Group chart at 31 December 2008. Companies and branches are wholly-owned by Danish owners and placed in Denmark unless otherwise stated.
TrygVesta’s insurance offering includes the following areas: liability, workers’ compensation, motor, building, contents, cargo, house, personal accident and health care. By far most of our customer relations are handled through our own channels. In addition, we have a strategic partnership with Nordea, the largest bank in the Nordic region.
The future is now “At TrygVesta, we are seeing major changes on several fronts.
Businesses develop in global markets; life styles and social cultures are changing – and our customers make new demands on how we can continue to provide peace of mind in their homes, at work and in their spare time.
Results 32 The Group’s financial performance in 2008 34 Private & Commercial Denmark 39 Private & Commercial Norway 43 Finnish general insurance 46 Swedish general insurance 48 Corporate 50 Investment activities 52 Our customers 55 Our employees 58
Capitalisation and risk management 60 Capitalisation and profit distribution 62 Risk management 65
Corporate governance 74 Supervisory Board 76 Group Executive Management 78 Corporate governance 80 Remuneration 85 Shareholder information 87
Accounts Statement by the Supervisory Board and the Executive Management 91 Independent auditors’ report 92 Income statement and balance sheet – TrygVesta Group 93 Statement of changes in equity – TrygVesta Group 96 Cash flow statement – TrygVesta Group 98 Notes 99 Income statement and balance sheet – TrygVesta A/S (parent company) 138 Statement of changes in equity (parent company) 140 Notes (parent company) 141 Financial highlights and key ratios by geography 146
Inserts are placed in a separat pocket at the end of the Annual Report 2008 l Introduction to TrygVesta l TrygVesta Annual Report 2008
The year 2008 will go down in history as a year of financial crisis, a rapid slowdown in economic activity and difficult conditions for investors, borrowers and banks. Thanks to
– profitable growth, peace-of-mind delivery, self-service and human competencies – continued to support a positive development. Growth in Finland and Sweden outperformed expectations. Product improvements such as the extended roadside assistance product Udvidet Tryg Vejhjælp and the new building policy Ny Villaforsikring in Denmark enhanced our peace-of-mind delivery while the introduction of online sales of travel insurance provided new self-service options.
Profit before tax was down from DKK 3,109m to DKK 1,347m due to sharp declines in equity returns. Profit for the year after tax was DKK 846m, which exceeded expectations by
Rising average prices indicate that growth and increasing profitability are in pipeline for the coming years. TrygVesta’s conservative investment policy and a reduced proportion of equities since mid-2007, our investment portfolio generated a positive return of 3.5% in 2008.
DJ Euro Insurance Index including dividends dropped 44% in 2008. Despite these strong price declines the TrygVesta share yielded a total return of -12% including dividends. A
healthy insurance business and conservative investment strategy were contributory factors in the relatively good performance of TrygVesta shares.
TrygVesta is a Nordic insurance group addressing the entire Nordic market. That is why we implemented a new Nordic organisation on 1 January 2009 with clearly defined pan-Nordic responsibility and uniformity with respect to sales, product development, claims handling,
At the same time, our new process-oriented organisation creates good environments for the professional and personal development of our 4,000 employees, and we intensify our in-house cooperation with a view to exploiting our competencies in the best possible manner. We call our new structure “The Living Organisation”. It reflects our corporate culture and to exploit it to the full, it ties in with “The Living House”, a change of our physical working environment designed to enhance innovation, development, knowledge-sharing and drive.
TrygVesta managers and employees to commit themselves to and familiarise themselves with the value of CSR.
TrygVesta has drawn up a CSR declaration of intent, defining our commitment and describing our responsibility in relation to employees, customers and the external community. For example we have employed maladjusted young people with an immigrant background in an attempt to give them better opportunities and to meet customer requirements for a broader customer service interface.
Recent years’ favourable performance will not make us rest on our laurels. We have further potential for improvement in many areas, and we will face a wide variety of future challenges and opportunities to expand our peaceof -mind delivery and value creation.
Profit/loss on gross business 2,230 1,884 2,760 2,662 2,554 Profit/loss on ceded business -708 -7 -591 -343 -669 Technical interest, net of reinsurance 185 170 343 501 499
Return on investments after technical interest 371 894 1,228 340 -988
Profit/loss for the year, continuing business 1,496 2,125 3,085 2,267 846 Profit/loss on discontinued and divested business after tax -75 -28 126 -1 0
Key ratios Gross claims ratio 68.3 71.1 65.9 67.3 67.9 Business ceded as a percentage of gross premiums 4.6 0.1 3.7 2.1 3.9
Claims ratio, net of reinsurance 71.2 69.7 68.4 68.1 70.7 Expense ratio, net of reinsurance 17.6 17.6 17.2 17.1 17.8
Gross expense ratio with adjustment ** 17.1 17.0 16.8 16.7 16.9
Number of shares, year end (1,000) 68,000 68,000 67,790 67,638 64,378
Other key ratios are calculated in accordance with ’’Recommendations & Financial Ratios 2005’’ issued by the Danish Society of
Leading the Brand 192 managers with personnel responsibilities completed a Nordic development programme during the year. The programme Leading the Brand was a strategic initiative aimed at forging a closer link between managers’ role and TrygVesta’s vision, strategy and corporate values. In 2009, TrygVesta intends to launch a further management development programme – Leading by Strategy, designed for managers who have managers reporting to them.
New roadside assistance product in Denmark TrygVesta extended its role as a peace-of-mind provider with the roadside assistance concept Tryg Vejhjælp in Denmark. Tryg Vejhjælp offers a loan car, towing, battery jumpstart and other services. The extended Tryg Vejhjælp product also offers a taxi service, hotel accommodation, an annual safety check-up and a bi-annual change between snow tyres and summer tyres. Tryg Vejhjælp was added to the motor insurance coverage of some 300,000 concept customers in 2008 at no additional cost.
New international network partner TrygVesta and AXA Corporate Solutions signed a letter of intent to the effect that by 1 January 2009 TrygVesta would be using the international network of AXA Corporate Solutions to meet Nordic customers’ international insurance requirements. The AXA Corporate Solutions partnership makes TrygVesta part of a global network represented in more than 90 countries and with geographical coverage of 95% of the inhabited world. AXA is one of the world’s largest insurance companies.
Self-service in Norway In Norway, TrygVesta’s customers were given the option to report claims electronically on the Internet. The option of electronic claims reporting means that customers’ claims are handled quicker, and it involves less forwarding of documents. This solution makes internal processes more efficient and creates potential for further automation efforts in claims handling. The option was received favourably by customers.
SundPuls TrygVesta launched a preventive health care product, called SundPuls. The product offers Danish businesses a thorough check of the state of their employees’ health. Based on the health check, each employee receives an individual action plan and the business receives an overall anonymised report. In addition, employees are offered advice on food, exercise, smoking and alcohol over the SundPuls telephone service and can read about health issues at the SundPuls Internet portal. Employees with special needs, for example substance abuse problems or a risk of lifestyle diseases, may be offered additional expert counselling. SundPuls is offered to businesses with more than 25 employees and the annual cost is DKK 895 per employee.
The partnership provides for Nordea to sell TrygVesta’s policies on a pan-Nordic basis in its branch network, and for TrygVesta to sell Nordea’s life and pension products in Denmark and Norway. The agreement also involves Nordea’s portfolio management of most of TrygVesta’s investment assets.
The first milestone was to reverse the adverse trend in the Oslo area and lift sales, and in 2008 we out- performed the growth forecasts for the first time. TrygVesta is now the company that records the highest growth rates in the private lines in Oslo. In 2009, TrygVesta intends to focus on further increasing sales in Oslo to the private as well as the commercial market.
The office had a staff of five at 31 December 2008.
NemKonto In Denmark, TrygVesta began transferring repayments from insurances automatically to customers’ NemKonto,
Global is the future “TrygVesta’s share of the aggregate Nordic market is expected to rise in the years ahead, including from our rapidly growing market shares in Finland and Sweden. TrygVesta operates on a pan-Nordic scale, developing uniform sales channels, products and infrastructure.
The Nordic insurance markets have a wide distribution of conventional insurance services such as motor, building, transport, workers’ compensation and personal accident insurance. Volume growth is largely in line with GDP plus the impact of price changes over time. Profitability fluctuates relative to claims expenses.
An economic downturn will, however, generally result in weaker growth as car and real estate sales decline. Likewise, the number of commercial policies and workers’ compensation policies will be affected by cyclical trends. These factors are to some extent offset by ongoing price increases.
Historically, weaker economic activity has generally not had an adverse impact on claims due to the combined effect of more cautious behaviour, lower mileage and the possibility of cheaper claims procurement. Furthermore, prior periods of weak economic activity have only to a limited extent been characterised by unusual increases in the number of, for example, burglaries and fraudulent claims.
Markets and strategy l Markets and strategy l TrygVesta Annual Report 2008
while the large companies have focused on service and extended coverage. The competitive environment in each of the markets is described in more detail on page 17 in the section on The Nordic insurance markets.
All insurance companies have investment portfolios consisting of funds dedicated to payment of claims at a later date. Such portfolios are generally invested in equities, real estate and bonds, but some industry players have also chosen to invest portfolios in hedge funds and structured financial products. Interim reports published by the
TrygVesta has no structured financial products or hedge funds, and the proportion of equities in the investment portfolio was reduced already in 2007 and early in 2008.
Furthermore, the bond portfolio consists of liquid, ordinary bonds with an average maturity of two years.
Source: Data based on national statistics and most recent published financial statements for the largest companies.
For a number of years TrygVesta has worked with an internal capital model
Growth exceeded 70% in 2008. The strong growth was attributable to an increasing number of companies offering health care insurance in their pay packages. TrygVesta expects the total market for health care insurance in Denmark to exceed one million policies in 2009. The Norwegian market for health care insurance is smaller than the Danish market due to the strong public focus on health and welfare.
The market is nevertheless seeing healthy growth with policies being regarded as a supplement to the public system.
Insurance companies are, naturally, greatly impacted by weather related claims. The climate has warmed in the Nordic region, and it is expected generally to become warmer, damper and windier, thereby likely to increase claims expenses. TrygVesta regularly assesses the risk of changed claims patterns in order to price policies such as building and house insurance correctly. However, climate change also presents opportunities as we can advise customers on how to prevent damage, and we adapt our coverage in order to reduce customers’ concerns.
The Solvency II regime will require enhanced expertise and core competencies, thereby potentially leading to greater consolidation in the market due to smaller players’ need for and lack of resources to meet the new sophisticated requirements.
QIS is a term for quantitative studies about the effect from new
The aggressive market behaviour of small and mediumsized insurers from 2005 to 2008 is expected to be replaced by endeavours to strike a good balance between price and risk in the years ahead. The price changes already announced will gradually feed through as gross premiums earned in 2009 and 2010.
As regards the commercial and corporate market, a foreign group opened an office while another announced an intention to offer insurance to large businesses.
Small Norwegian insurers have increased their market share in recent years at the expense of larger companies.
Some of the small companies are expected to retain their growth ambitions despite difficult conditions for investment portfolios, although all market players are assumed to focus on profitable growth and capital.
Competition in Finland in 2008 was marked by rising claims expenses and a consequent need among the large insurers to increase prices. Bancassurance is common in
2009 is expected to see rising prices in order to offset the impact of higher claims expenses on profitability, and
The Swedish market is generally characterised by being served by call centres. TrygVesta is growing rapidly in the
Swedish market, partly thanks to the bancassurance partnership with Nordea and partly to active additional sales to new customers through the company’s own call centre. The partnership with Nordea has contributed to a quick penetration in Sweden where bancassurance is a fairly new concept.
In line with trends in the other Nordic markets, the underlying claims performance requires price increases in order for profitability to be maintained, and TrygVesta has scheduled price increases in 2009.
TrygVesta has been an active player in the Swedish market since 2006, and has built a portfolio of DKK 259m
Gjensidige 2008*2007200620052004 * Latest published interim report before 3 March 2009 * Latest published interim report before 3 March 2009 l Markets and strategy l TrygVesta Annual Report 2008
Building insurance accounts for 11% of total premiums earned by the Group. A building policy covers damage to the policyholder’s house caused by events such as fire and storm and water damage. The policy also provides legal expenses cover and covers the policyholder’s liability as the owner of a building.
Personal accident insurance contributes 10% of total premiums earned by the Group. A personal accident insurance policy provides cover against accidental bodily injury or death. The policy may be taken out with full-time or spare-time cover. Coverage and sums insured are
tailored to customer requirements. Compensation is in the form of a lump sum intended to help the policyholder cope with the financial consequences of an accident, thereby easing the strain of a changed everyday life.
Workers’ compensation insurance 9% of total premiums earned by the Group is attributable to workers’ compensation insurance. A workers’ compensation policy provides cover for employees against bodily injury sustained at work and, in Norway, also occupational diseases. This insurance is mandatory for all employers and covers their employees, except for public employees and those employed by sole proprietorships.
Proactive claims handling has three winners: the business, the injured person and TrygVesta in the form of a shorter period of absence from work, enhanced selfesteem for the injured person and reduced expenses.
A transport insurance policy covers damage to the policyholder ’s dispatched goods caused by for example collision, capsizing or crashing.
Our efforts to implement the strategy in all relevant processes such as budgeting, marketing, utilisation of capital and IT are clearly and firmly anchored, and the work is organised to a defined schedule with general targets and sub-targets.
Emphasising that overall growth should be profitable increases our focus on profitable pricing and on managing relative costs, as is also reflected by the change of our strategic theme ‘growth’ to ‘profitable growth’ in 2008.
We intend to maintain and strengthen our market position in the Nordic region with due consideration to earnings.
In Denmark and Norway, where we are the number one and number three player, respectively, in terms of market position, we are making adjustments to where and how customers meet us and to the products and coverage required by individual customers. Thus we enhanced our motor policy for concept customers in 2008 by adding the Tryg Vejhjælp roadside assistance feature at no extra cost, but with add-on options. We still have relatively modest market shares in Finland and Sweden where we focus strongly on sales. The Finnish sales channels were extended by an outbound call centre and our own sales force, and sales in 2008 were the highest since the beginning of 2002.
We continuously seek to have efficient claims handling procedures, always enabling us to provide high quality at a low cost. We do this by making claims handling processes more efficient on an ongoing basis and by joint procurement so that our customers get a quality experience.
A period of economic downturn is a challenge for many individuals and businesses. Accordingly, our peace-of-mind delivery is even more relevant in periods of uncertainty because an unforeseen expense or event that changes everyday life for the claimant may have greater consequences than would otherwise be the case.
TrygVesta’s peace-of-mind delivery aims to alleviate customer concerns, and we do this by offering easy access, clear communication, easy-to-understand coverage and remedying if a claim occurs.
Innovative – are reflected in our products and our communications with customers. We changed the contents of our Danish building policies in 2008 to provide extended coverage for precipitation claims caused by changed climatic conditions, thereby meeting our customers’ need for peace of mind.
and whenever it suits them best, the same way as many people now handle their banking matters, travels and purchases of books, electronic products and the like.
We already offer various online service options, but this only amounts to a small proportion of our total business processes. In order to fully exploit online insurance servicing a number of processes and product contents have to be adjusted to facilitate end-to-end processes.
Our existing solutions comprise sales in Sweden and Finland, sales of travel insurance, and an option for commercial customers to report changes to the persons covered by workers ’ compensation insurance and changes to their car fleet.
In 2009, online claims reporting will become available for private customers in Norway. Customers in Denmark will be able to buy the most common policies, such as motor, contents and building, and in a few years’ time, customers will have a full self-service option for changing their policies and for reporting and handling claims.
In order to be an attractive partner for customers and employees alike, employees need to develop and be compassionate, and as an organisation we should live up to our vision. Our strategic focus on human competencies reflects that we understand and respect that people are the most important resource in a successful organisation.
Lean is a process driven and customer oriented review of work processes and routines for the purpose of reducing waste and free resources, making room for development, innovation and more efficient work routines. Our Lean efforts were launched in 2007 with three projects, and 16 projects were implemented in 2008. 28 new projects are scheduled for 2009.
As an example, Lean has been implemented in our Private underwriting departments, reducing handling times by more than 50% for several tasks within a few weeks. Furthermore, employee satisfaction has increased, and the dayto -day collaboration with Sales and Customer Service has grown much stronger. These factors have also contributed to the growing customer satisfaction. The experience gained in Private underwriting will now be deployed in other departments.
“The Living House”, a means to fully exploit the synergies anticipated from project “The Living Organisation”, will create a new environment in the workplace, intended to further enhance creative thinking and innovation.
Initiatives and results in 2008 • growing market shares • Swedish part of the Corporate business • Oslo efforts • health care – treatment insurance in Norway,
Goals and projects for 2009-10 • annual premium growth in excess of market growth • to increase Nordic market share • to increase share of the private market in Finland and Sweden (2012) to 8%
Initiatives and results in 2008 • increase customer loyalty • satisfaction with claims handling • risk consultancy for corporate customers • simplified customer communications • segmentation/customer commitment
Goals and projects for 2009-10 • to enhance customer loyalty • to increase the proportion of concept customers • to increase the retention rate
Initiatives and results in 2008 • “ The Living House” • lower rates of employee turnover and sickness absence • Leading the Brand training • Managing by BSC • Corporate Social Responsibility (CSR) • Lean
This group increased following the introduction of more peace-of-mind deliveries for concept customers
Administrative expenses and sales costs as a percentage of earned premiums 16.5 with a slowly falling trend
The expense ratio for 2008 was in line with expectations when adjusted for expenses for ”The Living House”
The ratio of the technical result exclusive of technical interest to earned premiums 89-91 in the medium term
Note: 2001 = 100 for indexed indicators l Markets and strategy l TrygVesta Annual Report 2008
To be the most attractive workplace in the financial sector in the Nordic region
The portfolio per employee decreased in 2008 by 5% points due to the decline of NOK relative to DKK
Employee satisfaction is among the highest in the financial sector in the Nordic region
The financial crisis and economic downturn have caused greater uncertainty in a number of areas. TrygVesta is committed to providing profit guidance that is as precise as possible. However, with respect to 2009, the outlook is subject to much greater uncertainty.
The Outlook for 2009 does not include the impact from the acquisition of Moderna Försäkringar Sak, as these activities only will be included once the transaction is closed and this is expected in first half of 2009. For further information please refer to separate company announcement dated 2 March 2009.
Since the end of the third quarter of 2008, the credit and financial crisis has, among other things, resulted in significant changes in interest rates and exchange rates, and such changes impact TrygVesta’s profit outlook for 2009.
Interest rate level 3.93% Exchange rate DKK/NOK 0.85 Premium growth* 4.9% 4% Technical result before run-off 1,591 1,500 1,650 1,350 Technical result after run-off 2,384 1,500 Investment result -988 300 Profit before tax 1,347 1,800 Profit after tax 846 1,300 1,400 1,200 * In local currency ** Since the autumn of 2008, changes in interest rates and exchange rates have impacted the outlook negatively for the pre-tax profit for 2009 by DKK 400m, of which DKK 350m is attributable to lower interest rates and DKK 50m to the lower NOK against DKK. Interest rate changes have had an adverse impact of 1 percentage point on the combined ratio.
in local currency terms, assuming no major changes in competitive conditions relative to 31 December 2008.
Our third quarter 2008 interim report released in November 2008 set out a combined ratio forecast for 2009 at the level prevailing in 2008. This was based on interest rate and other assumptions as prevailing at 30 September 2008.
The interest rate used to discount provisions for claims fell by 1.2 percentage points in the period from the fourth quarter of 2008 until mid-February 2009 (including the effect of a changed discount curve) with a significant adverse effect on the combined ratio. Seen in isolation, a 1 percentage point drop in interest rates would increase the combined ratio by around 1 percentage point due to an increase in the discounted technical provisions.
The increase of the outlook in the combined ratio from the forecast in the autumn of 2008 thus only reflects the lower interest rate level.
The outlook for the financial results for 2009 is based on assumptions with respect to gross earned premiums, gross claims incurred, gross expenses, result of business ceded and technical interest. Our outlook for gross earned premiums is based on the Group’s portfolio at 31 December 2008 and assumptions with respect to sales and loss of policies and price adjustments of existing policies.
We generally base our expectations for claims incurred on assumptions for the various products in the individual business areas. Expectations regarding claims ratios are based on historical performance in the form of average claims ratios for the past five years, with recent years’
The outlook for 2009 assumes weather related claims of around DKK 250m and large claims of around DKK 500m gross. The outlook assumes no run-off losses or gains in 2009 on the provisions for claims.
The outlook further includes other expenses such as those relating to IT, operations and our owner-occupied properties, which are predominantly based on agreements that are known to us.
Due to the volatile and unusual conditions prevailing in the financial markets the assumptions for investment return are subject to considerable uncertainty. See the section on Risk management on page 69 for a sensitivity analysis.
NOK against DKK would adversely impact the total profit of the Group which presents its financial statements in
DKK. The currency risk on the part of equity tied up in
The effective tax rate is affected by the corporate tax rate of 25% in Denmark and 28% in Norway, and by the fact that tax loss carry-forwards are not utilised in Sweden and Finland. We expect an effective tax rate of 27 for 2009. Whether this is achieved depends on the amount of gains or losses on equities which are tax-exempt or non-deductible.
The return on equity for 2009 is expected to be 14-16%
Gross earned premiums were 4.9% higher in local currency terms (4.3% in DKK terms), the result of a great effort by our employees, high customer retention rates and a large inflow of new customers, with the new markets in Sweden and Finland once again contributing high growth rates. In 2008 we succeeded in reversing the previous negative growth in Private & Commercial Norway to positive growth of 4.8% in local currency terms, driven by higher customer retention and premium increases.
However, 2008 was challenging for our insurance operations. Claims expenses increased due to higher average claims within building insurance, triggered in part by rising claims inflation (higher labour costs and material prices)
The technical result amounted to a profit of DKK 2,384m in 2008 compared with DKK 2,820m in 2007. Outperforming the forecast announced in our third quarter interim report in November 2008 by DKK 184m, the profit was primarily driven by run-off gains on prior-year provisions of DKK 191m in the fourth quarter of 2008.
good in a historic perspective. Higher claims and wage inflation combined with investments in “The Living
House” were the primary causes of the technical result for 2008 being DKK 436m lower than in 2007. Claims expenses also increased within personal insurance, including health care insurance, in 2008. The growing use of health care insurance has triggered higher claims expenses, and premium increases have been implemented to offset this effect.
DKK 887m in 2008. TrygVesta recognises all investment assets at market value, and value changes have a direct impact on the income statement. The proportion of equities in the investment portfolio was reduced from
DKK 1.2bn higher if the lower allocation to equity investments had not been implemented.
The profit after tax fell by DKK 1,420m to 846m due to the lower investment return and a slightly lower technical result. Capital losses on equities are non-deductible, and therefore the tax rate was above normal.
Sweden and Finland accounted for 1.4 percentage points and Denmark and Norway accounted for 3.5 percentage points of the Group’s total premium growth of 4.9% in local currency terms.
Gross earned premiums in the Corporate business increased by 4.3% over 2007. Gross earned premiums grew rapidly at the beginning of the year due to the large inflow of new customers in the second half of 2007, while the growth rate was somewhat slower in the second half of 2008. During the period from mid-2007 to 2008, the
Corporate business outperformed the estimated market growth by a considerable margin, and a more natural growth level was therefore expected in the second half
The combined ratio was up from 86.1 in 2007 to 89.1 in 2008. The adverse performance was triggered by higher claims expenses for building and personal insurances.
Large claims were higher than expected in 2008, while weather related claims were lower than expected. Run-off gains had a favourable impact of 4.6 percentage points on the combined ratio in 2008, on a level with 2007.
Gross claims at DKK 11,766m were 5.3% higher, bringing the claims ratio, net of ceded business, to 71.8 in 2008 compared with 69.4 in 2007. The DKK 591m increase in gross claims incurred was primarily attributable to higher claims expenses in relation to building and personal insurance.
compared with a net amount of DKK 743m (gross amount of DKK 744m) in 2007. The motor and personal accident lines were the major contributors of run-off gains, while building generated run-off losses in 2008, mainly attributable to larger than expected cloudburst claims from 2007.
The underlying claims ratio increased when adjusted for the effect of large claims, weather related claims, run-off results and interest rates. The underlying increase in claims expenses was attributable to higher claims expenses in several areas. The average building claim in Denmark was
As disclosed in the third quarter 2008 interim report, costs in the fourth quarter of 2008 would be adversely impacted by costs in connection with “The Living House”
project to create the workplace of the future. The project will change the physical working environment at Ballerup and Bergen with a view enhancing innovation, development and knowledge sharing. Previously, all or part of such costs would have been capitalised as appreciation of the values of the properties, but the item has been recognised in current costs due to the current uncertain situation.
DKK 1,523m in 2007, corresponding to a gross return of 3.5% in 2008 compared with 4.1% in 2007. Investment activities generated a loss of DKK 988m after transfer of technical interest compared with a profit of DKK 340m in 2007.
The performance fell considerably short of expectations and was mainly attributable to capital losses on equities of DKK 887m incurred in 2008. The proportion of equities in the investment portfolio was reduced from DKK 5.4bn in 2007 to DKK 1.7bn in January 2008. Capital losses on equities would have been approximately DKK 1.2bn higher if the lower allocation to equity investments had not been implemented.
TrygVesta acquired its head office in Ballerup at a price of DKK 1,085m in the spring of 2008. The acquisition replaced the existing lease with Danica from 1995, which would have expired in 2025. The purchase provides
DKK 842m in 2007, equalling an increase in the effective tax rate from 27% to 37%. The effective tax rate in 2007 was favourably affected by the reduction of the Danish corporate tax rate from 28% to 25%, which reduced the deferred tax. The effective tax rate in 2008 was adversely affected by non-deductible equity losses, which were partly offset by a favourable impact from closed tax cases.
DKK 25,193m in 2007, equal to 6.4%. The ratio of provisions for claims, net of reinsurance, to earned premiums, was 112 against 124 in 2007.
Equity stood at DKK 8,244m at 31 December 2008, a reduction of DKK 1,766m.
For further information please refer to separate company announcement dated 2 March 2009.
The higher average claims on building insurance presented one of the major challenges in 2008 due to higher wage to skilled craftsmen and higher costs of materials, a changed claims mix and run-off losses from an increase of provisions for cloudburst claims from 2007. However, the rapid economic slowdown reduced demand for craftsmen services during the year, thereby curbing claims inflation. TrygVesta has implemented price increases on building insurance as a
Gross earned premiums 6,390 6,490 6,605 Gross claims incurred -4,215 -4,041 -4,443
Denmark under the Tryg brand name. Sales are handled by five customer centres/call centres, 16 local service centres, our own sales agents, Nordea’s branches, affinity groups, car dealers and real estate agents. Private &
Performance at a sustained high level in 2008 despite rising claims inflation
result of the change in claims patterns in connection with the climate changes.
Health care insurance premiums grew by more than 70%, and TrygVesta further strengthened its position in this market. The Private & Commercial and Corporate portfolios total more than DKK 200m.
The motor portfolio is characterised by a large proportion of high seniority customers, for whom the continuous shift towards lower premiums is connected with a high degree of loyalty and good profitability.
In 2008, Private & Commercial Denmark launched a number of initiatives to further enhance the customer experience.
DLG, Denmark’s leading supplier of feedstuffs for the agricultural sector, for the distribution of insurance products in Denmark and Sweden. DLG, which also sells telecommunications, food products and machinery, generates annual revenue of DKK 38bn and has 5,000 employees.
The agreement is expected to contribute to earned premiums and earnings beginning in 2009.
In 2008, total claims expenses at DKK 4,443m were up by 9.9% relative to 2007, and the gross claims ratio increased from 62.3 to 67.3. Despite the increase we are still at an acceptable level. In this connection, it should be emphasised that the claims ratio was exceptionally low in 2007.
The average claim in building insurance rose by around 20 percentage points in 2008, which was one of the most important reasons for the increase in claims expenses.
Average claims rose as a consequence of higher payroll and material costs and a change in the claims mix, with
The claims frequency for motor policies fell by around 3 percentage points in 2008 compared with 2007, and the average claim was up by around 4 percentage points.
TrygVesta’s cooperation with selected garages helps keep average claims expenses at a competitive level, while ensuring that customers receive high-quality service.
A large part of this difference was attributable to higher run-off gains in 2007, as, in relative terms, a 2.6 percentage point higher positive impact was recorded in 2007 as compared with 2008. Moreover, the underlying claims inflation contributed to the higher combined ratio in 2008 relative to 2007. Premium initiatives already implemented and additional planned initiatives are intended to enable the strong earnings to be retained going forward.
Claims ratio, net of ceded business 65.3 67.8 74.2 Gross expense ratio 20.4 20.8 21.7 of the positive trend, TrygVesta was able to retain its market share in 2008. This could be viewed as an indication that the many initiatives, particularly in the Oslo region, are beginning to pay off.
The technical result amounted to a profit of DKK 315m in 2008 compared with DKK 692m in 2007. The perfor mance was adversely affected by high claims inflation and a higher number of fires in single-family houses as compared with previous years. Moreover, Private & Commercial Norway recorded run-off losses of DKK 32m in 2008 as compared with run-off gains of DKK 81m in 2007.
Sales are handled by 85 franchise offices, our own sales agents, three regional customer centres, 35 local sales centres, car dealers and Nordea’s branches. Private &
Commercial Norway has around 1,100 employees and some 300 franchise office staff.
Private & Commercial Norway recorded a gross premium increase of 4.8% in local currency terms (3.3% in DKK
terms) to DKK 4,636m, as against a decline in gross premiums of 0.2 percentage point in local currency terms in 2007. The DKK 146m increase was attributable to a combination of rising customer loyalty and increased sales in several regions, particularly in the Oslo area.
Gross premiums were also favourably affected by the premium increases implemented since mid-2007 on motor and building policies in particular. Private & Commercial Norway has scheduled additional premium increases in 2009, which will contribute to further growth going forward. The retention rate improved further in 2008 to 86.9 from 85.8 at 31 December 2007, and Private & Commercial Norway recorded a rising retention rate for large customer relationships in particular. Customer loyalty has been growing since Private & Commercial Norway changed its price and loyalty model in 2005/2006.
DKK 409m, higher, and the claims ratio, net of ceded business, increased from 67.8 to 74.2. The increase was mainly attributable to an increase in medium-sized building and fire claims. In 2008, expenses for fires in single-family houses in Norway totalled NOK 264m, which was substantially above the level of previous years, as indicated in the chart. Fires in single-family houses are far more frequent in Norway than in Denmark, due to the fact that many houses and cabins in Norway are made from wood and heated by electric heating and wood burning stoves or fireplaces. Large claims, defined as claims in excess of DKK
The claims frequency for motor policies rose by approximately 1 percentage point relative to 2007, and the average claim was up by around 4 percentage points. The average claim tracks the general development in payroll and material costs. TrygVesta’s cooperation with selected garages which repair three out of four motor claims ensures high quality and lower costs per repair.
The increase was primarily attributable to higher selling commission costs, wage inflation of around 8% and expenses of
DKK 12m incurred in connection with “The Living House” in the fourth quarter of 2008. Excluding expenses relating to
Overall, the combined ratio was 95.9 in 2008, as against 88.6 in 2007. A large part of this difference was attributable to the higher run-off gains in 2007. Moreover, the increase in the combined ratio relative to 2007 was attributable to higher expenses for fires in single-family houses and underlying claims inflation. The premium initiatives implemented since mid-2007 in several areas are expected to improve profitability in the upcoming period.
Claims ratio, net of ceded business 78.3 75.3 73.2 Gross expense ratio 41.7 49.8 43.5
Our Finnish branch sells insurances to private household customers and small enterprises under the brand name of
TrygVesta Finland and Nordea Vahinkovakuutus. Insurance policies are sold by Nordea’s branches, our own sales force and call centres, car dealers and via the Internet.
In 2008, the Finnish business sold around 160,000 insurance policies, as against approximately 100,000 policies in 2007. The sustained high level of sales was achieved through a targeted effort to build and strengthen the sales channels. The rapidly growing portfolio is attributable partly to sales made through Nordea, but to an increasing extent also to sales made through own sales channels. Such sales account for around three quarters of sales today, a large part of which concerns additional sales to customers originally introduced by Nordea. Sales via the Internet totalled 6% of aggregate sales, a new record in terms of the number of policies.
The claims ratio, net of ceded business was 73.2 in 2008 against 75.3 in 2007. Despite a generally satisfactory claims performance, there are a few lines, which, based on an overall evaluation of the competitive situation and the premium and profitability levels, require premium increases. These increases will be implemented in 2009.
The effects of these price increases will begin to materialise from the second half of 2009, but will not feed through until 2011.
Gross earned premiums 4 90 221 Gross claims incurred -6 -80 -214
Claims ratio, net of ceded business 145.3 88.9 96.8 Gross expense ratio 1,003.8 105.6 47.1
Vesta Skadeförsäkring sells insurances to private individuals. Insurance policies are sold by Nordea’s branches, our own call centre and via the Internet. The Swedish branch has around 100 employees.
DKK 131m, to stand at DKK 221m. The rapid growth was generated principally by strong sales through Nordea, but increasingly also by employees of the business unit’s own call centre, which now account for around 50% of sales.
at 31 December 2008 and was adversely impacted by the weakening of SEK relative to DKK. The number of customers totalled 107,000 at 31 December 2008 compared
The claims ratio, net of ceded business was 96.8 compared with 88.9 in 2007. This level is considered satisfactory for such a relatively new portfolio. Moreover, the
generated significant fluctuations, as the size of the business is still relatively limited.
In 2008, TrygVesta signed a new agreement with Nordea on settlement of commission regarding policies sold through Nordea. As a result of this agreement, it is now possible to accrue commission over the first year of the policy, as it is actually a prepayment to Nordea, as compared with the previous method of charging commission to the income statement at the time of writing the business.
Gross claims ratio 67.5 73.9 63.3 Business ceded as % of gross premiums 6.4 3.3 9.4
Claims ratio, net of ceded business 73.9 77.2 72.7 Gross expense ratio 11.0 9.5 10.7
The technical result rose by DKK 250m to DKK 1,092m in 2008, reflecting a strong customer selection approach based on pricing risk correctly. In addition, run-off gains of DKK 486m in gross terms, as against DKK 102m in 2007, contributed to the performance improvement.
DKK 5,512m. Since mid-2007, Corporate has significantly outperformed the estimated market growth due to the addition of several new large customers. The Danish part of the Corporate business recorded growth of 5.6%, and the Norwegian part recorded growth of 3.4%.
(DKK 394m net) and was mainly attributable to motor and personal lines. In 2007 the gross run-off result totalled
Expenses rose by 16.7% to DKK 588m, corresponding to an expense ratio of 10.7, as against 9.5 in 2007. The increase was a result of several factors. In 2007, expenses were favourably influenced by the reversal of a provision relating to losses on reinsurers. In 2008, relatively high wage inflation added to the pressure on expenses. Moreover, 2008 was impacted by expenses in connection with
“The Living House”. Excluding this expense, the expense ratio was 10.5. The expense ratio produced by the Corporate business is considered competitive and satisfactory.
The combined ratio was 83.4 in 2008, against 86.7 in 2007. Run-off gains favourably impacted the combined ratio by 7.1 percentage points in 2008 compared with 1.6 percentage points in 2007. Large claims impacted the combined ratio adversely by 4.6 percentage points in 2008, as against 8.3 percentage points in 2007.
***) The item comprises interest on operating assets, bank debt and reinsurance deposits, exchange rate adjustment of insurance items, costs of investment activities and offsetting of return on owner-occupied property.
The overall allocation of assets is made by TrygVesta based on risk and cash management considerations, while specific securities are mainly selected by external asset managers within the defined framework.
if we had not reduced the equity portfolio during 2007 and 2008. The return on investment activities after transfer to technical interest was DKK 1,328m lower than in 2007 due to lower equity returns and an increase in the amount transferred to technical interest.
The return on investment activities before other financial income and expenses was DKK 1,258m, equal to a return of 3.5%. The return was 2.2% including changes in provisions for claims due to lower interest rates.
in Norway, with yields rising in the first half-year and dropping significantly in the second half-year. The mortgage spread widened drastically in Denmark during the period until 31 October when Danish regulators adopted a new yield curve for discounting insurance company liabilities, thereby stabilising demand for Danish mortgage bonds. About 75% of the bonds, or DKK 22bn, are issued by banks or mortgage credit institutions, and 23% are issued by the Danish and Norwegian governments. 92%
of the portfolio is rated AAA or AA. The proportion of unrated bonds was reduced from 15% to 5% during the year. The unrated 5% of the portfolio comprises mainly short-term Norwegian money market certificates issued by banks. We have diversified exposure to banks, mainly
Nordic banks with little or no involvement in the financial products that triggered the subprime crisis. We currently monitor the performance of credits with the financial institutions to which our bonds portfolio is exposed.
We conduct ongoing follow-up on interest rate sensitivity to optimise the match between assets and liabilities in order to reduce the impact of interest rate changes on our income statement. The duration including cash of the
TrygVesta’s total equity return was 0.5% above the benchmark return. International equities generated a negative return of 36.6%, which was 2.9% above the benchmark return. Nordic equities generated a negative return of 48.1%.
For comparison, the VINX Benchmark Cap Index generated a negative return of 42.4%. Currency risks relating to international equities were hedged during the year. Unlisted equities accounted for DKK 180m at 31 December 2008. Nestle
SA was the largest stake, accounting for 2.9% of the portfolio of listed equities and 0.09% of total investment assets. The 25 largest equities in our portfolio accounted for 31.5% of the total listed equity portfolio. After reducing the equity proportion in June and December 2007 by a total of DKK 0.8bn, TrygVesta reduced the equity exposure by an additional DKK 2.2bn in January. At 31 December 2008 the Group’s equity portfolio had a total value of DKK
The investment return on real estate was DKK 263m including revaluation and sales gains of DKK 78m and 6.0% from current operations. The occupancy rate was 99.0 at 31 December 2008 compared with 97.5 at 1 January 2008. The portfolio comprises the head office properties at Ballerup and Bergen, amounting to around DKK
1.3bn at 31 December 2008, and a portfolio of investment properties of some DKK 2.3bn, consisting of well-diversified quality buildings, typically in prime locations in major cities in Denmark and Norway. The portfolio mainly comprises office premises, but also includes a small proportion of other commercial property and residential property.
Meeting customers on their own terms is another strategic focus area. Our experience is that customers feel greater accessibility and pece of mind when they have an online self-service option. This focus resulted in a number of benefits to customers in 2008 and will also have a great impact on our communications with customers in the years ahead.
Nordic countries compared with other European countries. The customer satisfaction and loyalty surveys performed in the Nordic region in 2008 showed that the industry was generally on a level with 2007. TrygVesta’s customer loyalty surged from 73.2 to 78.4 while customer satisfaction was almost unchanged at 72.2. In Denmark, we ranked above the average of large companies with respect to customer loyalty while we were below average in terms of customer satisfaction. Since 2007, we have seen customer loyalty rise by 4.7 points to 76.9 with satisfaction declining from 75.9 to 74.7. We believe expectations to TrygVesta are fairly high.
SundPuls is that prevention is better than cure. SundPuls addresses businesses wanting to offer their employees to work actively with their health by having a health check. SundPuls offers advice and guidance, and the www.sundpuls.dk portal and the SundPuls telephone line provide lifestyle advice. The product supplements
TrygVesta’s other health care offering to commercial customers, comprising the SmerteFri and StressStop products. All products emphasise the importance of taking action before treatment becomes necessary.
Group’s four strategic focus areas is self-service and electronic communication. We set up a Nordic e-business centre in 2007, which launched several self-service solutions and other initiatives in 2008. In Denmark, customers could, for example, opt to receive mail from TrygVesta in e-Boks, their electronic mailbox on the Internet, and more than 138,562 Danish customers had registered for this service by the end of 2008. Norwegian customers welcomed the option of reporting claims online. In Denmark, we introduced online sales of travel insurance, one of our core products.
International requirements. Several large commercial and corporate customers need to take out insurance globally. In 2008, TrygVesta extended its partnership with
1) The benchmarks in the Nordic comparison are simple averages of official EPSI country results for companies with a presence in more than one Nordic market.
Read more about TrygVesta’s customers on the insert ”Our most important handshake”
It is our employees at TrygVesta who provide peace of mind and make a difference for customers. Highly skilled and motivated employees are our most important asset and a prerequisite for us to achieve our targets. Human competencies are one of the Group’s four strategic focus areas. That means ongoing focus on ensuring our employees to have the skills and reserves of energy required to handle everyday challenges. This focus area is also about giving managers and employees latitude and responsibility, and we expect managers to create commitment and frameworks and to generate results. We give high priority to innovative thinking and openness towards new ideas, and we believe that helps create an attractive and exciting workplace.
The 2008 employee survey showed the same high level of employee satisfaction as the status survey in 2007, that 90% of the Group’s employees were very satisfied or satisfied with working at TrygVesta. As a new feature in 2008, we compared the results of the employee survey with the Nordic labour markets in general and specifically with the financial sector in the Nordic region. This comparison indicated higher satisfaction levels for TrygVesta than for
We believe that respect, openness and trust are important features for maintaining a good working environment.
The results of the employee survey are therefore used proactively in dialogue meetings in all departments. As a consequence of the results, focus in 2009 will be on communication and employee branding, our performancerelated pay systems and on performance interviews and development plans.
TrygVesta performed a thorough analysis of the Group’s recruitment process in 2008, resulting in a large number of initiatives to ensure transparency, flow and high quality in the recruitment process.
CEO took part in a project intended to help young people with an immigrant background and a criminal past gain access to the labour market.
In 2009, we intend to further develop the opportunities for employees wishing to work internationally, and we intend to continue to raise our profile vis-à-vis potential new employees.
TrygVesta Management Academy is a development unit focusing on developing managers and specialists.
TrygVesta. As part of the overall talent development strategy the next stage of the programme will also include managers and industry experts.
In 2008 TrygVesta initiated a three-year collaboration with art society Kunst foreningen Gl. Strand in Copenhagen under the name Tryg Tryk. As part of the arrangement, a lithograph will be made each year that will be made available to the Group’s customers and employees.
Under the agreement, 120 lithographs by artist Ivan Andersen were customised in 2008. Half of them were made available to TrygVesta while the artist and the art society were entitled to the other half. TrygVesta distributed 40 of the lithographs available to it to reward outstanding performance by employees who had been recommended by their colleagues.
TrygVesta relies on its capital base and financial strength to assume risks from the customers and for the customers to be confident that TrygVesta is able to meet its obligations if and when they report a claim. The aim is for the capital base to match the Group’s risk profile and support natural growth. Basically, TrygVesta’s capital base is the result of risk assessments and risk management. This basic view thus also determines the dividend policy.
TrygVesta wants the risk and capitalisation to be assessed externally on a regular basis, and therefore
This is consistent with TrygVesta’s ambitions and provides a good balance with high creditworthiness and powerful financial strength while at the same time avoiding tying up more capital than can be justified by commercial reasons. In practice, an A level rating corresponds to capital of around 52%-56% of premiums, and the agencies seek to calibrate the rating so that companies at this level have adequate capital on a one-year horizon with
Our internal risk and capital requirement assessments are based on the balance sheet model (ALM), which uses stochastic simulation to calculate the necessary capital taking into consideration the actual insurance portfolio mix and profitability, the actual provisioning profile and the composition of provisions, the existing reinsurance protection and the chosen investment profile. Within this framework, it is also possible to quantify the geographic diversification effect and the effect of the investment policy under which interest rate risk on the bond portfolio matches the corresponding interest rate risk on the discounted provisions, thereby ensuring that TrygVesta’s net interest rate risk is negligible for practical purposes (see the section on Risk management). TrygVesta calculates its
Individual Solvency Need on this basis in accordance with the rules effected for Danish insurance companies at 1 July 2007. Under these rules, insurance companies and their supervisory boards are required to regularly identify, quantify and control all forms of risk, and to calculate and report the necessary capital on a quarterly basis. TrygVesta calculates the necessary capital corresponding to a 99.5%
security level on a one-year horizon, equal to the security level required under Solvency II in the future. As the wish is to continue to maintain a rating of A-, TrygVesta has made a simplified model based on the Standard & Poor’s capital
model, which is used to determine the capital target and thus dividends. The model is described in more details at www.trygvesta.com, and is updated on a quarterly basis.
In future, the capital requirement will have to be calculated under the EU Solvency II rules, which are expected to be implemented from 2012. See the section on Solvency II
Dividend is determined on the basis of the Group’s profit distribution policy.
• Any excess capital after distribution of ordinary dividends and taking into consideration the capital, strategy and growth, will be returned to shareholders in the form of a share buy back programme.
TrygVesta intends to pursue a risk-based transparent policy for capital management, and thus also for dividend distribution. At 31 December, a capital requirement is determined based on the simplified Standard & Poor’s model corresponding to the level of an A-rating plus a buffer of 5%. Any capital in excess thereof will be distributed as dividend. Dividend is determined once a year while profit is generated on an ongoing basis, and this means that the buffer will grow over the year in excess of the 5% originally determined. Buffer growth in 2007 and 2008 was 21.5% and 16.5%, respectively.
Total distribution per share (DKK) 6 38 33 21 * The share buy back programme was based on our 2007 profit, amounted to DKK 1,405m and was initiated on 4 April 2008. On 2 February 2009, the programme was extended up to and including 22 April 2009 due to low trading volumes. The programme had been scheduled for completion by 2 March 2009.
In 2005, TrygVesta raised subordinate loan capital in the form of a 20-year bond loan in the amount of EUR 150m, which was listed on the London Stock Exchange. The loan, which carries a coupon of 4.5%, is included in the capital base at DKK 685m and in TAC at DKK 1,102m. Subordinate loan capital accounted for 12% of the capital calculated according to Standard & Poor’s capital model for credit purposes in 2008, with the present limit being 25%.
In 2005, TrygVesta raised a five-year revolving credit facility of DKK 2,000m subscribed with eight Danish and international banks. At 31 December 2008, DKK 599m had been utilised under the facility. Interest rate expenses on loan capital totalled DKK 100m for 2008. The total debt ratio was 18.0 at 31 December 2008.
As a result of the decision not to implement share buy backs on the basis of our 2008 performance, the buffer relative to an A-level rating in the simplified Standard &
Group’s solvency, if required. The plan includes restructuring of assets from equities to bonds and the buying of proportional reinsurance. These measures together would substitute for around DKK 1,000m capital. The capital base could also be increased by the raising of additional subordinate loan capital of around DKK 1,100m in relation to the Standard & Poor’s capital model.
Being an insurance business, TrygVesta’s concept is to create peace of mind for customers by helping them manage and handle situations when a claim has occurred.
TrygVesta has set up a number of risk committees and drafted policies for the purpose of optimising the controlling, monitoring and handling of the present and future risk exposure. The supreme body of this structure is the risk management committee which, in addition to the
Provisioning risk We make technical provisions at the end of a financial period to cover expected future payments for claims already incurred. 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
In addition to the risk management committee TrygVesta has set up four special committees to handle the risk management process within the areas of
The special committees report to the risk management committee, and their chairmen are also members of the risk management committee.
The business units are involved in the risk management environment through membership of the relevant committees, as risk managers and as participants in the annual mapping of risk, through compliance with and implementation of policies and controls, including by setting up rules with respect to authority, binding signatures and implementation of the relevant system support. A standard project model is applied for implementing TrygVesta’s strategy in specific projects, of which risk assessment is an integral element. TrygVesta has defined a structured process for mapping risk throughout the Group. The risk managers describe risk, assess the potential impact and probability and evaluate the adequacy of the control environment. Such data is compiled in TrygVesta’s risk data base, which forms the basis for further processing in the risk management environment in the representation of TrygVesta’s overall risk exposure. The risk exposure is supplemented by a number of scenarios illustrating the consequences of special events that may impact several risks simultaneously. The Group’s overall risk exposure is presented in an annual risk report submitted to the Executive Management and the Supervisory Board.
There is a direct correlation between the scenarios identified by the risk managers and the Group’s calculation of its Individual Solvency Need.
TrygVesta’s risk management environment anchored in the Supervisory Board and business areas, and the risk identification process
The Individual Solvency Need is determined by calculating one-year consequences of such risk scenarios and converting them to the level of probability on the basis of which the capital is made up. An element covering the worst case of such sub-scenarios overlapping is added to the Individual Solvency Need.
Norway. The primary risk of single events is claims caused by storm. TrygVesta has defined the level of cover using simulation models to the effect that protection would statistically be inadequate less than once every 250 years.
Folketing passing the act on a terrorist insurance arrangement in the general insurance area in June. The act provides for the government to provide a guarantee of up to DKK 15bn for the total Danish market to cover such losses in excess of the level that can be protected in the reinsurance market.
After the period of the policy’s cover has expired, insurance risk relates to the provisions for claims made to cover future payments on claims already incurred.
The size of the provisions for claims is determined both through individual assessments and statistical calculations. At 31 December 2008, the provisions for claims amounted to DKK 19,715m with an average duration of 3.3 years.
Most of the provisions for claims relate to personal injury claims. They are exposed, among other risks, to changes in inflation, the discount rate (see also the heading interest rate risk under investment risk), disbursement patterns, economic trends, legislation and court decisions.
Provisioning risk Increase in social inflation by 1% -520 Error estimation of e.g. 10% on workers’ compensation and motor -1,099
MARKET RISK Investment risk Interest rate market – increase in interest rates of 1% Impact on fixed interest securities -512 Higher discounting of provisions for claims 562
Real estate market Decrease of real estate markets of 15% -534
Currency market Decrease of NOK of 15% relative to DKK impacts profit -107 Decrease of exchange rates of balance sheet items in foreign currencies of 15% 76 Impact arising from hedging -90
MARKET RISK Investment risk Interest rate market – increase in interest rates of 1% Impact on Norwegian pension obligation 157
Currency market Decrease of exchange rates of equity in foreign currencies of 15% -342 Impact arising from hedging 342
SENSITIVITY IN CASE OF SELECTED CHANGES IN uNDERWRITING, PROVISIONING AND MARKET CONDITIONS
Fluctuating interest rate levels is one of the most important elements in determining investment risk. As TrygVesta furthermore discounts provisions for claims in accordance with the IFRS accounting rules (market value), the provisions for claims are also exposed to interest rate risk. If interest rates fall, the value of the Group’s bond portfolio would increase, but at the same time it would cause the provisions for claims to rise. Changes in the level of interest rates thus have an opposite effect on assets and liabilities. An important element of TrygVesta’s risk management is to have a bond portfolio mix ensuring that the two opposite effects are counterbalanced as exactly as possible.
Value adjustments of assets are determined by yield changes on the actual bond portfolio, which to a great extent comprises Danish mortgage bonds, while the counteracting adjustments of provisions are determined by changes in the discount curve prescribed by the Danish Financial Supervisory Authority. Until recently, this curve was calculated as the Euro zero-coupon yield curve plus a spread between the Danish and German government zero coupon yield curve. In connection with the financial crisis the spread between mortgage bond yields and government bond yields has widen significantly.
When updating the internal model to account for an interest rate scenario as seen in 2008, the net interest rate risk is increasing significantly, as illustrated in the second figure on page 70. In this situation, the net interest rate risk would have a 90% certainty to fluctuate within a range of +/- DKK 260m. In response to the problems the financial crisis has caused for life insurers in particular, the Danish Financial Supervisory Authority in
The equity portfolio primarily focuses on the large, liquid equity markets in Europe and the USA (see the graph in the section on Investment activities). TrygVesta has defined a strategy with relatively little exposure to the
Nordic region (around 20% at 31 December 2008) in order to reduce company risk, because a few companies account for large parts of the markets in these countries.
Furthermore, TrygVesta has tied each equity mandate to a recognised benchmark (MSCI), which is monitored closely. The 25 largest equities in the portfolio accounted for some 32% of the total listed equity portfolio at 31
TrygVesta is exposed to exchange rate fluctuations. This exposure is minimised through currency derivatives, and cash flows are mostly matched. The Group’s premium income in foreign currency is mostly matched by claims and expenses in the same currencies, primarily NOK, EUR,
SEK and USD. This means that an expected profit would be adversely impacted by depreciating exchange rates relative to DKK. TrygVesta does not hedge the remaining, limited currency risk in connection with future cash flows in foreign currencies.
TrygVesta uses currency derivatives to hedge the risk of a loss of value of balance sheet items due to exchange rate fluctuations in accordance with a general hedge ratio of 90–100% for each currency. The aim is to hedge 98–100%
TrygVesta manages credit risk and concentration risk through investment limits and rating requirements (see the section on Investment activities for an overview of the bond portfolio distributed on ratings and geography).
Receivables with Danish banks are covered by a government guarantee from October 2008 to 2010.
The financial crisis in 2007 and 2008 emphasised the importance of managing risk, including credit risk.
CDOs or similar products, and accordingly has not incurred financial losses in this respect in connection with the financial crisis.
Operational risk relates to errors or failures in internal procedures, fraud, breakdown of infrastructure, IT security and similar factors. As operational risks are mainly internal, TrygVesta focuses on establishing an adequate controlling environment in the Group’s operations. In practice, the work is organised through a structure of procedures, controls and guidelines that cover the various aspects of the Group’s operations, including the IT
security policy. TrygVesta has also set up a security and investigation unit to handle matters such as fraud, IT
In order to avoid any unintentional violations of competition law, a competition law training programme for the entire organisation has been completed.
Strategic risk is managed through a strategic planning process. The Supervisory Board defines the overall strategy within the framework of the Group’s corporate vision, and the Group Executive Management uses this as the basis for further strategy work. The balanced scorecard is used as a tool to ensure current follow-up on the implementation of the strategy and the initiatives launched in the business areas. During the year, the strategy is managed in Executive Management meetings and meetings to follow up on the balanced scorecard performance by business areas and staff functions. TrygVesta maintains full strategic focus on the business partners, and protects the reputation through corporate values, by maintaining focus on handling complaints and through internal and external communication policies. The Group also continuously monitors the market to ensure that the assessment of external conditions rely on an up-to-date basis, be it competitors’ market initiatives, new legislation or other external factors that may impact the Group.
The financial crisis has had an adverse impact on TrygVesta albeit only to a fairly limited extent, thereby illustrating the results of effective risk management in the Group. TrygVesta considers the risk identification process and overall risk exposure to be satisfactory relative to the risk appetite defined by the Supervisory Board. However, TrygVesta is continuously seeking to optimise the relationship between risk and return and to reduce unwanted risks further.
Corporate governance is the future “At TrygVesta, we promote management behaviour that supports our business and our peace-of-mind delivery. Managers are responsible for pursuing our vision and creating value for our stakeholders in a sound and profitable manner. Our commitment and responsibility to the world around us support our business further.”
Malaplast Co. Ltd. Bangkok, Advisory Board of CareWorks Africa Ltd. and The Danish
Bodil Nyboe Andersen Deputy chairman of the Supervisory Board and chairman of the audit committee. Born 1940. Joined the Supervisory Board in 2006
Jørn Wendel Andersen Born 1951. Joined the Super- visory Board in 2002
Deputy chairman of Technor AS, Sørcogruppen AS, Technor Holding AS, Norges Statsbaner
Mr Brinch runs his own business providing strategic consulting and board services. Mr
Brinch has experience and knowledge within the areas of strategic development, branding, distribution and consulting services with respect to board work.
Niels Bjørn Christiansen Born 1966. Joined the Supervisory Board in 2006
Rune Torgeir Joensen Elected by the employees and member of the audit committee. Born 1956. Joined the Super- visory Board in 2008
Danfoss and GN Store Nord A/S. He has competencies within management, strategy, IT, processes, distribution, innovation, production, finance and private and listed companies.
Per Skov Member of the audit committee. Born 1941. Joined the Super- visory Board in 1998
Berit Torm Elected by the employees. Born 1959. Joined the Super- visory Board in 2008
Peter Falkenham COO and member of the Group Executive Management in charge of Private & Commercial Denmark. Born 1958. Joined TrygVesta in 2000. Joined the Group Executive Management in 2000
The Group Executive Management will be extended by four members and will be as follows: Christine Bosse, Group CEO, 48 years old.
Read more about the organisational changes and see the new management at www.trygvesta.com > About us > Management.
In 2008, TrygVesta’s Supervisory Board focused on organising the Group’s strategic development with a healthy balance between short-term and long-term activities and action plans. The Supervisory Board takes care in preparing future tasks for the Group, such as new capital requirements and capital resources in connection with the future Solvency II rules so as to continuously strengthen the Group’s financial and strategic position.
TrygVesta’s corporate governance and remuneration policies are based on the corporate governance recommendations issued by OMX Nordic Exchange Copenhagen.
TrygVesta issues press releases and company announcements on a regular basis and publishes interim reports and annual reports in order to enable stakeholders to form an adequate impression of the Group’s position and its performance. The financial statements have been prepared in accordance with IFRS. TrygVesta updates its outlook for the Group’s performance each quarter. All financial announcements are released simultaneously in Danish and English. The Group has a number of in-house guidelines to ensure that disclosures are made in accordance with the stock exchange rules of ethics. Investor Relations has regular contacts to equity analysts and major investors and organises investor presentations, teleconferences and webcasts together with the management. The Supervisory Board is regularly briefed on the dialogue with investors. All material is available at www.trygvesta.com, which also offers stakeholders to receive the latest news as RSS feeds or to download webcasts and teleconferences as podcasts. The Group’s mission and relevant stakeholder policies, such as the policies for Investor
Relations, communications and the environment, are available at www.trygvesta.com under Investor, About us,
1,053m had been bought under the total share buy back programme of DKK 1,405m, and DKK 352m of the share buy back programme was thus outstanding. TrygVesta has
Board convenes the annual general meeting by a company announcement and by advertisement in at least one national newspaper, giving not less than eight days’
notice. Shareholders may elect to receive an electronic notice of the general meeting, or they may download the notice at www.trygvesta.com. The notice includes relevant information about the time and place of the meeting and sets out the agenda, which as a minimum comprises the following items: • Report of the Supervisory Board on the activities of the company during the past financial year
• Presentation of the annual report for approval and discharge of the Supervisory Board and the Executive
The Supervisory Board holds at least six annual meetings and an annual strategy seminar to discuss and define strategies and goals for the years ahead. The Supervisory
Board discusses the Supervisory Board’s tasks on a regular basis, and at the last meeting in the year, it determines the items on the agenda for the coming year.
Board. The assessment includes individual interviews between the Chairman of the Supervisory Board and the individual members in January and a discussion of these interviews at the next following Board meeting.
The Supervisory Board is headed by the Chairman and the Deputy Chairman. The duties of the Chairman and the Deputy Chairman of the Supervisory Board are defined in the rules of procedure of the Supervisory
The Chairman of the Supervisory Board acts as spokesman for the Supervisory Board for external purposes.
The Supervisory Board makes an assessment of the competencies required for the Supervisory Board to perform its duties in the best possible way. In connection with the evaluation of the Supervisory Board’s work and its members ’ competencies, it is assessed whether the Supervisory
4 affiliated 4 non-affiliated 4 members elected members members by the employees elected among elected among elected according the members candidates to agreement of the Super- without any between the Danish visory Board affiliation with and Norwegian of Trygheds- Trygheds- employee associations Gruppen smba. Gruppen smba. distributed on the Group’s Danish employees and one Norwegian employee.
TrygVesta’s Supervisory Board at www.trygvesta.com under Our business > Corporate governance.
Supervisory Board members hold more than the recommended number of directorships. However, the Supervisory
The Group CEO chairs the TrygVesta CSR Board, and in addition, the Group Executive Vice Presidents, Customer
Board. The figure shows the three sub-committees in the CSR work.
TrygVesta considers diversity a strength and has therefore worked towards the goal that the composition of the company’s employees should reflect that of society in
general. In the past few years, there has been increased focus on ethnicity, both in our current recruitment activities and in projects focusing on recruitment of employees with an ethnic background. In 2008, just over 4% of the
Management comprised nine members, including three women. TrygVesta’s Group Executive Management is thus one of the most highly gender diversified among large companies in the Nordic region. The age distribution in the
IT security. This framework is then implemented in risk policies that define detailed guidelines for the Group’s risk management. A risk management committee comprising the Group CEO, Group CFO and selected senior executives monitors the risk management environment. The Executive
The Supervisory Board ensures that the Group is monitored by competent and independent auditors. Each year, the annual general meeting appoints external auditors recommended by the Supervisory Board. The audit agreement with the external auditors, including the auditors’
fees, is concluded between the Supervisory Board and the auditors. The Supervisory Board adopts the framework for the auditors’ performance of non-audit services each year.
TrygVesta’s internal audit department regularly reviews the quality of the Group’s internal control systems and business procedures. The department is responsible for planning, performing and reporting the audit work to the Supervisory Board. The internal and external auditors’
Board meetings for the purpose of assessing the auditors ’ observations and conclusions.
TrygVesta’s audit committee complies with the statutory requirements of 1 July 2008 for listed companies. As of 31 December 2008, certain unlisted financial businesses were also required to have an audit committee. However, it is possible to set up shared audit committees for several financial businesses within the same group. The audit committees must be set up immediately following the companies’ annual general meetings held in the spring of 2009. TrygVesta will ensure compliance with the statutory requirements in accordance with the applicable rules.
Members - Bodil Nyboe Andersen, chairman - Per Skov - Rune Joensen
• To monitor that internal control and risk management systems function efficiently.
• To review and discuss the results of the internal and external auditors’ work, and to supervise management ’s follow-up on the recommendations reported by the internal and external auditors.
The remuneration committee has four members elected by the Supervisory Board. The remuneration committee is chaired by the Chairman of the Supervisory Board. In addition, the committee must include at least one member of the Supervisory Board of TryghedsGruppen and at least one non-affiliated member of the Supervisory Board. The remuneration committee was set up in the spring of 2008. Going forward, the committee intends to hold four annual meetings. The work of the remuneration committee is based on TrygVesta’s remuneration policy and guidelines for incentive pay adopted by the shareholders at the annual general meeting held on 3 April 2008.
Members - Mikael Olufsen, chairman - John R. Frederiksen - Paul Bergqvist - Birthe Petersen
• To ensure compliance with the Group’s guidelines for incentive pay.
• The committee’s terms of reference were approved at a meeting of the Supervisory Board held in November 2008.
Supervisory Board and the Executive Management and has defined overall guidelines for incentive pay.
Chairman 750,000 Deputy Chairman 500,000 Members, each 250,000 Total, Supervisory Board 3,750,000
TrygVesta’s Executive Management comprises three members. Their remuneration reflects a wish to secure a balanced earnings performance for the Group in the short as well as the longer term.
The remuneration of the Executive Management includes performance-related bonus, comprising a bonus plan of up to three months’ salary including pension (four months for the Group CEO). The plan is directly linked to pre-defined benchmarks. The assessment of the individual member’s achievement includes the Group’s overall performance as well as that of the individual members within their areas of responsibility. Specific benchmarks are defined within all four perspectives of the balanced scorecard (financial, customer, processes and learning) and reflect the strategic focus areas of the Group and the individual business areas or organisational units, including growth, profitability, cost reduction, customer satisfaction, customer loyalty, image,
processes, communication, employee satisfaction and development, and innovation. Members may choose to receive their bonus in cash or shares at a discount to the market price. Members who choose shares at a discount to the market price can buy the shares at par with a total discount equal to the bonus entitlement. Part of the remuneration consists of stock options in order to build loyalty and motivation. The value of the stock options on grant may not exceed 50% of the fixed annual salary inclusive of pension. On exercise the value, calculated as the difference between the market price on exercise and the price on granted, may not exceed 200% of the member’s fixed annual salary inclusive of pension. Members are entitled to company cars. A contribution equal to 25% of their fixed salary is paid into a pension scheme. Each member is entitled to 12 months’ notice of termination and to 12 months’ severance pay. The Group CEO is entitled to 12 months’ notice and to 18 months’ severance pay plus pension contributions during such period.
Like the Executive Management, the Group Executive Management and senior employees are offered a performancerelated bonus of up to three months’ salary on similar terms.
Furthermore, TrygVesta has a stock option programme for the Executive Management, the Group Executive Management, senior executives and employees to reward outstanding performance. Each option entitles the holder to one share at the exercise price. Stock options cannot be exercised earlier than three years and not later than five years after the grant. The strike price is the market price on grant plus 10%. The exercise price is the strike price minus dividend payout in the period. Stock options can only be exercised during the open trading windows for the full-year and half-year profit announcements. Own shares are bought to cover the stock option programmes.
Stine Bosse 24,597 1,700,000 Morten Hübbe 15,916 1,100,000 Peter Falkenham 11,575 800,000 Other Group Executive Management and senior executives 167,203 11,800,000 Granted to reward outstanding performance 28,700 2,000,000 Total granted in 2008 247,991 17,400,000
In 2008, the stock options entitled the holders to shares at the average price of TrygVesta shares (all trades)
TrygVesta expects to grant programme of a similar value and on similar terms in 2009.
TrygVesta operates an employee bonus programme because it is important to the Group that all employees see their own efforts relative to the company’s overall targets. Employee bonus benchmarks are combined ratio and growth. For 2008, the bonus triggered an offer to buy shares at a discount to the market price with a discount element equal to DKK 5,000 to each employee.
• having a website that is of relevance to professional and private investors alike
TrygVesta refrains from commenting on matters relating to financial performance or forecasts during a period of three weeks prior to the release of financial reports.
TrygVesta shares opened 2008 at DKK 388 and closed at DKK 328, thus generating a total negative return for 2008 of 12% including dividends of DKK 17. By way of comparison, the OMX C20 index fell by 46% and the DJ
Euro Insurance Index dropped 44%. TrygVesta shares were affected by the general decline in equity prices in 2008 as described in the Preface.
MOST ACTIVE STOCKBROKERS IN TERMS OF PROPORTION OF TuRNOVER ON OMX NORDIC EXCHANGE COPENHAGEN
TrygVesta has a total share capital of DKK 1,700,000,000 comprised of a single class of shares (68m shares of
DKK 25 nominal value each), and all shares rank pari passu.
of the issued shares and is the only shareholder, apart from TrygVesta, with a holding of more than 5%.
Trygheds Gruppen invests in Nordic businesses that promote peace of mind and health, and supports benevolent activities.
The website is being developed on an ongoing basis and is an important vehicle for providing information about the
In addition to the above-mentioned anouncements of the share buy back programme which was initiated on 4 April 2008, TrygVesta has published an announcement of the weekly share buy back amount every Monday.
Income Statement and Balance Sheet – TrygVesta Group 93 Statement of Changes in Equity – TrygVesta Group 96 Cash Flow Statement – TrygVesta Group 98
Income Statement and Balance Sheet – TrygVesta A/S (parent company) 138 Statement of Changes in Equity (parent company) 140 Notes (parent company) 141 Financial Highlights and Key Ratios by Geography 146
Inserts are placed in a separat pocket at the end of the Annual Report 2008
The Supervisory Board and the Executive Management have today considered and adopted the annual report for 2008 of TrygVesta A/S and the TrygVesta Group.
In our opinion, the accounting policies applied are appropriate, and the annual report gives a true and fair view of the Group’s and the parent company’s assets, liabilities and financial position at 31 December 2008 and of the results of the Group’s and the parent company’s operations and the cash flows of the Group for the financial year 1 January – 31 December 2008.
Christine Bosse Morten Hübbe Peter Falkenham Group CEO Group CFO Group COO
92 of 152 l Independent auditor’s report l TrygVesta Annual Report 2008
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Our audit did not result in any qualification.
Claims paid -11,336 -12,880 Reinsurance recoveries 495 605 Change in provisions for claims 161 1,114 Change in the reinsurers’ share of provisions for claims 6 -486 4 Claims incurred, net of reinsurance -10,674 -11,647
Acquisition costs and administrative expenses -2,769 -3,003 Commission and profit commission from the reinsurers 95 72 5 Total insurance operating expenses, net of reinsurance -2,674 -2,931
Investment activities 16 Income from associates 1 -2 Income from investment properties 116 128 7 Interest income and dividends 1,382 1,523
Profit/loss on continuing business 2,267 846 10 Profit/loss on discontinued and divested business -1 0
Deposits in credit institutions 302 389 17 Total other financial investment assets 35,546 30,472
Reinsurers’ share of provisions for unearned premiums 159 176 22 Reinsurers’ share of provisions for claims 1,428 860 18 Total reinsurers’ share of provisions for insurance contracts 1,587 1,036
Total receivables in relation to direct insurance contracts 901 838 Receivables from insurance enterprises 509 250 Other receivables 1,145 601 19 Current tax assets 93 111 17 Cash in hand and at bank 298 282
Accrued interest and rent earned 666 626 Other prepayments and accrued income 59 142
Balance sheet – TrygVesta Group l Balance sheet – TrygVesta Group l TrygVesta Annual Report 2008
Total provisions for insurance contracts 26,916 25,193 23 Pensions and similar obligations 403 523 24 Deferred tax liability 1,109 949
TrygVesta Annual Report 2008 l Balance sheet – TrygVesta Group l
Equity entries in 2007 Profit for the year 75 1,035 1,156 2,266 Revaluation of owner-occupied properties -3 -3 Exchange rate adjustment of foreign entities 84 84 Hedge of foreign currency risk in foreign entities -98 -98 Actuarial gains and losses on pension obligation 94 94 Tax on equity entries 3 24 -25 2
Equity entries in 2008 Profit for the year -126 549 423 846 Exchange rate adjustment of foreign entities -585 -55 -640 Hedge of foreign currency risk in foreign entities 615 615 Actuarial gains and losses on pension obligation -196 -196 Tax on equity entries -154 53 -101
Proposed dividend per share DKK 6.50 (in 2007 DKK 17). 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 year end (64,377,683). The dividend is not paid until approved by the shareholders at the annual general meeting of the subsequent year.
TrygVesta Forsikring A/S’ Norwegian branch, has in its branch financial statements included provisions for contingency funds in the amount of NOK 2,743m (2007 NOK 2,564m). In TrygVesta Forsikring A/S, these provisions, due to their nature as additional provisions, are included in shareholders’ equity (retained earnings), net of deferred tax. TrygVesta Forsikring A/S’ option to pay dividend to TrygVesta A/S is influenced by this amount. The dividend payment is also affected by a contingency fund provision of DKK 670m, which is included in shareholders’ equity in TrygVesta Forsikring A/S. TrygVesta Garantiforsikring A/S has a similar contingency amounting to DKK 139m, which is also included in the company’s shareholders’ equity.
Revaluation of owner-occupied properties for the year -3 0 Tax on owner-occupied properties for the year 3 0 Exchange rate adjustment of foreign entities for the year 84 -640 Hedging of currency exposure in foreign entities for the year -98 615 Tax on hedging of currency exposure in foreign entities for the year 24 -154 Actuarial gains/losses on defined benefit pension plans 94 -196 Tax on actuarial gains/losses on defined benefit pension plans -25 53
TrygVesta Annual Report 2008 l Statement of changes in equity – TrygVesta Group l
Cash generated from operations Premiums 16,800 17,412 Claims paid -11,376 -12,934 Ceded business -122 -22
Interest income 1,164 1,573 Interest expenses -186 -135 Dividend received 169 40
Investments Acquisition of real property -16 -1,098 Sale of real property 17 26 Acquisition of equity investments and unit trust units (net) 1,062 2,080 Purchase/Sale of bonds (net) -856 -1,180 Deposits in Credit institutions -303 -87 Purchase of operating equipment -187 0 Sale of operating equipment 5 110 Foreign currency hedging -98 615
Total investments -376 466 funding Purchase of own shares -50 -1,160 Dividend paid -2,244 -1,156 Change in debt to credit institutions -65 110 funding, continuing business -2,359 -2,206
Change in cash and cash equivalents, net -47 32 Price adjustment of cash and cash equivalents, beginning of period 7 -48
Cash and cash equivalents, end of period 298 282 l Cash flow statement –TrygVesta Group l TrygVesta Annual Report 2008
The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU on 31 December 2008 and in accordance with the Danish Statutory Order on Adoption of IFRS.
Profit reconciliation Profit for the year ended 31 December – IFRS 2,266 846 Current-year effect of actuarial gains and losses on pension obligation after tax 69 -143 Change in deferred tax relating to contingency funds -2 0
Profit for the year ended 31 December – Danish fSA executive order 2,333 703
Shareholders equity at 31 December – IFRS 10,010 8,244 Deferred tax provisions for contingency funds 23 21 Change in deferred tax relating to contingency funds -2 0
Equity at 31 December – Danish fSA executive order 10,031 8,265
Implementation of accounting standards in 2008 In 2008, the Group implemented the following standards: • IAS 1 concerning ‘Presentation of Financial Statements – Capital Disclosures’ will take effect on 1 January 2009. The standard deals exclusively with presentation. The implementation has not resulted in major changes but involves a change in the information to be presented for the capital base and the presentation of the Group’s calculation of recognised income and expenses directly in equity.
• IFRS 7 concerning ‘Financial Instruments Disclosures’ will take effect on 1 January 2009, although the improvements must be implemented in case of early implementation of IAS 1. Replacing IAS 30 and IAS 32, the standard involves additional presentation of interest income and interest expenses.
• IAS 23 concerning ‘Borrowing costs”, which is effective for financial years commencing on or after 1 January 2009. IAS 23 requires the recognition of borrowing costs in the cost of a qualifying asset (intangible assets, property, plant and equipment and inventories). The standard is not expected to have financial reporting impact (IAS 23 remains to be adopted by the EU).
• IFRIC 16 concerning hedge accounting is expected to be implemented in 2009. The standard will result in an assessment of existing hedges. (IFRIC 16 has yet to be adopted by the EU). The standard is not expected to have financial reporting impact.
• IFRS 2, amendment to ‘Share-based payment’. The amendment concerns vesting conditions and the cancellation of allotted share options. The amendment is not expected to have financial reporting impact. (The amended IFRS 2 has yet to be adopted by the EU).
Amendments to IFRS 3 concerning ‘Business combinations’, and IAS 27 concerning ‘Consolidated and separate financial statements’, IAS 28 concerning ’Investments in assosiates’ and IAS 31concerning ’Interests in Joint Venture’ are expected to be implemented in 2009. The amendments are applied prospectively for any future business combinations.
Other interpretations, including IFRIC 12 ’Service Concession Arrangements, IFRIC 13 ’Customer Loyalty Programmes’, IFRIC 14 ’The limit on a Defined Benefit Asset’, IFRIC 15 ‘Agreements for Construction of Real Estate’ and IFRIC 17 ’Distributions of Non-cash Assets to Owners’, are not expected to have any financial reporting impact.
Accounts has no impact on the aggregate insurance operating expenses. • The TrygVesta Group’s defined benefit plan in Norway is impacted by
DKK 53m due to a change in the assumptions that provided the basis for the value at the end of 2008.
Accounting estimates and judgements 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 company’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
A more detailed description of primary assumptions about the future and other primary sources of estimation uncertainty is given in the risk management section in the Management’s report.
Liabilities for unpaid claims are estimates that involve actuarial and statistical projections of the claims and the administration of the claims. The projections are based on the TrygVesta Group’s know- ledge of historical developments, payment patterns, reporting delays, duration of the claims settlement process and other effects that might influence the future development of the liabilities.
The TrygVesta Group establishes claims reserves covering both case reserves and estimated claims that have been incurred by its policyholders but not yet reported to the company (known as “IBNR” reserves) and future developments on claims which are known to the TrygVesta Group but have not been finally settled. The group also includes in its claims reserves direct and indirect claims settlement costs or loss adjustment expenses that arise from events that have occurred up to the balance sheet date even if they have not yet been reported to the TrygVesta Group.
For discounting of provisions for claims, the Group generally applies a risk-free market rate composed of a risk-free euro-denominated interest rate and a country-specific spread to the German government bond yield. As a result of the adoption of the temporary ‘Package to ensure financial stability’, from the end of October the Group has applied a synthetic interest rate that includes a certain mortgage yield spread, for liabilities denominated in Danish kroner. Liabilities in Norwegian kroner are still discounted using a Norwegian risk-free interest rate composed as described above. Liabilities in Swedish kroner and euro are discounted using a Danish risk-free interest rate.
fair value of financial assets Measurements of financial assets for which prices are quoted in an ac-
tive market or which are based on generally accepted models with observable market data are not subject to material estimates. 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 a current OTC price of a similar financial instrument or using a model calculation. The valuation models include the discounting of the instrument cash flow using an appropriate market interest rate with due consideration to credit and liquidity premiums.
Consolidation The consolidated financial statements comprise the financial statements of TrygVesta A/S (the parent company) and enterprises (subsidiaries ) controlled by the parent company. Control is achieved where the parent company directly or indirectly holds more than 50% of the voting rights or is otherwise able to exercise or actually exercises a controlling influence.
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 balance sheet. The share of income and expenses and assets and liabilities are presented on a line by line basis in the consolidated financial statements.
Newly acquired or divested subsidiaries are consolidated at the results for the period subsequent to achieving or surrendering control, respectively. Profit and loss in divested subsidiaries and profit and loss on discontinued activities are included under discontinued and divested business in the income statement.
On initial recognition, transactions in foreign currencies are translated into the functional currency at the exchange rate ruling at the transaction date. Assets and liabilities denominated in foreign currency are translated at the exchange rates at the balance sheet date. Translation differences are recognised in the income statement under value adjustments.
On consolidation, the assets and liabilities of the group’s foreign operations are translated at exchange rates of the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising on translation are classified as equity and transferred to the group’s translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of. All other currency translation gains and losses are recognised in the income statement.
The operational business segments in the TrygVesta Group are the Private & Commercial (Denmark) segment, the Private & Commercial (Norway) segment, the Corporate segment and the General Insurance (Finland and Sweden) segment.
Geographical information is presented on the basis of the economic environment in which the TrygVesta Group operates. The geographical areas are Denmark, Norway, Finland and Sweden.
Claims incurred Claims incurred represent claims paid during the year and adjusted for changes in provisions for unpaid claims less the reinsurers’ share. In addition, the item includes run-off results regarding previous years. The portion of the increase in provisions which can be ascribed to unwinding is transferred to technical interest.
Changes in provisions for claims due to changes in the yield curve and exchange rates are recognised as a market value adjustment.
TrygVesta hedges the risk of changes in future wage and price figures for provisions for workers’ compensation and annuities for accident and health insurance. For 90-100% of this risk, TrygVesta uses swaps specifically acquired with a view to hedging the inflation risk. Value adjustment of these swaps is included in claims incurred, thereby reducing the effect of changes to inflation expectations under claims incurred.
Assets held under operating leases are not recognised in the balance sheet, but the lease payments are recognised in the income statement over the term of the lease, corresponding to the economic life of the asset, while assets held under finance leases are recognised at fair value and depreciated according to the same accounting policy as the group applies for similar owned assets. For assets held under finance leases, a lease liability is recognised at amortised cost.
Equity-settled share options are measured at the fair value at the grant date and recognised under staff costs over the period from the grant date until vesting. The balancing item is recognised directly in equity.
The options are issued at an exercise price that corresponds to the market price of the company’s shares at the time of allocation. No other vesting conditions apply. Special provisions are in place concerning sickness and death and in case of change to the company’s capital position, etc.
The share option agreement entitles the employee to the options unless the employee resigns his position or is dismissed due to breach of the employment relationship. In case of termination due to restructuring or retirement, the employee is still entitled to the options. The share options are exercisable exclusively during a two-week period following the publication of full-year or half-year reports and in accordance with TrygVesta’s in-house rules on trading in the company’s shares. The options are settled in shares. A part of the company’s holding of treasury shares is reserved for settlement of the options allocated.
Investment activities Income from associates includes the group’s share of the associates’ net profit.
Discontinued and divested business Discontinued and divested activities are consolidated in one line item in the income statement and supplemented with disclosure of the discontinued and divested activities in a note to the financial statements.
fixed assets Operating equipment Fixtures and operating equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost encompasses the purchase price and costs directly attributable to the acquisition of the relevant assets until the time when the asset is ready to be brought into use.
Depreciation on plant and equipment is calculated using the straightline method over their estimated useful lives, as follows: • IT, 4 years • Vehicles, 5 years • Furniture, fittings and equipment, 5-10 years
Impairment of intangible assets, equipment, owner-occupied property and investment property The carrying amount of intangible assets, operating equipment, owner -occupied property and investment property is tested at least once a year for impairment in the cash-generating unit to which the asset belongs, and the asset is written down to the recoverable amount through the income statement if the carrying amount is higher. The recoverable amount is generally calculated as the present value of the future cash flows expected to be derived from the activity to which the asset belongs.
Investments in associates Associates are enterprises over which the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are measured according to the equity method of accounting so that the carrying amount of the investment represents the group’s pro- portionate share of the enterprises’ net assets.
Derivative financial instruments and hedge accounting The group’s activities expose it to financial risks, including changes in share prices, foreign currency exchange rates, interest rates and inflation. Forward exchange contracts and currency swaps are used for currency hedging of portfolios of shares, bonds, hedging of foreign entities and insurance balance sheet items. Interest rate derivatives in the form of futures, forward contracts, repos, swaps and FRAs are used to manage cash flows and interest rate risks related to the portfolio of bonds and technical provisions. Share derivates are used from time to time to adjust share exposures.
Recognition of the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. The group designates certain derivatives as hedges of investments in foreign operations. Changes in the fair value of derivatives that are designated and qualify as net investment hedges in foreign net assets and which provide effective currency hedging of the net investment are recognised directly in equity. The net asset value of the foreign entities as estimated in the beginning of the financial year is hedged 90-100% by entering into short-term forward exchange contracts according to the requirements of hedge accounting. Changes in the fair value relating to the ineffective portion are recognised in the income statement. Gains and losses accumulated in equity are included in the income statement on disposal of the foreign operation.
Amounts recoverable from reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract.
The group assesses continuously its reinsurance assets for impairment. If there is objective evidence that the reinsurance asset is impaired, the group reduces the carrying amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in the income statement. Impairment write-downs are recognised in the income statement.
Treasury shares The purchase and sale sums of treasury shares and dividends thereon are taken directly to retained earnings under equity. Treasury shares include shares acquired as part of the share buyback programme and shares for employee shares and the share option programmes.
Subordinate loan capital Subordinate loan capital is recognised initially at fair value, net of transaction costs incurred. Subordinate loan capital is subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Employee benefits Pension obligations The group operates various pension schemes. The schemes are funded through payments to insurance companies or trustee-administered funds. In Norway, the group operates a defined benefit plan. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, dependent on age, years of service and compensation. In Denmark, the group operates a defined contribution plan. A defined contribution plan is a pension plan
Notes under which the group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions.
Provisions Provisions are recognised when, as a consequence of an event that has occurred before or on the balance sheet date, the group has a legal or constructive obligation, and it is likely that an outflow of resources will be required to settle the obligation. Provisions are measured as the management’s best estimate of the amount with which the liability is expected to be settled.
financial highlights and key ratios Financial highlights and key ratios for the TrygVesta Group are set out at the beginning of the Annual Report.
2 Earned premiums, net of reinsurance Direct insurance 16,764 17,465 Indirect insurance 78 47
Gross Ceded Gross Ceded 3 Technical interest, net of reinsurance Interest on insurance provisions 1,400 1,428 Transferred from provisions for claims concerning discounting -896 -926 Return on discontinued business -3 -3 4 Claims incurred, net of insurance Claims incurred -11,919 -12,634 Run-off previous years, gross 744 868
Reinsurance recoveries 502 194 Run-off previous years, reinsurers’ share -1 -75
Administative expenses include fee to the auditors appointed by the Annual General Meeting: Deloitte -8 -8
Outstanding options from 2006 allocation 31 Dec 2007 35,370 148,030 0 183,400 - 12 - 22
Outstanding options from 2007 allocation 31 Dec 2007 25,700 104,802 16,000 146,502 - 14 - 7
Number of options exercisable end of 2008 0 0 0 0 0 0 0 0
Outstanding options by exercise date: Allocated in 2006 concerning 2005 183,400 0 -2,620 0 180,780 February 2009 - February 2011 Allocated in 2007 concerning 2006 146,502 0 -2,906 0 143,596 February 2010 - February 2012 Allocated in 2008 concerning 2007 247,991 0 0 0 247,991 February 2011 - February 2013
The following assumptions were applied in calculating the market value of outstanding share options at the time of allocation: Average share price (DKK) at time of allocation 355.85 456.76 378.24 Exercise price (DKK) 0 0 0 Expected volatility 17.9% 24.1% 20.3% Expected maturity 4 years 4 years 4 years Risk-free interest rate 3.3% 3.9% 3.6%
Senior executives received part of their bonus in the form of shares at a discount to the market price. In 2008, a total of 26,323 shares were granted at discount to the market price of DKK 25 per share or DKK 9.3m. The grant of shares equalled 0.1% of the share capital.
The amount was provided in 2007 and did not affect the profit for 2008.
Profit/loss on business ceded -87 -82 -172 -1 0 -1 -343 Technical interest, net of reinsurance 164 182 137 14 3 1 501
Total return on investment activities after technical interest 340 Other income and expenses -51
Profit on continuing business 2,267 Profit/loss on discontinued and divested business -1
Provisions for bonuses and premium rebates 268 0 141 0 0 0 409
TrygVesta A/S, Tryg Ejendomme A/S, Ejendomsselskabet af 8. maj and eliminations are included in ‘Other’. Depreciation/amortisation is included in gross operating expenses, but managed at Group level and allocation to the individual segments would therefore not provide a true and fair view. Other assets and liabilities are managed at Group level and are therefore not allocated to the individual segments. These amounts are thus included under ‘Other’.
6 Operating segments P&C P&C 2008 Denmark Norway Corporate finland Sweden Other Total
Profit/loss on business ceded -89 -68 -516 -1 0 5 -669 Technical interest, net of reinsurance 180 122 173 17 7 0 499
Other Norwegian Group Life insurance Total One-year policies 2007 2008 2007 2008 2007 2008
Profit/loss on ceded business 12 2 0 0 13 - 47 - 13 - 16 0 0 156 - 104 Technical interest, net of reinsurance 53 58 4 5 58 63 76 65 71 72 1 25
Notes 7 Interest and dividends Dividends 168 39 Interest income cash in hand and at bank 46 49 Interest income bonds 1,112 1,404 Interest income other 56 31
Effective tax rate % % Tax on profit for the year 25 25 Diffrence between Danish and foreign tax rate 1 0 Prior-year tax adjustment 0 -5 Change tax rate in Denmark -1 0 Tax on non-taxable income and expenses, and tax concerning limitation of deductibility 0 15 Change in valuation of tax assets 1 2 Other taxes 1 0
See TrygVestas financial performance 2008 for futher information in the Management’s report regarding the tax expense
10 Profit/loss on discontinued and divested business Technical interest, net of reinsurance 3 3 Claims incurred, net of reinsurance -1 -1 Insurance operating expenses, net of reinsurance -3 -2
Profit/loss on discontinued and divested business -1 0 11 Intangible assets Cost Balance 1 January 373 528 Exchange rate adjustment 4 -21 Transferred to operating equipment -1 -1 Additions during the year 175 154 Disposals during the year -23 -15
Amortisation and writedowns Balance 1 January -153 -193 Exchange rate adjustment -3 22 Amortisation for the year -56 -31 Reversed amortisation 19 7
Depreciation and impairment writedowns Balance 1 January -145 -149 Exchange rate adjustment -1 8 Depreciation for the year -31 -20 Reversed depreciation 28 22
Amortisation is recognised in the income statement under insurance operating expenses and claims incurred.
Notes 13 Owner-occupied property Cost Balance 1 January 317 318 Exchange rate adjustment 10 -57 Additions during the year* 0 1,085 Disposals during the year -9 -13
Accumulated value adjustments Balance 1 January 12 -8 Value adjustment for the year at revalued amount in profit and loss -17 -1 Value adjustment for the year at revalued amount in equity -3 0
Accumulated depreciation Balance 1 January -3 -4 Exchange rate adjustment 0 1 Depreciation for the year -1 -6
In establishing the market value of the properties, the following return percentages were used for each property category: Lowest Average highest percentage percentage percentage
14 Assets under construction Cost Balance 1 January 0 0 Additions during the year 0 54
Total expenses for 2008 amount to DKK 40m (DKK 43m in 2007). Of this amount, unlet property represented DKK 0.5m (DKK 1m in 2007). Total expenses for investment property generating rental income thus amount to DKK 39.5m (DKK 42m in 2007).
Notes 16 Investments in associates Cost Balance 1 January 0 0
Revaluations at net asset value Balance 1 January 18 19 Exchange rate adjustment 0 -3 Revaluations during the year 1 0 Reversed depriciation 0 -2
Total other financial investment assets, cash and investments in associates in accordance with the balance sheet 35,863 30,768
The bond and share portfolio includes unit trusts in which the underlying assets are bonds and shares. In addition, the amounts include liquid assets allocated to the portfolio manager, money market deposits and debt and receivables from unsettled investment transactions.
The bond portfolio includes unit trusts in which the underlying assets are bonds.
The option adjusted duration is used to measure duration. The option adjustment relates primarily to Danish mortgage bonds and reflects the expected duration-shortening effect of the borrower’s option to cause the bond to be redeemed through the mortgage institution at any point in time.
The note should be seen in connection with the expected cash flow from the Group’s provisions for unearned premiums and provisions for claims, see note 22. Please refer to the section on ’Interest risk’ in ’Risk management’ in the ’Management’s report’.
Sold futures on shares are recognised in the amount at DKK -67m. Unlisted equity investments are measured at estimated fair value, see ’Accounting policies’.
Please refer to the section on Market risk Risk management in the Management’s report.
The impact on the income statement is similar to the impact on shareholders’ equity. The calculation is made in accordance with the disclosure requirements of the executive order issued by the Danish FSA on the presentation of financial reports by insurance companies and profession-specific pension funds. Please refer to the section on ‘Risk management’ for an elaboration of risk management and risk exposure.
Due within one year 13,153 224 8,444 297 Due after more than five years 681 0 3,618 0
Including writedowns of due amounts 106 120 18 Reinsurers’ share Reinsurer’s share 1,609 1,051 Writedowns after impairment test -22 -15
19 Current tax Current tax, beginning of year 186 243 Exchange rate adjustment 8 -66 Current tax for the year 746 434 Current tax on equity entries -24 154 Tax paid during the year -673 -628
Current tax is recognised in the balance sheet as follows: Under assets, current tax 93 111 Under liabilities, current tax 336 248
Bought during the year -221,200 -5,530 -3,346,610 -83,665 Sold during the year 69,677 1,742 85,815 2,145
Nominal Nominal No. of value % of share No. of value % of share Tresury shares shares (DKK’000) capital shares (DKK’000) capital
170m worth of treasury shares, corresponding to 10.0% of the share capital in the period until the next annual general meeting in 2009. In 2008, Tryg Vesta acquired treasury shares worth nom. DKK 83,665k, corresponding to 3,346,610 shares at a total cost of DKK 1,197m. Treasury shares are acquired for use in the Group’s incentive programme and as part of the share buy back programme. TrygVesta’s share buy back programme was launched after the annual general meeting held on 3 April 2008. Until 31 December 2008, shares worth DKK 1,053m had been bought back, corresponding to 75% of the total share buy back programme.
20 Capital adequacy Shareholders’ equity according to annual report 10,010 8,244 Subordinate loan capital 637 685 Proposed dividend -1,156 -423 Solvency requirements to subsidiary undertakings -3,824 -4,601
The capital base and the solvency ratio are calculated in accordance with the Danish Financial Business Act. TrygVesta manages its capital requirement as described in “Capitalisation” in the Management’s report’
21 Subordinated loan capital In December 2005, TrygVesta Forsikring A/S raised a subordinate bond loan for EUR 150m at the price of 99,017. The loan carries a fixed rate of interst at 4.5% p.a. until 2015, when it can be repaid. After that time, it will carry interest at 2.1% above EURIBOR until it expires in 2025. The loan is measured at amortised cost, and when the loan was raised capital losses and costs were deducted, amounting to DKK 16m at the balance sheet date. The fair value of the loan at the balance sheet date is DKK 908m (in 2007 DKK 1,041m) based on a price of 81.23 (in 2007 a price of 93.12). The price is sourced from Bloomberg, which applies a group of market players as its data sources.
The loan is an interest-only loan, and the lender has no option to call the loan or otherwise terminate the loan agreement with TrygVesta Forsikring A/S. The loan is automatically accelerated upon the liquidation or bankruptcy of TrygVesta Forsikring A/S. The share of subordinated capital included in the calculation of the capital base amounts to DKK 685m (in 2007 a total of DKK 637m).
Provisions for claims, end of year 1) 20,761 1,366 19,395 1) The table consists of figures for TrygVesta Forsikring A/S and TrygVesta Forsikring, Norwegian branch of TrygVesta Forsikring A/S. Other units in the Group are included in ‘Other’
2) Comprises provisions for claims for TrygVesta Garantiforsikring A/S and the Finnish and Swedish business units. 3) Discounting also includes exchange rate adjustments.
The table consists of figures for TrygVesta Forsikring A/S and TrygVesta Forsikring, Norwegian branch of TrygVesta Forsikring A/S.
Change in carrying amount of plan assets: Carrying amount of plan assets, beginning of year 825 932 Exchange rate adjustment 27 -177 Investments in the year 87 31 Estimated return on pension funds 43 44 Actuarial gains/losses -9 -173 Paid during the period -32 -29 Effect associated with optional shift to contribution pension plan -9 0
Specification of pension costs for the year: Present value of amounts accumulated during the year 60 58 Interest expense on accrued pension obligation 56 62 Expected return on plan assets -43 -56 Accrued employers’ nat. insurance contribution 10 9 Effect associated with optional shift to contribution pension plan -7 0
The Group’s Swedish branch complies with the industry pension agreement, the FTP plan, which is insured with Försäkringsbranschens
Pensionskassa - FPK. Under the terms of the agreement, the Group’s Swedish branch has undertaken, along with the other businesses in the collaboration, to pay the pensions of the individual employees in accordance with the applicable rules.
24 Deferred tax Tax asset Operating equipment 84 65 Debt and provisions 0 133 Bonds and loans secured by mortgages 84 0
Tax liability Land and buildings 157 157 Contingency funds 1,021 890 Debt and provisions 35 0 Intellectual property rights 64 100
No deferred tax is associated with investments in subsidiaries (in 2007 DKK 0m).
Other provisions primarily include provisions for own insurance contracts 26 Debt to credit institutions Bank loans 597 598 Bank overdrafts 2 111
Debt falling due within one year 2 111 Debt falling due after more than five years 0 0
600m had been utilised at 31 December 2008. In 2008, the loan carried interest at CIBOR plus a margin, totalling approximately 5.3% p.a. The unutilised part of the loan facility is measured at amortised cost, and an amount of DKK 5m was deducted from the loan proceeds upon signing the loan agreement. The cost is depreciated on a straight-line basis until the loan facility expires in July 2010. The fair value of the loan is considered to be the utilised part of the facility of DKK 600m.
Profit/loss for the period from continuing business (DKKm) 2,267 846 Average number of shares (1,000 shares) 67,648 66,184 Basic earnings per share of DKK 25 33.5 12.8
Payment due by period 2007 < 1 years 1-3 years 3-5 years > 5 years Total
The amounts include the following: TrygVesta Forsikring A/S has on 1 february 2008 signed an operating agreement with CSC for an amount of DKK 1bn for a period of 5 years which cannot be cancelled the next 2 years.
The Danish companies in TrygVesta Group are jointly taxed with TryghedsGruppen smba.
Assets to cover the technical provisions have been registered in a total amount of 33,746 29,690
Most of the Danish companies in TrygVesta Group are jointly registered for VAT and payroll tax and are jointly and severally liable for payment of all such direct and indirect taxes.
Companies of the TrygVesta Forsikring Group are part of certain disputes. Management believes that the outcome of these legal proceedings will not affect the Group’s financial position beyond those receivables and obligations recognised in the balance sheet.
Notes 30 Acquisition of subsidiary On 8 May 2008, TrygVesta Forsikring A/S acquired all the voting shares (nominally DKK 1m) of Ejendomsselskabet af 8. maj 2008 A/S
through a cash payment of DKK 1,085.5m to Danica Pension. The sole activity of Ejendomsselskabet af 8. maj 2008 A/S is the ownership of TrygVesta’s Ballerup headquarters. Costs for advisors in connection with the preparation, conclusion and performance of the agreement was DKK 0.2m.
Owner-occupied property 1,085.0 1,085.0 Cash in hand and at bank 0.5 0.5
There have not been any adjustment to the fair value, which is therefore identical to the carrying amount are therefore the same. There is no difference between cost and the fair value of the identifiable assets, liabilities and contingent liabilities.
A pro forma statement of TrygVesta Group’s profit/loss for 2008 as if Ejendomsselskabet af 8. maj 2008 had been acquried as per 1 January 2008 would not be significantly different from the Group’s realised profit/loss for 2008. The Group’s gross premiums earned would not be affected.
Outstanding guarantees cover the policyholders’ financial obligations pursuant to the contract. Following an individual assessment, all guarantees are issued without additional security. The company has full recourse against the individual companies. No provisions have been made for non-performing guarantees and no expenses were incurred during the financial year.
31 Leases with related parties Transactions with related parties also comprise rental income as premises are being let to a member of the Board on market terms.
Specification of remuneration Supervisoy Board -4 -4 Executive Management -16 -19
Intra-group trading involved - Providing and receiving services 0 1 - Sale of unlisted shares 15 0
Intra-group trading Administration fee, etc. is fixed on a cost-recovery basis. Intra-group accounts are offset and carry interest on market terms.
The TrygVesta companies have entered into reinsurance contracts on market terms.
Total receivables 0 293 7 Current tax assets 21 18 8 Deferred tax assets 0 0 Cash in hand and at bank 1 1
TrygVesta Annual Report 2008 l Balance sheet for TrygVesta A/S (parent company) l
140 of 152 l Statement of changes in equity (parent company) l TrygVesta Annual Report 2008
Profit for the year -2,007 2,287 423 703 Exchange rate adjustment of foreign entities -640 -640 Hedge of foreign currency risk in foreign entities 615 615 Tax on equity entries -154 -154
Proposed dividend per share DKK 6.50 (total for 2007 DKK 17 DKK). 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 year end (64,377,683). The dividend is not paid until approved by the shareholders at the annual general meeting of the subsequent year.
TrygVesta Forsikring A/S’ Norwegian branch has in its financial statements included provisions for contingency funds in the amount of
Profit on continuing business 2,396 757 Profit/loss on discontinued business after tax -1 0 3 Other expenses Administrative expenses -48 -56
Remuneration for the Supervisory Board and the Executive Management is disposed in note 12 ‘Related parties’.
Administrative expenses include fee to the auditors appointed by the Annual General Meeting: Deloitte -0.9 -0.9
142 of 152 l Notes (parent company) l TrygVesta Annual Report 2008
5 Profit/loss on discontinued and divested business Technical interest, net of reinsurance 3 3 Claims incurred, net of reinsurance -1 -1 Insurance operating expenses, net of reinsurance -3 -2
Profit/loss on discontinued and divested business -1 0 6 Investments in subsidiaries Cost Balance 1 January 6,987 6,987
Claims payments - Key management 0.3 0.2 - Other related parties 43.6 9.6
Leases with related parties Transactions with related parties also comprise rental income as premises are being let to a member of the Board on market terms.
12 Parent company TryghedsGruppen smba TryghedsGruppen smba controls 60% of the shares in TrygVesta A/S.
Subsidiaries and associates TrygVesta A/S has 100% control of TrygVesta Forsikring A/S 100%.
Intra-group transactions Intra-group trading involved - Providing and receiving services 49 59 - Intra-group account 131 297
Assets are transferred on market terms Administration fee, etc. is fixed on a cost-recovery basis. Intra-group accounts are offset and carry interest on market terms.
146 of 152 l Financial highlights and key ratios by geography l TrygVesta Annual Report 2008
Danish general insurance Gross premiums earned 8,525 8,764 9,084 9,346 9,620
Key ratios Gross claims ratio 73.0 77.1 66.8 69.3 64.9 Business ceded as % of gross premiums 3.5 -3.9 3.9 0.0 4.2
Claims ratio, net of ceded business 76.5 73.2 70.7 69.3 69.1
Number of full-time employess, end of period 2,223 2,215 2,231 2,242 2,377
Norwegian general insurance Gross premiums earned 6,653 6,810 6,738 6,919 7,129
Key ratios Gross claims ratio 62.1 63.0 64.3 64.0 71.0 Business ceded as % of gross premiums 6.2 5.2 3.6 4.9 3.8
Number of full-time employess, end of period 51 48 77 127 154 financial highlights and key ratios by geography
Swedish general insurance Gross premiums earned - - 4 90 225
Number of full-time employess, end of period - - 40 61 105
Number of full-time employess, end of period 34 24 0 0 0
Claims ratio, net of ceded business 72.9 71.2 69.6 69.4 71.8
Gross expense ratio Calculated as the ratio of gross insurance operating expenses to gross earned premiums.
(Claims incurred + insurance Operating expenses + result of reinsurance) x 100
Price/earnings Calculated as the ratio of the price per share to earnings per share.
TrygVesta urges readers to refer to the section on risk management for a description of some of the factors that could affect the Group’s future performance or the insurance industri.