market insight and international experience. See the description of competencies at tryg.com and in the notice convening the annual general meeting.
The Supervisory Board has carried out a self-evaluation as required by the Danish Financial Supervisory Authority’s guidelines on evaluation of board members’ knowledge and experience in general insurance companies. The evaluation concludes that the Supervisory
Board recommends three members to Tryg’s Supervisory Board from among the members of TryghedsGruppen’s Supervisory Board.
The Supervisory Board includes members from Denmark, Sweden and Norway and has five female members, including three female employee representatives.
New board members are given an introduction to Tryg when taking up office. See CVs and descriptions of the competencies of the
Supervisory Board in the section Supervisory Board on pages 54-55 and at tryg.com > Governance > Management > Supervisory Board.
Sweden. Employee representative elections were held in 2012. The next election will be held in 2016. Danish law states that employee representatives have the same rights, obligations and responsibilities as the other board members.
The Supervisory Board and the individual board members deem that each member has adequate time and resources to perform their
To ensure the integration of new talent on the Supervisory Board, members elected by the annual general meeting may hold office for a maximum of nine years. Furthermore, members of the Supervisory
Board must retire at the first annual general meeting following their 70th birthday. See the ages of the individual board members on pages 54-55 and at tryg.com > Governance > Management > Supervisory Board.
Tryg’s Supervisory Board has set up an Audit Committee, a Risk
Committee, a Nomination Committee and a Remuneration Committee. The board committees’ terms of reference are available at tryg.com and include descriptions of members, meeting frequency, responsibilities and the activities of the committees during the year.
The special competencies of each member are also described separately at tryg.com.
Two out of four members of the Audit Committee and the Risk Committee, including the chairman of the committees, are independent persons. One out of four members of the Remuneration Committee is an independent person, while one out of two members of the
Board committee members are elected primarily on the basis of their special competencies that are considered important by the Supervisory Board. It is also considered important to involve the employee representatives in the committees. The committees exclusively prepare matters for decision by the entire Supervisory Board.
In 2006, Tryg set up an Audit Committee. The framework of the Audit
Committee monitors the risk management environment as well as associated processes. The Committee has four members, and in 2012 the Risk Committee held four meetings.
The Remuneration Committee has four members, and the Chairman of the Supervisory Board is Chairman of the Remuneration Committee. Moreover, the committee must consist of at least one member of
The Remuneration Committee held four meetings in 2012. The work of the Remuneration Committee is based on Tryg’s remuneration policy. See the tasks of the Remuneration Committee at tryg.com > Governance > Management > Supervisory Board > Board committees.
Evaluation of the work of the Supervisory Board and the Executive Management
The Supervisory Board has defined an evaluation procedure for assessing the composition of the Supervisory Board and the
Super visory Board. The Supervisory Board fixes the remuneration of the Executive Management for one year at a time. There is an annual review based on the requirements for attracting and retaining the best-qualified Executive Management members. The fixed salary must be competitive and appropriate for the market in order to provide sufficient motivation for each director to do his or her best in order to achieve the company’s defined targets.
The Executive Management’s remuneration consists of a fixed salary, pension and a variable salary. The variable salary constitutes only a limited part of the overall remuneration. The Supervisory Board can decide that the fixed salary be supplemented with a variable salary of up to 10% of the fixed basic salary including pension at the time of allocation. The Supervisory Board has decided that the variable salary consists of a matching shares programme. Four years after the purchase by a member of the Executive Management of a specified number of shares, such member is allocated a corresponding number of free shares in Tryg. The allocation of matching shares at the time of allocation is not dependent on Tryg’s financial performance.
Each member of the Executive Management is entitled to 12 months’
This is paid on an ongoing basis upon retirement. The benefit depends achievements and performance of the Supervisory Board and its individual members.
The Chairman is in charge of the evaluation and holds evaluation interviews with each member at the beginning of the year, according to an agenda agreed in advance. The outcome is discussed at the first board meeting of the year. The Supervisory Board carries out an annual evaluation of the achievements and performance of the
Executive Management in accordance with clearly pre-defined criteria and of the cooperation between the Supervisory Board and the
Executive Management. In addition, the Supervisory Board reviews and approves the rules of procedure of the Supervisory Board and the Executive Management each year to ensure they are aligned with
The Chairman of the Supervisory Board receives a triple remuneration, while the Deputy Chairman receives a double remuneration.
on years of service and constitutes part of the salary earned immediately prior to retirement.
Being an insurance business, Tryg is subject to the risk management requirements set out in the Danish Financial Business Act.
The Supervisory Board’s Risk Committee monitors the company’s risk management and control on an ongoing basis and reports on this quarterly to the Supervisory Board.
Tryg introduced decentralised risk management whereby risk managers in the individual business areas carry out controlling tasks for the risk management environment and Tryg’s compliance function.
Bill-Owe Johansson 300,000 300,000 Mari Thjømøe 209,167 209,167 Jørgen Huno Rasmussen 209,167 209,167
The Executive Management has established a formal group reporting process comprising monthly reporting, including budget reporting and deviation reporting, among other things.
Tryg has set up an Ethical Hotline which is managed by an external partner, which allows employees, customers or business partners to report any serious wrongdoing or suspicions of such. Reporting takes place in confidence to the Chairman of the Audit Committee and Tryg’s internal Audit Manager. See more about Tryg’s Ethical
Group seeks at all times to minimise the risk of unnecessary losses in order to optimise returns on the company’s capital. Read more about Tryg’s risk management in the section Capital and risk management on page 38 and in note 1 page 77.
Each year, the annual general meeting appoints an independent auditor recommended by the Supervisory Board. In connection with the Supervisory Board’s review of the annual report, it discusses accounting policies and other issues. The results of the audit are discussed in the Audit Committee and at board meetings for the purpose of assessing the auditor’s observations and conclusions.
Management. The Chairman of the Audit Committee will deal with any matters that need to be reported to the Supervisory Board.
Governance with the exception of the recommendation for the number of independent members of the board committees as stated in item 5.10.2 of the Recommendations on Corporate Governance.
Paul Bergqvist b) Born 1946. Joined: 2006. Nationality: Swedish. Professional board member. Former CEO of Carlsberg A/S.
Deputy Chairman Born 1947. Joined: 2011. Nationality: Danish. Professional board member. Adjunct Professor, CBS. Former Governor, Danmarks Nationalbank.
Chairman Born 1943. Joined: 1997. Nationality: Danish. Professional board member. Former CEO of Toms Chokoladefabrikker A/S.
Experience from managing international companies, including strategic development, and experience as a board member of Danish and international companies.
Born 1957. Joined: 2011. Nationality: Danish. CEO of the public limited company Schouw & Co and Dutch Consul. Former CEO of BioMar A/S.
Education: Academy Economist, Graduate Diploma in Marketing Management and IEP – Executive Programme from Insead. Chairman: Dovista A/S. Chairman or Deputy Chairman in Schouw & Co companies. Board member: Tryg A/S, Tryg Forsikring A/S, TryghedsGruppen smba and Aida A/S. Committee memberships: Audit and Risk Committee in Tryg A/S. Number of shares held: 118 Change in portfolio in 2012: 0
Bill-Owe Johansson Employee representative Born 1959. Joined: 2010. Nationality: Swedish. Claims Handler (Moderna). Employed in 2002.
As the CEO of FLSmidth, Jørgen Huno Rasmussen has experience in international management and special competencies within strategy, business development, communication, risk management and finance.
Management experience from a number of major enterprises such as Norsk Hydro and Statoil. She has special knowledge of strategic and financial planning, restructuring, investment and investor relations. As a Norwegian citizen, she has special insights into Norwegian market conditions.
Education: MSc in Economics and Business Administration and Lieutenant-Colonel in the Royal Danish Air Force Reserve. Chairman: Dansk Energi- og Forsyningsselskabers Arbejdsgiverforening, Energi Danmark A/S, CLEVER A/S. Board member: TryghedsGruppen smba, Tryg A/S, Tryg Forsikring A/S, DI General Council and Forskerparken CAT A/S. Committee memberships: Remuneration Committee in Tryg A/S. Number of shares held: 1,750 Change in portfolio in 2012: 0
Education: Certified commercial insurance agent. Various insurance and sales courses and negotiation training. Board member: Tryg A/S and Tryg Forsikring A/S. Number of shares held: 86 Change in portfolio in 2012: 0
Education: Insurance training. Board member: Tryg A/S and Tryg Forsikring A/S. Committee memberships: Audit and Risk Committee in Tryg A/S. Number of shares held: 86 Change in portfolio in 2012: 0
Education: A.P. Møller Group international shipping education, Graduate Diploma in Financing and various international management programmes. Board member: Tryg A/S, Tryg Forsikring A/S and DFDS A/S. Committee memberships: Audit and Risk Committee in Tryg A/S. Number of shares held: 745 Change in portfolio in 2012: +335
Experience from international corporations via her work in Coloplast and Mærsk UK and skills in strategy, economics, financing and communication.
Born 1972. Employed in 2002. Joined the Group Executive Management in 2003. Appointed Group CEO in 2011. Member of the Executive Management and the Group Executive Management.
Board member: Forsikring & Pension (Danish Insurance Association) and Tjenestemændenes Forsikring.
Number of shares held: 9,910 Change in portfolio in 2012: +2,820
Number of shares held: 2,017 Change in portfolio in 2012: +1,000
Born 1967. Employed in 2011. Joined the Group Executive Management in 2011. Member of the Executive Management and the Group Executive Management.
Number of shares held: 35 Change in portfolio in 2012: 0
Lars Bonde Group Executive Vice President, Private, Country Manager in Denmark and COO
Born 1965. Employed in 1998. Joined the Group Executive Management in 2006. Member of the Executive Management and the Group Executive Management.
Tryg focuses on reducing the climate impact of its activities and on protecting and promo ting human rights in the Nordic countries.
Tryg’s CSR commitment concentrates on four thematic areas: Climate, Prevention, Inclusion and Well-being.
policy at tryg.com > CSR > CSR strategy > CSR policy.
In handling claims, we come face to face with the consequences of climate change every year. Damage caused by cloudbursts, landslides and hurricanes impacts Tryg’s customers considerably. The prevention of climaterelated claims is therefore a key priority, and together with customers, researchers and the authorities, Tryg is focusing on finding new ways of minimising and handling the consequences of such perils. The climate perspective is also used to identify new ways of cutting operating costs.
See the climate targets at tryg.com > CSR > Thematic areas >
The main sources of CO2 emissions from Tryg’s buildings and transport activities come from heating, electricity and waste as well as air
travel. Tryg has introduced a number of initiatives aimed at reducing emissions. These include the use of low-energy bulbs and LED lighting, electricity savings achieved by having cleaning done in daylight hours rather than at night and increased focus on reducing waste. For paper waste alone, Tryg in Norway achieved a 53% reduction in 2012 compared to 2011. An internal campaign planned for 2013 will encourage employees to act more sustainably in terms of their paper consumption, waste handling and transport and travel.
CO2 emissions were reduced by a total of 27.5% from 2007 to 2012.
Today, Tryg is finding that social responsibility is a significant competition parameter in the insurance market. In particular, inclusion and diversity are central issues in our partnerships with customers, NGOs and public institutions. Read more about the targets for our human rights efforts at tryg.com > CSR > Thematic areas > Inclusion.
Read more about labour rights at tryg.com > CSR > Thematic areas > Well-being > Labour rights.
The purpose of Tryg’s efforts within the fields of diversity and inclusion is to make the most of the potential which arises when employees from different backgrounds work together for the benefit of customers and colleagues. For this reason, we work actively with diversity emanating from gender, age, ethnicity, disability, sexual orientation, faith and religion. Priority is given to efforts aimed at women in management, the active recruitment of employees of different ethnicities, accessibility for employees with disabilities, marking of religious festivals and access to rooms for reflection as well as tolerance of different sexual orientations. Read more about the activities at tryg.com > CSR
Moreover, we have examined whether higher levels of sickness absence among young women hamper their access to management positions. In order to prevent sickness absence, the office in Bergen has taken on a health visitor who advises mothers on the work/
With a view to ensuring equal pay for women and men performing the same work, or work of the same value, Tryg carried out a number of job assessments in 2012 and ensured an equalisation of pay where inequalities were identified.
In 2012, the proportion of women in management fell from 37.5% to 34.0%. The aim is to increase the share by 2% by 2014. See the action plan for women in management at tryg.com > CSR strategy > Plans of action. See the report for the Charter for More Women in Management (in Danish only) at tryg.com/dk > CSR > Inclusion.
Translating diversity into improved well-being and better customer service requires knowledge about legislation prohibiting discrimination, but also insights into the stereotypes and prejudices which we all carry with us and which are inherent in our daily routines. Tryg has therefore developed a workshop on diversity, aimed at disseminating information about diversity and at removing structural barriers to diversity in connection with recruitment, employment, promotion and dismissal, and at using diversity actively in the consultancy offered to customers and in the development of the business.
Charter. Watch the film on diversity in Tryg (in Danish) at tryg.com > CSR > Thematic areas > Inclusion.
One of the central partnership agreements made in 2012 was with the Union of Education Norway (UDF) and resulted in a joint project with the Norwegian Red Cross on training refugee guides. The guides are volunteers who help refugees to become integrated into their local communities. Guides for the project are recruited among Tryg and
UDF employees and as part of a regional partnership with local Red
As an insurance company, we handle a variety of personal data every day. The correct processing of personal data and the promotion of correct data protection are therefore Tryg’s contribution to protecting and promoting the right to privacy. Ensuring the correct use of personal data in our daily customer contact and claims handling activities is crucial to our customer services. In order to increase Tryg employees’
A small proportion of Tryg’s investment portfolio is invested in shares and corporate bonds which are managed by external partners. They are all obliged to integrate environmental considerations and social and governance (ESG) issues into their investment decision-making, for example through membership of UN PRI.
In 2012, Tryg organised Security Days in cooperation with the University of Trondheim (NTMU), Norway.
The seminar in Trondheim was a pilot project which will inform the development of tailored claims prevention seminars, which may in future be extended to Tryg’s departments in Bergen and Oslo.
Note Tryg Group Statement by the Supervisory Board and the Executive Management 66 Independent auditor’s reports 67 Financial highlights 69 Income statement 70 Statement of comprehensive income 71 Statement of financial position 72 Statement of changes in equity 74 Cash flow statement 76 1 Risk management 77 2 Capital management 88 3 Operating segments 90 3 Geographical segments 92 3 Technical result, net of reinsurance, by line of business 94 4 Premium income, net of reinsurance 96 5 Insurance technical interest, net of reinsurance 96 6 Claims, net of reinsurance 96 7 Insurance operating costs, net of reinsurance 96 8 Interest income and dividends etc. 101 9 Price adjustments 101 11 Profit/loss on discontinued and divested business 102 12 Intangible assets 104 13 Property, plant and equipment 106 14 Investment property 108 15 Equity investments in associates 109 16 Financial assets 110 17 Reinsurers’ share 114 18 Current tax 115 19 Assets held for sale and associated liabilities 115 21 Premium provisions 116 21 Claims provisions 117 22 Pensions and similar liabilities 118 23 Deferred tax 120 24 Other provisions 121 25 Amounts owed to credit institutions 121 26 Debt relating to unsettled funds transactions and repos 121 27 Earnings per share 121 28 Contractual obligations, collateral and contingent liabilities 122 29 Related parties 123 30 Financial highlights 124 31 Accounting policies 125
In our opinion, the accounting policies applied are appropriate, and the annual report gives a true and fair view of the Group’s and the parent company’s assets, liabilities and financial position at 31 December 2012 and of the results of the Group’s and the parent company’s operations and the cash flows of the Group for the financial year
Group’s and the parent company’s financial position in general and describes significant risk and uncertainty factors that may affect the
In our opinion, the consolidated financial statements give a true and fair view of the Group’s financial position at 31 December 2012, and of the results of its operations and cash flows for the financial year 1 January to 31 December 2012 in accordance with International
Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial services companies. Moreover, in our opinion, the parent financial statements give a true and fair view of the parent company’s financial position at 31 December 2012, and of the results of its operations for the financial year 1 January to 31 December 2012 in accordance with the Danish Financial Business Act and Danish disclosure requirements for listed financial services companies.
Pursuant to the Danish Financial Business Act, we have read the management commentary. 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 commentary is consistent with the consolidated and parent financial statements.
Profit/loss on gross business 2,550 2,062 647 894 2,344 Profit/loss on ceded business -597 -518 -311 507 86 Insurance technical interest, net of reinsurance 474 145 124 171 62
Investment return after insurance technical interest -937 1,083 550 61 585
Profit/loss for the year before tax 1,441 2,734 1,006 1,603 3,017
Statement of financial position Total provisions for insurance contracts 25,228 29,042 32,031 34,220 34,355 Total reinsurers’ share of provisions for insurance contracts 1,036 1,320 1,588 2,067 2,317
Claims ratio, net of ceded business 71.4 74.7 81.6 76.6 71.8
Profit/loss for the year 1,140 2,208 27 Earnings per share of DKK 25 – continuing business 19.0 36.0 Earnings per share of DKK 25 18.9 36.5 Diluted earnings per share of DKK 25 18.9 36.4 Earnings per share of DKK 25 – discontinued and divested business -0.1 0.5 Diluted earnings per share of DKK 25 – discontinued and divested business -0.1 0.5
Other comprehensive income which cannot subsequently be reclassified as profit or loss Revaluation of owner-occupied property for the year 20 42 Tax on revaluation of owner-occupied property for the year -6 -12 Actuarial gains/losses on defined-benefit pension plans -399 -62 Tax on actuarial gains/losses on defined-benefit pension plans 111 16 Deferred tax on contingency fund provision -22 0
Operating equipment 102 138 Owner-occupied property 1,745 1,443 Assets under construction 10 11 13 Total property, plant and equipment 1,857 1,592 15 Equity investments in associates 14 21
Deposits with credit institutions 1,635 949 Derivative financial instruments 614 547
Total other financial investment assets 43,214 43,818 16 Total investment assets 45,427 45,920 17 Reinsurers’ share of premium provisions 192 237 21 Reinsurers’ share of claims provisions 1,875 2,080 17 Total reinsurers’ share of provisions for insurance contracts 2,067 2,317
Note Equity and liabilities 20 Equity 9,007 10,979 2 Subordinate loan capital 1,589 1,597
Profit/loss for the year 76 664 400 1,140 Revaluation of owner-occupied property for the year 20 20 Foreign currency translation adjustment of foreign entities for the year 30 -1 29 Hedging of currency risk in foreign entities for the year -27 -27 Actuarial gains and losses on pension obligation -399 -399 Tax on changes in equity -6 7 89 90
Nullification of treasury shares -65 65 0 Dividend paid -256 -256 Dividend, treasury shares 14 14 Purchase of treasury shares -91 -91 Exercise of share options 15 15 Issue of share options and matching shares 14 14
Total changes in equity in 2011 -65 14 10 0 76 370 144 549
Total changes in equity in 2012 0 30 54 2 -41 733 1,194 1,972
Proposed dividend per share DKK 26 (DKK 6.52 in 2011). Dividend per share is calculated as the total dividend proposed by the Supervisory Board after the end of the financial year divided by the number of shares at the end of the year (61,316,103 shares). The dividend is not paid until approved by the shareholders at the annual general meeting. In the financial statements of Tryg Forsikring A/S’s Norwegian branch, it has included contingency fund provisions in the amount of DKK 2,394m (DKK 2,430m in 2011). In the financial statements of Tryg Forsikring A/S’s Swedish branch, it has included contingency fund provisions in the amount of DKK 160m (DKK 144m in 2011). In Tryg Forsikring A/S, these provisions, due to their nature as additional provisions, are included in equity (retained earnings), net of deferred tax. Tryg Forsikring A/S’s possible payment of dividend to Tryg A/S is influenced by this amount. The dividend payment is also affected by a contingency fund provision of DKK 670m, which is included in equity in Tryg Forsikring A/S. Tryg Garantiforsikring A/S has a similar contingency fund provision amounting to DKK 139m, which is also included in the company’s equity. The contingency fund provisions can be used to cover losses in connection with the settlement of insurance provisions or otherwise for the benefit of the insured.
Interest income 1,379 1,340 Interest expenses -109 -100 Dividend received 10 15
Cash flow from operating activities, discontinued and divested business -168 37
Investments Acquisition and refurbishment of real property -50 -53 Sale of real property 2 278 Acquisition and sale of equity investments and unit trust units (net) -191 -563 Purchase/sale of bonds (net) -3,523 -1,897 Deposits with credit institutions 1,124 163 Purchase/sale of operating equipment (net) -18 -54 Hedging of currency risk -27 -184
Financing Exercise of share options/purchase of treasury shares (net) -76 110 Dividend paid -256 -400 Change in amounts owed to credit institutions -19 3
Risk management principles Risk management is an integral part of Tryg’s business model. Tryg seeks at all times to minimise the risk of unnecessary losses in order to optimise returns on the company’s capital.
The second line of defence is the risk management function, which ensures a consistent risk management approach across business areas. This function carries out measurements and assessments at Group level, and recommendations for capital management and general risk hedging (reinsurance, inflation swaps, currency hedging etc.) are made.
The third line of defence is the internal audit, which most important task is to carry out an independent assessment of the control environment etc. for the Supervisory Board.
Further to this, Tryg has established an ORSA (Own Risk and Solvency Assessment) process, which is to demonstrate the correlation between risk assessments and profiles relative to the assumptions used in the internal model. In addition to the ORSA, a capital plan is prepared to demonstrate that the company’s capital base can support the selected business plan over a three to five-year period taking into account the dividend policy, also when the business plan is subjected to a number of negative stress scenarios. The ORSA process is part of the future Solvency II regime.
The actual capital contains a buffer in relation to the individual solvency requirement, which helps to ensure that the company with a high degree of certainty will be able to comply with the dividend policy, which aims for a steadily rising nominal dividend per share corresponding to a payout ratio of 60-90% of net profit/loss for the year. This also supports Tryg’s A rating with a stable outlook from the credit rating agency Standard & Poor’s.
Underwriting risk The underwriting risk is the risk relating to the conclusion of insurance contracts and thus the risk that premium income does not adequately cover the claims that Tryg is obliged to pay when damage has occurred. This risk can be assessed and managed based on statistical analyses of historical experience within various business sectors.
The ongoing assessment of the underwriting risk is based on Tryg’s internal capital model, which defines the target premium levels for each area of the insurance business. This applies both when determining and updating tariffs, and when individually pricing major agreements for the corporate and partner segments. The underwriting risk is managed by means of ongoing profitability monitoring, business processes, acceptance policy, proxies and reinsurance. The overall management framework is defined by the Supervisory Board in Tryg’s insurance policy.
Reinsurance is used to reduce the risk in areas where a special need for this exists. The need for reinsurance is assessed on an ongoing basis using Tryg’s internal capital model, in which the price of reinsurance is compared with the reduction in the capital requirement that can be achieved.
Underwriting risk The risk relating to the conclusion of insurance contracts. The risk that claims at the end of an insurance contract deviate significantly from our pricing assumptions when concluding the contract. Handled by the Underwriting Reinsurance Committee
Underwriting risk Effect of 1% change in: Combined ratio (1 percentage point) +/- 196 +/- 200 Claim frequency (1 percentage point) +/- 1,608 +/- 1,599 Average claim +/- 153 +/- 141 Premium rates +/- 194 +/- 197
Provisioning risk 1% change in social inflation +/- 738 +/- 779 10% error in the assessment of long-tailed lines of business (workers’ compensation, motor liability, liability, accident) +/- 1,725 +/- 1,826
Equity market 15% decline in equity market -279 -367 Effect of derivatives 7 18
Currency market Equity: 15% decline in exposed currency (exclusive of EUR) relative to DKK -659 -851 Impact of derivatives 629 868
Technical result per year: Effect of 15% change in exchange rates of NOK and SEK relative to DKK +/- 83 +/- 175 a) Additional sensitivity information about pay increase rate and mortality in Note 22 ‘Pensions and similar obligations’
Denmark has established a national guarantee scheme to cover NBCR (Nuclear Biological Chemical Radioactive) terrorist attacks. Insurance companies in the Danish market pay claims of up to DKK 500m for these types of events, and joint reinsurance then covers up to DKK 5bn. Claims above DKK 5bn will be covered by a government guarantee of DKK 15bn. Tryg’s share of the total retention will be approximately DKK 100m, which will be the maximum claim as a consequence of NBCR events.
Estimated acc. claims, end of year 11,683 11,084 11,408 12,147 11,954 12,908 13,637 14,284 17,551 17,854 15,287 1 year later 12,074 11,189 11,401 12,050 12,208 13,552 14,340 15,838 17,652 18,296 2 years later 12,068 10,834 11,252 11,864 11,703 13,572 14,934 15,872 17,591 3 years later 12,123 10,836 11,136 11,458 11,462 14,134 14,940 15,624 4 years later 12,111 10,855 10,866 11,187 11,876 14,120 14,888 5 years later 12,022 10,824 10,659 11,543 11,863 14,017 6 years later 12,011 10,609 10,729 11,441 11,841 7 years later 11,743 10,617 10,617 11,454 8 years later 11,857 10,535 10,576 9 years later 11,746 10,549 10 years later 11,676 11,676 10,549 10,576 11,454 11,841 14,017 14,888 15,624 17,591 18,296 15,287 151,801
Provisions before discounting, end of year 434 640 651 850 1,221 1,611 2,323 2,627 3,579 4,847 7,845 26,629
Reserves from 2001 and prior years 2,114 Other 400 Gross claims pro- visions, end of year 27,242
Reserves from 2001 and prior years 1,879 Other 213 Claims provisions, net of reinsurance, end of year 25,162
Operational risk Operational risk relates to errors or failures in internal procedures, fraud, breakdown of infrastructure, IT security and similar factors. As operational risks are mainly internal, Tryg focuses on establishing an adequate control environment for its operations. In practice, this work is organised by means of procedures, controls and guidelines that cover the various aspects of Tryg’s operations, including the IT security policy. Tryg has also set up a security and investigation unit to handle internal fraud, IT security, physical security and contingency plans.
Tryg has prepared contingency plans to handle the most important areas, such as contingency plans for handling prolonged IT breakdowns in the individual areas of the business. A crisis management structure has also been established to deal with the eventuality that Tryg is hit by a major crisis. The Supervisory Board defines the overall framework for managing operational risk in Tryg’s IT security policy and operational risk policy.
Tryg manages its bond spread risk by means of ratings and credit ratings, among other things, and uses these to set nominal limitations on purchases from the different bond issuers. Furthermore, Tryg regularly calculates the price sensitivity of its bond portfolio in the event of a change in the bond spread.
covering approximately 1,428 employees. This scheme was closed to new employees in 2008, and the total provision was DKK 1,042m at the end of 2012. Changes in the pension provision are not recognised in the income statement, but are charged directly to changes in equity.
Impact of exchange rate fluctuations in SEK and NOK Currency Change excl. on technical result 2010 2011 Change effect Currency effect
Impact of exchange rate fluctuations in SEK and NOK Currency Change excl. on statement of financial position 2011 2012 Change effect Currency effect
Credit and counterparty risk Credit risk and counterparty risk is the risk of incurring a loss if counterparties fail to meet their obligations. In connection with investment activities, the primary counterparties are bond issuers and counterparties in other financial instruments. Tryg uses limits and rating requirements to manage credit risk.
As already mentioned, Tryg matches the interest rate sensitivity of the provisions with interest rate swaps, leading to counterparty risk on the derivative contracts. However, a framework agreement concerning cash collateral has been concluded for most of them if the value of the interest rate swap exceeds a certain threshold level (CSA agreement), which reduces the counterparty risk. Moreover, Tryg is exposed to a natural credit risk as a result of its considerable exposure to different mortgage forms (covered bonds), including mortgage bonds in the Nordic region. The risk is primarily AAA-rated, with an AA-rated risk in exceptional circumstances, and is diversified with a broad range of issuers.
Reinsurers’ share of provisions for insurance contracts 1,588 2,067 479 6 473
AAA to A 37,940 98.8 38,387 97.6 Other 372 1.0 716 1.8 Not rated 88 0.2 246 0.6
Bond portfolio by ratings 38,400 100.0 39,349 100.0 Included in assets held for sale 0 487
Reinsurance balances AAA to A 1,901 97.4 1,578 91.6 Other 0 - 9 0.5 Not rated 50 2.6 136 7.9
Tryg’s capital base consists of equity and additional subordinate loan capital. The relationship between these is evaluated on an ongoing basis in order to maintain an optimum structure which takes into account the return on equity, the capital cost and flexibility. The actual capital is assessed differently by authorities and Standard & Poor’s. The authorities require companies to determine the capital base consisting of equity minus intangible assets, discount effect and other statutory corrections plus additional capital. The additional capital can be included by up to 50% of the Solvency I requirement, although additional capital with a definite maturity may not exceed 25% of the Solvency I requirement.
Standard & Poor’s uses the term ‘Total Adjusted Capital’ (TAC), where the subordinate loan capital may generally not exceed 25% of the total capital.
In 2005, Tryg took out a 20-year subordinate bond loan of EUR 150m listed on the London Stock Exchange. In 2009, in connection with the acquisition of Moderna, Tryg took out a subordinate loan with expiry in 2032 of EUR 65m from TryghedsGruppen, which owns 60% of Tryg. Tryg’s total holding of subordinate debt subsequently amounted to approximately EUR 215m. In total, debt amounted to 18% of equity at the end of 2012, and interest expenses in 2012 amounted to DKK 80m.
Given Tryg’s desire to optimise its capital structure in light of the currently favourable market conditions for core capital, Tryg has decided to refinance the subordinate loan from TryghedsGruppen. Due to the most recent reports about the postponement of the commencement of Solvency II, Tryg has decided that the new subordinate loan should be such that it can be fully recognised according to the current capital adequacy rules. This includes the option of including subordinate loan capital with an indefinite maturity in the capital base by up to 50% of the company’s capital requirement. Moreover, it is expected that the subordinate loan can be included as Tier 2 capital under Solvency II.
Maturity of the Group’s financial obligations 2012 0-1 year 1-5 years > 5 years Total
Amounts owed to credit institutions 11 0 0 11 Debt relating to unsettled funds transactions and repos 4,161 0 0 4,161
The subordinate loan to TryghedsGruppen smba, which represented DKK 485m at the end of 2012, is scheduled for refinancing in Q1 2013.
Capital adequacy Equity according to annual report 9,007 10,979 Proposed dividend -400 -1,594 Solvency requirements for subsidiaries – 50% -2,508 -2,406
The capital base and the solvency ratio are calculated in accordance with the Danish Financial Business Act.
The fair value of the loan at the statement of financial position date 962 1,119 464 490 The fair value of the loan at the statement of financial position date is based on a price of 86 100 96 101 Total capital losses and costs at the statement of financial position date 10 7 0 0 Interest expenses for the year 50 50 33 30
Lender Listed bonds TryghedsGruppen Principal EUR 150m EUR 65m Issue price 99.017 100 Issue date December 2005 April 2009 Maturity year 2025 2032 Loan may be called by lender as from 2015 30 June 2012 Repayment profile Interest-only Interest-only Interest structure 4.5% (until 2015) 5.13% above EURIBOR 3M (interest until 30 June 2012) 2.1% above EURIBOR 3M (from 2015) 7.63-6.63% (max. and min. until 30 June 2012) 5% above EURIBOR 3M (interest 1 July 2012-30 June 2019) 6% above EURIBOR 3M (interest from 1 July 2019)
a) In December 2005, Tryg Forsikring A/S took out a subordinate bond loan with no option for the creditor to call the loan before maturity or otherwise terminate the loan agreement with Tryg Forsikring A/S. The loan is automatically accelerated upon the liquidation or bankruptcy of Tryg Forsikring A/S.
b) Tryg Forsikring A/S has subscribed the subordinate loan capital in connection with acquisitions made in April 2009. The loan is scheduled for refinancing in Q1 2013.
The prices used for determining fair value in respect of both loans are based on an assessment of the credit spread of the loans conducted by Nordea.
Profit/loss on ceded business 81 32 -37 -3 13 86 Insurance technical interest, net of reinsurance 27 5 6 24 0 62
Provisions for bonuses and premium discounts 291 32 101 0 1 425 Liabilities associated with assets held for sale 742 742 Other liabilities 8,237 8,237
Profit/loss on continuing business 1,148 Profit/loss on discontinued and divested business after tax -8
Run-off gains/losses, net of reinsurance 185 147 630 -18 0 944
Provisions for bonuses and premium discounts 238 23 123 0 0 384 Other liabilities 9,957 9,957
Costs are allocated according to specific keys, which are believed to provide the best estimate of assessed resource consumption. The operating business segments consist of Private, Commercial, Corporate and Sweden (Private and Commercial). Finland is included under ‘Discontinued and divested business’/‘Other’. The comparative figures have been restated accordingly.
Number of full-time employees, end of period 2,356 2,296 2,349 2,315 2,187
Claims ratio, net of ceded business 74.2 74.5 79.8 76.4 71.4
Claims ratio, net of ceded business 96.0 82.4 85.4 84.6 76.8
Number of full-time employees, end of period 105 425 414 423 444
Number of full-time employees, end of period, continuing business 3,911 4,119 4,101 4,076 3,913 Number of full-time employees, end of period, discontinued and divested business 180 217 191 242 189 a) Moderna Försäkringar is included in ‘Swedish general insurance’ from 2 April 2009. b) Amounts relating to eliminations, restructuring expenses and discontinued and divested business are included under ‘Other’. c) Adjustment of gross expense ratio included only in ‘Tryg’. Explanation of adjustment as a footnote to Financial highlights.
DKKm 3 Technical result, net of reinsurance, by line of business
Profit/loss on ceded business -58 30 509 87 -2 -1 Insurance technical interest, net of reinsurance 1 0 160 54 11 8
Accident and health Health care Workers’ compensation Motor TPL insurance Motor comprehensive insurance Marine, aviation and cargo insurance
Profit/loss on ceded business -15 -12 0 0 -89 -14 -35 -12 -7 -4 -75 -25 Insurance technical interest, net of reinsurance 11 4 4 1 -2 -21 30 14 31 16 3 0
Fire and contents (Private) Fire and contents (Commercial) Change of ownership Liability insurance Credit and guarantee insurance Tourist assistance insurance
Profit/loss on ceded business 308 97 506 46 0 0 -4 10 -21 -28 -1 -1 Insurance technical interest, net of reinsurance 37 20 28 14 4 0 6 0 2 3 5 3
Average claims DKK b) 12,303 11,856 70,676 58,678 26,050 25,631 55,012 76,535 3,387,982 3,700,928 8,502 8,889 Total claims 345,104 306,088 44,803 32,471 6,236 4,280 10,436 8,927 50 57 53,321 53,491
Gross claims ratio 7.6 127.0 78.8 71.7 90.8 91.8 Combined ratio 138.0 256.0 92.7 87.7 102.7 98.1
Notes a) The claims frequency is calculated as the number of claims incurred in the year in proportion to the average number of insurance contracts in the year. b) Average claims are total claims before run-off in the year relative to the number of claims incurred in the year. c) Other insurance, gross claims and gross operating expenses include restructuring costs of DKK 28m and DKK 69m, respectively, in 2012.
Notes 4 Premium income, net of reinsurance Direct insurance 20,022 20,395 Indirect insurance 36 60
Gross Ceded Gross Ceded 5 Insurance technical interest, net of reinsurance 2011 2012
Run-off previous years, gross, was DKK 756m lower in 2012 than in 2011, primarily due to a negative run-off of DKK 554m relating to the cloudburst on 2 July 2011 and the Norwegian Natural Perils Pool. These run-offs are covered to a wide extent by reinsurance of DKK 518m. The run-off gain from the reinsurance agreement concerning the weather claims frequency is included by DKK 136m.
7 Insurance operating costs, net of reinsurance Commission regarding direct insurance contracts -432 -477 Other acquisition costs -1,936 -2,013
7 Insurance operating costs, net of reinsurance (continued) Administration expenses include fee to the auditors appointed by the annual general meeting: The fee is divided into: Statutory audit -6 -6 Tax advice -1 0
Total lease expenses amount to DKK 36m (DKK 39m in 2011).
Insurance operating costs and claims include the following staff expenses: Salaries and wages -2,277 -2,379
Restructuring costs To achieve the anticipated cost-efficiency and profitability in the new efficiency improvement project,
Tryg plans to reduce its staff by approximately 400 employees in 2012-2014. Restructuring costs relating to the streamlining project are included with DKK 97m in 2012, consisting primarily of staff expenses.
Per option Total value Per option Total value Executive Other at time of at time of at 31 at 31 Manage- senior Other allocation allocation December December ment employees employees Total (DKK) (DKKm) (DKK) (DKKm)
7 Share option programmes Spec. of outstanding options: Allocation 2007-2010 Allocated in 2007-2010, beginning of year 113,353 479,921 71,886 665,160 99/69/94/75 54 60/118/115 52
Outstanding options from 2006-2010 allocation at 31 Dec. 2011 113,353 479,921 71,886 665,160 - 55 - 18
Number of options exercisable at 31 Dec. 2011 53,417 236,068 28,666 318,151
Tryg did not allocate share options in 2012. At 31 December 2012, the share option plan comprised 551,275 share options (800,834 share options at 31 December 2011). Each share option entitles the holder to acquire one existing share with a nominal value of DKK 25 in Tryg A/S. The share option plan entitles the holders to buy 0.9% of the share capital in Tryg A/S if all share options are exercised.
The dividend payout ratio is not included in the calculation as the strike price is reduced by dividends paid in order to prevent option holders from being placed at a disadvantage in connection with the company’s dividend payments. The assumptions for calculating the market value at the end of term are based on the same principles as for the market value at the time of allocation.
Matching shares allocated at 31 Dec. 2012 4,979 5,996 10,975 302 4 427 5
Matching shares allocated at 31 Dec. 2011 4,979 5,996 10,975 302 4 319 4
Notes 8 Interest and dividends etc. Interest income and dividends Dividends 10 15 Interest income cash at bank and in hand 51 26 Interest income bonds 1,173 1,133 Interest income other 18 22
Interest expenses Interest expenses subordinate loan capital and credit institutions -83 -80 Interest expenses other -30 -20 9 Price adjustments Price adjustments concerning financial assets or liabilities at fair value with value adjustment in the income statement: Equity investments 13 2 Unit trust units -100 378 Share derivatives 16 -2
Effective tax rate % % Tax on accounting profit/loss 25 25 Difference between Danish and foreign tax rates 1 2 Tax adjustment, previous years -2 0 Adjustment of non-taxable income and costs 4 -2 Change in valuation of tax assets 1 3 11 Profit/loss on discontinued and divested business Gross premium income 633 611 Gross claims -471 -484 Total insurance operating costs -159 -244
Profit/loss on gross business 3 -117 Profit/loss on ceded business -8 -4 Insurance technical interest, net of reinsurance 13 4
DKKm 11 Profit/loss on discontinued and divested business (continued) Technical result, net of reinsurance, by line of business
Motor TPL Motor comprehensive Fire and contents insurance insurance (Private) Other line of business Total
Claims frequency a) 2.3% 2.5% 14.8% 16.0% 2.9% 3.3% Average claims DKK b) 48,875 49,614 9,509 9,493 16,503 15,435 Total claims 2,818 2,906 12,872 13,324 7,375 8,132 a) The claims frequency is calculated as the number of claims incurred in the year in proportion to the average number of insurance contracts in the year. b) Average claims are total claims before run-off in the year relative to the number of claims incurred in the year.
Transferred to assets held for sale 0 0 -4 0 -4 Transferred from assets under construction 0 0 14 -14 0
Impairment losses and write-downs for the year 0 0 -2 -38 -40
Software developed in-house is included in ‘Software and assets under construction’ by DKK 110m at 31 December 2012
DKKm 12 Intangible assets (continued) Impairment test Goodwill At 31 December 2012, 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 the total Swedish insurance activities.
The cash flows appearing from the latest budgets approved by management for the next 5 financial years are used when calculating the value in use of the total Swedish activities acquired. 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. Higher return requirements or lower growth would entail a lower value of the activities, whereas lower return requirements or higher growth expectations would entail a higher value. The impairment test shows a calculated equity of approximately DKK 1.8bn relative to a recognised equity of DKK 0.8bn and did not indicate any impairment.
Assumed Required annual growth return 2012 > 5 years before tax
Trademarks and customer relations The impairment test performed for trademarks and customer relations did not indicate any impairment.
The impairment test compares the carrying amount with the estimated present value of future cash flows.
Accumulated value adjustments Balance at 1 January 0 27 -88 -61 Foreign currency translation adjustments 0 0 -2 -2 Value adjustments for the year at revalued amount in income statement 0 -350 0 -350 Value adjustments for the year at revalued amount in other comprehensive income 0 42 0 42
Operating Owner-occupied Assets under DKKm equipment property construction Total 13 Property, plant and equipment (continued)
Foreign currency translation adjustments 0 2 0 2 Transferred from assets under construction 0 340 -340 0 Additions for the year 18 21 -3 36 Disposals for the year -59 0 0 -59
Accumulated value adjustments Balance at 1 January 0 17 -88 -71 Value adjustments for the year at revalued amount in income statement 0 -10 0 -10 Value adjustments for the year at revalued amount in other comprehensive income 0 20 0 20
Impairment test Property, plant and equipment A valuation of the owner-occupied property has been carried out, including the improvements made, and a revaluation of DKK 42m
(DKK 20m in 2011) was subsequently included in other comprehensive income and impairment of DKK 350m (DKK 10m in 2011) in the income statement. The impairment test performed for operating equipment did not indicate any impairment. In establishing the market value of the owner-occupied property, the following return percentages were used: Return percentages weighted average 2011 2012
14 Investment property Fair value at 1 January 2,158 2,199 Foreign currency translation adjustments 2 24 Additions for the year 29 35 Disposals for the year -1 -259 Value adjustments for the year 12 47 Reversed on sale -1 35
Total expenses for 2012 are DKK 29m (DKK 39m in 2011). Of this amount, expenses for non-let property total DKK 2m
(DKK 2m in 2011); total expenses for the income-generating investment property are DKK 27m (DKK 37m in 2011).
External experts were involved in valuing the majority of the investment property.
In establishing the market value of the properties, the following return percentages were used for each property category: Return percentages weighted average 2011 2012
Deposits with credit institutions 1,635 949 Derivative financial instruments 614 547 Assets held for sale 0 487
Financial assets at fair value with value adjustment in the income statement 43,214 44,305
Loans and receivables measured at amortised cost Total receivables in relation to direct insurance contracts 1,158 1,149 Receivables from insurance enterprises 317 227 Receivables from Group undertakings 1 1 Other receivables 189 612 Current tax assets 93 0 Cash at bank and in hand 402 504 Assets held for sale 0 141
Financial liabilities at fair value with value adjustment in the income statement Derivative financial instruments 35 66
Total financial liabilities at fair value with value adjustment in the income statement 35 66
Information on valuation of subordinate loan capital at fair value is stated in Note 2. Other financial liabilities measured at amortised cost only deviate to a minor extent from fair value.
Gains/losses in the income statement for assets held at the statement of financial position date recognised in price adjustments 11 -13
Reconciliation between investment assets as per ‘Investment activities’ in the management’s review and the statement of financial position
Investment assets as per the section ‘Investment activities’ in the management’s review 41,019 2,444 2,081 45,544 Consisting of: Cash and cash equivalents allocated to portfolio management -61 0 0 -61 Debt and receivables relating to unsettled funds and property transactions 905 0 0 905
Repo debt and reverse receivables 94 0 0 94 Assets held for sale -598 0 0 -598
Derivatives according to statement of financial position 25,146 579 29,369 481 Inflation derivatives included in claims provisions 2,931 37 2,590 3
Receivables Receivables from insurance enterprises 1,475 1,376 Receivables from Group undertakings 1 1 Other receivables 189 612
Specification of write-downs on receivables from insurance contracts: Balance at 1 January 135 143 Foreign currency translation adjustments 0 2 Transferred to assets held for sale and write-downs and reversed write-downs for the year 8 -32
Reversed write-downs are estimated at DKK 48m (DKK 52m in 2011) in one year, but may vary due to major cases/disputes. Written-down receivables are collected by an external collection agency.
Receivables in connection with insurance contracts include overdue receivables totalling: Falling due: Within 90 days 170 160
Other receivables do not include overdue receivables 17 Reinsurers’ share Reinsurers’ share 2,086 2,354 Write-downs after impairment test -19 -37
Impairment test At 31 December 2012, management performed a test of the carrying amount of total reinsurers’ share of provisions for insurance contracts.
The impairment test resulted in impairment charges totalling DKK 37m (DKK 19m in 2011). Write-downs for the year include reversed write-downs totalling DKK 16m (DKK 1m in 2011). There is no overdue reinsurers’ share over and above the share already provided for.
Number of Nominal value Number of Nominal value Number of shares, exclusive of treasury shares shares (DKK ’000) shares (DKK ’000)
Number of Nominal value % of Number of Nominal value % of Treasury shares shares (DKK ’000) share capital shares (DKK ’000) share capital
Pursuant to the authorisation granted by the shareholders, Tryg may acquire up to 10.0% of the share capital in the period up until 14 April 2015. Treasury shares are acquired for use in the Group’s incentive programme and as part of the share buyback programme.
Claims provisions, beginning of year 26,159 1,755 24,404 Price adjustment of provisions, beginning of year 720 44 676
Change in claims in the financial year in respect of the current year 16,623 1,483 15,140 Change in claims in the financial year in respect of prior years -1,005 -34 -971
Defined-benefit pension plans: Present value of pension obligations funded through operations 122 106 Present value of pension obligations funded through establishment of funds 1,868 2,045
22 Pensions and similar obligations (continued) % % Assumptions used: Discount rate 2.7 2.4 Estimated return on pension funds 4.0 2.5 Salary adjustments 4.0 3.5 Pension adjustments 3.8 3.3
Sensitivity information Impact on equity shareholders from the following changes: Interest rate increase of 0.3 percentage points 96 84 Interest rate decrease of 0.3 percentage points -89 -90 Increase in expected return of 1.5 percentage points 18 18 Pay increase rate, increase of 1 percentage point -109 -105 Pay increase rate, decrease of 1 percentage point 92 86 Mortality +1 year’s life 73 70
Actuarial gains/losses associated with the pension obligation -23 70 -181 -367 22 Actuarial gains/losses associated with pension assets -173 -42 -47 -32 -84 Actuarial gains/losses in other comprehensive income, end of year -196 28 -228 -399 -62
Tax liability Intangible rights 136 76 Land and buildings 228 253 Bonds and loans secured by mortgages 49 78 Contingency funds 1,174 1,193
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 50m (DKK 90m in 2011).
A provision of DKK 97m has been made for restructuring in connection with management’s plans for efficiency improvements and aims to reduce the Group’s cost level.
Unsettled funds transactions include debt for bonds purchased in 2011 and 2012; however, with settlement in 2012 and 2013, respectively.
Collateral The Danish companies in the Tryg Group are jointly taxed with TryghedsGruppen smba. As of 1 July 2012, the companies and the other jointly taxed companies are thus jointly and severally liable for any obligation to withhold tax deducted at source on interest, royalties and dividends in respect of the jointly taxed companies.
Tryg Forsikring A/S and Tryg Garantiforsikring A/S have registered the following assets as having been furnished as security for the insurance provisions: Equity investments in associates 0 21 Equity investments 0 199 Unit trust units 2,378 3,261
The Group has received DKK 315m as cash and cash equivalents (DKK 66m in 2011) as security for current derivative contracts.
DKK 420m (DKK 3,382m in 2011) of the Group’s bond portfolio was sold in repo transactions and must be repurchased. The value of the bond portfolio is still recognised in the statement of financial position and has been furnished as security for financial liabilities concerning repo transactions.
29 Related parties The Group has no related parties with a decisive influence other than the parent company,
Claims payments - Parent company (TryghedsGruppen smba) 0.1 0.0 - Other related parties 1.4 0.2
Specification of remuneration 2012 Number of persons Basic salary Variable salary Pension Total a)
The maximum amount paid in severance pay to an individual is DKK 20m.
Supervisory Board 2 0 Executive Management 2 8 Risk-takers 4 0
The maximum amount paid in severance pay to an individual is DKK 4m.
The members of the Supervisory Board in Tryg A/S are paid a fixed remuneration and are not covered by the incentive schemes.
Intra-group trading involved: 2011 2012 - Subordinate loan capital 464 490
Transactions between TryghedsGruppen smba and Tryg A/S are conducted on an arm’s length basis.
Intra-group transactions: Administration fee etc. is fixed on a cost-recovery basis. Intra-group accounts are offset and carry interest on market terms. The companies in the Tryg Group have entered into reinsurance contracts on market terms. Transactions with Group undertakings have been eliminated in the consolidated financial statements in accordance with the accounting policies.
The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU on 31 December 2012 and in accordance with the Danish Statutory Order on Adoption of IFRS.
The annual report of the parent company is prepared in accordance with the Executive Order on Financial Reports for Insurance Companies and Multi-Employer Occupational Pension Funds issued by the Danish Financial Supervisory Authority. The deviations from the recognition and measurement requirements of IFRS are: • Investments in subsidiaries are valued according to the equity method, whereas under IFRS valuation is made at cost or fair value. Furthermore, the requirements regarding presentation and disclosure are less comprehensive than under IFRS.
• The Danish Financial Supervisory Authority’s executive order does not allow provisions for deferred tax of contingency reserves allocated from untaxed funds. Deferred tax and the other comprehensive income of the parent company have been adjusted accordingly on the transition to IFRS.
Change in accounting policies Following an amendment to the Executive Order on Financial Reports for Insurance Companies and Multi-Employer Occupational Pension Funds issued by the Danish Financial Supervisory Authority and applicable from 1 January 2013, but which Tryg has decided to implement early, actuarial gains and losses are recognised directly in other comprehensive income in the parent company. These were previously recognised in the income statement – see the table at the bottom of page 124 (opposite page). In 2011, there was a minor reclassification between derivative financial instruments and claims provisions of DKK 37m.
No standards or interpretations have been implemented for the first time for the financial year beginning on 1 January 2012 that have had a significant impact on the Group. New or amended standards and interpretations that have been implemented but have not significantly affected the Group: • Amendments to IFRS 7 ‘Disclosures – Transfers of Financial Assets’ • Amendments to IAS 12 ‘Deferred Tax – Recovery of Underlying Assets’ • Amendments to IAS 1 ‘Presentation of Items of Other Comprehensive Income’
• Amendments to IFRS 10, 11 and 12 ‘Transition Guidance’ a)
• Amendments to IAS 1 ‘Presentation of Items of Other Comprehensive Income’ b)
• Amendments to IAS 1 ‘Annual Improvements 2009-2011 Cycle (comparative information)’ a)
• Amendments to IAS 16 ‘Annual Improvements 2009-2011 Cycle (servicing equipment)’ a)
Changes to accounting estimates In June 2012, the Danish Financial Supervisory Authority adjusted the discount curve used for discounting claims provisions. The effect of the transition to a new curve on 30 June 2012 is: DKKm Effect
Liabilities relating to insurance contracts Estimates of provisions for insurance contracts represent the Group’s most critical accounting estimates, as these provisions involve a number of uncertainty factors.
The Financial Supervisory Authority’s adjusted discount curve, which is based on euro swap rates, national spreads and Danish swap rates, and also an option-adjusted mortgage interest rate spread, is used to discount Danish claims provisions.
Defined-benefit pension schemes The Group operates a defined-benefit plan in Norway. A defined-benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, depending on age, years of service and salary.
The net obligation with respect to the defined- benefit plan is based on actuarial calculations involving a number of assumptions. The assumptions include discount interest rate, expected future salary and pension adjustments, turnover, mortality and expected future return on pension assets.
Valuation of property Property is divided into owner-occupied property and investment property.
Undertakings in which the Group exercises significant influence but not control are classified as associates. Significant influence is typically achieved through direct or indirect ownership or control of more than 20% but less than 50% of the votes.
On consolidation, intra-group income and costs, shareholdings, intra-group accounts and dividends, and gains and losses arising on transactions between the consolidated enterprises are eliminated.
The date of acquisition is the date on which control of the acquired company actually passes to Tryg.
On consolidation, the assets and liabilities of the Group’s foreign operations are translated using the exchange rates applicable at the statement of financial position date. Income and expense items are translated using the average exchange rates for the period. Exhange rate differences arising on translation are classified as other comprehensive income and transferred to the Group’s translation reserve.
Such translation differences are recognised as income or as expenses in the period in which the activities are divested. All other foreign currency translation gains and losses are recognised in the income statement.
Segment information Segment information is based on the Group’s management and internal financial reporting system and supports management decisions concerning the allocation of resources and the assessment of the Group’s results divided into segments.
The operational business segments in Tryg are Private, Commercial, Corporate and Sweden. Private encompasses the sale of insurance products to private individuals in Denmark and Norway. Commercial encompasses the sale of insurance products to small and medium-sized businesses in Denmark and Norway. Corporate sells insurance products to industrial clients in Denmark and Norway. In addition, Corporate handles all activities involving brokers. Sweden encompasses the sale of insurance products to private individuals and corporate customers in Sweden.
Segment income and segment costs as well as segment assets and liabilities comprise those items that can be directly attributed to each individual segment and those items that can be allocated to the individual segments on a reliable basis. Unallocated items primarily comprise assets and liabilities relating to investment activities managed at Group level.
Bonuses 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.
The options are issued at an exercise price that corresponds to the market price of the Group’s shares at the time of allocation plus 10%. No other vesting conditions apply. Special provisions are in place concerning sickness and death and in case of change to the Group’s capital position etc. The share option agreement entitles the employee to the options unless the employee resigns his position or is dismissed due to breach of the contract of employment. In case of termination due to restructuring or retirement, the employee is still entitled to the options.
Matching shares Members of Executive Management and risk-takers have been allocated shares in accordance with the matching shares programme. Under this programme, the individual management member is allocated one share in Tryg A/S for each share the Executive Management member or risktaker acquires in Tryg A/S at the market rate for own liquid cash at a contractually agreed sum in connection with the matching share programme.
Investment activities Income from associates includes the Group’s share of the associates’ net profit/loss.
Income from investment property before fair value adjustment represents the profit from property operations less property management expenses.
Other income and costs Other income and costs include income and expenses which cannot be ascribed to the Group’s insurance portfolio or investment assets, including the sale of products for Nordea Liv og Pension.
Intangible assets Goodwill Goodwill is acquired in connection with the acquisition of undertakings. Goodwill is calculated as the difference between the cost of the undertaking and the fair value of acquired identifiable assets, liabilities and contingent liabilities at the time of acquisition. Goodwill is allocated to the cash-generating units under which management manages the investment and is recognised under intangible assets. Goodwill is not amortised but is tested for impairment at least once per year.
Trademarks and customer relations Trademarks and customer relations are identified as intangible assets on acquisition. The intangible assets are recognised at fair value at the time of acquisition and amortised on a straight-line basis over the expected economic lifetime of 5-12 years.
Property, plant and equipment Operating equipment Fixtures and operating equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost encompasses the purchase price and costs directly attributable to the acquisition of the relevant assets until the time when such assets are ready to be brought into use.
Owner-occupied property Owner-occupied property is property that is used in the Group’s operations. Owner-occupied properties are measured in the statement of financial position at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation
and impairment losses. Revaluations are performed regularly to avoid material differences between the carrying amounts and fair values of owner-occupied property at the statement of financial position date. The fair value is calculated on the basis of market-specific rental income per property and typical operating expenses for the coming year. The resulting operating income is divided by the required return on the property in per cent, which is adjusted to reflect market interest rates and property characteristics, corresponding to the present value of a perpetual annuity.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, when it is probable that future economic benefits associated with the item will flow to the Group, and the cost of the item can be measured reliably. Ordinary repair and maintenance costs are expensed in the income statement when incurred.
Derivative financial instruments are reported from the trading date and are measured in the statement of financial position at fair value. Positive fair values of derivatives are recognised as bonds and shares or derivatives if they cannot unambiguously be attributed to the former. Negative fair values of derivatives are recognised under derivative financial instruments. Positive and negative values are only offset when the company is entitled or intends to make net settlement of more financial instruments.
Changes due to unwinding are recognised in insurance technical interest. Changes due to changes in the yield curve or foreign exchange rates are recognised as price adjustments. The Group continuously assesses its reinsurance assets for impairment. If there is objective evidence that the reinsurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset to its recoverable amount. Impairment losses are recognised in the income statement.
Derivative financial instruments are reported from the trading date and are measured in the statement of financial position at fair value. Receivables that arise as a result of insurance contracts are classified in this category and are reviewed for impairment as a part of the impairment test of accounts receivable.
Dividend Proposed dividend is recognised as a liability at the time of adoption by the shareholders at the annual general meeting (date of declaration).
The provision for annuities under workers’ compensation insurance is calculated on the basis of a mortality corresponding to the G82 calculation basis (official mortality table).
For other lines of business, the inflation assumptions, because present only implicitly in the actuarial models, will cause a certain lag in predicting the level of future losses when a change in inflation occurs. On the other hand, the effect of discounting will show immediately as a consequence of inflation changes to the extent that such changes affect the interest rate.
In special instances, the employee can enter into a contract with the Group to receive compensation for loss of pension benefits caused by reduced working hours. The Group recognises this liability based on statistical models.
Deferred tax is measured according to the statement of financial position liability method on all timing differences between the tax and accounting value of assets and liabilities. Deferred income tax is measured using the tax rules and tax rates that apply in the relevant countries on the statement of financial position date when the deferred tax asset is realised or the deferred income tax liability is settled.
Other provisions Provisions are recognised when the Group has a legal or constructive obligation as a result of an event prior to or at the statement of financial position date, and it is probable that future economic benefits will flow out of the Group. Provisions are measured at the best estimate by management of the expenditure required to settle the present obligation. The measurement of provisions is based on a discounting of the costs necessary to settle the obligation if this has a significant effect on the measurement of the obligation.
Cash flows from financing activities comprise changes in the size or composition of Tryg’s share capital and related costs as well as the raising of loans, repayments of interest-bearing debt and the payment of dividends.
Note Investment activities 1 Income from Group undertakings 1,189 2,265 Price adjustments 1 0 Administration expenses in connection with investment activities -8 -8
Proposed distribution for the year: Dividend 400 1,594 Transferred to reserve for net revaluation according to the equity method 911 1,865 Transferred to retained profit -171 -1,251
Other comprehensive income which can subsequently be reclassified as profit or loss Foreign currency translation adjustment of foreign entities for the year 29 193 Hedging of currency risk in foreign entities for the year -27 -184 Tax on hedging of currency risk in foreign entities for the year 7 46
Nullification of treasury shares -65 65 0 Dividend paid -256 -256 Dividend, treasury shares 14 14 Purchase of treasury shares -91 -91 Exercise of share options 15 15 Issue of share options 14 14
Profit/loss for the year 1,865 -1,251 1,594 2,208 Revaluation of owner-occupied property for the year 42 42 Foreign currency translation adjustment of foreign entities for the year 193 193 Hedging of currency risk in foreign entities for the year -184 -184 Actuarial gains and losses on pension obligation -62 -62 Tax on changes in equity 50 50
Dividend paid -400 -400 Dividend, treasury shares 6 6 Purchase and sale of treasury shares 66 66 Exercise of share options 44 44 Issue of share options 9 9
Proposed dividend per share DKK 26 (DKK 6.52 in 2011). Dividend per share is calculated as the total dividend proposed by the Supervisory Board after the end of the financial year divided by the number of shares at the end of the year (61,316,103 shares). The dividend is not paid until approved by the shareholders at the annual general meeting. Tryg Forsikring A/S’s Norwegian branch has in its branch financial statements included contingency fund provisions in the amount of DKK 2,394m (DKK 2,430m in 2011). Tryg Forsikring A/S’s Swedish branch has in its branch financial statements included contingency fund provisions in the amount of DKK 160m (DKK 144m in 2011). In Tryg Forsikring A/S, these provisions, due to their nature as additional provisions, are included in equity (retained earnings), net of deferred tax. Tryg Forsikring A/S’s possible payment of dividend to Tryg A/S is influenced by this amount and by a contingency fund provision of DKK 670m, which is included in equity in Tryg Forsikring A/S. Tryg Garantiforsikring A/S has a similar contingency fund provision amounting to DKK 139m, which is also included in the company’s equity. The contingency fund provisions can be used to cover losses in connection with the settlement of insurance provisions or otherwise for the benefit of the insured.
Tax on accounting profit 25 25 Change in respect of previous years -2 -1 4 Equity investments in Group undertakings Cost Balance at 1 January 6,987 6,987
7 Capital adequacy Equity according to annual report 9,024 10,996 Proposed dividend -400 -1,594 Solvency requirements for subsidiaries – 50% -2,508 -2,406
Companies in the Tryg Group are party to a number of disputes. Management believes that the outcome of these legal proceedings will not affect the Group’s financial position over and above the receivables and liabilities recognised in the statement of financial position at 31 December 2012.
9 Related parties Tryg A/S has no related parties with a controlling influence other than the parent company, Trygheds-
Claims ratio, net of ceded business 78.4 79.7 74.6 74.9 76.3 78.1 69.7 68.9 71.2
Combined ratio exclusive of run-off 101.5 97.3 92.7 94.3 94.4 98.4 90.1 87.0 88.4
Key ratios Gross claims ratio 73.2 78.9 61.6 96.4 64.2 78.2 62.6 56.8 59.8
Claims ratio, net of ceded business 73.1 81.1 68.6 71.5 66.3 71.1 61.2 59.1 62.6
Key ratios Gross claims ratio 78.3 68.2 77.2 85.8 90.0 78.9 64.0 78.2 77.8
Claims ratio, net of ceded business 80.6 77.6 74.3 76.3 85.4 76.7 65.8 80.7 78.5
Claims ratio, net of ceded business 78.1 79.4 74.1 75.4 77.6 77.2 67.7 71.3 71.1
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Expense ratio, net with adjustment 16.9 16.9 17.1 17.0 16.9 Combined ratio, net with adjustment 87.2 90.7 98.5 92.7 87.6 Expense ratio, net without adjustment 17.3 16.8 17.0 16.9 16.6
Technical interest ratio, net of reinsurance 3.0 0.9 0.7 0.9 0.3 Return on equity before tax on continuing business (%) 15.8 30.7 11.1 18.4 30.2 Return on equity after tax on continuing business (%) 10.2 23.6 8.2 13.1 21.8
Average reinsurers’ share of provisions for insurance contracts 1,312 1,178 1,454 1,828 2,192
Number of full-time employees, end of period, continuing business 3,911 4,119 4,101 4,076 3,912 Number of full-time employees, end of period, discontinued and divested business 180 217 191 242 189
Diluted average number of shares (1,000) a) 63,448 62,444 60,401 60,714 Share price at 31 December (DKK) 328.0 342.8 257.5 319.0 426.5 Net asset value per share (DKK) 127.5 152.3 139.5 149.2 180.9 Market price/net asset value 2.6 2.3 1.8 2.1 2.4 a) There has been no dilution of earnings or equity in 2008.
The expense ratio, net without adjustment, is calculated as the ratio of actual insurance operating costs, net of reinsurance, to premium income, net of reinsurance.
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 cost (rent) in respect of owner-occupied property based on a calculated market rent and the deduction of actual depreciation and operating costs on owner-occupied property.
Run-off gains/losses The difference between the claims provisions at the beginning of the financial year (adjusted for foreign currency translation adjustments and discounting effects) and the sum of the claims paid during the financial year and that part of the claims provisions at the end of the financial year pertaining to injuries and damage occurring in earlier financial years.
Combined ratio The sum of the gross claims ratio, the net reinsurance ratio and the gross expense ratio.
Norwegian general insurance Comprises Tryg Forsikring A/S, Norwegian branch, and the Norwegian branch of Tryg Garantiforsikring A/S.
Relative run-off gains/losses Run-off gains/losses net of reinsurance relative to claims provisions net of reinsurance, beginning of year.
Certain statements in this annual report are based on the beliefs of our management as well as assumptions made by and information currently available to management. Statements regarding 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’, ‘intends’, ‘plans’, ‘seeks’,
A number of different factors may cause the actual performance to deviate significantly from the forward-looking statements in this annual report, including but not limited to general economic developments, changes in the competitive environment, developments in the financial markets, extraordinary events such as natural disasters or terrorist attacks, changes in legislation or case law and reinsurance. Should one or more of these risks or uncertainties materialise, or should any underlying assumptions prove to be incorrect, Tryg’s actual financial condition or results of operations could materially differ from that described herein as anticipated, believed, estimated or expected. Tryg is not under any duty to update any of the forward-looking statements or to conform such statements to actual results, except as may be required by law. Read more in the chapter Capital and risk management in the annual report on page 38, and in Note 1 on page 77, for a description of some of the factors which may affect the Group’s performance or the insurance industry.
Group chart at 1 January 2013. Companies and branches are wholly owned by Danish owners and domiciled in Denmark, unless otherwise stated.
Fire and contents – Commercial Commercial fire and contents insurance, which includes building insurance, represents 14% of total premium income and covers the loss of or damage to the buildings, stock or equipment of commercial customers. Moreover, Tryg provides cover for operating losses in connection with covered claims.
Workers’ compensation insurance Workers’ compensation insurance accounts for 5% of total premium income and covers employees against bodily injury sustained at work (in Norway, also occupational diseases). Workers’ compensation insurance is mandatory and covers a company’s employees (except for public sector employees and persons working for sole proprietors).
Tryg works with the concept of proactive claims handling, pursuing a close dialogue with the claimant to optimise the process. Our proactive claims handling team consists of claims handlers, social counsellors, legal experts, occupational health practitioners, orthopaedic surgeons and a network of psychologists. Proactive claims handling has three winners: the company, the claimant and Tryg in the form of shorter periods of sick leave, enhanced self-esteem for the injured person and reduced expenses.