Focused strategy y Danish player y Stable insurance risks y Low expense ratio y Limited financial risk y Synergy between life and non-life insurance y Efficient capital management y Limited top line growth y Profitable growth - in that order y High net result y High buy-back yield y No protection against take-over in the Articles of Association
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TOPDANMARK ANNUAL REPORT FOR 2016 23 February 2017 Announcement No. 11/2017
• Profit forecast model was DKK 1,200-1,300m in the interim report for Q1-Q3 2016
• EPS: DKK 16.8 (2015: DKK 11.7) • Combined ratio: 85.1% (2015: 86.8%) • Combined ratio excluding run-off profits was 90.4%
(2015: 91.1%) • Premiums declined 1.2% in non-life insurance, but increased 17.6% in life insurance • Profit on life insurance increased to DKK 189m
(2015: DKK 174m) • After return and revaluation of non-life insurance provisions, investment return was DKK 487m (2015: DKK 165m)
• Consequently, the combined ratio is increased to 9192 in the profit forecast model for 2017
• The efficiency improvement programme will run over the coming years and it is characterized in that expenses are paid before realization of the efficiency savings. However, return on investment is high and consequently, it is expected that additional expenses and gains from efficiency improvement will be offset during 2018 and 2019
Webcast Topdanmark's CEO, Christian Sagild will present the financial highlights and comment on the forecast in a webcast.
Steffen Heegaard Group Communications and IR Director Direct tel.: +45 4474 4017, mobile: +45 4025 3524
Annual financial statements ● Group 32 Income statement 33 Statement of comprehensive income 34 Assets 35 Shareholders’ equity and liability 36 Cash flow statement 37 Statement of changes in equity 38 Notes to the financial statements 71 Accounting policies
Run-off profits, net of reinsurance 201 306 351 381 470 123 206
Deferred tax on security funds (348) (306) (306) (306) (306) (306) (306) Shareholders' equity of Group end of period 5,368 5,184 5,135 4,640 4,702 4,640 4,702 Total assets, parent company 6,895 6,485 6,143 5,653 5,779 5,653 5,779 Total assets, Group 59,435 61,092 64,516 67,654 73,476 67,654 73,476
Provisions for insurance and investment contracts: Non-life insurance 16,251 16,721 16,485 16,286 16,264 16,286 16,264 Life insurance 32,553 33,640 36,375 40,537 47,351 40,537 47,351
Financial ratios (parent company) Post-tax profit as a % of shareholders'
Average number of shares ('000) 128,276 117,904 107,908 99,971 91,465 96,806 88,297 Average number of shares, diluted ('000) 129,367 119,131 108,805 100,461 91,721 97,241 88,551
To the extent possible, comparative figures are adapted to the new Executive Order on Financial Reports. Please see Accounting Policies
Results for 2016 Topdanmark’s post-tax profit was DKK 1,536m (2015: DKK 1,170m). EPS was DKK 16.8 (2015: DKK 11.7).
Profit on life insurance increased DKK 15m to DKK 189m due to an improvement in investment return with favourable impact on the investment return on shareholders’ equity.
Profit of the parent company etc. increased DKK 10m to DKK 41m.
The DKK 1,536m profit is higher than assumed in the most recent profit forecast model for 2016 in the interim report for Q1-Q3 2016, which was a post-tax profit of DKK 1,200-1,300m. Aside from run-off profits, the improvement was due to a higher than assumed investment return and lower expenses for weather-related claims.
Results for Q4 2016 Profit for Q4 2016 increased to DKK 421m (Q4 2015: DKK 333m). EPS was DKK 4.8 (Q4 2015: DKK 3.4).
After return and revaluation of non-life insurance provisions, the investment return declined DKK 16m to DKK 106m. The investment return was extraordinarily high in Q4 2015, and although the investment return was above the normal level in Q4 2016, it was lower than in Q4 2015.
Developments in motor insurance continue to reflect an increase in the sale of smaller and safer cars, resulting in a 2.9% decline in average premium in motor insurance in 2016, reducing the Topdanmark Group’s total earned premiums by 0.9%.
In the SME segment, the focus on profitability has generated a defection of some large-scale industrial customers, who did not meet Topdanmark’s profitability requirements. For the Topdanmark Group, this defection had a 0.8% adverse effect on premiums earned in 2016. At the end of 2016, Topdanmark’s exposition to largescale industrial customers had been significantly reduced.
Topdanmark still experiences an influx of small and medium-size SME businesses, which had a favourable impact on Topdanmark’s trend in premiums of 0.4pp.
Weather-related claims were DKK 59m in 2016 (2015: DKK 187m), representing a 1.4pp improvement of the claims trend. Topdanmark assumes a normal level of DKK 170m net of reinsurance for weather-related claims. In 2016, expenses for weather-related claims were DKK 111m below the normal level.
Illness/accident favourably impacted the claims trend by 0.2pp due to improved risk assessment and price differentiation.
The favourable trend in theft claims continued in 2016, representing a 0.2pp improvement.
The risk premium (claims frequency x average claim) for motor insurance remained unchanged in 2016. There was a 4.8% increase in comprehensive insurance whereas there was a 6.2% decline in personal injury. The increase in comprehensive motor insurance is i.a. due to new technology in new cars (safety equipment etc.) and a higher volume of road traffic. Due to the overall trend in motor insurance, the claims trend deteriorated 0.2pp.
Developments in Q4 2016 Premiums earned declined 1.4% to DKK 2,203m. The decline was 1.2% in the personal segment and 1.7% in the SME segment. The decline in premiums is due to the defection of one of the last large-scale SME customers at the beginning of Q4 2016. This had an adverse impact on premiums earned for SME of 0.7%.
The claims trend improved to 67.6 in Q4 2016 (Q4 2015: 73.9). In Q4 2016, the claims trend was affected by weather-related claims generating expenses of DKK 140m net of reinsurance. In Q4 2016, weather-related claims were limited to the storm Urd causing weatherrelated claims of DKK 25m. The lower level of weatherrelated claims favourably impacted the claims trend by 5.2pp in Q4 2016.
Furthermore, the claims trend was favourably impacted by higher run-off profits (3.8pp), primarily run-off profits on workers’ compensation and motor liability.
Expense ratio The expense ratio increased to 16.9 in Q4 2016 (Q4 2015: 16.6) primarily due to the decline in premiums.
Investment return after return and revaluations non-life insurance provisions 111 103 102 373
In Q4 2016, premiums earned declined 1.2% to DKK 1,217m, primarily due to a decline in motor insurance premiums.
The expense ratio increased to 16.7 from 16.3, due to an increase in the number of sales employees, increase in the payroll tax imposed on Danish financial businesses and the lower level of premiums.
The combined ratio improved to 85.2 (2015: 86.2). Excluding run-off profits, the combined ratio declined to 89.9 (2015: 90.7).
SME The SME segment offers policies to Danish-based SME and agricultural businesses.
The claims trend improved 3.0pp to 69.0 benefitting from improved run-off (2.0pp), an improved claims trend for weather-related claims (1.6pp) and an improvement in other SME businesses (liability insurance in particular). On the other hand, there was a deterioration in the claims trend for fire in the agricultural area (0.7pp).
Profit on life insurance activities comprises the profit on life insurance plus the investment return of Liv Holding
The risk result declined to DKK 13m (2015: DKK 19m) mainly due to a deterioration in the claims trend for disability cover.
Trend in premiums Gross premiums increased 17.6% to DKK 7,430 in 2016, of which premiums on unit-linked pension schemes were DKK 5,759m, representing an increase of 18.3% compared to 2015. Unit-linked pension schemes represented 94.0% of new sales in 2016.
Developments in Q4 2016 The result of life insurance declined to DKK 54m (Q4 2015: DKK 85m). The Q4 2015 result was impacted by transfer from the shadow account of DKK 28m. The investment result was reduced by DKK 6m to DKK 34m. The result of sales and administration improved by DKK 8m to a DKK 14m loss in Q4 2016 due to an increase in expense contributions. The result of insurance risk declined DKK 9m due to fluctuations in the risk result for disability cover.
Asset management 54 102 Investment return 2 910 Return and revaluations non-life insurance provisions 146 (423) Investment return after return and revaluations . . non-life insurance provisions 148 487
The post-tax equity exposure was DKK 796m (pre-tax: DKK 1,021m) excluding associated companies, but including the impact of derivatives. The equity portfolios are well diversified with no large individual positions.
The composition of the portfolios is based on OMXCCAP for Danish equities representing around 30% of the portfolio at 31 December 2016 and MSCI World in the original currency for foreign equities.
The class “Unlisted equities and hedge funds” includes private equity positions (DKK 61m) and positions in hedge funds where the investment mandates aim at positioning in the credit market (DKK 174m).
“Credit bonds” are composed of a well-diversified portfolio, primarily exposed to businesses in Europe and in the US, predominantly in the investment grade segment.
The class “CDOs” primarily comprises positions in CDO equity tranches. The underlying assets of CDOs are mostly senior secured bank loans, while the remainder are primarily CDOs with investment grade investments as underlying assets.
The property portfolio comprises mainly owner-occupied property (DKK 856m). The properties are valued in accordance with the rules of the DFSA (Danish Financial Supervisory Authority) i.e. at market value taking into account the level of rent and the terms of the tenancy agreements. In total, 98% of the property portfolio is let.
Topdanmark uses the Solvency ll discount curve with volatility adjustment (VA) for assessing insurance provisions. The VA component comprises a corrective element for the development in pricing of Danish mortgage bonds, as well as a corrective element for the development in pricing of European business credits. The VA component was 51bp at the end of 2016 and 60bp at the beginning of the year.
The result was a profit of DKK 41m in 2016 (2015: DKK 31m).
Non-life insurance In the interim report for Q1-Q3 2016, Topdanmark for 2017 assumed an almost unchanged level of premiums earned compared to 2016, and a combined ratio of around 90-91%, excluding run-off.
It was also stated in company announcement no. 60/2016 that the implementation of digital improvement measures might result in yet unknown temporary additional expenses and investments. Furthermore, it was stated that the potential additional expenses or investments or the potential additional earnings had not been taken into account in the profit forecast model for 2017.
Topdanmark has decided to invest in efficiency improvement. The main elements of the efficiency improvement programme are: • Digitalisation – self-service, online purchase etc. • Efficiency improvement – optimisation and automation of administrative processes • Transformation – performance and change culture.
The result is highly sensitive to fluctuations particularly in the investment return. The risk allowance and shadow account will not be finally calculated until the preparation of the 2017 Annual Report.
Total Group profit Overall, the assumed post-tax profit forecast model for 2017 is DKK 900-1,000m. The assumed profit for 2017 is exclusive of run-off.
The profit forecast model is based on the assumption of an annual 7.0% return on equities and foreign exchange rates unchanged from the level on 10 February 2017.
Furthermore, it is assumed that the return on interestbearing assets hedging the discounted claims provisions is just sufficient to cover discounting and revaluation of the claims provisions, while the return on the remaining interest-bearing assets is assumed to be 1.8% (risk-free interest rate plus 2.0pp).
The buy-back of DKK 1,450 before 23 February 2017 is fully executed, and Topdanmark has received DFSA approval for buy-back of the remaining DKK 200m. DKK 1m of the remaining DKK 200m have been bought back by 21 February. The buy-back of the remaining DKK 199m should take place before the AGM on 4 April 2017. Additionally, Topdanmark has received permission for buy-back of another DKK 150m. If Sampo’s proposal of revoking the buy-back is not adopted at the AGM, it is expected that the DKK 150m should be bought back before publication of Topdanmark’s interim report for Q1 2017 on 23 May 2017.
The reduction of DKK 1,524m in shareholders’ equity was partly offset by a DKK 50m strengthening of shareholders' equity by issue and exercise of share options etc.
The number of Topdanmark shares was 95,000,000 at 10 February 2017, of which Topdanmark’s holding of own shares was 8,695,000. If, contrary to expectations, no further shares are bought back before the Annual General Meeting on 4 April 2017, the number of voting shares will be 86,305,000.
In the years 2000-2016, the annual average buy-back yield has been 9.4%.
Future earnings distribution Sampo has proposed to Topdanmark’s AGM on 4 April 2017 that the authority of the Board of Directors to buy back own shares be revoked. Sampo’s proposal should be viewed in the context of Sampo’s announcement in its Interim Report for Q1-Q3 2016 that Sampo intends to propose discontinuation of Topdanmark’s share buy-back programme at the AGM on 4 April 2017 and a switch to earnings distribution by means of payment of dividend.
As a consequence of this policy, for a number of years, the Company has identified and reduced or eliminated the 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 has been reduced.
The solvency ratio can be adjusted to a certain extent in accordance with the Board of Director’s wishes. For example, the Board of Director’s can choose to increase the solvency ratio by reducing capital requirements via a lowering of the Group’s investment-related risk profile. An element thereof could be to offer life-insurance customers with guaranteed benefits to switch to unit-link for which the capital requirement is significantly lower. It is an ongoing consideration process because both riskreducing measures will reduce the profitability of the Topdanmark Group.
The risk management function implements an annual ORSA process identifying risks in the business, quantifying these risks and collecting them in a risk register. Additionally, the principles of solvency calculation are reviewed, and the risk management process is updated. An ORSA report has been prepared, which, together with the risk register and risk management process, was considered at a Board seminar in the autumn of 2016.
Disaster risks. • Storm and rainstorm • Fire • Terror • Workers' comp.
The market risk is freely adjustable in relation to each customer group's risk capacity.
Topdanmark's Board of Directors has set limits on the acceptance of market risks in the form of risk limits and scenario based requirements on the overall maximum loss.
Compliance Most important risks Risk preferences Risk reducing activities Insufficient knowledge of current or future legislation and rules.
Strategic risks Most important risks Risk preferences Risk reducing activities Generally, strategic risks are related to the Company's business model, political conditions, reputation, alliance partners' and competitors' behaviour as well as macroeconomic conditions.
Risk scenarios The 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.
This model, approved by the DFSA, provides the basis for including non-life risks in Topdanmark's solvency calculations.
Topdanmark Forsikring issued subordinated notes in two tranches: • DKK 500m, call in 2020, expiry in 2025 • DKK 850m, call in 2021, expiry in 2026.
At the end of 2016, Topdanmark’s own funds were DKK 6,348m (beginning of 2016: DKK 6,943m), among other things because Topdanmark has redeemed a subordinated loan of DKK 400m.
The solvency requirement (SCR) was DKK 3,634m (beginning of 2016: DKK 3,193m).
At the end of 2016, shareholders’ equity for solvency was DKK 3,992 (beginning of 2016: DKK 4,259m).
Provisioning risk Provisions on ow n account − 1% increase (96) (98)
Market risk Interest-bearing assets 1 pp increase (431) (592) Provisions for claims in effective and benefits etc. interest rate 465 672
Shareholders At the end of December 2016 Topdanmark had 40,201 shareholders registered by name.
The following shareholder owns more than 5% of the share capital: Sampo plc Fabianinkatu 27 FL-00100 Helsinki Finland
Board members are elected individually. The majority of the Board Members elected at the general meeting meet the definition of independence set out by the Committee on Corporate Governance.
Six of the nine Board members are women, three of them elected at the Annual General Meeting and three by Topdanmark's employees. Consequently, Topdanmark meets its goal: that the Board members comprise a minimum of three persons of each gender. Topdanmark meets the statutory definition of an equal gender distribution.
Amendments to the Company's Articles of Association The general meeting is Topdanmark's chief decisionmaking vehicle. Decisions at general meetings are made by a simple majority of votes, unless a special majority or representation is required by the Danish Companies Act or the Articles of Association. The Articles of Association provide that decisions on the alteration of the Articles of Association are only valid if adopted by an affirmative vote of not less than two thirds of the votes cast as well as of the capital represented at the general meeting. The Articles of Association provide no restrictions on voting rights.
On 23 September 2013, the EU Commission decided that If P & C Insurance Holding Ltd (publ) de facto was in control of Topdanmark. As a consequence of this special situation, it has been agreed that Topdanmark’s Executive Board earns a compensation over three years, representing six months' salary for each qualifying year. Christian Sagild and Lars Thykier have earned this compensation during the years 2013-2015. Marianne Wier and Brian Rothemejer Jacobsen will earn the compensation during the years 2016-2018. The compensation will be paid on resignation.
The remuneration package of the Executive Board, the Friday Team and significant risk takers is based upon a fixed basic salary. A fixed share thereof, 10%, is paid as share options. Individual bonuses are not paid. The determination of the fixed basic salary paid to the Executive Board and the Friday Team is based on a specific assessment of the employee. In its assessment Topdanmark includes, among other factors, their position, characteristics and performance.
Share options For 2017, Topdanmark has granted 263,387 share options to its Executive Board and a number of executives. The strike price of DKK 197 was fixed at 110% of the market price of Topdanmark's shares on 30 December 2016 (average of all trades).
The options granted for 2017 are not be exercised any earlier than subsequent to the publication of the 2019 Annual Report in 2020 and no later than subsequent to the publication of the 2021 Annual Report in 2022. In the intervening period, the options can only be exercised up to three banking days subsequent to Topdanmark's publication of annual and interim reports.
Investor Relations Topdanmark wishes to openly and sufficiently inform investors, analysts and other stakeholders on the Group's matters in order to ensure that as far as possible: • Value-creating activities are reflected in a fair price for
Since the buy-back programme was initiated in 1998, Topdanmark has decided to cancel DKK 16.8bn of own shares representing a 77.0% write-down of the share capital. The average price of the shares written down is DKK 53 per share.
Topdanmark’s buy-back programme is executed under the European Commission’s Regulation No. 2273/2003 of 22 December 2003 (the “Safe Harbour” method). Topdanmark has made an agreement with Danske Bank, which is the lead manager for the share buy-back. The agreement with Danske Bank ensures that trade decisions and the execution of the buy-back will be independent of and without influence from Topdanmark.
Trading in Topdanmark's shares Daily share trading on all stock exchanges was DKK 72m in 2016 (2015: DKK 70m).
Topdanmark is monitored by 21 share analysts. The analysts' recommendations of Topdanmark's shares are available on Topdanmark's investor site www.topdanmark.com → Investor Relations → Share profile → Analysts.
AGM 4 Apr 2017 Q1 2017 Interim Report 23 May 2017 2017 Half-year Report 15 Aug 2017 Q1-Q3 2017 Interim Report 14 Nov 2017 2017 Annual Report 22 Feb 2018 Deadline for submitting items for AGM agenda
Topdanmark 05 Sep 51/2016 Topdanmark – weekly report on share buy-backs 01 Sep 50/2016 Topdanmark's holding of own shares exceeds 5% 31 Aug 49/2016 Share capital and voting rights in Topdanmark 29 Aug 48/2016 Topdanmark – weekly report on share buy-backs 23 Aug 47/2016 Write-down of Topdanmark's share capital ‒ Topdanmark's holding of own shares below 10% 22 Aug 46/2016 Topdanmark – weekly report on share buy-backs
Member of The Audit Committee, Remuneration Committee and Nomination Committee of Topdanmark.
Current position held: Deputy Chairman of the Staff Association of Topdanmark.
Previous positions held: 1986-1989: Dealer, Danske Bank’s arbitrage, commercial paper and liquidity risk management. 1989-1990: Danske Bank New York Branch, implementing risk management system. 1990-1992: Vice President, Danske Bank, interest rate derivatives trading. 1992-1996: Treasury Manager, FLS Industries A/S. 1996-1999: Group Financial Officer, Vice President, FLS
FLS Industries A/S. 2000-2003: CFO, FLS Industries A/S. 2003-2006: Independent consultancy, Nielsen +
Offices held: Member of the Boards of Directors of: • Kirk Kapital A/S • Gigtforeningen (the Danish Rheumatoid Arthritis
Society) • Matas A/S • Chairman of the Audit Committee, Matas A/S • Coloplast A/S • Deputy Chairman of Arkil Holding A/S • Chairman of the Audit Committee, Arkil A/S • De Forenede Ejendomsselskaber A/S • Amager Strandvej 60-64/Ved Amagerbanen 37
Independence: Birgitte Nielsen meets the definition of independence set out by the Committee on Corporate Governance.
Offices held: • Member of the Board of Directors of BankInvest.
1986-1989: Ass. General Manager, Baltica-Nordisk Re. 1989-1993: Deputy General Manager, Employers
Independence: Annette Sadolin has been a member of Topdanmark’s Board of directors for 12 years and consequently, she no longer meets the definition of independence set out by the Committee on Corporate Governance.
Offices held: Member of the Board of Directors of: • FDM Travel A/S • Ecosys A/S (Chairman).
Independence: Jens Aaløse meets the definition of independence set out by the Committee on Corporate Governance.
Member of the Boards of Directors of: • Forsikring & Pension • Ambu A/S • Gobike A/S • Bikeshare Danmark A/S.
Member of the Board of Directors of: Danish Employers' Association for the Financial Sector.
Relative run-off profits, net of reinsurance (%) 1.6 2.4 2.8 3.0 3.7
Comparative figures for non-life insurance have been adapted to new Executive Order on Financial Reports as of 2015. For life-insurance it has not been possible to correct the comparative figures, other than the changes for presentation of income statement and balance sheet, due to the new Executive Order on Financial Reports.
Gross claims paid (6,254) (6,286) Reinsurance cover received 476 424 Change in the provisions for claims 71 349 Change in risk margin 14 (1) Change in the reinsurers' share of the provisions for claims (68) (1) Claims incurred, net of reinsurance 4 (5,762) (5,516)
Claims and benefits paid 7 (3,240) (3,453) Reinsurance cover received 7 6 Claims and benefits paid, net of reinsurance (3,233) (3,447)
Change in the life insurance provisions 8 (3,680) (6,159) Change in the reinsurers' share (1) (5) Change in the life insurance provisions, net of reinsurance (3,681) (6,164)
Income from associated companies 18 93 46 Income from investment properties 9 94 74 Interest income and dividends etc. 1,938 1,740
Reinsurers' share of the provisions for unearned premiums 20 67 71 72 Reinsurers' share of the life insurance provisions 33 32 27 Reinsurers' share of the provisions for claims and benefits 21 646 582 586 Total reinsurers' share of provisions 746 684 685
Amounts due from policyholders 304 328 383 Amounts due from insurance companies 195 81 100 Amounts due from associated companies 497 353 366
Assets held temporarily 3 0 0 Current tax assets 0 34 0
Profit margin, life insurance and investment contracts 27 - - 103
ACCRUALS AND DEFERRED INCOME 89 123 109 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 64,493 67,654 73,476
Cash flow from operations Gross premiums written 8,827 8,724 Claims paid (6,182) (6,266) Expenses paid (1,314) (1,315) Reinsurance ceded (12) (150) Cash flow from non-life insurance 1,319 992
Cash and cash equivalents at 1 January 2,590 4,361 Revaluation of cash and cash equivalents 35 (6) Cash and cash equivalents at 31 December 4,361 2,282
Shareholders' equity at 31 December prior year 115 10 1,146 39 3,825 5,135 Effect of new Executive Order on Financial Statements (71) (71) Equity end of year 2015 according to new Executive Order on Financial Statements 115 10 1,146 39 3,754 5,064
Cancellation of own shares (10) 10 0 Share buy-back (1,524) (1,524) Share-based payments 18 18 Exercise of share options 32 32 1 January Own funds 2016 2016
Shareholders' equity 4,642 4,702 Deferred tax on security funds 306 306 Profit margin 898 735 Intangible assets (689) (806) DFSA-approved share buy-back programme 0 (210)
Technical profit / (loss) on non-life insurance 684 505 (6) 1,184 36 1,220
Life insurance Gross premiums written 6,320 6,320 Allocated investment return 1,194 1,194 Pension return tax (165) (165) Benefits and change in provisions (6,920) (6,920)
Net reinsurance (3) (3) Technical profit on life insurance 13 6 19
Pension return non-life insurance 4 (4) 0 Return and revaluations non-life insurance provisions 87 87 Transferred to technical result (1,194) (1,194)
Net reinsurance (4) (4) Technical profit on life insurance 1 6 7
Pension return non-life insurance (19) 19 0 Return and revaluations non-life insurance provisions (423) (423) Transferred to technical result (3,147) (3,147)
Shares in associated companies 53 118 0 172 Other financial investment assets 18,085 25,212 7 43,304 Investment assets related to unit-linked products 0 15,796 0 15,796 Reinsurers' share of provisions 652 32 0 684 Amounts due from affiliated companies 614 462 453 (1,529) 0
Provisions for insurance and investment contracts 16,264 47,351 0 63,615 Amounts due to affiliated companies 0 1,594 17 (1,611) 0
Technical provisions, net of reinsurance, relating to illness / accident insurance administered by life insurance, and assets and other liabilities allocated to this portfolio are included in non-life insurance.
Note 3. Gross premiums earned - non-life insurance Gross premiums written 8,883 8,745 Change in provisions for unearned premiums 28 110 Change in profit margin and risk margin 117 51 Gross premiums earned 9,029 8,906
Note 5. Technical result - non-life insurance Gross premiums written 8,883 8,745 Gross premiums earned 9,029 8,906 Gross claims incurred (6,170) (5,939) Bonuses and rebates (62) (48) Gross operating expenses (1,404) (1,432) Net reinsurance (174) (126) Technical profit 1,220 1,361
Run-off profits, net of reinsurance 381 470 Claims provisions, net of reinsurance 12,540 12,623 Number of claims incurred ('000) 432 421 Average value of claim (DKK '000) 15 15 Frequency of claims (per thousand value) 114 110
Average value of claim (DKK '000) 23 22 9 9 12 12 Frequency of claims (per thousand value) 50 49 194 194 175 162
Run-off profits, net of reinsurance 18 24 21 24 69 30 Claims provisions, net of reinsurance 587 567 508 457 211 196
Note 6. Gross premiums written - life insurance Individual policies 330 316 Policies which are part of a tenure 1,650 1,803 Group life 533 534 Regular premiums 2,513 2,653
Surrenders in 2015 includes advanced tax of DKK 94m on capital pension schemes.
Note 8. Change in life insurance provisions Products with guarantees and profitsharing 789 (284) Unit-linked products (4,469) (5,875) Change in life insurance provisions (3,680) (6,159)
Note 9. Income from investment properties Rental income 188 188 Operating expenses from properties rented out (62) (95) Operating expenses from properties not rented out (19) (10) Gross profit 106 83 Administrative expenses (13) (9) Income from investment properties 94 74
Revaluation Provisions for unearned premiums and profit margin (2) (15) Provisions for claims and benefits 246 (272) Risk margin 2 (5) Reinsurers' share of the provisions for claims and benefits (1) 1
Note 14. Profit per share Profit for the year 1,170 1,536 Average number of shares ('000) 99,971 91,465 Diluting impact of options ('000) 490 256 Average number of shares, diluted ('000) 100,461 91,721 EPS (DKK) 11.7 16.816.8 EPS, diluted (DKK) 11.6 16.7
Impairment and amortisation at 1 January 0 (189) (406) 0 (595)
Impairment and amortisation at 31 December 0 (207) (445) 0 (653)
Impairment and amortisation at 1 January 0 (207) (445) 0 (653)
Development projects under construction primarily comprise new administration system for life-insurance. Book value of finished development projects primarily comprises the Group's digital platform for communication with customers. Amortisation of intangible assets is primarily included in claims incurred and operating expenses.
Owner-occupied properties are measured at a revalued amount corresponding to fair value (level three).
The measurement is based on an expected annual return on operations and a rate of return. A general plus/minus 0.5pp change in the rate of return wil have an effect of minus DKK 75m / plus DKK 91m on the fair value (2015: minus DKK 76m / plus DKK 92m). Average rate of return 5.3% 5.3% Book value if the properties had been valued at cost price with depreciations 749 748
Fair value at 1 January 3,829 3,868 Additions, including improvements 256 198
Investment properties are included in the balance sheet as: Investment properties 3,717 3,448 Investment assets related to unit-linked products 151 131
Profit on disposal 1 0 Shares in associated companies 172 1,180
Bornholms Brandforsikring A/S has been recognised on the basis of the most recent financial information at 30 September. The financial information is according to the companies' most recent annual reports.
Reimbursement of claims relating to previous years (357) (222) Change in expected income relating to previous years (5) (32)
Reimbursement of claims relating to this year (119) (202) Expected income relating to this year 413 455
Recognised as: Deferred tax assets (19) (14) (10) Deferred tax liabilities 74 73 59
Note 23. Other subordinated loan capital Hybrid Subordinated Subordinated Subordinated core capital loan capital loan capital loan capital
Subordinated loan capital is fully included in the Group's own funds 2016.
Provisions for unearned premiums at 1 January 1,960 1,944 Profit margin at 1 January 878 772
Intra-group transfers (370) (137) Retrospective provisions at 31 December 20,736 20,674 Accumulated revaluation at 31 December 1,888 1,831 Collective bonus potential at 31 December 1,697 1,960 Insurance provisions direct business at end of year 24,321 24,465 Total insurance provisions at end of year 24,321 24,465 Life insurance provisions with guarantees and profitsharing 24,321 24,465
Technical Guaran- Individual Collective Life Portfolios analysed by technical interest rates interest teed bonus bonus insurance 1 January 2016 rate benefits potential potential provisions
Note 25. Life insurance provisions with guarantees and profitsharing - continued Technical Guaran- Individual Collective Life
Portfolios analysed by technical interest rates interest teed bonus bonus insurance 2016 rate benefits potential potential provisions
Technical 1 January Risk margin (share of guaranteed benefits) interest rate 2016 2016
Note 25. Life insurance provisions with guarantees and profitsharing - continued Risk groups Risk result after addition of risk bonus 30 35 Risk result after addition of risk bonus in per cent 0.1 0.2
Cost groups Customers' share of administration expenses after addition of expense bonus 101 78 Operating expenses - insurance 203 196 Result of sales and administration (101) (118)
Insurance Investment 2015 contracts contracts Total Gross provisions at 1 January 9,915 936 10,851 Retrospective provisions at 1 January 9,915 936 10,851 Gross premiums written 4,868 685 5,553 Addition of return 565 58 623 Claims and benefits (953) (160) (1,113) Expense loading inclusive of expense bonus (47) (6) (53) Risk gain after addition of risk bonus 9 0 9 Premiums waived transferred to life insurance provisions (22) 0 (22) Intra-group transfers 336 34 370 Retrospective provisions at 31 December 14,670 1,546 16,216
Return on customer funds after expenses before tax in per cent 5.9 10.1
Claims paid relating to previous years (2,991) (2,970) Change in expected claims payments relating to previous years (387) (502)
Illness / accident insurance, net of reinsurance, administered by the life insurance business 2,056 2,223 Average period of settlement 13 years 13 years
Less paid incl. inf lation hedging 3,317 4,836 5,303 6,535 5,421 6,399 6,104 5,943 5,974 5,927 55,757 Provisions before discounting
Provisions relating to previous years at 31 December 1,822 Gross provisions at 31 December 2016 13,209
Less paid incl. inf lation hedging 3,115 4,588 4,941 5,309 5,109 5,363 5,745 5,674 5,698 5,607 51,149 Provisions before discounting
Provisions relating to previous years at 31 December 1,820 Provisions, net of reinsurance, at 31 December 2016 12,623
Reconciliation: Provisions for claims 13,209 Less reinsurers' share of provisions (586) Provisions, net of reinsurance, at 31 December 2016 12,623 Composition of expected payments, net of reinsurance: Discounting / revaluation w orkers' compensation
Note 29. Technical basis for risk allowance and shadow account Customers' share of technical basis for risk allowance 433 554 Share of technical basis for risk allowance allocated to shareholders' equity 37 44 Insurance technical result 470 598
Shadow account at 1 January 26 26 Depreciation over 5 years - (5) Provided/(used) 0 14 Shadow account at 31 December 26 35
These expenses have been disclosed in: Non-life insurance: Acquisition costs 920 945 Administrative expenses 484 487 Claims paid (claims handling and assessment) 848 852
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* 0 7 *In 2016, primarily fee for one-off services related to the acquisition of It systems. The Group has an internal audit department which carries out most of the audit work.
Total number of options ('000) Board executives Resigned Total Average strike price exercised options 2015 99 91 99 92 Average strike price exercised options 2016 - 104 102 104
Average current price on date of exercise 2015 219 Average current price on date of exercise 2016 167
(DKK '000): Søren Thorup Sørensen 1,378 1,488 Torbjörn Magnusson 678 788 Jens Aaløse - 233 Ann-Jeanette Bakbøl 233 350 Tina Møller Carlsson 233 350 Mette Jensen 233 350 Birgitte Nielsen 525 525 Lone Møller Olsen - 233 Annette Sadolin 525 525
Anders Colding Friis 350 117 Bjarne Graven Larsen 233 Per Mathiesen 117 Michael Pram Rasmussen 335 Desiree Schultz 117 Aage Nedergaard Smidt 117 Total fee paid to nine Board members 5,075 4,958
Board of Directors Number of shares Søren Thorup Sørensen 3,729 3,729 Torbjörn Magnusson 500 500 Jens Aaløse - 50 Ann-Jeanette Bakbøl 0 0 Tina Møller Carlsson 1,270 1,270 Mette Jensen 1,400 1,400 Birgitte Nielsen 350 350 Lone Møller Olsen - 2,425 Annette Sadolin 2,620 2,620 Anders Colding Friis 4,450 -
Sampo plc At 1 February 2017, Sampo plc holds 39,579,226 shares in Topdanmark A/S. At 31 December 2015, IF P&C Insurance Holding Ltd (publ) held 31,476,920 shares in Topdanmark A/S.
Loans and receivables at amortised cost Amounts due from policyholders 328 383 Amounts due from insurance companies 81 100 Other debtors 259 226 Liquid funds 640 831
Accrued interest and rent 284 278 Total financial assets 61,166 66,170
Investment properties 151 151 Investment assets related to unit-linked products 10,442 5,203 151 15,796 Total financial assets at fair value 26,242 32,185 674 59,100
Financial assets, level 3, of DKK 713m, comprises of investment properties DKK 131m and bonds DKK 582m.
Bonds measured by reference to non-observable inputs - Level 3: Portfolio at 1 January 172 523
Note 36. Financial liabilities Financial liabilities measured at fair value through profit or loss Held for trading: Designated at fair value: Amounts due to credit institutions 1,346 44 Total financial liabilities measured at fair value through profit or loss 1,873 923
Financial commitments entered at current value based on observable input, level 2.
Financial liabilities payable after five years or more: Other subordinated loan capital 1,256 0 Amounts due to credit institutions 3 3
Note 38. 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: Other subordinated loan capital 1,754 1,347 Provisions for unearned premiums 172 174 Life insurance provisions 36,861 43,324 Provisions for claims and benefits 9,783 9,115 Deferred tax on security funds 306 306
Derivatives to hedge against the net change in assets and liabilities 1,204 (109)
* Annual return as a percentage before pension return (PAL) and corporation tax.
Assets related to unit-linked products Land and buildings 136 147 3.8
Assets related to unit-linked products do not include assets chosen by policy holders.
The exposure in foreign shares is adjusted by means of derivatives and comprises: Guarantees and profitsharing 5,582 4,640 Unit-linked 7,636 9,702
Shares issued at 31 December 105,000 95,000 Own shares at 31 December (9,328) (7,784) Number of shares at 31 December 95,672 87,216
Note 43. Own shares Number of Nominal Percentage Bought shares value of share /sold '000 DKKm capital DKKm
Number of shares held to cover the granting of options: 1,783,000 (2015: 1,701,000).
Note 44. Collateral The Group's insurance companies have registered the following assets as security for technical provisions: Shares in associated companies 0 404
Deposits with credit institutions 3,100 280 Investment assets related to unit-linked products 15,796 21,528 Liquid funds 349 462 Accrued interest 275 278 Shares in and amounts due from affiliated companies eliminated in the consolidated accounts 5,173 7,111
Note 45. Contingent liabilities Contract liabilities 121 394 Adjustments to VAT liabilities 39 52 Other liabilities 13 10 Capital commitments made to loan funds and private equity funds etc. 1,254 1,461 Topdanmark EDB II ApS has concluded a contract with Schantz A/S on procurement and implementation of a new administration system for Topdanmark Life insurance. The Group companies participate in technical insurance collaboration where they are jointly liable for the insurance liabilities.
Non-life: Topdanmark Forsikring A/S Ballerup Insurance TDP.0007 A/S Ballerup Property Topdanmark EDB A/S Ballerup Internal IT services E. & G. Business Holding A/S Ballerup Holding Topdanmark Holding S.A. Luxembourg Holding Risk & Insurance Services S.A. Luxembourg Administration
Claims handling supported by Topdanmark’s claims handling system Topdanmark’s claims handling system supports professional accuracy, and Topdanmark continuously works to optimise its systems in order to improve the claims handling processes through automation.
Loss prevention and loss limitation Topdanmark focuses on loss prevention and loss limitation. The main objective is to incline customers towards pro-active risk handling so that they themselves can keep abreast of reducing their vulnerability. By doing this, Topdanmark ensures security for the customer and also reduces its own risk.
During such a long period of settlement, the levels of compensation could be significantly affected by changes in legislation, case-law or practice in the award of damages adopted by, for example, the Danish Labour Market Insurance which awards compensation for injury and loss of earnings potential in all cases of serious industrial injuries.
The practice adopted by the Danish Labour Market Insurance also has some impact on the levels of compensation for accident and personal injury within motor, liability and commercial liability insurance.
Provisions for unearned premiums The risk on provisions for unearned premiums is relevant particularly within lines with combined ratio of 100 or more, e.g. change of ownership insurance, workers' compensation and motor liability insurance where the provision for unearned premiums could be insufficient to cover the related expenses.
The Danish non-life companies have established a terror pool. In 2016, the terror pool bought reinsurance, which covered DKK 5,425m after DKK 500m. In 2017, reinsurance covers DKK 4.5bn after DKK 500m. Industrial injuries caused by any form of terror are covered by the Government with a few exceptions.
Extra costs due to longer lifetimes will be partially covered by individual and collective bonus potential. The remainder affects profit/loss for the year and consequently shareholders' equity.
The risk on the property portfolio is limited by a strategy focusing on the four largest cities in Denmark, with main emphasis on Copenhagen and Århus. Topdanmark invests in well-situated properties within the segments of housing and flexible office properties.
The concentration risk is limited by ensuring that investment size reconciles with counterparty creditworthiness.
Topdanmark's liquidity risk is therefore primarily related to the parent company.
Undiscounted expected cash flow for the Group’s most significant liabilities: The Group uses derivatives to hedge investment risks. The hedging of currency risk in particular often results in significant positive or negative changes to balance sheet values.
In cashflows for life insurance provisions, repurchase and rewrite to paid-up policies are included in 2016. Comparative figures for 2015 have not been adjusted.
Life insurance provisions for unit-linked products are covered by corresponding investment assets and therefore not stated in the table.
IT Group IT Security, reporting to the IT manager, is responsible for information security.
Cyber-crime risk The general threat from cyber-crime is increasing. In general, Topdanmark handles the risk via an IT Security Committe/Cyber-Crime Board that regularly assesses the threat and the measures necessary to secure the required security level.
Tests The implementation of new IT systems is only effected after extensive testing procedures.
Accessibility It is Topdanmark's goal that the accessibility of its main systems is no less than 99.5%. In 2016, the mainframe platform had an average accessibility level of 99.86%, while average accessibility of the de-centralised systems was a little lower because they are dependent on the mainframe platform.
Internal audit The 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.
Event register According to the Executive Order on management and control of insurance companies (the Section 71 Executive Order) Topdanmark shall monitor and report on operational risks. Therefore, Topdanmark should have a process and a tool to register events. Accordingly, the events are collected in a database and communicated onwards in the management system, when and if relevant, in order that the organisation learns from its errors.
Rules comprise all rules, internal rules of Topdanmark's policies and the relevant guidelines as well as all relevant legislation and its sub rules. Furthermore, rules comprise fixed trade practices for the performance of activity in Topdanmark.
Accordingly, compliance comprises compliance with the rules which are necessary and required to ensure that Topdanmark's business is conducted in an appropriate and, in terms of business, proper way. Documentation of compliance for Topdanmark's stakeholders is part of compliance.
• Administration and updating of the Compliance Function's routines and tools.
Change in accounting policies New Executive Order on Financial Reports In 2016, Topdanmark has implemented the Executive Order on Financial Reports for Insurance Companies and Multi-employer Occupational Pension Funds amended to comply with the European solvency rules, Solvency II, which took effect on 1 January 2016.
Solvency ll lays down the basic principles for calculation of insurance provisions: • Best estimate of present value of expected future cashflows for insurance contracts concluded by the company
In Solvency ll, the assumed profit is included in own funds when the insurance contracts are concluded.
The table below discloses the financial effect on result and shareholders’ equity for 2015: The transition to the new Executive Order on Financial Reports results in an increase in the post-tax result for 2015 of DKK 38m from 1,132m to 1,170m. At the end of 2015, shareholders’ equity was reduced by DKK 33m from DKK 4,673 to DKK 4,640.
Result and equity according to financial statement 1,132 5,135 4,673 Adjustments Claims provisions
Correspondingly, it has not been possible to calculate the effect in terms of value for the 2016 financial year according to previous accounting policies.
Future accounting standards IFRS The IASB has issued a number of new and revised standards and interpretations, which have not yet taken effect and/or been approved by EU.
The most significant new standards are: IFRS 9 "Financial instruments", IFRS 15 "Revenue from contracts with customers" and IFRS 16 "Leases". IFRS 16 has not yet been adopted by the EU.
IFRS 15 is applicable to all contracts with customers not comprised by other standards (e.g. financial contracts or insurance contracts).
As a result of IFRS 16, most of the existing operational lease contracts will be recognised in the balance sheet as a lease asset (right to use the asset) and a lease liability, respectively.
Future changes to IFRS are not expected to materially change Topdanmark Group’s accounting policies. As regards IFRS 17, futher analysis of the final standard awaits. It is expected to be available in H1 2017.
The 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 Labour Market Insurance.
Premium provisions Premium provisions are included based on an estimate of future payments for incidents in the remaining period of cover. A significant uncertain and estimated assessment is involved in the determination thereof. Premium provisions must be seen in connection with profit margin. Financial estimates and assessments with effect on the result of the year and shareholders’ equity are primarily relevant within businesses with combined ratio of 100 or more, e.g. change of ownership, workers’ compensation and motor liability, where premiums earned are insufficient for covering expected payments and a risk margin.
The result of life insurance comprises unconditional and conditional profit elements.
The risk return is transferred to shareholders' equity if it can be covered by collective and individual bonus potentials and profit margin.
Income statement Premiums earned Gross 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. For loss-making insurance, the expected loss is included at the time the contract is concluded.
Topdanmark A/S is jointly taxed with all the Danish companies of the Group. As the management company of the joint taxation, Topdanmark A/S settles all corporation tax payments with the tax authorities.
In accordance with the guidelines of the DFSA, the subsequent recognition of the investment properties is made at fair value representing the estimated amount at which the property could be sold within a reasonable time frame to an independent buyer. The fair value is calculated, using the return model, as the calculated capital value of the expected cash flow from each property.
Associated companies 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.
Reinsurers' share of the provisions for outstanding claims has been calculated as the amounts expected to be received from reinsurance companies according to the reinsurance contracts concluded. Expected future payments are discounted using a structure of interest rates. The reinsurers' share is regularly assessed for impairment and written down to its recoverable amount, as required.
Premium provisions are calculated on the basis of the latest prognosis for combined ratio for the next 12 months. The prognosis is prepared on a quarterly basis, ia., based on analyses of the trend in premiums, compensation and expenses and for change of ownership also statistical analyses of trend in claims notification in relation to the time the insurance policies were written.
Changes in the present value of the expected payments due to changes in the interest rate curve and reduction of maturity of profit margins during the period of cover of the insurance contracts, are transferred to the item Return and revaluation of non-life insurance provisions.
If the present value of expected payments and risk margin for an insurance portfolio with similar risks is expected to exceed the premiums, the profit margin for this portfolio is set to zero.
Life insurance provisions Life insurance provisions for average interest rate are measured at fair value. Accordingly, the liabilities are calculated on the basis of the market value independent of the original technical base. The fair value of the life insurance provisions is based on the realistically expected future premiums to be received, benefit payments to be made and administrative expenses incurred on the contracts written.
Remaining life expectancy for a 60-year-old man and a 60-year-old woman is as follows: The provisions include amounts to cover the expected expenses on the future administration of the insurance contracts written. These expenses have been calculated using an annual indexation of 2%.
The provisions include a risk margin corresponding to the percentage which would be demanded by an independent purchaser of the company's portfolio of life insurance policies to compensate for the risk of fluctuations in the expected payments. The risk margin is calculated as the increase in guaranteed benefits stressing the biometric risks.
Best estimate for guaranteed benefits is measured as the present value of current, guaranteed benefits plus future administration expenses and deduction of present value of agreed premiums. Guaranteed benefits are calculated considering amendments of the insurance contracts to paid-up policies and buy-back.
Remaining 60 year old 60 year old Life expectancy man woman
Collective bonus potential is used for equalization of each year’s bonus allocations. Thus, in years where the investment and insurance results are better than the allocated bonus, transfer to collective bonus potential will be made while in years when the result is insufficient to finance the allocated bonus, funds will be transferred from the collective bonus potential.
As a consequence of the DFSA’s interpretation of 20 May 2016 concerning the financial calculation of profit margin, the balance item has conservatively been estimated at zero for the traditional savings product with guaranteed yield.
The annuity reserves for disability in illness and accident insurance are calculated using an inflationary structure.
Provisions for claims in workers' compensation insurance comprise provisions for annuities and other provisions for claims and benefits. The assessment of the future annuities is based on the present annuities including the expected wage and salary indexation, and a rate of mortality corresponding to G82 with monthly age writedowns. Workers’ compensation claims are often paid as the capitalised value of an annuity. The capitalisation rate at the time of capitalisation is to be calculated as a moving average of the most recent five years’ interest rate on leading mortgage bonds less tax. The capitalisation rate is calculated as the forward swap rates plus 0.85% p.a. and less a deduction for tax corresponding to the base tax rate.
Corporation tax and deferred tax Current tax liabilities and tax receivable, including joint tax contributions, are included in the balance sheet as calculated tax on taxable income for the year adjusted for tax on previous years' taxable income and prepaid tax on account. Deferred tax on temporary differences between the accounting, and tax value of assets and liabilities is charged in accordance with the balance sheet liability method. Deferred tax on shares in subsidiaries and associated companies is not included where the Group controls the timing of the reversal of the temporary difference, and where it is probable that the temporary difference will not be reversed within the foreseeable future.
The calculation of deferred tax is based on the planned use of each asset and the settlement of each liability, using the tax rates expected to be in force when the deferred tax is expected to crystallise as current tax, based on the tax rates and rules in force on 31 December.
Other loans, including employee bonds, are measured at their amortised cost.
Effect of change in accounting policies Amortisation premium provisions 21 (21) Amortisation profit margin 5 (5) Change in enhancement of premium provision (16) (2) (17) 4 (13) Amortisation Claims provisions 23 (23)
Technical profit Non-life insurance Gross premiums Technical Claims Reinsurance Expenses Technical (DKKm) earned interest profit
Eliminated operating profit ow ner-occupied properties (14) (22) (36) Segment non-life 2015 (ratio basis) 8,956 (2) (6,224) (171) (1,426) 1,133 Amortisation premium provisions 22 (2) 21 Amortisation profit margin 5 () 5 Change in enhancement premium provisions (16) (16) Item "Technical interest" excluded 2 2 Change in amortisation claims provisions 23 (1) 23 Change in valuation of derivatives (new interest rate curve) 3 3 Change in risk margin claims provisions 14 14 Segment non-life new policy 8,967 0 (6,184) (174) (1,426) 1,184 Eliminated operating profit ow ner-occupied properties (14) (22) (36)
Gross claims ratio 69.5 69.0 Net reinsurance ratio 1.9 1.9 Claims trend 71.4 70.9 Expense ratio 15.9 15.9 Combined ratio 87.3 86.8 Combined ratio excl. run-off profits 91.6 91.1
Technical result life insurance Invest- Pension Re- Techment return Unit- Ex- insu- nical
(DKKm) Premiums return tax Benefits Claims Life linked Bonus penses rance result
Investment properties 3,868 (151) 3,717 Shares in associated companies 184 (12) 172 Total other f inancial investment assets 43,292 12 43,304 TOTAL INVESTMENT ASSETS 47,344 (151) 47,193 INVESTMENT ASSET RELATED TO UNIT-LINKED PRODUCTS 15,645 151 15,796 DEBTORS 1,730 (23) (2) 1,706 OTHER ASSETS 799 9 808 PREPAYMENTS AND ACCRUED INCOME 477 477 TOTAL ASSETS 67,670 67,654
SHAREHOLDERS' EQUITY 4,673 131 266 (125) (313) 8 4,640 OTHER SUBORDINATED LOAN CAPITAL 2,154 2,154
Shares in affiliated companies 6 5,111 5,643 Total investment in affiliated companies 5,111 5,643 TOTAL INVESTMENT ASSETS 5,111 5,643
Amounts due from affiliated companies 497 65 Other debtors 4 65 TOTAL DEBTORS 501 129
Amounts due to affiliated companies 274 289 Current tax liabilities 0 58 Other creditors 24 16 TOTAL CREDITORS 298 363 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 5,653 5,779
Related parties 9 Own funds 10 Own shares 11 Contingent liabilities 12 Other note disclosures 13 Accounting policies 14
Shareholders' equity at 31 December prior year 115 2,285 3,042 5,442 Effect of new Executive Order on Financial Statements (71) (71) Equity end of year 2015 according to new Executive Order on Financial Statements 115 2,214 3,042 5,371
Profit / (loss) for the year 1,208 (38) 1,170 Other comprehensive income in affiliated companies 1 0 1 Total comprehensive income for the year 1,209 (38) 1,171
Dividends received from subsidiaries (2,057) 2,057 0 Other movements in capital of subsidiaries (4) 0 (4) Cancellation of own shares (10) 10 0 Share buy-back (1,667) (1,667) Sale of own shares 16 16 Share-based payments 10 10 Exercise of share options 50 50
Profit / (loss) for the year 1,585 (49) 1,536 Other comprehensive income in affiliated companies 1 0 1 Total comprehensive income for the year 1,586 (49) 1,537
Dividends received from subsidiaries (1,062) 1,062 0 Other movements in capital of subsidiaries 6 0 6 Cancellation of own shares (10) 10 0 Share buy-back (1,524) (1,524) Share-based payments 10 10 Exercise of share options 32 32
Note 4. Taxation Current tax 10 11 Taxation (income) 11 11
Calculated tax on profit for the year 22.0% (2015: 23.5%) 11 13 Adjusted for the tax effect of: Non-deductible expenses / income not liable to tax (1) (2)
Deferred tax assets of DKK 2m (2015: DKK 1m) concern subordinated loan capital.
Note 6. Shares in affiliated companies Topdanmark Forsikring A/S 4,868 5,383 Topdanmark Kapitalforvaltning A/S 76 93 Topdanmark Invest A/S (investment) 167 167 Shares in affiliated companies 5,111 5,643 The affiliated companies are domiciled in Ballerup.
Note 7. Share capital DKK Share capital at 1 January 115,000,000 105,000,000 Reduction in capital (10,000,000) (10,000,000) Share capital 105,000,000 95,000,000 Each of Topdanmark's 95,000,000 (2015: 105,000,000) shares has a nominal value of DKK 1. No share enjoys any special rights. The shares are freely tradeable. Each share has one vote.
Principal Date of issue Maturity If permitted by the DFSA, the debtor can give notice of termination from Interest rate EURIBOR 3 months+1.90% to 2017 Subsequently Market value calculated on the basis of observable input, level 2.
Note 9. Related parties Topdanmark A/S has no related parties with controlling influence. Related parties with significant influence comprise Sampo plc, the Board of Directors, the Executive Board and their families. Remuneration of the Board of Directors Directors' fees adopted by the AGM were DKK 5,075,000 (2015: DKK 5,075,000) of which DKK 263,000 (2015: 263,000) related to Topdanmark Forsikring A/S. Due to vacancy of directorship part of the year, remuneration paid was DKK 4,958,000 (DKK '000): Søren Thorup Sørensen 1,378 1,488 Torbjörn Magnusson 678 788 Jens Aaløse - 233 Ann-Jeanette Bakbøl 233 350 Tina Møller Carlsson 233 350 Mette Jensen 233 350 Birgitte Nielsen 525 525 Lone Møller Olsen - 233 Annette Sadolin 525 525
Anders Colding Friis 350 117 Bjarne Graven Larsen 233 Per Mathiesen 117 Michael Pram Rasmussen 335 Desiree Schultz 117 Aage Nedergaard Smidt 117 Total fee paid to nine Board members 5,075 4,958 The Board of Directors receive only a fixed remuneration.
Christian Sagild 8.9 9.0 Brian Rothemejer Jacobsen (10 months) - 3.9 Lars Thykier 5.9 6.0 Marianne Wier (10 months) - 3.8
Note 9. Related parties - continued In addition, the Executive Board successively accrues a remuneration corresponding to 18 months' salary. The compensation will be paid on resignation. The Group has no unhedged pension commitments.
There are no special accrual conditions related to the option programme than employment for the full year of accrual. Options are allocated at beginning of year and a proportional reduction on the number is made in connection with resignation.
The option programme of the Executive Board is disclosed in the Group note staff costs, remuneration of the Executive Board.
From 2016, Topdanmark A/S calculates solvency cover at Group level according to Solvency II.
In 2015, Topdanmark was comprised by solvency rules for financial holding companies.
Written down (10,000) (10) - Held at 31 December 2015 9,328 9 8.9
Written down (10,000) (10) - Held at 31 December 2016 7,784 8 8.2
The 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 (FDSA) on financial reports for insurance companies and multi-employer occupational pension funds (nationwide, occupational pension funds specific to Denmark).
In our opinion, the consolidated financial statements and annual financial statements give a true and fair view of the Group’s and the parent company's assets, liabilities and financial position at 31 December 2016 as well as of the Group’s and the parent company’s activities and the Group’s cash flow for the financial year 1 January to 31 December 2016.
Statement on the management review Our opinion on the consolidated financial statements and the parent financial statements does not cover the management review, and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements and the parent financial statements, our responsibility is to read the management commentary and, in doing so, consider whether the management commentary 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. Moreover, it is our responsibility to consider whether the management commentary provides the information required under 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 2016 and of the results of its operations and cash flows for the financial year 1 January to 31 December 2016 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial companies.
Further, in our opinion, the parent financial statements give a true and fair view of the Parent’s financial position at 31 December 2016, and of the results of its operations for the financial year 1 January to 31 December 2016 in accordance with the Danish Financial Business Act.
Provisions for insurance and investment contracts At 31.12.2016, provisions for insurance and investment contracts amount to DKK 16,264m for non-life insurance and DKK 47,351m for life insurance.
The calculation of provisions for insurance and investment contracts is complex and to a significant extent subject to accounting estimation that is based on management assessments and assumptions about future events. We believe that the most significant risks relate to changes in assumptions, and the methods and models applied may also have a significant influence on the measurement of provisions for insurance contracts and the technical result. Consequently, there is a risk that provisions for insurance and investment contracts are not measured applying appropriate models and realistic assumptions.
The following elements are particularly complex and/or to a significant extent subject to management estimation, assessments and methods where even small changes may have a material impact: • Life expectancy, life expectancy improvements and disability (life); • Risk premium; • Expected future inflation and salary development (life and workers´compensation); • Expected future cash flow from insurance and investment contracts entered into, including profit margin and risk margin; • Yield curve plus volatility adjustment; • Direct and indirect costs to release claims outstanding provisions; • Best estimate of future payments for losses occurred and their maturities, including in particular for large portfolios subject to long-term release; Management has described the measurement of provisions for insurance and investment contracts, the actuarial calculations and assumptions applied in more detail in the notes.
Statement on the management review Management is responsible for the management review.
Moreover, it is our responsibility to consider whether the management commentary provides the information required under the Danish Financial Business Act.
As disclosed in the five-year summary, the solvency ratio is exempt from the requirement to be audited. Consequently, our opinion on the consolidated financial statements does not cover the solvency ratio, and we do not express any form of assurance conclusion thereon.
As part of an audit in accordance with International Standards on Auditing and additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements and the parent financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Announcement No. 11/2017 from Topdanmark A/S Page 98 of 98 our auditor’s report. However, future events or conditions may cause the Group and the Parent to cease to continue as a going concern.
We communicate with Those Charged with Governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.