Key features of Annual Report 2013 • 447B447BPost-tax profit of DKK 1,468m (2012: DKK 1,823m) • 448B448BThis profit was higher than the assumed profit of
(2012: DKK 210m) • 456B456BTopdanmark bought back own shares of DKK
Q4 2013 • 457B457BPost-tax profit was DKK 251m (Q4 2012: DKK
Annual financial statements – parent company 65B65B79 Income statement 66B66B79 Statement of comprehensive income 67B67B80 Balance sheet 68B68B81 Statement of changes in equity 69B69B82 Notes to the financial statements 70B70B87 Disclaimer 71B71B88 Statement by Management on the Annual Report 72B72BAuditors’ reports 73B73B89 Internal audit’s reports 74B74B90 Independent auditor’s reports
Results: Non-life insurance 1,592 1,092 1,086 2,103 1,361 529 162 Life insurance 292 384 187 210 442 46 102 Parent company etc. (21) 31 76 22 73 18 54 Pre-tax profit 1,863 1,506 1,349 2,335 1,875 593 318 Tax (417) (338) (326) (512) (407) (140) (67) Profit 1,446 1,168 1,023 1,823 1,468 453 251
Run-off profits, net of reinsurance 214 204 148 201 306 77 101
Shareholders' equity of parent company at 1 January 3,243 4,465 4,900 4,915 5,716 5,489 5,543 Profit 1,446 1,168 1,023 1,823 1,468 453 251 Share buy-back (376) (892) (1,159) (1,200) (1,836) (272) (331) Share-based payments 150 159 150 177 142 46 28 Other movements in shareholders' equity 2 1 1 2 0 1 (1) Shareholders' equity of parent company
Post-tax profit per share (DKK) 9.2 7.7 7.4 14.2 12.5 3.6 2.2 Post-tax profit per share, diluted (DKK) 9.2 7.7 7.4 14.1 12.3 3.6 2.2 Net asset value per share, diluted (DKK) 28.7 33.8 36.8 45.8 48.3 45.8 48.3 Share buy-back per share, diluted (DKK) 2.4 5.9 8.4 9.3 15.4 2.2 2.9 Listed share price end of period 70.3 73.8 89.5 121.3 142.8 121.3 142.8
Average number of shares ('000) 156,881 151,307 137,409 128,276 117,904 124,606 113,695 Average number of shares, diluted ('000) 157,688 151,587 138,023 129,367 119,131 125,924 114,758
Combined ratio excl. run-off profits 93.6 95.7 92.0 90.3 95.0 91.7 104.9 *) Shareholders' equity and loan capital
The comparatives for premiums earned life insurance and financial ratios have been restated: see accounting policies
507B507BThe DKK 1,468m profit was better than the DKK 1,3001, 400m assumed in the most recent profit forecast model for 2013 in the interim report for Q1-Q3 2013. The improvement, which was achieved in spite of another storm after the forecast date, was due to a higher than assumed investment return and run-off profits in Q4.
512B512BThe investment return after transfer to the technical result declined DKK 97m to DKK 169m.
524B524BAs provisions for outstanding claims are discounted to present value, lower interest rates will increase the claims expenses. Interest rates were lower in 2013 than in 2012 which, depending on the composition of the portfolio, increased the combined ratio by around 0.5pp.
525B525BIt is estimated that the overall combined ratio, excluding any run-off profits / losses, increased from 90% to a level of around 93% for the entire Danish market in 2013. However, there are significant differences between the combined ratios of the individual companies.
530B530BThe profitability of insuring major industrial enterprises does not in all cases meet Topdanmark's return requirements, which generated a loss of some major unprofitable customer relationships in 2013, particularly in workers' compensation insurance.
532B532BThe claims trend in fire insurance was DKK 57m poorer than in 2012, which caused the claims trend to deteriorate 0.6pp. In H1 2013 the personal segment was hit by a higher level of fire claims while in H2 2013 mainly the agricultural area was hit.
534B534BRun-off profits net of reinsurance were DKK 306m in 2013 (2012: DKK 201m), which represented a 1.1pp improvement of the claims trend. Primarily illness/accident insurance (DKK 139m), motor third-party and comprehensive insurance (DKK 93m) and workers' compensation insurance (DKK 63m) generated run-off profits.
Expense ratio 536B536BThe expense ratio increased to 16.2% (2012: 15.8%) due to investment in increased sales power in the personal market, the agricultural market and the lower SME market. This investment in sales power generated an increase in new business, which in turn increased the payment of sales commission as compared to 2012.
Developments in Q4 541B541BPremiums earned in Q4 2013 increased 2.4 % to DKK 2,263m.
545B545BThe overall combined ratio was 100.4% in Q4 2013 (Q4 2012: 88.2%). Excluding run-off profits the combined ratio was 104.9% in Q4 2013 (Q4 2012: 91.7%).
546B546BThe two storms in Q4 had a 14.6pp effect on the claims trend which was 12.4pp higher than the expected normal level.
Claims incurred (1,541) (2,581) (6,131) (7,145) Expenses (353) (363) (1,388) (1,438) Net reinsurance (54) 672 (193) 445
Investment return after transfer to technical result 260 165 1,015 575
76B76BPremiums earned increased 2.4 % to DKK 4,881m reflecting growth in primarily house and contents insurance. Premiums earned in motor insurance increased 1.7% in spite of a 2.2% decline in average premium. Premiums earned in Q4 2013 increased 3.0 % from Q4 2012.
78B78BThe claims trend improved 1.1pp to 72.1% due to higher run-off profits representing a 3.3pp improvement of the 79B79Bclaims trend. The storms in Q4 caused a 2.0pp deterioration of the claims trend. Fire claims had a 0.5pp adverse effect on the claims trend.
80B80BThe expense ratio increased to 16.9% (2012: 16.2%) due to the increased investment in distribution power and higher sales commission.
81B81BThe combined ratio improved to 88.9% in 2013 (2012: 89.4%). Excluding run-off profits, it increased to 92.9% (2012: 90.1%).
SME and Industrial 82B82BThe SME and Industrial segment offers policies for Danish-based SME, agricultural and industrial businesses.
83B83BPremiums earned increased 0.3 % to DKK 4,025m in 2013. This low growth was due to the loss of a major customer in workers' compensation and negative premium adjustments following a favourable claims trend in a few schemes which provide that premiums paid by customers are dependent on the claims trend. Premiums earned increased 2.1% in Q4.
85B85BThe claims trend deteriorated 8.2pp to 79.4% mainly due to the storms in Q4 which had a 5.8pp adverse effect on the claims trend. Furthermore, there were declining runoff profits, representing a 1.4pp deterioration of the claims trend. Finally the claims trend in fire insurance deteriorated, representing 0.8pp primarily as a consequence of the high level of agricultural claims in H2.
Run-off profits / (losses), net of reinsurance (5) 92 31 192
93B93BThe many new legislative rules etc. in the industry have made heavy demands on process and system development and required considerable resources. Examples of new legislation in the industry are the 2012 tax reform, individual solvency, consistent customer protection, interest rate agreement, adjustment of openness and transparency and the cost request.
550B550BAs a result of the tax reform, which was adopted in 2012, the deductibility of payments into capital pension schemes was removed with effect from 1 January 2013.
551B551BIn this connection companies were given the opportunity to offer a new product, an old-age insurance policy, with no deductibility of payments into the scheme, but tax-free payouts instead. Furthermore, it was made possible to pay tax on existing capital pension schemes in 2013 at a lower tax rate than if the tax was paid on the expiry of the policy (37.3% against 40.0%). In the spring of 2013 this possibility of paying a lower tax rate was extended to be applicable also in 2014. The industry has spent time on establishing the old age insurance and on advising customers on old age insurance and any tax payment.
96B96BThe remaining amount on the shadow account is due to the cost and risk groups. DKK 10m of this amount is expected to be included in income in a subsequent period where a profit is generated in the relevant contribution groups.
Merger 103B103BIn order to simplify the group structure, the life insurance companies Topdanmark Link Livsforsikring A/S, Topdanmark Livsforsikring II A/S, Topdanmark Livsforsikring III A/S, Topdanmark Livsforsikring V A/S and Topdanmark Livsforsikring A/S have merged with the latter as the continuing company. The merger took effect from 1 January 2013.
Rate of interest on policyholders' savings 104B104BIn the full year 2013 the rate of interest, before pension return tax, on policyholders' savings was 2.0% in the new business interest rate group, 1.8 % in the interest rate groups with low guarantees and 4.35% in the interest rate groups with high guarantees.
110B110BIt is Topdanmark's policy to accept a certain level of financial risk, given its strong liquid position and stable, high earnings from insurance operations. Topdanmark has invested in, among others, equities, properties and CDOs in order to improve the average investment return. The return in Q4 2013 and in 2013 on the most significant classes of assets is disclosed in the following table: 111B111B
490B490BThe equity portfolios are well diversified with no large individual positions. The composition of the portfolios is
113B113BMost of the portfolio comprises high-quality mortgage bonds, which ensures a linkage between the investment return and the discount rate. The class of government and mortgage bonds comprises primarily Danish mortgage bonds and revaluation of technical provisions. In addition, there are government bonds mainly from European core countries, covered bonds and derivatives. Covered bonds are mortgage bonds where the size of the loan may not exceed 70% of the value of the security. If the value of the security declines so much that the requirement is not fulfilled, the issuer will provide further security.
115B115BThe underlying assets of CDOs are mostly senior secured bank loans, while the remainder are primarily CDOs with investment grade investments as the underlying assets.
122B122B"Money market etc." comprises money market deposits, intra-group balances and the result of currency positions and other returns not included in other classes.
Book value 31 December AAA and AA 99 48 Low er than AA 719 816 Total book value 818 865
558B558BParent company etc. 559B559BThe parent company Topdanmark A/S does not perform any independent activities.The result of the parent company etc. includes the results of subsidiaries, excluding the insurance business (primarily Topdanmark Kapitalforvaltning, the asset management company) and finance costs.
Taxation 561B561BThe tax charge was DKK 407m of a pre-tax profit of DKK 1,875m, corresponding to an effective tax rate of 21.7% (2012: 21.9%). The deviation from the nominal tax rate of 25% was primarily due to Topdanmark's utilisation of an uncapitalised equity loss carried forward. After Q4 2013 the uncapitalised equity loss carried forward was DKK 131m. Practically all tax is paid in Denmark: see www.topdanmark.com → About Topdanmark →CSR → Resumé and data → Social accounting.
• 567B567B1-2% growth in premiums • 568B568BAround 0.5pp adverse impact on the combined ratio due to increase in expenses on recourse, reinsurance and payroll tax
• 569B569BRun-off profits for 2014 are expected to be lower than in 2013.
570B570BIncreasing, but continued low financial growth is expected in 2014. BNP growth in Denmark is expected to increase from around 0.4% to around 1.5%.
578B578BThe claims trend in 2013 was affected by two storms in Q4. If the level of weather-related claims is normal in 2014, the claims trend will improve around 2pp from the 2013 level.
Expected trend in Danish life and pension market 126B126BIt is expected that in 2014 the life and pension market will be characterised as follows: • 127B127BContinued intensive competition • 128B128BIncreased need for pension saving • 129B129BMovement from with-profits to unit-linked schemes • 130B130BLegislation on unallocated provisions in the event of transfer of a pension scheme.
131B131BTopdanmark expects that, like the previous years, 2014 will be affected by intensive competition in the life and pension market. Competition is expected to concentrate on the conditions of taking out the policy and the size of cover of the products.
134B134BSeveral companies are offering their customers a grant or a share of the unallocated provisions if they choose to move their pension schemes from with-profits to unitlinked schemes. In January 2014, the DFSA prepared a bill on re-selection bonus binding the companies to ensure that those customers who, at the company’s request, re-select, take the financial value of their pension schemes with them.
Topdanmark's profit forecast model for 2014 580B580BTraditionally Topdanmark does not publish actual profit forecasts but instead the expected level of results if a number of assumptions of the return in the financial markets are met. As the return in the financial markets changes on a daily basis, Topdanmark's profit forecast model will already deviate from actual expectations by the time it is published. Therefore, set out in Risk scenarios is additional information on how changes in the assumptions underlying the profit forecast model will affect the results.
581B581BAs can be seen, the investment return forecast model is not based on a specific estimate of the expected investment return for the rest of the year but solely on a long-term standard assumption of the return.
• 585B585BA normal year for weather-related claims of DKK 170m, broken down by quarter: • 586B586BQ1: DKK 50m • 587B587BQ2: DKK 25m • 588B588BQ3: DKK 45m • 589B589BQ4: DKK 50m
• 590B590BA level of interest rates corresponding to the interest rate curve on 8 November 2013
595B595BOverall the pre-tax profit on non-life insurance is assumed to be DKK 1,020-1,120m.
596B596BIn the profit forecast model for 2014, it is assumed that the investment return will be sufficiently high to include a risk return of DKK 140-150m in income. At the same time, a few cost and risk groups are expected to incur a loss of around DKK 30m, which will be transferred to the shadow account. Subsequently, the shadow account including interest will be DKK 100-110m at the end of 2014.
601B601BTaxation 602B602BGiven a corporation tax rate of 24.5%, the tax charge is expected to be DKK 290-330m.
604B604BThis profit forecast model is subject to an annual 7.0% return on equities and unchanged foreign exchange rates from the level on 21 February 2014. Furthermore it is assumed that the return on interest-bearing assets hedging the discounted provisions is just sufficient to cover discounting and revaluation of the provisions, while the return on the remaining interest-bearing assets will be 2.31% (risk-free interest rate plus 2.0pp).
608B608BThe reduction in shareholders' equity of DKK 1,836m was partly offset by DKK 142m strengthening of shareholders' equity by issue and exercise of share options.
609B609BIn 2014 it is intended to buy back own shares of DKK 1,700m including the buy-back of DKK 414m transferred from 2013. The buy-back of DKK 1,700m assumes a profit in line with the profit forecast model of DKK 950610B610BThe share buy-back programme for 2014 represents a buy-back yield of 10.2% (calculated on the basis of the price of Topdanmark's shares on 21 February 2014).
614B614BSince 1998 when Topdanmark started buying back own shares, it has been decided to cancel DKK 11.8bn of own shares representing a 69.7 % write-down of the share capital, with an average price of DKK 41 per share that has been written down.
616B616BTopdanmark's buy-back programme is managed by Topdanmark Kapitalforvaltning (asset management). It is believed that Topdanmark Kapitalforvaltning is able to carry out the buy-back programme at lower prices than by using a safe harbour solution.
618B618BFurthermore, it does not buy back own shares during the period of five banking days after the announcement of a quarterly report as this is the period in which the executives may exercise their share options. Below is a table of the periods when Topdanmark is allowed to buy back own shares.
622B622BAs a consequence of this policy the Company has, for a number of years, identified and reduced or eliminated those risks which could potentially cause losses exceeding what Topdanmark considers to be acceptable. For example, major strategic shareholdings have been sold, the catastrophe cover for weather-related events or terror has been increased significantly and the financial risk reduced.
623B623BIn this light it is Topdanmark's opinion that the Company's future annual results will, with a very high probability, be positive even in the event of, for example, another collapse in the financial markets as in 2008.
626B626BTopdanmark's Risk management function identifies, assesses and quantifies risks. It reports to the Risk Committee which is responsible for risk policies, risk limits, solvency calculation, capital plans, Topdanmark's own risk and solvency assessment (ORSA) and Topdanmark's partial, internal model for non-life insurance risks. The members of the Risk Committee are the CFO of the Group, the CEO of Topdanmark Livsforsikring and the heads of the primary risk areas: Asset Management, Statistical Services, Reinsurance, Finance, Life Actuarial Services and Life Finance. The Risk Committee reports and recommends to the Board of Directors via the Executive Board.
628B628BIn 2013 the internal model was amended to meet the requirements of use in solvency calculations in accordance with the new Danish solvency rules in 2014 and the future EU Solvency II rules. The model is used for, among other things, optimising the reinsurance programme, cost of capital, forecast balancing and calculating capital requirements.
629B629BIn 2013 the risk management function implemented an ORSA process identifying risks across the business, quantifying these risks and collecting them in the Risk register. Additionally, the principles of solvency calculation were reviewed and the risk management process was updated. An ORSA report was prepared, which together with the Risk register and risk management process, was considered at a Board meeting in the autumn of 2013.
631B631BThe most important risks are described in the following survey. A more detailed description is available in Note 50.
691B691BInvestment 692B692BTo obtain efficient and secure reinsurance cover which is price competitive, a certain level of counterparty concentration is required 693B693BA certain level of credit risk is accepted as an element of the creation of return. Counterparty risk is due to the use of derivatives which are primarily used to control and reduce market risk 694B694BCounterparty risk is limited by mainly buying hedging from reinsurance companies which as a minimum have a rating of A695B695BCredit risk is limited by diversification both geographically and in terms of type of debtor 696B696BCounterparty risk on financial contracts is limited by the required security when overall risk on any given counterparty reaches a relatively low threshold value 697B697BOperational risks 698B698BMost important risks 699B699BRisk preferences 700B700BRisk reducing activities 701B701BIT
702B702BErrors in internal processes, human errors insurance fraud and deceit 703B703BGenerally, operational risks are to be reduced to an acceptable level 704B704BRisk assessment, IT security policy, guidelines, controls and IT emergency plans based on ISO27001 705B705BGroup IT security department 706B706BPolicy for routines, process descriptions, controls and division of duties 707B707BStrategic risks 708B708BMost important risks 709B709BRisk preferences 710B710BRisk reducing activities 711B711BGenerally, strategic risks are related to the Company's business model, political conditions, reputation, alliance partners' and competitors' behaviour as well as macroeconomic conditions 712B712BLow strategic risk due to strong business model 713B713BTopdanmark's business model stands strong against strategic risks. The results of the Company will, with a very high probability, be positive even in the event of another collapse in the financial markets as in 2008. The results of the Company will also be positive if it is hit by a storm like the 1999-hurricane, which was the largest storm event in the Company's history 714B714BIn a situation where Topdanmark's solvency might come under pressure, the share buy-back will be stopped. Additionally, the cancellation of own shares bought under the buy-back programme will be effected with a certain delay giving Topdanmark the opportunity to increase its solvency capital by selling own shares
715B715BRisk scenarios 143B143BThe Group's risk factors are illustrated in the following table on the most significant risk factors. The given assumptions do not reflect Topdanmark's expected risks, but are shown only as examples which could be used as a basis for assessing the Company's exposure to the risks mentioned.
721B721BThose rules imposing the greatest requirements on the Group's capital are the rules on individual solvency requirement, and Topdanmark's capital planning is based on these rules.
722B722BIt is expected that future EU Solvency II rules will take effect on 1 January 2016. These rules will replace the three sets of rules listed above.
723B723BIndividual solvency requirement 724B724BIndividual solvency requirement is a set of Danish rules in force until the Solvency II rules take effect. Each insurance company is to calculate a solvency requirement representing their minimum required capital based on the risks they accept. Additionally, the companies are required to provide documentation for how they identify, manage, limit and calculate risks.
726B726BFor several years Topdanmark's policy for calculating solvency requirements has been to match the rules which are expected under Solvency II, and, therefore, the solvency calculation has regularly been aligned with the Solvency II expectations. In this calculation Topdanmark uses an internal model for calculation of the non-life risk.
727B727BThe most significant changes in the new rules from the most recent solvency calculation of the Topdanmark Group are: • 475B475BChange in the calculation of life insurance provisions, including recognition of surrender probabilities • 476B476BRecognition as loss-absorbing buffer in the solvency calculation of a tax asset due to a negative 200-yearevent.
728B728BThe solvency calculation for Topdanmark Livsforsikring (life Insurance) has been adjusted in keeping with the relevant rules. Particularly, loss absorption is now calculated in accordance with the Solvency II rules and not the Danish accounting rules. For this purpose a model has been developed, which recognises best estimate for the utilisation of a portfolio of its surrender and paid-up options. The calculation of the effect of all the company's risks is now based on this model.
729B729BTransitional rules related to the new executive order on solvency require that the calculation of the capital base is substantially, but not fully, adapted to the new solvency rules.
• 479B479BRecognition of an expected profit on non-life insurance contracts, concluded for the remaining period of cover.
731B731BSignificant expected Solvency II elements which are not included in the calculation of capital base according to the transitional rules: • 480B480BRecognition of subordinated loan capital, where in 2014 Topdanmark will not be able to recognise the full subordinated loan capital. Full recognition is expected in accordance with new rules as of 2015
• 481B481BThe rules on subsidiaries in the parent company's solvency and capital base will be changed in 2015. The new rules are not expected to bring about further capital requirements.
733B733BInsurance holding companies are also covered by the new executive order on solvency for insurance companies. According to these rules, Topdanmark A/S is an insurance holding company. These rules do not require the calculation of solvency requirement for Topdanmark A/S, but they require the calculation of a capital base which must be positive after deduction of the solvency requirements for the subsidiaries.
736B736BSolvency calculation and capital requirements 737B737BAn important goal of Solvency II is to promote good risk management based on market values and actual risk calculations. Solvency II will include a standard model for calculation of solvency requirements which will be common to all insurance companies in the EU. Although the model will provide the opportunity for companyspecific values for some variables, the standard model will not provide a fair view of all the risk elements of all companies.
739B739BTopdanmark is in constant dialogue with the DFSA on the model. It is expected that the application for the Solvency II approval will be submitted to the DFSA in 2014 and that the model will be approved before Solvency II takes effect.
741B741BThe new rules seem to indicate a modest easing of the capital requirement as compared to previous expectations. However, so far a solvency capital cover of DKK 4,700m, as a minimum, is maintained from the solvency capital elements, shareholders' equity reduced by intangible assets, (DKK 4,050m), hybrid capital (DKK 400m) and subordinated loan capital (DKK 250m): see www.topdanmark.com → Investor → Capital model. If the capital requirement is higher than expected, the difference will be covered by issuing further supplementary loan capital. At the end of 2013, the calculated solvency capital was DKK 5,527m.
743B743BThe necessary capital of DKK 4,700m, as stated above, has been based on an expected approval of Topdanmark's internal model for non-life insurance risk. If it is not approved, the necessary capital will increase by around DKK 800m. This potential increase in the capital requirement can be covered by the safety margin of DKK 500m referred to above supplemented by an adjustment of the financial risk.
746B746BTopdanmark has well-advanced in its preparations, and areas like organisation and data are practically in place.
747B747BThere are two important outstanding sub-projects, partly the new, very detailed external reports to the DFSA and for publication on the website, partly the approval as partial internal model of Topdanmark's own risk model for non-life risk to be used under Solvency II.
Capital model 146B146BTopdanmark pursues a policy of keeping its shareholders' equity at a relatively low level and paying out to shareholders any amounts in excess of the conservatively estimated shareholders' equity sufficient to support the underlying business.
147B147BIn spite of this policy Topdanmark has decided on a capital model that has a relatively high proportion of shareholders' equity. This ensures that any regulatory requirements on solvency capital in excess of expectations could be covered solely by issuing further supplementary capital.
748B748BDetailed information on, among other subjects, Topdanmark's capital structure model and model for calculation of share buy-back potential is available on www.topdanmark.com → Investor Relations → Capital Model.
752B752BShareholders 753B753BAt 31 December 2013 Topdanmark had 47,963 shareholders registered by name.
1050B1050BTopdanmark's Board of Directors comprises nine members, six of them elected by at the AGM and three by Topdanmark's employees in accordance with the Danish Companies Act.
1051B1051BIn accordance with this Act the number of Board members elected by employees should be equivalent to no fewer than half the number of those elected by shareholders in general meeting. The rights, duties and responsibilities of the Board members elected by employees are the same as those of the Board members elected by shareholders at the general meeting.
1054B1054BTopdanmark has no fixed general selection criteria. It believes that, by imposing very specific requirements on the Board of Directors, it may prevent the election of an evidently qualified Board candidate who does not fully meet the requirements. Instead an individual decision will be made on each Board candidate based upon an overall consideration of their qualifications, the Company's present needs and the composition of the rest of the Board of Directors. Topdanmark believes that in a company like Topdanmark, among them its Board members ought to possess skills within accounting, finance, financing, insurance operations, reinsurance and marketing and sales in the personal and professional markets. With its current composition Topdanmark's Board of Directors possesses all these skills.
1055B1055BDiversity 1056B1056BTopdanmark’s current Board of Directors reflects diversity in many areas including professional background and education, sex and age. Its members have experience from the financial and industrial sectors, nationally and internationally. The Board of Directors believes that this composition enables it to consider a given problem from many different angles which is confirmed by experience from the day-to-day Board work. Read more about each Board member’s background and competence on www.topdanmark.com → About Topdanmark → Executive Board and Board of Directors and Board of Directors and Executive Board in this Annual Report.
762B762BAdditionally, Topdanmark offers severance pay in accordance with legislation, as set out in a contract or in specific cases as has been individually agreed upon, but always adhering closely to the guidelines of the Danish Salaried Employees Act. The maximum amount of the overall severance pay will represent two years' salary.
149B149BBesides salary policy, the remuneration policy also includes Topdanmark's general guidelines for performance-related pay, its pension policy and its guidelines for the granting of severance pay. The remuneration policy covers Topdanmark's Board of Directors, Executive Board, significant risk takers and, as provided by legislation, employees involved in control functions and audit work. If specifically stated, Topdanmark's remuneration policy also covers its executive team, comprising a number of the heads of business sectors and administrative departments ("the Friday Team") and certain other employees, at the discretion of the Board of Directors. The remuneration policy etc., as adopted by the AGM, is available on www.topdanmark.com → Investor Relations → Corporate Governance → Remuneration structure.
152B152BBesides options, which in accordance with the revolving option scheme are paid to the Executive Board, significant risk takers and the Friday Team as part of their fixed salaries, the Executive Board may grant a total of up to 200,000 options to employees who are expected to make a special effort or otherwise contribute extraordinarily to value creation in the Company in that year of granting.
153B153BNo special pension contribution is paid to the Executive Board, and, therefore, they are paid a personal allowance of 25% of their cash salary. Consequently Topdanmark has no pension commitments towards the Executive Board and no type of pension compensation on retirement is granted. The Friday Team and significant risk takers receive a pension contribution of up to 25% of their cash salary. The amount is paid to the chosen pension provider and consequently all pension obligations are fully covered by them.
157B157BThe market value of the options for 2014 has been calculated at DKK 10m at the time of granting.
159B159BAt the end of 2013 the exposure of the options held by the Executive Board represented 0.7% of the number of outstanding shares.
160B160BDetailed information on Topdanmark's option scheme is available on www.topdanmark.com → Investor Relations → Corporate Governance → Remuneration structure
Corporate Governance 766B766BTopdanmark's "Statutory Corporate Governance Report, see Section 131 of Executive Order on Financial Reports for insurance Companies and Lateral Pension Funds" (”Accounting Order”), is available on www.topdanmark.com → Investor Relations → Reports and presentations → Statutory Corporate Governance Reports (
779B779BThe regular contact with investors and analysts is supported by Topdanmark's website www.topdanmark.com.
Shares 780B780BTopdanmark's shares are listed on NASDAQ OMX Copenhagen and included in a number of share indices, one of them being the OMX Copenhagen 20 index (OMXC20).
783B783BSince the buy-back programme was initiated in 1998, Topdanmark has cancelled DKK 11.8bn of own shares representing a 69.7% write-down of the share capital. In the years 2000-2013 the average buy-back yield has been 9.5%.
Most active brokers at NASDAQ OMX Copenhagen in 2013 % Nordea 33
Share split 787B787BIn order to increase the liquidity of its shares Topdanmark reduced the denomination from DKK 10 per share to DKK 1 per share with effect from 13 March 2013.
788B788BThis was the second time Topdanmark effected a share split. The first time was on 20 October 1999 when the share was split from DKK 100 per share to DKK 10 per share. On 20 October 1999 the price of a one krone share was DKK 13.9.
794B794BAll of Topdanmark's Board members elected at the AGM are up for election. Jens Maaløe is not standing for re795B795Belection. The Board of Directors proposes that Torbjörn Magnusson is elected as a new member of the Board; all other members of the Board are proposed for re-election.
161B161BThe announcements are available on www.topdanmark.com → Investor Relations → Company announcements.
168B168BEducation: Law degree, University of Copenhagen 169B169BOffices held: Member of the Boards of Directors of: • 170B170BA.P. Møller-Mærsk A/S (Chairman) 171B171B– and one subsidiary
174B174Band one subsidiary • 175B175BLouisiana Museum of Modern Art 176B176BMember of: International Council JP Morgan Chase 177B177BIndependence: Michael Pram Rasmussen meets the definition of independence set out by the Committee on Corporate Governance 178B178BSøren Thorup Sørensen, Deputy Chairman*, ***,****, ***** 179B179BDOB: 29 September 1965 180B180BJoined Topdanmark’s Board of Directors: 2010 181B181BCurrent position held: CEO of KIRKBI A/S 826B826BPrevious positions held: 1987-2006: KPMG Denmark and UK
2006-2009: Group CFO and member of Group Executive Board, 827B827BA.P. Møller-Mærsk A/S
828B828BEducation: MSc (Business Administration and Auditing), CBS, Denmark State-authorised public accountant Advanced Management Programme, Harvard Business School, USA
182B182BAnders Colding Friis* 183B183BDOB: 25 August 1963 184B184BJoined Topdanmark's Board of Directors: 2012 185B185BCurrent position held: Group CEO of Scandinavian Tobacco Group A/S 0B0BPrevious positions held: 1987-1989: Marketing trainee, Mölnlycke Kemtekniske Produkter 1989-1991: Product Manager, Mölnlycke Kemtekniske Produkter 1B1BGöteborg 2B2B1991-1992: Product Group Manager, Mölnlycke Kemtekniske Produkter 3B3BAllerød 4B4B1992-1994: Market Manager, Estrella A/S 5B5B1994-1996: Sales and Marketing Manager, Schulstad Brød A/S 6B6B1996-1998: Sales and Marketing Manager, Schulstad Gruppen A/S 7B7B1998-1999: Group Managing Director, Schulstad Gruppen A/S and 8B8BCEO, Schulstad Brød A/S 9B9B1999-2006: Group Managing Director, Skandinavisk Tobakskompagni A/S
197B197B1991-1993: CEO, NKT Dedicom A/S 198B198B1994-1995: Managing Director, DSC Communications A/S 199B199B1995-1997: Regional Manager, Tele Danmark A/S 200B200B1997-2002: CEO, NetTest Danmark A/S
212B212BIndependence: Jens Maaløe meets the definition of independence set out by the Committee on Corporate Governance 213B213BPer Mathiesen** 214B214BDOB: 2 June 1966 215B215BJoined Topdanmark’s Board of Directors: 2013 216B216BCurrent position held: Customer Advisor
217B217BBirgitte Nielsen* 840B840BDOB: 13 September 1963 841B841BJoined Topdanmark’s Board of Directors: 2013 842B842BCurrent position held: Professional Board Member 843B843BPrevious positions held: 1986-1989: Dealer, Danske Banks arbitrage, commercial paper and liquidity 844B844Brisk management 845B845B1989-1990: Danske Bank New York Branch, implementing risk management system 846B846B1990-1992: Vice President, Danske Bank, interest rate derivatives trading 847B847B1992-1996: Treasury Manager, FLS Industries A/S 848B848B1996-1999: Group Financial Officer, Vice President, FLS Industries A/S 849B849B1999-2000: Group Corporate Control, Vice President, FLS Industries A/S 850B850B2000-2003: CFO, FLS Industries A/S 851B851B2003-2006: Independent consultancy, Nielsen + Axelsson Aps 852B852BEducation: Banking education 853B853BB.Com Degree (HD),International Trade, CBS B.Com Degree (HD), Accounting and Financial Management , CBS General Management Program, CEDEP/INSEAD
854B854BOffices held: Member of the Boards of Directors of: • 483B483BKirk Kapital A/S • 484B484BFinansiel Stabilitet • 485B485BArkil A/S • 486B486BGigtforeningen (the Danish Rheumatoid Arthritis Society) • 487B487BMatas A/S • 488B488BDe Forenede Ejendomsselskaber 855B855BIndependence: Birgitte Nielsen meets the definition of independence set out by the Committee on Corporate Governance 218B218BAnnette Sadolin*, *** 219B219BDOB: 4 January 1947 220B220BJoined Topdanmark’s Board of Directors: 2004 221B221BCurrent position held: Professional Board Member 1065B1065BPrevious positions held: 1980-1986: Assistant to management and subsequently Divisional 1066B1066BManager, Baltica Re / Baltica-Nordisk Re 1067B1067B1986-1989: Ass. General Manager, Baltica-Nordisk Re 1989-1993: Deputy General Manager, Employers Reinsurance 1068B1068BInternational, Copenhagen 1069B1069B1993-1996: CEO, Employers Reinsurance International, Copenhagen 1996-2003: Member of Executive Board, GE Frankona 1070B1070BRückversicherungs-Aktiengesellschaft, Munich 1071B1071BEducation: Law degree, University of Copenhagen 1072B1072BSpecial law programme, Columbia University, NY, USA 1073B1073BGE training programmes incl. Six Sigma GB Certificate 1074B1074BOffices held: Member of the Boards of Directors of: • 222B222BDSB • 223B223BDSV A/S • 224B224BRatos AB(Sweden) • 225B225BBlue Square Re (Holland) • 226B226BSkodsborg Kurhotel & Spa A/S
862B862BKim Bruhn-Petersen 245B245BCOO of Topdanmark A/S 246B246BDOB 1956, joined Topdanmark in 1989, joined Topdanmark's Executive Board on 1 January 2006 247B247BEducation: 248B248BMA (Laws), Diploma 249B249BManagerial responsibilities: • 250B250BPersonal • 251B251BSME and Industrial • 252B252BMarketing • 253B253BClaims Administration 254B254BMember of the Boards of Directors of: 863B863BForsikringsakademiet A/S (Danish Insurance Academy) 864B864BBornholms Brandforsikring A/S 865B865BThe Danish Employers’ Association for the Financial Sector 866B866BLars Thykier 255B255BCFO of Topdanmark A/S 256B256BDOB 1955, joined Topdanmark in 1986, joined Topdanmark's Executive Board on 1 June 2009 257B257BEducation: 258B258BMSc 259B259BManagerial responsibilities: • 260B260BAsset Management • 261B261BFinance • 262B262BAccounting • 263B263BStatistical Services • 264B264BReinsurance • 265B265BTax • 266B266BCredits 867B867BInformation on the Executive Board's responsibilities, as required by Article 80 of the Danish Financial Business Act, is shown in the Annual Report for Topdanmark Forsikring A/S.
Allocated investment return, net of reinsurance 2,443 2,233 579 2,364 2,031
Following the merger of the Group’s life insurance companies, intra-group custody account transfers are no longer included in premiums and benefits. The comparatives have been restated.
Gross claims paid (6,682) (6,510) Reinsurance cover received 791 424 Change in the provisions for claims, gross 560 (622) Change in the reinsurers' share of the provisions for claims (407) 653 Claims incurred, net of reinsurance 5 (5,738) (6,055)
Acquisition costs (853) (947) Administrative expenses (519) (468) Reinsurance commission and share of profits 76 83 Total operating expenses, net of reinsurance (1,297) (1,332) TECHNICAL PROFIT ON NON-LIFE INSURANCE 6 1,092 801
Claims and benefits paid 8 (3,146) (3,860) Reinsurance cover received 7 8 Change in the provisions for claims and benefits (3) (11) Claims and benefits paid, net of reinsurance (3,142) (3,862)
Change in the life insurance provisions 9 (738) 1,635 Change in the reinsurers' share 1 (4) Change in the life insurance provisions, net of reinsurance (738) 1,631
Acquisition costs (108) (115) Administrative expenses (217) (222) Total operating expenses, net of reinsurance (325) (337) TECHNICAL PROFIT ON LIFE INSURANCE 7 297
Technical profit on non-life insurance 1,092 801 Technical profit on life insurance 7 297
Technical interest transferred to non-life insurance business (238) (182) Pension return tax (396) (272) Investment return transferred to life insurance business (2,364) (2,031) Other income 12 19
Profit per share, DKK 14 14.2 12.5 Profit per share, diluted DKK 14 14.1 12.3
Profit for the year 1,823 1,468 Items which can subsequently be reclassified as profit or loss: Exchange rate adjustment of foreign business 1 0 Items which cannot subsequently be reclassified as profit or loss: Deferred tax on security funds (change in the tax percentage) 0 42 Revaluation of owner-occupied properties 1 2 Other comprehensive income 2 43 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,825 1,511
Machinery and equipment 146 116 Owner-occupied properties 861 869 TOTAL TANGIBLE ASSETS 16 1,007 985
Loans guaranteed by mortgages 8 6 Other loans 1 0 Deposits with credit institutions 1,657 1,047
Reinsurers' share of the provisions for unearned premiums 21 75 87 Reinsurers' share of the life insurance provisions 38 34 Reinsurers' share of the provisions for claims and benefits 22 683 1,337 Total reinsurers' share of provisions 797 1,458 Amounts due from policyholders 390 346 Amounts due from insurance companies 157 65 Amounts due from associated companies 22 36 Other debtors 193 121 TOTAL DEBTORS 1,559 2,026
Assets held temporarily 1 2 Deferred tax assets 23 20 22 Liquid funds 368 420
Accrued interest and rent 376 373 Other prepayments and accrued income 151 164 TOTAL PREPAYMENTS AND ACCRUED INCOME 527 537 TOTAL ASSETS 59,435 61,092
Share capital 138 125 Revaluation reserve 18 20 Security fund 1,104 1,146 Other reserves 29 34 Total reserves 1,133 1,180 Profit carried forward 4,079 3,860 TOTAL SHAREHOLDERS' EQUITY 5,368 5,184
Guaranteed pension benefits 21,402 19,231 Bonus potential on future premiums 3,689 3,387 Bonus potential on paid-up benefits 1,849 2,364 Total life insurance provisions 26 26,941 24,982
Collective bonus potential 28 768 1,472 Provisions for bonuses and rebates 105 121 Provisions for unit-linked contracts 29 4,757 7,088 TOTAL PROVISIONS FOR INSURANCE AND INVESTMENT CONTRACTS 48,804 50,361
Pensions and similar commitments 33 30 Deferred tax liabilities 23 109 86 Deferred tax on security funds 348 306 TOTAL LIABILITIES PROVIDED 489 422 DEPOSITS RECEIVED FROM REINSURERS 141 143
Other creditors 1,097 1,115 TOTAL CREDITORS 3,390 3,731 ACCRUALS AND DEFERRED INCOME 89 96 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 59,435 61,092
Investment assets related to unit-linked contracts (582) (1,686) Balances with associated companies 21 (172)
Revalu- Profit Share ation Security Other carried capital reserve fund reserves forward Total
Shareholders' equity at 31 December prior year 148 17 1,104 22 3,275 4,567
Total comprehensive income for the year 1 0 7 1,817 1,825
Shareholders' equity at 31 December prior year 138 18 1,104 29 4,079 5,368
Life insurance Gross premiums written 3,059 3,059 Allocated investment return 2,364 2,364 Benefits and change in provisions (5,093) (5,093)
Pension return tax (28) (368) (396) Transferred to technical result (238) (2,364) (2,601)
Note 3. Gross premiums earned - non-life insurance Gross premiums written 8,851 9,018 Change in gross provisions for unearned premiums (29) (56) Gross premiums earned 8,823 8,963
Note 4. Technical interest, net of reinsurance - non-life insurance Calculated interest 238 182 Discounting (annual amortisation) of technical provisions and reinsurers' share (217) (168) Technical interest, net of reinsurance 20 14
Note 5. Claims incurred, net of reinsurance - non-life insurance Run-off profit: Gross business 201 387 Reinsurance ceded 1 (81) Run-off profit, net of reinsurance 201 306
Claims incurred include revaluation of derivatives hedging the inflation risk in workers' compensation and illness / accident insurance (32) (163)
The loss ratio and the combined ratio have been calculated before elimination of internal rent.
Technical profit / (loss) analysed by industry is disclosed on the next page.
Note 6. Technical result - non-life - continued 2012 2013 2012 2013 2012 2013
Average value of claim (DKK '000) 39 38 7 6 63 64
Run-off profits / (losses), net of reinsurance 30 85 (4) 7 24 (7) Claims provisions, net of reinsurance 1,690 1,697 157 114 608 633
Technical interest, net of reinsurance 3 2 1 1 1 1
Run-off profits / (losses), net of reinsurance 28 22 (11) (2) (47) 4 Claims provisions, net of reinsurance 574 644 533 528 256 272
Individual policies 138 206 Policies which are part of a tenure 764 1,171 Single premiums 902 1,377 Gross premiums 3,059 3,511
Proportion of gross premiums represented by premiums related to unit-linked contracts not eligible for bonus 1,178 1,881 Investment risk is taken by the policyholder. All other gross premiums relate to bonus eligible insurance contracts.
Number of policyholders at 31 December ('000): Individual policies 53 50 Policies which are part of a tenure 85 81 Group life 171 162
Note 8. Claims and benefits paid - life insurance Claims payable on death 138 118 Claims payable on maturity 174 480 Pension and annuity payments 576 584
Note 10. Income from investment properties Rental income 262 219 Operating expenses from properties rented out (50) (55) Operating expenses from properties not rented out (4) (10) Gross profit 207 153 Administrative expenses (8) (9) Income from investment properties 200 144
Note 11. Revaluations Held for trading: Loans guaranteed by mortgages 0 (1)
Total designated at fair value 449 674 Revaluations of financial assets and liabilities at fair value through profit or loss 2,679 1,233 Of which revaluation of derivatives transferred to claims incurred 32 163 Investment properties (52) (64) Provisions for unearned premiums (4) 1 Provisions for claims and benefits (343) 231 Reinsurers' share 6 (1) Liquid funds (23) (20)
Note 13. Taxation Current tax 577 436 Change in deferred tax (20) (24) Change in deferred tax on security funds 0 (42) Prior year adjustment (49) (1) Tax in foreign companies 2 (2) Tax for the year 509 367 Tax taken to other comprehensive income 0 42 Tax taken to shareholders' equity 3 (1)
Completed development projects includes primarily the Group's new claims system. Amortisation of intangible assets is mainly included in claims incurred and operating expenses.
Goodwill and development projects under construction are subjected to an impairment test at the end of the financial year. The discounted value of future cash flows is compared with its carrying value. The future cash flows are based on three years' expected technical result and a terminal value of the segments to which goodwill and development projects under constructions relate. The pre-tax discount rate used is 12% (2012: 12%) corresponding to 9% (2012: 9%) post-tax. Goodwill relates to the personal segment.
Cost / revaluation at 1 January 587 818 1,404 Additions, including improvements 89 43 132
Revalution taken to other comprehensive income 0 1 1 Transferred on revaluation 0 (1) (1) Cost / revaluation at 31 December 479 861 1,340
Impairment and amortisation at 1 January (461) 0 (461) Amortisation for the year (60) (1) (61) Transferred on revaluation 0 1 1 Reversal of total impairment and amortisation of assets sold or withdrawn from operations during the year 187 0 187 Impairment and amortisation at 31 December (333) 0 (333)
Impairment and amortisation at 1 January (333) 0 (333) Amortisation for the year (55) (2) (56) Transferred on revaluation 0 2 2 Reversal of total impairment and amortisation of assets sold or withdrawn from operations during the year 91 0 91 Impairment and amortisation at 31 December (297) 0 (297)
The measurement is based on an expected annual return on operations and a return requirement.
Cost of revalued owner-occupied properties 739 747 Machinery and equipment includes assets under finance leases of 15 0
Investment properties are measured at fair value (level three). The measurement is based on an expected annual return on operations and a return requirement.
Share of profit 26 57 Share of other comprehensive income 1 0 Dividends received (65) 0 Shares in associated companies 928 892
Reinsurers' share at 1 January 68 75 Reinsurance ceded 660 726 Reinsurance earned (652) (714) Reinsurers' share of the provisions for unearned premiums at 31 December 75 87
Reimbursement of claims relating to previous years (683) (268) Change in expected income relating to previous years 1 (81)
Reimbursement of claims relating to this year (108) (157) Expected income relating to this year 383 1,157
Reinsurers' share of the provisions for claims at 31 December 683 1,337
Recognised as: Deferred tax assets 12 20 22 Deferred tax liabilities (121) (109) (86)
Non-capitalised balance of equity losses that can be carried forward 317 131
Subordinated loan capital of Topdanmark Forsikring A/S has been included in the Company's capital base at up to 25% of the solvency margin 252 256
Intra-group transfers (54) (323) Retrospective provisions at 31 December 25,138 23,537 Accumulated revaluation at 31 December 1,803 1,445 Life insurance provisions at 31 December 26,941 24,982
Guaranteed benefits 21,402 19,231 Bonus potential on future premiums 3,689 3,387 Bonus potential on paid-up benefits 1,849 2,364 Life insurance provisions 26,941 24,982
Increase in guaranteed benefits as life insurance provisions must not be lower than the guaranteed surrender value 5 4
Portfolios analysed by capitalisation rates Guaranteed future paid-up 2013 benefits premiums benefits
Claims paid relating to previous years (2,958) (2,863) Change in expected claims payments relating to previous years (201) (306)
Claims paid relating to this year (2,932) (3,223) Expected claims payments relating to this year 5,939 6,361
Provisions for workers' compensation insurance, net of reinsurance 5,882 5,642 Average period of settlement 7 years 8 years
Provisions relating to previous years at 31 December 1,484 Gross provisions at 31 December 2013 - non-life insurance 13,831
Provisions relating to previous years at 31 December 1,475 Provisions, net of reinsurance, at 31 December 2013 - non-life insurance 12,494
Reconciliation: Provisions for claims 13,929 Less amount relating to life insurance (98) Less reinsurers' share of provisions (1,337) Provisions, net of reinsurance, at 31 December 2013 - non-life insurance 12,494 Composition of expected payments, net of reinsurance: Discounting / revaluation w orkers' compensation
Insurance Investment 2012 contracts contracts Total Gross provisions at 1 January 3,335 402 3,737 Retrospective provisions at 1 January 3,335 402 3,737 Gross premiums written 1,178 69 1,247
Claims and benefits (671) (82) (752) Expense loading inclusive of expense bonus (36) (5) (40) Risk gain after addition of risk bonus 3 0 3 Premiums waived transferred to life insurance provisions (12) 0 (12)
Intra-group transfers 53 1 54 Retrospective provisions at 31 December 4,320 437 4,757 Provisions for unit-linked contracts 2012 4,320 437 4,757
Gross provisions at 1 January 4,320 437 4,757 Retrospective provisions at 1 January 4,320 437 4,757 Gross premiums written 1,881 134 2,015
Claims and benefits (592) (95) (687) Expense loading inclusive of expense bonus (31) (4) (35) Risk gain after addition of risk bonus 5 0 5 Premiums waived transferred to life insurance provisions (14) 0 (14)
Note 32. Auditors' fee Fee to the auditors elected at the Annual General Meeting Deloitte: Fee for statutory audit of the annual accounts 4 4 Fee for other assurance engagements 0 0 Fee for tax advice 0 0 Fee for services, other than audit work* 10 4 *Primarily fee for one-off services related to the acquisition of an IT system in the life insurance group. The Group has an internal audit department which carries out most of the audit work.
Social security costs 39 41 Payroll tax 171 189 Share options 6 7 Employee shares 42 -
Per granting: Average strike price exercised options 2012 80 79 80 79 Average strike price exercised options 2013 77 77 76 77 Average current price on date of exercise 2012 105 Average current price on date of exercise 2013 133 Fair value of granting 2012 2 6 7 Fair value of granting 2013 2 7 9
The fair value of the granting for the year has been calculated using the Black and Scholes model assuming a price of DKK 142.95 (2012: DKK 89.78) per share, an interest rate corresponding to the zero coupon rate based on the swap curve on 31 December the previous year, future volatility of 22% (2012: 22%) p.a. and a pattern of exercise similar to Topdanmark's previous granting of share options. The volatility has been calculated on the basis of previous years' volatility, which continues to be Management's best estimate of future volatility.
Number of options which could be exercised on 31 December ('000) 1,314 1,079
Note 34. Related parties The Group has no related parties with controlling influence. Related parties with significant influence comprise If P&C Insurance Holding Ltd (publ), the Board of Directors, the Executive Board and their families.
Remuneration of the Board of Directors Directors' fees were DKK 4,631,000 (2012: DKK 4,631,000) of which DKK 244,000 (2012: 244,000) related to Topdanmark Forsikring A/S. Fee (DKK '000): Michael Pram Rasmussen 1,300 1,300 Søren Thorup Sørensen 488 758 Anders Colding Friis 217 325 Charlotte Hougaard 325 325 Jens Maaløe 325 325 Per Krogsgaard Mathiesen - 244 Birgitte Nielsen - 217 Annette Sadolin 488 488 Desiree Schultz 325 325
Remuneration of the Executive Board Salaries etc. 16 18 Share options 2 2 Employee shares 1 Total remuneration to three members of the Executive Board 19 20
Christian Sagild 8.3 8.6 Kim Bruhn-Petersen 5.5 5.7 Lars Thykier 5.5 5.6 10% of the fixed basic salary etc. paid to the Executive Board is paid as share options. Additionally, the Executive Board earns successively a compensation representing six months' salary in each of the years 2013-2015. The compensation will be paid on resignation. The Executive Board receives only a fixed remuneration. The Group has no unhedged pension commitments.
Shares, bonds and subordinated notes held by the Board of Directors and Executive Board Board of Directors Number of shares 30,830 29,130 Bonds, nominal value DKK '000 128 157 Subordinated notes (subordinated loan capital) Topdanmark Forsikring, nominal value DKK '000 19,610 12,050 Executive Board Number of shares 306,350 173,430 Bonds, nominal value DKK '000 1,364 1,146
Designated at fair value: Deposits with credit institutions 1,657 1,047 Investment assets related to unit-linked contracts 4,313 6,673
Total financial assets 51,522 52,623 The book value of loans and receivables at amortised cost approximately corresponds to fair value.
Level 1 Level 2 Level 3 Total Held for trading: Loans guaranteed by mortgages and other loans 0.0 0.0
Investment assets related to unit-linked contracts 3.0 1.2 0.0 4.3 Total financial assets at fair value 29.8 20.3 0.0 50.1
Note 35. Financial assets - continued Inputs based Inputs not based 2013 Quoted on observable on observable Financial assets recorded at fair value prices market data market data
Deposits with credit institutions 0.0 0.0 Investment assets related to unit-linked contracts 4.6 2.1 0.0 6.7 Total financial assets at fair value 26.0 25.1 0.1 51.1
Book value of financial liabilities at amortised cost approximately corresponds to fair value.
Observable inputs Financial liabilities recorded at fair value Level 2 Held for trading: Designated at fair value: Amounts due to credit institutions 2,007 2,159 Total financial liabilities recorded at fair value 2,029 2,329
Note 37. Settlement of assets and liabilities Except for tangible and intangible assets, investment properties, investments in associated companies and CDOs most other assets are expected to be settled within a year. It is expected that the following significant liabilities will be settled 12 months or more after the balance sheet date: Subordinated loan capital 1,153 1,155 Provisions for unearned premiums 187 177 Guaranteed benefits 19,410 16,869 Bonus potential on future premiums 3,338 2,645 Bonus potential on paid-up benefits 1,673 2,016 Provisions for claims and benefits 10,121 9,871 Collective bonus potential 716 1,310 Provisions for unit-linked contracts 4,121 6,200 Deferred tax on security funds 348 306
Other financial investment assets 1,173 894 618 0.0 Derivatives to hedge against the net change in assets and liabilities** 1,340 919 * Annual return as a percentage before pension return and corporation tax. ** Topdanmark Livsforsikring has invested in interest rate options - Euro-CMS-floors with a strike rate of 5% - to hedge the guaranteed benefits.
Note 39. Exposure information Non-life insurance Event Effect on shareholders' equity 0.7-1.0 pp increase in interest rates (157) (6) 0.7-1.0 pp decline in interest rates 173 9 12% decline in equity prices (137) (182) 8% decline in property prices (103) (104) Exchange rate exposure (VaR 99.0%) (10) (14) Loss on counterparties of 8% (186) (187)
Max. effect on bonus potential on benefits on paid-up policies Max. effect on
Event 0.7-1.0 pp increase in interest rates (167) (52) 714 0 0.7-1.0 pp decline in interest rates 167 (72) (1,160) (22)
Note 40. Shares analysed by industry and region (%) - life insurance Other North South Other Other Not 2013 Denmark Europe America America Japan Far East countries analysed Total
Note 43. Number of shares Reconciliation of the number of shares ('000) Shares issued at 1 January 148,259 137,500 Own shares at 1 January (14,940) (13,560) Number of shares at 1 January 133,319 123,940 Shares bought back (11,405) (13,033) Shares sold 2,026 1,725 Shares issued at 31 December 137,500 125,000 Own shares at 31 December (13,560) (12,368) Number of shares at 31 December 123,940 112,632
Number of shares held to cover the granting of options: 2,840,000 (2012: 4,024,000)
Note 45. Provision of security The Group's insurance companies have registered the following assets as security for technical provisions: Shares in associated companies 681 723 Loans to associated companies 158 158
Bonds provided as security for loans in accordance with standard repo-contracts for Danish mortgage and government bonds 739 611 Other provision of security 18 58
Following the merger of the life insurance companies, intra-group custody account transfers between the merged companies have been eliminated. As a result the comparatives have been adjusted as follows: Financial Comstatements Adjust- paratives
The five-year summary in accordance with Section 91(a) of the Danish executive order on financial reports for insurance companies and lateral pension funds is the last page of Management's review. For further details see "Risk management" and "Capital model" in "Management's review".
Notes to the financial statements • Group 901B901BNote 50. Risk factors
Non-life insurance Underwriting risk Acceptance policy 902B902BTopdanmark's acceptance policy is based on a desire to make a profit from both products and customers. Topdanmark varies the pricing of its products depending on the relevant risk criteria and the costs of administering those products.
903B903BTopdanmark's pricing has been aligned with the individual markets and types of customers. In the personal and commercial markets, prices are mostly based on standardised rates while major commercial and industrial customers are offered more individualised charges.
904B904BDanish insurance companies do not cover damage arising from floods or the cost of replanting forests following storms, industrial diseases, war or warlike acts, earthquake or other natural disasters and with certain exceptions damage due to nuclear energy or radioactivity.
1079B1079BThe practice adopted by the Danish National Board of Industrial Injuries also has some impact on the levels of compensation for accident and personal injury within motor, liability and commercial liability insurance.
Provisions for outstanding claims (%) 2012 2013 Short-tail 14 15 Annuity provisions in workers' compensation 24 23 Other claims provisions in workers' compensation 22 22
911B911BThe actuarial team is in constant dialogue with the claims departments on any changes in the practices stemming from new legislation, case law or compensation awards as well as the impact of such changes on the routines used to calculate individual provisions.
1081B1081BProvisions for unearned premiums 1082B1082BThe risk on provisions for unearned premiums is relevant particularly within change of ownership insurance and lines with high levels of compensation, for example, workers' compensation and motor liability insurance. In the event of a change in the level of either premiums or compensation in these lines, the provision for unearned premiums could be insufficient to cover the related expenses. In this case it will be necessary to strengthen this provision.
Disaster risks 1085B1085BTopdanmark limits its insurance risk on significant events through a comprehensive reinsurance programme.
Cumulative risk 913B913BKnown cumulative risk is where it has been recognised prior to the event that several policyholders could be affected by the same event. In personal lines Topdanmark's retention is DKK 15m for the first claim, DKK 5m for the second and DKK 15m for any third or subsequent risk. The retention is a maximum of DKK 25m in SME and industrial lines. Unknown cumulative risk is where several policyholders could be affected by the same individual event (conflagration damage) without the common risk being recognised prior to the event occurring. The retention is a maximum of DKK 50m.
915B915BLow interest rates mean that the market value of the guarantees granted is high and that the related bonus potential is low. The lower the bonus potential, the higher the risk of any losses being wholly or partially born by shareholder's equity. If interest rates are high, the same
916B916BDeclines in the collective bonus potential are most frequently due to the investment return being lower than the addition of interest to deposits. Declines in collective bonus potential are also possible if interest rates are relatively high.
917B917BIn order to protect shareholders' equity it will be relevant to reduce market risks in the event of low interest rates.
919B919BIn portfolios with high guaranteed benefits, including the portfolio of policies with 4.5% guaranteed benefits, the interest rate risk in interest groups with such schemes has been countered by EURO CMS floors with a strike rate of 5%.
Disability 921B921BDisability risk is the risk of increasing disability intensity or declines in the rates of resumption of work, in that the benefits have been guaranteed until expiry. Losses may 922B922Bbe incurred due to an increase in disability frequency or due to inadequate health evaluation when the policy is written.
923B923BExtra costs due to a permanent change in disability risk will be partially covered by collective bonus potential and bonus potential on paid-up benefits. The remainder affects profit / loss for the year and consequently shareholders' equity.
928B928BMarket risks 929B929BRisk reducing activities 930B930BInterest rate risk 931B931BTopdanmark is exposed to interest rate risk due to provisions for outstanding claims in non-life insurance and guaranteed benefits in life insurance 932B932BGenerally, the interest rate risk is limited and controlled by investing in interest-bearing assets in order to reduce the overall interest rate exposure of the assets and liabilities to the desired level 933B933BIn life insurance the interest rate risk on guaranteed benefits is hedged by interest rate options − EURO CMS floors with a strike rate of 5%
934B934BEquity risk 935B935BTopdanmark is exposed to equity risk from direct investments as well as those investments made via derivatives 936B936BThe equity risk is alleviated by trades in the market and by derivatives 937B937BProperty risk 938B938BTopdanmark is exposed to property risk from investments in properties rented out for business or private residence 939B939BThe risk on the property portfolio is limited by a strategy focusing on the four largest cities in Denmark, where Topdanmark invests in well-situated properties within the segments of housing and flexible office properties 940B940BCurrency risk 941B941BTopdanmark's currency risk relates in practice only to investments 942B942BThe currency risk is alleviated by derivatives 943B943BInflation risk 944B944BFuture inflation is implicitly included in a number of the models Topdanmark uses to calculate its provisions 945B945BWorkers' compensation and illness / accident insurance differ from the general principles regarding the inclusion of an allowance for inflation. The provisions in workers' compensation insurance are calculated on the basis of the expected future indexation of wages and salaries and those in illness / accident insurance on the basis of the expected net price index 946B946BAn expected higher future inflation rate would generally be included in the provisions with a certain time delay, while at the same time the result would be impacted by higher future indexation of premiums 947B947BIn order to reduce the risk of inflation within workers' compensation and illness / accident insurance Topdanmark uses index-linked bonds and derivatives hedging a significant proportion of the expected cash flows 948B948BLiquidity risk 949B949BIn insurance companies the liquidity risk is very limited as premiums are paid prior to the beginning of the risk period 950B950BTopdanmark's liquidity risk is therefore primarily related to the parent company 951B951BTopdanmark finances its activities and share buy-back programme by using its subsidiaries' surplus liquidity via inter-group accounts, which are reduced by paying dividends 952B952BFurther financing requirements are covered by shortterm money market loans, typically with a maturity of one month or less
953B953BThe liabilities of the Group's insurance companies are primarily technical provisions on which the payment obligation is met by means of the cash flow from operations.
Credit and counterparty risk 960B960BCredit risk is the risk of losses caused by one or more counterparties' full or partial breach of their payment obligations. Topdanmark is exposed to credit risk in both its insurance and investment business.
Investment 962B962BTopdanmark's investment risk is the inability of bond, loan or financial contract counterparties to meet their obligations. Most of Topdanmark's interest-bearing assets comprise Danish mortgage bonds and debt issued or guaranteed by top-rated European states. The risk of losses is considered to be very small due to the high quality of the issuers and a desired spread on both issuers and issues. To limit the risk on other bond and loan debtors the portfolio is well diversified both geographically and with regard to type of debtor – and, therefore, the exposure to the concentration of risks is insignificant.
965B965BTo limit the counterparty risk of financial contracts the choice of counterparties is restrictive, and security is required when the value of the financial contracts exceeds the predetermined limits. The size of the limits depends on the counterparty's credit rating and the term of the contract.
Operational risk 966B966BOperational risk includes errors in internal processes, human errors, system errors, breakdowns of IT systems and losses incurred due to external events.
969B969BIT 970B970BGroup IT Security is responsible for IT security reporting to the IT manager.
971B971BRisk assessments of each operational IT risk are made regularly. Group IT Security reports quarterly on risks and events to the Executive Board.
972B972BTopdanmark's risk assessment, IT security policy and IT emergency strategy (based on IS027001) are revised each year by the Executive Board to be accepted by the Board of Directors.
974B974BPeriodically Topdanmark’s critical IT systems are tested to see if they can be compromised from outside, and whether the IT systems have vulnerabilities that need to be repaired. These tests are made by an external company with special expertise in this area. Topdanmark’s IT security committee discusses and prioritizes the performance and results of the tests.
975B975BIt is Topdanmark's goal that the accessibility of its main systems is no less than 99.5%. In 2013 it was 99.96%.
979B979BThe routines and procedures in all critical areas are regularly checked by the auditors in order to assess the risks and recommend measures to limit each individual risk.
982B982BFor the financial year 2013, Topdanmark implemented amendment to IAS 1 presentation of other comprehensive income.
983B983BFurthermore, Topdanmark has implemented IFRS 13 on measurement of fair value. The implementation had no impact on the recognition and measurement but only on other disclosures.
985B985BThe restatement of the comparatives in the income statement and cash flow statement is disclosed in a note.
986B986BIn March 2013 Topdanmark effected a share split reducing the denomination of its shares from DKK 10 to DKK 1 per share.
987B987BFrom 2013, net asset value per share is presented including the diluting effect of share options, and at the same time the method of calculation has been slightly adjusted.
989B989BThere have been no other changes in accounting policies from those adopted in the 2012 Annual Report.
991B991BFuture changes to the rules are not expected to materially change Topdanmark Group’s accounting policies.
272B272BThe most significant estimates and judgements are made in the calculation of the provisions for outstanding claims.
273B273BThe provision risk is significant, in particular in lines with a long period of claims settlement such as workers' compensation, accident, commercial and motor liability. The levels of compensation could be significantly affected by any changes in legislation, case-law or the practice in the award of damages adopted by, for example, the Danish National Board of Industrial Injuries.
General Consolidated financial statements 275B275BThe consolidated financial statements include the parent company Topdanmark A/S and all of the companies that are controlled by the parent company. The parent company is deemed to control the companies through direct or indirect ownership of more than 50% of the voting rights, or when it can have or has an otherwise controlling influence.
277B277BConsolidation 278B278BThe consolidated financial statements have been prepared by aggregating items within the financial statements of the parent company and the subsidiaries on a line-by-line basis. The same accounting policies are applied by the subsidiaries as by the parent company.
281B281BCompanies acquired during the year have been included in the consolidation from the date of assumption of control and those companies sold during the year, until the date of relinquishment of control.
283B283BIncome is recognised in the income statement when earned. Similarly, all expenses are recognised which relate to the financial year, including amortisation and impairment.
285B285BTrue sale and repurchase transactions and true purchase and resale transactions (repo / reverse transactions) are recognised and measured as secured loans.
Measurement of fair value 286B286BFair value is the price which would be achieved on the sale of an asset or paid for the transfer of a liability in a normal transaction between the market players at the time of measurement.
287B287BThe IFRS defines a hierarchy of three levels for measurement of fair value: 993B993BLevel 1 288B288BThe calculation at fair value is based on the listed prices of transactions in active markets. If there is an active market for listed shares, bonds, derivatives etc., the measuring is generally based on the closing price on 31 December.
289B289BLevel 2 290B290BIf there is no closing price, another public price is used, which is believed to be the most appropriate, in the form of indicative prices from banks/brokers. Assets of this type are, for example, hedge funds, CDOs, credit bonds etc. Valuation methods or other publicly available information are used to value listed securities, where the closing price does not reflect the fair value.
295B295BAn insurance contract is a contract, under which the insurer accepts significant insurance risk from the policyholder by agreeing to compensation if a specified uncertain future event adversely affects the policyholder. Insurance risk is always considered to be material in non-life insurance. In life insurance it is considered to be material when it covers the effect of disability (including the effect of premiums waived) and mortality (where the benefit exceeds the total savings of the policy).
299B299BThe initial recognition of transactions in currencies other than DKK is made at the exchange rates prevailing at the date of the transactions. Debts and receivables, and other monetary items, which have not been settled on 31 December, are translated at the closing exchange rates on 31 December. Translation differences are disclosed in Revaluations in the Income Statement.
Share-based payments Share options 994B994BThe Executive Board and Senior Executives participate in a share option scheme.
995B995BThe fair value, on the date the option is granted less the subscription proceeds, is included in staff costs in the income statement, with the relevant credit shown as a change in equity. The fair value is calculated using the Black & Scholes model and in accordance with IFRS 2 on share-based payments.
996B996BThe options are settled with own shares. Any strike amount received on the exercise of the options is taken to shareholders’ equity.
310B310BThe risk return is transferred to shareholders' equity if it can be covered by a sufficient technical basis for risk allowance within each contribution group. Any surplus risk return is transferred to a shadow account, which will be included as income when the group returns to being in profit.
311B311BIf there is a negative technical basis for risk allowance, which exceeds the collective bonus potential and the individual bonus potential, the excess will be debited to shareholders' equity.
318B318BTopdanmark conducts insurance business only in Denmark and, therefore, no specific geographical segmental information is provided.
319B319BRatios 998B998BThe financial ratios have been calculated in accordance with the definitions of ratios issued by the Danish Society of Investment Professionals in 2010, except for “profit per share” and “diluted profit per share”, which have been calculated in accordance with IAS 33 Earnings per share.
999B999BIncome statement 492B492BPremiums earned 323B323BGross premiums in non-life insurance comprise those premiums receivable during the year and an estimate of premiums on insurance contracts written, either directly or indirectly, for which the period of risk has commenced before the end of the financial year. They do not include own risks. Premiums earned net of reinsurance comprise gross premiums for the year adjusted for changes in the provisions for unearned premiums and net of reinsurance. Effectively, this means the premiums are being recognised in line with the distribution of risk over the period of cover.
Allocated investment return net of reinsurance in life insurance 326B326BThe investment return is calculated as the overall investment return in the life insurance group net of the proportion of the investment return relating to illness and accident insurance and the proportion transferred to shareholders' equity in accordance with the definition of profit reported to the DFSA.
Claims incurred and benefits paid 327B327BIn non-life insurance, claims incurred net of reinsurance comprise claims paid during the year adjusted for changes in the provisions for outstanding claims and net of the reinsurers' share. Accordingly, claims incurred comprise known and expected claims relating to the year as well as any adjustments to the provisions made in previous years. Furthermore, they comprise direct and indirect expenses on claims handling. However, the proportion of the change in provisions for outstanding claims relating to changes in discounting and revaluation is included in technical interest net of reinsurance and revaluations respectively. Topdanmark has entered into swaps partially hedging the provisions for workers’ compensation and annuities in illness and accident insurance against changes in future wage and price indexation. The revaluation of these swaps is included in claims incurred.
328B328BIn life insurance, claims and benefits paid net of reinsurance comprise payments relating to claims, surrenders and cash bonuses.
Investment activities 331B331BIncome from associated companies comprises a share of the post-tax results of the associated companies calculated in accordance with the Group's accounting policies. Income from investment properties comprises the operating results excluding interest charges and revaluations that have been disclosed separately in the financial statements. Interest, dividends etc. comprise all interest, dividends etc. earned in the financial year. Realised and unrealised gains and losses on investment assets and changes in the provisions for outstanding claims net of reinsurance due to changes in the interest rate structure are included in revaluations, which also includes exchange rate adjustments and realised gains and losses on owner-occupied properties. Administrative expenses on investment activities comprise the cost of asset management including transaction costs.
333B333BOther income and expenses 334B334BOther income and expenses that do not relate to the administration of insurance portfolios or investment assets are included in other income and expenses.
an indication of impairment, the book value is written down to its recoverable amount.
Investment properties 345B345BThe initial recognition of investment properties is made at cost and subsequent recognitions are made at fair value with revaluations in the income statement. A value has been calculated for each property on the basis of an expected future return on its operations and a rate of return (required yield). This value is adjusted for any special conditions having a temporary effect on the earning capacity of the property as well as the level of maintenance required on each property. The yield has been fixed taking into account the relevant market conditions for each type of property, its position, use, tenure of lease etc. and sales efforts within a reasonable time frame. Market trends and the return requirements of the market are regularly analysed. Each property is assessed annually by the Group's own valuation experts.
346B346BAssociated companies 347B347BShares held in associated companies are measured at their net asset value, in accordance with the Group's accounting policies. Associated companies are companies which are not subsidiaries, although the Group has substantial influence through a significant shareholding and representation on the board of the company.
352B352BAll financial assets included in "other financial investments assets" and "investment assets related to unit-linked contracts" are measured at fair value with any value adjustment taken to the income statement.
Receivables that are measured at amortised cost 353B353BThe initial recognition of receivables is made at fair value and subsequent recognitions are made at amortised cost. Amounts, due from finance leases, are included at the net investment in the lease contract. The receivables are regularly assessed for impairment and written down to their recoverable amount, as required. Such impairments are generally made collectively on the basis of the receivable ageing analysis. When an individual receivable is considered irrevocable, the value of the impairment is transferred out of the account for collective allowances.
Reinsurers' share 354B354BReinsurers' share of the provisions for unearned premiums represents the proportion of reinsurance premiums paid which, net of commission received and based on the spread of risk during the period of cover, relate to the period after the end of the financial year.
360B360BThe security funds can only be used for strengthening the technical provisions or otherwise for the benefit of policyholders and only if permitted by the DFSA.
Subordinated loan capital 362B362BThe initial recognition of subordinated loan capital is made at fair value less transaction costs and subsequently measured at amortised cost.
366B366BProvisions for claims incurred are calculated using an in-house statistical model that is based on the relationship between the possibility of resumption of work and the period passed since the occurrence of the claim. The provisions include amounts to cover the expected expenses on the future administration of the insurance contracts written. These expenses have been calculated using an annual indexation of 2%.
370B370BThe liabilities are disclosed in the balance sheet as follows: 371B371BGuaranteed pension benefits are measured as the present value of current guaranteed benefits plus future administrative expenses less the present value of the agreed premiums. Guaranteed benefits also include provisions for group life policies and provisions for claims incurred but not reported (IBNR).
372B372BBonus potential on future premiums comprises the present value of the agreed future premiums less the present value of the guaranteed benefits originating from these premiums.
376B376BInflation is taken into account when calculating the value of the provisions as future inflation is implicitly included in a number of the statistical models used. Therefore, an expected higher future inflation rate would generally be included in the provisions with a specific time delay.
Deposits received from reinsurers 393B393BDeposits received from reinsurers represent amounts deposited to cover reinsurers' liabilities to the Company.
395B395BOther loans, including employee bonds, are measured at their amortised cost.
Other 437B437BGenerally all the amounts in the report are disclosed in whole numbers of DKKm. The amounts have been rounded and consequently the sum of the rounded amounts and totals may differ slightly.
Total other financial investment assets 1 1 TOTAL INVESTMENT ASSETS 6,715 6,323
Deferred tax assets 1 1 Liquid funds 3 2 TOTAL OTHER ASSETS 4 3 TOTAL ASSETS 6,895 6,485
Shareholders' equity at 31 December prior year 148 2,563 2,204 4,915
Profit / (loss) for the year 1,825 (2) 1,823 Other comprehensive income in affiliated companies 2 0 2 Total comprehensive income for the year 1,826 (2) 1,825
Note 1. Income from affiliated companies Topdanmark Forsikring A/S 1,761 1,416
Note 4. Taxation Current tax 13 10 Change in deferred tax 1 0 Prior year adjustment 39 2 Taxation (income) 53 12
Adjusted for the tax effect of: Non-deductible expenses / income not liable to tax (1) 0 Prior year adjustment 40 (1)
Note 5. Machinery and equipment Cost at 1 January 4 4
This bullet loan has no final maturity date but if permitted by the DFSA, the debtor can give notice of termination as from 15 September 2017 at par. The loan carries a floating interest rate determined as EURIBOR 3 months + 1.90%. From 15 September 2017 increased to EURIBOR 3 months + 2.90%.
Share of loan included in capital base 406 407 Interest charges 11 9
Remuneration of the Board of Directors Directors' fees were DKK 4,631,000 (2012: DKK 4,631,000) of which DKK 244,000 (2012: 244,000) related to Topdanmark Forsikring A/S.
Fee (DKK '000): Michael Pram Rasmussen 1,300 1,300 Søren Thorup Sørensen 488 758 Anders Colding Friis 217 325 Charlotte Hougaard 325 325 Jens Maaløe 325 325 Per Krogsgaard Mathiesen - 244 Birgitte Nielsen - 217 Annette Sadolin 488 488 Desiree Schultz 325 325
Anders Knutsen 731 244 Trine Zappe 325 81 Knud J. Vest 108 Total fee paid to nine Board members 4,631 4,631
Note 9. Related parties - continued Significant risk taker Besides the Executive Board one employee of the Group has significant influence on its risk profile. In accordance with an exemption clause this remuneration is not disclosed.
Shares, bonds and subordinated notes held by the Board of Directors and Executive Board Board of Directors Number of shares 30,830 29,130 Bonds, nominal value DKK '000 128 157 Subordinated notes (subordinated loan capital) Topdanmark Forsikring, nominal value DKK '000 19,610 12,050
Executive Board Number of shares 306,350 173,430 Bonds, nominal value DKK '000 1,364 1,146
Average effective interest rate on balances is 0.01% (2012: 0.13%). Shares are disclosed in the balance sheet and specified in the note on Shares in affiliated companies. Balances are disclosed in the balance sheet.
Shareholders' equity 5,716 5,490 Deferred tax assets (1) (1) Hybrid core capital 406 407 Capital adequacy requirements for insurance companies – 50% (1,521) (1,460) Core capital 4,600 4,436 Capital adequacy requirements for insurance companies – 50% (1,521) (1,460) Capital base 3,079 2,976
Weighted items 4,390 4,149 Core capital as a percentage of weighted items 104.8 106.9 Solvency ratio 70.1 71.7
Solvency has been calculated according to the rules for financial services holding companies.
There have been no events in the period from 31 December 2013 until the presentation of the financial statements which could change the assessment of the annual report.
445B445BNotes to the financial statements • Parent company 446B446BNote 14. Accounting policies 396B396BThe annual financial statements for the parent company Topdanmark A/S have been prepared in accordance with the Danish Financial Business Act, including the executive order issued by the Danish Financial Supervisory Authority (DFSA) on financial reports for insurance companies and lateral pension funds (nationwide, occupational pension funds specific to Denmark).
397B397BThere have been no other changes in accounting policies from those adopted in the 2012 Annual Report.
403B403BThe above description of risk factors is not exhaustive. Investors and others, who may base decisions relating to Topdanmark on statements relating to the future, should make their own careful considerations on these and other factors of uncertainty.
404B404BTopdanmark’s statements relating to the future are solely based on information known at the time of the preparation of this Annual Report.
1013B1013BIn our opinion, the consolidated financial statements and annual financial statements give a true and fair view of the Group’s and the Company's assets, liabilities and financial position at 31 December 2013 as well as of the Group’s and the Company’s financial performance and the Group’s cash flow for the financial year 1 January to 31 December 2013.
1014B1014BWe believe that the management review contains a fair review of the development of the Group’s and Company’s activities and financial position, together with a description of the most material risks and uncertainties by which the Group and the Company can be affected.
1015B1015BWe recommend the Annual Report for adoption at the Annual General Meeting.
Audit for the year 1027B1027BWe conducted our audit on the basis of the Danish Financial Supervisory Authority’s regulation on the preparation of the audit in financial services companies etc. and financial services groups, and in accordance with International Standards on Auditing. This requires that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements and annual financial statements are free from material misstatement. We have participated in the audit of the material and risky areas.
1029B1029BWe believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
1034B1034BOn this basis, it is our opinion that the information provided in the management review is consistent with the consolidated financial statements and annual financial statements.
Independent auditor’s reports To the shareholders of Topdanmark A/S Report on the consolidated financial statements and annual financial statements 1036B1036BWe have audited the consolidated financial statements and annual financial statements of Topdanmark A/S for the financial year 1 January to 31 December 2013, which comprise the income statement, statement of comprehensive income, balance sheet, statement of changes in equity and notes, including the accounting policies, for the Group as well as the Company, and including cash flow statement for the Group. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial services companies. The annual financial statements have been prepared in accordance with the Danish Financial Business Act.
Auditor’s responsibility 1038B1038BOur responsibility is to express an opinion on the consolidated financial statements and annual financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements and annual financial statements are free from material misstatement.
1039B1039BAn audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and annual financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatements of the consolidated financial statements and annual financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements and annual financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as the overall presentation of the consolidated financial statements and annual financial statements.
1043B1043BFurther, in our opinion, the annual financial statements give a true and fair view of the Company's assets, liabilities and financial position at 31 December 2013, and of the results of its activities for the financial year 1 January to 31 December 2013 in accordance with the Danish Financial Business Act.
1045B1045BOn this basis, it is our opinion that the information provided in the management review is consistent with the consolidated financial statements and annual financial statements.