As the world changes, we make it easier to be tryg
Highlights 03 Tryg at a glance 04 Business areas 05 Income overview 06 Introduction by Chairman and Group CEO 07
Financial outlook 10 Targets and strategy 13 Tryg’s results 17 Private 21 Commercial 23 Corporate 25 Sweden 27 Investment activities 29 Solvency and dividend 31 Investor information 33 Corporate governance 35 Supervisory Board 40 Executive Board 43 Corporate Responsibility in Tryg 44
Tryg aims to pay a nominal, stable and increasing ordinary dividend, while maintaining stable results and a high level of return on capital employed
Expense ratio 2019: 14.2 585m 311m 3,541m Return on free investments portfolio (DKK)
Increase in awareness of TryghedsGruppen’s member bonus among non-customers 2019: 28%
Quarterly dividend of DKK 1.75 per share, supporting TryghedsGruppen’s member bonus. Solvency ratio of 183.
We aim to distribute a nominal, stable increase in dividend and to pay out 60-90% of our profit.
Our 4.400 employees provide peace of mind for 4 million customers and handle approximately 1 million claims on a yearly basis.
Trygheds­ Gruppen TryghedsGruppen owns 53% of Tryg and contributes to projects that create peace of mind via TrygFonden. In 2020, TrygFonden has contributed with up to DKK 650m.
Broad diversity of products We offer a broad range of insurance products for private individuals as well as businesses.
Tryg at a glance As the world changes, we make it easier to be tryg*
Private Commercial Corporate Sweden Private provides insurance products to private customers in Denmark and Norway. Private offers a range of insurance products including motor, contents, house, accident, travel, motorcycles, pet and health.
employees a) employees a) employees a)employees a)of premiums of premiums of premiumsof premiums
Own sales agents • Call centres • Real estate agents • Internet •
Management’s review - Contents a) Employee numbers do not include shared service units such as IT, Finance etc. and claims departments
Profit/loss on gross business 975 829 4,014 3,803 3,400 3,582 3,351 Profit/loss on ceded business -187 -66 -499 -566 -624 -779 -951 Insurance technical interest, net of reinsurance -7 0 -20 1 -10 -14 -10
Investment return after insurance technical interest 513 198 311 579 -332 527 987
Run-off gains/losses, net of reinsurance 314 256 1,145 1,194 1,221 972 1,239
Combined ratio on business areas a) Adjusted for depreciation on intangible assets related to Brands and Customer relations after tax Note: Tryg´s acquisition of Alka affects the Financial Statement from closing the 8 November 2018 Annual report 2020 | Tryg A/S | 6
All financial targets met In 2020, Tryg met all the financial targets presented at the Capital markets day (CMD) in November 2017. The technical result target of DKK 3,300bn should be seen against a full-year techinal result of DKK 3,495bn, the combined ratio target of ≤ 86 should be seen against a full-year combined ratio of 84.5, and the expense ratio target of ~14 should be seen against a full-year expense ratio of 14.1. In a stock exchange announcement on March 27, Tryg abandoned the ≥ 21% after tax ROE target for 2020 following unprecedented capital market developments in Q1. The mark to market losses in Q1 were more than fully recovered in the following quarters, and Tryg is reporting a FY ROE of 22.5%.
Many customers prefer digital communication, and Tryg aims to offer a wide range of digital self-service solutions, including solutions that enable customers to access exactly which products and coverage they need, buy insurance products, make changes to existing products and to report claims. In 2020, more than 5 million customers logged in to Tryg’s digital self- service offerings.
Tryg continued to focus on distribution efficiency, and in 2020 the continued use of agents was the primary driver of benefits. Private in Denmark and Norway as well as Commercial in Denmark have been particularly successful in using agents.
Strong customer focus Tryg continues to have a strong customer focus. In 2020, the Transaction Net Promotor Score (TNPS) was 72, exceeding the ambitious target of 70. The number of products per customer was 3.9 in 2020, corresponding to growth of 7% per customer, and therefore slightly lower than the targeted 4.0. This is mainly due to strong growth in the car sales channel in Norway selling only motor insurance.
Tryg has a strong focus on ensuring that shareholders receive a nominal and stable increase in dividends. A total dividend of DKK 7.00 per share will be paid for 2020.
Thanks to all employees 2020 was a very challenging year for all the employees in Tryg as a result of COVID-19. We are very proud to see how the employees adapted to a new and unprecedented situation with a continued strong customer focus. Furthermore, even in this difficult situation we saw that job satisfaction increased to 80 in 2020 against 78 in 2019. The Supervisory Board and the Executive Board would like to thank all employees for their great efforts.
Strong development together with new and old partners During 2020, existing partner channels developed, and furthermore new partnerships were launched. For example, Moderna launched Mekonomen Bilförsäkring together with the existing partner Mekonomen and broadened its product offering through Akademikerförsäkring to include the Bilsport & MC and Atlantica product ranges.
TryghedsGruppen’s member bonus For the fifth consecutive year, TryghedsGruppen, Tryg’s majority shareholder, paid out a member bonus for 2020 of DKK 985m, equivalent to 8% of premiums paid for 2019. The bonus was paid to Tryg and Alka customers in Denmark, or every fourth Dane.
Digital seminars During the year, Commercial and Corporate in Moderna arranged a number of digital seminars for brokers all around Sweden. They attracted more than 10,000 participants in the course of the year, and levels of engagement were high, both internally and externally.
Governments across Scandinavia have, to different extents, introduced schemes to help businesses in these very challenging times. The start of vaccination programmes towards the end of the year is expected to gradually help improve the macroeconomic outlook in 2021. However, due to the enduring uncertainty, the macroeconomic backdrop remains challenging.
Retention levels are very high in the Nordic region compared to nearly everywhere else in the world. This is a key profitability driver as it helps insurers keep their overall expenses low. Retention rates hover around 90% in the Private and Commercial (SMEs) segments, which represent more than 80% of Tryg’s total business. A direct distribution model also contributes significantly
Tryg’s reserves position remains strong. On the CMD in November 2017, it was disclosed that run-off gains were expected to be between 3% and 5% in 2020. Tryg’s systematic claims reserving approach still includes a margin of approximately 3% on best estimate.
In 2021, weather and large claims both net of reinsurance are expected to total DKK 600m and DKK 550m, respectively, which is unchanged compared to previous years.
The interest rate used to discount Tryg’s technical provisions is historically low. An interest rate increase will have a positive effect on Tryg’s results. An interest rate increase of 1 percentage point will increase the pre-tax result by around DKK 300m, and vice versa. The calculation includes the lower claims in the P&L from higher discounting, the higher technical interest and the higher return on the bonds in the free portfolio.
The investment portfolio is divided into a match portfolio corresponding to the technical provisions, and a free portfolio. The objective is for the return on the match portfolio to be approximately zero as capital gains and losses on the assets side should be mirrored by corresponding developments on the liabilities side. The free portfolio is invested in different asset classes with a view to obtaining the best risk-adjusted return.
2021 outlook The three-year strategy period ended in 2020 with Tryg meeting all its financial targets. A new capital markets day was initially scheduled for 29 January 2021 but it has been postponed until the autumn following the recommended cash offer for RSA Insurance Group plc and pending approval by the regulatory authorities. The acquisition is considered transformational as it will create the largest Scandinavian non-life insurer, doubling the pro-forma technical result. Therefore, including the acquired asset in future financial targets is deemed essential for Tryg’s next Capital Markets Day.
Tryg stand-alone Tryg (excluding RSA’s assets) expects a technical result of between DKK 3.3bn and 3.7bn in 2021. The range is driven by the natural volatility of large and weather claims and the more challenging macroeconomic outlook (compared to past years), which could impact the top line especially in the Commercial and Corporate segments. The low end of the range would imply a significantly higher level of weather and large claims compared to a normalised guidance of large claims of DKK 550m and weather claims of DKK 600m a year. Run-off gains are expected to be between 3-5%.
Other income and costs in the P&L are expected to be between DKK -150m and DKK -250m. Tryg is booking in this line the depreciation from the Alka acquisition, some holding company costs not related to the insurance portfolio and the income and costs related to selling pension products for Danske Bank.
Tryg has disclosed total costs of DKK 4.4bn costs related to the RSA transaction. Some of these costs will be booked in the P&L while some will be on the balance sheet. During 2020, the deal-contingent forward hedges (derivate contracts entered to ensure certainty of funds at the time of R.2.7 announcement) was booked with no impact in P&L. During 2021, the cost of DKK1.3bn related to the cost of the contracts will be booked in the P&L if the acquisition is completed. It is important to note that the cost related to the DCF hedge is not tax-deductible. Additionally, DKK 1.6bn pertaining to underwriting fees for the rights issue and to financial and legal advisor costs will all be booked in the balance sheet. Total restructuring costs of DKK 1.5bn will also be booked in the P&L. At the time of writing, it is expected that some DKK 500m will be booked in 2021 and a remaining DKK 1bn in 2022. However, the exact timing remains uncertain as it is dependent from the closing of the transaction and relative integration.
A first draft of the purchase price allocation shows a likely annual intangible assets depreciation (after tax) range between DKK 600m and DKK 800m expected from 2022.
Employees are a key resource Tryg’s employees are essential to delivering the overarching purpose of making it easier to be ‘tryg’ for the customers. All employees are encouraged to understand that they play an integral role in supporting the overall purpose. Therefore, clear and ambitious targets are set for each individual employee – and regular feedback must be provided.
Grasping opportunities to develop rather than just defending our business • Digitalisation • New products • Analytics
Adjusting to customer preferences and needs • Self-service • Straight-through processing • Packaging of products
Increasing customer relevance and share of wallet • Product innovation • Prevention • Add-on services
In 2020, Tryg was very pleased to see a historically high level of employee satisfaction, surpassing the general level of employee satisfaction in the financial sector in the Nordics. Tryg is aiming for the highest level of employee satisfaction in the financial sector in the Nordic region.
Creating value for our shareholders Tryg’s shareholders must see Tryg as a company with a clear focus on profitability and efficiency, which reflects the company’s core strategy and its financial targets. Tryg’s performance can be measured by its long-term total shareholder return. Tryg aims to pay a nominal, stable and increasing ordinary dividend, while maintaining stable results and a high level of return on capital employed.
Financial targets In November 2017 at a CMD, Tryg communicated a set of financial targets for 2020. Tryg’s main target for 2020 was a technical result of DKK 3.3bn, which has been met with Tryg reporting a technical result of DKK 3,495m for 2020. The financial target of an expense ratio ~14 and a combined ratio at or below 86 were also met. The ROE target at or above 21% was suspended, as communicated in the stock exchange announcement on 27 March 2020, considering the mark-to-market investment losses in Q1 2020. However, following the rebound of the financial markets in the last three quarters of the year, Tryg reported an ROE of 22.5% for the FY, and therefore realised the initial target.
Customer targets for 2020. This was reflected in an increased focus on customer satisfaction measured through the TNPS score. In 2020, Tryg reached a TNPS level of 72, and the target was therefore met.
There is a strong correlation between customer loyalty and the number of products per customer, and therefore a target of increasing the number of products per customer by 10% was defined. In the strategy period, the number of products per customer was 3.9, an increase of 7%. Tryg's efforts in partnering with car dealerships have resulted in a higher-than-expected amount of one-product customers. As growth in this particular segment has been higher than expected, the 10% increase in products per customer has not been achieved. However, Tryg considers the increase in products per customer as being satisfactory, and the potential for enhancing the coverage for new customers from our car channels will be explored going forward.
Strategic initiatives Tryg defined four strategic initiatives to support both its financial targets and customer targets for 2020. KPIs have been defined for each initiative. Furthermore, synergies related to Alka will also be part of the initiatives.
Fraud detection has been another important driver of the claims excellence initiative in the strategy period. Following the successful integration of Alka, a more sophisticated fraud detection methodology has been implemented across Tryg's claims-handling units. Initially, the methodology was implemented in Tryg Denmark in 2019, followed in 2020 by Norway and Sweden. The methodology is based both on automated fraud detection algorithms in the claims-handling systems, and enhanced training of employees. Additional cost savings of DKK 70m compared to 2017 have been realised.
Digital empowerment of customers is another important initiative in Tryg. Digital services, simplification and efficient customer interaction are becoming increasingly important for customers. Customers in general prefer speedy processes, and therefore digital solutions also support Tryg’s focus on customer satisfaction. The target for 2020 was 50% straight-through processing (STP) of claims and a self-service level of 70% for all contacts with Tryg. The focus on digital services in Tryg contributed DKK 120m to the financial targets as well as improving customer satisfaction.
The increase in log-ins is generated by a number of new digital self-service solutions such as digital invoicing, online insurance check-ups and various ways for customers to order and change products and register claims. The self-service target at 70% has been exceeded with the level of 72%, this has been achieved despite a surge of phone calls related to the COVID-19 outbreak in the first part of the year.
Increasing distribution efficiency is a strategic priority for Tryg. The target has been to improve distribution with an impact of DKK 150m in 2020. The initiative has generated a total impact of approximately DKK 175m, exceeding the target.
Finally, an important component for improving distribution efficiency involves partner agreements. In Norway, the partner agreement with NITO has generated very good leads, increased sales and retention levels. The agreement with Danske Bank also got off to a good start in 2019, generating good leads and sales both for Private and Commercial customers in Denmark and Norway. Finally, Tryg’s Norwegian branch, Enter Forsikring, has in the strategy period launched ‘Enter Proff’, selling car insurance to commercial customers.
Alka synergies In connection with the acquisition of Alka, Tryg communicated a guidance of DKK 300m of synergies which are expected to be achieved in 2021. At the same time, Tryg announced synergies targets of DKK 75m in 2019, DKK 150m in 2020 and DKK 300m in 2021. Synergies of DKK 90m were realised in 2019 (DKK 75m target). In 2020, Tryg realised synergies of DKK 176m (DKK 150m target) demonstrating that it is slightly ahead of the plan for delivering synergies. Approximately half of the achieved synergies relate to costs, while the inclusion of the Alka business in Tryg's extensive procurement network has also been an important driver.
In Q4, Tryg realised synergies of DKK 46m, comprising DKK 19m from claims, DKK 16m from costs and DKK 11m from revenue.
Strategy 2021 In 2021, Tryg will continue to build on the strong foundation within customer and sales excellence that has been established during the past three years. This will entail the enhancement of some of the strategic focus areas from the 2020 strategy, as well as additions to these. Furthermore, in 2021 there will be a strong focus on the B2B segment, and initiatives will be introduced aimed at growing the Commercial segment, and at increasing profitability in the Corporate segment. As regards the acquisition of Trygg-Hansa in Sweden and Codan in Norway, planning the integration is a priority in order to ensure that Tryg will be on track with ambitious synergy targets as soon as the transaction closes.
Tryg expects to present CMD targets based on the new strategy in autumn 2021 following the closing of the acquisition.
The investment result was DKK 311m (DKK 579m), characterised by high volatility between quarters. The COVID-19 outbreak caused wide-spread selling in capital markets in March, which was followed by a robust recovery in the following quarters. The macroeconomic picture looked very bleak in March/April, improved slightly afterwards, and the start of COVID-19 vaccination programmes towards the end of 2020 and beginning of 2021 is renewing hopes of stabilisation of the world economy. Equities closed the year up 13.5%, while corporate bonds also saw strong returns. In general, all asset classes in the free portfolio contributed positively to the strong performance.
In 2020, Danish customers received the fifth member bonus from TryghedsGruppen (Tryg’s 53% majority shareholder). The 8% bonus is appreciated by customers and seen as an important competitive advantage, boosting customer loyalty and supporting customer targets.
Premiums Premium income totalled DKK 22,653m (DKK 21,741m), representing growth in 2020 in local currencies of 7.0%.
The Commercial segment posted growth of 6.0% in 2020 (8.3% in 2019 impacted by Alka), supported by an increase in the number of customers in Denmark, helped by continued strong sales by Tryg's independent sales agents and improved sales from the broker sales channel. In Norway, growth primarily related to price adjustments to improve profitability, which were generally accepted by customers.
The segment Sweden posted growth of 4.9% (6.1%), helped by price adjustments, especially for motor to improve profitability, but also by strong sales in the boat sales channel Atlantica, helped by many people holidaying in Sweden (as opposed to travelling abroad) through the COVID-19 period.
COVID-19 outbreak had a significant negative impact in the first quarter of 2020 due to high gross losses on travel insurance somewhat mitigated by lower claims frequencies in lines such as motor, property and accident resulting in a total negative gross impact of DKK -180m or DKK -40m after reinsurance. In the following quarters, a positive impact was recorded due to lower activity in the society leading to lower claims frequency primarily mentioned lines of business. The total impact from COVID-19 for FY 2020 was DKK 39m on a gross basis (before reinsurance) and DKK 179m on a net basis (after reinsurance).
Expenses The expense ratio was 14.1 (14.2). At the CMD in 2017, Tryg announced an expense ratio target of around 14 in 2020. A number of initiatives to lower distribution costs are being implemented, and some of the savings from these initiatives are being invested in new digital solutions. The expense ratio was impacted by satifactory growth in the Private segment, especially in Norway, where commissions are paid upfront in many distribution channels. This higher level was also supported by distribution initiatives, for example the implementation and increased use of more efficient independent sales channels, especially in Denmark in both Private and Commercial. The expenses were negatively impacted by DKK 38m related to COVID-19 initiatives such as IT and increased cleaning and disinfection of offices.
Investment activities The investment return totalled DKK 311m (DKK 579m), with capital market developments being very volatile in 2020. During March, following the outbreak of COVID-19, an extreme sell-off in virtually all assets classes was recorded, with equities dropping an unprecedented 25-30% in just a few weeks. A recovery gradually built up in Q2 and continued gathering strength, with a very robust performance in the last quarter of the year. All asset classes in the free portfolio produced good returns for the full year with equities (up 13.5%) and corporate bonds (returning 6%)
Capital position The solvency ratio (based on Tryg’s partial internal model) was 183 at year-end. Back in March, Tryg moved the dividend decision to year-end as opposed to quarterly in 2020 due to considerable capital market volatility and heightened regulatory pressure on the financial sector in general. However, as the business model proved sufficiently robust, this decision was revisited, and in November dividend for the first nine months of 2020 was paid. Tryg will pay a Q4 dividend of DKK 1.75 per share on 29 January 2021 in connection with the publication of the FY 2020 results. The Q4 dividend is proportionate to the dividend for the first nine month paid in November, and also in line with the policy of paying a stable quarterly dividend.
Tryg’s own funds mainly consist of shareholders’ equity, intangibles (fully deducted), Tier 2 instruments (subordinated debt and the Norwegian natural perils pool), Tier 1 instruments and future profits. Most of Tryg’s own funds consist of shareholders’ equity. Tier 2 capacity has been fully utilised, while Tier 2 bonds in the amount of DKK 147m are currently not included in own funds, as they exceed the 50% solvency capital requirement (SCR). Tier 1 capacity has also been almost fully utilised, with DKK 261m remaining at year-end 2020.
Tryg’s solvency ratio displays low sensitivity to capital market movements. The area with the highest level of sensitivity is spread risk, where a widening/tightening of 100 basis points would impact the solvency ratio by approximately 20 percentage points. Sensitivities towards falling equity market and interest rate movements are low.
Tryg calculates its SCR based on a partial internal model in accordance with the Danish Financial Supervisory Authority’s Executive Order on Solvency and Operating Plans for Insurance Companies. The model is based on the structure of the standard model. Tryg uses an internal model to assess insurance risks, while other risks are calculated using standard model components. Tryg’s SCR, calculated using the partial internal model, was DKK 4,855m at the end of 2020 compared to DKK 5,021m at the end of 2019. The lower SCR in 2020 has primarily been driven by the FSA approval of the company’s revised partial internal model in April
Claims The claims ratio (net) was 72.3. Large claims of DKK 201m (DKK 98m) were higher than last year and higher compared to a normal quarter (DKK 137m), while weather claims of DKK 148m (DKK 94m) were also higher than last year, but below a normal Q4, which ordinarily would be characterised by relatively harsh Scandinavian weather conditions. The run-off result was DKK 314m (DKK 256m). The underlying claims ratio improved 0.6 percentage points for the Group and 0.2 percentage points for the Private segment. In the last quarter of the year, further restrictions were introduced due to a new outbreak of COVID-19, which has resulted in lower economic activity, impacting claims frequencies in selected lines of business. The overall impact has been quantified to DKK 52m. In Q4, weather claims were impacted by a landslide in Norway on 30 December with an impact of approximate DKK 100m for Tryg.
Dividend policy Tryg’s dividend policy targets a nominal, stable increase in dividend payments on a full-year basis. A total dividend of DKK 7.00 per share will be paid out for 2020 (DKK 6.80 in 2019). After the significant negative impact of COVID-19 in Q1 2020, Tryg announced an annual dividend decision instead of quarterly dividend payment. However, despite challenging times, Tryg's business model proved very resilient, and it was decided to pay out a dividend of DKK 5.25 per share for the first three quarters of 2020. Tryg will pay a Q4 dividend per share of 1.75. The full-year dividend will amount to DKK 2,115m, or 76% of the profit for the year.
Investments The investment return totalled DKK 513m (DKK 198m) for Q4 2020, driven by a return of DKK 513m (DKK 226m) on the free portfolio, a return of DKK 17m (DKK 19m) on the match portfolio, and other financial income and expenses of DKK -17m (DKK -47m). The primary driver of the strong investment return in Q4 is the performance of equities, which were up 14% (7.5%), while corporate bonds also generated very good returns.
Other income and costs Other income and costs totalled DKK -70m (DKK -20m). In Q4 2019, a positive VAT compensation of DKK 45m was booked.
Taxes Tryg paid taxes of DKK 185m (DKK 234m) in Q4, resulting in a tax rate of 15.1%. The lower -than-normal tax rate is attributable to strong capital markets returns in the quarter as well as expected repayment of losses related to Tryg’s Finnish business of just over DKK 50m.
Events after Q4 2020 accounting period On 18 January 2021, RSA Insurance Group Plc held a general meeting with shareholders set to vote on the GBP 7.2bn takeover by Regent Bidco (consortium between Tryg and Intact). RSA shareholders voted in favour of the special resolution relating to the acquisition proposed at the general meeting.
Results 2020 The technical result for 2020 was DKK 2,045m (DKK 1,951m), with a combined ratio of 83.9 (83.7). The result was attributable to a combination of higher premium growth in both Denmark and Norway and slightly improved underlying claims ratio development and net positive impact from COVID-19.
Premiums Gross premium income was up 9.0% (7.8% in 2019 excluding Alka) in local currencies, which was attributable to growth in both Denmark and Norway. The growth was mainly driven by continued high retention levels in the Danish and Norwegian Private segments, strong developments in partner agreements and cross-selling to existing customers primarily in Denmark. The partner agreements driving growth in Norway were primarily OBOS, Norwegian Society of Engineers and Technologists (NITO) and a car sales channel (Enter). Growth was achieved through the development of innovative solutions and products tailored especially to the members of the various partner organisations.
Claims The gross claims ratio totalled 69.7 (68.1), while the claims ratio, net of ceded business was 70.3 (70.0). The underlying claims level improved by 0.2 percentage points, which was attributable to the claims excellence programme and price adjustments aimed at mitigating increased claims inflation. The underlying claims ratio improvement was somewhat lower than last year due to the high organic premium growth and the fact that new customers have an approximately 3% higher claims frequency than existing customers. Weather claims were on par with 2019 levels and primarily related to Norway. COVID-19 had a limited positive impact of 1.0%, with travel insurance impacting negatively and motor, content and accident insurance impacting positively. In Q4, weather claims were impacted by a landslide in Norway on 30 December with an impact of approximate DKK 60m for Tryg.
The business area accounts for 56% of the Group’s total premium income.56%
Expenses The expense ratio for Private was 13.6 (13.7), which was in line with the previous year. The expenses were impacted by commissions due to high premium growth that were mitigated through initiatives to reduce distribution costs. A key initiative was an increase in the number of very efficient private sales agents and generally increased efficiency for the sales channels. Total employee numbers increased from 1,317 at the end of 2019 to 1,344 in 2020, reflecting a continued focus on efficiency, but also an increase especially in distribution.
Commercial Commercial sells insurance products to small and medium-sized businesses in Denmark and Norway. Sales are effected via Tryg’s own sales force, brokers, Alka (Denmark), franchisees (Norway), customer centres as well as group agreements.
The retention rate for Commercial Denmark was unchanged at 88.6 compared to the prior-year period, while in Norway the retention rate increased from 89.0 to 89.2. The positive developments in Denmark and Norway are attributable to a strong customer focus, while the customer bonus model also supported the development in Denmark.
Claims The gross claims ratio was 62.9 (67.1), with a claims ratio, net of ceded business of 66.2 (69.3). The lower claims level was helped by an improvement in the underlying clams ratio, a lower level of large and weather claims and a positive impact from COVID-19 due to lower claims frequencies for business lines such as motor, accident and workers' compensation. In Q4, weather claims were impacted by a landslide in Norway on 30 December with an impact of approximate DKK 20m for Tryg.
Premiums Gross premiums increased by 7.2% (4.8%) in local currencies, primarily due to increased customer numbers in Denmark and price adjustments in Norway. The retention rate in Denmark was stable at 88.6 (88.6), while the retention rate in Norway increased significantly to 89.2 (89.0) due to a strong focus on customer loyalty.
Results 2020 The technical result was DKK 464m (DKK 496m), with a combined ratio of 88.0 (87.6). The result was positively affected by an underlying improvement, a slightly higher level of large claims and a slightly higher run-off level. Premiums were up 1.4% (2.0%), impacted by price hikes in Norway, Denmark and Sweden to improve profitability, and a high retention level in Denmark, driven by the member bonus model. Even though the underlying profitability is increasing, Tryg will still have to improve profitability in all countries and will therefore continue to implement profitability actions in all countries in 2021, which might reduce premium income, depending on market conditions.
Premiums Gross premium income was up 1.4% (2.0%) in local currencies. An increase of around 3.6% was seen in Denmark, impacted by price adjustments of approximately 10% and continued positive developments for the credit and surety business (Tryg Garanti) and a high retention level. In Corporate Norway, premiums decreased by 3.6%, primarily due to price hikes of approximately 14% (excluding fronting and captive agreements). In Sweden, which accounts for only 20% of the total Corporate business, premium growth was 5.1% and was also impacted by profitability initiatives of approximately 8% resulting in a loss of customers.
profitability initiatives to be implemented in 2021. In Q4, weather claims were impacted by a lanslide in Norway on 30 December with an impact of approximate DKK 15m for Tryg.
Expenses The expense ratio for Corporate was 11.4 (10.4) and was quite stable throughout the year. The low expense ratio is driven by high average premiums in the Corporate segment, leading to relatively low administration costs in per cent of premiums, and by the fact that brokers are paid by customers. Employee numbers were almost unchanged from 290 at the end of 2019 to 291 in 2020.
Results Q4 2020 The technical result was DKK -6m (DKK 73m), with a combined ratio of 100.5 (92.6). The results were positively impacted by an improved underlying claims ratio, but negatively impacted by a higher level of large and weather claims, a slightly lower level of run-off and a negative net impact from COVID-19 claims due to a single claim in Tryg Garanti. Premium growth was a slightly positive 2.0% (1.1%) and was impacted by price adjustments and growth in Tryg Garanti.
Expenses The expense ratio was 13.5 (12.1) and somewhat higher than Q4 2019 and higher than the full year, which however did not represent a trend but rather reflected volatility in costs.
Sweden sells insurance products to private customers under the ‘Moderna’ brand. Moreover, insurance is sold under the brands Atlantica, Bilsport & MC and Moderna Djurförsäkringar. Sales take place through its own sales force, call centres, partners and online.
Premiums Gross premium income totalled DKK 1,604m (DKK 1,521m), equating to growth of 4.9% (6.1%) in local currencies. Growth was especially attributable to motor insurance as a result of widespread acceptance of price adjustments to improve the claims ratio for this product. During the COVID-19 pandemic, Tryg has seen a big increase in the demand for boat insurance as many people were ‘staycationing’ in Sweden instead of travelling abroad. Atlantica, which is a niche brand in Private Sweden for boat insurance, is a very profitable segment.
Expenses The expense ratio was 16.8 (17.5), which is a somewhat lower level than the previous year. Expenses were impacted by one-off costs related to organisational restructuring in 2020. Employee numbers in Sweden were up by 23 compared to the prior-year period, totalling 323 at the end of 2020, primarily because of an increase in Inbound Sales.
The business area accounts for 7% of the Group’s total premium income.7%
Results Q4 2020 Gross premium income for Q4 2020 was DKK 393m (DKK 364m). The technical result was DKK 96m (DKK 90m), with an expense ratio of 13.9 (21.5) and a combined ratio of 75.7 (75.3).
Premiums Gross premium income was DKK 393m (DKK 364m), or 5.6% (3.3%) in local currencies. The primary growth driver was the price adjustments implemented for motor insurance to improve profitability, but also strong sales from the inbound channel and improved distribution from Danske Bank.
Expenses The expense ratio was 13.9 (21.5) and was impacted by adjustments relating to previous quarters and therefore did not represent the actual expense level.
Investment activities The investment return totalled DKK 311m (DKK 579m) for the FY 2020, driven by a return of DKK 585m (DKK 857m) on the free portfolio, a return of DKK -19m (DKK -42m) on the match portfolio, and other financial income and expenses of DKK -255m (DKK -236m).
Free portfolio Financial markets experienced a highly volatile year due to the outbreak of COVID-19 in March and the resulting macroeconomic worries followed by a strong recovery in the following quarters. Equity markets were down 25-30% during the second half of March, but finished the year up 13%, an unprecedented rollercoaster. Macroeconomic worries were dominant in February and March, while large Government spending programmes across the globe have mitigated the impact on employment levels but obviously increased public borrowing levels, which in some cases were already very high. The start of COVID-19 vaccination programmes just after Christmas has given hope for a rapidly improved outlook for 2021 although the winter months are likely to remain very challenging.
Other financial income and expenses -17 -47 -255 -236 the return on equities explains around half the difference between investment returns in 2019 and 2020. The credit bonds portfolio also produced a good return of DKK 136m (6.3%) even though it was lower than in 2019 (10.8%), primarily due by falling rates throughout most of the year and tightening credit spreads. The return on the investment property portfolio was DKK 64m (DKK 159m in 2019 driven by revaluations of DKK 68m in Q4), or 2.7%.
Equity and property investments totalled DKK 5.4bn, while approximately DKK 2.3bn were invested in corporate bonds. Some DKK 3.8bn were primarily invested in Nordic covered bonds and government bonds, including inflation -linked bonds, where current yields remain negative, putting downward pressure on the return on the free portfolio and the overall investment income. Finally, an amount corresponding to just under DKK 1bn was invested in diversifying alterative assets.
Other financial income and expenses Other financial income and expenses is primarily characterised by interest expenses related to outstanding subordinated debt, the cost of currency hedges to protect shareholders’ equity and the cost of running investment operations. Other financial income and expenses totalled DKK -255m (DKK -236m). Tryg has previously announced that this line should report a result of approximately DKK -60m per quarter after which the overall amount for 2020 is broadly in line with expectations.
The credit bonds portfolio returned a very positive result of DKK 113m (DKK 27m) or 5.0%, with most fixed-income asset classes posting very strong returns driven by a risk-on rally, primarily on the back of better COVID-19 news. Finally, the property portfolio booked a return
Return ­ free portfolio Investment assets a) Diversifying Alternatives consists of CAT Bonds and a tactical mandate including both bonds, interest based investment funds and equity based investment funds. b) In addition to the equity portfolio exposure is derivatives contracts of DKK 69m.
Q4 Financial highlights 2020of DKK 72m (DKK 93m) or 2.9% for the quarter. The overall result of the free portfolio was a very robust DKK 513m (DKK 198m) or 4.5%.
The match portfolio reported an overall result of DKK 17m (DKK 19m), driven primarily by a small narrowing of Nordic covered bonds explaining the DKK 13m (DKK -4m) performance, while the regulatory deviation contributed a result of DKK 4m (DKK 23m).
Other financial income and expenses were DKK -17m (DKK -47m), the lower-than-normal level being attributable to the accrual of costs, while the overall guidance for this line remains unchanged at approximately DKK -60m a quarter.
Investment risk Invested assets are split into a match portfolio (DKK 28.1bn) and a free portfolio (DKK 12.4bn). The objective is for the return on the match portfolio to be as close as possible to zero as capital gains and losses on the assets side should be mirrored by corresponding developments on the liabilities side. The free portfolio is intended to produce the maximum risk-adjusted return. The investment risk associated with the free portfolio is managed through limits on exposure within single asset classes.
Tryg’s solvency ratio is a function of developments in own funds and the solvency capital requirement (based on the approved partial internal model). As mentioned previously, Tryg has modelled the insurance risk internally, while all other modules are based on the standard formula. The capital model is based on Tryg’s risk profile and takes into consideration the composition of Tryg’s insurance portfolio, geographical diversification, its claims reserves profile, reinsurance programme, investments mix and overall level of profitability. The solvency ratio was 183 as per year-end 2020, up from 162 at the end of 2019.
Adequacy is measured in relation to Tryg’s strategic targets, including return on equity and dividend policy. Tryg will pay a Q4 dividend of DKK 1.75 per share on 29 January 2021, after having paid a dividend for the first nine month of 5.25 per share immediately after the Q3 results. The full-year dividend amounts to DKK 7.00 per share, equivalent to the total distribution of just above DKK 2.1bn.
Share capital and ownership Tryg’s share capital totalled DKK 1,510,739,955 on 31 December 2020. It comprises one share class (302,147,991 shares with a nominal value of DKK 5), and all shares rank pari passu. The majority shareholder, TryghedsGruppen smba, owns 53% of the shares and is the only shareholder holding more than 5% of the share capital. TryghedsGruppen invests in peace of mind and healthcare providers in the Nordic region and supports non-profit-making activities.
This is particularly true for insurance investors as insurance is one of the sectors offering the highest dividend yield. From an investment perspective, a quarterly dividend is a clear reminder of the high profitability of Tryg’s business and the company’s focus on returning capital to shareholders. Tryg’s dividend policy is based on the following assumptions: • An aspiration to distribute a steadily increasing dividend in nominal terms on a full-year basis.
• A competitive dividend policy in comparison with the policies of our Nordic competitors.
Shareholders at 31 December 2020 *Shareholders holding more than 10.000 sares.
Corporate governance Tryg focuses on managing the company in accordance with the principles of good corporate governance and generally complies with the Danish recommendations prepared by the Committee on Corporate Governance. The Recommendations on Corporate Governance are available at corporate-governance.dk. At tryg. com, Tryg has published its statutory corporate governance report based on the ‘comply-or-explain ’ principle for each individual recommendation.
The Supervisory Board is informed about the dialogue with investors and other stakeholders on a regular basis. Tryg has an IR policy, which states that all company announcements are published in Danish and English. Tryg publishes quarterly interim reports in English. Furthermore, Tryg publishes an annual profile in Danish, English and Norwegian. The profile is addressed to Tryg’s private shareholders, customers, employees and other stakeholders and will be published on 9 February 2021.
Annual general meeting Tryg holds an annual general meeting (AGM) every year. As required by the Danish Companies Act and Tryg’s Articles of Association, the
AGM is convened via a company announcement and at tryg.com subject to at least three weeks’ notice. Shareholders may also opt to receive the notice by post or email. The notice contains information about time and venue as well as an agenda for the meeting.
Due to the recommended acquisition, an Extraordinary General Meeting (EGM) was held on 18 December 2020. Again, due to COVID-19, Tryg encouraged all shareholders to submit questions, make use of written votes or issue a proxy and to follow the general meeting via livestream rather than by physical attendance.
Share and capital structure Tryg’s share capital comprises a single share class, and all shares rank pari passu. The majority shareholder, TryghedsGruppen smba, owns 53% of the shares and is the only shareholder owning more than 5% of the company’s shares. The Supervisory Board ensures that Tryg’s capital structure is aligned with the needs of the Group and the interests of its shareholders and that it complies with the requirements applicable to Tryg as a financial undertaking. Tryg has adopted a capital plan and a contingency capital plan, which are reviewed annually by the Supervisory Board.
Depending on the development in results, each year the Supervisory Board proposes the distribution of quarterly dividends, and possibly an extraordinary annual dividend if further adjustment of the capital structure is required. In March 2020, Tryg’s Supervisory Board decided to move to full-year dividends due to market volatility and the general macroeconomic backdrop. Tryg’s business model has proved resilient even in very challenging times, and the
Duties, responsibilities and composition of the Supervisory Board The Supervisory Board is responsible for the central strategic management and financial control of Tryg and for ensuring that Tryg’s business is organised in a robust way. This is achieved by monitoring targets and frameworks on the basis of regular and systematic reviews of strategy and risks. The Executive Board reports to the Supervisory Board on strategies and action plans, market developments and Group performance, funding issues, capital resources and special risks.
Women are thus not underrepresented on Tryg’s Supervisory Board, which is in compliance with legislation as well as Tryg’s policy. The Supervisory Board has members from Denmark, Sweden and Norway.
See details about the independent board members in the section Supervisory Board on pages 40-42 and at tryg.com > Governance
As part of the evaluation, the Supervisory Board also focuses on other executive positions and board memberships held by the members of the Supervisory Board, including the level of commitment and workload associated with each position in order to prevent potential overboarding.
In early 2020, an evaluation with external assistance was conducted, involving individual interviews with all board members and members of the Executive management based on a questionnaire focusing on board competencies and performance. The overall conclusion was that Tryg has a very good, value-adding and professional Supervisory Board that works efficiently and in accordance with sound governance principles. The evaluation resulted in a continued focus on securing succession on the board, proactively trimming the reporting process on
See CVs and descriptions of skills in the section Supervisory Board on pages 41-42 and at tryg.com > Governance
All members of the Audit Committee and three out of four members of the Risk Committee, including the committee chair, are independent persons. Three out of the five members of the Remuneration Committee are independent persons, including the committee chair. Two out of three members of the Nomination Committee are independent, including the committee chair. Two out of four members of the IT-Data Committee are independent persons, including the committee chair. Board committee members are elected primarily based on special skills that are considered important by the Supervisory Board.
Remuneration of management Tryg has adopted a remuneration policy for Tryg in general, which contains specific schemes for the Supervisory Board, the Executive Board and other employees in Tryg, whose activities have a material impact on the risk profile of the company, risk takers. The remuneration policy for 2020 was adopted by the Supervisory Board in January 2020 and approved by the annual general meeting on 30 March 2020.
Total 9,141,443 1) Joined the Remuneration Committee as additional member in March 2020; In 2020 Torben Nielsen also received a fee as Chair of the Board of the subsidiaries Tryg Invest A/S (DKK 125,000) and Kapitalforeningen Tryg Invest Funds (DKK 200,000), 2) Joined as a member of the Remuneration Committee in March 2020, 3) Resigned from the Supervisory Board in March 2020, 4) Joined as a member of the IT-Data Committee in March 2020 5) Joined the Supervisory Board in March 20200 * Employer contributions to social security relating to board members from Sweden and Norway
The variable pay is set out in an incentive programme for the Executive Board. The allocation of the variable salary components under the incentive programme is based on a result and performance assessment of each participant’s work in the performance year (financial year), based on specific weighted financial and non-financial targets decided at the beginning of the performance year.
The targets for 2020 were based on Tryg’s technical result, Transactional Net Promoter Score, employee satisfaction levels, the incorporation of Alka and the implementation of the strategy.
Furthermore, all members of the Executive Board received a discretionary one-off bonus in December 2020 in recognition of their strategic efforts to ensure that Tryg, together with Canadian Intact, was able to submit a binding offer to purchase RSA. The one-off bonus took the form of conditional shares, which are deferred for four years.
Read more about the incentive programme in the Remuneration policy and in the Remuneration Report at tryg.com
Other risks associated with the financial reporting are described in the section Solvency and dividend on pages 31-32 and in Note 1 Risk management on page 60
Read more about Tryg’s Risk management in the section Solvency and dividend on pages 31-32 and in Note 1 on page 60
Tryg’s internal audit department regularly reviews the quality of the Group’s internal control systems and business procedures. It is responsible for planning, performing and reporting on the audit work to the Supervisory Board.
Deviations and explanations Tryg complies with the Recommendations on Corporate Governance except as regards the number of independent members of board committees, with which Tryg complies partially; see recommendation 3.4.2. of the Recommendations on Corporate Governance.
The deviations are explained in Tryg’s Statutory Corporate Governance report, which is available at tryg.com
Career Professional board member. Former CEO of Siemens Denmark Education MSc in Electrical Engineering Board seats, Chair Tryg A/S and Tryg Forsikring A/S, Monsenso A/S (until 14.4.2021), Siemens Gamesa Renewable Energy A/S and Asetek A/S Board seats, Deputy Chair Cowi Holding A/S, Gomspace Group AB incl. GomSpace A/S, GN Store Nord A/S incl. GN Audio A/S and GN Hearing A/S Commitee memberships Remuneration Committee (Chair), Nomination Committee (Chair) and IT-Data Committee in Tryg A/S, Nomination Committee in COWI Holding A/S, Nomination Committee in Gomspace Group AB, Remuneration Committee (Chair) in Asetek A/S and Remuneration Committee, Nomination Committee and Strategy Committee in GN Store Nord A/S Experience More than 25 years of top management experience in the IT and telecommunication industry and electrical engineering. The latest position being CEO of Siemens Denmark from 2002 to 2017. Broad international experience with global and regional business responsibilities in both BtC and BtB. Competencies Solid technological background in telecommunication, IT, digitalisation, business models, strategy and business development. Understanding of risk management, M&A, business know-how and judgement as well as insurance. Number of shares 6,000 Change in portfolio since 2019 2,000
Born in 1947. Joined the Supervisory Board in 2011. Danish citizen.
Employed since 2006 Career Business Coordinator in Moderna SE Education Norra Real Gymnasium, financial services & insurance at Företagsekonomiska Institut Stockholm. Education at Forsikringsakademiet for new board members Board member Tryg A/S and Tryg Forsikring A/S Commitee memberships IT-Data Committee in Tryg A/S Experience Team Manager in Moderna Affinity for 12 years, Business developer in Moderna and Affinity for 2 years Competencies Solid insurance knowledge from his years in industry, business know-how and judgement, experience with organisation development, business development, customer handling and interaction. Number of shares 956 Change in portfolio since 2019 138
Born in 1974. Joined the Supervisory Board in 2020. Danish citizen.
Employed since 1987 Career Officer of Tryg’s Personnel Department Education Insurance training Board member The Central Board of Forsikringsforbundet, Tryg A/S and Tryg Forsikring A/S Commitee memberships Risk Committee and Remuneration Committee in Tryg A/S
Experience From 1987 to 2001, Tina Snejbjerg worked with sale of insurance to both private and commercial customers as well as providing insurance advice to customers. From 2001-2009, Tina Snejbjerg was the deputy chair of the local department of Forsikringsforbundet and since 2009, she has been the chair working with operations, strategy, negotiation agreements and engaged in recruiting and retaining members.
Competencies From many years of experience, Tina Snejbjerg has acquired solid business know-how and judgement, problem-solving abilities working with management and HR-related issues in the financial sector, specifically the insurance industry. Number of shares 1,175 Change in portfolio since 2019 138
Born in 1958. Joined the Supervisory Board in 2013. Danish citizen.
Career 1st Deputy Mayor, Municipality of Syddjurs and member of the finance committee. Agriculturalist, wind energy production, tenanted properties and project development of building sites. CEO in Demex Holding A/S and C.W. Holding A/S Education Agricultural education at Bygholm Agricultural College and various business courses Board seats, Chair Midttrafik I/S Board member Tryg A/S and Tryg Forsikring A/S, TryghedsGruppen smba, Seidelmann Holding ApS, Houmarken A/S, Lyngfeldt A/S, Lyngfeldt Finansiering A/S, Lyngfeldt Maskinudlejning ApS, K/S Prinz Carl Anlage l and Syddjurs udviklingspark Experience Top management experience from operating his own business for 35 years Competencies Analytical approach to problem-solving, solid business know-how and business development, understanding of risk management and succession Number of shares 2,500 Change in portfolio since 2019 0
Experience Top management experience as the owner of HASLE Refractories A/S since 2003 as well as 10 years of experience as member of various supervisory boards Competencies Business know-how and judgement, experienced in business development with an analytical approach to problem-solving Number of shares 269 Change in portfolio since 2019 269
Education: Insurance training, LL.M. Board seats, Chair: P/F Betri Trygging, Tryg Livsforsikringsselskab A/S and Forsikrings akademiet Board member: Danish Employers’ Association for the Financial Sector and Cphbusiness (Copenhagen Business Academy) Number of shares held: 81,960 Change in portfolio in 2020: +11,552
Corporate Responsibility in Tryg Tryg has been a signatory member to the UN Global Compact since 2008. In addition to this section on Corporate Responsibility, Tryg publishes its independent Corporate Responsibility report on tryg.com. Our Corporate Responsibility report is our statutory statement on corporate social responsibility and gender diversity at management level presented in accordance with Sections 132 and 132a of the Danish Executive Order on Financial Reports for Insurance Companies and Lateral Pension Funds (Nationwide Occupational Pension Funds). Our Corporate Responsibility report also includes extensive Environmental, Social and Governance (ESG) data.
Tryg’s Corporate Responsibility strategy for 2020 focused on four areas: Actively creating peace of mind, Climate and environment, Responsible workplace and Business ethics. Our Corporate Responsibility efforts are linked to Tryg’s business model and core business (see page 13). As an insurance provider, Tryg provides a safety net for its customers across the Nordics in case of a claim and offers prevention initiatives to reduce and limit claims. Hence, Tryg creates peace of mind before, during and after a claim. The Corporate Responsibility Board, chaired by the CFO, supervises Tryg’s Corporate Responsibility efforts.
Download Terms of reference for Corporate Responsibility Board Download Corporate Responsibility policy
In 2020, Tryg conducted an extensive materiality assessment to identify the environmental, social, economic and governance issues that are perceived to be most important to Tryg and its stakeholders. The results of the materiality assessment form the basis of our corporate responsibility approach, which ensures that we focus on the opportunities and risks in relation to Corporate Responsibility that matter most to our stakeholders.
Climate risks and opportunities Environmental and climate-related issues such as climate change and natural disasters are material issues for Tryg and for our stakeholders. The changing climate is causing harm and concern to our customers and society. Also, extreme weather events potentially represent a risk to Tryg. Yet, it also represents several opportunities.
Physical risks and oppotunities Extreme weather events such as flooding, cloudbursts and storms as well as changing weather patterns such as milder winters represent a physical risk to Tryg, since environmental and climate-related events can cause an increase in the frequency of climate-related claims.
The transition to a low-carbon economy also represents several opportunities for Tryg. We are able to utilise new technology, knowledge and data to improve our claims prevention measures as well as implement more sustainable claims handling processes. Sustainable claims handling is a key area, in which we can become more sustainable and contribute to a low-carbon economy, while offering our customers a more sustainable claims handling process. Also, sustainable claims handling reduces the use of materials, benefitting both the environment and Tryg’s claims costs.
Tryg calculates carbon emissions based on the Greenhouse Gas Protocol Initiative (GHG protocol).
Diversity and inclusion We believe that a diverse representation of employees and, more importantly, diversity of thought are key elements to the success of Tryg. In 2020, Tryg increased the number of women in management positions from 35% in 2019 to 38% through a successful high focus on improving gender balance. As a result, a 50/50 balance for managerial recruitments was achieved in 2020.
While we have made significant progress in recent years, we still have some way to go before reaching our 2020 group target of 41% women in management positions.
Tryg’s Supervisory Board is composed of six men and six women, and under Danish law as well as Tryg’s own policy, there is equality among the genders.
In 2020, Tryg expanded its diversity agenda to include a broader focus by promoting diversity of thought in management teams. We will be focusing on increasing diversity for three factors: gender, age and industry/experience.
Activities to increase diversity and inclusion To attract, hire and retain female leaders as well as increase diversity in management teams, Tryg’s action plan for diversity for 2023 focuses on eliminating bias in our recruitment and HR process.
Tryg will recruit the candidate with the best competencies and skills for the team, and we are striving to hire candidates who will increase diversity of thought in our management teams. We are also reducing unconscious bias in our recruitment process through data collection and through training of our recruitment managers. By raising awareness and training our leaders on how to lead diverse teams in our leadership programmes, we are focusing on building an inclusive culture.
Business ethics Tryg is committed to run an ethical, transparent and responsible business. Our materiality assessment shows that business ethics, data privacy and cyber security are material matters to Tryg. Building knowledge and capacity on these issues, not only internally among our employees through for example e-learning, but also throughout our business relations, requires continuous attention.
Our commitment to ethical and strong corporate governance is the foundation on which we build our business. Tryg’s Code of Conduct defines the rules, which all employees are required to adhere to. Our tax policy and anti-corruption policy further outline our commitment to acting as a responsible company. Our Supplier Code of Conduct sets out minimum requirements for our suppliers and partners to operate in accordance with responsible business principles and in full compliance with all applicable laws and regulations. Tryg’s responsible investment policy outlines the principles we follow to ensure that our investments are conducted in accordance with our values.
Download Code of Conduct Download Tax policy Download Anti-corruption policy Download Supplier Code of Conduct Download Responsible investment policy Read more on pages 24-28 in our Corporate Responsibility report
To uphold our security level, we test our employees in their knowledge of our security rules once a year, including rules on cyber security, confidential material, press enquiries and access to our offices.
Data Tryg deals with personal data on a daily basis, and it is of high priority to us that our customers’ personal data are stored and handled in a lawful, secure and compliant manner. Through our personal data policy, we seek to create transparency for our customers on how we collect, process and use their personal data.
Our data ethical principles form part of Tryg’s Code of Conduct, are based on industry standards in the form of the Danish trade association,
Insurance & Pension Denmark’s Data Ethical Codex, relevant legal requirements as well as internationally agreed standards, and outline three main principles.
Responsible investments Tryg wants to ensure that its assets are invested in a responsible manner. Our materiality assessment has identified responsible investment as a material issue to Tryg, as we are at risk of violating international standards when investing. Tryg wants to be transparent about its efforts to mitigate this risk.
Climate risk and carbon footprint monitoring To mitigate risk in Tryg’s investment portfolio, we monitor the carbon footprint and climate risk associated with our investments. We currently monitor our equity portfolio and parts of our credit bond portfolio and focus especially on transition risks and opportunities that arise from the transition to a low-carbon economy. Our equity portfolio is characterised by having a low exposure to climate transition risks.
In 2020, we strengthened our commitment by updating our Code of Conduct regarding suppli-
ers and partners, implemented a Supplier Code of Conduct and designed a systematic follow-up procedure via an external supplier evaluation platform provider.
Our new Supplier Code of Conduct sets out minimum requirements for our suppliers and partners to operate in accordance with responsible business principles and in full compliance with all applicable laws and regulations.
The strategic pillar, Responsible company, focuses on how Tryg can raise the bar for its work with responsible procurement, responsible investment as well as diversity and inclusion. We seek to reduce the carbon intensity of our equity portfolio by at least 50% in 2030 compared to 2020. Also, we want to contribute to the green transition by divesting all our investments in fossil fuel production companies with no strategy for a green transition before 2030.
Tryg wants to be a green workplace and have set the target of achieving carbon neutrality in 2023 in relation to the carbon emissions deriving from scope 1, scope 2 and from waste, air and train travel in scope 3*. We want to reduce our carbon footprint by 30% in 2023 and 50% in 2030 compared to 2019 and will compensate for the rest of our carbon emissions. However, our goal is to compensate less and reduce more over time.
Tryg Group Note Statement by the Supervisory Board and the Executive Board 50 Independent auditor’s reports 51 Financial highlights 54 Income statement 55 Statement of comprehensive income 56 Statement of financial position 57 Statement of changes in equity 58 Cash flow statement 59 1 Risk and capital management 60 2 Operating segments 70 2 Geographical segments 72 2 Technical result, net of reinsurance, by line of business 74 3 Premium income, net of reinsurance 76 4 Insurance technical interest, net of reinsurance 76 5 Claims, net of reinsurance 76 6 Insurance operating costs, net of reinsurance 76 6 Matching shares and conditional shares 78 7 Interest and dividends 79 8 Value adjustments 79
Tryg A/S (parent company) Income statement 107 Statement of financial position 108 Statement of changes in equity 109 Notes 110
Information Other key figures 117 Group chart 118 Glossary 119 Product overview 121 Disclaimer 122
Morten Hübbe Barbara Plucnar Jensen Lars Bonde Johan Kirstein Brammer Group CEO Group CFO Group COO Group CCO
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 2020 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 2020.
Furthermore, in our opinion the management’s review gives a true and fair view of developments in the activities and financial position of the
Group and the parent company, the results for the year and of the Group’s and the parent company ’s financial position in general and describes significant risk and uncertainty factors that may affect the Group and the parent company.
Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements and the parent financial statements for the financial year 1 January to 31 December 2020. These matters were addressed in the context of our audit of the consolidated financial statements and the parent financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Consequently, the audit of the claims provisions is considered a key audit matter.
Management has specified the risks etc. related to the estimates of the claims provisions in note 1 ”Risk and capital management” on pages 60-69 and in ”Accounting policies”, note 29 on pages 99-106. The principles of estimating the claims provisions have been specified in ”Accounting policies”, note 29 on page 105, and further specified in note 1 on pages 63-66 and in note 19 on pages 90-91.
• Based on the actuarial estimates of the claims provisions and analyses, and in cooperation with our own internationally qualified actuaries, we have assessed the development in the claims provisions, including run-off gains/losses and the development in the size of the margin included in
cable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Statement on the management’s review Management is responsible for the management ’s review.
Our opinion on the consolidated financial statements and the parent financial statements does not cover the management’s review, and we do not express any form of assurance conclusion thereon.
Based on the work we have performed, we conclude that the management’s review is in accordance with the consolidated financial statements and the parent financial statements and has been prepared in accordance with the requirements of the Danish Financial Business Act. We did not identify any material misstatement of the management’s review.
• Conclude on the appropriateness of Management ’s use of the going concern basis of accounting in the preparation of the consolidated financial statements and the parent financial statements, and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent’s ability to continue as a going concern. If we conclude that a
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements and the parent financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor ’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
NOK/DKK, average rate for the period 69.63 75.80 77.53 79.99 80.09
Investment return after insurance technical interest 311 579 -332 527 987
Profit/loss on discontinued and divested business after tax 0 -2 -2 -2 -1
Note: Tryg´s acquisition of Alka affects the Financial Statement from closing the 8 November 2018.
Total investment return 348 744 4 Return on insurance provisions -37 -166
Profit/loss for the year 2,773 2,843 24 Earnings per share, DKK 9.19 9.42
Exchange rate adjustments of foreign entities for the year -51 32
Reinsurers' share of premium provisions 291 216 19 Reinsurers' share of claims provisions 1,087 1,285 16 Total reinsurers' share of provisions for insurance contracts 1,377 1,501
Total provisions for insurance contracts 32,488 32,224 20 Pensions and similar obligations 130 303 21 Deferred tax liability 851 911
Debt relating to repos 3,259 2,601 15 Derivative financial instruments 897 800 23 Debt to group undertakings 0 300 17 Current tax liabilities 357 125
The possible payment of dividend from Tryg Forsikring A/S to Tryg A/S is influenced by contingency fund provisions of DKK 1,706m (DKK 1,677m in 2019). The contingency fund provisions can be used to cover losses in connection with the settlement of insurance provisions or otherwise for the benefit of the insured.
Exchange rate adjustment of cash and cash equivalents, 1 January 0 -1
Purchase/sale of equity investments and unit trust units (net) -5,502 49
1st line of defence is the Business Management 2nd line of defence is Compliance-, Actuarial- and Risk Management function 3rd line of defence is Internal Audit and Internal Audit function
The 1st line consists of the Business Management: The business areas are responsible for the daily risk management and for carrying out every day work based on Tryg’s policies and instructions regarding the management of risks and are responsible for being compliant with both internal and external requirements. This means that there must be procedures and guidelines in place for vital areas, and that internal controls are carried out in such a way that risks are identified in a timely manner and necessary risk mitigation activities are implemented.
Furthermore, the function prepares specific recommendations in relation to capital management, reinsurance, investment risk management and more. Tryg’s risk management function is also responsible for determining the company’s solvency capital requirement.
The functions in the second line of defence must have an overview of business processes and risks across the organisation.
The Supervisory Board has organised their own Risk Committee consisting of 4 members of the Supervisory Board. In addition to these 4 members, the Chief Financial Officer, Chief Risk Officer and the General Counsel (in Capacity as overseeing the Compliance function) are part of the Committee. The Supervisory Board’s Risk Committee was established to ensure that all risk and capital related topics are discussed thoroughly before discussed in the Supervisory Board. The Supervisory Board meets minimum 4 times annually.
The model calculates Tryg’s capital requirement with 99.5% solvency level with a 1-year horizon, which means that Tryg will be able to fulfil its obligations in 199 out of 200 years. The partial internal model has been used for a number of years, and was approved by the Danish Financial Supervisory Authority (DFSA) in December 2015. A major model change was approved by DFSA in April 2020.
Company’s Own Risk and Solvency Assessment (ORSA) ORSA is the company’s own risk assessment based on the Solvency II principles, which implies that Tryg must assess all material risks that the company is or may be exposed to. The ORSA report also contains an assessment of whether the calculation of solvency capital requirement is reasonable and is reflecting Tryg’s actual risk profile.
Insurance risk Insurance risk comprises two main types of risks: Underwriting risk and reserving risk.
In the event of a frequency of natural disasters, Tryg is covered for up to DKK 600m, after total annual retention of DKK 300m. Tryg has also taken out reinsurance for the risk of large claims occurring in sectors with very large sums insured. Tryg’s largest individual building and contents risks are covered by up to DKK 2bn. Retention for large claims is DKK 100m, gradually dropping to DKK 25m. Single risks exceeding DKK 2bn are covered individually.
Tryg has combined the minimum cover of other sectors into a joint cover with retention of DKK 100m for the first claim and DKK 25m for subsequent claims. For the individual sectors, individual cover has subsequently been taken out as needed. The use of reinsurance creates a natural counterparty risk. This risk is handled by applying a wide range of reinsurers with a suitable rating and adequate capital level as defined by the Supervisory Board.
Long-tailed reserves in particular are subject to interest rate and inflation risk. Interest rate risk is hedged by means of Tryg’s match portfolio which corresponds to the discounted claims reserves. In order to manage the inflation risk of Danish workers’ compensation claims reserves, Tryg has bought zero coupon inflation swaps. Tryg determines the claims reserves via statistical methods as well as individual assessments.
Investment risk The overall framework for managing investment risk is defined by the Supervisory Board in Tryg’s investment policy. In overall terms, Tryg’s investment portfolio is divided into a match portfolio and a free portfolio. The match portfolio corresponds to the value of the discounted claims reserves and is designed to hedge the interest rate sensitivity of these as closely as possible. Tryg carries out daily monitoring, follow-up and risk management of the Group’s interest rate risk. The swap and bond portfolio is thus adjusted conti nuously to minimise the net interest rate risk.
Notes The free portfolio is subject to the framework defined by the Supervisory Board through the investment policy. The purpose of the free portfolio is to achieve the highest possible return relative to risk. Tryg’s property portfolio constitutes the company’s largest investment risk. The Property portfolio comprises investment properties, the value of which is adjusted based on the conditions on the property market through internal valuations backed by external valuations. At the end of 2020, investment properties accounted for 6.75% (including property funds) and Tryg’s equity portfolio accounted for 6.12% of the total investment assets.
Operational risk 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, Tryg focuses on an adequate control environment for its operations. In practice, this work is organised by means of procedures, controls and guidelines covering the various aspects of the Group’s operations. The Supervisory Board defines the overall framework for managing operational risk in Tryg’s Operational risk policy and in the Information Security Policy.
Insurance risk Effect of 1% change in: Combined ratio (1% percentage point) +/-226 +/- 217
Equity: 15% decline in exposed currency (exclusive of EUR) relative to DKK -1,485 -883
Gross provisions for claims, end of year 24,957 a) The diagonal for 2018 to 2020 is affected by the Alka acquisition
performed compliance controls are reported to the Supervisory Board’s Risk Committee.
Provisions before discounting, end of year 656 736 777 837 925 1,065 1,302 1,556 2,139 3,668 7,503 21,164
The notes below are based on Tryg's investment portfolio without the external customers share.
Assets and debt Hedge Exposure a) Due to correlation between DKK and EUR the exposure limit is higher than all other currencies.
Amortised cost value of the loan recognised in statement of financial position 563 605 985 1,059 738 713 The fair value of the loan at the statement of financial position date 589 642 1,027 1,108 745 730 The fair value of the loan at the statement of financial position date is based on a price of 105 106 104 104 101 102 Total capital losses and costs at the statement of the financial position date 1 2 2 3 2 3 Interest expenses for the year 26 32 36 45 21 19 Effective interest rate 4.6% 5.3% 3.6% 4.3% 2.8% 2.6%
Repayment profile Interest-only Interest-only Interest-only Interest structure 3.75 % above NIBOR 3M (until 2023) 2.75 % above NIBOR 3M (until 2025) 2.75 % above STIBOR 3M (until 2026)
4.75 % above NIBOR 3M (from 2023) 3.75 % above NIBOR 3M (from 2025) 3.75 % above STIBOR 3M (from 2026)
The main part of Tryg’s investment assets are classified as level 1 and 2 and are valuated based on quoted market prices or consolidated references prices. This involves the bonds portfolio, the main part of shares and unit trust units as well as the statement of financial instruments. Assets, which can be classified as level 3, can be attributed to unlisted assets, specific unlisted Unit trusts and investment property. As these investment assets are not valued based on observable input, there will be a discretionary element in this hierarchy.
Tryg has chosen to implement a currency hedge strategy that focuses on mitigating the currencies impact on the financial results. This means that the impact on the P/L of changes in local currencies is limited.
The shareholders’ equity, due to the currency hedge strategy, is not sensitive to changes in the local currencies.
Impairment of intangiblens COVID-19 has not have any affect on the assumptions related to impairment of Goodwill, Trademarks and Brand. Reference is made to note 11 for further description on Impairment test.
Run-off gains/losses, net of reinsurance 120 336 448 249 -9 1,145
Reinsurers' share of premium provisions 50 0 240 0 0 291
Reinsurers' share of claims provisions 140 114 821 12 0 1,087
Provisions for bonuses and premium discounts 1,303 118 5 69 0 1,495
Insurance technical interest, net of reinsurance -3 1 2 0 0 1
Run-off gains/losses, net of reinsurance 238 310 407 246 -7 1,194
Provisions for bonuses and premium discounts 1,195 114 27 34 0 1,370
Claims ratio, net of ceded business 66.5 66.4 66.7 67.9 69.7
Swedish general insurance SEK/DKK, average rate for the period 70.95 70.62 72.67 77.24 78.93
Claims ratio, net of ceded business 69.9 75.9 80.6 74.0 79.7
Profit/loss on ceded business - 7 - 15 0 - 1 - 22 - 14 - 36 - 12 - 53 - 44 - 37 4
Profit/loss on ceded business - 194 - 216 - 344 - 129 0 0 41 8 - 1 - 131 142 - 1
Profit/loss on ceded business 9 - 15 - 502 - 566 3 0 - 499 - 566
Gross Ceded Gross Ceded a) Mainly Norway 4 Insurance technical interest, net of reinsurance
Discounting transferred from claims provisions -57 -165 5 Claims, net of reinsurance
Fees to the auditors appointed by the annual general meeting: Deloitte, included in administrative expenses -9 -8
Insurance operating costs and claims include the following staff expenses: Salaries and wages -2,776 -2,747
Average number of full-time employees during the year (continuing business) 4,278 4,148
In 2020, the recognised fair value of matching shares for the Group amounted to DKK 14m (DKK 11m in 2019). At 31 December 2020, a total amount of DKK 54m was recognised for matching shares.
In 2020, the fair value of Conditional shares is prorated relative to the deferral period and recognised in the income statement amounted to DKK 24m (DKK 16m in 2019). The shares allocated in 2020 had an average weighted rate of 169 at grant date.
Interest expenses subordinate loan capital, credit institutions and cash at bank -95 -117
Value adjustments concerning financial assets or liabilities at fair value with value adjustment in the income statement: Equity investments -153 463
Value adjustments concerning assets or liabilities that cannot be attributed to IAS 39: Investment property 4 62
Exchange rate adjustments concerning financial assets or liabilities which cannot be stated at fair value total DKK -104m (DKK -97m in 2019).
Other Income Other income amounts to DKK 88m (DKK 168m in 2019) and primarily relates to the sale of pensions products. In 2019 other income encompassed a one-off allowance regarding VAT of DKK 45m.
Amortisation and write-downs at 1 January -104 -236 -1,391 0 -1,731
Amortisation and write-downs at 1 January -104 -81 -1,277 -2 -1,464
Amortisation and write-downs at 31 December -104 -236 -1,391 -0 -1,731 a) Hereof proprietary software DKK 366m (DKK 494m at 31 December 2019)
Primary assumptions for impairment test: When assessing the cash flow management has based its estimates of premiums earned on the insurance portfolio adjusted to reflect the expected effect of business decisions and market development from past experiences. The portfolio is indexed with the wage and salary index. Claims incurred are based on expected claims ratios, which corresponds to normalised large- and weather claims. Reinsurance is taken into account when looking at the overall technical result together with the expected cost ratio. Required returns are based on management’s own requirements for returns of the individual cash generation units and are not expected to change significantly in the near future.
Alka In 2018, Tryg acquired Forsikrings- Aktieselskabet Alka . The insurance activities were incorporated into the Tryg Group's business structure from 8 November 2018.
The impairment test shows a calculated value in use of approximately DKK 0.5bn (0.3bn) relative to a recognised goodwill of DKK 46m (49m) and does not indicate any impairment in 2020. According to the sensitivity informations below a change in the required return rate will have the highest effect on the equity. An increase in the required return of approx. 5.3% will result in a write down of goodwill.
11 Intangible assets (continued) - Earned premium assumed CAGR 0 - 10 years 5% 4% - Earned premium assumed CAGR > 10 years 2% 2% - Required return before tax 10% 13% - Expected level of Combined ratio 87% 87%
Sensitivity information Impact on the calculated present value from the following changes: Required return +1.0 percentage point -93 -48 Required return -1.0 percentage point 135 58 Combined ratio +1.0 percentage point -47 -30 Combined ratio -1.0 percentage point 47 30
At 31 December 2020, management performed an impairment test of the carrying amount of goodwill based on the allocation of the cost of goodwill to the cash-generating unit. Moderna portfolio consists from 1 January 2017 of Moderna, Securator and Skandia, which was prior to this date three separate cash-generating units. The reasons behind the merger of Securator and Skandia into Moderna, is that they are managed together as part of the Swedish business and reported under the segment “Sweden”
11 Intangible assets (continued) - Earned premium assumed CAGR 0 - 10 years 2% 3% - Earned premium assumed CAGR > 10 years 2% 2% - Required return before tax 10% 11% - Expected level of Combined ratio 90% 91%
Sensitivity information Impact on the calculated present value from the following changes: Required return +1.0 percentage point -337 -211 Required return -1.0 percentage point 480 288 Combined ratio +1.0 percentage point -77 -177 Combined ratio -1.0 percentage point 81 177
Software and assets under construction As at 31 December 2020 management performed a test of the carrying amounts of software and assets under construction.
Assets under construction are not depreciated but tested once a year for impairment or when there is any indication of a decrease in value. Amortised software is assessed for impairment at the balance sheet date or when there are indications that the future cash flow cannot justify the carrying amount.
In the event that the recoverable amount is lower than the carrying amount, the difference is recognised in the income statement.
Accumulated depreciation and value adjustments at 31 December -126 -62 0 -274 -462
b) Lease assets (Right of use-assets), Group occupied property concists of leases of offices buildings. Contract terms are from 1 to 16 years and with yearly rent adjustments. Tryg has no lease contracts with variable lease payments based on sale or similar.
Total expenses for 2020 are DKK 13m (DKK 12m in 2019). External experts were involved in valuing the majority of the investment properties.
Tryg’s property valuations are based on the market-based rental income and operating expenses of the individual property relative to the required rate of return. The most important factors impacting the valuations are the applied rates of return, annual net rental income and occupancy rates. The average rates of return applied are stated above.
Decrease in occupancy rate of 3% -7 -8 14 Equity investments in associates Cost
Carrying amount at 31 December 16 0 a) Ejendomsselskabet af 1. marts 2006 P/S, Denmark was sold in January 2019.
In such cases, Tryg uses recent transactions in similar instruments and discounted cash flows or other generally accepted estimation and valuation techniques based on market conditions at the balance sheet date to calculate an estimated value. This category covers instruments such as derivatives valued on the basis of observable yield curves and exchange rates and illiquid mortgage bonds valued by reference to the value of similar liquid bonds.
Valuation based on significant non-observable input (level 3) consist of certain financial instruments based substantially on non-observable input. Such instruments include unlisted shares, unit trust investments, some unlisted bonds and Deal Contingent Forwards. The fair value of Investment property is also based on non-observable input. Please refer to note 13 and accounting policies section Investment property.
Derivative financial instruments at fair value with value adjustments in the income statement 990 728
Derivative financial instruments at fair value with value adjustments in other comprehensive income -93 72
Financial liabilities at amortised cost with value adjustment in the income statement 14,159 12,618
Derivative financial instruments, assets 1 1,127 0 1,128 Derivative financial instruments, debt 0 -800 0 -800
Financial instruments transferred from ”Quoted market prices or consolidated reference prices” to ”Observable input” 1,021 0
Financial instruments transferred from "Non-observable input" to "Observable input" 878 0 15 Financial assets (Continued)
Financial instruments measured at fair value in the statement of financial position on the basis of non-observable input: Carrying amount at 1 January 1,375 1,522
Gains/losses in the income statement for assets held at the statement of financial position date recognised in value adjustments 44 -1 a) Hereof realised DKK 53 (DKK 5m in 2019)
DKKm Bond Equity and unit trust units Investment property Derivatives and other items Other lending Total
Investment assets according to balancesheet 34,339 9,505 1,117 1,840 80 46,881
Other, hereof financial instrument in liabilities -3,259 0 0 -629 0 -3,888
Gains and losses at 31 December 3,753 -3,435 318 2019 Gains Losses Net
Receivables are written down in full when submitted for debt collection. The write-down is reversed if payment is subsequently received from debt collection and amounts to DKK 37m (DKK 39m in 2019).
The use of reinsurance creates a natural counterparty risk. The Risk will be handled by applying a wide range of reinsurers with at least an ’A’ rating.
Due to IFRIC 23, uncertain tax positions should be valuated and recognized in the tax balance.
Used in connection with exercise of incentive programme 585 457 -585 -457
Number of shares as a percentage of issued shares at 31 December
Pursuant to the authorisation granted by the shareholders, Tryg may acquire up to a total face value 151m DKK of the share capital in the period up until 31 December 2021. Own shares are acquired for use in the Group’s incentive programme.
Paid in the financial year in respect of prior years -7,005 808 -6,197
Change in claims in the financial year in respect of the current year 16,650 -711 15,940
Paid in the financial year in respect of the current year -8,414 158 -8,255
Paid in the financial year in respect of prior years -7,082 262 -6,820
Change in claims in the financial year in respect of the current year 16,050 -397 15,653
Defined-benefit pension plans: Present value of pension obligations funded through operations 34 51
Present value of pension obligations funded through establishment of funds 0 1,139
Specification of change in recognised pension obligations: Recognised pension obligation at 1 January 1,190 1,105
Specification of pension cost for the year: Present value of pensions earned during the year 0 26
The premium for the following financial years is estimated ata) 1 35
Due to the termination of the largest part of the plan only minor sensitivities are left.
Description of the Norwegian plan a) In the Norwegian part of the Group, about half of the employees had a defined-benefit pension plan. The plans were based on the employees’ expected final pay, The secured employee part of the plan has been terminated as of 01 January 2020. Tryg agreed with the Norwegian employees to replace the defined benefit pension scheme (for employees with a high seniority) with a market based pension scheme in a life insurance company, this had a total positive net impact of DKK 128m. The pension funds and liability was transferred to Livsforsikringsselskapet Nordea Liv AS as of the terminationdate.
The loss in Tryg A/S cannot be utilised in the Danish joint taxation scheme. The loss can be carried forward indefinitely. Loss determined according to Swedish and Finnish, German and Austria rules can be carried forward indefinitely. In Netherlands tax can be carried forward 6 years
Description of the Swedish plan Moderna Försäkringar, a branch of Tryg Forsikring A/S, complies with the Swedish 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.
This years premium paid to FPK amounted to DKK 10m (DKK 12m in 2019), which is about 2,2 % of the annual premium in FPK(2019). FPK writes in its Annual report for 2019 that it had a solvency ratio of 137 at 31 December 2019 (Solvency ratio of 134 at 31 December 2018).
Depreciation on intangible assets related to Brands and Customer relations after tax 105 122
Other provisions relate to provisions for the Group’s own insurance claims and restructuring costs. Additions to the provision for restructuring costs and own insurance claims during the year amounts to DKK 14m and use of existing restructuring provisions amounts to DKK 42m.
The balance as at 31 December 2020 excluding own insurances amounts to DKK 47m (DKK 80m at 31 December 2019).
There are no short team-leases recognised in the financial statement. Debt related to Leasing are included in Other debt. Please refer to note 12 for specification of ROU assets.
Obligations due by period 2020 <1 year 1­3 years 3­5 years > 5 years Total a) Other contractual obligations mainly consists of investment commitments, IT and outsourcing agreements. Please refer to note 12 for lease agreements recognised as ROU.
Inflation derivatives, recognised in claims provisions 712 0 712 0 -710 2
Based on this assessment the FO is concluding that certain customers may have a recovery claim against Tryg.
Tryg does not agree with the FO’s assessment as the company believes it has followed the guidelines stated by the Danish FSA in terms of price increases. Tryg is in a process with the FO in order to gain a better understanding of the FO assessment of the case.
The Group has no related parties with a decisive influence other than the parent company, TryghedsGruppen smba and the subsidiaries of TryghedsGruppen smba (other related parties). Related parties with significant influence include the Supervisory Board, the Executive Management and their members’ family.
Premium income - Parent company (TryghedsGruppen smba) 0.5 0.5 - Other related parties 3.4 3.1
In November 2020 Tryg made a recommended cash offer together with Intact (a leading Canadian Insurer ), to acquire RSA Insurance Group plc. As part of the transaction, Tryg will take over RSA’s Swedish and Norwegian businesses and co-own RSA’s Danish business on a 50/50 economic basis for a consideration of £4.2bn to be paid by Tryg.
The transaction is expected to be closed during H1 2021, following shareholders’ and regulatory approval. During 2020, some transaction costs in the amount of DKK 323m related to the acquisition have been recognized in the balance sheet and will be included in the purchase price upon completion of the acquisition as the acquired business initially will be accounted for under the equity method until the Swedish and Norwegian businesses will be separated from the Danish business through a demerger expected to be completed in Q1 2022. Please refer to the management’s review for further information on the recommended cash offer.
The DCF contracts have a notional value of £4.2bn and will be settled upon closing of the acquisition at any time in the period from 17 May to the end of November 2021. The cost of the contracts being DKK 1.3bn is built into the contracts as additional forward points compared to marked based forward rates and thus is only paid if the acquisition is concluded.
In 2019 Tryg Forsikring A/S paid Tryg A/S DKK 2,039m and Tryg A/S paid TryghedsGruppen smba DKK 1,224m in dividends.
Transactions with Group undertakings have been eliminated in the consolidated financial statements in accordance with the accounting policies.
Future orders, standards and interpretations that the group has not implemented, and which have still not entered into force but could affect the group significantly: • IFRS 9 ‘Financial Instrumentsa)
b) Expected to enter into force for the accounting year commencing 1 January 2023.
Tryg Group’s financial position, including in relation to its technical result or profit/loss after tax.
The preparation of financial statements under IFRS requires the use of certain critical accounting estimates and requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving more judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are: • Liabilities under insurance contracts • Valuation of defined benefit plans • Fair value of financial assets and liabilities • Valuation of property • Business Combinations • Measurement of Goodwill, Trademarks and
Several assumptions and estimates underlying the calculation of the claims provisions are mutually dependent. This has the greatest impact on assumptions regarding interest rates and inflation.
Defined benefit pension schemes The Group has terminated our defined-benefit plan in Norway as of 01 January 2020. A defined-benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, depending on age, years of service and salary.
Fair value of financial assets and liabilities Measurements of financial assets and liabilities for which prices are quoted in an active 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 for credit and liquidity premiums. The fair value of deal contingent derivatives (DCF) that Tryg has entered into in connection with a recommended cash offer together with Intact (a leading Canadian Insurer), to acquire RSA Insurance Group plc is further explained in note 26.
Valuation of property The fair value is calculated based on a market-determined rental income, as well as operating expenses in proportion to the property’s required rate of return in per cent. Investment property is recognised at fair value. The calculation of fair value is based on market prices, taking into consideration the type of property, location and maintenance standard, and based on a market- determined rental income as well as operating expenses in proportion to the property’s required rate of return. Cf. note 12, 13 and 15.
Control of subsidiaries Control of subsidiaries is assessed yearly. Hence whether a subsidiary should still be part of the consolidation on line by line basis or as a single line item in the balance sheet.
On consolidation, intra-group income and costs, intra-group accounts and dividends, and gains and losses arising on transactions between the consolidated enterprises are eliminated.
Notes liabilities and contingent liabilities, on the other hand, are recognised as an asset under intangible assets, and are tested for impairment at least once a year. If the carrying amount of the asset exceeds its recoverable amount, it is impaired to the lower recoverable amount.
Claims Claims are claims paid during the year adjusted for changes in claims provisions less the reinsurers’ share. In addition, the item includes run-off gains/losses in respect of previous years. The portion of the increase in provisions which can be ascribed to unwinding is transferred to insurance technical interest.
Notes Insurance operating costs Insurance operating costs represent acquisition costs and administration expenses less reinsurance commissions received. Expenses relating to acquiring and renewing the insurance portfolio are recognised at the time of writing the business. Underwriting commission is recognised when a legal obligation occurs. Administration expenses are all other expenses attributable to the administration of the insurance portfolio. Administration expenses are accrued to match the financial year.
Equity-settled conditional shares are measured at the fair value at the allotment date and recognised under staff costs over the period from the allotment date until the end of the deferral period (the transfer date), where the holder receive free shares.
Matching shares As part of the matching shares-program for the executive board members, members of the board have bought investment shares in Tryg A/S at market price, using taxed funds, for up to the amount decided by the Supervisory Board.
The purchase of investment shares entitles the holder to a number of matching shares, corresponding to the number of investment shares which the holder has bought. The shares (matching shares) are provided free of charge, four (Executive Board) or three years (other participants) after the time of purchase of the investment shares. The holder may not sell the shares until six months after the matching date.
Assets under construction Group-developed intangibles are recorded under the entry “Assets under construction” until they are put into use, whereupon they are reclassified as software and are amortized in accordance with the amortization periods stated above.
Notes 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 such assets are ready to be brought into use.
Right-of-use asset (ROU asset) and lease liability are recognised at the lease commencement date. The ROU asset is initially measured the cost, which comprises the initial amount of the lease liability adjusted for
• any initial direct cost incurred • estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset
Lease liability The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, Tryg uses its incremental borrowing rate. Subsequently, the lease liability is measured at amortised cost using the effective interest method and is presented as part of other debt. It is remeasured when there is a change in future lease payments. A corresponding adjustment is made to the carrying amount of the ROU asset.
Land and buildings Land and buildings are divided into owner-occupied property and investment property. The Group sold the owner-occupied property in Høje Taastrup and have no longer any owner occupied properties. All remaining properties are classified as investment property.
Impairment test for intangible assets, property and operating equipment Operating equipment and intangible assets are assessed at least once per year to ensure that the depreciation method and the depreciation period that is used are connected to the expected economic lifetime. This also applies to the salvage value. Writedown is performed if impairment has been demonstrated.
Subsidiaries with a negative net asset value are recognised at zero value. Any receivables from these enterprises are written down by the parent company ’s share of such negative net asset value where the receivables are deemed irrecoverable. If the negative net asset value exceeds the amount receivable, the remaining amount is recognised under provisions if the parent company has a legal or constructive obligation to cover the liabilities of the relevant enterprise.
Equity investments in associates Associates are enterprises in which the Group has significant influence but not control, generally in the form of an ownership interest of between 20% and 50% of the
Amounts receivable from reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract.
Receivables are recognised initially at fair value and are subsequently assessed at amortised cost. The income statement includes an estimated reservation for expected unobtainable sums when a clear indication of the asset impairment is observed. The reservation entered is assessed as the difference between the carrying amount of an asset and the present value of expected future cash flows.
Provisions for insurance contracts Premiums written are recognised in the income statement (premium income) proportionally over the period of coverage and, where necessary, adjusted to reflect any time variation of the risk. The portion of premiums written on in-force contracts that relates to unexpired risks at the statement of financial position date is reported as premium provisions. Premium provisions are generally calculated according to a best estimate of expected payments throughout the agreed risk period; however, as a minimum as the part of the premium calculated using the pro rata temporis principle until the next payment date. Adjustments are made to reflect any risk variations. This applies to gross as well as ceded business.
Claims provisions are determined for each line of business based on actuarial methods. Where such business lines encompass more than one business area, short-tailed claims provisions are distributed based on number of claims reported while long-tailed claims provisions are distributed based on premiums earned. The models currently used are Chain-Ladder, Bornhuetter-Ferguson, the Loss Ratio method. Chain-Ladder techniques are used for lines of business with a stable run-off pattern. The Bornhuetter-Ferguson method, and sometimes the Loss Ratio method, are used for claims years in which the previous run-off provides insufficient information about the future runoff performance.
Deferred tax is measured according to the statement of financial position liability method on all timing differences between the tax and accounting value of assets and liabilities. Deferred income tax is measured using the tax rules and tax rates that apply in the relevant countries on the statement of financial position date when the deferred tax asset is realised, or the deferred income tax liability is settled.
Debt related to leasing and the external investors share of Kapitalforeningen Tryg Invest Funds and TI Real Estate KL are included in other debt. The external investors share of Kapitalforeningen Tryg Invest Funds relates to shares, bonds and investment properties.
Proposed distribution for the year: Transferred to reserve for net revaluation according to the equity method 235 865
Total equity and liabilities 12,823 12,255 7 Deferred tax assets 8 Own funds 9 Contractual obligations, contingent liabilities and collateral 10 Related parties 11 Reconciliation of profit/loss and equity 12 Accounting policies
Total investment assets 12,475 12,234 6 Current tax assets 20 17
Total changes in equity in 2020 0 220 442 -484 0 179
Adjustment of non-taxable income and costs 1 1 4 Intangible assets
Carrying amount at 31 December 0 1 5 Equity investments in Group undertakings
Name, registered office and activity Ownership share in % Profit/loss Equity
Tax receivable at 31 December 20 17 7 Deferred tax assets
Tryg A/S calculates solvency ratio and own funds on Group level according to Solvency II rules. Please refer to note18 in the Tryg Group on Solvency II own funds.
The Danish companies in the Tryg Group are jointly taxed with TryghedsGruppen smba. The companies and the other jointly taxed companies are liable for any obligations to withhold taxes at source on interest, royalties, dividends and income taxes etc. in respect of the jointly taxed companies.
Tryg A/S has no related parties with a controlling influence other than the parent company, TryghedsGruppen smba. Related parties with a significant influence include the Supervisory Board, the Executive Board and their members’ related family.
Cash variable salary Pension Total a) Total expenses recognised in 2019 for matching shares and conditional shares allocated in 2019 and previous year. For matching shares and conditional shares allocated to Executive Board in 2019, please refer to ”Corporate governance” in Management review.
b) Barbara Plucnar Jensen took up the position as CFO on 1 March 2019. c) Risk-takers in Tryg A/S includes only one employee, wherefore salary and pension is not presented.
The Executive Board and risk-takers are included in incentive programmes. Please refer to note 6 in the Tryg Group annual report for information concerning this.
Each member of the Executive Board is entitled to 12 months’ notice and severance pay equal to 12 months’ salary plus pension contribution (Group CEO is entitled to severance pay equal to 18 months’ salary). If a change of control clause is actioned CEO and COO are instead entitled to Severance pay equal to 36 months’ salary.
Parent company TryghedsGruppen smba TryghedsGruppen smba controls 53% of the shares in Tryg A/S.
Transactions with Group undertakings and associates Tryg A/S exercises full control over Tryg Forsikring A/S, Alka Fordele A/S and Tryg Invest A/S. In 2020 Tryg Forsikring A/S paid Tryg A/S DKK 2,599m and Tryg A/S paid TryghedsGruppen smba DKK
Claims ratio, net of reinsurance 70.5 67.3 67.1 76.4 70.4 71.0 66.5 72.3 66.6
Combined ratio exclusive of run-off 83.7 82.3 82.2 91.1 84.9 85.4 83.1 89.8 83.0
Claims ratio, net of reinsurance 68.2 66.0 63.5 67.0 72.8 68.3 64.2 71.6 56.7
Claims ratio, net of reinsurance 87.0 76.5 68.3 74.4 80.4 71.3 76.2 81.2 101.5
Combined ratio exclusive of run-off 109.1 98.3 87.1 103.3 100.7 92.2 93.5 105.3 106.3
Run-off, net of reinsurance (%) -4.9 -18.2 -12.3 -9.7 Number of full-time employees 31 December 441 419
Other income and costs -70 -20 -265 -188 Profit/loss before tax 1,223 940 3,541 3,628 Run-off gains/losses, net of reinsurance 314 256 1,145 1,194
b) In 2020, Amounts primarily relates to one-off items. In 2019 amounts primarily relates to eliminations and one-off items.
Earnings per share of continuing business (DKK) 9.19 9.42 5.74 9.12 8.84
Net asset value per share (DKK) 40.64 40.05 37.56 41.78 34.37
Number of full-time employees, continued business, at 31 December 4,400 4,151 4,027 3,373 3,264
Group chart at 1 January 2021. Companies and branches are wholly owned by Danish owners and domiciled in Denmark, unless otherwise stated.
Danish general insurance Comprises the legal entities Tryg Forsikring A/S (including Finnish, Netherlands, Austria and German guarantee branch and Tryg Livsforsikring A/S and excluding the Norwegian and Swedish branches).
Profit or loss for the year x 100 Average number of shares
Earnings per share of continuing business Diluted earnings from continuing business after tax Diluted average number of shares
Run-off gains/losses The difference between the claims provisions at the beginning of the financial year (adjusted for foreign currency translation adjustments and discounting effects) and the sum of the claims paid during the financial year and the part of the claims provisions at the end of the financial year pertaining to injuries and damage occurring in earlier financial years.
Weather claims, net of reinsurance Weather claims, net of reinsurance, is defined as claims related to Storm, Cloudbursts, Natural perils and Winter, adjusted for reinsurance.
Weather claims, net of reinsurance, as calculated by the Tryg Group, represents
Run-off, net of reinsurance Run-off, net of reinsurance, as calculated by the Tryg Group, represents
Premium growth excluding Alka in local currencies Premium Growth excluding Alka in local currencies, as calculated by the Tryg Group, represents
Alka in local currencies in year X-1) Premium income excluding Alka in local currencies in year X-1
Impact from COVID-19 claims, Gross as calculated by the Tryg Group, represents
Impact from COVID-19 technical result, net of reinsurance The impact from COVID-19 on technical result, net of reinsurance is defined as impact from COVID-19 on technical result, gross adjusted for reinsurance.
Motor insurance Motor insurance accounts for 30% of total premium income and comprises mandatory third-party liability insurance providing cover for injuries to a third party or damage to a third party’s property, and a voluntary comprehensive insurance policy that provides cover for damage to the customer’s own vehicle from collision, fire or theft.
Fire and contents – Private Fire and contents insurance for private customers represents 25% of total premium income and includes, for example, house and contents insurance.
A number of different factors may cause the actual performance to deviate significantly from the forward-looking statements in this annual report, including but not limited to general economic developments, changes in the competitive environment, developments in the financial markets, extraordinary events such as natural disasters or terrorist attacks, changes in legislation or case law and reinsurance.