Tryg is the second-largest insurance company in the Nordic region. We are the largest player in Denmark and the third-largest in Norway. In Sweden, we are the fifth-largest company in the market.
Editor Investor Relations | Publication 28 January 2015 | Layout amo design 16 Commercial 20 Sweden 22 Investment activities 24 Capital and risk management 26 Shareholder information 28 Corporate governance 32 Supervisory Board 34 Group Executive Management 36 Corporate Social Responsibility in Tryg
Claims ratio, net of ceded business 68.8 73.7 69.6 72.1 71.8 76.6 81.6
Combined ratio exclusive of run-off 91.0 94.3 90.3 92.7 93.2 97.9 102.7 Run-off, net of reinsurance (%) -7.3 -5.2 -6.1 -5.0 -5.0 -4.7 -4.4 Large claims, net of reinsurance (%) 4.3 1.1 3.1 2.1 2.3 2.7 3.8 Weather claims, net of reinsurance (%) 2.6 8.8 2.4 3.2 1.8 3.6 6.3
Our ambition is to make Tryg the world’s best insurance company. However, this will only be possible if we have our customers’ support and maintain our positive financial development. With this end in mind, in 2014 we continued our work to implement a number of important initiatives to strengthen Tryg’s insurance operations in a permanent way. We have streamlined our internal processes across the organisation and made structural changes to ensure that the machine driving the entire business is geared to supporting our most important mission – to deliver a world-class customer experience. At the same time, these initiatives have led to substantial improvements in our financial results. The profit for the year totalled DKK 2,557m, equivalent to a return on equity of 23.0%, while the combined ratio was 84.2.
In 2014, we acquired three smaller companies and portfolios, as we believe that we will be able to use our strong position to integrate these in our business. For this reason, acquisitions are something that we will continue to focus on in the coming years.
An important aspect of the customer experience is that the price customers pay for their insurance is fair and competitive. For this reason, another strategic focus area is that we must become even better at developing and pricing products to fulfil our customers’ needs and to reflect the individual risk. In 2014 we launched a number of pricedifferentiated products which have been very well received by our customers. This boosts our sales, reduces our claims ratio and ultimately results in more satisfied customers. We expect that our continued focus on this area will enable us to become even quicker and better at launching new products in the coming years.
Group’s investments and the overall capital level, which must strike the right balance between risk and rules on the one hand and Tryg’s general targets on the other.
DKK 29 per share in accordance with our dividend policy of distributing 60-90% of the profit for the year and having an increasing dividend in nominal terms.
DKK 1bn programme. The share price also reflected the previous year’s value creation with a return of 36.5%, including dividend. Based on the high share
platform, and the change to its new IT operations provider TCS was implemented successfully. In January, Tryg concluded a five-year agreement, which will provide better operational reliability and reduce costs.
of the former Codan customers opted to be covered by Tryg’s insurance products.
Tryg’s Swedish branch, Moderna, launched an automatic claims handling system. The customer registers a claim online, and the entire claims handling process is performed automatically, including claims payment. When the process is completed, it is notified with a text message.
Three new price-differentiated products Tryg launched three new price-differentiated products in Norway: leisure boat, group life and company car insurances. The products were well-received, with high sales rates and improved risk selection.
Tryg has identified the fundamental values of our company, which will help us meet our targets and support the company’s ambition.
Tryg believes that loyal customers and solid financial results are deeply intertwined. Loyal customers have a high retention rate. This means that the cost of attracting new customers can be kept low, which contributes to a low expense ratio. Like
Tryg’s efficiency programme, a high retention rate is of value to customers because it strengthens our results and competitive position and reduces the need to increase prices.
Tryg’s shareholders must see Tryg as a company which sets ambitious targets and achieves them.
NPS for 2014 was 15; however, with considerable variation between the different areas, from -11 in
The retention rate is generally high in Tryg. It expresses the extent to which customers will reselect Tryg as their insurance company. However,
Tryg wishes to raise the retention rate further by 1 percentage point between now and 2017.
Customers with multiple insurance products are generally more satisfied and contribute to profitability. For this reason, Tryg is keen to increase the share of customers with three or more products by 5 percentage points.
Tryg has set up four strategic initiatives to support the financial and customer targets. The strategic initiatives planned for 2015 are all a natural extension of the initiatives for 2014. In other words, we are building on the foundations laid during the previous strategy period.
At the end of 2014, 75% of the tariffs are assessed to be on a par with those of our major competitors against less than a third at the start 2013.
The new price-differentiated products proved their worth, with improved rates of sales to new customers and a lower claims ratio. For our customers this means that our pricing is more correct and better reflects the individual risk.
relatively stable with an unemployment rate at around 3.5% and a low interest rate level. Car sales in Norway increased by 1.4% in 2014. Towards the end of the year, the financial situation in Norway deteriorated due to a sharp decline in oil prices leading to a drop in the value of the Norwegian krone. This development has reduced expectations for economic growth and employment with the risk of a recession in Norway in 2015.
Tryg has worked hard to realise its targets for 2015, which were announced in 2012. 2014 saw consid-
In the coming years, Tryg will continue its work to improve pricing and the use of its own and external data. Also, we will still be focusing on time to market. The ambition is to further reduce development time to five months, and in connection with this to update the pricing of the individual products annually.
Customer journey & success culture was a new strategic initiative in 2014. The objective is to improve customer experience and thus loyalty by strengthening the customer culture within Tryg.
In order to find out more about how customers perceive Tryg, we introduced SMS follow-ups after customer contact. In 2014, more than 144,000
To enhance the internal customer culture, an internal training course was initiated. This has involved customers are given wider authority, and that procedures are adjusted to streamline customer service. In this way, we aim to ensure that the firstline employee will be able to resolve and close the case 90% of the time. The target of increasing the number of customers with three or more products also has a direct bearing on the NPS, as these customers have higher NPS scores.
The most important initiative to improve results in 2013 and 2014 was the measures to reduce expenses and claims. In 2012, we set up an overall target of saving DKK 1,000m by year-end 2015. At the end of 2014, claims costs were down by approximately
In November 2014, we set new targets for the efficiency programme corresponding to a total of
Expense reduction will be achieved by a continued focus on outsourcing, improvement of the retention rate and efficiency gains deriving from more efficient customer service, for which the target, as mentioned above, is for 90% of all customer enquiries to be processed and closed by the first-line employee.
Also, in 2015, an executive for customer experience is appointed for each of the main business areas.
We performed several NPS surveys of the degree to which customers recommend the company in 2014. The results gradually improved over the year from 10 in the first surveys to 15 by the end of 2014, which shows that the initiatives had an effect.
In 2014, Tryg acquired three smaller companies and portfolios, as we will be able to use our strong position to integrate these in our business. This is something that we will continue to focus on in the coming years.
Claims reductions will be realised by continuing to streamline procurement of claims services. The number of suppliers has been reduced significantly in recent years, and it is possible to reduce this figure even further, which will contribute to reducing claims. In addition, the use of new process management systems for repairing building damage, in particular, will lead to a reduction in claims, just as efficiency improvements in staff functions and the claims organisation will also make a positive contribution.
IT stability is important for being able to offer our customers efficient service in claims handling, sales, service and policy renewal. IT stability was not satisfactory in 2013, for which reason Tryg launched a strategic initiative to strengthen this area. As a result, an agreement with a new IT operations provider, Tata
Consultancy Services Limited (TCS), was concluded in 2014. This will provide Tryg with a more modern
Together, the new agreements will ensure better operational stability, while reducing costs.
Tryg expects that the development in gross premium income will be slightly negative to unchanged in 2015 and on a par with the growth in GDP in 2016.
Tryg has a solid reserve position, which was also confirmed in connection with an external review by KPMG in 2014. This review has strengthened
The interest rate used for discounting Tryg’s technical provisions is historically low, and we do not expect any significant interest rate increases in the short term. A higher interest rate level will have a positive effect on Tryg’s results.
The value of the Norwegian krone fell in 2014, which had a negative impact on Tryg’s operating profit. The share of equity held in Norwegian kroner and Swedish kronor is continuously hedged in the financial markets.
In 2015, weather claims net of reinsurance and large claims are expected to be unchanged at
The investment portfolio is generally divided into a match portfolio corresponding to the technical provisions and a free portfolio. The objective is for the return on the match portfolio and changes in the technical provisions due to interest changes to be neutral when taken together.
Tax rates have gradually been lowered in Denmark, Norway and Sweden in recent years. In
We will strive to become even more efficient up to 2017.
Denmark, the tax rate was 24.5% in 2014 and will be reduced to 22% up to 2016. The Norwegian tax rate was 27%, while the Swedish rate was 22%.
When calculating the total tax payable, it should also be taken into account that gains and losses on shareholdings are not taxed in Norway. All in all, this will cause the expected tax payable for an average year to be reduced from around 23-24%
Tryg is launching a new efficiency programme. The aim is to reduce expenses and claims by a total of
The efficiency programme affected results positively by DKK 395m, corresponding to an improvement of the combined ratio by approximately 2 percentage points. In 2014, the efficiency programme once again made it possible to avoid any major general price increases, and the prices have largely only been adjusted to take account of claims inflation. If unsatisfactory development of products or segments is identified, selective price measures may of course be taken.
In 2014, many price-differentiated products were developed, primarily for new customers. However, a large part of the portfolio was converted in 2014 to ensure that all customers have the most up-todate products. This conversion is also contributing to making Tryg’s processes more efficient, as old products may be discontinued. It also ensures that staff will only have one product to consider in their advisory and claims work.
The investment return was DKK 360m, and was especially affected by increasing equity prices, a low interest rate level and a domicile write-down of DKK 106m in Q4 2014. The primary purpose of the investment business is to support the insurance business, and the aim is to have a low risk profile. The investment return for 2014 was thus higher than what was generally expected.
(DKK 19,504m), representing a fall of 1.1% when measured in local currencies. The development in premium income was expected in view of the initiatives implemented to improve profitability in recent years. In 2014, Private saw an improved development trend, accounting for about 50%
(-2.9%), which is satisfactory. For this business area, Tryg is prepared for larger fluctuations in premium income due to the competitive situation and the focus on having a profitable portfolio.
Bank insurance is an important distribution channel, and Tryg has a sound agreement with
In 2014, Tryg acquired a number of small companies and portfolios, including Securator, a market-leading provider of additional cover for electronic equipment in Denmark. In addition, Tryg acquired the renewal right for Codan’s agricultural portfolio, which has been successfully integrated in Tryg’s agricultural portfolio. Also, Tryg acquired a small Swedish portfolio within pet insurance.
• Investment return, after transfer to insurance, of DKK 360m (DKK 588m).
• Share split in the ratio 1:5 to be approved at the annual general meeting in 2015.
The gross claims ratio was 67.8 (73.9), and the claims ratio, net of ceded business, which covers both claims and business ceded as a percentage of gross premiums, was 69.6 (72.1). The claims level is due to a combination of better procurement of claims services and administration of DKK 282m, corresponding to 1.5%, and an overall higher level of weather and large claims of 5.5% (5.3%). The run-off level was slightly higher at 6.1% (5.0%), which reflects a solid level of provisions.
The claims measures implemented have first and foremost included improved agreements with car repair shops, but 2014 also saw initiatives that have improved the procurement of claims services within contents insurance, among other things in the form of the agreement with
Tryg. Customers are offered freedom of choice among claims products, and Tryg has access to favourable purchasing agreements and updated prices for similar products, which is particularly important in the field of electronics claims. Fixedprice agreements were introduced for a number of defined standard house and building repairs. At the end of 2014, Tryg started using the IN4MO system for the management of all processes and deliveries in connection with building claims. This system will contribute to reducing claims expenses in the coming years, and allows all stakeholders to follow the progress when damage is being repaired, which will improve customer experience.
The gross claims ratio improved to 67.8 (73.9), which is especially attributable to better procurement of claims services and administration of DKK 282m, particularly related to purchasing agreements within contents insurance, web auctions for extensive damage repairs and the introduction of fixed-price agreements for a number of house and building repairs.
Q3 2014. The extent of damage was considerably lower than in connection with the cloudburst in the Copenhagen area in July 2011. A significant reason for this was the many preventative measures launched after the cloudburst in 2011. After this cloudburst, Tryg offered customers an inspection of their homes and required them to place their belongings in basements above floor level. In addition, in case of repeated claims, Tryg required customers to install an anti-flooding device.
DKK 220m in the second half of 2014, which means that after another approximately DKK 80m of claims, this agreement will provide cover in the first half of 2015. This is one example of how Tryg strives to achieve stability in the results of the insurance business.
and weather claims 2.4% (3.2%). The level of large claims and weather claims was DKK 1,021m, which largely corresponds to the level of DKK 1,050m which is expected for an average year.
The run-off level stood at 6.1% (5.0%), which underlines Tryg’s solid provisions coverage, as was announced on the Capital Markets Day in November 2014. The run-off gain was highest in Corporate, because the share of long-term business in the form of workers’ compensation, in particular, is larger than for the other business areas.
The expense ratio was 14.6 (15.6). Adjusted for one-off effects related to the Norwegian pension scheme and the change of IT suppliers in Q2 2014, the expense ratio was 15.3. The improvement of 0.3 percentage points was achieved through the ongoing efficiency programme and should be seen in the light of the expense ratio target of less than 15 in 2015 and 14 or less in 2017.
The efficiency programme contributed DKK 113m in 2014, corresponding to an impact on the expense ratio of 0.6 percentage points. The initiatives comprised a reduction in the number of employees, particularly in the staff functions, but also in the business areas.
Tryg has generally focused on reducing complexity, just as the number of offices has been reduced.
The expense level is also affected by increases in the payroll tax in Denmark, from 10.9% to 11.4% in 2014. The tax will gradually increase and will stand at 12.3% in 2021. However, this will not affect Tryg’s target of an expense ratio of below 15 in 2015 and of 14 or less in 2017.
in 2014. Tryg’s investment portfolio is divided into a match portfolio and a free portfolio.
The match portfolio totalled DKK 29.5bn, 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 free portfolio is a diversified portfolio of real estate, equities and bonds which largely reflect the company’s total equity. At 31 December 2014, the value of the free portfolio totalled DKK 12.4bn. The return on the match portfolio was DKK 181m (DKK 40m)
at the end of 2014. Tryg determines the individual solvency requirement according to the Danish
Financial Supervisory Authority’s guidelines. The individual solvency requirement was DKK 6,560m at the end of 2014, and is measured based on the adequate capital base, which amounted to
Authority of Norway made an announcement concerning issues associated with Solvency II. In the announcement, the Financial Supervisory Authority of Norway estimates that the Norwegian Natural
Perils Pool and the Norwegian guarantee scheme in their current form should only to a limited extent be included in the capital adequacy calculation.
NOK 1.2bn from the Norwegian Natural Perils Pool and the Norwegian guarantee scheme after tax. This matter has not been clarified further in Q4 2014.
In relation to Solvency II, final clarification of the expected future profit and the future recognition of subordinate loan capital is still pending; this will have a positive impact on Tryg’s capital. The final Solvency
According to Tryg’s dividend policy, the aim is to pay out 60-90% of the profit for the year, and for the dividend to be steadily increasing. For 2014, a dividend of DKK 29 (DKK 27) per share is proposed, corresponding to a total of DKK 1,731m
In 2014, a share buy back of DKK 1bn was completed, and on the Capital Markets Day on 5
• Large claims impacted the combined ratio by 4.3 percentage points (1.1).
(DKK 154m), and was affected by a write-down of DKK 106m relating to the domicile in Ballerup.
Profit/loss on gross business 444 225 1,611 1,352 Profit/loss on ceded business -48 57 -23 -43 Insurance technical interest, net of reinsurance 4 4 24 26
Combined ratio exclusive of run-off 84.5 90.8 86.4 89.3 Run-off, net of reinsurance (%) -2.1 -3.1 -3.9 -3.3 Large claims, net of reinsurance (%) 0.0 0.4 0.1 0.1 Weather claims, net of reinsurance (%) 2.6 8.0 2.5 3.2
• Combined ratio improved by 3.5 percentage points to 82.5 (86.0).
Private encompasses the sale of insurance products to private individuals in Denmark and
Internet, Tryg’s own agents, franchisees (Norway), interest organisations, car dealers, estate agents and Nordea’s branches. The business area accounts for 49% of the Group’s total premium income.
Tryg more attractive to profitable customers, which will also result in a slight increase in premiums.
The development in premium income in Denmark is still affected by the sale of small cars which generally have more safety features. This leads to a reduction in both premiums and claims. In addition, competition on the Danish car market
Developments in Norway were affected by competition from small market players, while the new price-differentiated products and improved selection also had a positive impact. Growth in
Private in Norway was 1.5% (-0.3%), and generally developed positively throughout the year.
The gross claims ratio amounted to 67.7 (70.4), and the claims ratio, net of ceded business, was 68.0
(70.9). The underlying improvement amounted to 1.6 percentage points, and is attributable in particular to the efficiency programme implemented as well as the initial effects of the price differentiation and improved selection. The level of weather claims was largely unchanged, with a higher level in the first three quarters and a considerably lower level in Q4 relative to 2013. The expenses for weather claims amounted to 2.5 (3.2). Run-off gains/losses improved the combined ratio by 3.9 (3.3) and were thus slightly higher than in 2013.
The number of employees was reduced from 923 at the end of 2013 to 903 in 2014, reflecting an increase in distribution and a reduction in administration.
in Q4 2014. Gross premiums were reduced by 0.2% (-1.7%). The retention rate in Denmark was increased to 89.6 (89.2), while the retention rate in Norway was 87.0 (87.2). The gross claims ratio was 65.3 (75.6), and the claims ratio, net of ceded business, was 67.4 (73.1). The expense ratio was
Key ratios Premium growth in local currencies -1.8 -1.2 -3.0 -2.9
Combined ratio exclusive of run-off 86.5 92.8 86.8 91.4 Run-off, net of reinsurance (%) -12.0 -7.0 -7.4 -6.0 Large claims, net of reinsurance (%) 4.2 0.3 4.3 4.5 Weather claims, net of reinsurance (%) 2.6 15.7 1.9 4.5
Commercial encompasses the sale of insurance products to small and medium-sized businesses in
(-2.9%) was realised, when measured in local currencies. The largely unchanged development comprised a reduction in the Danish business of 4.5% and growth in the Norwegian business of 0.6%. The reduction in Denmark is attributable to the important measures implemented in previous years as well as the fact that the smaller Danish companies are still struggling financially.
The growth in the Norwegian business has been achieved through, among other things, a significant increase in sales from the franchise distribution channel, which is attributable to a number of factors, including sales and service training for commercial products. The change in the setup of Commercial and Corporate led to an increase in premiums of approximately
DKK 900m. The new additions have now been fully integrated and included in Commercial’s service concepts. Similarly, the acquisition of the renewal
Integration of customers from Corporate and an acquired agricultural portfolio were important focus areas.
Back to work in no time Anja Holt’s claim was processed smoothly and quickly, which meant that she was able to get back to work soon after suffering a slipped disc.
Norwegian employer’s treatment insurance with Tryg provided cover. “I was treated by the best experts, which ensured that I was quickly back on my feet,” says Anja Holt.
The treatment insurance guarantees short treatment times and covers, among other things, costs relating to diagnosis, surgery and rehabilitation. For Anja, the insurance ensured that she was able to get back to work quickly. In addition to easing Anja’s discomfort, the short treatment time minimised the loss suffered by her employer. “The time from reporting the injury to the operating table was very short, and I was back at work after only six weeks. This meant that my employer did not have to manage without me for long,” says Anja Holt.
right for Codan’s agricultural portfolio progressed very satisfactorily with considerable positive support and full integration in Commercial.
The expense ratio was 15.8 (18.6), and adjusted for one-off effects related to the Norwegian pension scheme and the change of IT suppliers, the expense ratio was 16.9. This development is very satisfactory and was achieved by means of the efficiency programme and structural adjustments in the Commercial organisation. This comprises, among other things, changes in the distribution structure and synergies in connection with the integration of the business transferred from
Gross premiums fell by 1.8% (-1.2%) in Q4, which was a positive development relative to 2014 as a whole. The retention rate in Denmark was 87.0
(86.1), while it was 87.8 (87.6) in Norway. The gross claims ratio was 55.2 (73.8), the claims ratio, net of ceded business, was 58.9 (67.9), and the expense ratio was 15.6 (17.9).
Key ratios Premium growth in local currencies 1.5 -2.1 1.1 -2.9
Combined ratio exclusive of run-off 106.4 102.2 100.2 100.7 Run-off, net of reinsurance (%) -16.0 -7.5 -10.4 -9.0 Large claims, net of reinsurance (%) 15.4 3.6 9.4 4.7 Weather claims, net of reinsurance (%) 2.9 5.5 3.0 2.5
The focus was on implementing a new organisation and enhanced concepts for international customers.
For this reason, Corporate should have a lower combined ratio over time than the other business areas to contribute to Tryg’s financial targets.
As part of the change in the setup of Corporate and Commercial, small customers with a total premium of approximately DKK 900m were moved. Against this background, Corporate has been able to continue its work on developing focused advisory concepts for large customers in a more targeted way.
Corporate sells insurance products to corporate customers under the brand ‘Tryg’ in Denmark and
(DKK 358m), and the combined ratio amounted to 89.8 (91.7). The result was affected by a significantly higher overall level of large claims and weather claims, approximately DKK 200m higher than in
“After the cloudburst in 2011, we teamed up with Tryg to prepare an emergency plan and implement preventive measures to ensure that we are fully prepared for such cloudbursts,” says Mogens Ramsløv, Vice
Tryg and Tivoli prevent cloudburst damage After the cloudburst in Copenhagen in 2011, Tivoli suffered a double-digit million kroner loss. The preventive measures proved their worth when a cloudburst hit again in 2014.
Corporate’s advisory concept, and this has been extended further in recent years, which has had a positive impact on the claims level.
The expense ratio was 11.1 (11.8), and adjusted for one-off effects related to the Norwegian pension scheme and IT operating expenses, the expense ratio was 11.6.
The technical result was DKK 98m (DKK 59m), and the combined ratio was 90.4 (94.7). The improved result is especially attributable to the claims level, but also to a significantly lower expense level.
Gross premiums rose by 1.5% (-2.1%) in Q4, almost corresponding to the level for the full year.
The claims level was 67.2 (75.0), and the claims ratio, net of ceded business, was 79.8 (82.6) and was affected by both a high level of large claims and a high run-off level.
Also, the claims ratio reflected a good underlying improvement, adjusted for run-off, large claims and weather claims. The expense ratio was 10.6 (12.1), which was a satisfactory low level, underlining Corporate’s focus on having a competitive expense level.
Profit/loss on gross business 11 31 133 129 Profit/loss on ceded business -5 10 -21 9 Insurance technical interest, net of reinsurance 1 3 6 11
as a result of the termination of the agreement with Nordea.
Djurförsäkringar. Sales are effected via Tryg’s own salespeople, call centres and the Internet. The business area accounts for 7% of the Group’s total premium income.
The results of this business area have improved significantly in recent years. The combined ratio for 2014 was largely at the same level as in 2013, and was achieved in a year which saw an expected gradual reduction of the Nordea portfolio as a result of terminating the partner agreement in Sweden. In 2014, the cooperation with Danske Bank in Sweden was gradually expanded, and new, small portfolios were acquired. In addition, the important agreement with Elkjöp on product insurance distribution has been extended. At the same time, significant structural measures were also implemented in 2014 with regard to distribution, as a result of which the call centre in Luleå was closed, with only one call centre remaining based in Malmö.
This was achieved through a continued focus on profitability within the broad private market and the usual sound results in the niche areas comprising leisure boats, motorcycles and product insurance.
(-4.9%). This reduction was primarily due to the mentioned termination of the partner agreement with Nordea, just as the number of partner agreements in general was reduced, including ICA and Villaägerne (The house owners) in Sweden, to ensure profitability.
Securator, which is a market-leading provider of extended guarantee insurance for electronic equipment in Denmark, as well as the acquisition of a small portfolio within insurance for pets.
The gross claims ratio amounted to 71.3 (74.2), and the claims ratio, net of ceded business, was 72.8
(73.6). The largely unchanged claims ratio, net of ceded business, is satisfactory and positively affected by the gradual reduction of the Nordea portfolio, while it is negatively affected by a few mid-sized claims and an increasing claims frequency within contents insurance. Claims handling in Moderna is characterised by a high degree of efficiency, and the introduction of automatic claims handling without claims handlers continues. The claims handling is determined by the type of claim, the customer’s claims history and a number of other factors. Tryg sees great potential in this kind of claims handling for the Group as a whole. This is also a very efficient form of claims handling for customers, as a large portion of claims are registered and finalised on the same day, which results in high customer satisfaction and a positive effect on the claims level.
The expense ratio was 19.2 (17.6), or 18.8 excluding one-off effects. The higher expense level is related to the reduction in premium income.
The centralisation of customer service and telemarketing in Malmö was completed in 2014, which means that the corresponding function in
The expense ratio was 22.2 (19.3), and the number of employees was increased from 356 to 382. Excluding employees associated with the portfolios acquired, the number of employees was reduced by 22.
At 31 December 2014, the investment portfolio totalled DKK 41.9bn. The investment portfolio is divided into a match portfolio and a free portfolio of DKK 29.5bn and DKK 12.4bn, respectively.
The sole purpose of the match port-folio is to hedge fluctuations in the discounting of insurance provisions and thus reduce the interest rate risk attaching to Tryg’s claims provisions. In addition to transferring the change in the value of the commitments, the match portfolio will also provide interest on the provisions to transfer insurance technical interest. The free investment portfolio generally corresponds to equity and is invested in bonds, real estate and equities.
The uncertainty in the financial markets has primarily been due to one-off events such as Russia’s annexation of the Crimea, the demonstrations in Hong Kong and the new tensions in the Middle East.
The investment return was affected by both positive equity and credit markets and falling interest rates as well as good performance.
The return on the free portfolio was DKK 548m, while the return on the match portfolio was
The regulatory deviation is explained by the fact that the commitments are primarily calculated on the basis of euro swaps, while hedging is local. The difference between euro swaps and Norwegian swaps, in particular, explains most of the regulatory deviation. The interest rate difference between, for example, the two-year European and Norwegian
Return – free portfolio Return Return (%) Return Return (%) Investment assets
Return, match portfolio 340 1,336 Value adjustments, changed discount rate -217 -741 Transferred to insurance technical interest -84 -414
Hereof: Match, regulatory deviation 31 77 Match, performance 8 104 swap rates is now only 1 percentage point, which is the lowest level since 2009.
DKK 90m. The value of Tryg’s domicile in Ballerup was wrote down by DKK 106m.
The gross return on Tryg’s free investment portfolio in Q4 was DKK 154m. The return on the bond portfolio was DKK 29m for the quarter, while the equity portfolio contributed a return of
Another example of the operationalisation of risk appetite is the management of the investment risk via exposure limits within different asset classes (shares and property etc.) and the management of the total interest risk via Tryg’s match strategy. This prescribes that Tryg’s investment assets corresponding to the technical provisions must be invested in interestbearing assets, the interest rate sensitivity of which precisely matches and thereby hedges the interest rate sensitivity of the discounted provisions.
Good risk management requires, among other things, the ongoing identification and quantification of risk factors, subsequent reduction of undesired risks and the reporting of the whole risk scenario. The quantification consists, among other things, of a calculation of the capital requirements and, against this background, an annual review is made of the framework for Tryg’s risk appetite.
Capital management is based on Tryg’s internal capital model. The capital model is based on the risk profile, and thus takes account of the composition of the insurance portfolio, the geographical spread, the provision profile, the reinsurance programme, the investment portfolio and Tryg’s profitability in general. The model calculates the statutory capital requirement (Individual Solvency
Requirement) with a 99.5% certainty level, such that Tryg would statistically be able to honour claims in 199 out of 200 years.
Solvency Requirement is called the adequate capital base. At the end of 2014, this totalled DKK
In conjunction with the capital plan, a contingency plan has been prepared which describes specific measures that may be introduced in the short term, should the company’s desired capital position be threatened. Both the capital plan and the contingency plan have been approved by Tryg’s
Tryg’s subordinate loan of EUR 150m. This refinancing will take the future Solvency II rules into account.
Tryg expects its internal model to be approved so that it can continue to be used by the company. If the approval process takes longer than expected, it will be necessary to use the Solvency II standard model for a period, which will result in a lower solvency surplus.
• Norwegian Natural Perils Pool, which may have a negative effect of DKK -1 to 0bn. Tryg expects that Norwegian Natural Perils Pool will still be available as a tier 2 capital element when
• The Solvency II assessment of premium provisions will contribute positively with DKK 0.5 to 0.7bn to the own funds statement (expected future profit).
• An increased possibility for raising subordinate loan capital amounts from DKK 1.5 to 2.5bn.
Tryg thus expects an overall positive capital effect in connection with the transition to Solvency II.
reports, which assess the general risk scenario and propose improvements. In 2014, such a risk assessment was also carried out and considered by the company’s day-to-day management and
Supervisory Board, which are consequently entering 2015 with a fully updated view of Tryg’s risk profile. Read more about Tryg’s risk management in Note 1 on page 47.
Small shareholders a) Shareholders holding more than 10,000 shares. Free float is excluding TryghedsGruppen.
Investor Relations (IR) is responsible for communication with the equity market as well as for contact to rating agencies and bond investors.
Tryg’s management and IR hold investor meetings to discuss the company’s development with investors and analysts. In addition, Tryg participates in a number of financial conferences. In 2014, investor meetings were held in the financial centres in
Including a dividend of DKK 27 per share, the share rose by 36.5% (31.4% excluding dividend). By comparison, the OMX C20 CAP index rose by 20.9% in 2014, while the index of insurance shares in Europe,
NASDAQ in Copenhagen is still the primary exchange where most of the trading in the Tryg share takes place. In 2014, NASDAQ Copenhagen accounted for 50% of the turnover of the Tryg share.
In addition, 15% of trading in 2014 was carried out on alternative exchanges (MTF trades), led by
OTC trades) of the share increased from 43 million shares in 2013 to 49 million shares in 2014.
Tryg had a total share capital of DKK 1,492,387,900 on 31 December 2014. This comprised one share class (59,695,516 shares with a nominal value of DKK 25), and all shares rank pari passu. The majority shareholder, TryghedsGruppen smba,
At the end of 2014, there was a free float of 40% of the shares, divided among approximately 27,000 registered shareholders. The 200 largest shareholders owned 89% of the shares.
Financial calendar 2015 25 March 2015 Annual general meeting 26 March 2015 Tryg shares trade ex-dividend 30 March 2015 Payment of dividend based on annual results 2014 15 April 2015 Interim report for Q1 2015 10 July 2015 Half-year report 2015 13 July 2015 Tryg shares trade ex-dividend 15 July 2015 Payment of dividend based on half-year results 2015 9 October 2015 Interim report for Q1-Q3 2015
Distribution a) Dividend proposed by the Supervisory Board for adoption by the annual general meeting.
Tryg’s dividend policy aims to achieve stability in the distribution on a full-year basis. The dividend policy reflects our expectations of high earnings in the insurance business and a low risk profile within the investment activities, as well as the requirement to have a solid capital position based on Tryg’s internal capital model (Individual
Solvency). Tryg’s internal capital model provides the framework for the company’s capital requirement until this is replaced by the Solvency II rules.
Tryg’s dividend policy is based on the following assumptions: • A general objective of creating long-term value for the company’s shareholders.
• A competitive dividend policy in comparison with those of our Nordic competitors.
• Aspiration to distribute a dividend which is steadily increasing in nominal terms on a full-year basis.
In connection with the Capital Markets Day, it was announced that it had been decided to initiate an extraordinary share buy back of DKK 1bn starting on 2 January 2015. This decision was made against the background of Tryg’s solid capital position and expected earnings.
February 2015 and will be sent to shareholders, if requested. The annual general meeting will also be announced on tryg.com.
The company announcements issued in 2014 are available at tryg.com > Investor > News.
Tryg focuses on managing the company in accordance with the principles for good corporate governance and generally complies with the recommendations.
Denmark and abroad. IR also communicates with stakeholders in the social media via Twitter@TrygIR.
The Supervisory Board (Board) is informed of the dialogue with investors and other stakeholders on a regular basis. In November 2014, Tryg held a Capital Markets Day for analysts, investors and journalists, where among other things, new financial targets and customer targets for the period up to 2017 were presented.
This material provides all stakeholders with a comprehensive picture of Tryg’s position and performance.
The consolidated financial statements are presented in accordance with IFRS. At tryg.com, stakeholders are able to subscribe to press releases and company announcements as well as insider trading announcements. A number of internal guidelines ensure that the disclosure of price-sensitive information complies with the stock exchange codes of conduct.
Tryg has adopted a number of policies which describe the relationship between different stakeholders.
of the issued shares and is the only shareholder owning more than 5% of the company’s shares.
Management reports to the Board on strategies and action plans, market developments and group performance, funding issues, capital resources and special risks. The Board holds one annual strategy seminar to decide on and/or adjust the Group’s strategy with a view to sustaining value creation in the company. The Executive Management works with the Board to ensure that the Group’s strategy is developed and monitored. The Board ensures that the necessary competencies and financial resources are available for Tryg to achieve its strategic targets. The Board specifies its activities in a set of rules of procedure and an annual cycle for its work.
Board members elected by the annual general meeting are up for election each year at the annual general meeting. See pages 32-33 for information on when the individual members joined the Board, were re-elected and when their current election period expires. To ensure the integration of new talent on the Board, members elected by the annual general meeting may hold office for a maximum of nine years. Furthermore, members of the
Board must retire at the first annual general meeting following their 70th birthday. The Board has 12 members, five men and seven women (including one male and three female employee representatives ). The Board has members from Denmark,
Corporate Governance, while the other four members are dependent persons as they are appointed by the majority shareholder TryghedsGruppen.
See details about the independent board members in the section Supervisory Board on pages 32-33 and at tryg.com> Governance > Management> Supervisory Board.
The Board performs an annual evaluation of its work and skills to ensure that it possesses the expertise required to perform its duties in the best possible way.
The Board considers the composition, development, risks and succession plans of the Executive
Management in connection with the annual evaluation of the Executive Management, and regularly in connection with board meetings.
Each year, the Board discusses Tryg’s activities to guarantee diversity at management levels. Tryg attaches importance to diversity at all management levels. Tryg has prepared an action plan which sets out specific targets to ensure diversity and equal opportunities and access to management positions for qualified men and women. In 2014, the proportion of women at management level was 36.5%
against 34.6% in 2013. It is Tryg’s target to increase the total proportion of women at management level to 38% in 2015. See the action plan at tryg.com > CSR.
See the tasks of the board committees in 2014 at tryg.com > Governance > Management > Supervisory Board > Board committees.
Board and the Executive Management, including general guidelines for incentive pay.
Total remuneration of the Executive Management in 2014 Value of Car/ Total fixed matching Total DKK Basic salary Pension car allowance salary shares a) fee
The remuneration policy for 2014 was adopted by the Board in December 2013 and by the annual general meeting on 3 April 2014.
Members of the Executive Management are employed on a contractual basis, and all terms of their remuneration are established by the Board. This is based on the work and results of the individual members of the Executive Management and on the need to attract and retain the most highly qualified members of the Executive Management. The fixed pay element must be competitive and appropriate for the market and provide sufficient motivation for all members of the Executive Management to do their best to achieve the company’s defined targets.
The Executive Management’s remuneration consists of a fixed pay element, pension and a variable pay element. The variable pay element constitutes only a limited part of the overall remuneration. The
Board can decide that the fixed pay be supplemented with a variable pay element of up to 10%
of the fixed basic pay including pension at the time of allocation. The variable pay element 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 purpose of the matching shares programme is both to retain members of the Executive Management, and to create a joint financial interest between the Executive Management and shareholders. Read more about the matching shares programme in the remuneration policy at tryg.com > Governance > Remuneration.
Each member of the Executive Management is entitled to 12 months’ notice of termination and 12 months’ severance pay. However, the Group
Financial Business Act. In its policies, the Board defines Tryg’s risk management framework as regards insurance risk, investment risk and operational risk, as well as IT security. Guidelines are issued by the Board to the Executive Management.
Tryg engages in ongoing risk identification, mapping insurance risks and other risks related to realising the Group’s strategy or which may have a potentially substantial impact on the Group’s financial position. The process involves registering and continually monitoring the risks identified. In 2014, Tryg undertook an Own Risk and Solvency
The Board and the Executive Management approve and monitor the Group’s overall policies and guidelines, procedures and controls in important risk areas. They receive reports about developments in these areas and about the ways in which the frameworks are used. The Board checks that the company’s risk management and internal controls are effective. Non-compliance with the frameworks and guidelines established by the Board is reported to the Board. The Risk
The Group’s internal control systems are based on clear organisational structures and guidelines, general IT controls and segregation of functions, which are supervised by the internal auditors. Tryg has a decentralised set-up whereby risk managers in the business areas carry out controlling tasks for the risk management environment and Tryg’s compliance function.
Read more about Tryg’s risk management in the section Capital and risk management on pages 24-25 and in Note 1 on page 47.
After a call where five external auditors were evaluated, at the beginning of 2014 the Board decided to recommend Deloitte, and Deloitte was reappointed at the annual general meeting in April 2014. At least once a year, the internal and independent auditors meet with the Audit Committee without the presence of the Executive Management. The Chairman of the Audit Committee deals with any matters that need to be reported to the
Corporate Governance with the exception of the recommendation for the number of independent members of the board committees, with which Tryg complies partially; see item 3.4.2 of the Recommendations on Corporate Governance. The deviation is explained in Tryg’s statutory corporate governance report, which is available at tryg.com > Investor > Download.
Born 1946. Joined: 2006. Nationality: Swedish. Professional board member. Former CEO of Carlsberg A/S.
Educational background: Economist and engineer. Chairman: Sveriges Bryggerier AB, East Capital Explorer AB, Pieno Zvaigzdes AB, Norrköpings Segel Sällskap and Östkinds Häradsallmänning. Board member: Tryg A/S, Tryg Forsikring A/S and Green carrier AB. Committee memberships: Remuneration Committee in Tryg A/S. Number of shares held: 100 Change in portfolio in 2014: 0
Chairman Born 1952. Joined: 2012. Nationality: Danish. Professional board member. Adjunct Professor, CBS. Former Group CEO of the FLSmidth Group.
Number of shares held: 366 Change in portfolio in 2014: 0
Education: MSc in Political Science, the certified IoD Board Program. Board member: Tryg A/S and Tryg Forsikring A/S, TryghedsGruppen smba, California International Business University and Lær for Livet.
Anya Eskildsen has experience within financial management, strategic management, communication and marketing, innovation and ideas generation and international system exports.
Members of the Board are elected for a term of one year. Employee representatives are, however, elected for a term of four years. The next election of employee representatives will be held in 2016.
a) Dependent member of the Supervisory Board. b) Independent member of the Supervisory Board, as per the definition in
Employee representative Born 1955. Joined: 2012. Nationality: Norwegian. Chairman of Finansforbundet, Tryg Norway. Employed in 1996.
Education: Educated in the area of agricultural mechanics. Board member: Tryg A/S and Tryg Forsikring A/S. Committee memberships: Remuneration Committee in Tryg A/S and Lay Judge in the District Court of Bergen. Number of shares held: 20 Change in portfolio in 2014: +20
Employee representative Born 1959. Joined: 2010. Nationality: Swedish. Claims handler in Moderna (Swedish branch). Employed in 2002.
Education: Insurance training. Board member: Tryg A/S and Tryg Forsikring A/S. Number of shares held: 220 Change in portfolio in 2014: +20
a) Dependent member of the Supervisory Board b) Independent member of the Supervisory Board, as per the definition in
Education: A.P. Møller Group’s international shipping education, Graduate Diploma in Financing and various international management programmes.
Board member: Tryg Garantiforsikring A/S, Norsk Naturskadepool and Tryg Almennyttige Stiftelse. Member of the committee of shareholders of Livsforsikringsselskapet Nordea Liv Norge AS.
Number of shares held: 3,305 Change in portfolio in 2014: +598
Board member: Tryg Garantiforsikring A/S, Svensk Försäkring, Försäkringsbranschens Arbetsgivarorganisation, Försäkringsbranschens Pensionskassa, Securator A/S (Chairman) and Moderna Djurförsäkring i Norr AB.
Number of shares held: 5,411 Change in portfolio in 2014: +806
Board member: Tryg Garantiforsikring A/S, Thermo- pylae AS (Chairman) and Finansnæringens Fellesorganisasjon, TGS Nopec ASA and P/f Bakkafrost.
Number of shares held: 6,000 Change in portfolio in 2014: +1,090
Rikke Larsen, former Group Executive Vice President, People and Reputation left the Group Executive Management in October 2014.
Corporate Social Responsibility is associated primarily with our insurance products, our history and our expertise, and our efforts focus on climate, claims prevention, inclusion and employee well-being.
Guiding Principles on Business and Human Rights; these focus on the possibilities and risks inherent in our business activities with regard to the climate, human rights, labour rights and anti-corruption.
Tryg’s CSR policy is approved annually by the Supervisory Board. Download the policy at tryg.com >
In Tryg, we work actively to prevent and minimise the risk of damage and not only help once the damage has happened. Tryg focuses on how customers can avoid storm damage, and offers for example to check their basements for free. By being aware of the risk of flooding due to cloudbursts, it is possible to take preventive action and mitigate or avoid damage.
Bergen. At the same time, focus has been on reducing carbon emissions from travel by plane and car.
relative to 2007. The target for 2015 is a reduction of 50% relative to 2007. The reduction was primarily due to the reduced consumption of heating oil, as the office in Bergen made more use of heat pumps instead of oil boilers for heating, which also explains the increase in electricity consumption. Read more about the climate initiatives at tryg.com > CSR > Thematic areas > Climate.
In Tryg, we respect human rights in all aspects of our work, and we want to improve our preventive efforts to minimise the risk of human rights violations.
Danish employees were of non-Western origin; thus a) Non-Western background has been compiled by Statistics Denmark.
Read more about guidance in six languages at tryg.dk > Privat > Kontakt os > Other languages.
against 34.6% in 2013. The target figure for 2015 is 38% for more women in management. Read more about women in management at tryg.com > CSR > CSR strategy > Plans of action.
Tryg has introduced a number of initiatives to reduce burglaries. As the first insurance company in Denmark, Tryg is offering synthetic DNA marking to customers. Through customers marking their valuable possessions, we are supporting police investigations of burglaries and ensuring that burglars can be linked to the crime scene. In other countries, DNA marking has been shown to be an effective deterrent against burglary. Tryg has launched an experiment in Sønderborg, with the aim of documenting the preventive effect of DNA marking in Denmark. The purpose is to raise awareness of the benefits of DNA marking with a view to the long-term crime prevention.
As part of our daily work, we handle sensitive information from our customers, and it is crucial that they trust our handling of their personal data.
In 2014, we therefore held four workshops about personal data protection in Denmark.
Tryg Plus customers are helped in case of theft or abuse of their personal data. In 2014, 240 Danish and 49 Norwegian customers contacted Tryg ID.
The whistleblower scheme was applied four times in 2014. Read more about the ethical hotline at tryg.com > Governance > Ethical Hotline.
To ensure that Tryg’s values and fundamental desire to run a responsible business are also reflected in the way they do business, our suppliers are required to conduct themselves in a socially responsible manner. Among other things, suppliers of automobile services to our customers and services to our business units must report annually on specific initiatives and results in the environmental area and with respect to human rights, labour rights and anti-corruption. In 2014, 25 caravan workshops reported on their CSR efforts, and in 2015 an additional 400 car repairers will be required to report.
Read more about Tryg’s CSR KPIs at tryg.com > CSR > CSR strategy > CSR KPIs.
Tryg employees who are exposed to discrimination in their daily work must first contact their immediate superior. If this does not solve the problem, employees can contact their union representative or HR.
In Tryg, we screen our investments to make sure that they do not have a negative impact on the environment, human rights and anticorruption. The screening is carried out by
The Supervisory Board and the Executive Management have today considered and adopted the annual report for 2014 of Tryg A/S and the Tryg
December 2014 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
Financial Business Act and Danish disclosure requirements for listed financial services companies, and for such internal control as management determines is necessary to enable the preparation and fair presentation of consolidated and parent financial statements that are free from material misstatement, whether due to fraud or error.
Management is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International
Independent auditor’s reports preparation of consolidated and parent financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as the overall presentation of the consolidated and parent financial statements.
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 2014, and of the results of its operations for the financial year 1 January to 31 December 2014 in accordance with the Danish Financial Business
Other key ratios are calculated in accordance with ’Recommendations & Financial Ratios 2010’ issued by the Danish Society of Financial Analysts.
a) Profit/loss on discontinued and divested business after tax includes mainly Marine Hull insurance, which was divested in 2010 and 2014 and the Finnish branch of Tryg Forsikring, which was sold in 2012.
Profit/loss on gross business 3,313 2,085 2,344 894 647 Profit/loss on ceded business -341 349 86 507 -311 Insurance technical interest, net of reinsurance 60 62 62 171 124
Statement of financial position Total provisions for insurance contracts 31,692 32,939 34,355 34,220 32,031 Total reinsurers' share of provisions for insurance contracts 1,938 2,620 2,317 2,067 1,588
Solvency ratio (Solvency I – ratio between base capital and weighted assets) 87 90 90 112 125
Note Investment activities 14 Income from associates 10 6 Income from investment property 94 97 7 Interest income and dividends 949 1,029
Total investment return 774 1,071 4 Return on insurance provisions -414 -483
Note General insurance Gross premiums written 18,672 19,820 Ceded insurance premiums -1,059 -1,220 Change in premium provisions 268 36 Change in reinsurers' share of premium provisions -57 24 3 Premium income, net of reinsurance 17,824 18,660 4 Insurance technical interest, net of reinsurance 60 62
Claims paid -13,695 -14,059 Reinsurance cover received 1,361 1,034 Change in claims provisions 1,045 -352 Change in the reinsurers' share of claims provisions -688 406 5 Claims, net of reinsurance -11,977 -12,971
Other comprehensive income which cannot subsequently be reclassified as profit or loss Change in equalisation provision and other provisions 26 0 Revaluation of owner-occupied property for the year 2 9 Tax on revaluation of owner-occupied property for the year 0 -3 Actuarial gains/losses on defined-benefit pension plans -46 179 Tax on actuarial gains/losses on defined-benefit pension plans 12 -54
Other comprehensive income which can subsequently be reclassified as profit or loss Exchange rate adjustments of foreign entities for the year -178 -326 Hedging of currency risk in foreign entities for the year 191 305 Tax on hedging of currency risk in foreign entities for the year -47 -76
Operating equipment 97 122 Owner-occupied property 1,153 1,304 Assets under construction 11 0 12 Total property, plant and equipment 1,261 1,426 14 Equity investments in associates 225 215
Deposits with credit institutions 667 1,301 Derivative financial instruments 1,318 692
Reinsurers' share of premium provisions 219 237 19 Reinsurers' share of claims provisions 1,719 2,383 16 Total reinsurers' share of provisions for insurance contracts 1,938 2,620
Total receivables in connection with direct insurance contracts 1,232 1,088 Receivables from insurance enterprises 208 299 Other receivables 222 1,027 17 Current tax assets 0 145 Cash at bank and in hand 505 553
Note Equity and liabilities 18 Equity 11,119 11,107 1 Subordinate loan capital 1,768 1,818
Debt relating to direct insurance 565 447 Debt relating to reinsurance 188 330 23 Amounts owed to credit institutions 116 6 24 Debt relating to unsettled funds transactions and repos 2,902 2,821 15 Derivative financial instruments 799 514 17 Current tax liabilities 429 409 Other debt 1,153 1,033
Total equity and liabilities 52,224 53,371 1 Risk and capital management 26 Contractual obligations, collateral and contingent liabilities 27 Acquisition of subsidiaries 28 Related parties 29 Financial highlights 30 Accounting policies
Proposed dividend per share DKK 29 (DKK 27 in 2013) 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 (59,695,516 shares). The dividend is not paid until approved by the shareholders at the annual general meeting.
Nullification of own shares -41 41 0 Dividend paid -1,656 -1,656 Dividend own shares 59 59 Purchase and sale of own shares -1,005 -1,005 Exercise of share options 49 49 Issue of employee shares 45 45 Issue of share options and matching shares 3 3
Total changes in equity in 2014 -41 2 -34 45 -40 5 75 12 2013 Profit/loss for the year -156 869 1,656 2,369
Dividend paid -1,594 -1,594 Dividend, own shares 15 15 Purchase and sale of own shares -800 -800 Exercise of share options 100 100 Issue of share options and matching shares 4 4
Total changes in equity in 2013 0 6 -97 0 -156 313 62 128
Change in cash and cash equivalents, net -37 88 Additions relating to purchase of subsidiaries 14 0 Exchange rate adjustment of cash and cash equivalents, 1 January -25 -39
Interest income 995 1,006 Interest expenses -115 -142 Dividend received 39 19
Tryg’s risk profile is continuously measured, quantified and reported to the management and the Supervisory Board.
Given that the requirements for the Supervisory Board’s involvement in the company’s capital and risk management are considerable and ever-growing, Tryg’s Supervisory Board has decided to set up a special Risk Committee to address these topics separately in the course of the year. The Committee meets five times a year for a detailed review of various risk management topics and regularly keeps the entire Supervisory Board up-to-date on the status.
At the second level, there is also Tryg’s committee environment which deals with and monitors risk topics of a more principal and interdisciplinary nature.
Non-life insurance Health insurance Market risk Counterpart risk Operational risk Tryg
• Support of a steadily rising nominal dividend per share, where 60-90% of the net profit or loss for the yearis paid out in two instalments.
Viewed in isolation, in order to fulfil the first two objectives, the company’s capital buffer must be as large as possible, while the third objective is best achieved by keeping the capital buffer to a minimum or by ensuring that the capital base is mostly made up of subordinate loan capital. The balance between the different objectives and the resulting capital requirement is assessed in the company’s capital plan.
The model reflects all significant risks and takes (like the Solvency II standard model) into account the diversification between the different types of risks.
Tryg’s risk activities are underpinned by continuous risk management processes, which are dealt with by the Supervisory Board and the risk committee during the year, while the ORSA report is an annual summary document assessing all these processes and presenting the total risk picture to Tryg’s Supervisory Board.
Insurance risk Insurance risk comprises two main types of risks: underwriting risk and provisioning risk.
Underwriting risk is managed first and foremost through the company’s insurance policy defined by the Supervisory Board, and administered through business procedures, insurance take out guidelines etc. Underwriting risk is assessed in Tryg’s capital model, determining the capital impact from various insurance products.
Reinsurance is used as an important tool to reducing underwriting risk where a special need for this exists.
Tryg has also taken out reinsurance for the risk of large claims occurring in sectors with very large sums insured. Tryg’s largest individual building and contents risks are covered by up to DKK 1.7bn. Retention for large claims is DKK 100m, gradually falling to DKK 25m. Single risks exceeding DKK 1.7bn are hedged individually.
For Tryg’s subsidiary Tryg Garantiforsikring A/S, the maximum retention is DKK 30m.
The use of reinsurance creates a natural counterparty risk. This risk be handled by applying a wide range of reinsurers with at least an ‘A’ rating and USD 100m in capital.
Long-tail provisions in particular are subject to interest rate and inflation risk. Interest rate risk is hedged by means of Tryg’s match portfolio which corresponds to the discounted claims provisions. In order to counter the inflation risk of Danish workers’ compensation claims provisions, Tryg has bought zero coupon inflation swaps.
Tryg determines the claims provisions via statistical calculations and individual assessments. At the end of 2014, Tryg’s claims provisions totalled DKK 25,272m with an average duration of 3.7 years. The duration expresses the average length of time from the provision is determined until the compensation is paid and varies considerably from sector to sector.
Investment risk The overall framework for managing investment risk is defined by the Supervisory Board in Tryg’s investment policy. In overall terms, Tryg’s investment portfolio is divided into a match portfolio and a free portfolio.
Effect of 1% change in: Combined ratio (1 percentage point) +/- 184 +/- 192 Claim frequency (1 percentage point) +/- 1,369 +/- 1,437 Average claim +/- 122 +/- 139 Premium rates +/- 190 +/- 190
Equity market 15% decline in equity market -393 -398 Impact of derivatives -72 -35
Real estate market 15% decline in real estate markets -488 -499
Currency market Equity: 15% decline in exposed currency (exclusive of EUR) relative to DKK -835 -1,031 Impact of derivatives 791 985 Net impact of exchange rate decline -44 -46 Technical result per year: Impact of 15% change in NOK and SEK exchange rates relative to DKK +/- 230 +/- 195 a) Additional sensitivity information can be found in Note 20 ‘Pensions and similar obligations’
Tryg’s property portfolio mainly comprises owner- occupied and investment properties, the value of which is adjusted based on the conditions on the property market through internal valuations backed by external valuations. At the end of 2014, investment properties accounted for 4.9%, while owner-occupied properties accounted for 2.7% of the total investment assets. Property investments are expected to be at a similar level in 2015.
Annual report 2014 | Tryg A/S | | Menu – Financial statements fluctuations in the other Scandinavian currencies due to its ongoing insurance activities. Premiums earned and compensation paid in other currencies create a natural currency hedge, for which reason other risk mitigation measures are not required in this area. However, the part of equity held in other currencies than Danish kroner will be exposed to currency risk. This risk is hedged on an ongoing basis using currency swaps.
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 an adequate control environment for its operations. In practice, this work is organised by means of procedures, controls and guidelines covering the various aspects of the Group’s operations. Tryg has also set up a security and investigation unit to handle internal fraud, IT security, physical security and contingency plans.
Tryg has set up a crisis management structure to deal with the eventuality that Tryg is hit by major crises.
Strategic risk The strategic risk is the risk of loss as a result of Tryg’s chosen strategic position. The strategic position covers both business transactions, IT strategy, choice of business partners and changed market conditions.
Tryg’s strategic position is determined by Tryg’s Supervisory Board in close collaboration with the Group Executive Management.
Certain parts of the operationalisation take place via the decentralised risk manager structure, ensuring additional anchoring in the individual business areas.
The management of this type of risk will be handled in the individual business areas, which monitor the market and adapt the products as the conditions change. In the event of a change in insurance terms, it is ensured that Tryg’s reinsurance cover is consistent with the new conditions.
One example of this is drone insurance, where Tryg in 2014 decided to insure commercial purpose drones of up to 25 kg. In this context, there has been an ongoing dialogue with Tryg’s reinsurers to ensure that Tryg does not accept risks without having considered and identified the specific risk at the desired level.
Estimated accumulated claims End of year 10,443 11,172 10,954 11,879 12,451 13,811 16,056 16,386 13,905 13,754 13,074 1 year later 10,468 11,065 11,214 12,464 13,775 14,456 16,154 16,783 13,877 14,065 2 years later 10,334 10,916 10,747 13,017 13,645 14,475 16,103 16,776 13,814 3 years later 10,224 10,539 10,957 12,994 13,657 14,264 15,982 16,726 4 years later 9,962 10,666 10,893 12,993 13,616 14,145 15,892 5 years later 10,035 10,609 10,884 12,898 13,523 14,044 6 years later 9,814 10,514 10,862 12,771 13,491 7 years later 9,702 10,526 10,825 12,764 8 years later 9,666 10,499 10,641 9 years later 9,625 10,393 10 years later 9,393 9,393 10,393 10,641 12,764 13,491 14,044 15,892 16,726 13,814 14,065 13,074 144,298
Provisions before discounting, end of year 219 495 702 999 1,592 1,555 2,091 2,395 2,850 3,816 6,860 23,574
Reserves from 2003 and prior years 2,194 Other 671 Gross claims provisions, end of year 25,272
Estimated accumulated claims End of year 9,668 10,248 10,676 11,377 12,288 13,524 15,381 14,921 13,666 13,198 12,813 1 year later 9,678 10,246 10,936 11,995 13,548 14,099 15,403 14,612 13,606 13,096 2 years later 9,506 10,092 10,483 12,535 13,452 14,140 15,359 14,483 13,503 3 years later 9,397 9,720 10,661 12,506 13,474 13,973 15,260 14,392 4 years later 9,149 9,822 10,596 12,486 13,433 13,852 15,161 5 years later 9,212 9,770 10,592 12,420 13,354 13,745 6 years later 8,991 9,689 10,571 12,264 13,316 7 years later 8,890 9,702 10,533 12,266 8 years later 8,856 9,682 10,351 9 years later 8,811 9,564 10 years later 8,580 8,580 9,564 10,351 12,266 13,316 13,745 15,161 14,392 13,503 13,096 12,813 136,786
Provisions before discounting, end of year 163 463 694 986 1,578 1,545 1,922 2,232 2,808 3,417 6,690 22,497
Reserves from 2003 and prior years 1,981 Other 224 Claims provisions, net of reinsurance, end of year 23,553
Impact of exchange rate fluctuations in SEK and NOK on the statement of financial position
Reinsurers' share of provisions for insurance contracts 1,938 2,620 -682 -62 -620
Liquidity risk Maturity of the Group’s financial obligations including interest 2014 0-1 years 1-5 years > 5 years Total
Loan terms: Lender Listed bonds Listed bonds Principal EUR 150m NOK 800m Issue price 99.017 100 Issue date December 2005 March 2013 Maturity year 2025 Perpetual Loan may be called by lender as from 2015 2023 Repayment profile Interest-only Interest-only Interest structure 4.5% (until 2015) 3.75 % above NIBOR 3M (until 2023) 2.1% above EURIBOR 3M (from 2015) 4.75 % above NIBOR 3M (from 2023)
The share of capital included in the calculation of the capital base total DKK 1,496m (DKK 1,551m in 2013).
Profit/loss on ceded business -43 29 338 9 16 349 Insurance technical interest, net of reinsurance 26 12 13 11 0 62
Equity investments in associates 215 215 Reinsurers' share of premium provisions 8 9 219 1 0 237 Reinsurers' share of claims provisions 265 404 1,641 73 0 2,383 Other assets 49,778 49,778
Claims ratio, net of ceded business 69.0 72.5 70.9 75.2 82.3
Claims ratio, net of ceded business 67.9 69.2 71.4 76.4 79.8
Number of full-time employees, continuing business at 31 Dec. 3,599 3,703 3,913 4,076 4,101 Number of full-time employees, discontinued and divested business at 31 December 0 0 189 242 191 b) Amounts relating to eliminations, restructuring expenses and discontinued and divested business are included under 'Other'.
Annual report 2014 | Tryg A/S | | Menu – Financial statements 2 Technical result, net of reinsurance, by line of business
Accident and Worker’s Motor comprehensive Marine, aviation and DKKm health Health care compensation Motor TPL insurance cargo insurance
Profit/loss on ceded business - 7 - 3 - 1 0 - 8 - 36 - 51 - 36 16 - 2 21 - 91 Insurance technical interest, net of reinsurance 5 4 1 1 3 - 6 7 7 11 14 1 1
Gross claims ratio 69.9 72.6 77.2 73.4 96.9 65.8 93.7 86.7 -4.9 272.4 79.2 74.4 Combined ratio 84.3 89.9 96.5 94.1 115.4 75.9 109.8 95.4 66.4 93.9 93.5 88.6
Average claims DKK b) 9,615 10,508 62,035 56,519 20,263 25,531 81,763 59,246 1,068,663 6,994,362 5,673 8,265 Total claims 333,943 348,296 29,686 38,033 4,255 4,349 10,454 10,566 83 127 79,007 54,848 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 in the year.
Annual report 2014 | Tryg A/S | | Menu – Financial statements 3 Premium income, net of reinsurance Direct insurance 18,872 19,740 Indirect insurance 67 83
Gross Ceded Gross Ceded 4 Insurance technical interest, net of reinsurance Return on insurance provisions 414 483 Discounting transferred from claims provisions -354 -421 5 Claims, net of reinsurance Claims -13,376 -15,273 Run-off previous years, gross 726 862
Reinsurance cover received 268 1,332 Run-off previous years, reinsurers' share 405 108 6 Insurance operating costs, net of reinsurance Commissions regarding direct insurance contracts -395 -379 Other acquisition costs -1,560 -1,848
Insurance operating costs, gross -2,689 -3,008 Commission from reinsurers 102 105
The fee is divided into: Statutory audit -3 -6 Tax advice -1 -1 Other services -7 -6
Expenses have been incurred for the Group´s Internal Audit Department. -10 -11
Insurance operating costs and claims include the following staff expenses: Salaries and wages -2,098 -2,122
Allocated share options and matching shares -3 -4 Pension plans 143 -362 Other social security costs -5 -5 Payroll tax -351 -355
Remuneration for the Supervisory Board and Executive Management is disclosed in note 28 'Related parties'.
Average number of full-time employees during the year (continuing business) 3,639 3,800
Tryg did not allocate share options in 2014. At 31 December 2014, the share option plan comprised 53.380 share options (229.883 share options at 31 December 2013). 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 0,1 % of the share capital in Tryg A/S if all share options are exercised.
Outstanding options from 2009-2011 allocation 31 Dec. 2014 22,690 26,572 4,118 53,380 5 14
Number of options exercisable 31 Dec. 2014 22,690 26,572 4,118 53,380
Number of options exercisable 31 Dec. 2013 40,756 53,727 9,046 103,529
Average per Total value Average per matching share at time of matching share Total value Group Executive Other senior at grant date allocation at 31 Dec. at 31 Dec. Management employees Total DKK DKKm DKK DKKm
Matching shares allocated in 2011-2013 at 31.12.13 14,855 10,375 25,230 339 9 525 13
Interest expenses Interest expenses subordinate loan capital and credit institutions -90 -89 Interest expenses, other -25 -23 8 Value adjustments Value adjustments concerning financial assets or liabilities at fair value with value adjustment in the income statement: Equity investments -18 -42 Unit trust units 354 578 Share derivatives 17 30
Value adjustments concerning assets or liabilities that cannot be attributed to IAS 39: Investment property 23 -17 Owner-occupied property -106 -76
9 Tax Tax on accounting profit/loss -809 -749 Difference between Danish and foreign tax rates -58 -58 Tax adjustment, previous years -8 -2 Adjustment of non-taxable income and costs 140 152 Change in valuation of tax assets -24 -20 Change in tax rate 6 58 Other taxes -2 -1
Profit/loss on gross business 14 -2 Insurance technical interest, net of reinsurance 0 1
Amortisation and write-downs Amortisation and write-downs at 1 January 0 -89 -819 -92 -1,000
Moderna In 2009, Tryg acquired Moderna Försäkringar Sak AB, Modern Re S.A., Netviq AB and MF Bilsport & MC Specialförsäkringar. The insurance activities were incorporated into the Tryg Group's business structure in 2009 and are reported under Sweden. In 2010, the companies, excluding Modern Re S.A., were merged into Tryg Forsikring A/S as Moderna Forsäkringar, a branch of Tryg Forsikring A/S. Modern Re S.A. was discontinued in 2011.
Assumed annual Assumed annual Required return 2014 groeth 0-10 years growth > 10 years before tax
Software and assets under construction As at 31 December 2014, management performed a test of the carrying amounts of software and assets under construction. The impairment test compares the carrying amount with the estimated present value of future cash flows. The test indicated impairment of a small number of projects, resulting in impairment losses. The total impairment of intangible assets amounts to DKK 0m (DKK 13m in 2013).
12 Property, plant and equipment Owner-occupied Assets under DKKm Operating equipment property construction Total
Accumulated depreciation and value adjustments Accumulated depreciation and value adjustments at 1 January -90 -343 -90 -523
Accumulated depreciation and value adjustments at 31 December -115 -434 -85 -634
The following return percentages have been applied: Return percentages, weighted average 2014 2013
In determining the fair value of the properties, not only publicly available market data are included, corresponding to the ‘non-observable input’ in the fair value hierarchy.
No reclassifications have been made between this category and other categories in the fair value hierarchy during the year.
Total rental income for 2014 is DKK 124m (DKK 126m in 2013).
Total expenses for 2014 are DKK 30m (DKK 29m in 2013). Of this amount, expenses for non-let property total DKK 4m (DKK 2m in 2013), total expenses for the income-generating investment property are DKK 26m (DKK 27m in 2013).
Deposits with credit institutions 667 0 0 667 Derivative financial instruments, assets 0 1,318 0 1,318 Derivative financial instruments, debt 0 -799 0 -799
Deposits with credit institutions 1,301 0 0 1,301 Derivative financial instruments, assets 0 692 0 692 Derivative financial instruments, debt 0 -514 0 -514
Carrying amount at 1 January 150 209 Exchange rate adjustments -4 -10 Gains/losses in the income statement -18 -48
Gains/losses in the income statement for assets held at the statement of financial position date recognised in value adjustments -18 -42
Bonds measured on the basis of observable inputs consist of Norwegian bonds issued by banks and to some extent Danish semi-liquid bonds, where no quoted prices based on actual trades are available. No significant reclassifications have been made between the categories 'Quoted prices' and 'Observable input' in 2014. Inflation derivatives are measured at fair value on the basis of non-observable input and are included under claims provisions at a fair value of DKK -438m (DKK -166m in 2013).
15 Financial assets Financial assets at fair value with value adjustments in the income statement 43,030 42,782 Derivative financial instruments at fair value used for hedge accounting with value adjustment in other comprehensive income 142 73 Receivables measured at amortised cost with value adjustment in the income statement 2,167 3,112
Financial liabilities Derivative financial instruments at fair value with value adjustments in the income statement 799 514 Financial liabilities at fair value with value adjustment in the income statement 7,121 6,864
Value adjustments Value adjustments of foreign entities recognised in other comprehensive income in the amount of: Value adjustments at 1 January 201 527 Value adjustment for the year -178 -326
Total derivative financial instruments 37,370 81 39,003 12 Due after less than 1 year 19,438 86 16,003 -58
Annual report 2014 | Tryg A/S | | Menu – Financial statements 17 Current tax Net current tax at 1 January -264 -652 Exchange rate adjustments 26 64 Current tax for the year -632 -631 Current tax on equity entries -47 -76 Adjustment of current tax in respect of previous years -24 14 Tax paid for the year 512 1,017
Number of shares at 1 January 59,374 60,695 1,942 621 Bought during the year -1,793 -1,621 1,793 1,621
Used in connection with exercise of incentive programme 243 300 -243 -300
15 Financial assets (continued) Receivables Receivables from insurance enterprises 1,439 1,387 Reverse repos 0 885 Other receivables 223 142
Specification of write-downs on receivables from insurance contracts: Write-downs at 1 January 112 113 Exchange rate adjustments -4 -7 Transferred to assets held for sale and write-downs and reversed write-downs for the year -1 6
Including writedowns of due amounts 107 112 Other receivables do not contain overdue receivables 16 Reinsurer's share Reinsurers' share 1,958 2,647 Write-downs after impairment test -20 -27
DKKm Gross Ceded Net of reinsurance 19 Claims provisions 2014 Claims provisions at 1 January 25,271 -1,780 23,491 Value adjustments of provisions , beginning of year -839 58 -781
Discounting and exchange rate adjustments 1,104 -51 1,053 Claims provisions at 31 December 24,601 -1,272 23,329
Paid in the financial year in respect of the current year -6,571 43 -6,528 Paid in the financial year in respect of prior years -6,604 628 -5,976
Solvency ratio (Solvency I – ratio between capital base and weighted assets) 87 90
Annual report 2014 | Tryg A/S | | Menu – Financial statements 20 Pensions and similar obligations (continued) Specification of pension cost for the year: Present value of pensions earned during the year 38 56 Interest expense on accrued pension obligation 39 42 Expected return on plan assets -33 -23 Accrued employer contributions 6 11 Effect associated with change in agreement -421 0
The premium for the following financial years is estimated at: 53 78 Number of active persons and number of pensioners 1,289 1,376
Specification of change in recognised pension obligations: Recognised pension obligation at 1 January 1,756 2,151 Adjustment regarding plan changes not recognised in the income statement and expected estimate deviation a) -421 0 Exchange rate adjustments -123 -278 Present value of pensions earned during the year 41 63 Capital cost of previously earned pensions 38 39 Acturial gains/losses 58 -157 Paid during the period -59 -62
Change in carrying amount of plan assets: Carrying amount of plan assets at 1 January 1,033 1,109 Exchange rate adjustments -72 -144 Investments in the year 57 81 Estimated return on pension funds 32 21 Acturial gains/losses 4 10 Paid during the period -44 -44
Total recognised obligation at 31 December 342 791 a) The change of the pension scheme in Norway is carried out in the same way as has been done for other major financial companies in Norway and causes a reduction in the provision.
Impact on equity from the following changes: Interest rate increase of 0.3 percentage point 27 80 Interest rate decrease of 0.3 percentage point -30 -70 Pay increase rate, increase of 1 percentage point -55 -65 Pay increase rate, decrease of 1 percentage point 45 69 Turnover, increase of 2.0 percentage point 49 66 Turnover, decrease of 2.0 percentage point -61 -84
Other provisions relate to provisions for the Group’s own insurance claims and restructuring costs. The provision for restructuring costs has been reassessed and amounts to DKK 79m (DKK 23m at 31 December 2013).
Unaccrued timing differences of statement of financial position items 146 122
Development in deferred tax Deferred tax at 1 January 1,057 1,143 Exchange rate adjustments -62 -119 Change in deferred tax relating to change in tax rate -6 -50 Change in deferred tax previous years -16 16 Change in capitalised tax loss 6 5 Change in deferred tax taken to the income statement 22 -7 Change in valuation of tax asset 24 20 Change in deferred tax taken to equity -3 49
The losses are not recognised as tax assets until it has been substantiated that the company can generate sufficient future taxable income to offset the tax loss. The total current and deferred tax relating to items recognised in equity is recognised in the statement of financial position in the amount of DKK 14m (DKK -133m at 31 December 2013).
Obligations due by period 2014 <1 year 1-3 years 3-5 years > 5 years Total
Tryg has signed the following contracts with amounts above DKK 50m: Outsourcing agreement with TCS for DKK 193m for a 4 year period, which expires in 2017. Lease contracts on premises for DKK 265m. The contracts expire after 5 years. Operation of mainframe contract of DKK 62m, which expires in late 2017. Telephony services contract with Telenor for DKK 84m, which expires in 2015 and 2017 respectively.
• Other costs, including depreciation of property, plant and equipment and amortisation of intangible assets, have been calculated on the basis of the fair values determined in the pre-acquisition balance sheets, rather than the original carrying amounts.
Gruppen smba and the subsidiaries of TryghedsGruppen smba (other related parties). Related parties with significant influence include the Supervisory Board, the Executive Management and their members ’ family.
Claims payments - Parent company (TryghedsGruppen smba) 0.1 0.2 - Other related parties 0.3 0.2
Djurförsäkring i Norr AB by acquiring all shares in the companies. Securator A/S is a Danish market leader within the sale and brokering of multi-annual product insurance via dealers in the electronics and telecommunications sector and supermarket chains. The acquisition is expected to increase Tryg's market share within product insurance by providing access to Securator A/S's customer portfolio and distribution channels. Optimal Djurförsäkring i Norr AB is a swedish market leader within the sale of pet insurance. Tryg also expects to realise cost savings through synergies.
Intangible assets Intangible assets 0 Equipment 1 Receivables, other assets and accrued income 65 Provisions for insurance contracts -37 Other provisions 0 Debt and accruals and deferred income -40
The Executive Management is paid a fixed remuneration and pension. The variable salary is awarded in the form of a matching share programme, see 'Corporate governance'. Besides this, the directors have free car appropriate to their position as well as other market conformal employee benefits.
Intra-group trading involved:: 2014 2013 - Providing and receiving services 1 0
The annual report of the parent company is prepared in accordance with the executive order on financial reports presented by insurance companies and lateral pension funds issued by the Danish FSA. 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.
Change in accounting policies Some of the Group's assets, mainly "Investment property " of DKK 191m in 2013, have been reclassified to "Investments in associates" following the implementation of IFRS 11 and IAS 28, according to which the Group's interest in joint ventures must be accounted for using the equity method. So far, property has been recognised using the pro-rata method. A reclassification has been made in respect of other debt of DKK 431m in 2013 from the main item "Accruals and deferred income" to "Total debt". The reclassification is due to change in due date.
Implementation of changes to accounting standards and interpretation in 2014 The International Accounting Standards Board (IASB) has issued a number of changes to the international accounting standards, and the International Financial Reporting Interpretations Committee (IFRIC) has also issued a number of interpretations.
No standards or interpretations have been implemented for the first time for the accounting year that began on 1st January 2014 that will have a significant impact on the group.
Associates and Joint Ventures’ • IFRIC 21 ‘Levies’ • Amendments to IAS 19 ‘Clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periodes of service’
• Amendments to IFRS 8 ‘aggregation of segments, reconciliation of segment assets’ a)
• Amendments to IAS 28 ‘regarding the sale or contribution of assets between an investor and its associate or joint venture’ c)
b) enters into force for the accounting year commencing 1 January 2015 or later.
d) enters into force for the accounting year commencing 1 January 2017 or later.
e) enters into force for the accounting year commencing 1 January 2018 or later.
Changes to accounting estimates There have been no changes to the accounting estimates in 2014.
Valuation of property Property is divided into owner-occupied property and investment property. Owner-occupied property is assessed at the reassessed value that is equivalent to the fair value at the time of reassessment, with a deduction for depreciation and write-downs. The fair value is calculated based on a market-determined rental income, as well as operating expenses in proportion to the property’s required rate of return in per cent.
Investment property is recognised at fair value. The calculation of fair value is based on market prices, taking into consideration the type of property, location and maintenance standard, and based on a market- determined rental income as well as operating expenses in proportion to the property’s required rate of return. Cf. note 12 and 13.
Recognition and measurement The annual report has been prepared under the historical cost convention, as modified by the revaluation of owneroccupied property, where increases are recognised in other comprehensive income, and revaluation of investment property, financial assets held for trading and financial assets and financial liabilities (including derivative instruments ) at fair value in the income statement.
The tax effect of revaluations is taken into account. The acquisition price of an enterprise consists of the fair value of the price paid for the acquired enterprise. If the final determination of the price is conditional upon one or more future events, such events are recognised at their fair values at the date of acquisition. Costs relating to the acquisition are recognised in the income statement as incurred.
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. Exchange rate differences arising on translation are classified as other comprehensive income and transferred to the Group’s translation reserve.
The operational business segments in the Tryg are Private, Commercial, Corporate and Sweden. Private encompasses the sale of insurances to private individuals in Denmark and Norway. Commercial encom passes the sale of insurances to small and medium sized businesses, in Denmark and Norway. Corporate sells insurances to industrial clients primarily in Denmark, Norway and Sweden. In addition, Corporate handles all business involving brokers. Sweden encompasses the sale of insurance products to private individuals in Sweden as well as sale of Product insurances in the nordic region.
The comparative figures, including five-year financial highlights and key ratios, have been restated to reflect discontinued business. Discontinued and divested business in the income statement includes the profit/ loss after tax of the run-off for the marine hull business and the divested activities in the Finnish branch in 2012. Discontinued business also comprises the Tryg Forsikring A/S run-off business.
Depreciation of operating equipment is calculated using the straight-line method over its estimated economic lifetime as follows: • IT, 4 years • Vehicles, 5 years • Furniture, fittings and equipment, 5-10 years
Gains and losses on disposals and retired assets are determined by comparing proceeds with carrying amounts. Gains and losses are recognised in the income statement. When revalued assets are sold, the amounts included in the revaluation reserves are transferred to retained earnings.
Land and buildings Land and buildings are divided into owner-occupied property and investment property. The Group’s owner-occupied properties consist of the head office buildings in Ballerup and Bergen and a small number of holiday homes. The remaining properties are classified as investment property.
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
Impairment test for intangible assets, property and operating equipment Operating equipment and intangible assets are assessed at least once per year to ensure that the depreciation method and the depreciation period that is used are connected to the expected economic lifetime. This also applies to the salvage value. Writedown is performed if depreciation has been demonstrated.
Derivative financial instruments and hedge accounting The Group’s activities expose it to financial risks, including changes in share prices, foreign exchange rates, interest rates and inflation. Forward exchange contracts and currency swaps are used for currency hedging of portfolios of shares, bonds, hedging of foreign entities and insurance statement of financial position items. Interest rate derivatives in the form of futures, forward contracts, repos, swaps and FRAs are used to manage cash flows and interest rate risks related to the portfolio of bonds and insurance provisions. Share derivatives in the form of futures and options are used from time to time to adjust share exposures.
Recognition of the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of investments in foreign entities. Changes in the fair value of derivatives that are designated and qualify as net investment hedges in foreign entities and which provide effective currency hedging of the net investment are recognised directly in equity. The net asset value of the foreign entities estimated at the beginning of the financial year is hedged 90-100% by entering into short-term forward exchange contracts according to the requirements of hedge accounting. Changes in the fair value relating to the ineffective portion are recognised in the income statement. Gains and losses accumulated in equity are included in the income statement on disposal of the foreign entity.
Reinsurers’ share of provisions for insurance contracts Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group and that meet the classification requirements for insurance contracts are classified as reinsurers’ share of provisions for insurance contracts. Contracts that do not meet these classification requirements are classified as financial assets.
Subordinate loan capital Subordinate loan capital is recognised initially at fair value, net of trans- action costs incurred. Subordinate loan capital is subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the borrowing period using the effective interest method.
Note Investment activities 1 Income from Group undertakings 2,600 2,410 Interest expenses 0 1 Administration expenses in connection with investment activities -7 -6
Total changes in equity in 2014 -41 103 -125 75 12 2013 Profit/loss for the year 817 -106 1,656 2,367 Other comprehensive income 34 34
1 Income from Group undertakings Tryg Forsikring A/S 2,600 2,410 2 Other expenses Administration expenses -51 -52
Remuneration for the Supervisory Board, the Executive Management and risk-takers can be seen from note 28 concerning related parties of the Tryg Group. Refer to Note 6 of the consolidated financial statements for a specification of the audit fee.
Revaluation and impairment to net asset value Revaluation and impairment at 1 January 4,753 3,902 Revaluations for the year 1,759 2,445 Dividend paid -1,656 -1,594
Name and registered office Ownership share in % Equity 2014 Tryg Forsikring A/S, Ballerup 100 11,843 2013 Tryg Forsikring A/S, Ballerup 100 11,740 5 Current tax assets Tax receivable at 1 January 14 24 Current tax for the year 14 14 Adjustment of current tax in respect of previous years 0 0 Tax paid for the year -14 -24
7 Capital adequacy Equity according to annual report 11,134 11,122 Proposed dividend -1,731 -1,656 Solvency requirements of subsidiaries – 50% -2,353 -2,307
Solvency ratio (Solvency I – ratio between capital base and weighted assets) 87 90 8 C ontractual obligations, contingent liabilities and collateral The Danish companies in the Tryg Group are jointly taxed with TryghedsGruppen smba. The companies and the other jointly taxed companies are liable for any obligations to withhold taxes at source on interest, royalties, dividends and income taxes etc. in respect of the jointly taxed companies.
Reconciliation of equity Equity – IFRS 11,119 11,107 Deferred tax provisions for contingency funds 15 17 Change during the year of deferred tax provisions for contingency funds 0 -2
Combined ratio exclusive of run-off 84.5 85.3 82.4 93.7 90.8 84.0 89.0 93.5 88.4
Claims ratio, net of reinsurance 58.9 64.8 66.5 64.2 67.9 59.5 68.4 71.3 68.0
Key ratios Gross claims ratio 67.2 63.0 73.3 81.5 75.0 122.9 88.5 66.2 75.2
Claims ratio, net of reinsurance 79.8 76.0 73.4 86.1 82.6 84.7 76.3 76.3 76.1
A more detailed version of the table can be seen at tryg.com >investor > Downloads.
Key ratios Gross claims ratio 74.6 76.2 69.3 64.4 71.8 72.6 76.7 75.6 67.2
Combined ratio exclusive of run-off 99.2 97.7 91.7 91.5 94.5 89.8 94.3 92.0 87.2
Key ratios Gross claims ratio 64.1 64.9 70.7 71.7 74.9 75.9 73.7 71.2 70.2
Claims ratio, net of reinsurance 68.8 68.6 68.1 73.3 73.7 69.3 71.1 74.3 71.1
Other income and costs -20 -61 -90 -91 Profit/loss before tax 768 639 3,302 2,993 Run-off gains/losses, net of reinsurance 338 247 1,131 970
Technical interest ratio, net of reinsurance 0.3 0.3 0.3 0.9 0.7 Return on equity before tax on continuing business (%) 29.7 27.1 30.2 18.4 11.1 Return on equity after tax on continuing business (%) 22.9 21.5 21.8 13.1 8.2
Diluted average number of shares (1,000) 58,558 60,259 60,714 60,401 62,444
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. Other key ratios are calculated in accordance with ’Recommendations & Financial Ratios 2010’ issued by the Danish Society of Financial Analysts.
Solvency II New solvency requirements for insurance companies issued by the EU Commission. The new rules are expected to come into force in 2016, at the earliest.
Capital and risk management in the annual report on page 24-25, and in Note 1 on page 47, for a description of some of the factors which may affect the Group’s performance or the insurance industry.