Key features 2015 • Post-tax profit of DKK 1,132m (2014: DKK 1,558m). • This profit is in line with the profit forecast of DKK
1,050-1,150m assumed for 2015 in the interim report for Q1-Q3 2015.
• Trend in premiums: 2.6% decline in non-life insurance, 61.0% increase in life insurance.
• Profit on life insurance: DKK 85m (Q4 2014: DKK 2m).
• In the interim report for Q1-Q3 2015, it was announced that the assumed non-life premium development for 2016 was a decline of around 1%. The Danish non-life insurance market continues to be competitive. In line with comments in the interim report for Q1-Q3 2015, and keeping the strategy of profitability as the primary target unchanged, Topdanmark still expects negative premium growth in 2016.
• Overall post-tax profit forecast model: DKK 800-900m, excluding run-off, representing EPS of DKK 9.2.
Accounting policies 2016 • The accounting policies for 2016 will be changed on the basis of the new Danish Executive Order on Financial Reports. The changes are not expected to have material effect on results and shareholders’ equity.
Contents Management’s review 1 Key features 3 Financial highlights 4 Results for 2015 4 Results for Q4 2015 5 Non-life insurance 2015 9 Life insurance 2015 10 Investment activities 11 Parent company etc. 11 Taxation 11 Profit forecast model 13 Share buy-back 13 Risk management 17 Solvency calculation and capital requirements 18 Capital structure and ownership 19 Board of Directors and Articles of Association 20 Severance pay 20 Remuneration structure 21 Corporate Governance 21 CSR 22 Investor Relations 23 Accounting policies 2016 25 Annual General Meeting 25 Financial calendar 26 Company announcements and trading reports 28 Board of Directors and Executive Board 32 Five-year summary ● Group
Annual financial statements ● Group 33 Income statement 34 Statement of comprehensive income 35 Assets 36 Shareholders’ equity and liability 37 Cash flow statement 38 Statement of changes in equity 39 Notes to the financial statements 72 Accounting policies
Deferred tax on security funds (348) (348) (306) (306) (306) (306) (306) Shareholders' equity of Group
Post-tax EPS, diluted (DKK) 7.4 14.1 12.3 14.3 11.3 2.9 2.9 Net asset value per share, diluted (DKK) 36.8 45.8 48.3 52.2 51.8 52.2 51.8 Share buy-back per share, diluted (DKK) 8.4 9.3 15.4 15.8 16.6 3.9 3.9 Listed share price end of period 89.5 121.3 142.8 200.2 196.0 200.2 196.0
Average number of shares ('000) 137,409 128,276 117,904 107,908 99,971 104,273 96,806 Average number of shares, diluted ('000) 138,023 129,367 119,131 108,805 100,461 105,102 97,241
Number of shares end of period ('000) 133,319 123,940 112,632 103,623 95,672 103,623 95,672
Combined ratio excl. run-off profits 92.0 90.3 95.0 89.8 91.6 87.5 97.1 *) Shareholders' equity and loan capital
Results for 2015 Topdanmark’s post-tax profit was DKK 1,132m (2014: DKK 1,558m). EPS was DKK 11.3 (2014: DKK 14.4).
The technical result declined DKK 156m to DKK 1,133m primarily due to higher expenses on weather-related claims (DKK 99m) and the lower level of interest rates (DKK 60m).
The DKK 1,132m profit is in line with the assumption in the most recent profit forecast model for 2015 in the interim report for Q1-Q3 2015, which was a post-tax profit of DKK 1,050-1,150m.
Pre-tax profit declined DKK 36m to DKK 368m in Q4 2015.
Non-life insurance 2015 Premiums earned declined 1.8 % to DKK 8,956m. This was in line with the assumed decline in premiums of 1-2%. The personal segment accounted for a 1.1% decline and the SME and industrial segment for a 2.6% decline.
As part of the continued work to improve profitability, Topdanmark is introducing a new sales strategy for distribution through its certified sales representatives in the personal segment. The new sales strategy increases their responsibility for individual risk assessment when the policy is written. This change has caused a loss of momentum, but also improved the quality of the new customer portfolio. The new sales strategy will be fully implemented in the course of H1 2016.
The interest rate curve used to discount the provisions for outstanding claims was lower in 2015 than in 2014, which impacted the claims trend adversely by 0.7pp as compared to 2014.
Run-off profits, net of reinsurance, were DKK 381m (2014: DKK 351m), representing a 0.4pp improvement of the combined ratio. Run-off profits were generated in primarily motor liability, workers’ comp, change of ownership and illness/accident insurance.
Expense ratio The expense ratio increased to 15.9% (2014: 15.7%). Nominal expenses declined slightly, in spite of an increase in expenses due to general wage increases and the 0.8pp increase in the payroll tax. The expense savings were achieved partly through efficiencypromoting measures and partly through the payment of lower sales commission in connection with lower new sales in the personal segment.
Combined ratio Overall expenses on claims, reinsurance, sales and administration as a percentage of premiums earned (combined ratio) increased to 87.3% (2014: 86.0%). Excluding run-off profits, the combined ratio was 91.6% (2014: 89.8%).
Furthermore, as compared to Q4 2014, the claims trend was adversely impacted by illness/accident insurance as an adjustment of the expected sizes of claims resulted in an extraordinarily low claims level in Q4 2014 (1.3pp). Moreover, the claims trend was adversely impacted by a number of large fire claims in the SME and industrial area (0.9pp), workers’ compensation insurance (0.6pp) and car insurance (0.4pp). The increase in the claims trend for car insurance was mainly due to a 9% increase in the number of car accidents from Q4 2014. On the other hand, the claims trend benefitted from a higher level of run-off profits (1.6pp) and a lower number of thefts (0.6pp).
Technical interest 1 0 8 (2) Claims incurred (1,494) (1,642) (6,320) (6,224) Expenses (356) (371) (1,427) (1,426) Net reinsurance (77) (43) (88) (171) Technical result 378 188 1,289 1,133
Investment return after transfer to technical result (4) 65 478 104
Premiums earned declined 1.1% to DKK 4,966m. Premium growth was marginal in personal and illness/accident insurance, while there was a decline in premiums earned on car insurance impacted by a lower average premium (2.6%). In Q4 2015, premiums earned in the Personal segment declined 1.8% to DKK 1,241m primarily due to a decline in car, house and contents insurance premium prices.
Nominal expenses increased 1.8%, which, due to the lower level of premiums, increased the expense ratio by 0.6pp to 15.4%.
Life insurance 2015 The result from life insurance was a profit of DKK 174m (2014: DKK 200m).
The decline in profit was mainly due to the decline to DKK 57m in the investment return on shareholders’ equity (2014: DKK 105m).
Investment return on shareholders' equity 0 40 105 57 Sales and administration (22) (22) (65) (45) Insurance risk (3) 5 25 19 Risk return on shareholders' equity 35 36 145 137 Risk return transferred to (minus)/from shadow account (8) 28 (10) 7 Profit on life insurance 2 85 200 174
Developments in Q4 2015 The result of life insurance increased to DKK 85m (2014: DKK 2m). The improvement of DKK 83m was due to a higher investment return in Q4 2015 (DKK 40m) and the full inclusion of risk return in income (DKK 36m).
It 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 other things, equities, properties and CDOs in order to improve the average investment return. The return in Q4 and the full year 2015 on the most significant classes of assets is disclosed in the following table: Sources of gross premiums Q4 Q4
The investment return after the transfer to the technical result was DKK 168m, which was just under DKK 100m lower than the expected return for the year, calculated using Topdanmark's forecast model at the beginning of 2015. The lower return was primarily due to a relatively low return on Danish mortgage bonds as compared to the comparable revaluation of provisions and the very low short-term interest rates. Additionally, there was a lower return on foreign equities. The relatively high returns on Danish equities and a profit on the disposal of residential properties only partially alleviated the effect of development in the interest rate markets.
The post-tax equity exposure was DKK 754m (pre-tax: DKK 985m) excluding associated companies, but including the impact of derivatives.
The Group's investments have no significant concentration of credit risk except for AAA-rated Danish mortgage bonds. The class of “Government and mortgage bonds” comprises primarily Danish government and mortgage bonds and revaluation of technical provisions. In addition, there are foreign government bonds mainly from European core countries, covered bonds and derivatives.
Credit bonds with a rating lower than BBB (DKK 97m) comprise high yield bonds, part of which are convertible, and subordinated bank capital issued by EU banks. Credit bonds with a rating of BBB and A (DKK 151m) are ordinary and convertible corporate bonds, subordinated bank capital issued by EU banks and annuity policies.
The maturity of the CDO investments is dependent on any changes in the payments made by the underlying assets, which in turn are dependent on changes in the general economy, and therefore, it is not possible to outline the maturity distribution for the portfolio.
The class of "Assets related to I/A" (illness / accident) comprises the investments in Topdanmark Livsforsikring (the life insurance company) corresponding to the size of the illness / accident provisions.
Taxation The tax charge was DKK 349m of the pre-tax profit of DKK 1,481m, corresponding to an effective tax rate of 23.6% (2014: 22.5%).
Topdanmark continues to assume a combined ratio of around 91% for 2016, excluding run-off. The expense ratio is assumed to be around 16%.
Life insurance Assumed growth in regular premiums is 0-5% for 2016. At this time of the year, it is not appropriate to assume a level of growth in single premiums.
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 2016 Annual Report.
Non-life insurance - Technical result 1,133 750 – 800 - Investment return after transfer to technical result etc. 143 100 – 150 Profit on non-life insurance 1,276 850 – 950 Life insurance 174 130 – 160 Parent company etc. 31 30 – 40 Pre-tax profit 1,481 1,010 – 1,150 Taxation (349) (210) – (250)
Share buy-back In the interim report for Q1-Q3 2015 it was announced that the share buy-back programme for 2015, which was executed until 10 February 2016, was at DKK 1,950m. This buy-back has been fully concluded, see: company announcement No 09/2016 of 11 February 2016.
For the financial year 2015, the share buy-back was DKK 1,667m, representing a buy-back yield of 8.6%.
The reduction of DKK1,667m in shareholders’ equity was partly offset by DKK 76m strengthening of shareholders' equity by issue and exercise of share options etc.
In order to optimise the capital structure, the size of the buy-back programme for 2016 will exceed the expected post-tax profit by DKK 400m.
Following the change to Solvency II, Danish insurance companies, including Topdanmark, need the approval of the DFSA before they initiate the buy-back programme. Therefore, the buy-back programme for 2016 is subject to the approval of the DFSA.
In the years 2000-2015, the annual average buy-back yield has been 9.4%.
From 12 February 2016 to 9 May 2016, Danske Bank has been authorised to buy shares in Topdanmark up to a value of DKK 300m.
The buy-back must not be made at a price exceeding the higher of (1) the share price of the latest independent transaction and (2) the highest current independent offer price on Nasdaq Copenhagen on the day of trading.
The maximum number of shares in Topdanmark that may be bought on each trading day will represent 25% of the average daily trading volume of the Company's shares traded on Nasdaq Copenhagen within the 20 trading days preceding the purchase date.
The Board of Directors determines the overall risk policies and limits. The internal auditors report to the Board of Directors and report on, among other things, the observance of these risk policies and limits.
The Risk committee has set up the Model committee, the Data Committee and the Validation Committee, which are responsible for developing and operating Topdanmark's internal model for calculation of results probabilities and risks of the non-life insurance portfolio based on random simulation. The model is used for, among other things, optimising the reinsurance programme, cost of capital, forecast balancing and calculating capital requirements.
The risk management function has addressed the new rules for solvency calculation, reporting etc. of the Solvency II Directive in order to ensure that Topdanmark would meet this set of rules when it took effect on 1 January 2016.
Review Topdanmark believes that the Group's most important risks relate to the following main areas: • Non-life insurance. • Life insurance. • Market. • Credit and counterparty. • Operational. • Compliance. • Strategic.
The most important risks are described in the following survey. A more detailed description is available in note 49.
Provisioning risk. • Provisions for outstanding claims. • Provisions for unearned premiums.
Disaster risks. • Storm and rainstorm. • Fire. • Terror. • Workers' comp.
Spread of risk on different types of insurance / customer groups.
For agreements with bonus entitlement we aim at balancing return and risk so that ordinary risks are covered by the related bonus potential.
Market risks Most important risks Risk preferences Risk reducing activities Interest rate risk.
Credit and counterparty risks Most important risks Risk preferences Risk reducing activities Reinsurance.
A 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.
Counterparty risk is limited by mainly buying hedging from reinsurance companies which as a minimum have a rating of A-.
Credit risk is limited by diversification both geographically and in terms of type of debtor.
The Compliance Function exercises control and provides advice to ensure that the Group’s business sectors and administrative departments observe relevant legislation and internal rules.
Topdanmark's business model stands strong against strategic risks. The results of the Company will, with 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.
In 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.
In the calculation of the effect on the results, it is assumed that the bonus reserves and the individual bonus potential in life insurance could offset adverse fluctuations at the levels described as the collective bonus potential was DKK 1,697m at 31 December 2015 (2014: DKK 1,677m), and the bonus potential on paid-up benefits DKK 1,101m (2014: 746m).
An important goal of Solvency II is to promote good risk management based on market values and actual risk calculations. Solvency II includes a standard model for calculation of solvency capital requirements, which will be common to all insurance companies in the EU. Although the model provides the opportunity for company-specific values for some variables, the standard model will not provide a fair view of all the risk elements of all companies.
In 2016, insurance holding companies are subject to the same solvency rules and methods of calculation as those for insurance companies. A Group calculation will be made for Topdanmark A/S in 2016.
Provisioning risk Provisions on ow n account − 1% increase (98) (99)
Storm claims up to DKK 5,100m (76) (77) (Plus reinstatement premium etc.)
Announcement No. 16/2016 from Topdanmark A/S Page 18 of 91 see: company announcement of 18 June 2015 from Topdanmark Forsikring. The redeemed subordinated notes were replaced and supplemented in December 2015, when Topdanmark Forsikring issued new subordinated notes in two tranches, see: company announcement of 2 December 2015 from Topdanmark Forsikring: • DKK 500m, call in 2020 and expiry in 2025. • DKK 850m, call in 2021 and expiry in 2026.
There is no intention to issue additional subordinated notes in the event of redemption of previously issued subordinated notes with call in 2016.
The capital requirement of the new rules for 2016 are at the same level as the Individual Solvency requirement on 31 December 2015. Therefore, a solvency capital cover of DKK 4,700m, as a minimum, is maintained from the solvency capital elements: shareholders' equity reduced by intangible assets, hybrid capital and subordinated loan capital, see: www.topdanmark.com → Investor → Capital model. At the end of 2015, the calculated solvency capital was DKK 6,444m.
Detailed 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 → Capital model.
Furthermore, for the period until the Annual General Meeting in 2020, the Board of Directors is authorised to acquire own shares of up to 15% of the share capital for the purpose of ownership or security. The shares can be acquired at a minimum market price of DKK 1.05 per share of DKK 1 each and a maximum price of current market value plus 10%. It is a standing authorisation which, subject to the approval of the general meeting, is renewed regularly.
At 31 December 2015 Topdanmark’s share capital totalled DKK 105,000,000 divided into 105,000,000 shares of DKK 1 each, corresponding to 105,000,000 voting rights. As of 29 January 2016, Topdanmark held 10,526,000 of own shares representing 10.0% of the share capital, of which 2,108,466 shares are earmarked to cover Management's share option scheme.
Five of the nine Board members are women, two of them elected at the Annual General Meeting and three by Topdanmark's employees. Consequently, Topdanmark meets its goal: that the Board members elected at the Annual General Meeting comprise a minimum of two persons of each gender. Topdanmark meets the statutory definition of an equal gender distribution.
Severance pay As stated in the remuneration policy adopted at the Annual General Meeting, it is part of the contracts for the Executive Board and five other members of the Group’s top management team that, under certain circumstances, they will receive compensation in the form of an extended period of notice and an increased severance pay if Topdanmark, and/or the company of the Topdanmark Group with which the person concerned is employed, is taken over by or merges with a company outside of the Group, or if one or more owners take control of Topdanmark, and/or the company of the Topdanmark Group with which the person concerned is employed. The maximum amount of compensation will represent two years' salary.
Remuneration structure Topdanmark's remuneration policy is intended to optimise long-term value creation at a group level. In accordance with Section 77(d) of the Danish Financial Business Act and Section 139 of the Danish Companies Act, the Annual General Meeting has adopted "Remuneration policy of the Topdanmark Group including general guidelines for performance-related pay."
Share options For 2016, Topdanmark has granted 223,460 share options to its Executive Board and a number of executives. The strike price of DKK 215 was fixed at 110% of the market price of Topdanmark's shares on 30 December 2015 (average of all trades).
The market value of the options for 2016 has been calculated at DKK 10m at the time of granting.
At the end of 2015 the exposure of the options held by the Executive Board represented 0.3% of the number of outstanding shares.
Corporate Governance Topdanmark's "Statutory Corporate Governance Report, see Section 131 of Executive Order on Financial Reports for Insurance Companies and Multi-employer Occupational Pension Funds " (”Executive Order on Financial Reports”), is available on www.topdanmark.com → Investor Relations → Reports and presentations → Statutory Corporate Governance Reports (
Communication to investors and analysts is performed through the following information channels: • Investor meetings. • Telephone meetings. • Conference calls. • Webcasts. • Investment and insurance conferences.
Shares Topdanmark's shares are listed on NASDAQ Copenhagen and included in OMXC large Cap.
Since the buy-back programme was initiated in 1998, Topdanmark has decided to cancel DKK 15.0bn of own shares representing a 74.5% write-down of the share capital. The average price of the shares written down is DKK 48.6 per share.
Accounting policies 2016 With effect from 2016, the Executive Order on Financial Reports for Insurance Companies and Multi-employer Occupational Pension Funds has been amended to comply with the new EU solvency rules, Solvency II, which took effect on 1 January 2016.
A risk margin is calculated and recognised to cover the risk of deviation between best estimate and the final settlement of future cash flow.
The present value of insurance provisions is calculated using an interest rate curve provided in Solvency II (EIOPA interest rate curve). Topdanmark Forsikring and Topdanmark Livsforsikring use the volatility adjusted interest rate curve.
In Solvency II, the expected profit (profit margin) is included in the capital base at the time of the writing of the insurance policies, and consequently it is not a liability in the solvency balance sheet.
Non-life insurance Provisions for unearned premiums Provisions for unearned premiums are calculated at the present value of best estimate of expected payments of future claims covered by the policies written. In Topdanmark the policies are primarily written for one year.
Best estimate of premium payments not yet due for policies written is deducted from the provision for unearned premiums.
Risk margin The risk margin is calculated as the amount which the Company is expected to pay to an acquirer of the insurance portfolio to take over the risk of the actual costs on settlement of insurance provisions deviating from best estimate.
In Topdanmark Forsikring, the risk margin is calculated using the Cost of Capital model determined under Solvency II. In illness/accident insurance administered by Topdanmark Livsforsikring, a model developed in-house is used, in which the biometric risks are put under stress.
Profit margin The profit margin is the expected profit in future periods of cover for insurance policies written and is part of the insurance provisions.
The profit margin is calculated as the value of premiums for future periods of cover for insurance policies written less expected payouts and the proportion of the risk margin that relates to the settlement of the provision for unearned premiums. Accordingly, acquisition costs paid prior to the writing of the policy are not deducted from the profit margin.
In the financial statements, the profit margin is recognised as income continuously over the period of cover for the policies.
Innovatively, the guaranteed benefits are valued at best estimate of the frequencies of surrenders and termination of payment of premium, while the risk margin is calculated as the increase of the guaranteed benefits by stressing the biometric risks.
Profit margin The profit margin is the expected future profit for the Company on the contracts concluded, and it is financed, as far as possible, by the individual bonus potential and secondarily by the collective bonus potential. The value is calculated as an interest margin in accordance with the going concern principle, in which the recognised profit on the future premiums complies with the contract limits of Solvency II.
Comparatives for life insurance at 31 December 2014 have not been prepared.
All of the Board members elected at the Annual General Meeting are up for re-election. Bjarne Graven Larsen has resigned from the Board, and Anders Colding Friis is not standing for re-election. The Board proposes election of Lone Møller Olsen and Jens Aaløse as new Board members. All other members of the Board are proposed for re-election.
Company announcements and trading reports Company announcements Topdanmark submits announcements to Nasdaq Copenhagen with information on material and relevant events in the Group which can affect the price of Topdanmark's shares. The announcements are also sent to the press, share analysts, investors and other interested parties.
Independence: Søren Thorup Sørensen meets the definition of independence set out by the Committee on Corporate Governance.
Previous positions held: 1988-1989: Arthur Andersen & Co. 1990-1993: Skandia International. 1994-1996: Mercantile & General Re, London. 1997-1999: Vice President, Skandia P&C. 1999-2002: Head of Commercial Division and Head of
Offices held: Member of the Boards of Directors of: • Insurance Europe (Vice President). • Insurance Sweden. • Academedia AB.
Kemtekniske Produkter, Allerød. 1992-1994: Market Manager, Estrella A/S. 1994-1996: Sales and Marketing Manager, Schulstad
Independence: Anders Colding Friis meets the definition of independence set out by the Committee on Corporate Governance.
Offices held: Member of the Boards of Directors of: • Kirk Kapital A/S. • Arkil A/S. • Chairman of the Audit Committee, Arkil A/S. • Gigtforeningen (the Danish Rheumatoid Arthritis
Brian Rothemejer Jacobsen COO of Topdanmark A/S. DOB 1963, joined Topdanmark in 1988, joined Topdanmark's Executive Board on 1 March 2016.
Managerial responsibilities: • Asset Management. • Finance. • Accounting. • Statistical Services. • Reinsurance. • Tax. • Credits.
Allocated investment return, net of reinsurance 579 2,364 2,031 2,691 1,029
Change in the provisions for unit-linked contracts (233) (978) (1,968) (3,079) (4,471)
Provisions for insurance and investment contracts: Relative run-off profits, net of reinsurance (%) 1.3 1.6 2.4 2.8 2.9 * Before deducting bonuses and rebates
Gross premiums written 3 9,121 8,883 Reinsurance ceded (661) (671) Change in the provisions for unearned premiums, gross 3 47 134 Change in the reinsurers' share of the provisions for unearned premiums 2 5 Premiums earned, net of reinsurance 8,509 8,351
Acquisition costs (914) (920) Administrative expenses (493) (484) Reinsurance commission and share of profits 82 86 Total operating expenses, net of reinsurance (1,325) (1,318) TECHNICAL PROFIT ON NON-LIFE INSURANCE 6 1,321 1,169
Gross premiums written 7 4,448 6,320 Reinsurance ceded (7) (10) Premiums, net of reinsurance 4,441 6,309
Claims and benefits paid 8 (4,200) (3,240) Reinsurance cover received 9 7 Change in the provisions for claims and benefits 12 20 Claims and benefits paid, net of reinsurance (4,180) (3,214)
Acquisition costs (130) (153) Administrative expenses (227) (253) Reinsurance commission and share of profits 0 1 Total operating expenses, net of reinsurance (356) (405) TECHNICAL PROFIT ON LIFE INSURANCE 32 19
Interest charges (69) (61) Expenses on investment business (56) (66) Total investment return 4,052 1,616
Technical interest transferred to non-life insurance business (155) (106) Pension return tax (509) (165) Investment return transferred to life insurance business (2,691) (1,029) Other income 17 20
Other comprehensive income (10) 1 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,548 1,133
Operating equipment 115 127 Owner-occupied properties 857 857 TOTAL TANGIBLE ASSETS 17 972 984
Collective bonus potential 28 1,677 1,697 Provisions for bonuses and rebates 124 137 Provisions for unit-linked contracts 29 10,851 16,216 TOTAL PROVISIONS FOR INSURANCE AND INVESTMENT CONTRACTS 52,860 56,785
Creditors arising out of direct insurance operations 315 394 Creditors arising out of reinsurance operations 34 37 Bond loans 29 0 Amounts due to credit institutions 1,961 1,346 Amounts due to associated companies 3 6 Current tax liabilities 31 1
Gross premiums written 4,740 6,398 Claims and benefits (4,205) (3,365) Expenses paid (352) (385) Reinsurance ceded (29) (52) Cash flow from life insurance 154 2,595
Investment assets related to unit-linked contracts (3,042) (5,107) Balances with associated companies (199) 123
Financing Shares bought back (1,716) (1,652) Exercise of share options ect. 71 50 Sale of own shares 38 16 Redemption of subordinated loan capital 0 (350) Issue of subordinated loan capital 0 1,345 Bond loans (30) (29) Amounts due to credit institutions (198) (615)
Cash and cash equivalents comprise: Liquid funds 323 640 Deposits with credit institutions 2,267 3,721
Shareholders' equity at 31 December prior year 125 20 1,146 34 3,860 5,184
Shareholders' equity at 31 December prior year 115 10 1,146 39 3,825 5,135
Cancellation of own shares (10) 10 0 Share buy-back (1,667) (1,667) Sale of own shares 16 16 Issue of share options 10 10 Exercise of share options 50 50
Segment information income statement 1 Segment information balance sheet 2 Gross premiums earned - non-life insurance 3 Technical interest, net of reinsurance - non-life insurance 4 Claims incurred, net of reinsurance - non-life insurance 5 Technical result - non-life insurance 6 Gross premiums written - life insurance 7 Claims and benefits paid - life insurance 8 Change in life insurance provisions 9 Bonus 10 Income from investment properties 11 Revaluations 12 Other expenses 13 Taxation 14 Profit per share 15 Intangible assets 16 Tangible assets 17 Investment properties 18 Shares in associated companies 19 Investment assets related to unit-linked contracts 20 Reinsurers' share of the provisions for unearned premiums 21 Reinsurers' share of the provisions for claims 22 Deferred tax 23 Subordinated loan capital 24 Provisions for unearned premiums 25 Life insurance provisions 26 Provisions for claims 27 Collective bonus potential 28 Provisions for unit-linked contracts 29 Technical basis for risk allowance and shadow account 30 Advanced tax 31 Expenses 32 Auditors' fee 33 Staff costs 34 Related parties 35 Financial assets 36 Financial liabilities 37 Settlement of assets and liabilities 38 Analysis of assets and their return - life insurance 39 Exposure information 40 Shares analysed by industry and region (%) - life insurance 41 Leasing 42 Number of shares 43 Own shares 44 Provision of security 45 Contingent liabilities 46 Companies 47 Other disclosures 48 Risk factors 49 Accounting policies 50
Pension return tax (35) (473) (509) Transferred to technical result (155) (2,691) (2,846)
Life insurance Gross premiums written 6,320 6,320 Allocated investment return 1,029 1,029 Benefits and change in provisions (6,920) (6,920)
Total provisions for insurance and investment contracts 16,485 36,375 0 52,860 Amounts due to affiliated companies 178 1,593 39 (1,810) 0
Shares in associated companies 66 118 0 184 Other financial investment assets 18,073 25,212 7 43,292 Investment assets related to unit-linked contracts 0 15,645 0 15,645 Reinsurers' share of provisions 677 32 0 709 Amounts due from affiliated companies 614 462 453 (1,529) 0
Total provisions for insurance and investment contracts 16,248 40,537 0 56,785 Amounts due to affiliated companies 865 628 36 (1,529) 0
Gross premiums earned, direct business, by location of the risk: Other EU-countries 4 5 Other countries 1 1
Run-off profits, net of reinsurance 351 381 Claims provisions, net of reinsurance 12,989 12,937 Number of claims incurred ('000) 418 432 Average value of claim (DKK '000) 16 15 Frequency of claims 109 114
Note 6. Technical result - non-life - continued 2014 2015 2014 2015 2014 2015
Technical interest, net of reinsurance 1 0 0 0 1 0
Run-off profits / (losses), net of reinsurance 106 86 (4) (4) 52 83 Claims provisions, net of reinsurance 3,041 3,028 52 58 6,079 6,082
Average value of claim (DKK '000) 37 38 6 6 72 76
Run-off profits / (losses), net of reinsurance 50 134 (9) (8) 43 (17) Claims provisions, net of reinsurance 1,767 1,664 133 145 563 649
Individual policies 535 1,047 Policies which are part of a tenure 1,721 2,760 Single premiums 2,257 3,807 Gross premiums 4,448 6,320
Gross premiums written, direct business, by the policyholders' location: Other EU-countries 51 83 Other countries 6 30
Advanced tax on capital pension schemes Accumulated revaluation 48 13 Collective bonus potential 62 6
Loans guaranteed by mortgages 0 (1) Derivatives 300 (1,157) Total held for trading 2,062 (1,132) Investment assets related to unit-linked contracts: Unit trusts 107 59
Calculated tax on profit for the year 23.5% (2014: 24.5%) 493 348 Adjusted for the tax effect of: Returns on shares etc. not liable to tax (31) 5 Non-deductible expenses / income not liable to tax (6) (1) Prior year adjustment (4) (2)
Note 15. Profit per share Profit for the year 1,558 1,132 Average number of shares ('000) 107,908 99,971 Diluting impact of options ('000) 897 490 Average number of shares, diluted ('000) 108,805 100,461 EPS (DKK) 14.4 11.3 EPS, diluted (DKK) 14.3 11.3
Note 17. Tangible assets Operating Ownerequip - occupied 2014 ment properties Total
Impairment and amortisation at 1 January (297) 0 (297) Amortisation for the year (44) (2) (45) Transferred on revaluation 0 2 2 Reversal of total impairment and amortisation of assets sold or withdrawn from operations during the year 18 0 18 Impairment and amortisation at 31 December (323) 0 (323)
Cost / revaluation at 1 January 438 857 1,295 Additions, including improvements 60 0 60
Impairment and amortisation at 1 January (323) 0 (323) Amortisation for the year (41) (1) (43) Transferred on revaluation 0 1 1 Reversal of total impairment and amortisation of assets sold or withdrawn from operations during the year 67 0 67 Impairment and amortisation at 31 December (297) 0 (297)
A general plus/minus 0.5pp change in the rate of return wil have an effect of minus DKK 285m / plus DKK 341m on the fair value (2014: minus DKK 320m / plus DKK 384m). Average rate of return: Office property 5.8% 5.8% Residential and part residential 4.7% 4.7%
Book value at 1 January 892 340 Share of profit 193 93 Dividends received (3) (8)
Note 22. Reinsurers' share of the provisions for claims Non-life insurance Reinsurers' share at 1 January 1,337 648
Note 24. Subordinated loan capital Hybrid Subordinated Subordinated Subordinated core capital loan capital loan capital loan capital
Subordinated loan capital of Topdanmark Forsikring A/S has been included in the Company's capital base with 256 567
Guaranteed benefits 20,824 19,577 Bonus potential on future premiums 2,192 1,879 Bonus potential on paid-up benefits 746 1,101 Life insurance provisions 23,761 22,557
Note 27. Provisions for claims Non-life insurance: Gross Provisions at 1 January 13,831 13,637
Claims paid relating to previous years (3,738) (2,991) Change in expected claims payments relating to previous years (253) (387)
Claims paid relating to this year (3,186) (3,144) Expected claims payments relating to this year 6,169 6,183
Non-life insurance, net of reinsurance, at 31 December 12,989 12,937 Life insurance 86 67 Provisions for claims, net of reinsurance 13,076 13,004
Illness / accident insurance, net of reinsurance, administered by the life insurance business 2,066 2,098 Average period of settlement 13 years 13 years
Reconciliation: Provisions for claims 13,587 Less amount relating to life insurance (67) Less reinsurers' share of provisions (584) Provisions, net of reinsurance, at 31 December 2015 - non-life insurance 12,937 Composition of expected payments, net of reinsurance: Discounting / revaluation w orkers' compensation
The table show s the historical development in the estimated f inal liability (the sum of claims payments and provisions) for each claims year from 2006. Signif icant proportions of the liabilities show n have been calculated w ithout discounting w hich to a great extent eliminates changes in discounting rates and methods after the change to IFRS. How ever, w orkers' compensation and illness / accident administered by Topdanmark Livsforsikring A/S are included at discounted values.
Risk groups 181 192 Cost groups 12 18 Collective bonus potential 1,677 1,697
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
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 Provisions for unit-linked contracts 2015 14,670 1,546 16,216
Note 30. Technical basis for risk allowance and shadow account - continued Shadow account at 1 January 72 26
Shadow account by interest rate, risk and cost groups: Expected future recognition as income
Interest rate group 2 8 0 Risk groups 14 1 Cost groups 4 11 Total shadow account 26 12
Note 31. Advanced tax The Company has calculated advanced tax on capital pension schemes, analysed as follows: Paid tax on savings 761 94 Calculated tax on: Accumulated revaluation 48 13 Collective bonus potential 62 6 Total advanced tax 871 113 Tax on accumulated revaluation and collective bonus potential to be settled in 2016.
Share options Topdanmark's share option scheme is for its Executive Board and senior executives. The strike price has been fixed at 110% of the market price on the last trading date in the prior financial year (average of all trades). The options can be exercised 3-5 years subsequent to the granting. The scheme is settled by shares (equity instruments). The table below is categorised by the option holders' current standing: Strike Executive Senior Total number of options ('000) price Board executives Resigned Total
Average strike price exercised options 2014 78 79 78 77 Average strike price exercised options 2015 99 91 99 92 Average current price on date of exercise 2014 171 Average current price on date of exercise 2015 219 Fair value of granting 2014 2 8 10 Fair value of granting 2015 2 8 10
Number of options which could be exercised on 31 December ('000) 308 330
Shares, bonds and subordinated notes held by the Board of Directors and Executive Board The information relates to the Board of Directors and Executive Board notified on 31 December. Board of Directors Number of shares 25,970 14,319 Bonds, nominal value DKK '000 82 0 Subordinated notes (subordinated loan capital) Topdanmark Forsikring, nominal value DKK '000 6,050 4,050 Executive Board Number of shares 83,430 49,930 Bonds, nominal value DKK '000 690 0
Note 36. Financial assets Financial assets at fair value where the revaluation is taken to the income statement Held for trading: Loans guaranteed by mortgages and other loans 12 39
Total financial assets at fair value where the revaluation is taken to the income statement 55,859 58,937
Accrued interest and rent 372 284 Total financial assets 57,742 61,003 The book value of loans and receivables at amortised cost approximately corresponds to fair value.
Quoted Observable observable 2014 prices inputs inputs Financial assets recorded at 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 6.7 3.4 10.1 Total financial assets at fair value 24.9 30.7 0.2 55.9
Investment assets related to unit-linked contracts 10.4 5.2 15.6 Total financial assets at fair value 26.2 32.2 0.5 58.9
The fair value is equivalent to the cost price in the transaction currency.
There have been no other changes in the classification of financial assets or liabilities in 2015.
Allowance account (policyholders and insurance companies): Group companies have agreed to lend equities against security: Book value of equities lent 1,323 1,075 Fair value of bonds received as security for the loan 1,604 1,154
Financial liabilities measured at amortised cost Subordinated loan capital 1,156 2,154 Deposits with ceding undertakings 154 62 Creditors arising out of direct insurance operations 315 394 Creditors arising out of reinsurance operations 34 37 Bond loans 29 0 Amounts due to associated companies 3 6 Current tax liabilities 31 1 Other creditors 1,446 1,125 Total financial liabilities measured at amortised cost 3,168 3,779 Total financial liabilities 6,000 5,659
Financial liabilities payable after five years or more: Subordinated loan capital 407 1,256 Amounts due to credit institutions 4 3
Observable inputs Financial liabilities recorded at fair value Level 2 Held for trading: Designated at fair value: Amounts due to credit institutions 1,961 1,346 Total financial liabilities recorded at fair value 2,832 1,880
The return percentages are calculated as the return on derivatives as a percentage of the size of the exposure in the underlying asset. The exposure in foreign shares is adjusted by means of derivatives. After including derivatives the exposure in foreign shares on 31 December 2015 was DKK 5,307m (2014: DKK 4,532m).
Max. effect on before change bonus potential collective in bonus poten- used for 2014 Min. effect on bonus tial used for benefits of Event capital base potential such benefits paid-up policies 0.7-1.0 pp increase in interest rates (158) 62 530 0 0.7-1.0 pp decline in interest rates 157 (189) (547) (26)
Max. effect on before change bonus potential collective in bonus poten- used for 2015 Min. effect on bonus tial used for benefits of Event capital base potential such benefits paid-up policies 0.7-1.0 pp increase in interest rates (141) 116 731 0 0.7-1.0 pp decline in interest rates 112 (253) (627) (26)
Note 42. Leasing Operational finance leases: Minimum lease Present 2014 payment Interest value
Note 44. Own shares Number of Nominal Percentage Bought shares value of share /sold '000 DKKm capital DKKm
Deposits with credit institutions 1,543 3,100 Investment assets related to unit-linked contracts 10,375 15,796 Liquid funds 21 349 Accrued interest 0 275 Shares in and amounts due from affiliated companies eliminated in the consolidated accounts 6,959 5,173
Bonds provided as security for loans in accordance with standard repo-contracts for Danish mortgage and government bonds 432 0 Other provision of security 59 56
Other companies: Topdanmark Kapitalforvaltning A/S Ballerup Asset management Topdanmark Invest A/S Ballerup Investment Hotel Kongens Ege ApS Ballerup Property Topdanmark Ejendomsadministration A/S Ballerup Property
The historical profitability of major industrial and SME customers with individual insurance schemes is monitored using customer assessment systems.
General insurance rates are re-calculated at least every three years and motor, and workers' compensation rates are reviewed annually.
Topdanmark continues to improve its administration systems to achieve more finely meshed data capture, which in turn enables it to identify the claims trends at an earlier point in time and compile information on the constituent parts of the various types of claims.
Customers should feel ”well-helped” Topdanmark works to ensure that its customers feel “wellhelped ” in every situation during the claims handling process. It is crucial for the customers’ experiences that: • The customer feels LISTENED TO. • The customer has an OVERALL VIEW of the entire claims process – particularly who is doing what and when.
Promptness It is important to promptly obtain an overall impression of the size of a claim, implement any damage controlling actions and / or commence the repair. Prompt attention not only reduces the compensation paid but also provides a better experience for the customer.
The responsibility for arranging co-operation and purchase agreements has been channelled into one
Announcement No. 16/2016 from Topdanmark A/S Page 65 of 91 centralised purchasing function to ensure the highest possible discount, quality and security when delivering products and services. Service agreements have been made with, for example, Falck, Falck Health Care, Scalepoint, Bygma, tradesmen, garages and damage service companies.
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.
Composition of Topdanmark’s overall provisions for outstanding claims: The much higher provisioning risk in long-tail than in shorttail lines is due to the longer period of claims settlement. It is not unusual that claims in long-tail lines are settled three to five years after notification and in rare cases up to 10-15 years.
The provisioning risk represents mostly the ordinary uncertainty of calculation and claims inflation, i.e. an increase in the level of compensation due to the annual increase in
The 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.
For workers' compensation and motor liability insurance policies, which unlike change of ownership are one-year policies, the need for strengthening the provision for unearned premiums is assessed on the basis of quarterly analyses of the development in premiums and claims.
Cumulative risk Known cumulative risk is where it has been recognised prior to the event that several policyholders could be affected by the same event. In personal lines, Topdanmark's retention is DKK 15m for the first claim, DKK 5m for the 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.
Disability Disability risk is the risk of increasing disability intensity or declines in the rates of resumption of work, in that the benefits have been guaranteed until expiry. Losses may be incurred due to an increase in disability frequency or due to inadequate health evaluation when the policy is written.
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.
Generally, 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 .
Equity risk Topdanmark is exposed to equity risk from direct investments as well as those investments made via derivatives.
Further financing requirements are covered by shortterm money market loans, typically with a maturity of one month or less.
At the end of 2015, Topdanmark received cash margin payments of DKK 1,305m securing unrealised gains on derivatives (2014: 1,497m).
Topdanmark regularly develops and improves IT systems, routines and procedures. The responsible business units are also responsible for the risk management of this development.
Topdanmark's risk assessment, IT security policy and IT emergency strategy (based on IS027001), which are submitted to the Risk and Audit Committees, are revised each year by the Executive Board to be accepted by the Board of Directors.
IT emergency plan The IT emergency plan includes plans for re-establishing the IT environment if the systems suffer breakdowns. The IT emergency plan is tested regularly. Topdanmark's business critical systems can be inaccessible for 24 hours without causing significant business problems. In order to reduce the probability of breakdowns of the IT systems and limit their duration, Topdanmark has invested in, for example, emergency power plants with a diesel generator, disk mirroring, alarms and automatic firefighting equipment. Critical IT equipment is in duplicate and placed in two physically discrete machine rooms.
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 data base and communicated onwards in the management system, when and if relevant, in order that the organisation learns from its errors.
Compliance Function's work The Compliance Function is intended to: • issue rules for identification, management and control of compliance risks. • exercise control and advise the Group on compliance with legislation and internal rules.
Topdanmark Group's 2015 Annual Report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and the additional Danish disclosure requirements of NASDAQ Copenhagen A/S and the Danish Financial Business Act on annual reports prepared by listed financial services companies.
Accordingly, there have been no changes in accounting policies from those adopted in the 2014 Annual Report.
Future accounting regulation New executive order on financial reports With effect from 1 January 2016, the Executive Order on Financial Reports for Insurance Companies and Multiemployer Occupational Pension Funds was amended to comply with the European solvency rules, Solvency II, which took effect on 1 January 2016.
The details of the new accounting rules and the accounting effect are available in “Accounting policies 2016” in Management 's review.
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 estimates and judgements are made in the calculation of provisions for outstanding claims, life insurance provisions and investment properties.
Provisions for outstanding claims Provisions for claims incurred, but not yet paid, have been calculated as the best possible estimate at the end of any given year. As, at this time of the year, all necessary information is not available, there will be deviations between the actual claims paid and the provisions made in the form of either run-off losses (provisions too low) or run-off profits (provisions too high).
For portfolios with high guaranteed benefits, Topdanmark has, to a significant extent, hedged changes in interest rates by derivatives. For portfolios with low guaranteed benefits, the movements in interest rates are monitored,
Intra-group income and expenses, shareholdings, balances and dividends as well as gains and losses on intra-group transactions have all been eliminated.
Level 2 If 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 and credit bonds. Valuation methods or other publicly available information are used to value listed securities, where the closing price does not reflect the fair value.
The fair value, on the date the option is granted, 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.
The unconditional profit elements comprise the return on assets allocated to shareholders' equity, acquisition cost result and the profit on policies outside of contribution.
Technical interest net of reinsurance in non-life insurance The technical result on non-life insurance includes a return on the technical provisions net of reinsurance. The interest on the provisions is calculated using the relevant interest rate corresponding to the expected date of settlement. The discount expense of the regular revaluation of the present value of the provisions until the expected time of settlement is offset against the interest income. The interest and discount expense on discounted provisions, primarily provisions for outstanding claims net of reinsurance, are calculated on the same basis. Accordingly, the interest and discount expense on discounted provisions are exactly netted off each other. For non-discounted provisions, primarily provisions for unearned premiums net of reinsurance, the interest on the average value of the provisions is calculated using the relevant interest rate corresponding to the weighted average date of settlement.
Claims incurred and benefits paid In 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 derivatives partially hedging the provisions for workers’ compensation and annuities in illness and accident insurance against changes in future wage and price indexation. The revaluation is included in claims incurred.
Operating expenses Technical operating expenses which relate, either directly or indirectly, to the acquisition and renewal of the portfolios are included in acquisition costs. New business commission is generally recorded in the income statement on the date the insurance takes effect. Administrative expenses comprise other costs incurred in the administration of the portfolios which relate to the financial year, and which have been accounted for on an accruals basis. Commission received from reinsurers has been accounted for on an accruals basis over the policies’ period of cover.
Investment activities Income 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.
Associated companies Shares 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.
Remaining life expectancy for a 60-year-old man and a 60-year-old woman is as follows: Remaining 60 year old 60 year old Life expectancy man woman Topdanmark Livsforsikring 26.7 28.9 DFSA’s benchmark 25.5 27.9
Provisions for claims incurred are calculated using an inhouse 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%.
Provisions for claims and benefits are assessed for each line of business, either on a claim-by-claim basis (individual provisions), or by using statistical methods (collective as well as incurred but not reported (IBNR) and incurred but not enough reported (IBNER) provisions). Claims exceeding a fixed amount, dependent on the line of business, are assessed individually, and provisions for smaller claims are assessed collectively. IBNR provisions cover expenses on post-notified large claims. IBNER provisions cover extra expenses on already reported claims for which the individually assessed provisions are not sufficient due to, for example, inadequate information at the time of assessment. The collective provisions are calculated using de Vylder's credibility model adjusted for each line of business. The IBNR and IBNER provisions are calculated using models developed in-house. In agricultural and commercial lines claims are assessed individually. IBNR and IBNER provisions are also included in the total provision. In personal lines, claims not exceeding DKK 100,000 are assessed collectively while larger claims and all claims on change of ownership policies are assessed individually. IBNR and IBNER provisions are also included in the total provision. In motor and accident lines, total provisions comprise the sum of the collective and individual provisions. Individual provisions are the result of an assessment where the claims handler has assessed the total claim payment to exceed DKK 1.5m, and the case is estimated to exceed the amount paid out. Large claims and claims relating to previous years are individually assessed within personal liability in motor insurance.
Provisions for regular payments for loss of earnings potential in illness and accident insurance are calculated using an inflationary structure.
Provisions for claims and benefits 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 write-downs. 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.
The assessment of other provisions for claims and benefits relating to injuries, loss of provider and expenses is based on traditional actuarial triangulation models. Due to the special conditions surrounding payments on disability claims, it is not possible to use traditional actuarial triangulation models for this type of provisions. Topdanmark, therefore, uses a model developed inhouse, which, among other things, takes into account the stage each claim has reached. The calculation includes an allowance for the expected wage and salary indexation.
Provisions for claims incurred for loss of earnings potential in illness and accident insurance 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.
All provisions have been measured at present value by discounting the expected future payments using DFSA's interest rate structure.
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.
Creditors Amounts due to credit institutions and derivatives are measured at fair value.The fair value of amounts due to credit institutions usually corresponds to their nominal value. The fair value of derivatives is calculated on the same basis as financial assets.
Proposed appropriation of profit for the year: Transfer to net revaluation reserve at net asset value 1,599 1,170 Transfer to profit carried forward (41) (38)
Shares in affiliated companies 6 6,034 5,144 Total investment in affiliated companies 6,034 5,144 TOTAL INVESTMENT ASSETS 6,034 5,144
Other reserves 2,285 1,395 Total reserves 2,285 1,395 Profit carried forward 3,042 3,479 TOTAL SHAREHOLDERS' EQUITY 5,442 4,979
Bond loans 29 0 Amounts due to affiliated companies 217 264 Current tax liabilities 30 0
Other creditors 11 24 TOTAL CREDITORS 294 289 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 6,143 5,676
Shareholders' equity at 31 December prior year 115 2,285 3,042 5,442
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 Issue of share options 10 10 Exercise of share options 50 50
Note 1. Income from affiliated companies Topdanmark Forsikring A/S 1,552 1,110 Topdanmark Invest A/S (10) (3) Topdanmark Kapitalforvaltning A/S 57 63 Income from affiliated companies 1,599 1,170
Note 3. Other expenses Holding expenses 48 35 Other expenses 48 35
Note 4. Taxation Current tax 14 10 Prior year adjustment 3 0 Taxation (income) 17 11
Note 6. Shares in affiliated companies Topdanmark Forsikring A/S 5,794 4,901 Topdanmark Invest A/S (investment) 170 167 Topdanmark Kapitalforvaltning A/S 69 76 Shares in affiliated companies 6,034 5,144 The affiliated companies are domiciled in Ballerup.
Note 7. Share capital DKK Share capital at 1 January 125,000,000 115,000,000 Reduction in capital (10,000,000) (10,000,000) Share capital 115,000,000 105,000,000 Each of Topdanmark's 105,000,000 (2014: 115,000,000) shares has a nominal value of DKK 1. No share enjoys any special rights. The shares are freely tradeable. Each share has one vote.
Fee (DKK '000): Søren Thorup Sørensen 975 1,378 Torbjörn Magnusson 217 678 Ann-Jeanette Bakbøl - 233 Tina Møller Carlsson - 233 Anders Colding Friis 325 350 Mette Jensen - 233 Birgitte Nielsen 433 525 Annette Sadolin 488 525
Bjarne Graven Larsen - 233 Per Mathiesen 325 117 Michael Pram Rasmussen 1,192 335 Desiree Schultz 325 117 Aage Nedergaard Smidt 203 117 Charlotte Hougaard 122 Jens Maaløe 108 Total fee paid to nine Board members 4,712 5,075
Christian Sagild 8.8 8.9 Kim Bruhn-Petersen 5.8 5.9 Lars Thykier 5.7 5.9 10% of the fixed salary etc. paid to the Executive Board is paid as share options. In addition, the Executive Board has successively earned severance pay, representing 18 months' pay. The compensation will be paid on resignation. The Executive Board receives only a fixed remuneration.
Executive Board Number of shares 83,430 49,930 Bonds, nominal value DKK '000 690 0
Average effective interest rate on balances is 0.02% (2014: 0.05%). Shares are disclosed in the balance sheet and specified in the note on Shares in affiliated companies. Balances are disclosed in the balance sheet.
There have been no changes in accounting policies from those adopted in the 2014 Annual Report.
With effect from 1 January 2016, the Executive Order on Financial Reports for Insurance Companies and Multiemployer Occupational Pension Funds has been amended to comply with the European solvency rules, Solvency II, which took effect on 1 January 2016.
The changes are not expected to materially affect the results and shareholders’ equity.
The company is jointly liable for corporation tax chargeable to the jointly taxed companies of the Topdanmark Group.
The five-year summary, in accordance with Section 91(a) of the Danish Executive Order on Financial Reports for Insurance Companies and Multi-employer Occupational Pension Funds, is included in financial highlights on page 3. Risk disclosures in accordance with Section 91(b) are included in "Management's review" for the Group in "Risk management "and in Note 49 of the consolidated financial statements.
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 2015 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 2015.