Financial statements 49 Group chart 118 Glossary 119 Product overview 121
Improvement of under­ lying claims ratio (Group) percentage points 2019: 0.5%
Tryg reported a premium growth of 7.0%. The technical result of DKK 3,495m (DKK 3,237m) was impacted by continued positive developments in the core business, the delivery of the
Strong market position Tryg is one of the largest non-life insurance companies in the Nordic region. We are the largest player in Denmark and the fourth- largest in Norway. In Sweden, we are the fifth-largest company in the market.
Commercial provides insurance products including motor, property, liability, workers’ compensation, travel and health to small and medium-sized business in Denmark and Norway.
compensation, transport, group life etc. to corporate customers under the brand Tryg in Denmark and Norway, and Moderna in Sweden. Tryg is part of the global
Call centres • Internet • Own sales agents • Franchise offices
Profit/loss on continuing business 1,038 706 2,773 2,845 1,733 2,519 2,472 Profit/loss on discontinued and divested business after tax 0 -1 0 -2 -2 -2 -1
Return on equity after tax (%) 34.2 23.0 22.5 24.6 14.9 28.8 26.2
Operating earnings per share (DKK) a) 3.53 2.46 9.54 9.82 5.84 9.12 8.84 Net asset value per share (DKK) 40.64 40.05 37.56 41.78 34.37 Ordinary dividend per share (DKK) 1.75 1.70 7.00 6.80 6.60 6.40 6.20 Extraordinary dividend per share (DKK) 1.65 3.31 3.54
Premium growth in local currencies 7.4 10.4 7.0 17.1 6.3 1.7 0.1
Run-off, net of reinsurance (%) -5.5 -4.7 -5.1 -5.5 -6.5 -5.4 -7.0 Large claims, net of reinsurance (%) 3.5 1.8 2.2 2.1 2.6 1.4 2.2 Weather claims, net of reinsurance (%) 2.6 1.7 1.6 1.9 2.0 1.7 2.0
COVID-19 claims, net of reinsurance (%) -0.9 0.0 -0.8 0.0 0.0 0.0 0.0
Achieving targets through strategic initiatives Tryg has defined four strategic initiatives to achieve its financial targets, including continuous work on claims excellence through leveraging of Tryg's procurement power and capitalising Alka’s fraud capabilities.
High profitable growth driven by Private segment Tryg reported a premium growth of 7.0%, driven by strong growth of 9.0% in the profitable Private segment in both Denmark and Norway. The Commercial segment also reported a positive growth of 6.0%, supported by both Denmark and Norway. Corporate reported a growth of 1.4%, reflecting a continued focus on improving profitability in all countries. The development in 2020 supports the focus to rebalance the portfolio with more Private and Commercial business and less Corporate business.
Sweden. The acquisition is expected to achieve an ROI of around 7%, result in the high teen EPS accretion by 2023 and double the technical result (including DKK 900m of synergies) in 2024. Tryg takes confidence from the Alka acquisition, which delivered synergies of DKK 176m in 2020 against a target of DKK 150m.
A year with COVID-19 COVID-19 impacted 2020 in many ways. Primarily, it led to changed ways of working for all employees with much more working from home and virtual meetings. Despite this big change, Tryg managed to improve customer satisfaction and maintain high sales level due to very flexible employees and strong customer focus. The financial impact of COVID-19 was limited in 2020 with a large loss driven by travel insurance claims in Q1 2020 fully offset by lower claims frequencies in the following quarters.
Renewal of big partner agreements Tryg renewed its big partner agreements with UDF (Union of Education Norway) and NMF (Norwegian Band Federation) in Q4 2020 for three and five years, respectively. Partner agreements are very important for the Norwegian business, and Tryg was therefore pleased to renew these agreements on good terms for all parties.
A good year for Bilsport & MC and Atlantica Moderna’s enthusiast brands – Bilsport & MC (for car and motorcycle enthusiasts) and Atlantica (for boats) – have shown that profitability and growth can go hand in hand. A new product offered by Bilsport & MC was the single most important contributor to delivering full-year sales targets already in Q3 2020. Atlantica has benefitted from people holidaying in Sweden and has met full-year sales target with comfortable margins.
Management changes in Corporate In 2020, two new directors in Corporate Norway and Denmark as well as a new country manager in the Swedish business, Moderna, were appointed. The recruitment of the new management is aligned with Tryg’s ambition to increase our focus on profitability initiatives in all Corporate segments in the coming years.
Tryg Smart A number of NITO (Norwegian Engineer Organisation ) members were offered to test a sensor package that will be installed in the members’ holiday homes. Through an app, members can check temperature, leaks, smoke and electricity consumption. The initiative is tailored to NITO's members and supports Tryg's strong focus on prevention and digitalisation.
Tryg works from home Since March 2020, the vast majority of Tryg’s employees in Denmark, Sweden and Norway have been working from home as a result of COVID -19. Throughout this period, it has been a key priority to ensure strong operations and maintain a high level of customer satisfaction. It was very positive to see an increase in the overall TNPS score reaching an all-time high level under these conditions.
Recommended cash offer for RSA Insurance Group plc On 18 November, Tryg made a cash offer together with the Canadian insurer Intact to acquire RSA according to which Tryg would take over the Swedish and Norwegian businesses and co-own RSA’s Danish business on a 50/50 economic basis. Following the acquisition, Tryg will be the largest non-life insurance company in Scandinavia with a much more balanced portfolio across Denmark, Sweden and Norway. At the EGM on 18 December 2020, the Supervisory Board was authorised to increase the company’s share capital to finance the bid of approximately DKK 35bn.
The Nordic non-life insurance markets remain relatively stable in terms of top-line growth and product offerings. The Nordic countries are characterised by a high level of non-life insurance penetration – ratios of non-life insurance premiums in % of GDP are some of the highest in the world. This is attributable to the fact that households are generally wealthy and tend to cover their insurance needs relatively well.
In 2020, the outbreak of COVID-19 across the world resulted in a lot of human pain, devastation and uncertainties, and sharply dampened the economic outlook. The Scandinavian economies entered the crisis in a better position than most countries with good growth levels, balanced public finances and low levels of unemployment.
Establishing the biggest non-life insurer in Scandinavia and becoming #3 insurer across all Scandinavian countries
The return on bonds in the free portfolio (slightly above 60% of the free portfolio) will vary, but given current interest rate levels, a very low return is expected. For shares, the expected return is around 7% with the MSCI World Index as benchmark, while the expected return for property is around 5%. The investment return in the income statement also includes the cost of managing investments, the cost of currency hedges, interest expenses on subordinated loans and other minor items.
Source: Investor Presentation: Recommended Offer for RSA Insurance Group plc (available on tryg.com)
always refer to the financial targets presented at the next Capital Markets Day in autumn 2021 for the next three years ending in 2024.
Impact from RSA's assets The acquisition of RSA’s Norwegian and Swedish businesses and 50% of RSA's Danish business is expected to be approved before the end of Q2. Based on this assumption, RSA’s assets are expected to be 'equity-accounted' for in H2 2021. Tryg will book the net profit contribution (for the relevant period) of the acquired assets under 'income from associates' in the investment activities. In the table taken from Codan’s SFCR (Solvency & Financial Condition Report), it is possible to see the underwriting result by geographies for the past three years, the investment income (as sum of the three geographies) and the total net profit. It is important to note that the subsidiaries Privatsikring and Holmia are not consolidated in the Group and therefore not included in these figures but they are part of the acquisition perimeter.
Solvency and dividends Tryg expects to pay dividends of between 2.6 and 3.0bn for FY 2021. Tryg has previously disclosed an expected solvency ratio above 170 at the end of 2021. That expectation remains unchanged.
• Equity raise fully underwritten by Morgan Stanley and Danske Bank with firm commitment from TryghedsGruppen
• Total financing amount will cover: - Price of acquired assets - Costs, including restructuring, integration, separation and other transaction costs, of ~DKK 4.4bn pre-tax - Separation costs partly relate to de-merger of Trygg-Hansa and Codan Norway out of RSA DK
Targets and strategy At the Capital Markets Day in November 2017, Tryg announced a set of financial and non-financial targets for 2020. The financial targets were later updated following the acquisition of Alka. Along with a new strategy, a new purpose was defined.
‘As the world changes, we make it easier to be tryg’. This purpose has been the overarching principle guiding the realisation of the targets for 2020. Four strategic initiatives were defined to support the financial and non-financial targets: claims excellence, digital empowerment of customers, product & service innovation and distribution efficiency as well as Alka synergies, all of which are described in detail on page 14-16.
As the world changes, we make it easier to be tryg*
Tryg’s business model Tryg makes it easier to be ‘tryg’ for its customers by offering them insurance against risk, efficient claims handling, and advice and services to prevent claims from arising in the first place. By making it easier for our customers to feel protected and cared for, we benefit all of Tryg’s stakeholders. Via TryghedsGruppen’s 53% ownership of Tryg, part of the company’s profit is returned to customers, who are also members of TryghedsGruppen. Tryg’s purpose is valid for all stakeholders – our customers, our employees and our shareholders.
Customer targets In Tryg, customer satisfaction is of paramount importance, and Tryg has therefore worked intensively to continually improve the customer experience and reaching the customer targets 3,495m Technical result (DKK)
One of the main initiatives has been to further leverage Tryg’s procurement power, and cost savings of more than DKK 350m were realised. Initiatives in the strategy period include the renewal of a contract for windscreen services, a new five-year contract with Recover Nordic (the largest Nordic claims service group) and a claims agreement for electronic products (such as tablets, laptops and mobile phones) in Denmark.
Finally, improving the claims-handling process has also been an important driver to successfully meet the target, with realised accumulated
cost savings at DKK 220m in the strategy period. The benefits have been realised through more accurate claims assessments, better recourse management, data and speech analytics and the ongoing implementation of a new claims-handling system in Denmark and Norway. The previously mentioned focus areas all aim at improving the claims process for the customer, providing a far more efficient and relevant experience.
In the strategy period, the level of STP of claims increased due to the use of robotic automation processes (RPAs) in the claims-handling process, and due to the implementation of the new claims-handling system. Even though the STP target was challenged by the high number of phoned-in COVID-19-related claims, the new claims-handling system handled many of the simple travel claims, and the total STP level of 51% therefore exceeded the target of 50% STP. In the coming years, the new claims-handling system is expected to further boost STP levels in both Denmark and Norway.
Product & service innovation is important for Tryg to remain relevant to customers in the future. The target was to increase premiums by DKK 1,000m from new products and services by 2020+. In the strategy period, premiums from new products and services increased by DKK 1,060m, meeting the target.
A key initiative is innovation of new products and services such as cyber insurance, pregnancy insurance (in Sweden) offering access to specialist care after giving birth, and Senior Care (in Denmark) offering additional care for elderly people. Premiums from new products in the strategy period totalled DKK 640m.
Bundling of products has been another important focus for Tryg in order to reach the 2020+ target. The aim of bundling products has been to make insurance products more accessible for our customers by removing complexity. Based on Private's positive experience with, e.g., Health and Child insurance during the strategy period, the Commercial business also began to bundle products. Bundled products generated premiums of DKK 340m in the strategy period.
Prevention is key for the well-being of customers and a key element in Tryg’s purpose. Products such as Tryg Drive/Side Kick, a digital device that rewards good driving behavior, Tryg Alarm, and a rat blocker to prevent rats from entering drains following a few mild winters, are all part of Tryg’s prevention strategy.
Finally, entering new markets and increasing the profitable credit and surety business, Tryg Garanti, has also been an important initiative for realising Tryg’s 2020 targets. In 2019, Tryg Garanti expanded to Germany, Austria and the Netherlands, and further expansion is considered.
Corporate Responsibility Corporate Responsibility (CR) is an integrated part of Tryg’s core business and is closely linked to the purpose ‘as the world changes, we make it easier to be tryg’. Tryg focuses on activities related to human and labour rights, climate and the environment as well as anti-corruption, and is actively working to integrate CR into insurance, claims-handling and prevention activities. CR plays a role in Tryg's decision making, risk mitigation, the improvement and development of Tryg's products and services, the optimisation of the operations and business partners, employee development, and the contributions made to the societies which Tryg/Moderna is a part of.
Realised synergies Q4 2020 Realised synergies Q1-Q3 2020 Targeted synergies 2020 Targeted synergies 2021
Results 2020 Premium growth was 7.0%, driven primarily by strong growth in the Private and Commercial segments. The Private segment was up 9.0%, while the Commercial segment was up 6.0%. Corporate reported a virtually flat top-line development. Tryg reported a technical result of DKK 3,495m (DKK 3,237m) impacted positively by the underlying claims development, delivery of the Alka synergies, lower-than-normal large and weather claims and lower claims frequencies driven by the COVID-19 outbreak. The technical result was impacted negatively by currency developments and by even lower levels of interest rates. The gross impact of the COVID-19 outbreak on the technical result was close to nil, while the net impact was DKK 141m due to reinsurance cover of travel insurance. Tryg reported a combined ratio of 84.5 (85.1), driven by a claims ratio of 70.3 (70.9) and an expense ratio of 14.1 (14.2).
The Private segment reported an increased technical result, driven by the positive top-line development, an improved underlying claims ratio and lower claims frequencies in selected lines of business following the outbreak of COVID-19. The Commercial segment reported an increased technical result driven by the positive top-line development, an improved underlying claims ratio, lower claims frequencies in selected lines of business following the outbreak of COVID-19 and tight cost control reducing the expense ratio. The Corporate segment reported a stable technical result, virtually flat top-line development as price increases (across all geographies) offset the loss of some customers. The underlying claims ratio is moving in the right direction but more efforts are needed to produce long-term sustainable returns. Further profitability actions have been put in place in 2021. Private Sweden reported a somewhat higher technical result, top-line development was positive, and a modest improvement in the underlying claims ratio was recorded.
Synergies from the Alka transaction amounted to DKK 176m in 2020 with DKK 73m from claims, DKK 62m from costs and DKK 41m from revenue synergies. Targeted synergies for 2020 were DKK 150m.
Other income and expenses were DKK -265m (DKK -188m), the increase on 2019 being explained by a VAT refund in the last quarter of 2019, by lower income from the pensions products.
The pre-tax result was DKK 3,541m (DKK 3,628m), while the net profit was DKK 2,773m (DKK 2,843m), resulting in an ROE of 22.5% (24.6%).
The Corporate segment posted modest growth of 1.4% (2.0%) with a loss of premium income in Norway as a result of significant price adjustments for the third year in a row, while in Denmark and Sweden some growth was observed, primarily driven by price hikes, which did not impact churn much as they were the first significant price adjustments for many years.
Claims inflation is monitored constantly using internal and external parameters in all lines of business. Motor insurance and property insurances accounts for almost 70% of total premiums and a similar share of the technical result, and claims patterns are therefore carefully scrutinised. New trends such as sales of electric cars and general developments in property markets are followed closely to anticipate pockets of claims inflation and try to adjust prices accordingly.
leading the way. The start of COVID-19 vaccination programmes towards the end of 2020 is also helping the outlook, together with a clear outcome of the US presidential elections. The match portfolio also experienced a volatile pattern during the year, with a loss in Q1 followed by a recovery in the following quarters. Other financial income and expenses totalled DKK -255m (DKK -236m).
Oher income and costs Other income and costs were DKK -265m (DKK -188m). Approximately half of 'other income and costs' is represented by the amortisation of customer relations stemming from the Alka acquisition. Additionally, bancassurance fees and some other minor items are also booked in this line.
Tax Tryg paid a total tax bill of DKK 768m (DKK 783m) or 21.7% of profit before tax
Own funds totalled DKK 8,884m (DKK 8,119m) at the end of 2020. Own funds were primarily positively impacted by the net profit, and negatively impacted by the ordinary dividend.
86.3. The underlying claims ratio improved 0.6 percentage points for the Group and 0.2 percentage points for Private. The pre-tax result was DKK 1,223m, and the after-tax result was DKK 1,038m. Tryg pays a quarterly dividend of DKK 1.75 per share (DKK 529m) and reports a solvency ratio of 183.
2020, which reduced the SCR by approximately DKK 400m. The reduction in the SCR was driven by the inclusion of Sweden in the model, thereby increasing the diversification benefit, while some marginally lower capital charges for the non-life risks were also included as part of a general review and update of the model. Based on the standard formula, Tryg’s SCR was DKK 6,608m compared to DKK 6,293m at the end of 2019.
Results Q4 2020 The technical result was DKK 780m (DKK 762m), driven by a positive development in the underlying claims ratio, the delivery of Alka synergies and lower claims frequencies driven by COVID-19. These have broadly offset a significantly higher level of large and weather claims in Q4 2020 compared to Q4 2019. Investment income was DKK 513m (DKK 198m), primarily driven by very robust equity markets, but also by strong returns from corporate bonds. In general, all assets classes in the free portfolio posted good returns.
The claims ratio (net) was 72.3, the expense ratio was 14.0, and the combined ratio was 780m Technical result (DKK)
Expenses The reported expense ratio was 14.0 (14.6). Various initiatives aimed at lowering distribution costs are being implemented, and some of the savings from these initiatives are being invested in new digital solutions and partnerships. By reporting an expense ratio of 14,1 for FY 2020, Tryg delivers its FY 2020 expense ratio target.
Private sells insurance products to private individuals in Denmark and Norway. Sales are effected via call centres, the internet, Tryg’s own agents, Alka (Denmark), franchisees (Norway), interest organisations, car dealers, estate agents and Danske Bank branches.
The retention rate in Denmark decreased from 91.6 to 90.1 due to the termination of the Nordea agreement, which naturally led to a higher churn level. Excluding Nordea churn, the retention rate was 91.3. The higher level of churn was more than mitigated by new sales from the Danske Bank agreement. The sales to Danske Bank customers do not impact the retention rate as they are new sales, and will only impact the rentetion rate in the second year and onwards. In Norway, the retention rate increased from 87.1 to an all-time high of 88.4.
Results Q4 2020 The technical result totalled DKK 537m (DKK 494m), with a combined ratio of 83.3 (83.8). The higher technical result was due primarily to a higher level of premium income and positive impacts from COVID-19. The underlying claims ratio improved by 0.2 percentage points in line with developments in the previous quarters.
Premiums Gross premiums increased by 9.0% (16.2% in Q4 2019 including Alka, and 7.6% excluding Alka). In Q4, Tryg reported continued high growth levels in Denmark and Norway for the reasons as described for the full-year development. The retention rate in Denmark decreased from 91.6 to 90.1 due to churn from the Nordea agreement, which was more than off-set by sales to Danske Bank customers. In Norway, the retention rate increased from 87.1 to 88.4.
Results 2020 The technical result for 2020 was DKK 735m (DKK 566m), with a combined ratio of 83.3 (86.8). The combined ratio was positively affected by an improved underlying claims ratio, a lower level of large and weather claims and lower frequency for some lines of business because of COVID-19. The development in premiums improved significantly in both Denmark and Norway, driven by improved sales levels in Denmark and price adjustments in Norway to improve profitability.
Premiums The development in gross premium income was a positive 6.0% (8.3% in 2019, impacted by Alka) in local currencies with an improvement in both the Danish and Norwegian Commercial business areas. Commercial Denmark reported a positive development in customer numbers, driven by both own sales agents and improved sales from the broker sales channel. Commercial Denmark has a strong focus on rebalancing its portfolio with a higher proportion of small commercial customers and a lower proportion of large commercial customers as this supports the focus on profitability. In Norway, premium development was positively impacted by price adjustments, particularly for large commercial customers, which were widely accepted by the customers.
The business area accounts for 20% of the Group’s total premium income.20%
Results Q4 2020 The technical result was DKK 153m (DKK 105m), with a combined ratio of 86.4 (90.3). The result was negatively affected by a substantial increase in the level of large claims, but also positively impacted by a much higher level of run-off. Premium growth increased by 7.2% (4.8%).
Claims The gross claims ratio was 64.9 (69.1), with a claims ratio, net of ceded business, of 68.2 (72.8). The claims ratio was impacted by a higher level of large claims mainly related to fires and also a substantially higher level of run-offs compared to prior-year period. In Q4, weather claims were impacted by a landslide in Norway on 30 December with an impact of approximate DKK 20m for Tryg.
Expenses The expense ratio was somewhat higher at 18.2 (17.4), which did not represent a trend but reflected volatile expense pattern.
Claims The gross claims ratio totalled 69.5 (70.8), and the claims ratio, net of ceded business, was 76.6 (77.2). The claims ratio was impacted by price initiatives improving the underlying claims ratio in all countries, a higher level of large claims and a larger level of run-off gains. The claims ratio was slightly negatively impacted by COVID-19 with some positive impact for certain lines of business, e.g. travel insurance and workers' compensation. The claims ratio was also impacted by a few claims in Tryg Garanti related to COVID-19. As mentioned, Tryg will continue to focus on improving profitability in all countries as profitability remains challenging in the Corporate segment, considering a combined ratio of 109.1 excluding run-offs. Tryg plans further important
The business area accounts for 17% of the Group’s total premium income.17%
Premiums Gross premiums were up 2.0% (1.1%) in local currencies due to a combination of price adjustments and churn because of these initiatives. Tryg continues to see a positive premium development in Tryg Garanti, primarily because of the expansion in Germany, Austria and the Netherlands.
Claims The gross claims ratio was 79.9 (86.1), and the claims ratio, net of ceded business, was 87.0 (80.4). The higher claims ratio was primarily caused by a higher level of large claims, negative COVID-19 impact and a lower level of run-off. The underlying claims ratio improved based on the above initiatives in Norway, Denmark and Sweden.
Results 2020 Sweden reported a technical result of DKK 268m (DKK 231m) and a combined ratio of 83.2 (84.8). The lower combined ratio was driven by a lower expense ratio, and as planned there was also an improved underlying claims ratio due to price adjustments, especially for motor insurance. The high level of run-off gains reflects a strong reserving position in the motor third-party liability segment. The underlying profitability for the current underwriting year with a normalised run-off level is still not satisfactory. Premium growth in 2020 was primarily due to acceptance of price adjustments and organic growth for Atlantica, the niche area for boat insurance.
Claims The gross claims ratio was 61.3 (53.1) and net of ceded business 61.6 (53.8). The higher claims level was primarily due to a lower level of run-off gains at 21.4% compared to 29.5% for the prior-year period.
The total market value of Tryg’s investment portfolio was DKK 40.5bn (DKK 40bn) at yearend 2020. The investment portfolio consists of a match portfolio of DKK 28.1bn (DKK 29bn) and a free portfolio of DKK 12.4bn (DKK 11bn). The match portfolio is composed of low-risk fixed-income assets that match the Group’s insurance liabilities, so that fluctuations resulting from interest rate changes are offset to the greatest possible extent. The free portfolio reflects the Group’s capital, which is predominantly invested in fixed-income securities with a short duration, but also in equities and properties.
Match portfolio The result of the match portfolio is the difference between the return on the match portfolio and the amount transferred to the technical result. The result can be split into a 'regulatory deviation' and a ’performance result’. The regulatory deviation was DKK -48m (DKK -73m) for FY 2020, driven primarily by the increased yield spread between the FSA/EIOPA discounting curve (in EUR) and the assets side invested in Danish kroner. The performance result was DKK 29m (DKK 31m) as Nordic covered-bond spreads narrowed slightly.
Investment result in Q4 2020 The last quarter of 2020 was characterised by positive developments, especially in the equity markets. Tryg’s equity portfolio returned DKK 307m or 14.0%. The last three months of 2020 were characterised by the US Presidential Elections and by increased hope for vaccination programmes related to COVID-19 that finally started towards the end of December. Macroeconomic worries abated slightly although the first months of 2021 are still likely to be problematic.
Solvency and dividend Risk management is a key function in Tryg. The assessment and management of Tryg’s aggregated risk and associated capital requirement constitutes a core element in the management of the company.
Insurance risk The insurance risk is controlled by limiting the size of single exposures and through the use of reinsurance, thereby capping the cost of large and weather-related claims. Additionally, the insurance risk is managed through geographical limitations and by refraining from offering certain types of insurance such as aviation and marine hull insurance. Operating within these boundaries, Tryg’s risk depends on the company ’s choice of exposure within different segments and industries in the insurance market. Tryg operates in relatively stable markets, while slightly more than 80% of premiums are in the Private and Commercial (SMEs) segments. Quarterly fluctuations are driven mainly by large and weather-related events, and reinsurance is used extensively to stabilise the overall earnings level.
Capital management Capital management and capital modelling are key functions in Tryg. Capital management covers broadly the company’s current and future capital requirements, capital allocation to the different lines of business and required returns, dividends outlook, and the ability of the company to meet its own return on equity target.
The key components of Tryg’s own funds are shareholders’ equity, qualifying debt instruments (both Tier 1 and Tier 2 debt) and future profit, while all intangibles are deducted in the calculation. The debt capacity has been virtually fully utilised, and at the end of 2020 some DKK 147m of Tier 2 instruments are not included in own funds as they exceed the 50% SCR limit. Own funds totalled 8,884m at the end of 2020 against DKK 8,119m at the end of 2019, the primary drivers of the change in own funds having been profits and dividends.
Danish FSA’s approval of Tryg’s updated internal model in April, which included the Swedish business, thereby increasing the diversification benefit, while some marginally lower capital charges for non-life risks were also included.
Tryg’s solvency ratio continues to display low sensitivity towards capital market movements. Fixed-income securities represent some 90% of Tryg’s invested assets, and the highest solvency sensitivity is therefore towards spread risk, where a widening/tightening of 100 basis points will impact the solvency ratio by 20 percentage points. Lower sensitivity is displayed towards equity market falls and interest rate fluctuations. Additional changes in the UFR (Ultimate Forward Rate) will have a negligible impact due to the relatively short duration of Tryg’s liabilities (approximately four years on average).
Ordinary and extraordinary dividend The Supervisory Board regularly assesses capital structure in light of future internal earnings forecasts and balance sheet needs. The projections include initiatives set out in the company’s strategy for the coming years and are based also on the most significant risks identified by the company.
Moody’s rating Tryg has an ‘A1’ (stable outlook) insurance financial strength (IFSR) rating from Moody’s. The rating agency highlights Tryg’s strong position in the Nordic P&C market, robust profitability, very good asset quality and relatively low financial leverage. Moody’s also assigned an ‘A3’ rating to Tryg’s subordinated debt and a ‘Baa3’ rating to Tryg’s Tier 1 debt. The ratings were re-affirmed in autumn 2020 following the offer made by Tryg and Intact Financial Corporation (Intact) to acquire RSA Insurance Group Pls (RSA), whereby Tryg would acquire RSA’s Swedish and Norwegian operations, and Tryg and Intact would coown RSA’s Danish business on a 50/50 economic participation. Moody’s expects the acquisition to further increase and broaden Tryg’s earnings base in the long term. Furthermore, Tryg’s leverage will reduce meaningfully in the short term.
After the publication of quarterly and annual reports, Tryg’s management and IR team ordinarily travel extensively to meet with shareholders and potential investors. Quarterly analyst presentations are held in Copenhagen and London. Tryg also attends investor meetings and various financial conferences on a local and global basis. As a result of COVID-19, the majority of the analyst and investor meetings and financial conferences were held virtually in 2020. The Tryg share is currently covered by 20 analysts, who continuously update their recommendations and earnings forecasts. Tryg hosts an annual Analyst Day, while more in-depth Capital Market Days are hosted every three years. As a result of the recommended acquisition of RSA’s Scandinavian business, Tryg has decided to postpone the Capital Markets Day originally planned for 28 January 2021 to the autumn. A new date will be published in due course.
The Tryg share The Tryg share is listed on NASDAQ Copenhagen. Company announcements and trading announcements are published in both Danish and English, whereas interim reports and annual reports are published in English.
Quarterly dividends Tryg started paying quarterly dividends in 2017. The Tryg share has a distinct income profile in that the business generally grows in line with GDP, producing high margins, which are mostly returned to shareholders. The prolonged period of very low interest rates in the wake of the financial crisis means that investors, all else being equal, attach even greater importance to dividends than in a more normal environment.
TryghedsGruppen In 2020 and for the fifth year running, Tryg’s majority shareholder, TryghedsGruppen, paid out a member bonus to Tryg and Alka customers in Denmark corresponding to 8% of the annual premiums paid for 2019.
TrygFonden TrygFonden is the leading and most well-known peace-ofmind supporter in Denmark, supporting around 800 activities that contribute to creating peace of mind, such as coastal lifeguards, cuddle bears for children at hospitals and defibrillators. Behind TrygFonden is TryghedsGruppen, which owns 53% of the shares in Tryg and annually contributes around DKK 650m to projects that create peace of mind in all parts of Denmark.
In March 2020, Tryg announced that it was moving to a full-year dividend decision for 2020 due to market volatility and the general macroeconomic backdrop. Tryg’s business model has proved resilient even in very challenging times, and the company’s balance sheet and solvency position have remained very healthy throughout this period. In November 2020, the Supervisory Board approved the payment of the Q1-Q3 2020 ordinary dividend.
Annual general meeting Tryg’s annual general meeting will be held virtual on 26 March 2021 at 15:00 CET.
The notice will be advertised in the daily press in February 2021 and will be sent to shareholders upon request.
Financial calendar 2021 27 Jan. 2021 Tryg shares are traded ex-dividend 29 Jan. 2021 Payment of Q4 dividend 26 Mar. 2021 Annual general meeting 16 Apr. 2021 Interim report Q1 19 Apr. 2021 Tryg shares are traded ex-dividend 21 Apr. 2021 Payment of Q1 dividend 09 July 2021 Interim report Q2 and H1 12 July 2021 Tryg shares are traded ex-dividend 14 July 2021 Payment of Q2 dividend 12 Oct. 2021 Interim report Q1-Q3 13 Oct. 2021 Tryg shares are traded ex-dividend 15 Oct. 2021 Payment of Q3 dividend
This section on corporate governance is an excerpt of the corporate governance report.
Dialogue between Tryg, shareholders and other stakeholders Tryg’s Investor Relations (IR) department maintains regular contact with analysts and investors.
Together with the Executive Board, IR organises investor meetings, conference calls and participates in conferences in Denmark and abroad. Due to the outbreak of COVID-19, most meetings were held virtually in 2020. IR also communicates with stakeholders on social media via Twitter@TrygIR.
The consolidated financial statements are presented in accordance with IFRS. At tryg.com, stakeholders are invited to subscribe to press releases, company announcements as well as trading announcements by insiders. A number of internal guidelines ensure that the disclosure of price-sensitive information complies with legislation and stock exchange codes of conduct. Tryg has adopted a number of policies describing the relationship between different stakeholders.
All shareholders are encouraged to attend the AGM. The AGM is normally held by personal attendance as the Supervisory Board values personal contact with the Group’s shareholders. Shareholders may propose items to be included on the agenda for the AGM and may ask questions before and at the meeting. Shareholders may vote in person at the AGM, by post or appoint the Supervisory Board or a third party as their proxy. Shareholders may consider each item on the agenda. The proxy form and form for voting by post are available at tryg.com prior to the AGM.
In 2020, the general meeting differed from prior years due to COVID-19. In light of Tryg’s responsibility for the safety of shareholders, employees and management and the Danish authorities’ measures to control the risk of infection with COVID-19, Tryg decided to livestream the general meeting and recommended that neither shareholders nor their advisors attended the AGM in person, thus enabling the AGM to be held with a minimum of physical attendance. Instead, Tryg encouraged all shareholders to submit questions, make use of written votes or issue a proxy and to follow the general meeting via livestream rather than by physical attendance. Information on how to exercise shareholders ’ rights at the AGM were communicated to shareholders and published at tryg.com.
company’s balance sheet and solvency position have remained very healthy throughout this period. In November 2020, the Supervisory Board therefore approved the payment of the Q1-Q3 2020 ordinary dividend.
The current eight members of the Supervisory Board were elected by the annual general meeting for a term of one year. Of the eight members elected at the annual general meeting, five, and thus the majority, are independent persons, thus complying with recommendation 3.2.1. in the Recommendations on Corporate Governance, while the other three members are dependent persons as they are appointed by Tryg’s majority shareholder, TryghedsGruppen. See page 40 for information on when the individual members joined the Supervisory Board, were re-elected and when their current election period ends. To ensure the integration of new talent on the Supervisory Board, members elected by the annual general meeting may hold office for a maximum of twelve years. The Supervisory Board has 12 members in all, with an equal representation of men and women (currently including two male and two female employee representatives).
The Supervisory 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. In addition to the annual self-evaluation, an assessment is facilitated with external assistance as a minimum every three years to ensure objectivity in the evaluation process. The Supervisory Board focuses primarily on the following qualifications and skills: business judgement, problem solving, networking, risk management, succession management, general management, CFO/audit, people and organisation, business development, financial services, risk and regulatory matters, insurance – commercial and product, insurance – technical/financial modelling, digitalisation, value chain optimisation and customer journey.
Tryg’s financial position, risk management and compliance in order to optimise meeting preparations as well as continued focus on the roles of the board committees and their output. Further, the Supervisory Board decided to arrange a board education day on relevant matters.
Duties and composition of the Executive Board Each year, the Supervisory Board reviews and adopts the rules of procedure of the Supervisory Board and the Executive Board, comprising relevant policies, guidelines and instructions describing reporting requirements and requirements for communication with the Executive Board. Financial legislation also requires the Executive Board to disclose all relevant information to the Supervisory Board and report on compliance with limits defined by the Supervisory Board and in legislation.
The Supervisory Board considers the composition, development, risk and succession plans of the Executive Board in connection with the annual evaluation of the Executive Board, and regularly in connection with board meetings. Each year, the Supervisory Board discusses Tryg’s activities to guarantee diversity at management levels. Tryg attaches great 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. While Tryg has made progress in recent years, the target for 2020 of 41% women at management level was not met.
The board committees’ terms of reference can be found at tryg.com > Governance > Management > Supervisory Board > Board committees, including descriptions of members, meeting frequency, responsibilities and activities during the year.
The Chair of the Supervisory Board reports on Tryg’s remuneration policy each year in connection with the review of the annual report at the annual general meeting. The Board’s proposal for the remuneration of the Supervisory Board for the current financial year is also submitted for approval by the shareholders at the annual general meeting.
Remuneration of the Supervisory Board Members of Tryg’s Supervisory Board receive a fixed fee and are not comprised by any form of incentive or severance programme or pension scheme. Their remuneration is based on trends
in peer companies, taking into account the required skills, efforts and the scope of the Supervisory Board’s work, including the number of meetings held. The remuneration received by the Chair of the Supervisory Board is three times that received by ordinary members, while the Deputy Chair’s remuneration is twice that received by ordinary members of the Supervisory Board.
The Supervisory Board can decide that the basic salary should be supplemented with a variable pay element of up to 50% of the fixed salary including pension.
Tryg engages in ongoing risk identification, mapping insurance risks and other risks which may endanger the realisation of Tryg’s strategy, or which may potentially have a substantial impact on Tryg’s financial position. The process involves
Total salary 1) The value of Conditional Shares at the time of allotment in January 2021 for the 2020 performance year. 2) One-off award in Conditional Shares, cf. below
identifying and continually monitoring the risks identified. As in previous years, Tryg undertook an Own Risk and Solvency Assessment (ORSA) in 2020. The purpose of the ORSA is to ensure and demonstrate a link between strategy, risk management, risk appetite, solvency and capital planning over the planning period. Giving the outbreak of COVID-19, specific attention has been given to identifying, assessing and managing the risks stemming from this new situation.
The Supervisory Board and the Executive Board 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 applied. The Supervisory Board checks that the company’s risk management and internal controls are effective. The Board receives reports on non-compliance with the frameworks and guidelines established by the Supervisory Board. The Risk Committee monitors the risk management on an ongoing basis and reports quarterly to the Supervisory Board.
As part of the internal control system, Tryg has established independent risk management, compliance and actuarial functions. The functions are reporting to the Executive Board and the Supervisory Board’s Risk Committee. Tryg has a decentralised set-up whereby risk managers in the business areas carry out monitoring and reporting of second line internal controls for the risk management and compliance functions.
The annual general meeting annually appoints an independent auditor recommended by the Supervisory Board. At least once a year, the auditors meet with the Audit Committee without the presence of the Executive Board. The Audit Committee chair deals with any matters that need to be reported to the Supervisory Board.
Career Professional board member, Adjunct Professor at the Copenhagen Business School. Former Governor of Danmarks Nationalbank (Danish Central Bank) Education Savings bank training, Graduate Diplomas in Organisation, Work Sociology, Credit and Financing. Board seats, Chair Ny Holmegaard Værk Fund, Investeringsforeningen Sparinvest, Vordingborg Borg Fund, Museum of South East Denmark, Tryg Invest A/S and KTIF (Kapitalforeningen Tryg Invest Funds)
Board seats, Deputy Chair Tryg A/S and Tryg Forsikring A/S Board member Sampension KP Livsforsikring A/S and a member of the Executive Management of Bombebøssen Commitee memberships Audit Committee (Chair), Risk Committee (Chair) and Nomination Committee in Tryg A/S and Audit Committee (Chair) and Risk Committee (Chair) in Sampension Experience General experience from executive level in banking. Micro and macro knowledge from membership of the Board of Governors in the Danish Central Bank. Knowledge of chairmanship from non-executive boards. Competencies General top management experience from the financial sector as well as experience with risk management and regulatory requirements business know-how and judgement.
Born in 1975. Joined the Supervisory Board in 2017. Swedish citizen.
Employed since 1998 Career Manager advisor in Claims Denmark, Tryg A/S
Education Insurance education at Forsikringsakademiet (level 5) as well as various management and communication programmes Board member Tryg A/S and Tryg Forsikring A/S Experience Division partner in Tryg A/S and examiner at Forsikringsakademiet. Competencies Solid knowledge and experience within the insurance industry. Excellent interpersonal and verbal communication skills. Number of shares 138 Change in portfolio since 2019 138
Born in 1979. Joined the Supervisory Board in 2020. Norwegian citizen.
Employed since 2011 Career Senior investigator in Tryg A/S Education The Norwegian Police University College (BA) and Queensland University of Technology (Master of Justice ). Norwegian School of Economics (Business Economics and Management Accounting). Numerous courses in insurance-related matters. Board member Tryg A/S and Tryg Forsikring A/S Experience Police Officer/Detective for 10 years, including Leading Investigator at Organized Crime Unit in Oslo, Norway. Joined the Special Investigation Unit at Tryg in 2011. Competencies Broad experience with insurance-related matters from most parts of the Tryg organisation. Solid knowledge and experience with compliance/audits, impact analyses and responsive strategies. Excellent interpersonal and verbal communication skills Number of shares 745 Change in portfolio since 2019 138
Born in 1962. Joined the Supervisory Board in 2010. Danish citizen.
Career Group Managing Director of Lif (Medicine and Healthcare Industry), CEO of the subsidiary DLI A/S (Danish Medicine Information) and the subsidiary ENLI ApS (Ethical Board for the Pharmaceutical Industry) Education MSc in Political Science (cand.scient.pol.), European Health Leadership Programme INSEAD, Executive Management Programme INSEAD, Executive Program Columbia Business School, Executive Program Singularity University Board seats, Chair TryghedsGruppen smba Board member Tryg A/S and Tryg Forsikring A/S Commitee memberships Remuneration Committee, Nomination Committee and IT-Data Committee in Tryg A/S Experience General top management experience as CEO of Lif since 2004 and former CEO of Herlev University Hospital. Representive in TryghedsGruppen since 2010. Deputy Chair 2014-2019 and Chair since 2019. Competencies Solid business know-how and judgement, analytical approach to problem-solving and strategy, networking, skills and the ability to evaluate succession scenarios as well as understanding of digitalisation. Number of shares 2,905 Change in portfolio since 2019 0
Born in 1959. Joined the Supervisory Board in 2010. Danish citizen.
Career CEO of Lundbeckfonden (+ Lundbeck Invest A/S) Education The A. P. Møller Group International Shipping Education, Graduate Diploma in Finance and various international management programmes Board seats, Deputy Chair Ørsted A/S, H. Lundbeck A/S, ALK Abelló A/S and Falck A/S Board member Tryg A/S and Tryg Forsikring A/S Commitee memberships Audit Committee and Risk Committee in Tryg A/S, Audit Committee, Scientific Committee and Nomination Committee in ALK-Abelló A/S, Scientific Committee, Nomination Committee and Remuneration Committee in H. Lundbeck A/S, Audit Committee and Remuneration Committee in Falck A/S and Nomination Committee and Remuneration Committee in Ørsted A/S Experience Top management experience from various positions in the AP Moller-Maersk Group, CFO in Coloplast and currently CEO of Lundbeckfonden Competencies Solid business know-how and judgement, risk management, business development, finance, strategy, M&A and understanding of business models Number of shares 7,025 Change in portfolio since 2019 0
Career Professional board member and independent advisor Education MSc in Economy and Business Administration, Chartered Financial Analyst (CFA), Senior Executive Programme from London Business School and Effective Board Management from Harvard Business School Board seats, Chair Bilington Process Technology A/S, Seilsport Maritimt Forlag A/S and ThjømøeKranen A/S Board member Tryg A/S and Tryg Forsikring A/S, TF Bank AB, FCG Fonder AB, Norconsult A/S and Norconsult Holding A/S, Hafslund E-CO ASA and ICE ASA Commitee memberships Audit Committee and Risk Committee in Tryg A/S Experience Senior management experience from large cap companies, insurance and real estate. Extensive experience from board of directors within finance, IT, energy and renewables and is engaged in developing sustainable businesses and good governance. Headed the Norwegian
IR associations for a number of years and received the Women’s Board Award for Norway Competencies Business know-how from experience with the financial sector and energy as well as risk management, strategy, restructuring, business development, M&A, IR and financial communication and working with regulatory authorities Number of shares 4,300 Change in portfolio since 2019 0
Born in 1967. Joined the Supervisory Board in 2019. Danish citizen.
Career Director/owner of HASLE Refractories A/S Education MSc.(Eng) in Operations and Supply Chain Management, Aalborg University Board seats, Chair Business Center Bornholm Board seats, Deputy Chair Erhvervshus Hovedstaden – Bornholm Board member Tryg A/S and Tryg Forsikring A/S, HASLE Refractories A/S, HASLE Refractories India Pvt. Ltd, Bornholmstrafikken Holding A/S and TryghedsGruppen smba
Born in 1955. Joined the Supervisory Board in 2015. Swedish citizen.
Gladheim Fastigheter AB, Hypoteket Bolån, Sverige AB and Ponture AB Board member Tryg A/S and Tryg Forsikring A/S, Allert Östlund, DBT Capital AB, Havsgaard AB, Irisande Care Group AB, Jovinum Food&Beverage AB, Nedvi Fastigheter AB, Picsmart AB, Wonderbox AB and Ywonne Media Group AB Commitee memberships IT-Data Committee (Chair) and Remuneration Committee in Tryg A/S Experience More than 30 years as CEO and Managing Director in local and international environment in listed companies as well as banks. Experience from the following industries: manufacturing, logisticts, insurance, finance and banking Competencies Solid background from the insurance industry, non-life as well as life. Business know-how and judgement, banking and finance know-how, understanding of digitalisation and risk management Number of shares 3,080 Change in portfolio since 2019 450
Jukka Pertola 22/22 8/8 11/11 4/4 Torben Nielsen 22/22 7/7 15/15 8/8 11/11 Elias Bakk 22/22 3/4 Charlotte Dietzer 20/22 Gert Ove Mikkelsen 21/22 Tina Snejbjerg 22/22 15/15 10/11 Ida Sofie Jensen 22/22 8/8 10/11 4/4 Lene Skole 22/22 7/7 15/15 Mari Thjømøe 22/22 7/7 15/15 Claus Wistoft 22/22 Karen Bladt 22/22 Carl-Viggo Östlund 22/22 10/11 4/4
Education: LL.M., MBA, Graduate Diploma in Finance. Board member: Insurance & Pension Denmark (IPD). Number of shares held: 37,405 Change in portfolio in 2020: +13,009
Education: BSc in International Business Administration and Modern Languages, MSc in Finance and Accounting (CBS), management programme at Wharton Board seats, Chair: Conscia and Siteimprove Board seats, Deputy Chairman: Simcorp A/S Number of shares held: 230,812 Change in portfolio in 2020: +34,523
Actively creating peace of mind Actively creating peace of mind is one of the strategic elements of Tryg’s Corporate Responsibility strategy, through which Tryg is contributing to society as well as offering relevant products with a preventive element to our customers.
In 2020, Tryg launched the Tryg Sund app, which consolidates the health of our commercial customers in one app. During our busy everyday lives, it can be difficult to prioritise one’s health. Via Tryg Sund, we are able to push messages to inform our customers about the health initiatives we offer through our health portal. To increase the safety of our customers and their cars, we have launched Tryg Bilpleje, which is our new car service product that we offer to our car insurance customers. The purpose of the product is to ensure that our customers’ cars are safe and ready for the seasonal changes in weather.
The Nightravens and lifebuoys are two initiatives, which create peace of mind in society in Norway. The Nightravens prevent crimes from happening by being present and making people feel safe in the night life, while the lifebuoys provide safety along the coastlines, lakes, rivers and near harbours in Norway. The lifebuoy is a vitally important rescue tool, and for decades, Tryg has provided lifebuoys to Norwegian society. Today, Tryg owns more than 47,000 lifebuoys.
Climate and environment Tryg is not an energy-intensive company, since its carbon emissions are mainly associated with heating and electricity use at the offices in addition to car and air travel. However, we acknowledge that we are part of the solution when it comes to minimising carbon emissions. We support the Danish government’s ambition to reduce carbon emissions by 70% in 2030 compared to 1990 as well as the efforts to minimise climate change and its negative impacts addressed in the Paris Agreement.
Tryg has a direct impact on the climate and the environment through its own internal operations and an indirect impact through its business activities. Tryg’s climate and environmental policy sets out our commitment to minimising the carbon footprint and negative impact of our own operations and creating a positive impact through our business activities such as product development and claims handling.
Download the Climate and environmental policy Read more on pages 15-18 in our Corporate Responsibility report
A potential increase in the frequency of climate -related claims gives rise to insurance and underwriting risks. Therefore, Tryg monitors data available on material climate changes and seeks to mitigate the risk of such possible changes by working to prevent claims by advising its customers on how to protect their homes from
By contributing to the prevention of climate-related claims, Tryg is able to support society and the transition to a low-carbon economy, offer relevant products and services to our customers and increase our customers’ peace of mind.
Transitional risks and opportunities One of the main transitional risks is the potential development in climate-related policy and regulation.
Future policy actions, both at a national and at EU level, may seek to either constrain actions which contribute to the adverse effects of climate change or promote adaptation. Even though Tryg’s direct carbon footprint is limited, the implementation of such initiatives still represents a risk to Tryg, which calls for adaptation. Also, regulatory developments that include new disclosure or reporting requirements introduced within the financial sector to address climate-related issues represent a transitional risk, to which Tryg has to adapt to stay compliant as well as competitive.
Carbon emissions In 2020, Tryg’s total carbon emissions decreased by 51% compared to 2019, corresponding to a decrease of 2,626 tonnes of CO
However, 2020 was an unusual year due to the COVID-19 pandemic, which significantly affected Tryg’s carbon emissions.
From March 2020, except for business-critical travel, almost all business travel across national borders was cancelled to limit transmission of the virus, which led to an 81% decrease in carbon emissions from air travel compared to 2019.
Most of our employees in Denmark, Norway and Sweden were asked and advised to work from home. As a result, the electricity consumption at all our offices decreased by 36% in total compared to 2019, while total waste production decreased by 45%, all contributing to the decrease in Tryg’s total carbon emissions.
Yet, Tryg initiated several initiatives in 2020, which have also contributed to the decrease in our total carbon emissions. Read more under on page 17 in our Corporate Responsibility report.
Eco-Lighthouse in Norway Eco-Lighthouse is a Norwegian certification scheme for companies seeking to document their environmental efforts and demonstrate social responsibility. In 2020, Tryg initiated the recertification of its offices in Norway according to the specific criteria applicable to the insurance industry. We expect to meet the updated reporting deadlines and to obtain recertification in the first half of 2021.
Responsible workplace Providing a healthy and safe working environment and securing the well-being of our employees are vital to Tryg. Our materiality assessment indicated that there is a risk that Tryg can have adverse impacts on its employees through, for example, dissatisfaction, discrimination or the physical or psychosocial working environ-
ment. To mitigate this risk, we are continuously working to improve working conditions for our employees.
Employee satisfaction The annual employee satisfaction survey is key to measuring employee satisfaction and a starting point for talking about well-being in the workplace. In 2020, Tryg’s overall employee satisfaction score increased to 80, up from 78 in 2019. Despite 2020 being a different year for all employees in Tryg due to COVID-19, the score for 2020 is record-high.
We realise there are no quick or easy solutions, and the cultural change required to meet our target will take time. Hence, further actions are needed to realise our target. This involves looking at the barriers and focusing on the underlying structures, HR processes and our organisational culture. We will continue to work towards our target of 41% women in management positions in our next strategy period towards 2023.
Security As an insurance company, for which digitalisation and innovation are high priorities, Tryg is exposed to several security threats that we need to mitigate. Security is crucial to Tryg and essential for us to secure our business. A high security level creates a safe workplace as well as the basis for a successful and adaptive business. This includes cyber security, as we are dependent on well-functioning IT systems to perform our work and run our business. This was especially important during 2020, as most of our employees had to work from home for long periods of time.
We require all new employees to do a mandatory e-learning programme on GDPR and IT security as part of their onboarding programme. Over the course of the year, all new employees completed the online training.
• We care for personalisation and prevention. • We strive to ensure a strong data security.
Read more about data ethics on pages 25-26 in our Corporate Responsibility report
Ethical screening process In 2020, we updated our responsible investment policy to reflect our focus on especially climate -related and environmental issues as material for our investments. Our manager selection process focusses on choosing external portfolio managers with a similar responsible mindset as Tryg. However, a screening of our holdings is carried out each year based on controversial behaviour and controversial weapons to ensure that individual holdings do not deviate from expectations. Furthermore, we have formulated a formal escalation process, which guides the process after a screening of investments.
Active source management Tryg’s initiatives on active ownership are primarily directed towards managing and monitoring its external managers’ responsible investment processes. The process related to ensuring compliance by external managers with Tryg’s responsible investment policy is called Active source management. Our primary focus is selecting external managers who share our principles and have policies in place to ensure that investments are managed responsibly. External asset managers are UN PRI signatories or in the process of becoming signatories and are expected to incorporate ESG considerations in their investment processes.
Responsible supply chain management Tryg is committed to driving positive environmental and social progress and impact in the societies, in which we operate and to respect human rights as described in the Universal Declaration of Human Rights. Our commitment is enforced through our signatory membership of the UN Global Compact and is outlined in our Corporate Responsibility policy as well as in Tryg’s Code of Conduct and Supplier Code of Conduct.
Corporate Responsibility strategy 2023 Tryg’s new Corporate Responsibility strategy for 2023, 'Driving sustainable impact', is based on, how Tryg as a company and the employees can contribute to a more sustainable society, and how Tryg can support suppliers and help our customers to make more sustainable choices. The strategy is characterised by a strategic, commercial and holistic approach, the purpose of which is to integrate sustainability into every corner of the company. Hence, the strategy rests on three pillars: Responsible company, Green workplace and Sustainable insurance. For each strategic pillar, we have set ambitious targets for both 2023 and 2030, as we want to contribute to an actual and measurable impact as well as monitor progress.
Corporate Responsibility strategy 2023 * Tryg's carbon emission reduction targets are based on the Greenhouse Gas Protocol Initiative (GHG Protocol).
The strategic pillar Sustainable insurance focuses on how Tryg can support and motivate its customers on their own sustainability journey by offering sustainable products and services as well as incorporating sustainability in our claims handling process. Our ambition is to increase our sustainable claims spend by 20% compared to 2020 and achieve a total CO
Read more about Tryg’s Corporate Responsibility strategy 2023 on pages 31-34 in our Corporate Responsibility report Download the report
Notes Contents – Financial statements 2020 Tryg’s Group consolidated financial statements are prepared in accordance with IFRS
Note 10 Tax 79 11 Intangible assets 80 12 Property, plant and equipment 83 13 Investment property 84 14 Equity investments in associates 84 15 Financial assets 85 16 Reinsurers’ share 89 17 Current tax 89 19 Premium provisions 90 19 Claims provisions 90 20 Pensions and similar liabilities 91 21 Deferred tax 93 22 Other provisions 94 23 Other debt 94 24 Earnings per share 94 25 Contractual obligations, collateral and contingent liabilities 94 26 Acquisition of activities 97 27 Related parties 97 28 Financial highlights 98 29 Accounting policies 99
Jukka Pertola Torben Nielsen Elias Bakk Gert Ove Mikkelsen Charlotte Dietzer Karen Bladt Chairman Deputy Chairman
Also, in our opinion, the parent financial statements give a true and fair view of the financial position of the Parent at 31 December 2020 and of its financial performance for the financial year 1 January to 31 December 2020 in accordance with the Danish Financial Business Act.
Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor ’s responsibilities for the audit of the consolidated financial statements and the parent financial statements section of this auditor’s report. We are independent of the Group in accordance with the IESBA Code of Ethics for Professional Accountants and additional requirements appli-
Opinion We have audited the consolidated financial statements and the parent financial statements of Tryg A/S for the financial year 1 January to 31 December 2020, pages 54-113, which comprise the income statement, statement of comprehensive income, balance sheet, statement of changes in equity and notes, including the summary of significant accounting policies, for the Group as well as the Parent and the consolidated cash flow statement. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for listed financial companies, and the parent financial statements are prepared in accordance with the Danish Financial Business Act.
In our opinion, the consolidated financial statements give a true and fair view of the Group’s financial position at 31 December 2020 and of its financial performance and cash flows for the financial year 1 January to 31 December 2020 in accordance with International Financial Reporting Standards as adopted by the EU and
Claims provisions Management’s estimates of the claims provisions are based on actuarial methods and involve complex statistical methods as well as estimates of future events.
Changes in methods and assumptions may result in a material impact on the size of the claims provisions.
How the matter was adressed in the audit • Assessment and test of controls related to the processes of claims handling and the recognition and measurement of provisions for known claims.
The most important assessments and assumptions of future events relate to: • Estimated future claims payments, which are based on the completeness and the accuracy of historical claims and payment patterns, among other factors.
• Determination of the margin included in Management ’s estimate of the claims provisions to address the uncertainty related to the actuarial estimates.
We were appointed auditors of Tryg A/S on 28 January 2002 for the financial year 2002 as part of the formation of the Company. However, we have been the appointed auditors of the underlying subsidiaries since before 1995. We have been reappointed annually by decision of the general meeting for a total contiguous engagement period of more than 19 years up to and including the financial year 2020.
In connection with our audit of the consolidated financial statements and the parent financial statements, our responsibility is to read the management’s review and, in doing so, consider whether the management’s review is materially inconsistent with the consolidated financial statements and the parent financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
Management’s responsibilities for the consolidated financial statements and the parent financial statements Management is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for listed financial companies, and for the preparation of parent financial statements that give a true and fair view in accordance with the Danish Financial Business Act, and for such internal control as Management determines is necessary to enable the preparation of consolidated financial statements and parent financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibilities for the audit of the consolidated financial statements and the parent financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements and the parent financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and these parent financial statements.
material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements and the parent financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the Entity to cease to continue as a going concern.
SEK/DKK, average rate for the period 70.95 70.62 72.67 77.24 78.93
Insurance technical interest, net of reinsurance -20 1 -10 -14 -10
Total reinsurers' share of provisions for insurance contracts 1,377 1,501 1,415 1,366 2,034
Claims ratio, net of ceded business 70.3 70.9 70.7 70.4 71.0
Return on equity after tax (%) 22.5 24.6 14.9 28.8 26.2
Income from investment property 49 58 7 Interest income and dividends 506 534
Change in reinsurers' share of premium provisions 85 38 3 Premium income, net of reinsurance 21,998 21,198 4 Insurance technical interest, net of reinsurance -20 1
Change in the reinsurers' share of claims provisions -187 40 5 Claims, net of reinsurance -14,637 -14,429
Reinsurance commissions and profit participation from reinsurers 170 227 6 Insurance operating costs, net of reinsurance -3,032 -2,854
Tax on hedging of currency risk in foreign entities for the year -28 4
Owner-occupied property 630 730 12 Total property, plant and equipment 777 885 14 Equity investments in associates 16 0
Total other financial investment assets 45,748 44,239 15 Total investment assets 46,881 45,390
a) Other reserves contains Norwegian Natural Perils Pool and contingency fund provisions.
Total changes in equity in 2020 0 48 29 586 -484 0 179
Total changes in equity in 2019 0 18 60 158 514 1 751
• Compliance function • Actuarial function • Risk management function 2nd line of defence
Operationally - Frameworks - Limitations - Instructions - Allocated capital - Contingency plans 1 Risk and capital management
In Tryg, we have adopted a three lines of defence governance model across the organisation. This is to ensure robust governance and effective communication between the business areas, key functions and internal audit as well as reporting to the Supervisory Board and the Supervisory Board’s Risk Committee (“RiU”).
The 2nd line consists of the Compliance, Actuarial and Risk Management function: The compliance function has the overall responsibility for overseeing and monitoring compliance with applicable laws and legislation as well as internal policies and guidelines. The key responsibility of the actuarial function is to ensure and assess the adequacy of the provisions. The risk management function is responsible for the facilitation, monitoring and implementation of effective risk management practices and reporting of adequate risk-related information throughout the organisation. The risk management function ensures a consistent approach to risk identification across the organisation, risk assessment of the most significant risks at Group level and reporting to the Supervisory Board.
The risk management function consists of a Group risk management department and decentralized risk
Notes managers in the individual business areas. The decentralized risk managers are anchored in the respective business areas, and also have a dotted reporting line into the Group risk management. The decentralized risk managers are responsible for carrying out the activities of the risk management function in their respective business areas including the monitoring and reporting of second line internal controls.
The 3rd line consists of internal audit: The third line must ensure an independent and objective audit of the organization’s internal controls, risk management and governance processes. Internal audit reports independently to the Supervisory Board and to its Audit Committee.
Capital management Tryg’s capital management is based on the key business objectives: • A solid capital base, supporting both the statutory requirements and a single ‘A’ rating from Moody’s. • Support of a steadily increasing nominal dividend per share, with a payout ratio in the interval 60-90%.
Tryg’s capital base currently consist of Tier 1 and 2 capital, such as shareholders’ equity and subordinated loans.
Reinsurance is used to reduce the underwriting risk in situations where this cannot be achieved to a sufficient degree via ordinary diversification. In case of major events involving damage to buildings and contents, Tryg’s reinsurance programme provides protection for up to DKK 7.25bn, which statistically is sufficient to cover at least a 250-year event. Retention for such events is DKK 182.5m.
At the end of 2020, Tryg’s claims reserves net of reinsurance totalled DKK 23.870m with an average duration of approximately 4,6 years.
In 2021, the first steps toward phasing out IBOR-rates will start. For Tryg this has a small impact on existing as well as on new interest rate swaps used for hedging the interest rate risk. Shortly said: Euribor / Eionia – rates will be replaced by a ESTR-rate. The change of IBOR rates is expected to imply that Euribor in existing contracts will be measured as ESTR plus af fixed interest rate spread. Future contracts will incorporate ESTR rates instead of Euribor.
Tryg does not want to speculate in foreign currency, but since Tryg invests and operates its insurance business in other currencies than Danish kroner, Tryg is exposed to currency risk. Tryg is primarily exposed to fluctuations in the other Scandinavian currencies due to its ongoing insurance activities. Premiums earned and claims 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.
A special crisis management structure is set up to deal with the eventuality that Tryg is hit by major crises. This comprises a Crisis Management Team at Group level, national contingency teams at country level and finally business contingency teams in the individual areas. Tryg has prepared contingency plans to address the most important areas. In addition, comprehensive IT contingency plans have been established, primarily focusing on the business critical systems.
Other risks 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 Executive Board. Before determining the strategic position, the strategic decisions are subject to a risk assessment, explaining the risk of the chosen strategy to Tryg’s Supervisory Board and Executive Board.
Reserving risk 1% change in inflation on person-related lines of business a) +/- 411 +/- 412 10% error in the assessment of long-tailed lines of business
Effect of 1 % increase in interest curve: Impact of interest-bearing securities -1,159 -1,150
Real estate market 15% decline in real estate markets -294 -361
Provisions before discounting, end of year 658 735 854 905 938 1,092 1,308 1,618 2,209 3,829 8,009 22,156
The amounts in foreign currency in the table are translated to Danish kroner using the exchange rate at 31 December 2020 to prevent the impact of exchange rate fluctuations.
Emerging risk Emerging risk covers both new risks and already known risks, with changing characteristics. The management of this type of risk is 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.
Provisions before discounting, end of year 2 -1 77 68 13 27 6 62 71 161 506 992
Provisions for claims, net of reinsurance, end of the year 23,871 a) The diagonal for 2018 to 2020 is affected by the Alka acquisition.
DKKm 0­1 year 1­2 years 2­3 years > 3 years Total
The share portfolio includes exposure from share derivatives of DKK 69m (DKK 167m in 2019) Unlisted equity investments are based on an estimated market price. UK is included in EU ex. Nordic countries
Maturity of the Group’s financial obligations including interest 2020 0­1 years 1­5 years > 5 years Total
Debt relating to unsettled funds transactions and repos 3,259 0 0 3,259
Debt relating to unsettled funds transactions and repos 2,601 0 0 2,601
Notes The share of capital included in the calculation of the own funds totals DKK 2,663m (DKK 2,744m in 2019)
Prices used for determination of fair value in respect of the loans are based on actual traded prices from Bloomberg.
Amortised cost value of the loan recognised in statement of financial position 516 499 The fair value of the loan at the statement of financial position date 521 501 The fair value of the loan at the statement of financial position date is based on a price of 101 100 Total capital losses and costs at the statement of the financial position date 2 2 Interest expenses for the year 14 13 Effective interest rate 2.6% 2.4%
Valuation of investments assets Total financial investment assets are measured at fair value with value adjustment in the income statement. Listed bonds and shares, parts of unit trusts as well as derivative financial instruments are measured at quoted market prices or consolidated references prices at the balance sheet date.
On 31 December 2020, the value amounts to DKK 1,186m (DKK 1,375m on 31 December 2019).
Exchange rates Tryg has business in three different Nordic countries meaning that Tryg is exposed to fluctuations in the local currencies (NOK and SEK) in regard to the financial results.
Notes Description of segments Please refer to the accounting policies for a description of operating segments.
a) Amounts relating to one-off items. Please refer to note 2 ‘Geographical segments’ for details. Other assets and liabilities are managed at Group level and are not allocated to the individual segments but are included under ‘Other’.
Insurance technical interest, net of reinsurance -12 -5 -2 -1 0 -20
DKKm Private Commercial Corporate Sweden Other a) Group 2 Operating segments (continued)
Reinsurers' share of premium provisions 42 4 170 0 0 216
Number of full-time employees 31 December 2,859 2,650 2,520 1,933 1,839
Claims ratio, net of ceded business 78.7 78.8 73.8 73.2 69.0
Number of full-time employees 31 December 1,099 1,083 1,105 1,042 1,040 a) Includes Danish general insurance and German, Dutch, Austrian and Finnish guarantee insurance. The gross premium income related those branches amounts to DKK 106m (DKK 78m in 2019).
Run-off, net of reinsurance (%) -12.3 -9.7 0.4 -4.8 -2.8 Number of full-time employees 31 December 441 419 402 398 385
Run-off, net of reinsurance (%) -5.1 -5.5 -6.5 -5.4 -7.0 Number of full-time employees, continuing business at 31 Dea ) In 2020, amounts primarily relates to oneoff items. In 2019 - 2016, amounts primarily relates to eliminations and one-off items.
compensation Motor TPL Motor comprehensive insurance Marine, aviation and cargo insurance
Insurance technical interest, net of reinsurance - 3 - 1 - 1 0 - 1 0 - 1 1 - 4 1 0 0
Insurance technical interest, net of reinsurance - 6 - 4 - 2 3 0 0 - 2 0 0 0 - 1 1 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.
a) Group Life, one-year policies related to Norwegian Group Life and Alka Group Life.
Insurance technical interest, net of reinsurance 0 - 1 - 21 0 1 1 - 20 1
Run-off previous years, reinsurers' share 15 20 6 Insurance operating costs, net of reinsurance
Expenses have been incurred for the Group´s Internal Audit Department. -9 -10
Fees for non-audit services provided by Deloitte Statsautoriseret Revisionspartnerselskab (Deloitte Denmark) and other member firms of Deloitte Touche Tohmatsu Limited to Tryg Group amounts to DKK 82m (DKK 4m in 2019). The fee includes and consists of varius declaration tasks, objective tax advice, financial due diligence and transaction advice as well as general accounting and consulting services. Deloitte has complied with the cap for non-audit services as referred to in Article 4(2) of Regulation (EU) No 537/2014.
Payroll tax -528 -491 a) In 2020 defined benefit plans were included with DKK -128m (DKK 35m in 2019).
Matching shares In 2011-2020, Tryg entered into an agreement on matching shares in accordance with the Group’s remuneration policy.
Executive Board, Risk-takers and Other employees are allocated one share in Tryg A/S for each share they acquires in Tryg A/S at market rate for liquid cash at a contractually agreed sum over the 3- or 4-year deferral period.
Other costs Other costs amounts to DKK 354m (DKK 356m in 2019) and primarily relates to depreciations of customer relations and trademarks, cost related to the sale of pensions products and cost which is not ascribed to the insurance portfolio.
Depreciations related to trademarks and customer relationships amounts to DKK 135m (DKK 157m in 2019).
COVID-19 has not have any affect on the assumptions related to impairment of Goodwill, Trademarks and Brand.
The cash flows appearing from the latest prognosis approved by management for the next 6 quarters are used when calculating the value in use of Private DK. The cash flows in the latest prognosis period have been extrapolated for financial years after the prognosis periods (terminal period) and adjusted for expected growth rates determined on the basis of expectations for the general economic growth. The required return is based on an assessment of the risk profile of the tested business activities compared with the market’s expectations for the Group.
Impact on the calculated present value from the following changes: CAGR +1.0 percentage point (0-10 years) 1.4bn 1.2bn
At 31 December 2020, management performed an impairment test of the carrying amount of goodwill based on the allocation of the cost of goodwill to the cash-generating unit.
The cash flows appearing from the latest prognosis approved by management for the next 6 quarters are used when calculating the value in use of Moderna. The cash flows in the latest prognosis period have been extrapolated for financial years after the prognosis periods (terminal period) and adjusted for expected growth rates determined on the basis of expectations for the general economic growth. The required return is based on an assessment of the risk profile of the tested business activities compared with the market’s expectations for the Group.
An agricultural portfolio acquired in 2014 was impaired and written down in 2019 DKK 18m.
The impairment test compares the carrying amount with the estimated present value of future cash flows. The test did indicate an impairment of DKK 147m (DKK 7m) due to revaluation of the Groups IT-systems. The write-down is due to related system development costs will be higher, while for some of the systems benefits are also expected to be lower. The cost is recognised as write-downs under depreciations in the income statement.
Accumulated depreciation and value adjustments at 1 January -219 -20 0 -84 -323
Value adjustments for the year at revalued amount in income statement 0 0 -10 0 -10
Accumulated depreciation and value adjustments at 31 December -235 -46 0 -182 -463 a) Lease assets (Right of use-assets(ROU)) equipment only consists of leases of vehicles with a lease term of three to four years. The monthly amounts are fixed and there are no option for purchase or extension. Short term leases are not recognised as Right of use-assets.
Total rental income for 2020 is DKK 65m (DKK 74m in 2019).
”Quoted market prices and consolidated reference prices” (level 1) consists of financial instruments that are quoted and traded in a principal and active market (markets generally accessable and with substantial volume and trade frequency).
Valuation based on observable input (level 2) consists of financial instruments that are valued substantially on the basis of observable input other than quoted price or consolidated reference price for the instrument itself. If a financial instrument is quoted in a market that is not active, Tryg bases its measurement on the most recent transaction price. Adjustment is made for subsequent changes to market conditions, for instance, by including transactions in similar financial instruments that are assumed to be motivated by normal business considerations. For a number of financial assets and liabilities, no market exists.
If, at the balance sheet date, a financial instrument’s classification differs from its classification at the beginning of the year, the classification of the instrument changes. Changes are considered to have taken place at the balance sheet date. Developments in the financial markets can result in reclassifications between the categories. Some bonds have become illiquid and have therefore been moved from ”Quoted prices or consolidated reference prices” to the ”Observable input” category, while other bonds have become liquid and have been moved from ”Observable input” to the ”Quoted prices or consolidated reference prices” category.
Financial assets at fair value with value adjustments in the income statement 45,748 44,239
Receivables measured at amortised cost with value adjustment in the income statement 4,070 3,476
Fair value hierarchy for financial instruments and investment property measured at fair value in the statement of financial position
Derivative financial instruments, assets 6 1,834 0 1,840 Derivative financial instruments, debt 0 -897 0 -897 a) Consolidated reference prices means Nasdaq consolidated reference prices
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 or consolidated reference prices based on actual trades are available.
Financial instruments transferred from ”Observable input” or ”Non-observable input” to ”Quoted market prices or consolidated reference prices” 0 3,559
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-709m (DKK -723m in 2019).
Classified according to investment strategy 4,398 -6,390 2,518 -445 -80 0
Other, hereof financial instrument in liabilities -2,458 0 0 -800 0 -3,257
Classified according to investment strategy 83 -1,517 1,756 -246 -75 0 a) The setup of Tryg invest is impacting Tryg’s balance sheet as external customers investments are booked under “total other financial investments” with opposing liabilities entries such as “debt to group undertakings” and “other debt”.
Derivatives with value adjustments in the income statement at fair value: Nominal
Gains and losses on hedges charged to other comprehensive income: 2020 Gains Losses Net
Value adjustments of foreign entities recognised in other comprehensive income in the amount of: Value adjustments at 1 January -170 -202
As at 31 December 2020, management performed a test of the carrying amount of total reinsurers’ share of provisions for insurance contracts and receivables. The impairment test resulted in impairment charges totalling DKK 0m (DKK 0m in 2019).
Adjustment of current tax in respect of previous years 97 -50
Current tax is recognised in the statement of financial position as follows: Under assets, current tax 51 52
Tryg Forsikring A/S has asked the Danish Tax Authorities for a repayment of tax for unused tax loss in the closed Finnish branch in 2012. 80% of the expected tax repayment has been included in the balance of current tax.
Number of shares of DKK 5 (1,000) 2020 2019 2020 2019
Paid in the financial year in respect of the current year -8,691 199 -8,492
Change in claims in the financial year in respect of prior years -1,071 -91 -1,162
Change in claims in the financial year in respect of prior years -1,117 -65 -1,182
Change in carrying amount of plan assets: Carrying amount of plan assets at 1 January 940 875
Adjustment regarding the terminated part of the plan termination recognised in the income statement* -874 0
Adjustment regarding the terminated part of the plan termination recognised in the income statementa) -128 0
Weighted average duration of the defined benefit obligation (years) 8 13
Impact on equity from the following changes: Interest rate increase of 0.3 percentage point 1 57
Change in deferred tax relating to change in tax rate -2 0
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 50m (DKK 22m at 31 December 2019).
The Solvency Ratio is defined as the own funds relativ to the solvency capital requirement.
Debt related to external customers investments amounts to DKK 2,470m please refer to note 15 Tryg’s investment portfolio.
Tryg Livsforsikring A/S and Forsikrings-Aktieselskabet Alka Liv II have registered the following assets as having been held as security for the insurance provisions: Interest and rent receivable 4 5 25 Contractual obligations, collateral and contingent liabilities (continued)
Tryg is comitted to invest in some investment funds. The commitment amounts to DKK 1,015m. DKK 399m are expected called during 2020 and additionally DKK 525m within 5 years.
Collateral which is not offset in the statement of financial position
Contingent liabilities Price adjustments 2016-2020 At the end of October (2020) Tryg received the Forbrugerombudsmand ’s (FO or Consumer Ombudsman) assessment of the case. In FO’s opinion, Tryg was not complying with regulations on price adjustments for residential customers when increasing prices above indexation between March 2016 and February 2020. The case is related to a part of the private portfolio in Denmark.
Other Companies in the Tryg Group are party to a number of disputes.
Management believes that the outcome of these disputes will not affect the Group’s financial position significantly beyond the obligations recognized in the statement of financial position at 31 December 2020.
Claims payments - Parent company (TryghedsGruppen smba) 0.1 0.0 - Other related parties 0.4 0.5 26 Acquisition of activities
The offer is provided in GBP and thus the consideration for the business taken over by Tryg is fixed in GBP. This foreign currency exposure will persist from the time of the offer and until closing of the acquisition.
In order to eliminate the foreign currency exposure related to the acquisition Tryg enters into derivatives to buy GBP and sell DKK that mirrors the possibility of non-occurrence of the acquisition, i.e. the derivatives have a knock-out option that is automatically triggered if the acquisition does not occur. Such derivatives are often referred to as deal contingent derivatives (DCF). If the acquisition is not concluded the forwards will lapse without any payments.
Risk-takers independent control functions 5 9 0 1 1 11 a) Total expenses recognised in 2020 for matching shares and conditional shares allocated in 2020 and previous year. For matching shares and conditional shares allocated to Executive Board in 2020, please refer to ”Corporate governance” in Management review.
TryghedsGruppen smba has provided an irrevocable subscribtion undertaking to Tryg, to subscribe for new shares in the coming Tryg Rights Issue for an amount totalling DKK 6.0bn.
The transactions between TryghedsGruppen smba and Tryg A/S is conducted on an arm’s length basis.
Intra-group transactions with Parent company Administration fee, etc. is fixed on a cost-recovery basis.
Risk-takers are defined as employees whose activities have a significant influence on the company’s risk profile. The Supervisory Board decides which employees should be considered as risk-takers.
Change in accounting policies Tryg has not implemented any new significant accounting policies or IFRS standards in 2020.
Accounting regulation Implementation of changes to accounting standards and interpretation in 2020 The International Accounting Standards Board (IASB) has issued several changes to the international accounting standards, and the International Financial Reporting Interpretations Committee (IFRIC) has also issued a number of interpretations.
No standards have been implemented for the first time for the accounting year that began on 1 January 2020 that will have a significant impact on the group. See below regarding IFRS 9 ‘Financial instruments’
There has not been implemented any new or amended standards and interpretations that have affected the group significantly.
a) enters into force for the accounting year commencing 1 January 2018 - Insurance companies are allowed to postpone the implementation to 1 January 2023 if certain criteria are met.
Regarding IFRS 9 the assessment of no significant impact on the statement of financial position or profit and loss is based on the assumption that Tryg already carry all financial instruments at fair value through profit and loss. The implementation of IFRS 9, will not affect Tryg’s recognition and measurement. Tryg has postponed the implementation of IFRS 9 to 1 January 2023 when IFRS 17 Insurance Contracts will be applicable. Tryg can postpone IFRS 9 due to the fact that our activities are predominantly connected with insurance and that our liabilities connected with insurance is relatively greater than 80 per cent of the total liabilities. The impact of IFRS 17 (Insurance Contracts) is currently being assessed in a structured and formal manner and is expected to be concluded in due course ahead of the implementation date. Whilst the Tryg Group anticipates minor changes in certain of its key figures, such as premiums growth and claims ratio as a result of changes to the defintions of premiums and costs under IFRS 17 (Insurance Contracts), Tryg Group currently expects that the implementation of IFRS (Insurance Contracts) will not significantly change the
Claims provisions are discounted. As a result, initial changes in discount rates or changes in the duration of the claims provisions could have positive or negative effects on earnings. Discounting affects the motor third-party liability, general third-party liability, workers ’ compensation classes, including sickness and personal accidents, in particular.
Notes As part of the termination of the defined-benefit plan, an agreement of compensation to the employees covered by the plan was agreed. A liability has been established to cover the expected compensation to be paid to the employees upon retirement from the company. If the employee leaves before retirement only a part of the compensation is paid.
Measurement of Goodwill, Trademarks and Customer relations Goodwill, Trademarks and Customer relations was acquired in connection with acquisition of businesses. Goodwill is allocated to the cash-generating units under which management manages the investment. The carrying amount is tested for impairment at least annually. Impairment testing involves estimates of future cash flows and is affected by several factors, including discount rates and other circumstances dependent on economic trends, such as customer behaviour and competition. Cf. note 11.
Description of accounting policies Recognition and measurement The annual report has been prepared under the historical cost convention, as modified by the revaluation of owner-occupied 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 are recognised in the income statement.
Consolidation Consolidated financial statements The consolidated financial statements comprise the financial statements of Tryg A/S (the parent company) and the enterprises (subsidiaries) controlled by the parent company. The parent company is regarded as controlling an enterprise when it i) exercises a controlling influence over the relevant activities in the enterprise in question, ii) is exposed to or has the right to a variable return on its investment, and iii) can exercise its controlling influence to affect the variable return.
Basis of consolidation The consolidated financial statements are prepared based on the financial statements of Tryg A/S and its subsidiaries. The consolidated financial statements are prepared by combining items of a uniform nature.
Any positive balances (goodwill) between the acquisition price of the acquired enterprise, the value of minority interests in the acquired enterprise and the fair value of previously acquired equity investments, on the one hand, and the fair value of the acquired assets,
Key ratios Earnings per share (EPS) are calculated according to IAS 33. This and other key ratios are calculated in accordance with Recommendations and Ratios issued by the The Danish Finance Society and the Executive Order on Financial Reports for Insurance Companies and Multi-Employer Occupational Pension Funds issued by the Danish Financial Supervisory Authority.
Share-based payment The Tryg Group’s incentive programmes comprise an employee bonus scheme and incentive programmes for executive board, risk takers and other employees.
Employee bonus scheme According to the remuneration policy, the Group’s employees can be granted a bonus in the form of free shares. When the bonus is granted, employees can choose between receiving shares or cash. The expected value of the shares will be expensed over the performance period. The scheme will be treated as a complex financial instrument, consisting of the right to cash settlement and the right to request delivery of shares. The difference between the value of shares and the cash payment is recognised in equity and is not remeasured. The remainder is treated as a liability and is remeasured until the time of exercise, such that the total recognition is based on the actual number of shares or the actual cash amount.
Conditional shares Other risk takers have been allotted conditional shares in accordance with the incentive programme for risk takers.
Investment management charges represent expenses relating to the management of investments including salary and management fees on the investment area. The external investors share of the result in Kapitalforeningen Tryg Invest Funds and Tryg Invest Real Estate are either deducted (in case of a profit) from or added (in case of a loss) to the investment result.
Trademarks and customer relations Trademarks and customer relations have been identified as intangible assets on acquisition. The intangible assets are recognised at fair value at the time of acquisition and amortised on a straight-line basis over the expected economic lifetime of 5–15 years.
After completion of the development work, the asset is amortised according to the straight-line method over the assessed economic lifetime, though over a maximum of 8 years. The amortisation basis is reduced by any impairment and write-downs.
Tryg recognises a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee, excluding short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets.
At inception or on reassessment of a contract that contains lease components, Tryg allocates the consideration in the contract to each lease component based on their relative stand-alone prices.
The fair value is calculated on the basis of market-specific rental income per property and typical operating expenses for the coming year. The resulting operating income is divided by the required return on the property in per cent, which is adjusted to reflect market interest rates and property characteristics, corresponding to the present value of a perpetual annuity. The value is subsequently adjusted with the value in use of the return on prepayments and deposits and adjustments for specific property issues such as vacant premises or special tenant terms and conditions. Cf. note 15.
Notes voting rights. Equity investments in associates are measured using the equity method and the carrying amount of the investment represents the Group’s proportionate share of the enterprises’ net assets. Significant transaction costs are recognised as part of the acquisition price.
Notes Equity Share capital Shares are classified as equity when there is no obligation to transfer cash or other assets. Costs directly attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds, net of tax.
Revaluation reserves Revaluation of owner-occupied property is recognised in other comprehensive income unless the revaluation offsets a previous impairment loss.
Claims and claims handling costs are expensed in the income statement as incurred based on the estimated liability for compensation owed to policyholders or third parties sustaining losses at the hands of the policyholders. They include direct and indirect claims handling costs that arise from events that have occurred up to the statement of financial position date even if they have not yet been reported to the Group. Claims provisions are estimated using the input of assessments for individual cases reported to the Group and statistical analyses for the claims incurred but not reported and the expected ultimate cost of more complex claims that may be affected by external factors (such as court decisions). The provisions include claims handling costs.
Employee benefits Pension obligations The Group operates various pension schemes. The schemes are funded through contributions to insurance companies or trustee-administered funds. In Norway, the Group operated a defined-benefit plan which was closed at 01 January 20. In Denmark, the
Notes Group operates a defined-contribution plan. A defined -contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions. In Sweden, the Group complies with the industry pension agreement, FTP-Planen. FTP-Planen is primarily a defined-benefit plan as regards the future pension benefits. Försäkringsbranschens Pensionskassa (FPK) is unable to provide sufficient information for the Group to use defined-benefit accounting. The plan is on that basis accounted for as a defined-contribution plan. As part of the termination of the defined-benefit plan in Norway, an agreement of compensation to the employees covered by the plan was agreed. A liability has been established to cover the expected compensation to be paid to the employees upon retirement from the company. If the employee leaves before retirement only a part of the compensation is paid. There is no future actuarial assumptions related to the liability, only uncertainty is whether the employees stays to retirement or not.
Income tax and deferred tax The Group expenses current tax according to the tax laws of the jurisdictions in which it operates. Current tax liabilities and current tax receivables are recognised in the statement of financial position as estimated tax on the taxable income for the year, adjusted for change in tax on prior years’ taxable income and for tax paid under the on-account tax scheme.
Other The amounts in the report are disclosed in whole numbers of DKKm, unless otherwise stated. The amounts have been rounded and consequently the sum of the rounded amounts and totals may differ slightly.
Other comprehensive income which can subsequently be reclassified as profit or loss
Hedging of currency risk in foreign entities for the year 127 -19
Total changes in equity in 2019 0 826 -589 514 1 751
Remuneration for the Executive Board is paid partly by Tryg A/S and partly by Tryg Forsikring A/S and is charged to Tryg A/S via the cost allocation. Refer to Note 6 in the Tryg Group for a specification of the audit fee.
Tryg Forsikring A/S, Ballerup 100 2,895 12,214 6 Current tax assets
Adjustment of current tax in respect of previous years 0 1
Companies in the Tryg Group are party to a number of disputes in Denmark, Norway and Sweden. Management believes that the outcome of these disputes will not affect the Group’s financial position over and above the receivables and liabilities recognised in the statement of financial position at 31 December 2020.
Cash variable salary Pension Total a) Total expenses recognised in 2020 for matching shares and conditional shares allocated in 2019 and previous year. For matching shares and conditional shares allocated to Executive Board in 2020, please refer to ”Corporate governance” in Management review.
b) Risk-takers in Tryg A/S includes only one employee, wherefore salary and pension is not presented. The amounts are included in note 27 for Tryg Group.
Intra-group trading involved - Providing and receiving services 36 18 - Intra-group accounts 513 163
The executive order on application of International Financial Reporting Standards for companies subject to the Danish Financial Business Act issued by the Danish FSA requires disclosure of differences between the format of the annual report under International Financial Reporting Standards and the rules issued by the Danish FSA.
Fees are charges incurred during the financial year. Variable salary includes the charges for matching shares and conditional shares, which are recognised over 4 years.
Reference is made to section ’Corporate governance’ of the management’s review on the corresponding disbursements.
The Executive Board is paid a fixed remuneration, car allowance and pension. The variable salary is awarded in the form of share-based remuneration and cash. see ’Corporate governance ’.
The Supervisory Board decides which employees should be considered to be risk-takers.
Combined ratio exclusive of run-off 98.2 88.7 83.3 92.8 93.6 94.3 89.7 98.4 89.6
Claims ratio, net of reinsurance 61.6 67.6 65.1 71.9 53.8 70.8 67.8 76.7 72.0
Combined ratio exclusive of run-off 96.8 96.8 97.4 105.1 104.8 98.8 98.2 102.9 95.3
Claims ratio, net of reinsurance 72.3 68.6 66.6 73.9 71.5 70.5 67.9 74.0 72.6
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Number of full-time employees, continuing business at 31 December 4,400 4,151 a) Includes Danish general insurance and German, Dutch, Austrian and Finnish guarantee insurance. The gross premium income related those branches amounts to DKK 106m (DKK 78m in 2019)
Diluted average number of shares (1,000) 301,678 301,954 302,043 276,080 279,399
Gross premium income Calculated as gross premium income adjusted for change in gross premium provisions, less bonuses and premium discounts.
Own funds Equity plus share of qualifying solvency debt and profit margin (solvency purpose), less intangible assets, tax asset and proposed dividend.
Solvency II Solvency requirements for insurance companies issued by the EU Commission. The new rules came into force at 1 January 2016.
Glossary, Key Ratios and alternative performance measures The financial highlights and key ratios of Tryg have been prepared in accordance with the executive order issued by the Danish Financial Supervisory Authority on the financial reports for insurance companies and multi-employer occupational pension funds, and also comply with ‘Recommendations & Ratios’ issued by the CFA Society Denmark.
Alternative performance measures Until the sale of certain owner occupied properties by the Tryg Group in 2016, pursuant to the executive order issued by the Danish Financial Supervisory Authority on the financial reports for insurance companies and multi-employer occupational pension funds, the Tryg Group has calculated the gross expense ratio, the combined ratio and the operating ratio by adding a hypothetical market rent to and deducting the actual depreciation from operating expenses. Previously, in addition the Tryg Group has in its financial statements presented a gross expense ratio without these adjustment as an alternative performance measure, however, subsequent to 2016 this alternative performance measure is not relevant and not presented as the Tryg Group does not have owner occupied properties.
The following financial measures included in this Annual report are not measures of financial performance or liquidity under IFRS, as adopted by the EU or in accordance with the executive order issued by the Danish Financial Supervisory Authority on the financial reports for insurance companies and multi-employer occupational pension funds but are defined by management as follows: Large claims, net of reinsurance Large claims, net of reinsurance is defined as single claims or claims events gross above 10m in local currencies adjusted for reinsurance.
Large claims, net of reinsurance, as calculated by the Tryg Group, represents
(Premium income excluding Alka in local currencies in year X - Premium income excluding
Impact from COVID-19 claims, Gross The impact from COVID-19 on claims, Gross is defined as the impact calculated by comparing normalised claims frequencies and average claims levels for specific lines of business and the same for 2020.
Impact from COVID-19 technical result, Gross Impact from COVID-19 on technical result, Gross is defined as the impact from COVID-19 on claims, gross added by costs in relation to COVID-19 due to IT (employees working from home) and extra cleaning of premises etc.
Impact from COVID-19 claims, net of reinsurance The impact from COVID-19 on claims, net of reinsurance is defined as impact from COVID-19 on claims, gross adjusted for reinsurance.
Certain statements in this annual report are based on the beliefs of our management as well as assumptions made by and information currently available to management. Statements regarding Tryg’s future operating results, financial position, cash flows, business strategy, plans and future objectives other than statements of historical fact can generally be identified by the use of words such as ‘targets’, ‘believes’, ‘expects’, ‘aims’, ‘intends’, ‘plans’, ‘seeks’, ‘will’, ‘may’, ‘anticipates’, ‘would’, ‘could’, ‘continues’ or similar expressions.
Read more in the chapter Solvency and dividend on pages 31-32, and in Note 1 on page 60-69, for a description of some of the factors which may affect the Group’s performance or the insurance industry.