Editors Investor Relations | Publication 30 January 2014 | Design e-types | Layout amo design | Print Centertryk A/S | Paper Munken Polar
We offer a broad range of insurance products to both private individuals and businesses.
Profit/loss before tax 638 639 3,017 2,993 Profit/loss on continuing business 394 564 2,180 2,373
Combined ratio exclusive of run-off 92.1 94.3 93.2 92.7 Run-off, net of reinsurance (%) -4.7 -5.2 -5.0 -5.0 Large claims, net of reinsurance (%) 4.3 1.1 2.3 2.1 Weather claims, net of reinsurance (%) 2.2 8.8 1.8 3.2
Tryg’s many talented employees and strong management ensured that the combined ratio target set back in 2010 was attained. Despite two severe storms at the end of 2013, results were satisfactory.
In 2013, Tryg defined a set of more specific financial targets. The aim is a return on equity after tax of 20%. This must be achieved through a combined ratio of 90 or less. The return on equity target was met, constituting a satisfactory 21.5% in 2013.
of the net profit for the year, which is also in line with the aim of dis-
The Supervisory Board attaches importance to ensuring the right balance between customer satisfaction and value creation for shareholders. This is the only way of guarding the long-term interests of these stakeholders.
The results for 2013 were satisfactory and lived up to the agreed targets.
The expense ratio was 15.6 against 16.4 in 2012, representing a significant improvement, which was achieved mainly through efficiency improvements and fewer employees in staff functions.
The lower expense ratio is in line with the aim of an expense ratio below 15 in 2015. Efficiency improvements and lower costs will contribute to offering better concepts and benefits for our customers.
Tryg’s ambition is to be the best in the industry at insurance, people and earnings. In recent years, we have worked hard to strengthen our profitability.
In future, we want to further strengthen and balance all three ambitions.
The customer survey conducted in 2013 (EPSI) for the Private market showed a stable and high level of satisfaction in Denmark, and the highest level of satisfaction ever in Norway. Our ambition is an even higher level of customer satisfaction and higher loyalty than our competitors, which our initiatives must reflect. We have therefore decided that in 2014 we will consolidate our work with customer experience across the Group, while at the same time working with our culture. We have named this
‘Customer journey & success culture’. It involves a number of initiatives to strengthen customer experience and enhance customer satisfaction and loyalty. We will also strengthen our culture by focusing on giving our employees better opportunities for continuous improvement of performance and development. This is an important precondition for our employees successfully meeting their own ambitious targets and knowing how they contribute to realising Tryg’s targets and success.
In Tryg, we integrate corporate social responsibility into our practice in a way that creates results – for the climate, for people and financially. It is important for us to show our customers, employees, suppliers, investors and other partners that we comply with UN’s Global Compact principles on protection of the climate, human rights, labour rights and anti-corruption, demonstrating tangible action in areas which are relevant to our business.
| Tryg A/S | Annual report 2013 | Events in 2013
Tryg and Falck formed a new partnership aimed at delivering peace of mind for Nordic customers. The partnership differentiates Tryg in the market, strengthens profitability and the strategic focus on prevention.
In Denmark, Tryg launched the Tryg Plus special benefits programme comprising: Tryg Home Alarm, Tryg Backup, Tryg Safe in Life and Tryg ID. Read about the benefits programme on page 14.
Tryg Backup and Tryg ID. Read about the benefits programme on page14.
Consultancy Project of the Year. The prize is awarded annually by the Chartered
and is regarded as the most prestigious international prize within procurement and logistics.
Tryg launched the New Van Insurance for the Commercial and Corporate segments. The insurance provides several new types of cover which customers can select to suit their requirements.
Norwegian market, Tryg has very extensive data on which to base the pricing of products to most accurately reflect risks. In 2013, differentiated prices were developed for 13 of our insurance products in Denmark, Norway and Sweden; this is more price differentiation in just one year than had been introduced in the previous seven years altogether.
Together with an improved risk selection, the launch in 2013 has significantly increased the rate of sales for these products.
Improved profitability in the Commercial segment was of the utmost importance to meeting the financial targets, and it was therefore defined as a strategic initiative. The implementation of risk-adjusted pricing, segmentation, efficiency improvements and structural measures within distribution have significantly improved performance in this business area, as expressed in a combined ratio of 87.9 for 2013.
Targets and strategy | Annual report 2013 | Tryg A/S |
Moderna, which was acquired in 2009. In 2013, we therefore focused on creating a shared foundation through the standardisation of products and processes and the use of a shared IT system. Also, many initiatives have been introduced to improve profitability and optimise distribution through structural changes. At the end of the year, the Swedish business has some of the best products in the market, has partly implemented the future distribution structure and has entered into a new bank insurance partnership with Danske Bank in Sweden, following termination of the contract with Nordea. With a combined ratio of 91.2, the financial results for the year are very satisfactory.
A high level of efficiency is important to realising the financial targets, and, in addition, low costs are also important to improving competitiveness. Compared with other insurance companies in the Nordic countries, Tryg’s expense ratio is relatively low, and it will fall further towards the target ratio of below 15 in 2015. Tryg’s cost level is markedly lower than those of companies outside the Nordic region. The efficiency programme which has been launched with the ambition of reducing costs by DKK 1bn in 2015 has progressed according to plan, and cost reductions of DKK 382m were realised in 2013 against a target for the year of DKK 320m. This initiative has significantly impacted the results for 2013.
Consequently, special efforts have gone into substituting these older products with more up-to-date products. In the course of the year, two thirds of the older Private products have been phased out. This slightly exceeds the original target for the year. The number of IT
systems has also been reduced during the year, especially in Sweden, where the number of core systems was reduced from two to one.
In addition to the large pan-Nordic companies, the market is characterised by a number of large local companies and many smaller
companies. The smaller companies, of which there are many in the
Tryg believes that Tryg’s low costs compared with other insurance providers in the European market have been a significant reason why only few new players have chosen to establish themselves in the Nordic market within the Private and Commercial sectors. Most new players are seen within Corporate insurance, with distribution through insurance brokers.
Danish market, 2013 was characterised by low economic growth of approximately 0.3%, among other things due to low levels of private spending, to which small and medium-sized businesses tend to be particularly sensitive. The Corporate market is affected, in particular, by economic developments for our most important trading partners, especially Germany and Sweden. The Private market is impacted by generally low economic growth and increasing sales of small cars, resulting in diminishing insurance requirements. Towards the end of the year, the economy was thought to be picking up compared to previous years.a)
Tryg’s ambition is to create peace of mind and value, and this must be at the core of everything we do. It means that we must be the best in the industry when it comes to insurance, people and earnings. All three elements are fundamental to creating peace of mind and value for our customers, employees and shareholders.
Our customers are fundamental to our company, and are therefore at the core of everything we do in Tryg. Tryg wants to build and maintain close customer relations.
In spite of the price increases which were implemented in the period up until 2012, and which were necessary to ensure a sustainable balance between risk and profitability, in 2013 Tryg achieved increasing customer satisfaction. However, some parts of the market saw a greater increase in customer satisfaction.
Tryg ID, Tryg Safe in Life, Tryg Home Alarm and Tryg Backup (read more on pages 14-15). In the second half of 2013, a similar benefits programme was introduced in Norway, and a new type of motor insurance cover was introduced which means that customers no longer lose bonus points in connection with damage to their parked car, even if it is not known who caused the damage. In Sweden, a new subdivision of the most commonly used private insurance products – motor, contents, house and holiday home – was launched, and a benefits programme similar to the Danish and Norwegian ones was developed.
Tryg has a strong focus on claims prevention, which is reflected in our customer-oriented activities such as Tryg Basement Check and Tryg
Burglary Check. We are generally keen to integrate claims prevention in our products, for example by offering discounts to customers who install Tryg Home Alarm or water seals.
It is Tryg’s ambition to be best at people. To realise this ambition, we believe that it is important that all employees feel that they have an opportunity to be successful. This means that individual employees must feel that they are continuously developing and becoming better at their job. Clear and ambitious targets must be set for each individual employee and linked to Tryg’s ambitious targets, and regular feedback must be provided so that everybody knows how they contribute.
In order to provide peace of mind and create value for customers, employees and shareholders, Tryg must be a financially well-run business. The targets still include a return on equity of 20% after tax and a combined ratio of 90 or less.
Our customers are our most important asset, which is why we are implementing a number of initiatives designed to strengthen customer experience in the coming years. Our goal is to strengthen customer experience and make it so strong that our customers are confirmed in their choice of insurance company every time they contact Tryg and are willing to actively recommend us to others. Therefore we also want to measure to what extent our customers are willing to recommend us to others.
For 2014, the objective is that Tryg’s pricing relative to the risk will be at the same or above the level of our competitors for 75% of the products by the end of the year.
Tryg is reducing its cost and claims level through its efficiency programme. The programme will be the chief initiative to improve results and will also contribute to strengthening Tryg’s competitiveness.
DKK 250m in cost reductions and DKK 600m in claims reductions.
We will follow up on the programme in each quarter in connection with the external result reporting.
stability has an impact on customer satisfaction and on the productivity and job satisfaction of the individual employee. IT stability was not satisfactory in 2013 and affected productivity, customer service and employee satisfaction negatively during the year.
IT stability to be improved with the help of our new external supplier.
The agreement runs from 1 July 2013 to 30 June 2014, and as a result of the high level of weather claims in the second half of 2013,
Tryg will only to a limited degree be exposed to weather claims in the first half of 2014.
This amendment will not affect Tryg’s target of bringing its expense ratio down below 15 by 2015.
In Norway, the programme comprises Tryg ID, Tryg Backup and Tryg Home Alarm.
Apart from burglary protection, Tryg Home Alarm also includes the possibility of preventing water and fire damage.
Tryg Home Alarm is always connected to an emergency response centre and is offered in cooperation with Falck.
Customers only pay a low, monthly subscription fee, depending on the size of their home.
With a return on equity of 21.5% and a combined ratio of 87.7, 2013 was a satisfactory year for Tryg. The results are thus in line with the defined targets of a return on equity of 20% and a combined ratio of 90 or lower. The good results were achieved despite a generally higher level of weather claims and large claims in 2013 than in 2012, and than expected for an average year. In Q4 in particular, the level of storm claims was high, with more than 45,000 claims processed.
The good results were achieved especially by means of the ongoing efficiency programme, which improved results by DKK 382m, corresponding to an improvement of the combined ratio by 2.0 percentage points. In 2013, price adjustments have generally only been effected to counter claims inflation. Despite a high level of weather claims in 2013, no extraordinary price increases are planned for 2014. If segments and products develop in an unsatisfactory direction, selective price measures will still be taken.
All business areas generated strong results, and the balance in terms of earnings is thus satisfactory in the general portfolio. A few years ago, profitability in the business areas of Sweden and Commercial was not satisfactory, and strategic initiatives were put in place to improve it. Against this background, it is particularly satisfactory that
These areas saw a decline of 3.2% and 4.9%, respectively. Private experienced a fall of 2.2%, or 0.5% excluding profit sharing. The low growth in Private was expected as a result of the profitability initiatives taken in previous years, which reduced the number of unprofitable customers, in particular. In addition, the Danish part of Private was affected by both low economic growth and a continuing increase in the sales of small cars.
Corporate saw negative growth of 2.8%, but Tryg is prepared to accept larger fluctuations for this business area due to the competitive situation and the objective of having a profitable portfolio. The competition in
Tryg is continuously adapting its distribution to the customers’ changing requirements. This is the reason why Tryg has chosen to reduce the local representation and make targeted selections of distribution channels for the different customer segments in connection with new sales, upselling, renewals and service.
• Share buy back of DKK 1,000m in 2014 initiated on 2 January.
Bank insurance is an important distribution channel, and Tryg has a sound agreement with Nordea on bank insurance in Denmark and Norway, while Tryg sells to and services Nordea Liv & Pension customers.
Nordea in Sweden, it was a positive development that a referral agreement was concluded with Danske Bank in Sweden in October 2013.
(71.8). The claims level includes an improvement due to the claims initiatives of DKK 300m, corresponding to 1.5%, and a higher weather claims level of 3.2% (1.8%) due to the storms in Denmark in
Q4, in particular. In 2013, the large claims level was approximately 2.1% (2.3%), and the run-off level was unchanged at 5.0%, which reflects a solid level of provisions.
As mentioned above, weather claims impacted the combined ratio by 3.2% (1.8%) and are particularly related to the October and December storms in the Danish business. The total weather claims expenses amounted to DKK 875m, but since Tryg has a reinsurance agreement, the impact on profit was only DKK 620m, which also includes expenses for repurchase of a reinsurance agreement. However, to give the 45,000 customers with claims the best possible service, temporary staff was employed. Telephone hours were extended, and the staff did everything they could to live up to Tryg’s values of being best at insurance and people. The Danish Storm Council recognised the claims after the
December storm as flood claims, but even before this had been determined, Tryg elected to give its customers the best possible service.
Tryg has concluded a sideway reinsurance agreement running from 1 July 2013 to 30 June 2014. When the total weather claims expenses exceed DKK 300m, the agreement will cover the next
DKK 600m. To be covered by the agreement, a claims event must exceed DKK 20m. With this agreement, Tryg’s exposure to storm and cloudburst claims will be limited in the first half of 2014.
Tryg Garantiforsikring. However, due to a considerable reinsurance cover for this type of business, the effect on Tryg’s results was only
DKK 30m. In step with the expansion of the Swedish part of the
Corporate segment, a higher large claims level must also be expected
here, and, in combination with a slightly less favourable agreement with the reinsurance companies within guarantee insurance, based on the above-mentioned claim, this is the main reason why the expectations for the level of large claims, net of reinsurance, have increased from
Tryg will continue its claims prevention activities, but also strives to integrate them in products and benefits programmes. This has already been done in the benefits programmes launched on the
The efficiency programme contributed DKK 82m in 2013, corresponding to an impact on the expense ratio of 0.4 percentage points.
The initiatives were especially targeted at reducing the staff functions, focusing on simplification and efficiency as well as an assessment of what Tryg’s core competencies should be, and what should be outsourced. The simplification has resulted in fewer management levels, and the number of managers relative to the number of employees has been significantly reduced. These measures have reduced the number of managers by 10% since the beginning of the efficiency programme.
IT costs account for a considerable share of the total costs, and in light of the unsatisfactory operations during the year, a process was initiated to determine what will be outsourced and which partners
In recent years, the cost level has been impacted by increases in payroll taxes in Denmark, which will increase further in 2014 from 10.9%
The free portfolio is a diversified portfolio of real estate, equities and bonds which reflect the company’s total equity. At 31 December 2013, the value of the free portfolio totalled DKK 13bn.
Tax on profit for the year totalled DKK 620m, or 21% of the profit before tax. The low tax rate in 2013 is attributable to a high return on equities, which is exempt from taxation in Norway, and to the reduction of income tax in the coming years in both Denmark and Norway, which has reduced deferred tax. In 2013, Tryg paid DKK 1,017m in income tax as well as various payroll taxes totalling DKK 342m, making the total payment DKK 1,359m in 2013.
DKK 9,578m after proposed dividend. Tryg thus has surplus cover of DKK 3,212m, corresponding to 50.5%.
According to Tryg’s dividend policy, the aim is to pay out a share of the profit for the year in the range of 60-90% and for the nominal dividend to be steadily increasing. For 2013, a dividend of DKK 27 per share is proposed, corresponding to DKK 1,656m, which amounts to 70% of the profit for the year.
In 2013, a share buy back of DKK 800m was completed, and in December, Tryg announced that from 2 January 2014 and throughout the year, an additional extraordinary share buy back of DKK 1,000m will be initiated.
At the end of January 2014, Tryg changed the portfolio division of the Commercial and Corporate business areas. The purpose of the new subdivision is to make Corporate more focused on major customers, while placing customers with more standardised insurance requirements in Commercial. With this change, almost DKK 1bn worth of business will be moved from Corporate to Commercial. The new portfolio
• Weather claims impacted the combined ratio by 8.8 percentage points, especially due to storms during the quarter.
• Large claims impacted the combined ratio by 1.1 percentage points (4.3).
The profit after tax totalled DKK 565m for Q4 2013 (DKK 404m).
The combined ratio was 89.1 (87.4), and this was impacted by the
The premium level in local currencies fell in Q4 by 2.4% (0.5%), and exclusive of the impact of profit sharing, the premium growth was negative by 1.5%.
Key ratios Premium growth in local currencies 0.6 -1.7 1.5 -2.2
• Technical result improved by DKK 102m to DKK 1,335m (DKK 1,233m), despite the storms in Q4.
• Combined ratio improved by 1.7 percentage points to 86 (87.7).
• Gross premiums reduced by 2.2% against growth of 1.5% in 2012.
• Significant reduction of the expense ratio from 15.7 to 15.1.
Internet, Tryg’s own agents, franchisees (Norway), interest organisations, car dealers, estate agents and Nordea’s branches. The business area accounts for 48% of the Group’s total premium income.
The expense ratio was 15.1 (15.7). This considerable reduction was achieved through a reduction of staff costs as part of the efficiency programme as well as through continued optimisation of the distribution costs, in particular. The number of employees was increased from 887 in 2012 to 923 in 2013.
The technical result totalled DKK 286m (DKK 326m) and was mainly affected by the October and December storms in Denmark.
In addition, the run-off gains were at a high level of 3.1 (1.6), and, all in all, the results were positively affected by the ongoing efficiency programme. The combined ratio was 87.7 (86.8) in Q4 2013. Gross premiums fell by 1.7% in Q4, representing a lower reduction than for the full year. The retention rate in Denmark was 89.2 (90.2), which was still high, while the retention rate in Norway was 87.2
Price differentiation and new customer benefits were the main focus of 2013.
Profit/loss on gross business 183 13 567 410 Profit/loss on ceded business -25 54 32 19 Insurance technical interest, net of reinsurance -2 3 5 10
Key ratios Premium growth in local currencies -3.3 -1.5 -2.0 -3.2
The results of Commercial have historically been unsatisfactory, which spurred the decision to define the segment as a strategic initiative to ensure a profitable and sustainable business. The result was that the segment achieved satisfactory results both in 2012 and in 2013. The higher combined ratio in 2013 is due to the storms in Q4.
The technical result was DKK 439m (DKK 604m), with a combined ratio of 87.9 (83.7). These results reflect that Commercial has reached a satisfactory level, contributing positively to the Group’s overall profit. This was achieved through efficiency improvements and the implemented profitability and segmentation measures.
Commercial also developed price-differentiated products in 2013, and it has been particularly important to introduce a new workers’
This resulted in a higher rate of sales for this product.
• The gross premiums were reduced by 3.2% (2.0%) as a result of profitability measures and the economic situation for businesses in Denmark.
• Claims ratio, net of ceded business, of 73.9 (62.6) characterised by a high level of weather claims, mainly due to the October and December storms in Denmark.
A technical result of DKK 70m (DKK 156m) was posted, and was affected by the storms in Denmark, in particular, and a high level of run-off gains.
The combined ratio was 92.2 (82.6), and was affected by the abovementioned storm claims which caused weather claims to have an effect of 17.2 (4.0). Against this background, the combined ratio was satisfactory.
The gross claims ratio amounted to 69.1 (64.3), and the claims ratio, net of ceded business, was 68.6 (63.4). The low level is attributable to the profitability measures and the efficiency programme. Commercial was also affected by the October and December storms, and as the level of medium-sized claims was also higher, the claims ratio, net of ceded business, was slightly higher than in 2012. Extensive efforts were also directed at consulting and helping the many affected commercial customers.
The technical result for 2013 was DKK 573m (DKK 650m), with a combined ratio of 88.9 (87.7). These results are not satisfactory for certain areas when considering the capital requirement. Because of this, individual measures have been implemented for unprofitable customers in Denmark, Norway and Sweden.
All in all, gross premiums fell by 2.8% (2.0%) in local currencies. The negative development was a combination of a negative development of 2.8% in Denmark and 5.3% in Norway, and positive growth in
Sweden of 9%. The development in both Denmark and Norway can be ascribed to price increases, adjustments to the customer portfolio and lower sales. A characteristic of the corporate market is that a few customers can have a significant effect on premium development.
New players will often compete on price, which means that premium income will fluctuate more here than in the other business areas.
Throughout the year, Corporate continued its work on developing customer benefits targeted at the various customer groups. The
• Gross premiums reduced by 2.8% (2.0%) primarily due to profitability measures.
• Gross premiums reduced by 1.9% (1.4%) primarily due to profitability measures.
requirements vary considerably between the different customers, for example between the very big industrial groups and the mediumsized businesses that are served by brokers.
in Q4, which was expected considering the development in the rest of the year. The claims ratio was 70.4 (77.8), and the claims ratio, net of ceded business, was 75.9 (78.5), despite the above-mentioned higher level of weather claims. The expense ratio was 12.8 (12.2), which was slightly higher, due, in particular, to a reduction in premium income.
Sweden comprises the sale of insurance products to private customers under the ‘Moderna’ brand. Sales are effected via Tryg’s own salespeople, call centres and the Internet. The business area accounts for 8% of the Group’s total premium income.
In recent years, improving earnings in the business area in Sweden has been an important strategic initiative to improve Tryg’s results.
Significant structural measures in relation to distribution were implemented in 2013, and with the results achieved in recent years, the profitability target has been fulfilled.
A profit of DKK 149m (DKK 102m) was posted. This has been achieved through improved profitability within the broad private market. The improvement was also helped by reducing the bank insurance business volume, where profitability has been unsatisfactory.
The niche areas comprising leisure boats, motorcycles and product insurance in connection with electronics purchases continue to be very profitable.
In addition, as expected, premium income is affected by the termination of the distribution agreement with Nordea. Instead an agreement was concluded in 2013 with Danske Bank in Sweden to supplement the existing agreement with ICA Bank.
Profit/loss on gross business 47 31 81 129 Profit/loss on ceded business 3 10 -3 9 Insurance technical interest, net of reinsurance 4 3 24 11
Key ratios Premium growth in local currencies 0.9 -10.6 0.7 -4.9
Structural changes in relation to distribution were in focus in 2013.
in northern Sweden. In the course of 2013, Moderna converted to using only one IT system, which will contribute to further cost reductions.
The technical result was DKK 44m (DKK 54m), and the combined ratio was 88.2 (87.5 ), which was very satisfactory. Gross premiums fell by 10.6% in Q4, a high level which, among other things, resulted from the termination of the bank distribution cooperation with
The claims ratio was 71.8 (67.2), and the claims ratio, net of ceded business, was 68.9 (66.4).
The expense ratio was 19.3 (21.1), which was satisfactory in light of the falling premium level.
a) Bonds, cash deposits etc. at 31 December 2012 has been adjusted. Bonds from the Finnish branch have been removed. b) The item comprises interest on operating assets and bank debt, exchange rate adjustments of insurance items, writedown of owner-occupied property and costs of investment activities.
Key figures for the year – Investments Return Return 2013 Investment assets DKKm 2012 Total Match Free 31.12.12 31.12.13
Value adjustments, changed discount rate -475 298 298 Transferred to insurance technical interest -525 -483 -483
Total investment return 1,135 891 Other financial income and expenses, non-investment b) -550 -303
Tryg mainly invests in bonds, equities and property. The investment activities are regulated by legislation and by the policies and guidelines adopted and issued by the Supervisory Board.
This has been adopted in the strategy for the investment area, where the objective is to minimise the effect of interest rate changes and to drive the investments with as low a risk as possible and with as low a capital requirement as possible.
The satisfactory results were achieved in particular due to positive equity markets. The same was true for bonds, where credit spreads developed favourably, not least for high-yield bonds.
• Gross return on free portfolio of DKK 891m (DKK 1,130m).
Key figures for investments Q4 Return Investment Q4 Return Q4 2013 assets DKKm 2012 Total Match Free 31.12.13
Value adjustments, changed discount rate -104 18 18 Transferred to insurance technical interest -105 -120 -120
Total investment return before other financial items 275 321 38 283 Other financial income and expenses, investment b) -20 -14
The value of Tryg’s owner-occupied property in Ballerup was adjusted to the market rent level through a write-down of DKK 76m, which affected other financial expenses and income negatively.
In 2013, investor confidence largely returned, and the positive development on the equity markets, where the world index only developed negatively in two of the 12 months, provided a positive return on Tryg’s equity portfolio of DKK 564m, corresponding to 23.2%. Tryg’s equity portfolio is globally diversified, and the Japanese equites in particular, but also American and Nordic equities, contributed positively to the return on Tryg’s equity portfolio. By comparison, the Japanese Nikkei index yielded a return of approximately 57%, but also American and
The real estate portfolio, comprising Danish and Norwegian investment properties, generated a return of DKK 80m, which was below the expected level of 6% due to property write-downs.
Other financial income and expenses, which are included in the investment return, were negative at DKK 343m in total (DKK 620m).
DKK 76m relating to the above-mentioned write-down of Tryg’s owner-occupied property. After other financial income and expenses totalling DKK 167m, the total return on Tryg’s investment activities was DKK 154m in Q4.
Tryg ID I Identity theft is one of the fastest-growing crimes in the world and is also a growing problem in Denmark. Tryg offers free access to identity protection for our Tryg Plus customers. The identity protection service helps customers reduce the risk of identity theft and handle cases of suspected or confirmed identity theft.
The risk appetite is described in the company’s policies via exposure limits for different types of risk. Examples of this is the management of the investment risk via exposure limits within different asset classes
The fundamental insurance risk is managed via limits for the size of single large commitments and via the use of reinsurance, thereby limiting the maximum cost of large claims, expenses due to a storm, cloudburst or another event which affects a number of insurances simultaneously. Moreover, the insurance risk is managed through geographical limitations and by refraining from offering certain types of insurance such as aviation and marine insurance. Operating within these limits, the company’s risk will depend on the decisions made by the company as well as the development in the underlying risk factors such as share prices, the price of reinsurance, claims frequencies etc.
Good risk management requires the ongoing identification and quantification of these risk factors, subsequent reduction of undesired risks and reporting of the whole risk scenario. The quantification consists, among other things, of a calculation of the capital requirements, and against this background an annual review is made of the company’s risk appetite and limits.
Capital management is based on Tryg’s internal capital model which is based on the risk profile, and which thus takes account of the composition of the insurance portfolio, the geographical spread, the provision profile, the reinsurance programme, the investment portfolio and Tryg’s profitability in general. The model calculates the statutory capital requirement (Individual Solvency Requirement) with a 99.5% certainty level, meaning that Tryg would statistically be able to honour claims in 199 out of 200 years.
DKK 6,366m (DKK 6,410m). The capital required to meet the Individual Solvency Requirement is called the capital base. At the end of 2013, the capital base totalled DKK 9,578m after dividend, corresponding to a surplus cover of DKK 3,212m.
Moreover, at the annual general meeting to be held on 3 April 2014, the Supervisory Board will propose that dividend of DKK 27 per share be paid, corresponding to the distribution of DKK 1,656m.
Based on such an assessment, in 2013 Tryg repaid a subordinate loan from TryghedsGruppen of EUR 65m, replacing it with a new subordinate loan of NOK 800m. Unlike the old loan, the new sub ordinate loan is for a perpetual term, which therefore means that the loan is included in the capital base in full, which thus increased by NOK
800m. Against this background, in 2013 an extraordinary distribution was made through the acquisition of own shares for an amount of
panies (Bekendtgørelse om solvens og driftsplaner for forsikringsselskaber ) with effect from 1 January 2014. The executive order contains provisions for the uniform calculation of the solvency requirement based on either a predefined standard formula or an internal model.
Tryg’s capital model is based on the Solvency II principles, and the revised executive order therefore does not noticeably impact the size of the company’s Individual Solvency Requirement. The executive order contains a transitional provision on the calculation of the capital base which results in a moderate increase in Tryg’s solvency surplus cover.
The executive order also contains requirements for a specific risk assessment, the form and scope of which are very similar to the assessment known as the Own Risk and Solvency Assessment (ORSA) under the
Following the publication of interim reports, IR heads out on a roadshow with Tryg’s Executive Management to discuss the company’s development with investors and analysts. In addition, Tryg participates in a number of financial conferences. In 2013, we held investor meetings in the financial centres in Europe, the USA and Canada, and we visited Asia twice. These were the first investor meetings in Asia and were arranged following increased interest in the Tryg share. The Tryg share is followed closely by 22 analysts, who continuously update their expectations for and views on the share. See a list of analysts and their recommendations of Tryg at tryg.com > Investor.
The Tryg share is listed on Nasdaq OMX Copenhagen and is covered by the OMX C20 index (OMX C20 CAP), comprising the 20 most traded shares on the exchange. In accordance with the recommendations issued by Nasdaq OMX Copenhagen, Tryg does not comment on financial results or outlook two weeks before the publication of interim reports and four weeks before the publication of the annual report. All financial information is published on tryg.com in Danish and
English. It is possible to order annual reports and subscribe for news and RSS feeds on the website. It is also possible to follow @Tryg IR on
Twitter. The company announcements issued in 2013 are available at tryg.com > Investor > News.
The Tryg share started the year at a price of 426.50 and ended 2013 at 524.50. Including a dividend of DKK 26, the share rose by 29.1%
CAP index rose by 24.1% in 2013. The index of insurance shares in
Europe, the Euro STOXX Insurance Index, rose by 28.9% in 2013. The positive development of the Tryg share in 2013 was affected by the development in results, driven by the improvements resulting from
Nasdaq OMX is still the most important trading platform for the Tryg share, where most of the trading takes place, and where the price of the Tryg share is determined. Other trading platforms such as OTC
Tryg has a total share capital of DKK 1,532,902,575, comprising a single share class (61,316,103 shares with a nominal value of DKK 25), and all shares rank pari passu. The principal shareholder, Trygheds-
At the end of 2013, there was a free float of 40% of the shares, divided among 25,951 registered shareholders. The 200 largest shareholders owned 88% of the shares. At the end of 2013, and after the share buy back programme, Tryg held 1,942,142 own shares, corresponding to 3.2% of the share capital. At Tryg’s general meeting on 3 April 2014, the Supervisory Board intends to propose to nullify the 1.6 million shares that have been repurchased.
Tryg’s internal capital model provides the framework for the company’s capital requirement until this is replaced in accordance with the Solvency II
• The capital level must at all times reflect the objective of a 20%
Based on Tryg’s dividend policy and the satisfactory 2013 results, the
This corresponds to payment of 70% of the profit after tax. In addition, in December 2013, it was decided to initiate an extraordinary share buy back of DKK 1bn starting on 2 January 2014. This decision was made against the background of Tryg’s solid capital position and expected earnings.
Tryg’s annual general meeting will be held on 3 April 2014 at 14:00 at
Floods I Many residents in Jyllinge Nordmark were hit by Bodil, the storm which swept Denmark in December 2013. Tryg took mobile site huts to the most exposed areas, including Jyllinge Nordmark, to answer questions and help house owners with practical issues. Because Bodil was a flood, insurance companies were not obliged to be on site. However, residents were very positive about the assistance and help provided by Tryg.
‘We were rather overwhelmed by the extent of the damage when we first arrived, but we soon got a grip on the situation, and we stayed for as long as customers needed us there.
The Danish Storm Council covers some of the costs, but we are the ones who know how to tackle such a situation.
Tryg focuses on managing the company in accordance with the principles for good corporate governance and generally complies with the recommendations prepared by the Committee on Corporate Governance, most recently updated in 2013. The recommendations can be found at corporategovernance.dk. Tryg has published its statutory corporate governance report based on the ‘comply or explain’ principle at tryg.com. Download Tryg’s report at tryg.com > Investor > Download.
The Investor Relations (IR) department maintains regular contact with analysts and investors. Together with the Executive Management,
IR organises investor meetings, conference calls and webcasts and attends conferences in Denmark and abroad. IR also communicates with stakeholders in the social media via Twitter, @TrygIR. The
Supervisory Board (the Board) is informed regularly of the dialogue with investors and other stakeholders.
According to Tryg’s IR policy, all company announcements and financial statements are published in Danish and English, and Tryg publishes quarterly interim financial statements. Moreover, Tryg prepares quarterly investor presentations for use in the dialogue with investors and analysts. All announcements, financial statements and presentations are available at tryg.com. This provides all stakeholders with a comprehensive picture of Tryg’s position and development. The consolidated financial statements are presented in accordance with IFRS. At tryg.com, stakeholders can order printed annual reports and subscribe to press releases and company announcements as well as insider trading announcements. A number of internal guidelines ensure that the disclosure of price-sensitive information complies with the stock exchange codes of conduct.
The Board will consider any public takeover bid as prescribed by legislation and, depending on the nature of such bid, convene an extra ordinary general meeting.
is developed and monitored. The Board ensures that the necessary skills and financial resources are available for Tryg to achieve its strategic targets. The Board specifies its activities in a set of rules of procedure and an annual cycle for its work.
Tryg’s share capital comprises a single share class, and all shares rank pari passu. The principal shareholder, TryghedsGruppen smba, owns 60% of the issued shares and is the only shareholder holding more than 5% of the company’s shares.
Each year, the Board reviews and adopts the rules of procedure of the Board and the Executive Management with relevant policies, guidelines and instructions describing requirements for reporting and communication with the Executive Management. Financial legislation also requires the Executive Management to disclose all relevant information to the Board and report on compliance with limits defined by the Board and in legislation.
The Board considers the composition, development, risks and succession plans of the Executive Management in connection with the annual evaluation of the Executive Management and regularly in connection with Board meetings.
Corporate social responsibility (CSR) constitutes an integral part of the way in which Tryg operates its business. The Board has adopted a CSR
policy, and Tryg has joined several voluntary initiatives. Read more at tryg.com > CSR.
The process of selecting new board members is thorough and transparent for members. The Articles of Association stipulate that the Chairman of TryghedsGruppen’s Board must also be Chairman of
Tryg’s Board. Furthermore, TryghedsGruppen’s Board recommends three members to Tryg’s Board from among the members of Trygheds -
Board members elected by the annual general meeting are up for election each year at the annual general meeting. See pages 46-47 for information on when members joined the Board, were re-elected and when their current election period expires. To integrate new talent on the Board, members elected by the annual general meeting may hold office for a maximum of nine years. Furthermore, members of the Board must retire at the first general meeting following their 70th birthday. See pages 46-47 and tryg.com > Governance > Management > Supervisory Board.
Eight members of the Board are elected by the annual general meeting for one year at a time. Of the eight members elected at the annual general meeting, four are independent persons as stated in recommendation 3.2.1. in the Recommendations on Corporate Governance, while the other four members are not independent persons as they are appointed by the principal shareholder TryghedsGruppen. See pages 46-47 and tryg.com > Governance > Management > Supervisory Board.
The Board and the individual board members deem that all members have adequate time and resources to perform their duties as board members of Tryg in a satisfactory manner. Information about the board members’ position, directorships and executive functions, shareholding and changes in portfolio can be found under their CVs.
Three out of four Audit Committee and Risk Committee members, including the committees’ Chairman, are independent persons. Of the four members of the Remuneration Committee, one member is an independent person, while one out of two members of the Nomination
Committee is independent. Board committee members are elected primarily based on special skills that are considered important by the
Board. Involvement of the employee representatives in the committees is also considered important. The committees exclusively prepare matters for decision by the entire Board.
The Risk Committee supervises capital and risk management and monitors the risk management environment and related processes.
TryghedsGruppen and at least one independent Board member. The committee has one independent member at the present time. The
Board and the Executive Management. In addition, the Board reviews and approves the rules of procedure of the Board and the Executive
Board for the current financial year is also submitted for approval by the shareholders at the annual general meeting. The remuneration policy also covers Tryg employees whose activities have a significant influence on the Group’s risk profile, known as risk-takers, as well as employees in control functions such as compliance and internal audit. See remuneration policy at tryg.com > Governance > Remuneration.
Chairman of the Board is triple that received by ordinary members, while the Deputy Chairman’s remuneration is double that received by ordinary members of the Board. The Board has no pension scheme.
The Board fixes the remuneration of the Executive Management for one year at a time. This is based on the work and results of the individual members of the Executive Management and on the need to attract and retain the most highly qualified members of the Executive Management.
The Executive Management’s remuneration consists of a fixed pay element, pension and a variable pay element. The variable pay constitutes only a limited part of the overall remuneration. The Board can decide
a) New member of the Audit Committee and the Risk Committee and resigned from the Remuneration Committee b) Resigned from the Audit Committee c) Resigning members of the Supervisory Board
Board defines Tryg’s risk management framework as regards insurance risk, investment risk and operational risk, as well as IT security.
Four years after the purchase by a member of the Executive Management of a specified number of shares, such member is allocated a corresponding number of free shares in Tryg. The allocation of matching shares is not dependent on performance. The purpose of the programme is both to retain members of the Executive Management, and to create a joint financial interest between the Executive Management and shareholders. Read more at tryg.com > Governance > Remuneration.
Each member of the Executive Management has 25% of the basic salary paid into a pension scheme. However, the Group CEO receives a defined-benefit pension, disbursed from the retirement date.
Total remuneration of the Supervisory Board in 2013 Audit Risk Remuneration DKK Fee Committee Committee Committee Total
Ida Sofie Jensen 231,917 231,917 Bill-Owe Johansson 330,000 330,000 Lone Hansen 330,000 330,000
a sensible correlation between the strategy for assuming risks and the available capital over a period of three to five years. In December 2013, the Board adopted an individual solvency policy which provides a specific framework for calculating capital requirements and preparing a capital contingency plan and ORSA. The policy took effect on
Group’s overall policies and guidelines, procedures and controls in important risk areas. They receive reports about developments and about the ways in which the frameworks are used. The Board checks that the risk management and internal controls are effective. Noncompliance with the frameworks and guidelines is reported to the
Board. The Risk Committee monitors risk management on an ongoing basis and reports quarterly to the Board.
The Group seeks at all times to minimise the risk of unnecessary losses in order to optimise returns on the company’s capital.
Read more on page 34 and in Note 1 on page 67.
The audit results are discussed by the Audit Committee and at board meetings to assess the auditor’s observations and conclusions. The internal and independent auditors’ long-form audit reports are reviewed by the Board. The audit agreement and associated audit fee are agreed between the Board and the auditor based on a recommendation from the Audit Committee. Each year, the Audit Committee reviews the scope of the independent auditors’ non-audit services.
At least once a year, the internal and independent auditors meet with the Audit Committee without the presence of the Executive Management. The Chairman of the Audit Committee deals with any matters that need to be reported to the Board.
Tryg has set up an internal audit department which regularly reviews the quality of the internal control systems and business procedures. It is responsible for planning, performing and reporting the audit work to the Board.
Tryg follows the Recommendations on Corporate Governance with the exception of the recommendation for the number of independent members of the board committees, with which Tryg complies partially, see item 3.4.2 of the Recommendations on Corporate Governance.
Total remuneration of the Executive Management in 2013 Value of Car/ Total matching DKK Basic salary Pension car allowance fixed salary shares a) Total fee
Education: Savings bank training, Graduate Diplomas in Organisation and Work Sociology as well as Credit and Financing. Chairman: Investeringsforen. Sparinvest, Investeringsforen.
Sparinvest Sicav, Luxembourg, EIK banki p/f, VP Lux S.a.r.l., Capital Market Partners, Museum Southeast Denmark. Deputy Chairman: Tryg A/S, Tryg Forsikring A/S and VP Securities a/s. Board member: Sampension KP Livsforsikring A/S, Sydbank A/S, Dansk Landbrugs Realkredit and member of the Executive Board of Bombebøssen. Committee memberships: Audit Committee and Risk Committee (Chairman) and Nomination Committee in Tryg A/S. Number of shares held: 3,500 Change in portfolio in 2013: 0
Torben Nielsen has special skills in management, governance, finance, financial ser vices and risk management from his former role as Governor of Danmarks Nationalbank and several board positions.
Education: Graduate Diploma in Organisation and Graduate Engineer and Lic.techn. Chairman: Tryg A/S, Tryg Forsikring A/S, TryghedsGruppen smba, the Lundbeck Foundation and LundbeckFond Invest A/S. Board member: Vestas Wind Systems A/S, Bladt Industries A/S, Terma A/S and Haldor Topsøe A/S. Committee memberships: Remuneration Committee (Chairman) and Nomination Committee (Chairman) in Tryg A/S.
Education: Certified commercial insurance agent. Various insurance and sales courses and negotiation training. Board member: Tryg A/S and Tryg Forsikring A/S. Number of shares held: 86 Change in portfolio in 2013: 0
Vigdis Fossehagen Employee representative Born 1955. Joined: 2012. Nationality: Norwegian. Chairman of Finance Sector Union of Norway, Tryg. Employed in 1996.
Education: MSc in Political Science, European Health Leadership Programme INSEAD, Executive Management Programme INSEAD. Board member: Tryg A/S and Tryg Forsikring A/S, TryghedsGruppen smba, Plougmann & Vingtoft A/S and Den Erhvervsdrivende Fond Hans Knudsen Instituttet. Number of shares held: 94 Change in portfolio in 2013: +94
Mari Thjømøe b) Joined: 2012. Nationality: Norwegian. Professional board member and independent advisor. Former CFO of KLP.
Mari Thjømøe has experience from international management and competencies within strategy, finance, capital management, Investor Relations, branding and special knowledge of the insurance market. Being a Norwegian citizen, Mari Thjømøe has special insights into Norwegian market conditions.
Born 1963. Joined: 2010. Nationality: Danish. CEO of SEAS-NVE A.m.b.a. Former CFO and CEO of NVE A.m.b.a.
Education: MSc in Economics and Business Administration and Lieutenant-Colonel of the Danish Air Force Reserve. Chairman: Association of Danish Energy and Distribution Companies (DEA), Energi Danmark A/S, CLEVER. Deputy Chairman: TryghedsGruppen smba. Board member: Tryg A/S, Tryg Forsikring A/S, DI General Council. Committee memberships: Audit Committee and Risk Committee in Tryg A/S, Chairman of Executive Director Committee of Dansk Energi and member of Dansk Energi Fælles Forum, Danish Intelligent Energy Alliance and Chairman of the Green Committee in Region Zealand. Number of shares held: 1,750 Change in portfolio in 2013: 0
From his positions with SEAS-NVE and his former work with the Danish Air Force, Jesper Hjulmand has experience within the fields of M&A, strategy, organisational and management development, communication and business development.
Education: Insurance training. Board member: Tryg A/S and Tryg Forsikring A/S. Committee memberships: Risk Committee in Tryg A/S. Number of shares held: 86 Change in portfolio in 2013: 0
Education: A.P. Møller Group international shipping education, Graduate Diploma in Financing and various international management programmes. Board member: Tryg A/S, Tryg Forsikring A/S and DFDS A/S. Committee memberships: Audit Committee and Risk Committee in Tryg A/S. Number of shares held: 745 Change in portfolio in 2013: 0
Bill-Owe Johansson Employee representative Born 1959. Joined: 2010. Nationality: Swedish. Claims handler, Moderna (Swedish branch). Employed in 2002.
Standing from left Tor Magne Lønnum, Lars Bonde, Morten Hübbe. Seated Rikke Larsen, Truls Holm Olsen, Trond Bøe Svestad, Per Fornander, Jesper Joensen.
Born 1972. Employed in 2002. Joined the Group Executive Management in 2003. Member of the Executive Management and the Group Executive Management.
Board member: Tryg Ejendomme A/S, Ejendomsselskabet af 8. maj 2008 A/S and Tjenestemændenes Forsikring.
Number of shares held: 11,760 Change in portfolio in 2013: +1,850
Board member: Tryg Garantiforsikring A/S, Norsk Naturskadepool and Tryg Almen - nyttige Stiftelse.
Number of shares held: 2,990 Change in portfolio in 2013: +880
Board member: Tryg Garantiforsikring A/S, Thermopylae AS (Chairman), Finansnæringens Fellesorganisasjon and TGS Nopec ASA.
Number of shares held: 781 Change in portfolio in 2013: +746
Born 1967. Employed in 2013. Joined the Group Executive Management in 2013.
Tryg’s ambition is to create peace of mind and value for customers, employees and shareholders. This obviously implies that we must be responsible members of society.
We make our knowledge of insurance, customer requirements and risk management available in areas where we see challenges for society.
CSR contributes to value creation – for them and for us. Read our CSR policy at tryg.com > CSR > CSR strategy > CSR Policy.
In 2014, we are launching a web-based tool, VisAdapt, which will enable our customers to establish their vulnerability and risk with regard to climate-related damage in the area where their homes or commercial buildings are located. This tool has been developed in a cooperation between four Nordic insurance companies and a team of researchers under NORDSTAR, the Nordic Council’s Nordic Centre of Excellence.
In the past year, Tryg continued its cooperation with Formel M, the Municipality of Ballerup and the neighbouring companies in
Lautrupgård on Mobility Management. The project is about how to get from your home to the office and to meetings in a sustainable way, which will benefit both the environment and health and bring down transport costs and local traffic congestion.
Activities during the year included two campaigns supporting the use of green transport for work and for commuting. Employees are able to define and set their own targets for their contribution to intelligent transport. The project is supported by a workshop concept and materials available on Tryg’s intranet.
In 2013, Air travel also includes trips to and from Sweden.
Ballerup. This showed an increase in the number of employees cycling to work of 6 percentage points from 11% to 17% . The share of employees using their own car fell during the same period by 8 percentage points from 80% to 72%. Futhermore, there has been an increase in the use of public transport and the combination of means of transportation.
Tryg’s CO2 emissions come from the consumption of electricity, heat and transport as well as from waste. In 2013, Tryg markedly reduced its CO2 emissions, down 49.7% relative to 2007. The reduction is attributable primarily to the replacement of a cooling plant in Ballerup and a restructuring of the car fleet to include fewer and fuel-saving vehicles. The emissions reduction target is 25% in 2014. In 2013,
Tryg came second in the top 10 of the most sustainable brands in
Tryg’s climate action at tryg.com > CSR > Thematic areas > Climate.
It is a key objective for Tryg to respect and promote the human rights and labour rights that are relevant for our business and the areas in which we operate. This applies both internally and in our relations with our customers, suppliers, investors and partners. For this reason, we have focused our efforts on the human rights which we are most at risk of infringing, including the right not to be discriminated against, the right to data protection and the rights of workers.
Tryg attaches great importance to diversity, protects against discrimination and guarantees equal treatment of our employees, regardless of gender, age, ethnic origin, disability, sexual orientation, faith or religion. Our diversity and our different competencies, perspectives and experience contribute to job satisfaction and enable us to better understand our customers and their needs.
For almost 20 years, Tryg has endeavoured to include employees with a different ethnic origin than Danish and Norwegian in our organisation.
Dane (Nydansker) and ONE Danmark, we promote our efforts and share our experience with diversity in our day-to-day work.
Our target of 4% of our employees having a non-Western background was met in 2013. Read more about our inclusion activities at tryg.
The staff turnover was 11.8% in 2013, corresponding to 448 employees (221 women and 227 men). The gender distribution is even in all age groups. Most of the employees who left Tryg were evenly distributed in the 30-49 and 50+ age groups. Only a small number of employees in the under-30 age group left Tryg.
This work will be continued in 2014. Read more about our work at tryg.com > CSR > Thematic areas > Prevention > Data protection.
Nordea. Eighty-nine Year 8 and Year 9 school classes completed the course in 2013. In the first half of 2014, 30 courses will be offered.
In 2011, Tryg set up an Ethical Hotline, which allows all employees and other stakeholders to confidentially report any wrongdoing or attempts to circumvent Tryg’s rules. The Ethical Hotline was used once in 2013.
In this way, Tryg’s fund managers ensure that our investments respect the relevant international standards on responsible investments, for which reason Tryg has chosen to discontinue its own membership of UN PRI.
ESG Leaders, which comprises the leading global companies in terms of environmental, social and governance criteria (ESG). The international index includes around 1,800 companies, of which five are Danish.
financial statements are prepared in accordance with IFRS and published in Danish and English.
Note Tryg Group Statement by the Supervisory Board and the Executive Management 56 Independent auditor’s reports 57 Financial highlights 59 Income statement 60 Statement of comprehensive income 61 Statement of financial position 62 Statement of changes in equity 64 Cash flow statement 66 1 Risk management 67 2 Capital management 78 3 Operating segments 80 3 Geographical segments 82 3 Technical result, net of reinsurance, by line of business 84 4 Premium income, net of reinsurance 86 5 Insurance technical interest, net of reinsurance 86 6 Claims, net of reinsurance 86 7 Insurance operating costs, net of reinsurance 86 8 Interest income and dividends etc. 91 9 Value adjustments 91 11 Profit/loss on discontinued and divested business 92 12 Intangible assets 93 13 Property, plant and equipment 95 14 Investment property 97 15 Equity investments in associates 98 16 Financial assets 99 17 Reinsurers’ share 102 18 Current tax 103 19 Assets held for sale and associated liabilities 103 21 Premium provisions 104 21 Claims provisions 105 22 Pensions and similar liabilities 106 23 Deferred tax 109 24 Other provisions 110 25 Amounts owed to credit institutions 110 26 Debt relating to unsettled funds transactions and repos 110 27 Earnings per share 110 28 Contractual obligations, collateral and contingent liabilities 111 29 Related parties 113 30 Financial highlights 114 31 Accounting policies 115
The Supervisory Board and the Executive Management have today considered and adopted the annual report for 2013 of Tryg A/S and the Tryg Group.
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the EU, and the financial statements of the parent company have been prepared in accordance with the Danish Financial Business Act.
In addition, the annual report has been presented in accordance with additional Danish disclosure requirements for the annual reports of listed financial enterprises.
Danish disclosure requirements for listed financial services companies as well as for the preparation of parent financial statements that give a true and fair view in accordance with the Danish Financial Business
Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial services companies. Moreover, in our opinion, the parent financial statements give a true and fair view of the parent company’s financial position at 31 December 2013, and of the results of its operations for the financial year 1 January to 31 December 2013 in accordance with the Danish Financial Business Act and Danish disclosure requirements for listed financial services companies.
Investment return after insurance technical interest 1,083 550 61 585 588
Profit/loss on continuing business 2,109 741 1,148 2,180 2,373 Profit/loss on discontinued and divested business after tax a) -101 -148 -8 28 -4
Statement of financial position Total provisions for insurance contracts 29,042 32,031 34,220 34,355 32,939 Total reinsurers’ share of provisions for insurance contracts 1,320 1,588 2,067 2,317 2,620
Acquisition costs and administration expenses -3,295 -3,008 Reinsurance commissions and profit participation from reinsurers 103 105 7 Insurance operating costs, net of reinsurance -3,192 -2,903
Investment activities 15 Income from associates 6 0 Income from investment property 123 107 8 Interest income and dividends 1,196 1,029
Total investment return 1,110 1,071 5 Return on insurance provisions -525 -483
Other comprehensive income which cannot subsequently be reclassified as profit or loss Revaluation of owner-occupied property for the year 42 9 Tax on revaluation of owner-occupied property for the year -12 -3 Actuarial gains/losses on defined-benefit pension plans -62 179 Tax on actuarial gains/losses on defined-benefit pension plans 16 -54
Other comprehensive income which can subsequently be reclassified as profit or loss Exchange rate adjustments of foreign entities for the year 193 -326 Hedging of currency risk in foreign entities for the year -184 305 Tax on hedging of currency risk in foreign entities for the year 46 -76
Deposits with credit institutions 949 1,301 Derivative financial instruments 1,256 692
Total other financial investment assets 44,527 42,855 16 Total investment assets 46,629 44,895
Reinsurers’ share of premium provisions 237 237 21 Reinsurers’ share of claims provisions 2,080 2,383 17 Total reinsurers’ share of provisions for insurance contracts 2,317 2,620
Total receivables in connection with direct insurance contracts 1,149 1,088 Receivables from insurance enterprises 227 299 Receivables from Group undertakings 1 0 Other receivables 612 1,033 18 Current tax assets 0 145 Cash at bank and in hand 504 553 19 Assets held for sale 742 0
Interest and rent receivable 369 406 Other prepayments and accrued income 121 148
Total equity and liabilities 55,022 53,371 1 Risk management 2 Capital management 28 Contractual obligations, collateral and contingent liabilities 29 Related parties 30 Financial highlights 31 Accounting policies
Profit/loss for the year -44 658 1,594 2,208 Change in equalisation reserve for the year 2 -2 0 Revaluation of owner-occupied property for the year 42 42 Exchange rate adjustment of foreign entities for the year 192 -1 2 193 Hedging of foreign currency risk in foreign entities for the year -184 -184 Actuarial gains and losses on pension obligation -62 -62 Tax on changes in equity -12 46 16 50
Dividend paid -400 -400 Dividend, own shares 6 6 Purchase and sale of own shares 66 66 Exercise of share options 44 44 Issue of share options and matching shares 9 9
Proposed dividend per share DKK 27 (in 2012 DKK 26) Dividend per share is calculated as the total dividend proposed by the Supervisory Board after the end of the financial year divided by the number of shares at the end of the year (61,316,103 shares). The dividend is not paid until approved by the shareholders at the annual general meeting.
Interest income 1,340 1,006 Interest expenses -100 -142 Dividend received 15 19
Change in cash and cash equivalents, net 99 89 Cash and cash equivalents – discontinued and divested business -11 0 Exchange rate adjustment of cash and cash equivalents, beginning of year 14 -39
Provisioning risk At the end of a financial period, the level of technical provisions are set to cover expected future payments in respect of claims already incurred. The provisioning risk is the risk that future payments deviate significantly from our assumptions when making the provisions. Handled by the Provisions Committee
Operational risk The risk of errors, fraud or failures in internal procedures, systems and processes. Handled by the Operational Risk Committee
Effect of 1% change in: Combined ratio (1 percentage point) + / -200 + / -192 Claim frequency (1 percentage point) +/- 1,599 +/- 1,437 Average claim +/-141 +/-139
Provisioning risk 1% change in social inflation +/- 779 +/- 684 10% error in the assessment of long-tailed lines of business (workers’ compensation, motor liability, accident) +/-1,870 +/-1,753
Equity market 15 % decline in equity market -367 -398 Effect of derivatives 18 -35
Technical result per year: Effect of 15% change in exchange rates of NOK and SEK relative to DKK +/- 175 +/- 195 a) additional sensitivity information in note 22 ‘Pensions and similar obligations’
The individual solvency requirement must be covered by the ‘adequate capital base’ (see Note 2). The purpose of capital management in Tryg is to support the key business objectives: • A solid capital base, supporting both the statutory requirements and the ambition of keeping the ‘A-’ rating from Standard & Poor’s • A steadily rising nominal dividend per share with a distribution of 6090 % of the net profit for the year after tax • Return on the average equity of 20% after tax
The two first objectives are met by means of a high capital buffer, while the last objective requires that the capital buffer is kept at a minimum, or that the capital base mainly consists of subordinate loan capital. This balance is assessed in the company’s capital plan and ORSA report and forms the basis of recommendations on dividend and any extraordinary share buy backs (see Note 2).
Risks Underwriting risk The underwriting risk is the risk relating to the conclusion of insurance contracts and thus the risk that premium income does not adequately cover the claims that Tryg is obliged to pay when damage has occurred. This risk can to a certain extent be assessed based on statistical analyses of historical experience within various business sectors.
The insurance premium must be adequate to cover expected claims, but must also comprise a risk premium equal to the return on the part of Tryg’s capital that is used to protect against random fluctuations. All things being equal, this means that insurance sectors or areas which, from experience, are subject to major fluctuations, must comprise a larger risk premium as these require a larger capital base.
In Tryg, the ongoing assessment of the underwriting risk is based on the capital model, which defines the target premium levels for each area of the insurance business. This applies both when determining and updating tariffs, and when individually pricing major agreements for the corporate and partner segments. The underwriting risk is managed by means of ongoing profitability monitoring, business processes, acceptance policy, proxies and reinsurance. The overall management framework is defined by the Supervisory Board in Tryg’s insurance policy.
Based on the higher frequency of weather claims, Tryg has adjusted its risk assessment associated with weather-related events upwards. As a consequence of this, Tryg has taken out what is known as lateral cover for combinations of nature-related claims. This covers a total amount of DKK 600m with a retention of DKK300m for all claims above DKK 20m. This means that for each nature-related claim above DKK 20m, Tryg will be indemnified if it has already paid the retention of DKK 300m, up to a maximum of DKK 600m.
In the field of buildings and contents insurance, major events in 2014 are covered by catastrophe reinsurance cover of DKK 5.5bn with retention of DKK 150m. The primary risk for individual events is storms, and the scope of the cover is defined using simulation models such that this cover will prove insufficient in statistical terms less than once every 250 years. The reinsurance programme for catastrophes also covers other disastrous events, including terrorist attacks, up to a maximum of DKK 4.0bn.
In determining the claims provisions, both individual assessments and statistical calculations are used. At the end of 2013, claims provisions totalled DKK 28,087m. The duration of these provisions, that is, the average time until these amounts were disbursed to customers, was 3.4 years. Most of the claims provisions relate to personal injury claims. These provisions are exposed to changes in inflation, the discount rate, disbursement patterns, economic trends, legislation and court decisions.
This implies, among other things, that the provisions assessments are based on underlying model analyses, that quarterly internal control calculations are performed, supplemented by periodic external reviews, and that a safety surcharge is charged to approximate market value.
Claims provisions relating to annuities under Danish workers’ compensation insurance are discounted using the current market rate and simultaneously increased based on the wage inflation rate each year. This exposes Tryg to an explicit inflation risk. To hedge this, Tryg uses a number of zero coupon inflation swaps in Danish kroner, in which Tryg receives a fixed amount in return for payment of an amount based on the trend in Danish consumer prices. Tryg is exposed to interest rate changes as a result of its provisions under the Norwegian pension scheme, which is a defined-benefit plan covering approximately1,376 employees. This scheme was closed to new employees in 2008, and the total provision was DKK 723m at the end of 2013. The Norwegian pension provision is also sensitive to changes in the life expectancy as well as salary and pension adjustments.
Provisions before discounting, end of year 434 510 708 990 1,207 1,835 1,997 2,646 3,203 4,015 7,655 25,201
Reserves from 2002 and prior years 2,060 Other 816 Gross claims pro- visions, end of year 26,087
Estimated acc. claims, end of year 896 823 935 287 508 172 297 697 1,478 256 567 1 year later 861 837 829 286 473 239 371 778 2,206 289 2 years later 857 877 835 272 488 203 349 771 2,328 3 years later 913 875 829 305 493 192 301 747 4 years later 835 861 855 305 514 192 303 5 years later 831 870 851 301 484 179 6 years later 840 870 835 299 514 7 years later 838 859 834 301 8 years later 898 857 826 9 years later 942 861 10 years later 945 945 861 826 301 514 179 303 747 2,328 289 567 7,861
Provisions before discounting, end of year 90 61 22 12 32 9 28 209 507 118 523 1,610
Reserves from 2002 and prior years 216 Other 603 Reinsurers’ share of claims provis- ions, end of year 2,383
Provisions before discounting, end of year 345 449 686 979 1,175 1,826 1,968 2,437 2,696 3,898 7,132 23,591
Reserves from 2002 and prior years 1,844 Other 213 Claims provisions, net of reinsurance, end of year 23,704
The amounts in foreign currency in the table are translated to Danish kroner using the exchange rate at 31 December 2013 to prevent the impact of exchange rate fluctuations.
The match portfolio corresponds to the value of the discounted claims provisions and is designed to hedge the interest rate sensitivity of these to the widest possible extent. Tryg carries out daily monitoring, followup and risk management of the Group’s interest rate risk. The swap and bond portfolio is thus adjusted continuously to minimise the net interest rate risk.
In practice, it is not possible or expedient to aim for a complete match. The administration costs alone associated with a complete match mean that, in practice, a certain degree of mismatch is acceptable within an appropriate limit defined in the investment policy. Add to this that the provisions are discounted using a mathematical interest rate curve specified by the Danish Financial Supervisory Authority, which cannot be perfectly replicated in the market, for which reason a certain degree of mismatch must be accepted for regulatory reasons.
In addition, the free portfolio is subject to the framework defined by the Supervisory Board through the investment policy. Tryg’s largest investment risk pertains to its shareholdings, the value of which is directly dependent on how the equity markets fare. At the end of 2013, the equity portfolio accounted for 6.2% of the total investment assets. This share is expected to be at a similar level in 2014.
Tryg’s does not wish to speculate in foreign currency, but since Tryg invests and operates its business in other currencies than Danish kroner, Tryg is exposed to currency risk. Tryg is primarily exposed to fluctuations in the other Scandinavian currencies due to its ongoing insurance activities. Premiums earned and claims paid in other currencies create a natural currency hedge, for which reason other risk mitigation measures are not required in this area. However, the part of equity held in other currencies than Danish kroner will be exposed to currency risk. This risk is hedged on an ongoing basis using currency swaps.
In addition to the above-mentioned risks, Tryg is exposed to credit, counterparty and concentration risk. These risks primarily relate to exposures in high-yield bonds, emerging market debt exposures as well as Tryg’s investments in AAA-rated Nordic and European government and mortgage bonds. These risks are also managed through the investment policy and the framework for reinsurance defined in the insurance policy. For an insurance company like Tryg, liquidity risk is practically nonexistent, as premium payments fall due before claims payments.
The share portfolio includes exposure from share derivaties of DKK 325m. ( in 2012 DKK -120m) Unlisted equity investments are based on an estimated market price
Impact of exchange rate fluctuations in SEK and NOK Currency Change excl. on technical result 2012 2013 Change effect currency effect
Reinsurers’ share of provisions for insurance contracts 2,317 2,620 303 -146 449
Impact of exchange rate fluctuations in SEK and NOK Currency Change excl. on statement of financial position 2011 2012 Change effect currency effect
The new version of the Executive Order on Solvency and Operating Plans contains an annex on calculation of the ‘adequate capital base’. However, this is only a temporary measure of the companies’ individual solvency requirement until the entry into force of a new financial statements order (expected on 1 January 2015). For Tryg, the adequate capital base will be slightly higher than the capital base for accounting purposes, as some of the above-mentioned corrections do not apply to the calculation of an adequate capital base. It is expected that a new financial statements order, which will enter into force in 2015, will offer wider scope for including capital elements and for gearing.
Given Tryg’s desire to optimise its capital structure in light of the currently favourable market conditions for core capital, Tryg refinanced a subordinate loan of EUR 65m with a definite maturity to a new subordinate loan of NOK 800m with indefinite maturity in 2013. Due to its indefinite maturity, the new subordinate loan may be included in the capital base by up to 50% of the company’s minimum requirement under Solvency I. It is also expected that the subordinate loan may be included as Tier 2 capital under Solvency II.
Tryg’s total subordinated debt is DKK 1,818m. In total, debt amounted to 16% of equity at the end of 2013, and interest expenses in 2013 amounted to DKK 89m.
Maturity of the Group’s financial obligations including interest 2013 0-1 year 1-5 years > 5 years Total
Amounts owed to credit institutions 6 0 0 6 Debt relating to unsettled funds transactions and repos 2,821 0 0 2,821
Amounts owed to credit institutions 14 0 0 14 Debt relating to unsettled funds transactions and repos 1,470 0 0 1,470
Capital adequacy Equity according to annual report 10,979 11,107 Proposed dividend -1,594 -1,656 Solvency requirements of subsidiaries – 50% -2,406 -2,307
The capital base and the solvency ratio are calculated in accordance with the Danish Financial Business Act..
Loan terms: Lender Called in April 2013. Listed bonds Listed bonds Principal EUR 150m NOK 800m Issue price 99.017 100 Issue date December 2005 March 2013 Maturity year 2025 Perpetual Loan may be called by lender as from 2015 2023 Repayment profile Interest-only Interest-only
The share of capital included in the calculation of the capital base total DKK 1,551m ( in 2012 DKK 873m). The loans are initially recognised at fair value on the date on which a loan is entered and subsequently measured at amortised cost. The loans are taken by Tryg Forsikring A/S.The creditors have no option to call the loans before maturity or otherwise terminate the loan agreements. The loans are automatically accelerated upon the liquidation or bankruptcy of Tryg Forsikring A/S. Prices used for determination of fair value in respect of both loans are based on actual traded prices from Bloomberg.
Investment return after insurance technical interest 588 Other income and costs -91
Run-off gains/losses, net of reinsurance 310 176 464 20 0 970
Equity investments in associates 18 18 Reinsurers’ share of premium provisions 8 9 219 1 0 237 Reinsurers’ share of claims provisions 265 404 1,641 73 0 2,383 Assets held for sale 0 0 Other assets 49,975 49,975
Provisions for bonuses and premium discounts 507 29 94 10 0 640 Liabilities associated with assets held for sale 0 0 Other liabilities 9,325 9,325
DKKm Private Commercial Corporate Sweden Other Group 3 Operating segments (continued)
Investment return after insurance technical interest 585 Other income and costs -60
Profit/loss on continuing business 2,180 Profit/loss on discontinued and divested business 28
Provisions for bonuses and premium discounts 291 32 101 0 1 425 Liabilities associated with assets held for sale 742 742 Other liabilities 8,946 8,946
Description of segments Please refer to the accounting principles for a description of operating segments. Amounts relating to eliminations, restructuring expenses and discontinued and divested business are included under ‘Other’. Other assets and liabilities are managed at Group level and are therefore not allocated to the individual segments but are included under ‘Other’.
Costs are allocated according to specific keys, which are believed to provide the best estimate of assessed resource consumption.
Claims ratio, net of ceded business 73.9 82.3 75.2 70.9 72.5
Number of full-time employees 31 December 1,398 1,338 1,338 1,282 1,199
Number of full-time employees 31 December 425 414 423 444 458
Average claims DKK b) 11,856 10,508 58,678 56,519 25,631 25,531 76,535 59,246 2,541,601 6,994,362 8,889 8,265 Total claims 306,088 348,296 32,471 38,033 4,280 4,349 8,927 10,566 83 127 53,491 54,848
Gross claims ratio 127.0 23.5 71.7 73.2 91.8 100.0 72.2 73.9 Combined ratio 256.0 107.8 88.0 87.2 98.1 106.3 88.2 87.7
Gross Ceded Gross Ceded 5 Insurance technical interest, net of reinsurance 2012 2013
Return on insurance provisions 525 483 Discounting transferred from claims provisions -463 -421 6 Claims, net of reinsurance Claims -14,958 -15,273 Run-off previous years, gross 283 862
7 Insurance operating costs, net of reinsurance (continued) Administative expenses include fee to the auditors appointed by the annual general meeting: The fee is divided into: Statutory audit -6 -6 Tax advice 0 -1 Other services 0 -6
In the calculation of the expense ratio, costs are stated exclusive of depreciation and operating costs on the owner-occupied property but including a calculated rent concerning the owner-occupied property based on a calculated market rent of DKK 41m (DKK 46m in 2012).
Total lease expenses amount to DKK 30m (DKK 36m in 2012)
Allocated share options and matching shares -9 -4 Defined-contribution pension plans -295 -287 Defined-benefit pension plans -98 -75 Other social security costs -5 -5 Payroll tax -369 -355
Average number of full-time employees during the year (continuing business) 4,016 3,800
Outstanding options from 2008-2011 allocation 31 Dec. 2013 49,041 147,990 32,852 229,883 18 54
Number of options exercisable 31 Dec. 2012 51,165 153,305 18,670 223,140
In 2013, the fair value of share options recognised in the consolidated income statement amounted to DKK 2m (DKK 7m in 2012). At 31 December 2013, a total amount of DKK 78m was recognised for share option programmes issued in 2006-2011. Fair values at the time of allocation are based on the Black & Scholes option pricing formula.
The Group Executive Management includes retired managers with a total of 8.285 units with a value of DKK 0,6m at the time of allocation. Risk-takers are included under ‘Other senior employees’.
Matching shares allocated at 31. Dec. 3,928 2,526 6,454 457 3 525 3
Matching shares allocated at 31. Dec. 4,979 5,008 9,987 302 4 525 5
Interest expenses Interest expenses subordinate loan capital and credit institutions -80 -89 Interest expenses, other -20 -23 9 Value adjustments Value adjustments concerning financial assets or liabilities at fair value with value adjustment in the income statement: Equity investments 2 -42 Unit trust units 378 578 Share derivatives -2 30
Exchange rate adjustments concerning financial assets or liabilities which cannot be stated at fair value total DKK -146m (DKK 37m in 2012)
Profit/loss on gross business -117 -2 Profit/loss on ceded business -4 0 Insurance technical interest, net of reinsurance 4 1
Run-off regarding discontinued Marine Hull insurance 1 11 Divested finnish branch 27 -15
For the year 2013 there has been no line of business with premium income which exceed DKK 70m.
Transferred to assets held for sale 0 0 0 0 0 Transferred from assets under construction 0 0 77 -77 0
Amortisation and write-downs Amortisation and write-downs at 1 January 0 -73 -747 -92 -912
Amortisation and write-downs at 31 December 0 -89 -819 -92 -1,000
Amortisation and write-downs Amortisation and write-downs at 1 January 0 -51 -632 -54 -737
Amortisation and write-downs at 31 December 0 -73 -747 -92 -912 a) In cost at 31 December is included developed in-house DKK 245m (DKK 134m at 31 December).
Assumed Assumed Required annual growth annual growth return 2013 0-10 years > 10 years before tax
Trademarks and customer relations As at 31 December 2013, management performed a test of the carrying amounts of trademarks and customer relations as an integral part of the goodwill test. The test did not indicate any impairment.
Transferred to assets held for sale 0 0 0 0 Transferred from assets under construction 0 10 -10 0 Additions for the year 18 2 0 20 Disposals for the year -1 0 0 -1
Value adjustments for the year at revalued amount in income statement 0 -76 0 -76 Value adjustments for the year at revalued amount in other comprehensive income 0 9 0 9
Accumulated value adjustments Accumulated value adjustments at 1 January 0 27 -88 -61
Value adjustments for the year at revalued amount in income statement 0 -350 0 -350 Value adjustments for the year at revalued amount in other comprehensive income 0 42 0 42
Accumulated depreciation Accumulated depreciation at 1 January -85 -42 0 -127
In determining the fair value of the properties, not only publicly available market data are included, corresponding to the ‘non-observable input’ in the fair value hierarchy. No reclassifications have been made between this category and other categories in the fair value hierarchy during the year. The following return percentages have been applied: Return percentages weighted average 2012 2013
Total expenses for 2013 are DKK 32m (DKK 29m in 2012). Of this amount, expenses for non-let property total DKK 2m (DKK 2m in 2012); total expenses for the income-generating investment property are DKK 30m (DKK 27m in 2012).
Revaluations at net asset value Revaluations at 1 January 14 21 Exchange rate adjustments 1 -3 Value adjustments for the year 6 0
Shares in associates according to the latest annual report: Equity and Profit/loss Ownership Name and registered office Assets liabilities Equity Revenue for the year share in %
Financial liabilities Derivative financial instruments at fair value with value adjustments in the income statement 737 514 Derivative financial instruments at fair value with value adjustments in other comprehensive income 38 0 Financial liabilities at fair value with value adjustment in the income statement 6,176 6,483
Information on valuation of subordinate loan capital at fair value is stated in note 2. Other financial liabilities measured at amortised cost only deviate to a minor extent from fair value.
Fair value hierarchy for financial instruments measured at fair value in the statement of financial position.
Gains/losses in the income statement for assets held at the statement of financial position date recognised in value adjustments -13 -42
Bonds measured on the basis of observable inputs mainly consist of Norwegian bonds issued by banks and to some extent Danish semi-liquid bonds, where no quoted prices based on actual trades are available. No significant reclassifications have been made between the categories ‘Quoted prices’ and ‘Observable input’ in 2013. Inflation derivatives are measured at fair value on the basis of non-observable input and are included under claims provisions at a fair value of DKK -166m (DKK 3m in 2012).
Investment assets as per the section ‘Investment activities’ in the management’s review 38,339 2,656 2,022 43,017 Consisting of: Cash and cash equivalents allocated to portfolio management -253 0 0 -253 Debt and receivables relating to unsettled funds and property transactions 148 0 0 148
Total investment assets according to the statement of financial position 46,629
Derivative financial instruments used in connection with hedging of foreign entities for accounting purposes
Gains and losses on hedges charged to other comprehensive income: Gains and losses at 1 January 1,256 -1,580 -324 1,447 -1,955 -508 Value adjustments for the year 191 -375 -184 340 -35 305
Gains and losses at 31 December 1,447 -1,955 -508 1,787 -1,990 -203
Value adjustments Value adjustments of foreign entities recognised in other comprehensive income in the amount of: Value adjustments at 1 January 337 529 Value adjustment for the year 192 -326
Receivables Receivables from insurance enterprises 1,376 1,387 Receivables from Group undertakings 1 0 Reverse repos 326 885 Other receivables 286 148
Specification of write-downs on receivables from insurance contracts: Write-downs at 1 January 143 113 Exchange rate adjustments 2 -7 Transferred to assets held for sale and write-downs and reversed write-downs for the year -32 6
Receivables in connection with insurance contracts include overdue recievables totalling: Falling due: Within 90 days 160 194
Other receivables do not contain overdue receivables 17 Reinsurer’s share Reinsurers’ share 2,354 2,647 Write-downs after impairment test -37 -27
18 Current tax Net current tax, 1 January -167 -652 Exchange rate adjustments -16 64 Current tax for the year -949 -631 Current tax on equity entries 46 -76 Adjustment of current tax in respect of previous years 9 14 Tax paid for the year 425 1,017
Current tax is recognised in the statement of finansiel position as follows: Under assets, current tax 0 145 Under liabilities, current tax -652 -409
Net current tax -652 -264 19 Assets held for sale and associated liabilities Intangible assets 112 0 Property, plant and equipment 2 0 Investment assets and cash and cash equivalents 603 0 Reinsurers’ share of claims provisions 7 0
Premium provisions 125 0 Claims provisions 540 0 Other debt 77 0
In the statement of financial position at 31 December 2012 assets and liabilities related to the Finnish branch are classified as ‘Assets held for sale’ and ‘Liabilities associated with assets held for sale. The Group had no other assets held for sale and associated liabilites.
The proceeds from the sale are equal to the carrying amount of the related assets and liabilities. The profit is unchanged in relation to the assessment per 31.12.2012
Premium provisions 0 168 Claims provisions 0 565 Other debt 0 15
Number of shares at 1 January 60,373,269 1,509,332 60,694,811 1,517,370 Bought during the year 0 0 -1,620,637 -40,516 Sold during the year 200,000 5,000 0 0 Used in connection with exercise of incentive programme 121,542 3,038 299,787 7,495
Number of Nominal value % of Number of Nominal value % of Own shares shares (DKK ’000) share capital shares (DKK ’000) share capital
Claims provisions at 1 January 26,842 1,893 24,949 Value adjustments of provisions , beginning of year -1,569 -126 -1,443
Paid in the financial year in respect of the current year -7,442 -92 -7,350 Paid in the financial year in respect of prior years -8,233 -867 -7,366
Defined-benefit pension plans: Present value of pension obligations funded through operations 106 86 Present value of pension obligations funded through establishment of funds 2,045 1,671
Pension obligation, gross 2,151 1,757 Fair value of plan assets 1,109 1,034
Change in carrying amount of plan assets: Carrying amount of plan assets at 1 January 1,013 1,109 Exchange rate adjustments 58 -144 Investments in the year 130 81 Estimated return on pension funds 41 21 Acturial gains/losses -84 10 Paid during the period -49 -44
Specification of pension cost for the year: Present value of pensions earned during the year 69 56 Interest expense on accrued pension obligation 51 42 Expected return on plan assets -40 -23 Accrued employer contributions 11 11
The premium for the following financial years is estimated at: 114 78 Number of active persons and number of pensioners 1,428 1,376
Notes 22 Pensions and similar obligations (continued) % % Assumptions used Discount rate 2.4 3.3 Estimated return on pension funds 2.5 3.3 Salary adjustments 3.5 3.8 Pension adjustments 3.3 3.5
Description of the Norwegian plan In the Norwegian part of the group, 56 % of the employees have a defined-benefit pension plan. The plans are based on the employees’ expected final pay, providing the members of the plan with a guaranteed level of pension benefits throughout their lives. The pension benefits are determined by the employees’ term of employment and salary at the time of retiring. Employees having made contributions for a full period of contribution are guaranteed a pension corresponding to 66% of their final pay.
This years premium paid to FPK amounted to DKK 16m, which is about 3% of the annual premium in FPK (2012). FPK writes in its interim report for 2013 that it had a collective consolidation ratio of 114 at 30 June 2013 (consolidation ratio 104 at 30 June 2012). The collective consolidation ratio is defined as the fair value of the plan assets relative to the total collective pension obligations.
Tax liability Intangible rights 76 75 Land and buildings 253 227 Bonds and loans secured by mortgages 78 45 Contingency funds 1,061 835
Unaccrued timing differences of statement of financial position items 118 122
Notes 24 Other provisions Other provisions 1 January 11 98 Change in provisions 87 -75
Average number of shares (1,000) 60,491 60,155 Diluted number of shares (1,000) 223 104
Earnings per share, continuing business 36.0 39.4 Earnings per share 36.5 39.4 Diluted earnings per share 36.4 39.3 Earnings per share, discontinued and divested business 0.5 0.0 Diluted earnings per share, discontinued and divested business 0.5 0.0
Tryg Forsikring A/S and Tryg Garantiforsikring A/S have registered the following assets as having been held as security for the insurance provisions: Equity investments in associates 21 18 Equity investments 199 150 Unit trust units 3,261 3,741
Deposits with credit institutions 949 1,301 Receivables relating to reinsurance 1,614 585 Bonds and cash and cash equivalents included in the item ‘Assets held for sale’ 587 0 Interest and rent receivable 365 403 Equity investments in and receivables from Group undertakings which have been eliminated in the consolidated financial statements 2,128 1,944
According to the Bonds as collateral Gross amount statement of for repos/ Collateral in 2013 before offsetting Offsetting financial position reverse repos cash Net amount
Inflation derivatives, recognised in claims provisions 166 0 166 0 -155 11
TryghedsGruppen smba and the subsidiaries of TryghedsGruppen smba (other related parties). Related parties with significant influence include the Supervisory Board, the Executive Management and their members’ family.
Premium income - Parent company (TryghedsGruppen smba) 0.3 0.3 - Other related parties 3.0 1.9
Claims payments - Parent company (TryghedsGruppen smba) 0.0 0.2 - Other related parties 0.2 0.2
Specification of remuneration 2013 Number of persons Basic salary Variable salary Pension Total a)
DKKm 29 Related parties (continued) Fees are charges incurred during the financial year. Variable salary includes the charges for matching shares, which are recognised over 4 years and share options, which are recognised over 3 years. Reference is made to section Corporate governance’ of the management’s review on the corresponding disbursements.
The members of the Supervisory Board in Tryg A/S are paid with a fixed remunaration and are not covered by the incentive schemes. The Executive Management is paid a fixed remuneration and pension. The variable salary is awarded in the form of a matching share programme, see ‘Corporate governance’.
Each member of the Executive Management is entitled to 12 months’ notice and severance pay equal to 12 months’ salary plus pension contribution (Group CEO is entitled to severance pay equal to 18 months’ salary). Members of the Executive Management can assert no further claims in this respect, for example claims for compensation pursuant to Sections 2a and/or 2b of the Dansih Salaried Employees Act, as such claims are regarded as being included in the severance pay.
Intra-group trading involved: 2012 2013 - Subordinate loan capital, called in April 2013 490 0
Transactions between TryghedsGruppen smba and Tryg A/S are conducted on an arm’s lenth basis.
The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as per adopted by the EU on 31 December 2013 and in accordance with the Danish Statutory Order on Adoption of IFRS.
No standards or interpretations have been implemented for the first time for the accounting year that began on 1st January 2013 that will have a significant impact on the group. New or amended standards and interpretations that have been implemented but have not significantly affected the group: • Amendments to IFRS 7 ‘Offsetting of assets and liabilities’ • IFRS 13 ‘Fair Value Measurement’ • Amendments to IAS 1 ‘Presentation of Items of Other
• Amendments to IAS 16 ‘Annual Improvements 2009-2011 Cycle (Servicing Equipment)’
Future orders, standards and interpretations that the group has not implemented and which have still not entered into force: • IFRS 7 ‘Deferral of mandatory effective dates’ b)
• Amendments to IFRS 9 ‘Deferral of mandatory effective dates’ b)
• IAS 28 (as revised in 2011) ‘Investments in Associates and Joint Ventures’ a)
• Amendments to IAS 36 ‘Recoverable Amount Disclosures for Non-financial Assets’ a)
a) enters into force for the accounting year commencing 1 January 2014 or later.
b) enters into force for the accounting year commencing 1 July 2015 or later.
Significant accounting estimates and assessments The preparation of financial statements under IFRS requires the use of certain critical accounting estimates and requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are: • Liabilities under insurance contracts • Valuation of defined benefit plans • Fair value of financial assets and liabilities • Valuation of property • Measurement of goodwill, Trademarks and Customer relations
Owner-occupied property is assessed at the reassessed value that is equivalent to the fair value at the time of reassessment, with a deduction for depreciation and write-downs. The fair value is calculated based on a market-determined rental income, as well as operating expenses in proportion to the property’s required rate of return in per cent. Investment property is recognised at fair value. The calculation of fair value is based on market prices, taking into consideration the type of property, location and maintenance standard, and based on a market - determined rental income as well as operating expenses in proportion to the property’s required rate of return.
Measurement of goodwill, Trademarks and Customer relations Goodwill, Trademarks and customer relations was acquired in connection with acquisition of businesses. Goodwill is allocated to the cash-generating units under which management manages the investment. The carrying amount is tested for impairment at least annually. Impairment testing
involves estimates of future cash flows and is affected by a number of factors, including discount rates and other circumstances dependent on economic trends, such as customer behaviour and competition.
The consolidated financial statements are prepared on the basis of the financial statements of the parent company and its subsidiaries by combining items of a uniform nature. The financial statements of subsidiaries that present financial statements under other legislative rules are restated with reference to the accounting policies applied by the Group.
Investments in joint ventures are recognised using the pro rata consolidation method. Using pro rata consolidation, the Group’s share of joint venture assets and liabilities is recognised in the statement of financial position. The share of income and costs and assets and liabilities are presented on a line-by-line basis in the consolidated financial statements.
Business combinations Newly acquired undertakings are recognised in the consolidated financial statements from the date of acquisition. Comparative figures are not restated to reflect new acquisitions.
The purchase method is applied for new acquisitions if the Tryg Group gains control of the company acquired. Identifiable assets, liabilities and contingent liabilities in undertakings acquired are measured at fair value at the date of acquisition. The tax effect of revaluations is taken into account.
The cost of a company is the fair value of the agreed consideration paid plus, for acquisitions before 1 January 2010, costs directly attributable to the acquisition. If the final amount of the consideration is conditional on one or more future events, these adjustments are only recognised in cost if the event in question is likely to occur and its effect on cost can be measured reliably.
Currency translation A functional currency is determined for each of the reporting entities in the Group. The functional currency is the currency used in the primary
economic environment in which the reporting entity operates. Transactions in currencies other than the functional currency are transactions in foreign currencies.
On initial recognition, transactions in foreign currencies are translated into the functional currency using the exchange rate applicable at the transaction date. Assets and liabilities denominated in foreign currencies are translated using the exchange rates applicable at the statement of financial position date. Translation differences are recognised in the income statement under price adjustments.
Claims Claims are claims paid during the year and adjusted for changes in claims provisions less the reinsurers’ share. In addition, the item includes run-off gains/losses in respect of previous years. The portion of the increase in provisions which can be ascribed to unwinding is transferred to insurance technical interest.
Leasing Leases are classified either as operating or finance leases. The assessment of the lease is based on criteria such as ownership, right of purchase when the lease term expires, considerations as to whether the asset is custom- made, the lease term and the present value of the lease payments.
Discontinued and divested business Discontinued and divested business is consolidated in one item in the income statement and supplemented with disclosure of the discontinued and divested business in a note to the financial statements. Discontinued and divested business includes gross premiums, gross claims, gross costs, profit/loss on ceded business, insurance technical interest net of reinsurance, investment return after insurance technical interest, other income and costs and tax in respect of the discontinued business. Any reversal of earlier impairment is recognised under other income and costs.
The comparative figures, including five-year financial highlights and key ratios, have been restated to reflect discontinued business. Discontinued and divested business in the income statement includes the profit/ loss after tax of the run-off for the marine hull business in 2010 and the divested activities in the Finnish branch in 2012. Discontinued business also comprises the Tryg Forsikring A/S run-off business.
After completion of the development work, the asset is amortised according to the straight-line method over the assessed economic lifetime, though over a maximum of 4 years. The amortisation basis is reduced by any impairment and write-downs.
Equity investments in associates Associates are enterprises in which the Group has significant influence but not control, generally in the form of an ownership interest of between 20% and 50% of the voting rights. Equity investments in associates are measured using the equity method so that the carrying amount of the investment represents the Group’s proportionate share of the enterprises ’ net assets.
The fair values of quoted securities are based on stock exchange prices at the statement of financial position date. For securities that are not listed on a stock exchange, or for which no stock exchange price is quoted that reflects the fair value of the instrument, the fair value is determined using valuation techniques or using OTC prices. These include the use of similar recent arm’s length transactions, reference to other instruments that are substantially the same and a discounted cash flow analysis.
Impairment or reversal of earlier impairment arising in connection with the first classification as held for sale and gains or losses in connection with subsequent measurements at the lower of carrying amount and fair value less costs to sell are recognised in the income statement under the relevant items. Gains and losses are specified in the notes. Assets and disposal groups held for sale are measured at the lower of carrying amount at the time of classification as held for sale and fair value less costs to sell. Assets are not depreciated or amortised from the time of classification as held for sale.
Foreign currency translation reserve Assets and liabilities of foreign entities are recognised using the exchange rate applicable at the statement of financial position date. Income and expense items are recognised using the average monthly exchange rates for the period. Any resulting differences are recognised in equity. When an entity is wound up, the balance is transferred to the income statement. The hedging of the currency risk in respect of foreign entities is also offset in other comprehensive income in respect of the part that concerns the hedge.
Contingency fund reserves Contingency fund reserves are recognised as part of retained earnings under equity. The reserves may only be used when so permitted by the Danish Financial Supervisory Authority and when it is for the benefit of the policyholders. The Norwegian contingency fund reserves include provisions for the Norwegian Natural Perils Pool, security reserve and guarantee reserve. The Danish and Swedish provisions comprise contingency fund provisions. Deferred tax on the Norwegian and Swedish contingency fund reserves is allocated.
received on in-force contracts that relates to unexpired risks at the statement of financial position date is reported as premium provisions. Premium provisions are generally calculated according to a best estimate of expected payments throughout the agreed risk period; however, as a minimum as the part of the premium calculated using the pro rata temporis principle until the next payment date. Adjustments are made to reflect any risk variations. This applies to gross as well as ceded business.
In case of changes to the benefits stemming from the employees’ employment with the group so far,a change is seen in the actuarially calculated capital value which is considered as pension costs for previous financial years. The change is recognised in the results immediately.
Cash flows from investing activities comprise payments in connection with the purchase and sale of intangible assets, property, plant and equipment as well as financial assets and deposits with credit institutions.
Note Investment activities 1 Income from Group undertakings 2,265 2,410 Interest expenses 0 1 Administration expenses in connection with investment activities -8 -6
Other comprehensive income which cannot subsequently be reclassified as profit or loss Revaluation of owner-occupied property for the year 42 9 Tax on revaluation of owner-occupied property for the year -12 -3 Actuarial gains/losses on defined-benefit pension plans -62 179 Tax on actuarial gains/losses on defined-benefit pension plans 16 -54 Deferred tax on contingency fund provision 0 0
Profit/loss for the year 1,865 -1,251 1,594 2,208 Revaluation of owner-occupied properties 42 42 Exchange rate adjustment of foreign entities for the year 193 193 Hedging of currency risk in foreign entities for the year -184 -184 Actuarial gains and losses on pension obligation -62 -62 Tax on changes in equity 50 50
Dividend paid -400 -400 Dividend, own shares 6 6 Purchase and sale of own shares 66 66 Exercise of share options 44 44 Issue of share options 9 9
Dividend paid -1,594 -1,594 Dividend own shares 15 15 Purchase and sale of own shares -800 -800 Exercise of share options 100 100 Issue of share options and matching shares 4 4
The possible payment of dividend from Tryg Forsikring A/S to Tryg A/S is influenced by contingency fund provisions of DKK 3,020m (DKK 3,363m in 2012). The contingency fund provisions can be used to cover losses in connection with the settlement of insurance provisions or otherwise for the benefit of the insured.
Remuneration for the Executive Management is paid partly by Tryg A/S and partly by Tryg Forsikring A/S and Tryg Forsikring, a Norwegian branch of Tryg Forsikring A/S and is charged to Tryg A/S via the cost allocation. Remuneration for the Supervisory Board, the Executive Management and risk-takers can be seen from note 29 concerning related parties of the Tryg Group. Refer to Note 7 of the consolidated financial statements for a specification of the audit fee.
Revaluation and impairment to net asset value Revaluation and impairment at 1 January 1,998 3,902 Revaluations for the year 2,304 2,445 Dividend paid -400 -1,594
Tax payable at 31 December 24 14 6 Deferred tax assets Capitalised tax losses Tryg A/S 0 0
The loss in Tryg A/S can only be utilised in Tryg A/S. The loss can be carried forward indefinitely.
Administration fee, etc. is settled on a cost-recovery basis. Intra-group accounts are offset and carry interest on market terms.
Reconciliation of profit/loss Profit/loss – IFRS 2,208 2,369 Change during the year of deferred tax provisions for contingency funds 0 -2
Reconciliation of equity Equity – IFRS 10,979 11,107 Deferred tax provisions for contingency funds 17 17 Change during the year of deferred tax provisions for contingency funds 0 -2
Equity – Danish FSA executive order 10,996 11,122 11 Accounting policies Please refer to Tryg Group’s accounting policies.
Key ratios Gross claims ratio 76.0 80.4 71.8 69.0 70.1 72.9 68.5 64.7 75.6
Claims ratio, net of ceded business 76.3 78.1 69.7 68.9 71.2 74.7 69.3 66.4 73.1
Combined ratio exclusive of run-off 94.4 98.4 90.1 87.0 88.4 93.5 89.0 84.0 90.8
Key ratios Gross claims ratio 64.2 78.2 62.6 56.8 59.8 67.7 73.1 55.3 80.2
Combined ratio exclusive of run-off 115.1 107.8 92.8 88.7 87.2 92.0 94.3 89.8 94.5
Key ratios Gross claims ratio 78.5 79.9 68.7 70.3 70.2 71.2 73.7 75.9 74.9
Technical interest ratio, net of reinsurance 0.9 0.7 0.9 0.3 0.3 Return on equity before tax on continuing business (%) 30.7 11.1 18.4 30.2 27.1 Return on equity after tax on continuing business (%) 23.6 8.2 13.1 21.8 21.5
Number of full-time employess, continued business, at 31 December 4,119 4,101 4,076 3,913 3,703 Number of full-time employess, discontinued and divested business at 31 December 217 191 242 189 0
Share performance Earnings per share (DKK) 31.7 9.5 18.9 36.5 39.4 Diluted earnings per share (DKK) 31.7 9.5 18.9 36.4 39.3 Earnings per share (DKK) of continuing business 33.3 11.9 19.0 36.0 39.4 Number of shares, end of period (1,000) 63,228 60,634 60,373 60,695 59,374
Capital base Equity plus share of subordinate loan capital and less intangible assets, tax asset, discounting, equalisation reserve and proposed dividend.
Operating ratio Calculated as the combined ratio plus insurance technical interest in the denominator.
Tier 1 capital Equity less proposed dividend and share of capital claims in subsidiaries.
In Denmark, motor insurance taken out by concept customers includes Tryg’s roadside assistance, such as towing and battery jump-start.
Nordea branches. Moreover, Tryg engages in international cooperation with the AXA Group. It is an important element of Tryg’s distribution strategy to be available in places where customers want it and that most distribution takes place via the company’s own sales channels.
Statements regarding Tryg’s future operating results, financial position, cash flows, business strategy, plans and future objectives other than statements of historical fact can generally be identified by the use of words such as ‘targets’, ‘believes’, ‘expects’, ‘aims’,
Read more in the chapter Capital and risk management in the annual report on page 34, and in Note 1 on page 67, for a description of some of the factors which may affect the Group’s performance or the insurance industry.
This is a translation of the Danish annual report 2013. In case of any discrepancy between the Danish and the English version of the annual report 2013, the Danish version shall apply.