Topdanmark A/S • Borupvang 4 • DK-2750 Ballerup Tel +45 44 68 33 11 • CVR no. 78040017 topdanmark@topdanmark.dk • www.topdanmark.com
Topdanmark’s equity story The Topdanmark share is a value case – not a growth case
See the presentation of Topdanmark’s equity story on www.topdanmark.com → Investors → Share profile
TOPDANMARK ANNUAL REPORT FOR 2020 18 February 2021, Announcement No. 03/2021
Key features 2020 • Post-tax profit of DKK 1,124m (2019: DKK 1,547m) • EPS was DKK 12.9 (2019: DKK 17.7) • Combined ratio: 86.5 (2019: 83.7) • Combined ratio excluding run-off: 88.2 (2019: 88.3) • Premiums increased by 3.6% in non-life insurance and decreased by 1.1% in life insurance. • Profit on life insurance was DKK 117m (2019: DKK 327m). • After return on non-life insurance provisions, the investment return was DKK 52m (2019: DKK 179m).
Q4 2020 • Post-tax profit of DKK 571m (Q4 2019: DKK 431m) • EPS was DKK 6.5 (Q4 2019: DKK 4.9) • Combined ratio: 85.1 (Q4 2019: 88.3) • Combined ratio excluding run-off profits: 87.1
• The expected premium growth in non-life remains unchanged at just above 3%.
Efficiency programme • As announced in the Q3 Report, Topdanmark has upscaled investments to become more efficient. The efficiency programme is expected to generate annual gross efficiency gains of DKK 500m in 2025.
• In 2021, the net impact of the efficiency programme has been improved from negative DKK 30m, as assumed in the Q3 Report, to now DKK 20m in 2021.
Please direct any queries to: Peter Hermann Chief Executive Officer Direct tel.: +45 4474 4450
Contents Management’s review 1 Key features 3 Financial highlights 4 Results for 2020 4 Results for Q4 2020 4 Impact of the COVID-19 situation 5 Non-life insurance in 2020 7 Non-life insurance in Q4 2020 9 Life insurance in 2020 10 Life insurance in Q4 2020 10 Investment activities 12 Parent company etc. 12 Taxation 12 Targeted gross efficiency gains of DKK 500m in 2025 12 New IT systems 13 Profit forecast model 14 Risk management 15 Solvency calculation and capital requirements 16 Capital structure and ownership 17 Board of Directors and Articles of Association 18 Amendments to the Company’s Articles of Association 18 Severance pay 18 Remuneration structure 20 Distribution of dividend for 2020 21 Corporate Governance 21 CSR 21 Annual General Meeting 21 New Head of Investor Relations 21 Financial calendar 22 Company announcements 23 Board of Directors 28 Executive Board
Annual financial statements ● Parent company 83 Income statement 83 Statement of comprehensive income 84 Balance sheet 85 Statement of changes in equity 86 Notes to the financial statements 90 Statement by Management on the Annual Report 91 Independent auditor’s report
Premiums earned: Results: Run-off profits, net of reinsurance 470 344 353 433 164 90 50
Other movements in shareholders' equity (1) 0 1 (14) 1 0 0 Shareholders' equity of parent company
Provisions for insurance and investment contracts: Financial ratios (parent company) Post-tax profit as a percentage of
Post-tax EPS, diluted (DKK) 16.7 20.2 15.4 17.7 12.9 4.9 6.5 Share buy-back per share, diluted (DKK) 16.6 4.8 Dividend per share issued, proposed (DKK) 19.0 15.0 8.5 20.0 Net asset value per share, diluted (DKK) 57.3 75.6 72.9 76.7 82.0 Listed share price end of period 179.3 268.1 303.0 328.4 264.2
Average number of shares, diluted ('000) 91,721 85,873 86,637 87,229 87,475 87,367 87,634
Results for 2020 Topdanmark’s post-tax profit for 2020 was DKK 1,124m (2019: DKK 1,547m).
DKK 15m (loss). The investment return was impacted by the turmoil in the Danish mortgage market during Q1 2020 due to the COVID-19 outbreak, resulting in a substantial spread widening that impacted the portfolio of Danish mortgage bonds which is used for hedging of the provisions.
On the other hand, a lower run-off level (DKK 40m) and a higher claims trend on house insurance (DKK 38m) had a negative impact on the claims trend in Q4 2020.
The profit on life insurance increased by DKK 38m to DKK 74m.
Impact of the COVID-19 situation Topdanmark has a robust business model with a high degree of diversification between the business activities, a very low liquidity risk and a solid capital base (a solvency cover of 170 at the end of 2020).
During the COVID-19 pandemic, Topdanmark’s online claims handling platform has been used by a large number of customers. Also, the use of chatbot services tripled when the amount of customer inquiries within travel insurance peaked.
Non-life insurance in 2020 Premiums earned Premiums earned increased by 3.6% to DKK 9,732m. The private segment accounted for a 1.3% increase, and the SME segment accounted for a 6.2% increase. Adjusted for a change in segmentation, premium growth was 2.1% and 5.3% in the private segment and SME segment, respectively.
In the private segment, premiums were negatively impacted by the termination of the distribution agreement with Danske Bank at the end of H1 2019. However, the new distribution agreement with Nordea starting on 1 January 2020 has been off to a good start.
On 1 October, Sydbank terminated the distribution agreement with Topdanmark. The distribution agreement was established in 2015. At the end of 2020, the Sydbank portfolio represented DKK 0.5bn of which DKK 0.3bn was written by Topdanmark before the agreement was established. The distribution agreement with Sydbank represented approx. 5% of Topdanmark’s new sales in 2020. The termination of the agreement became effective by the end of 2020. As Topdanmark has good momentum in new sales and low churn rates, the terminated distribution agreement with Sydbank only has a marginal negative impact on the premium growth in 2021.
According to the Top 1-2-3 strategy, Topdanmark intends to expand through organic growth, through direct sales, digital sales and distribution partners. When it comes to growth through distribution partners, Topdanmark will further strengthen its cooperation with existing distribution partners, and in addition to this, look for new distribution partners including banks.
Claims trend The claims trend deteriorated to 70.1 in 2020 from 67.6 in 2019.
The run-off profit excluding COVID-19, net of reinsurance, was DKK 186m (2019: DKK 433m), representing a 2.5pp negative effect on the claims trend. Run-off profits were primarily generated in workers’ compensation, in illness and accident and on motor third-party liability whereas run-off losses were generated within accident, property and professional liability.
In 2020, weather-related claims amounted to DKK 102m (2019: DKK 70m), representing a 0.3pp deterioration of the claims trend. Thereby, the level of weather-related claims was DKK 68m below the assumed normal level of DKK 170m.
The claims trend on house insurance deteriorated by DKK 187m in 2020 corresponding to a negative impact on the claims trend of 1.9pp. Among the reasons are a higher level of water claims due to the rainy start of the year, and that COVID-19 caused a higher level of refurbishment on houses increasing the number of water
Topdanmark has taken actions by way of risk-based price increases, stricter acceptance criteria and increased focus on claims prevention.
Compared with 2019, COVID-19 is assumed to have had a net positive impact on the adjusted claims trend of DKK 121m (1.2pp) including a run-off loss of DKK 22m on income protection insurance. The positive impact of COVID-19 was on motor (DKK 76m), on contents (DKK 44m), on travel (DKK 58m), and on accident (DKK 26m).
Both illness and accident as well as workers’ compensation will be hit by the higher level of unemployment (harder to reactivate injured employees).
The increase in expense ratio is impacted by high sales through Nordea, and COVID-19 related expenses.
The general trend of wages and salaries and the increase in pay roll tax from 15.0% in 2019 to 15.2% in 2020 impacted the combined ratio by 0.4pp.
Claims before run-off, weather, large-scale claims and other 73.7 69.6 71.1 70.4
The change of distribution partner from Danske Bank to Nordea had a net negative impact of 0.1pp in Q4 2020.
Large-scale claims were DKK 16m in Q4 2020, which was DKK 1m higher than the large-scale claims of DKK 15m in Q4 2019.
The run-off profit excluding COVID-19, net of reinsurance, was DKK 48m (Q4 2019: DKK 90m), representing a 1.9pp negative effect on the claims trend.
The claims trend adjusted for run-off, weather-related claims, large-scale claims and change of risk margin improved by 4.1pp to 69.6 in Q4 2020.
COVID-19 impacted the claims trend positively on travel insurance (1.3pp), motor (0.7pp), and contents (0.7pp).
In Q3 2020, Topdanmark launched a new online sales platform targeting the private segment in the Topdanmark brand.
Following the introduction of the online sales platform, Topdanmark launched a branding campaign in print, on TV, and on digital channels. The focus of the campaign is Topdanmark’s brand promise: “We’re here to help” which
Investment return after return and revaluations of non-life insurance provisions 210 265 64 (50)
Premiums increased by 1.3% to DKK 5,179m. Premiums were negatively impacted by an adjusted segmentation in terms of accounting between the private and SME segments (DKK 43m). With this adjustment, premiums increased by 2.1%.
The technical result was DKK 527m in 2020, representing a decrease of DKK 159m compared with 2019.
Compared with 2019, the claims trend was favourably influenced by a positive development in motor, travel insurance, and on theft due to the COVID-19 situation.
The expense ratio deteriorated to 15.9 from 15.7 in 2019 due to increased acquisition costs and investments in digitalisation and automation.
In Q4 2020, premiums increased by 3.0% to DKK 1,304m. Adjusted for the change in segmentation (DKK 25m) and change in reservation for future losses in illness and accident (DKK 29m), premiums increased by 2.7%.
In Q4 2020, the claims trend improved by 5.9pp to 73.5 due to a lower level of claims from illness and accident and improved claims trend on motor, contents, and travel insurance related to COVID-19.
Premiums increased by 6.2% to DKK 4,571m. Adjusted for the change in segmentation between the private and the SME segments, premiums increased by 5.3%.
Topdanmark continues to have positive momentum in new sales to SMEs and agricultural businesses.
The expense ratio in 2020 was impacted by changes in the sales force organisation and by COVID-19 related issues.
The combined ratio was 82.7 in 2020 up from 80.3 in 2019.
In Q4 2020, premiums increased by 9.2% to DKK 1,186m. Adjusted for the change in segmentation (DKK 25m), premiums increased by 6.9%.
Life insurance in 2020 The result from life insurance was a profit of DKK 117m (2019: DKK 327m).
Profit on life insurance activities comprises the profit on life insurance plus the investment return of Topdanmark
Developments in 2020 Compared with 2019, the negative development in 2020 for life insurance primarily derives from investment return on shareholders’ equity. The investment return on shareholders’ equity was DKK 19m in 2020 (2019: DKK 186m) and was impacted by the situation on the financial markets due to COVID-19.
Trend in premiums Gross premiums decreased by 1.1% to DKK 10,981m in 2020, of which premiums on unit-linked pension schemes were DKK 10,216m, representing a 1.9% increase compared with 2019.
Regular premiums increased by 3.6% to DKK 3,394m in 2020. Single premiums decreased by 3.1% to DKK 7,587m in 2020.
Gross premiums decreased by 13.9% to DKK 2,575m in Q4 2020 of which premiums on unit-linked pension schemes were DKK 2,399m, a 13.0% decrease compared with Q4 2019.
Investment activities Topdanmark Group excl. life insurance The investment return of the Topdanmark Group excluding life insurance was DKK 426m in 2020 (2019: DKK 794m). Return and revaluation of non-life insurance provisions were a loss of DKK 374m in 2020 (2019: loss of DKK 616m).
The investment return including return and revaluation of non-life insurance provisions was DKK 52m, and thus DKK 150m lower than the projected return for 2020, when calculated using Topdanmark's forecast model at the beginning of 2020. The lower return should be seen in the light of COVID-19. Lockdowns imposed by numerous countries slowed down the economic activity in large parts of the world. The economic uncertainty has had a negative impact on some high-risk assets such as CLOs.
The Danish mortgage bond market is dominated by AAA bonds where spreads to swaps in March widened much faster and further than during the financial crisis a decade ago. Despite some easing of tensions up to the end of Q1 2020 and in the following three quarters, the losses from the assets hedging of the interest sensitivity of the provisions still dominate their revaluations by a wide margin.
Topdanmark's policy is to accept a certain level of financial risk, given its strong liquidity and stable, high earnings from insurance operations. Among other things, Topdanmark has invested in equities, property, and CLOs to improve the average investment return.
The Group's investments have no significant concentration of credit risk except for investments in AAArated Danish mortgage bonds.
The class “Government and mortgage bonds” mainly consists of Danish government and mortgage bonds. The interest rate sensitivity of this asset class is to a significant extent equivalent to the total interest rate sensitivity of the technical provisions in Topdanmark Forsikring, and the illness and accident provisions in Topdanmark Livsforsikring (the life insurance company). Consequently, the return on “Government and mortgage bonds” and the return and revaluation of non-life insurance provisions should be assessed on an aggregate level. However, as mentioned above during times of financial distress, proper interest risk management does not necessarily ensure that losses on liabilities are offset by gains on assets and vice versa.
The class “CLOs” primarily comprises positions in CLO equity tranches. The underlying assets of CLOs are mostly senior secured loans, while the remainder are primarily investment grade investments.
The property portfolio mainly comprises owner-occupied property (DKK 837m). The properties are valued in accordance with the rules of the Danish FSA (the Danish Financial Supervisory Authority) i.e. at market value taking into account the level of rent and the terms of the tenancy agreements. 99% of the property portfolio is currently let when adjusting for properties under construction or conversion for other purposes.
“Expenses, money markets etc.” comprises money market deposits, intra-group balances, the result from currency positions, other returns and expenses not included in the other classes.
Topdanmark uses the Solvency ll discounting curve with volatility adjustment (VA) for assessing insurance provisions. The VA component comprises a corrective element for the development in pricing of Danish
Announcement No. 03/2021 from Topdanmark A/S Page 12 of 94 mortgage bonds, as well as a corrective element for the development in pricing of European business credits. The VA component was 19bp at the beginning of the year and 22bp at the end of 2020.
Taxation The tax charge was DKK 329m of the pre-tax profit of DKK 1,453m, corresponding to an effective tax rate of 22.6% (2019: 22.2%).
Targeted gross efficiency gains of DKK 500m in 2025 As mentioned in the Q3 2020 Report, Topdanmark will upscale the level of investments to improve the efficiency of the company.
The annual gross efficiency gains are targeted to be DKK 500m in 2025. It is assumed that this improvement in efficiency will provide a good basis for Topdanmark’s competitive position in the future market.
DKK 120m of the efficiency gains are assumed to impact the 2021 result. Compared with 2020, additional costs following the increased level of investments in the efficiency programme will impact the technical result for 2021 negatively by approx. DKK 100m.
The net effect of the annual gross efficiency gains of DKK 500m may be impacted by deviations to the assumed future: • Due to competition, some of the efficiency gains may be lost by way of lower prices. • New efficiency programmes may affect the gains expected to be realised before 2025. • The market environment may be different from the one assumed. • The automatic price indexation is expected to cover claims inflation, and it is assumed that Topdanmark will make no general price increases above the automatic price indexation. This may not be the case.
• It is assumed that there will be no major external obstacles like new pandemics, additional levies, etc.
The assumed level of depreciation on the non-life core system will increase from approx. DKK 25m in 2021 to a peak at approx. DKK 230m in 2026.
As can be seen, the investment return forecast model is not based on a specific estimate of the expected investment return for the rest of the year, but solely on a long-term standard assumption regarding the return.
• The terms of the termination of the distribution agreement with Sydbank have yet to be finally negotiated, but it is expected that the termination will have a negative impact on growth of approx. 0.2pp.
• The automatic premium indexing in the private segment will be 2.3% in 2021. Approx. 70% of Topdanmark’s premiums earned are comprised by automatic premium indexing. Thus, the premium effect of the automatic premium indexing on non-life insurance is approx. 1.6%.
In the Q3 Report, Topdanmark also assumed a combined ratio for 2021 of about 90, excluding run-off. This was based on the following assumptions: • Weather-related claims of DKK 170m. The weatherrelated claims, broken down by quarter, are assumed to be as follows: o Q1: DKK 50m o Q2: DKK 25m o Q3: DKK 45m o Q4: DKK 50m
Furthermore, profitability improving measures on house insurance are assumed to improve the combined ratio in 2021 by 0.5-0.7pp compared with 0.25-0.5pp which was assumed in the Q3 Report.
The overall assumed pre-tax result for non-life insurance is DKK 1,130-1,230m.
The assumed life result for 2021 was affected by teething problems in the implementation of the new core IT system. The work is progressing, but some problems are yet to be solved, meaning that some of the implementing costs are carried over to 2021 and 2022. On top of this, the assumptions for the investment return for Life was lowered due to the lower interest rate and lower assumptions for the investment return in general.
The profit forecast model for life insurance is based on the following assumptions: • Full recognition as income of risk return for shareholders’ equity from all interest rate groups • No profit from the shadow account.
Since the announcement of the Q3 Report, the assumed investment return has improved due to price increases and growth in AUM.
Consequently, the pre-tax profit for the life division has been upgraded from DKK 50-100m to DKK 100-150m.
Total Group profit Topdanmark’s overall post-tax profit according to the profit forecast model for 2021 is DKK 1,000-1,100m representing an EPS of DKK 12.0. The assumed profit is exclusive of run-off.
Furthermore, it is assumed that the return on interestbearing assets hedging the discounted provisions exactly suffices to cover discounting and revaluation of the provisions, while the return on the remaining interestbearing assets is assumed to be 1.47% (risk-free interest rate plus 2.0pp).
Non-life insurance - Investment return after return and revaluations of non-life insurance provisions etc. (15) 80 – 130 Profit on non-life insurance 1,302 1,130 – 1,230
Parent company etc. 34 40 – 50 Pre-tax profit 1,453 1,270 – 1,430
Announcement No. 03/2021 from Topdanmark A/S Page 15 of 94 because both risk-reducing measures will reduce the profitability of the Topdanmark Group.
The internal model has been used in solvency calculations since 2014 in accordance with the Danish solvency rules, and from 2016 it has been amended to meet the EU Solvency II rules in force. The Danish FSA has approved the use of Topdanmark’s internal model when calculating solvency capital requirements.
On an ongoing basis, the risk management function addresses the rules for solvency calculation and reporting etc. of the Solvency II Directive to ensure that Topdanmark meets this set of rules.
Overview Topdanmark believes that the Group's most important risks relate to the following main areas: • Non-life insurance • Life insurance • Market • Counterparty • Operational • Compliance • Climate • Strategy.
Please refer to Note 46 for a more detailed description of the above-mentioned risks.
Risk scenarios The Group's risk factors are illustrated in the following table of the most significant risk factors calculated as the post-tax impact on profit and shareholders’ equity. The given assumptions do not reflect Topdanmark's expected risks but are shown only as examples which could be used as a basis for assessing the Company's exposure to the risks mentioned.
Solvency calculation and capital requirements Solvency II gives the companies the opportunity to fully or partially develop their own internal risk model for solvency calculation. Topdanmark uses a partial internal model developed in-house to calculate the non-life risk.
Risk scenarios (DKKm) after corporate tax and pension return tax 2019 2020 Non-life insurance Underwriting risk Combined ratio − 1pp increase (73) (76) Provisioning risk Provisions on own account − 1% increase (98) (101)
Market risk Interest-bearing assets 1 pp increase (521) (536) Provisions for claims in effective and benefits etc. interest rate 510 537
Annual currency loss with an up to 2.5% probability (VaR) (6) (1)
Topdanmark has an outstanding subordinated tier 1 loan (restricted tier 1 capital notes) of DKK 400m. This loan is perpetual, but includes an option enabling Topdanmark to redeem the loan as at 23 November 2022.
Topdanmark Forsikring has outstanding subordinated tier 2 notes in two tranches: • DKK 500m, call in 2025, expiry in 2030. • DKK 850m, call in 2021, expiry in 2026.
The following shareholders own more than 5% of the share capital: Sampo plc Fabianinkatu 27 FL-00100 Helsinki Finland
Topdanmark's Board of Directors comprises nine members, six of them elected by the annual general meeting and three by Topdanmark's employees in accordance with the Danish Companies Act.
In accordance with this Act, the number of Board members elected by employees must be at least half the number of those elected by the shareholders at the annual general meeting. The rights, duties and responsibilities of the Board members elected by employees are the same as those of the Board members elected by shareholders at the annual general meeting.
The Board of Directors has addressed its composition and qualifications in “Policy on diversity at board level”. The Company believes that, by imposing in advance very specific requirements on the Board members, it may prevent the election of an evidently qualified Board candidate, if they do not fully meet the requirements. Topdanmark wants to make an individual decision on each Board candidate based on an overall consideration of the candidate's qualifications as compared with the Company's business model and associated risks, present needs and the composition of the rest of the Board of Directors. Topdanmark believes that in a company like Topdanmark, its Board members should possess combined skills within organisation, strategic management, insurance operations, reinsurance, long-tail business, financial and insurance reporting, general statistics, risk management and risk assessment, sales to the private and commercial markets, marketing and branding, outsourcing, finance, own funds, solvency and minimum capital requirements, rules for internal models, audit, financing and investment, regulatory environment, compliance, IT and IT security, digitalisation as well as recruitment and human resources. Information on the defined competencies possessed by each of the Board members elected by shareholders at the annual general meeting is provided in the section on the Board of Directors in the Annual Report. Taking the latest evaluation of the Board into account, it is assessed that Topdanmark's Board of Directors with its current composition possesses the above-mentioned skills and qualifications.
Four of the nine Board members are women, two of them elected by the annual general meeting and two by Topdanmark's employees. Consequently, Topdanmark
Evaluation of the Board of Directors On a regular basis, the Board of Directors evaluates the Board assignments, the full Board and the contributions and results made by the individual members, cooperation with the Executive Board, the Chairman’s management of the Board of Directors, the Board composition, the work in the Committees and the set-up of the Committees, the organisation of the work and the quality of the material for the Board of Directors. The Board evaluation is based on anonymous questionnaires on the work in the Board and cooperation with the Executive Board, anonymous evaluation of the individual members of the Board of Directors and the Executive Board, optional individual interviews between the Chairman of the Board and each member of the Board and questionnaires on the expertise of each Board member. The Board of Directors carries out a self-evaluation once a year. The Chairman of the Board is in charge of the evaluation with no involvement of the Executive Board. On the basis of a specific evaluation, the Board of Directors decides if it is necessary and/or relevant to involve external consultants in the evaluation process.
Amendments to the Company's Articles of Association The annual general meeting is Topdanmark's ultimate decision-making vehicle. Resolutions at annual general meetings are passed by a simple majority of votes, unless a special majority or representation is required by the Danish Companies Act or the Articles of Association. The Articles of Association provide that resolutions amending the Articles of Association are only valid if adopted by an affirmative vote of not less than two thirds of the votes cast as well as of the capital represented at the general meeting. The Articles of Association provide no restrictions on voting rights.
Topdanmark business strategy. At the same time, Topdanmark’s remuneration policy should strengthen the attraction, retention and motivation of qualified members of Topdanmark’s management, as well as ensure consistency between the interests of management, the company and shareholders. The annual general meeting has adopted "Remuneration policy of the Topdanmark Group."
The decision of the application of short-term and longterm, incentive remuneration has been made for the purpose of securing a balance between short-term and long-term results.
The remuneration paid to the Executive Board, Orienteringsforum and other material risk takers should be competitive with remuneration at comparable companies and can be composed of the following remuneration components: fixed basic remuneration, additional remuneration, pension, other benefits, employee shares, option-based long-term incentive programme (“LTI programme”), cash- and share-based short-term incentive programme (“STI programme”) and extraordinary variable remuneration.
Topdanmark’s LTI programme for the Executive Board and Orienteringsforum is a revolving share option scheme which entails that a fixed proportion equivalent to 10% of (the cash salary + pension + company car value) is paid in the form of share options according to a revolving option programme.
The variable remuneration for a director cannot exceed 50% of the director’s fixed basic remuneration, including pension. The variable remuneration for other material risk takers, including members of Orienteringsforum, cannot exceed 100% of the employee’s fixed basic remuneration including pension. For directors, the share options and other derivatives cannot exceed 12.5% of the fixed basic remuneration including pension at the time of calculation.
The Executive Board is not paid a special pension contribution. The remuneration takes this into account in the form of a personal supplement of 25% of the cash pay. Consequently, Topdanmark does not have any pension-related obligations to the Executive Board, and there will be no payment of pension on retirement.
Besides the revolving scheme referred to above, further 80,000 share options have been granted for 2021 to a number of other executives who have made a special effort or otherwise contributed extraordinarily to value creation in the Company.
The options granted for 2021 are not to be exercised any earlier than subsequent to the publication of the 2023 annual results in 2024, and any later than subsequent to the publication of the 2025 annual results in 2026. In the intervening period, the options can only be exercised up to three banking days after Topdanmark's publication of its annual, half year and interim reports.
Distribution of dividend for 2020 Given Topdanmark’s solid own funds, the Board of Directors will recommend to the AGM that a distribution of an ordinary dividend of DKK 1,035m from this year’s profit of DKK 1,124m will take place, representing a payout ratio of 92.1. To comply with the Danish FSA’s recommendation of 18 December 2020 on continued prudence in relation to financial companies’ capital distribution, Topdanmark has been cautious when determining the recommended distribution of dividend, and has, as a precautionary measure, secured that the pay-out ratio is kept below Topdanmark’s customary pay- out level, and that Topdanmark’s conservative capital base is maintained.
During 2020, it was stated that when the situation was back to normal, the Board of Directors would have the option to distribute in part or in full the remaining DKK 8.5 of the previously announced dividend of DKK 17 per share as extraordinary dividend. If so, this extraordinary dividend would be paid out later in 2020 or after the ordinary general meeting in 2021.
Announcement No. 03/2021 from Topdanmark A/S Page 21 of 94 remainder of the dividend for 2019 until the AGM on 25 March 2021.
The Board of Directors will recommend to the AGM on 25 March 2021 that the remaining DKK 8.5 of the previously announced dividend of DKK 17 per share for 2019 will be distributed on top of the ordinary dividend for 2020.
The agenda for the Annual General Meeting will be published in the period from 17 February to 3 March 2021.
AGM 25 Mar 2021 Q1 2021 Interim Report 26 Apr 2021 2021 Half-year Report 16 July 2021 Q1-Q3 2021 Interim Report 21 Oct 2021 Announcement of 2021 Annual Results 21 Jan 2022
Deadline for submitting items for AGM agenda 9 Feb 2022 2021 Annual Report 17 Feb 2022
Previous positions held: 1994-1997: Financial Controller, Project Manager Head of Financial Control, Trygg-Hansa 1997-1999: Head of Control, Skandia P&C 1999-2001: Senior Vice President, Head of Business and Financial Control, If P&C Insurance Ltd 2002-2008: CFO, If P&C Insurance Ltd 2006-2019: Managing Director, If P&C Insurance Ltd 2008-2019: Deputy CEO, If P&C Insurance Holding Ltd 2019-2019: Executive Director, If P&C Insurance Holding Ltd.
Member of: • The Audit Committee, Remuneration Committee and Nomination Committee of Topdanmark • The Nomination Board of Nordea Abp (Chairman).
Expertise and qualifications: The Board has defined the required competencies and qualifications for board members of Topdanmark. Among these, Ricard Wennerklint possesses knowledge and experience of the following: Management experience from other financial businesses, board assignments in financial businesses, organisation, strategic management, insurance operations, reinsurance, long-tail business (premiums, provisions, run-off), financial and insurance reporting, general statistics, risk management and risk assessment, sales to the private market, sales to the professional market, marketing and branding, outsourcing, finance, own funds, solvency and minimum capital requirements, rules for internal models, auditing, financing and investments, regulatory environment, compliance, IT and IT security, digitalisation, recruitment and human resources.
Previous positions held: 1990-2002: Various executive positions, SAS Scandinavian Airlines A/S 2002-2006: Vice President, SAS Scandinavian Airlines A/S 2006-2010: CEO, Nordic Media Link AB and Dansk Reklame Film A/S 2010-2013: CEO, Danske Licens Spil A/S.
Offices held: Member of the Board of Directors of: • Dansk Erhverv (the Danish Chamber of Commerce)
(Deputy Chairman) • FDM Travel A/S • Sticks N Sushi (Chairman).
Offices held: Member of the Board of Directors of: • Bjatola A/S.
Previous positions held: 2012-2014: Senior Executive VP, Global Head of Corporate & Institutional Banking and Transactional Credit, Danske Bank A/S 2014-2017: Member of the Board of Directors of Solix Group AB 2015-2017: Member of the Board of Directors of Sampension KP Livsforsikring A/S 2016-2018: CCO, Intrum Justitia AB / Lindorff AS.
Offices held: Member of the Board of Directors of: • FLSmidth & Co. A/S and FLSmidth A/S • Finansiel Stabilitet SOV (Deputy Chairman) • Bavarian Nordic A/S • Knud Højgaards Fond og Højgaard Ejendomme A/S • VL52 ApS • Moneyflow Group A/S (Chairman).
• The Investment Committee of Knud Højgaards Fond • Faculty member at Copenhagen Business School,
Previous positions held: 1987-1996: Deputy Director and Group Treasurer, ISS International Service System A/S 1992-1994: CFO, Kulturby 1996, Copenhagen 1994-1996: CFO, ISS Scandinavia A/S 1996-2000: CFO and CEO, Louisiana Museum of Modern Art 2000-2003: CEO, TV2/Danmark A/S 2003-2004: Head of secretariat, Det Radikale Venstre 2004-2008: CEO, Nordea Liv og Pension A/S 2008-2011: CEO, Nordea Invest A/S 2011-2016: CEO, Unipension A/S.
Member of: • The Audit Committee of LEO Pharma • The Investment Committee of LEO Fondet
Previous positions held: 1995-1999: Kaleva Mutual Insurance Company 1999-2000: Sampo Life Insurance Company Limited 2000-2001: Managing Director, Evli Life Ltd.
(Finland) • BenCo Insurance Holding B.V. (the Netherlands) • Kaleva Mutual Insurance Company (Chairman)
(Finland) • Finland Chamber of Commerce • Alma Media Corporation (Deputy Chairman) • Youristia Oy (Chairman) • Finance Finland.
Expertise and qualifications: The Board has defined the required competencies and qualifications for board members of Topdanmark. Among these, Petri Niemisvirta possesses knowledge and experience of the following: Management experience from other financial businesses, board assignments in financial businesses, organisation, strategic management, insurance operations, long-tail business (premiums, provisions, run-off), financial and insurance reporting, general statistics, risk management and risk assessment, sales to the private market, sales to the professional market, marketing and branding, finance, own funds, solvency and minimum capital requirements, auditing, financing and investments, regulatory environment, compliance, IT and IT security, digitalisation, recruitment and human resources.
Member of: • The Group Executive Committee of Sampo. • The Audit Committee of Euronext N.V.
Managerial responsibilities: • Topdanmark Livsforsikring (life insurance) • HR and Communications • Strategy and CSR • Group Secretariat, Corporate Legal Matters.
Brian Rothemejer Jacobsen COO of Topdanmark A/S. Born 1963, joined Topdanmark in 1988, joined Topdanmark's Executive Board on 1 March 2016.
Member of the Board of Directors of: • Green World Society Ltd.
Information on The Executive Board's duties outside the Group as approved by the Board of Directors, and as required by Article 80 of the Danish Financial Business Act, is shown in the Annual Report for Topdanmark Forsikring A/S.
Allocated investment return, net of reinsurance 3,147 3,372 (2,326) 8,357 5,291
Combined ratio excl. run-off profits 90.4 85.8 87.5 88.3 88.2 Relative run-off profits, net of reinsurance (%) 3.7 2.7 2.8 3.5 1.3
LIFE INSURANCE** Rate of return related to with-profit products (%) 5.2 4.6 (0.4) 7.2 4.9 Rate of return related to unit-linked products (%) 10.3 8.6 (6.1) 16.3 7.5 Risk on return related to unit-link products 4.50 4.50 4.50 4.50 5.25 * Before bonuses and rebates.
** Ratios on life insurance are calculated for Topdanmark Livsforsikring A/S. In 2018 Topdanmark changed the classification of contracts in life insurance. To the extent possible, comparatives were restated.
Claims paid (6,503) (6,500) Reinsurance cover received 345 292 Change in the provisions for claims 376 (87) Change in risk margin 18 30 Change in the reinsurers' share of the provisions for claims (53) (41) Claims incurred, net of reinsurance 4 (5,817) (6,305)
LIFE INSURANCE Gross premiums written 6 11,106 10,981 Ceded reinsurance premiums (1) (1) Premiums, net of reinsurance 11,105 10,980
Acquisition costs (166) (184) Administrative expenses (319) (375) Insurance operating expenses, net of reinsurance (485) (559) TECHNICAL RESULT FROM LIFE INSURANCE (71) (176)
Income from associates 18 165 92 Income from investment properties 9 135 191 Interest income and dividends etc. 2,301 1,909
Return and revaluations of non-life insurance provisions 11 (616) (374) Investment return transferred to life insurance business (8,357) (5,291) Other income 19 14
Profit for the year 1,547 1,124 Items which cannot subsequently be reclassified as profit or loss: Revaluation / Reversed revaluation owner-occupied properties (18) 1
Other comprehensive income (14) 1 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,533 1,125
Operating equipment 113 108 Owner-occupied properties 834 837 TOTAL TANGIBLE ASSETS 16 948 946
Equity investments in associates 18 1,668 1,741 Total investments in associates 1,668 1,741
Loans guaranteed by mortgages 6 6 Deposits with credit institutions 2,745 4,989
Accrued interest and rent 388 415 Other prepayments and accrued income 219 210 TOTAL PREPAYMENTS AND ACCRUED INCOME 607 626 TOTAL ASSETS 98,442 109,288
Share capital 90 90 Revaluation reserve 0 1 Security fund 1,146 1,146 Other reserves 72 79 Total reserves 1,218 1,225 Profit carried forward 3,559 3,763 Proposed dividend 1,530 1,800 TOTAL SHAREHOLDERS' EQUITY 6,397 6,879
With-profit products 25 23,618 23,178 Unit-linked products 26 46,656 55,790 Total life insurance provisions 70,274 78,968
Provisions for bonuses and rebates 163 130 TOTAL PROVISIONS FOR INSURANCE AND INVESTMENT CONTRACTS 86,778 95,797
Pensions and similar commitments 30 31 Deferred tax liabilities 22 71 83 Deferred tax on security funds 306 306 TOTAL PROVISIONS 407 420 DEPOSITS RECEIVED FROM REINSURERS 69 33
Other debt 1,867 1,727 TOTAL DEBT 2,949 4,308 ACCRUALS AND DEFERRED INCOME 94 103 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 98,442 109,288
Reinsurance ceded (162) (166) Cash flow from non-life insurance 1,443 1,651
Gross premiums 10,942 10,984 Claims and benefits (4,138) (6,660) Pension return tax (122) (823)
Reinsurance ceded 32 (19) Cash flow from life insurance 6,257 2,999
Equity investments in affiliates - (81) Equity investments in associates (0) (8) Dividends from associates 175 27 Equity investments 1,412 400 Unit trusts 7 12
Investment assets related to unit-linked products (1,765) (5,157) Balances with associates 80 34
Cash flow from financing Dividend paid (1,300) (741) Exercise of share options 88 33 Redemption of subordinated loan capital 0 (500) Issue of subordinated loan capital 0 500 Amounts due to credit institutions (87) 1,195
Cash and cash equivalents at 1 January 4,634 3,294 Revaluation of cash and cash equivalents 0 (90) Cash and cash equivalents at 31 December 3,294 5,835
Shareholders' equity 6,397 6,879 Deferred tax on security funds 306 306 Profit margin 1,138 1,442 Intangible assets (1,291) (1,529) Proposed dividend (1,530) (1,800)
Tax effects (49) (41) Usable share, subordinated loan tier 1 400 400 Usable share, subordinated notes tier 2 1,353 1,350 Own funds 6,660 6,839
Net reinsurance (2) (2) Technical result on life insurance (180) 4 (176)
Pension return non-life insurance (21) 21 0 Return and revaluations of non-life insurance provisions (374) (374) Transferred to technical result (5,291) (5,291)
Equity investments in associates 72 1,670 0 1,741 Other financial investment assets 21,453 31,466 10 52,928 Investment assets related to unit-linked products 0 44,997 0 44,997 Reinsurers' share of provisions 537 5 0 541
Purchase of tangible and intangible assets 217 123 0 340 Assets and liabilities related to illness and accident insurance administered by Topdanmark life are included in non-life.
Note 3. Gross premiums earned - non-life insurance Gross premiums written 9,494 9,803 Change in provisions for unearned premiums 1 282 Change in profit margin and risk margin (32) (323) Gross premiums earned 9,463 9,763
Run-off result, net of reinsurance 125 143 (29) (14) 211 168 Claims provisions, net of reinsurance 3,527 3,653 94 111 6,112 6,085
Average value of claim (DKK '000) 37 38 5 6 87 91 Frequency of claims (per thousand value) 25 24 311 314 124 113
Note 5. Technical result - non-life - continued 2019 2020 2019 2020 2019 2020
Run-off result, net of reinsurance 1 3 5 (24) 433 164 Claims provisions, net of reinsurance 37 15 53 100 12,593 12,924
Note 6. Gross premiums written - life insurance 2019 2020 Individual policies 295 266 Policies which are part of a tenure 2,711 2,860 Group life 269 268 Regular premiums 3,275 3,394 Individual policies 2,179 4,226 Policies which are part of a tenure 5,652 3,361 Single premiums 7,831 7,587 Gross premiums 11,106 10,981
Tenancy agreements may include a period of non-terminability for the tenant. Future rental income in the period of non-terminability: Up to 1 year 279 260
Investment assets related to unit-linked products: Equity investments 4,679 1,486 Unit trusts 300 33
Revaluations of financial assets and liabilities at fair value through profit or loss 6,557 3,710 Of which revaluation of derivatives transferred to claims incurred 149 153 Investment properties 328 161 Liquid funds 0 (45)
Note 13. Taxation Current tax 479 345 Change in deferred tax (40) (12) Prior year adjustment (1) 1 Tax for the year 438 334 Tax in other comprehensive income 4 (0) Tax in shareholders' equity (1) (5) Tax in the income statement 441 329 Calculated tax on profit for the year, 22% 437 320 Adjusted for the tax effect of: Returns on shares etc. not liable to tax (3) (6) Non-deductible expenses 7 14 Prior year adjustment (1) 0
The future cash flows are based on three years’ expected technical result and a terminal value of the private segment to which goodwill relates. The expected technical results are calculated as part of an ongoing, quarterly forecast process. Primary assumptions: The calculation of premiums earned is based on the insurance portfolio adjusted to reflect the expected effect of business decisions and market development. The portfolio is indexed by the wage and salary index. Claims incurred are based on the current levels adjusted to reflect the normalised level of weather and large-scale claims. Furthermore, in general, the expected development in the level of claims and the effect of loss prevention activities are included. The levels of claims are adjusted to reflect the expected inflation. Expenses are calculated by projecting the expenditure base by the expected changes in activities and pay increases obtained through collective agreement, changes in taxes and duties etc. The reinsurance result is calculated in accordance with the current reinsurance programme and adjusted to reflect known and expected changes in prices and the size of cover. The calculation of the terminal value includes a growth rate of 0% (2019: 0%).
Note 16. Tangible assets Operating Ownerequip - occupied 2019 ment properties Total
Revaluation taken to other comprehensive income 0 1 1 Transferred on revaluation 0 (1) (1)
Impairment and amortisation at 1 January (236) 0 (236) Amortisation for the year (35) (1) (36) Transferred on revaluation 0 1 1 Reversal of total impairment and amortisation of assets sold or withdrawn from operations during the year 4 0 4 Impairment and amortisation at 31 December (266) 0 (266)
An increase in the required rate of return of 0.5pp will reduce the total fair value by 75 75
Carrying amount if the properties had been valued at cost less depreciations 716 717
Note 17. Investment properties Fair value at 1 January 4,137 4,932 Additions, acquistions 448 197 Additions, improvements 126 60
Investment properties are recognised in the balance sheet as follows: Investment properties 4,034 3,934 Investment assets related to unit-linked products 898 1,347
Share of profit 165 92 Dividends received (175) (27) Equity investments in associates 1,668 1,741
Reinsurers' share of the provisions for unearned premiums at 31 December 95 96
Reimbursement of claims relating to previous years (265) (193) Change in expected income relating to previous years (run-off) 45 (38)
Reimbursement of claims relating to this year (79) (99) Expected income relating to this year 247 289
Reinsurers' share of the provisions for claims at 31 December 478 440
Recognised as: Deferred tax assets (17) (25) (33) Deferred tax liabilities 103 71 83
Borrower Topdanmark A/S Topdanmark Topdanmark Topdanmark Forsikring A/S Forsikring A/S Forsikring A/S
The market valuation of subordinated loans is based on a mark-to-model method. Future cashflows are discounted by the risk free rate and an appropriate credit spread. The solvency II interest rate curve is used for approximation for risk free rates.
Note 24. Provisions for unearned premiums and profit margin - non-life insurance Provisions for unearned premiums at 1 January 1,819 1,849 Profit margin at 1 January 807 838
Gross premiums written 9,494 9,803 Gross premiums earned (9,463) (9,763) Change in risk margin 12 (3)
Provisions for unearned premiums at 31 December 1,849 1,590 Profit margin at 31 December 838 1,150 Provisions for unearned premiums and profit margin at 31 December 2,687 2,741
Note 25. Life insurance provisions with-profit products Life insurance provisions direct business at 1 January 23,134 23,618 Profit margin at 1 January 82 79 Total insurance provisions at 1 January 23,216 23,697 Collective bonus potential at 1 January (1,632) (1,961) Accumulated revaluation at 1 January (1,466) (1,994) Retrospective provisions at 1 January 20,118 19,742 Gross premiums written 1,078 765 Addition of return 334 214 Claims and benefits (1,643) (1,716) Expense loading inclusive of expense bonus (91) (84) Risk gain after allocating policyholders' risk bonus (61) 21
Intra-group transfers (46) (220) Retrospective provisions at 31 December 19,742 18,714 Accumulated revaluation at 31 December 1,994 2,739 Collective bonus potential at 31 December 1,961 1,810 Total insurance provisions direct business at 31 December 23,697 23,263 Profit margin at 31 December (79) (86) Life insurance provisions with-profit products 23,618 23,178
Portfolios analysed by guaranteed interest rates Guaranteed Guaran- Individual Collective Life interest teed bonus bonus insurance 2019 rate benefits potential potential provisions
Interest rate group 1 ]1%-2%] 33 37 Interest rate group 3 ]1%-2%] 2 2 Interest rate group 2 ]2%-3%] 13 13 Interest rate group 4 ]2%-3%] 4 5 Interest rate group 5 ]3%-4%] 19 21 Interest rate group 6 ]4%-5%[ 33 34
Guaranteed Bonus ratio and return interest rate 2019 2020 2019 2020
Risk groups Risk result after addition of risk bonus 59 9 Risk result after addition of risk bonus (%) 0.3 0.0
Note 26. Life insurance provisions unit-linked products Insurance Investment 2019 contracts contracts Total
Intra-group transfers 449 (403) 46 Retrospective provisions at 31 December 42,749 4,157 46,906 Profit margin at 31 December (234) (16) (250)
Gross provisions at 1 January 42,515 4,141 46,656 Profit margin at 1 January 234 16 250 Retrospective provisions at 1 January 42,749 4,157 46,906 Gross premiums written 10,216 363 10,578 Addition of return 3,387 287 3,675 Claims and benefits (4,677) (508) (5,185) Expense loading inclusive of expense bonus (95) (9) (104) Risk gain after addition of risk bonus (20) 0 (20)
Intra-group transfers 211 9 220 Retrospective provisions at 31 December 51,773 4,299 56,072 Profit margin at 31 December (266) (15) (281)
Return on customer funds after expenses before tax (%) 17.9 8.3
Note 28. Provisions for claims Gross Provisions at 1 January 13,003 13,071 Claims paid relating to previous years (3,147) (3,192) Change in expected claims payments relating to previous years (run-off) (388) (201) Claims paid relating to this year (3,356) (3,308) Expected claims payments relating to this year 6,514 6,788 Inflation hedging (149) (153)
Net of reinsurance Provisions at 1 January 12,476 12,593 Claims paid relating to previous years (2,882) (2,998) Change in expected claims payments relating to previous years (run-off) (433) (164) Claims paid relating to this year (3,276) (3,209) Expected claims payments relating to this year 6,267 6,499 Inflation hedging (149) (153)
Note 28. Provisions for claims - continued Claims liabilities analysed by claims year 9 years later 7,020 Less paid incl. inf lation hedging 6,656 5,770 6,992 5,847 5,802 5,497 5,210 5,426 4,959 3,311 55,470 Provisions before discounting
Provisions relating to previous years at 31 December 2,926 Gross provisions at 31 December 2020 13,364
Net of reinsurance 9 years later 5,966 Less paid incl. inf lation hedging 5,602 5,442 5,700 5,439 5,458 5,114 5,009 5,078 4,789 3,213 50,843 Provisions before discounting
The table show s the historical development in the estimated f inal liability (the sum of claims payments and provisions) for each claims year. Signif icant proportions of the liabilities show n have been calculated w ithout discounting w hich to a great extent eliminates changes in discounting rates. How ever, illness and accident administered by Topdanmark Livsforsikring A/S and w orkers' compensation are included at discounted values.
Note 29. Technical basis for risk allowance and shadow account Customers' share of technical basis for risk allowance 629 (95) Share of technical basis for risk allowance allocated to shareholders' equity 139 (17) Insurance technical result 767 (112)
Note 30. Expenses Expenses in the income statement presented by nature: Staff costs (excl. commissions) 1,821 1,951 Executive Board 27 28 Board of Directors 6 6 Other staff costs 76 57 Commissions non-life 176 230 Commissions life 45 41 Premises costs etc. 116 104 IT operations and maintenance 318 336 Impairment and amortisation 114 144 Other expenses 300 289 Total expenses 2,998 3,186
Note 31. Auditors' fee Fee to the auditors elected at the Annual General Meeting EY Godkendt Revisionspartnerselskab: Fee for statutory audit of the annual accounts 4.3 4.2 Fee for other assurance engagements* 0.2 0.2 Fee for services, other than audit work 0.2 0.3 *Fee for other assurance engagements includes fee for issuance of reports to the Danish Tax Authority and other public authorities. Fee for services, other than audit work, includes general accounting advisory and participation in meetings with the Danish FSA. The Group has an internal audit department which carries out most of the audit work.
Social security costs 37 32 Payroll tax 256 274 Share options 8 8 Employee shares 50 57
Employee shares For the period November 2019 to October 2020, Topdanmark has allotted 228,556 shares at a value of DKK 59m for a salary cut. The annual costs amount to DKK 60m. For the period November 2018 to October 2019, Topdanmark has allotted 163,870 shares at a value of DKK 49m for a salary cut. The annual costs amount to DKK 51m.
Remuneration of the Board of Directors Directors' fees adopted by the AGM were DKK 5,871m (2019: DKK 5,871m). As the former Chairman of the Board of Directors in 2019 has renounced a remuneration for attending in the Remuneration Committee, the director's fees for 2019 amount to DKK 5,839m. The board counts nine members.
The fee includes DKK 289 thousands (2019: DKK 289 thousands) concerning Topdanmark Forsikring A/S.
Former board members: Tina Møller Carlsson 128 Torbjörn Magnusson 449 Lone Møller Olsen 193 Annette Sadolin 193 Søren Vestergaard 128 Total fee paid 5,839 5,871 For foreign board members, social charges of DKK 344 thousands (2019: DKK 362 thousands) have additionally been paid.
Peter Thomas Brian R. Lars 2019 Hermann Erichsen Jacobsen Thykier Total
Marianne Wier resigned in February 2018 with a notice period of one year. Salary for the notice period amounts to DKK 1.1m for 2019, including options (DKK 0.09m) and holiday pay which was recognised as an expense in 2018. Marianne Wier has successively accrued remuneration equal to 18 months’ salary corresponding to DKK 8.8m which was paid at the end of the notice period in 2019. Thus, paid remuneration and compensation for present and former members of the Executive Board amount to DKK 35.6m of which variable remuneration accounts for DKK 2.3m.
Board of Directors Ricard Wennerklint 2,000 2,000 Jens Aaløse 50 50 Elise Bundgaard 1,024 1,458 Anne Louise Eberhard 100 100 Mette Jensen 936 1,125 Cristina Lage 450 450 Ole Lomholt Mortensen 1,794 1,221 Petri Niemisvirta 500 500 Morten Thorsrud 500 500
Executive Board Peter Hermann 821 4,776 Thomas Erichsen 1,319 4,070 Lars Thykier 450 3,835 Brian Rothemejer Jacobsen 450 15,073
(DKKm) Sampo plc held subordinated notes in Topdanmark Forsikring A/S 405 270
Designated at fair value, total 37,951 48,639 Total financial assets at fair value through profit and loss 86,881 96,578
Financial assets at fair value prices inputs inputs 2019 Level 1 Level 2 Level 3 Total Held for trading: Unit trusts 6 6
Investment assets related to unit-linked products 27,954 7,213 39 35,206 Total financial assets at fair value 71,148 15,362 371 86,881
Due to the COVID-19 situation, end of March Topdanmark transferred structured products as CLOs of DKK 6,628m from level 2 to level 3 implying valuation models based on non-observable inputs.
Collaterised Loan Obligations (CLO) are actively managed loan portfolios investing in Leveraged Loans. Each CLO contains different investment opportunities, ranging from the most secure AAA rated tranche to unrated Sub-Ordinated Notes (Equity). Topdanmark Asset Management invests across the debt-stack and has investments within Equity as well.
Note 35. Financial liabilities Financial liabilities at fair value through profit and loss Held for trading: Designated at fair value: Amounts due to credit institutions 155 1,350 Total financial liabilities at fair value (observable inputs level 2) 835 2,333
Note 36. Collateral relating to financial assets and liabilities Gross Carrying Net position Offsetting value Bonds Cash position
Assets Derivatives, investment assets 198 0 198 Derivatives hedging inflation, other assets 16 0 16
Assets Derivatives, investment assets 1,405 0 1,405 Derivatives hedging inflation, other assets 7 0 7
As at 1 April 2020, the Group acquired the company Rådhuskontorerne ApS for DKK 81m cash. The purchase price was compounded as follows: Investment properties (land) 112 Deferred tax liabilities (16) Other debt (15)
Other investment assets (1,260) (1,789) 0.0 Derivatives to hedge against the net change in assets and liabilities 77 575 * Annual return as a percentage before pension return tax (PAL) and corporation tax.
Other investment assets 6,828 3,056 0.0 Assets related to unit-linked products do not include assets chosen by policy holders.
When calculating yield rates, the return of derivatives is allocated in proportion to the exposure in the underlying asset.
Note 39. Return and risk - unit-linked products Selected age points in relation Percentage of Return in to time of retirement Years average percentage 2019 to retirement provisions before PAL Risk
Number of shares held to cover the granting of options: 1,130 thousands (2019: 1,086 thousands). Own shares are held solely by the parent company.
Deposits with credit institutions 400 1,300 Investment assets related to unit-linked products 36,104 44,997 Accrued interest 295 331 Equity investments in and receivables from affiliates eliminated in the consolidated accounts 6,275 4,963 Registered assets 74,567 82,736 Bonds provided as security for loans in accordance with standard repo-contracts for Danish mortgage and government bonds 0 257
In connection with the implementation of a new customer and core system, Topdanmark Forsikring A/S has undertaken to provide support to specific suppliers to fulfil Topdanmark EDB IV ApS' obligations in accordance with the contracts.
Life: Topdanmark Liv Holding A/S Ballerup Holding Topdanmark Livsforsikring A/S Ballerup Insurance Topdanmark EDB II ApS Ballerup IT services Topdanmark Ejendom A/S Ballerup Property TDE.201 ApS Ballerup Property Rådhuskontorerne ApS Ballerup Property Bygmestervej ApS Ballerup Property
Note 45. Other disclosures The five-year summary, in accordance with Section 91(a) of the Danish Executive Order on Financial Reports for Insurance Companies and Multi-employer Occupational Pension Funds is shown on page 29. Sensitivity information according to Section 126 is part of "Risk Scenarios" in Management's review.
Disability, which is the risk of increasing disability intensity or declines in the rates of resumption of work.
Normal fluctuations in investment return and risk results are provided for by the bonus potential per contribution group.
Market Most important risks Risk preferences Risk reducing activities Interest rate risk
Topdanmark's policy is to accept a certain level of market risk in order to profit from the Group's strong liquid position and its high, stable earnings from insurance operations.
The following description of risks in the Topdanmark Group elaborates on the above matrix.
Non-life insurance Underwriting risk Acceptance policy Topdanmark's acceptance policy is based on a wish to make a profit from both products and customers. Topdanmark varies the pricing of its products depending on the relevant risk criteria and the costs of administering those products.
Topdanmark's pricing has been aligned with the individual markets and types of customer. In the private and commercial markets, prices are mostly based on standardised rates, while major commercial customers are offered more individualised charges.
The handling of claims is intended to make the customers feel "well-helped" and safe while at the same time ensure efficient management and control of the claims incurred.
Efficient management of claims incurred Topdanmark is continuously focusing on making its claims handling processes more efficient under the following three main headings: • Promptness • Better claims procurement • Quality.
Loss prevention and loss limitation Topdanmark focuses on loss prevention and loss limitation by investing in, among others, IoT-solutions and machine learning. The main objective is to incline customers towards pro-active risk handling so that they themselves can keep abreast of reducing their vulnerability. By doing this, Topdanmark ensures security for the customer and reduces its own risk at the same time.
Examples of short-tail lines are buildings, personal property and comprehensive motor insurance. Long-tail lines relate to personal injury and liability such as workers' compensation, accident, motor third-party insurance and commercial liability.
Annuity provisions in workers' compensation 27 11 26 10 Other claims provisions in workers' compensation 22 2 21 2
Storm and cloudburst Reinsurance covers storm claims of up to DKK 5.1bn with a retention of DKK 100m. Snow load, snow thawing and cloudburst are also covered. Reinstatement for the proportion of the cover used up is activated by payment of a reinstatement premium. In the event of another storm within the same year, there is cover of a further DKK 5.1bn with a retention of DKK 100m. In the event of a third and fourth storm, there is cover of up to DKK 670m with a retention of DKK 20m if the events occur within the same calendar year. To this should be added the cover not already hit twice by the first two storms. The cover of a third or fourth storm is dependent on the storm programme not having been hit previously by two individual storms each exceeding DKK 2.9bn. The storm programme is renewed on 1 July.
Specific reinsurance cover of DKK 100m for cloudburst takes effect if accumulated annual cloudburst claims exceed DKK 50m. For a claim to be accumulated, the single event must exceed DKK 10m. The maximum retention in the event of an extreme cloudburst is DKK 75m plus reinstatement premiums.
Cumulative risk Known cumulative risk is where it has been recognised prior to the event that several policyholders could be affected by the same event. In personal lines, Topdanmark's retention is DKK 15m for the first claim, DKK 5m for the subsequent claims up to a total aggregated amount of DKK 50m. DKK 15m for further claims after exhausting of the aggregate cover of DKK 50m. The retention is a maximum of DKK 25m in the SME line. Unknown cumulative risk is where several policyholders could be affected by the same individual event (conflagration damage) without the common risk being recognised prior to the event occurring. The retention is a maximum of DKK 50m.
In order to protect shareholders' equity, it will in general be relevant to reduce market risks in the event of low interest rates. All policies have been split into contribution groups according to the guaranteed benefit scheme. In each contribution group, the investment policy is intended to ensure the ability to meet the guaranteed benefits, and the market risk is adjusted in accordance with the risk capacity of the contribution groups. The movements in interest rates are followed in order that risk reducing actions may be taken when needed.
Disability Disability risk is the risk of increasing disability intensity or declines in the rates of resumption of work, in that the benefits have been guaranteed until expiry. Losses may incur due to an increase in disability frequency or due to inadequate health evaluation when the policy is written.
Market Market risk represents the risk of losses due to changes in the market value of the Group's assets, liabilities and off-balance items as a result of changes in market conditions. Market risk includes interest rate, equity, property, currency, inflation and liquidity risk.
Market risks Risk reducing activities Interest rate risk Topdanmark is exposed to an interest rate risk due to provisions for outstanding claims in non-life insurance and guaranteed benefits in life insurance.
With regard to cover of interest-bearing assets, supplementary hedging by interest rate swaps will be bought as required.
The risk on the property portfolio is limited by a strategy focusing on Copenhagen and Aarhus. Topdanmark invests preferably in well-situated properties within the segments of housing and flexible office properties.
In order to reduce the risk of inflation within workers' compensation and illness and accident insurance, Topdanmark uses index-linked bonds and derivatives hedging a significant proportion of the expected cash flows.
Liquidity risk In insurance companies the liquidity risk is very limited as premiums are paid prior to the beginning of the risk period. Topdanmark’s liquidity risk is therefore primarily related to the parent company.
Topdanmark performs an ongoing monitoring of the liquidity risk based on scenario-based stress reporting.
Counterparty risk Counterparty risk, also known as credit risk, is the risk of losses caused by one or more counterparties' full or partial breach of their payment obligations. Topdanmark is exposed to credit risks in both its insurance and investment business.
New IT systems will not be put into production until completion of an extensive test procedure.
IT The department Group Information Security is responsible for Topdanmark’s general information security.
Risk assessment Risk assessments of each operational IT risk are made regularly. Group Information Security reports on risks and events to the management on a quarterly basis.
Cybercrime risk The general threat from cybercrime is increasing. In general, Topdanmark handles the risk via an IT Security Committee/Cyber-Security Board that regularly assesses the threat and the preventive actions necessary to secure the required security level.
Topdanmark’s technical IT security is based on several layers of protection (Defense in Depth) and Technology & Solutions also tests infrastructure and new applications, among others. Relevant employees have been trained to use the tools to conduct such tests.
Accessibility Topdanmark's goal is for the accessibility of its main systems to be no less than 99.5%.
The algorithms saved in the robots’ software are based on the experience of expert employees within the subject area. For example, the software calculating prices is adjusted as actuarial adjustments of the tariff in question are made.
Pandemic risk Topdanmark has a robust business model with a high degree of diversification between the business activities, a very low liquidity risk and a solid capital base. In case of a pandemic like the Covid-19 escalating, Topdanmark will operate with an effective contingency plan. The contingency plan concerns both Topdanmark internally and in relation to changed risk factors for non-life, life- and market risks.
Compliance risk At Topdanmark, compliance comprises compliance with all statutory and managerial requirements for Topdanmark's corporate governance.
Topdanmark Group meets the conditions for postponement given that the Group has not previously implemented IFRS 9-standards and since provisions for insurance and investment contracts represent more than 90% of the total liabilities.
The standard classifies the financial assets based on the company's business model for holding of assets and the cash flow generated by the asset. The standard is not expected to substantially affect the presentation of accounts for the Group.
IFRS 17 “Insurance Contracts” This standard defines the principles for recognition and measurement of insurance contracts. IFRS 17 is expected to come into force on 1 January 2023. However, the standard has not yet been adopted by the EU. Topdanmark has initiated an analysis of the standard. The financial effect has not yet been clarified.
From 2021, expenses for loss preventing activities will be reclassified from administrative expenses to claims incurred due to a change in the Danish FSA's Executive Order on Financial Reports for Insurance Companies. The effect is expected to be insignificant.
The most significant estimates and judgements are made in the calculation of insurance provisions, as well as measurement of the fair value of collateralised loan obligations (CLO´s) and investment properties.
Provisions for claims Provisions for claims incurred, but not yet paid, have been calculated as the best estimate at the end of any given year. As all necessary information is not available, there will be deviations between the actual claims paid and the provisions made in the form of either run-off losses (provisions too low) or run-off profits (provisions too high).
Provisions for unearned premiums Premium provisions are measured based on an estimate of future payments for incidents in the remaining period of cover. A significant uncertain and estimated assessment is involved in the determination thereof. Premium provisions must be seen in connection with the profit margin as an increase in the estimated cashflow will be absorbed by the profit margin up to a combined ratio of 100. Financial estimates and assessments with effect on the result of the year and shareholders’ equity are therefore primarily relevant within business lines with
combined ratio of 100 or more, where premiums are insufficient for covering expected payments and a risk margin, and consequently provisions to cover losses must be made.
Life insurance provisions The uncertainty related to the value of the life insurance provisions is based on a number of actuarial estimates of disability, lifetime etc., and the frequency concerning surrenders and termination of premiums which may have a significant effect on the size of the life insurance provisions.
CLO’s The transfer of CLO´s in March 2020 from valuation according to indicative prices (level 2) to valuation models based on unobservable input (level 3), implies inputs, such as probability of default, recovery etc., based on best estimates. Towards the end of 2020 market liquidity is starting to improve, and if continued a transfer to level 2 is anticipated during 2021.
Properties owned by the subsidiaries and used by the group have been re-classified from investment properties to owner-occupied properties.
The initial recognition of financial instruments is made at fair value on the date of settlement. Any changes in the value between the trade and settlement dates are included in the balance sheet under the heading Derivatives. Direct expenses on the acquisition or issue of financial instruments which are measured at fair value with any revaluation of the fair value taken to the income statement are included in expenses on investment activities, when incurred. However, financial instruments which, subsequent to the initial recognition, have been measured at amortised cost are recognised at fair value adjusted for direct expenses on the acquisition or issue of the financial instrument.
Level 2 If the transaction on the open market is limited or if listed prices are not set on the market, indicative prices from banks/brokers specifying the non-forced sale value can be used. If this is not possible, valuation methods in which input is based on publicly available information are used.
An insurance contract is a contract under which the insurer accepts significant insurance risk from the policyholder by agreeing to compensate if a specified uncertain future event adversely affects the policyholder. Insurance risk is always considered to be significant in non-life insurance. In life insurance, it is considered to be significant when it covers disability including premium waiver or when the contract is with profit.
The classification is carried out on contract level. Contracts with related joint and several premium waiver or group products are considered insurance contracts in full.
Share options The Executive Board and Senior Executives participate in a share option scheme.
Calculation of profit in life insurance The calculation of profit in life insurance is regulated by the Danish Financial Business Act. Topdanmark's policy on the calculation of the profit for the year has been reported to the Danish FSA.
The conditional profit elements comprise the risk return which is calculated for each contribution group. The risk return for each contribution group (cost, risk and interest rate groups) has been based on their estimated risk on shareholders' equity and on the profit margin determined by the company for the year.
Segment information The Topdanmark Group´s insurance business is divided into three business segments: Private offers non-life insurance policies to individual households in Denmark. In this segment is also included illness and accident insurance offered through the life company.
SME offers non-life insurance policies to Danish-based agricultural and SME businesses.
Cash flow statement The cash flow statement of the group has been prepared in accordance with the direct method disclosing cash flow from operations, investments and financing as well as the changes in the Group’s liquid funds between the beginning and the end of the financial year. Investment activities also include amounts received and paid on the purchase and sale of investment, intangible and tangible assets. Cash flows from financing comprise changes in capital, including the purchase and sale of own shares. Furthermore, it includes the raising of loans and repayments on interest-bearing debt. Cash and cash equivalents comprise liquid funds as well as deposits with credit institutions.
Income statement Premiums earned Gross premiums in non-life insurance comprise those premiums which are due within the financial year. Premiums earned net of reinsurance are recognised in line with the distribution of risk over the period of cover. For onerous insurance contracts, the expected loss is included when the contracts are underwritten or when the contracts become onerous.
As premium provisions and profit margin are calculated at a discounted basis, an element of interest is included in premiums earned. In life insurance, gross premiums comprise those premiums for insurance contracts, which are due within the year.
Pension return tax Pension return tax comprise individual tax on pension returns, calculated on the interest accrued on policyholders´ savings, and tax on return allocated to collective bonus potential and accumulated revaluations etc.
Claims incurred and benefits paid Claims incurred in non-life insurance comprise claims relating to the year as well as any adjustments to the claims provided for the year before. Furthermore, claims incurred comprise direct and indirect expenses on claims handling. The effect on change in provisions for outstanding claims due to amortisation and revaluation is transferred to Return and revaluations non-life insurance provisions. Revaluation of derivatives partially hedging the provisions for workers’ compensation and annuities in illness and accident insurance against changes in future wage and price indexation is included in claims incurred.
Operating expenses Technical operating expenses which relate, either directly or indirectly, to the acquisition and renewal of the portfolios are included in acquisition costs. Sales commission is generally recognised in the income statement on the date the insurance contract takes effect. Administrative expenses comprise other costs incurred in the administration of the portfolios which relate to the financial year, and which have been accounted for on accruals basis. Commission received from reinsurers has been accounted for on accruals basis over the reinsurance contracts’ period of cover.
Investment return Income from associates comprises a share of the post-tax results of the associates calculated in accordance with the Group's accounting policies. Income from investment properties comprises the operating results excluding interest charges and revaluations. Interest income and dividends etc. comprise all earned interest income and dividends received in the year. Realised and unrealised gains and losses on investment assets, exchange rate adjustments, and realised gains and losses on owneroccupied properties are included in revaluations. Administrative expenses on investment activities comprise the cost of asset management including transaction costs.
Topdanmark A/S is jointly taxed with all the Danish companies of the Topdanmark Group and all Danish companies and affiliates in the Sampo Group. As the management company of the joint taxation, Topdanmark A/S settles all corporation tax payments with the tax authorities.
Acquired software licences are measured at cost and amortised on a straight-line basis over the expected useful life of a maximum of three years. Development projects which are clearly defined and definable are measured at costs incurred and depreciated over the expected useful life of a maximum of 10 years. Impairment is assessed end of year, and the carrying amount is written down to a lower recoverable amount.
Tangible assets Operating equipment Operating equipment is measured at cost less depreciation on a straight-line basis over the expected useful life with respect of the residual value, which is annually revalued. Impairment is assessed end of year, and the carrying amount is written down to a lower recoverable amount.
Owner-occupied properties Owner-occupied properties are those properties used for the Group's own operations. The properties are measured at a revalued amount being the fair value on the date of revaluation. The buildings are depreciated on a straightline basis, given an expected life of 50 years and an annually re-assessed residual value. Land is not depreciated. The fair value of the revaluation of owneroccupied properties is assessed on the same basis as investment properties. Any revaluation surplus is included in other comprehensive income unless the revaluation is a reversal of a previous impairment. Impairments are included in the income statement unless the impairment is a reversal of previous revaluation included in other comprehensive income.
In accordance with the guidelines of the Danish FSA, the subsequent measurement of the investment properties is made at fair value representing the estimated amount at which the property could be sold within a reasonable time frame to an independent buyer. The fair value is calculated, using the return model, as the calculated
The calculated fair values are regularly tested to other valuation models and by use of external valuers.
Financial assets at fair value with any value adjustment through profit and loss are financial assets which are either included in a trading portfolio, are derivatives or at their first recognition are designated in this classification, because the assets are managed and measured on a fair value basis, or because this eliminates or significantly reduces accounting inconsistency.
Reinsurers' share of provisions Reinsurers' share of the provisions for unearned premiums represents the proportion of reinsurance premiums paid, net of commission received, which based on the spread of risk during the period of cover, relate to the period after the end of the financial year.
Premiums for insurance contracts concluded comprise due and undue premiums for insurance contracts for which the Group is committed on the reporting day.
Topdanmark’s insurance contracts are mostly written for a 1-year period, and the provisions are calculated based on the prognosis for combined ratio for the next 12 months. The prognosis is based on analyses of the trend in premiums, claims and expenses and for change of ownership also statistical analyses of trend in claims notification in relation to the time when the insurance contracts were written.
Life insurance provisions Life insurance provisions for with-profit products are measured at fair value. Accordingly, the liabilities are calculated based on market value independent of the original technical base. The fair value of the life insurance provisions is based on the realistically expected future premiums to be received, benefit payments to be made and administrative expenses incurred on the contracts written.
The life expectancy for a 60-year-old man and a 60-yearold woman is as follows: The provisions include amounts to cover the expected expenses on the future administration of the insurance contracts written. These expenses have been calculated using annual indexation of 2%.
Life insurance provisions are calculated as the sum of a best estimate for guaranteed benefits, best estimate for unguaranteed benefits and the risk margin.
Remaining 60 year old 60 year old Life expectancy man woman Topdanmark Livsforsikring 27.0 29.5 Danish FSA's benchmark 26.5 28.9
All provisions have been measured at present value by discounting the expected future payments using an interest rate curve determined in Solvency ll (EIOPA interest rate curve). The interest rate curve is adjusted for volatility.
Company's experience. The liability is measured at present value by discounting the expected future payments using the interest rate structure.
Post-tax profit as a percentage of shareholders’ equity/return on shareholders´ equity (%) Profit for the year * 100 Shareholders´ equity (average)
Relative run-off, net of reinsurance (%) Run-off on own account * 100 Claims provisions on own account 1 January
Gross premiums earned comprise the line items “Gross premiums written”, “Change in the provisions for unearned premiums”, “Change in profit margin and risk margin” and “Bonuses and rebates”. Gross claims incurred comprise the line items “Gross claims paid”, “Change in the provisions for claims” and “Change in risk margin”. Gross operating expenses comprise “Administrative expenses” and “Acquisition costs”. Reinsurance result comprises reinsurer´s share of the abovementioned line items.
The run-off result is due to claims provisions at the beginning of the year being settled or reassessed through the current year at amounts other than expected and provided for in last year´s accounts. The run-off result, gross, is included in claims incurred regardless of income or expense. Run-off result on own account is net of reinsurance’s share.
Cost per policyholder (DKK) Insurance operating expenses Number of policyholders (average) (Group life customers weighted by 10 percent)
Income from affiliates 1 1,587 1,168 Interest charges (10) (11) Total investment return 1,577 1,157
Proposed appropriation of profit for the year: Transfer to net revaluation reserve at net asset value 1,587 1,168 Transfer from profit carried forward (1,570) (1,844)
TOTAL TANGIBLE ASSETS 3 3 Equity investments in affiliates 5 6,431 6,816 Total investment in affiliates 6,431 6,816 Equity investments 0 4 Total other financial investment assets 0 4 TOTAL INVESTMENT ASSETS 6,431 6,820 Receivables from affiliates 836 913 Other receivables 0 48 TOTAL RECEIVABLES 836 961 Liquid funds 3 1 TOTAL OTHER ASSETS 3 2 TOTAL ASSETS 7,274 7,785
Other reserves 2,682 3,067 Total reserves 2,682 3,067 Profit carried forward 2,401 2,228 Proposed dividend 1,530 1,800 TOTAL SHAREHOLDERS' EQUITY 6,703 7,185 OTHER SUBORDINATED LOAN CAPITAL 7 398 399 Amounts due to affiliates 139 133 Current tax liabilities 27 60 Other debt 7 8 TOTAL DEBT 172 201 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 7,274 7,785
Shareholders' equity at 31 December previous year 90 2,439 2,443 1,350 6,322 Profit / (loss) for the year 1,587 (1,570) 1,530 1,547 Other comprehensive income in affiliates (14) (14) Total comprehensive income for the year 1,574 (1,570) 1,530 1,533 Dividend paid (1,350) (1,350) Dividend, own shares 50 50 Dividends received from subsidiaries (1,380) 1,380 0 Other movements in capital of subsidiaries 50 50 Share-based payments 11 11 Exercise of share options 88 88
Shareholders' equity at 31 December previous year 90 2,682 2,401 1,530 6,703 Reduction of proposed dividend previous year 765 (765) 0 Profit / (loss) for the year 1,168 (1,844) 1,800 1,124 Other comprehensive income in affiliates 1 1 Total comprehensive income for the year 1,169 (1,844) 1,800 1,125 Dividend paid (765) (765) Dividend, own shares 24 24 Dividends received from subsidiaries (840) 840 0 Other movements in capital of subsidiaries 55 55 Share-based payments 10 10 Exercise of share options 33 33
Note 6. Share capital Each of Topdanmark's 90,000,000 shares has a nominal value of DKK 1 and has one vote. No share enjoys any special rights. The shares are freely negotiable.
Remuneration and shareholdings in Topdanmark appear from note 33 to the financial statements for the Group.
If P&C Insurance Ltd, a subsidiary in the Sampo Group, held subordinated notes in Topdanmark A/S 133 133
Note 9. Own shares The number of own shares held by the parent company appear from note 41 to the financial statements for the Group.
Note 11. Other disclosures The five-year summary, in accordance with Section 91(a) of the Danish Executive Order on Financial Reports for Insurance Companies and Multi-Employer Occupational Pension Funds, is included in financial highlights. Risk disclosures in accordance with Section 91(b) are included in "Management's review" in "Risk management " and in note 46 "Risk factors".
The annual financial statements of the parent company Topdanmark A/S have been prepared in accordance with the Danish Financial Business Act, including the executive order issued by the Danish FSA on financial reports for insurance companies and multi-employer occupational pension funds.
Opinion We have audited the consolidated financial statements and the parent company financial statements of Topdanmark A/S for the financial year 1 January to 31 December 2020, which comprise income statement, statement of comprehensive income, balance sheet, statement of changes in equity and notes, including accounting policies, for the Group and the Parent Company, and a consolidated cash flow statement. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for listed financial institutions and the parent company financial statements are prepared in accordance with the Danish Financial Business Act.
Our opinion is consistent with our long-form audit report to the Audit Committee and the Board of Directors.
Significant management estimates regarding life insurance provisions include: • Determination of calculation methods and models • Mortality, disability and reactivation rates • Future inflation and wage rate development • Expected future cash flows on insurance contracts.
Information on provisions for insurance and investments contracts is disclosed in notes 24 and 28 (provisions regarding non-life insurance contracts) and notes 25-27 (provisions regarding life insurance contracts).
Unit-linked contracts do not involve guaranteed returns. Consequently, we do not consider the measurement of these provisions to be associated with significant risk of material misstatement apart from risks related to the measurement of unlisted investments.
Measurement of unlisted investments Unlisted investments include at 31 December 2020, among other things, investment properties, unlisted securities, loans, derivatives, and CLOs, with a total value corresponding to 17% of the Group’s investment assets.
Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance as to whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs and additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
Lars Rhod Søndergaard Allan Lunde Pedersen State Authorised Public Accountant State Authorised Public Accountant mne28632 mne34495