Management’s report Page Introduction to TrygVesta 2 Group chart 4 Group overview 5 Preface by Mikael Olufsen and Stine Bosse 6 Financial highlights and key ratios of TrygVesta 8 Highlights of 2009 10
Accounts Accounts – contents 81 Statement by the Supervisory Board and the Executive Management 82 Independent auditors’ report 83 Income statement and balance sheet – TrygVesta Group 84 Statement of changes in equity – TrygVesta Group 88 Cash flow statement – TrygVesta Group 90 Notes – TrygVesta Group 91 Income statement – TrygVesta A/S (parent company) 134 Balance sheet – TrygVesta A/S (parent company) 135 Statement of changes in equity (parent company) 136 Notes (parent company) 137 Financial highlights and key ratios by geography 142
TrygVesta wants to be perceived as the leading peace-of-mind provider in the Nordic region and is dedicated to providing peace of mind to our customers on a daily basis. In 2009, our more than 4,300 employees ensured peace of mind for more than 2.7 million private customers and more than 140,000 businesses.
We are the largest player in Denmark and Norway’s third largest player. We have operated our rapidly growing activities in Finland and Sweden since 2001 and 2006, respectively. Our position in
Introduktion til TrygVesta l Introduction to TrygVesta l Annual report 2009
Introduction to TrygVesta l Introduction to TrygVesta l Annual Report 2009
Insurance for private individuals as well as small and medium-sized businessses.
MIKAEL OLUFSEN – At the start of 2009, prospects for the global economy were extremely uncertain, but as the year progressed, low interest rates and government stimulus packages had a positive impact on both the financial markets and the economy. Considerable uncertainty still prevails, however.
– TrygVesta is committed to being perceived as the leading peace-of-mind provider in the Nordic region. In that perspective, what was 2009 like for TrygVesta?
On the Supervisory Board, we were aware of how the recession could impact the business. In 2009, this involved paying special attention to the investment portfolio and regular operational follow-up. When we experienced rising expenses for claims in 2009, caused, among other things, by a greater number of break-ins in Denmark and Norway, we concurred in Management’s analyses and initiatives for claims prevention and premium increases. It is crucial that we ensure a sound financial and operational development for the Group, in order to lay the foundation for a good performance in good times as well as bad. The financial crisis presented a challenge for all financial companies, and the
Supervisory Board followed developments closely. As a listed company with a majority shareholder that has a membership of a million Danes, we have a special obligation to be sharp now and in the future when it comes to the competencies of senior management and the Supervisory Board.
We are committed to corporate governance, and the financial crisis underlines how important that is.
Gross premiums earned 18.3 Technical result 1.6 Profit after tax 2.0 Total shareholders’ equity 9.7
In 10-15 years, the structure of the labour market will probably be characterised by more people with an immigrant background being active on the labour market and a much larger elderly population. This calls for us to be innovative in attracting employees with an immigrant background and the right employee skills.
In 2009, we opened the first finished parts of The Living
House, the comprehensive refurbishment of TrygVesta as a workplace. This work transcends the physical aspect, and like
Nordic organisation with clearly defined pan-Nordic responsibilities and uniformity with respect to sales, product development, claims handling, IT systems and underwriting. The dedicated Nordic organisation will strengthen the Group’s market position, because we have now paved the way for shared processes and infrastructure. I would also mention that through the strategic focus on self-service we are in the process of establishing better internal and customer-driven business processes, and looking ahead, our IT systems will support the self-service business processes completely.
MIKAEL OLUFSEN –The Supervisory Board is confident that the TrygVesta organisation evolved since we became a listed company in 2005 has a good structure with many competent employees and managers who can take the company into the future. The identity which a company shows its customers is to a large extent based on the experience customers have when they contact the company. Therefore, it is vital to optimise that experience, by strengthening the internal culture for service, innovation, development and drive. In addition, we must ensure that TrygVesta’s strategy is aligned with the realities of the world in these very challenging times. TrygVesta must also stay focused on the four strategic performance indicators: profitable growth, peace-of-mind delivery, self-service and human competencies, in order to provide peace of mind to shareholders, customers and employees, and thereby be perceived as the leading peaceof -mind provider in the Nordic region.
– What are your plans for implementing that, and what will be the results for 2010?
Solvency II rules – and thus the basis for long-term stable and disciplined development of our industry.
MIKAEL OLUFSEN – The Supervisory Board intends to dedicate efforts to profitable growth, improvement of the technical result, continuously enhanced customer service, and sustained development of the level of competencies throughout the
Group. This will ensure TrygVesta’s continued ability to create value for customers, employees and shareholders alike.
Annual report 2009 l Introduction to TrygVesta l 2009 Expected 2010*
NOK/DKK, average rate for the period 92.85 93.04 92.81 91.74 84.59 SEK/DKK, average rate for the period - 80.37 80.73 78.02 70.02
Profit/loss for the year, continuing business 2,125 3,085 2,267 846 1,979 Profit/loss on discontinued and divested business after tax -28 126 -1 0 29
Run-off gains/losses, net of reinsurance 283 555 743 793 713 Relative run-off gains/losses 1.8 3.0 3.6 4.0 3.8
Balance sheet Total provisions for insurance contracts 26,757 25,957 26,916 25,193 29,002 Total reinsurers’ share of provisions for insurance contracts 2,630 1,561 1,587 1,036 1,320
Key ratios Gross claims ratio 71.1 65.9 67.3 67.9 72.2 Business ceded as a percentage of gross premiums 0.1 3.7 2.1 3.9 3.2
Introduction to TrygVesta l Introduction to TrygVesta l Annual report 2009
Other data Net asset value per share (DKK) 121 147 148 128 153
acquisition of Moderna Försäkringar The acquisition of Moderna Försäkringar was completed on 2 April, making Moderna a part of TrygVesta. Moderna contributed around 250 employees and a share of 2% of the Swedish market to the Group.
The Living Organisation An extensive organisational change took effect on 1 January 2009. The organisation got a pan-Nordic structure with fewer management layers and a flatter organisation vis-à-vis customers. The Group Executive Management was expanded from six to nine members.
The Principles for Responsible Investment are based on a number of principles intended to ensure that TrygVesta ’s investments comply with a range of environmental and social requirements besides focusing on good corporate governance.
Online self-service TrygVesta launched two new self-service products as part of the self-service strategy. The Motor and Contents self-service products were launched on tryg.dk. The insurances can be bought online every day from 7:00 to 24:00.
Joining international climate initiative TrygVesta was the first Nordic company to join the ClimateWise climate initiative. ClimateWise is the insurance industry’s international climate initiative. Being a part of this industry initiative allows TrygVesta to benefit from and exchange climate competencies and experience with some of the leading global insurance companies.
More self-service solutions In October, YoungLiving products and dog health cover were included in the self-service offering at tryg.dk.
Focus on electric vehicles (EVs) TrygVesta extended the collaboration with Better Place, and intends to convert parts of the Group’s car fleet to EVs, The intention is for around 25% of TrygVesta’s car fleet to consist of EVs as from 2011.
Customised product to young people TrygVesta launched YoungLiving – a new Nordic product targeting young people between 18 and 28 years, packaging several insurances into one product.
Capital markets day TrygVesta held a capital markets day in London on 1 September, attended by 50 analysts and investors.
Collaboration agreement on EV insurance TrygVesta entered into a collaboration with Better Place, the world’s leading provider of services for electric vehicles. The collaboration is initially intended to help develop a customised EV insurance product.
TrygVesta focuses on a common understanding of goals, strategies and prioritised action plans
TrygVesta’s vision is supported by our strategic focus and ongoing assessment, adaptation and development of the strategic focus areas. The strategy is achieved through activities and action plans implemented in all relevant processes; customer service, marketing, capital utilisation and
In practice, the strategy is pursued by ongoing optimisation of day-to-day operations, productivity enhancements, higher quality in customer service with respect to sales as well as claims handling, and simplified communication with customers. The strategic efforts are planned and managed centrally, but with clearly defined ownership in the relevant business areas.
Accordingly, we focus strongly on profitable risk pricing and cost management in general. In 2009, we achieved growth of 9.6% in local currency, a combined ratio of 92.3 and a return on equity of 22%. TrygVesta aims to expand the
In Denmark and Norway, where we are the number one and number three player, respectively, we made adjustments to the way we present ourselves to customers.
enhancing measures such as premium increases, additional sales to existing customers and an adjustment of sales channels. These measures are expected to have a positive impact on profits in the years ahead.
The Group’s expenses in all business areas and staff functions are regularly assessed in order to eliminate ineffective processes and costs, thereby gradually reducing relative costs over time. Lean plays a major role in that process. Lean is a process-driven and customer-oriented review of work processes and routines for the purpose of reducing waste, freeing resources and thereby making room for development, innovation and more efficient work routines. TrygVesta’s Lean efforts started in 2007, and around 1,000 employees and 90 managers have since worked in accordance with the method. The Lean projects have produced good results in the form of greater employee satisfaction, customer satisfaction and faster and more efficient processes. In 2009, for example, case processing time was halved in several departments.
Structured and consistent use of customer data will enable us to prioritise and adapt products and service efforts to individual customer needs. We have worked to refine our customer segmentation since 2008. When fully implemented, the results will provide enhanced customer loyalty and satisfaction, generate good opportunities for additional sales, and thus support profitable growth. In 2009, we focused on using segmentation to support advisory services to our customers.
A period of economic downturn is a challenge for many individuals and businesses. Therefore, our peace-of-mind delivery is even more relevant in periods of reduced certainty because an unforeseen expense or event that changes everyday life for the customer may have greater consequences than would otherwise be the case. Our peace-of-mind delivery aims to alleviate customer concerns by offering easy access to contact, plain communication, easy-to-understand coverage and, not least, remedying if a claim occurs.
VISION We want to be percieved as the leading peace-of-mind provider in the Nordic region
equally, we have to treat them differently”. Likewise in 2009, insurance broker Willis made a survey among their own employees, asking them to assess claims handling in the companies they work with. TrygVesta also emerged best from this survey. One of the explanations emphasised in this respect was the extra service provided by TrygVesta through Proactive Claims Handling.
In 2010, we will launch the most comprehensive programme of change in TrygVesta’s history. This programme of change is an extensive process intended to develop TrygVesta into a truly pan-Nordic company. This means that in the future, we will have shared Nordic product development and structures providing a better overview, faster product launches and lower administrative and sales cost. The insurance company of tomorrow will significantly rely on online self-service. This form of customer interaction is a key driver for the project paving the way for development and identification of synergies.
Self-service means that customers handle their own business online, and that the underlying systems automatically generate policies with the desired content, or that simple claims are handled automatically. Self-service options include policy changes, service, advice, claims handling and purchase of insurances. In 2009, we extended our customers ’ online self-service options. In Denmark, customers got the option to buy the most common insurances online, such as motor, contents, dog and house insurances. In a few years’ time, all our customers will have a full range of self-service options for changing their insurance or reporting and handling a claim. Since 2008 when we opened the e-Boks service and until 31 December 2009, 177,000 customers have signed up for this electronic service.
Electronic customer communication on ’My page’ or e-Boks (DK) or netbank (SE + FI)
munication with our customers. At the start of the year, we will introduce a new procedure for obtaining customer e-mail addresses and acceptances thereof (Denmark requires that customers provide acceptance for companies to send them e-mails). The objective is to be better able to tailor our communication to the wishes and requirements of the individual customer, thereby making for a more personal and relevant customer experience.
In order to be an attractive partner for customers and live up to our vision of being perceived as the leading peaceof -mind provider in the Nordic region, employees have to develop and put themselves in the customer’s place.
Living House begin to interact. With a view to providing additional momentum, we plan to re-brand the Group based on a shared business model and supporting pan-Nordic IT systems.
Learning, the Group’s training unit, which handles employee training and quality assurance of training offers, organised 243 different courses in 2009. On average each employee attended a course 1.7 times during the year.
The Group’s training and development efforts in 2010 will focus on implementing efficiency measures for all learning activities to provide an overview of the financial benefits of the learning activities and to assure the quality of and improve the Group’s training offers. The peace-of-mind provider training will be the largest training initiative in 2010, with more than 2,000 employees receiving training to give customers a unique peace-of-mind experience. Likewise in 2010, a value-based development programme will be initiated, to be attended by more than 50 managers. This programme will help identify talent and competencies more effectively and strengthen the Group’s value-based corporate culture.
Denmark will work in a paperless environment. This will improve the working environment for the employees, reduce costs and speed up case processing, for the benefit of the customer experience and the company’s earnings.
results in 2009 > Acquisition of Moderna Försäkringar for DKK 939m.
Premium growth of 12.2% and a technical result of SEK 107m (nine-month result)
> Premium increases in P&C Norway gradually improving profit > Yearly premium growth better than market growth
results in 2009 > Self-service of the most common types of insurances in Denmark > Self-service of claims reporting in Norway > 177,000 customers joined e-Boks in Denmark
Goals for 2010-11 > Handling of motor claims in Denmark > New Group internet platform > Start of common Nordic business models, processes and IT systems
results in 2009 > Increased customer loyalty > Satisfaction with claims handling > Risk consultancy for corporate customers
Goals for 2010-11 > Common Nordic brand platform > Increase customer loyalty, retention rate and proportion of concept customers > Improve distribution strategy and customer accessibility
We intend to focus on our employees and to be an attractive workplace.
Index showing the proportion of our private customers having made a multiple product/
The proportion of 100 customers staying on with the company after one year
TrygVesta emerged as the best among the largest companies surveyed in Denmark.
Administrative expenses and sales costs as a percentage of earned premiums
The 2009 expense ratio was impacted by costs in connection with The
Living House. Adjusted for such costs, the expense ratio was in line with expectations * Including costs of The
The combined ratio was 92.3, adversely impacted by lower interest rates and higher claims expenses in the Danish private business return on equity after tax (%)
Gradual improvement of the expense ratio by 0.1 percentage points per year 89-91 in the medium term 21-23% annually
Despite low interest rates and stimulus packages from several governments, the speed and sustainability of an economic recovery are still subject to uncertainty due to continued high levels of debt and the need for debt reduction, factors that are expected to have an adverse effect on private and public spending in the coming years. As part of TrygVesta’s transparent information platform, we aim to provide accurate guidance to and assumptions for the future developments of our company.
Expectations for earnings in 2010 are nonetheless subject to uncertainty due to rapidly increasing claims expenses recorded in 2009 for contents, house and change of ownership insurances and uncertainty with respect to the impact of changes in interest rate levels. TrygVesta’s tecnical result and investment performance are to a significant degree affected by changes in interest rates. This is partly because the investment return is affected by interest rate levels, and partly due to ongoing interest rate return of insurances. On the other hand, the balance sheet effect will be neutral due to a matching of insurance provisions and the investment portfolio. Compared with previous years, the low interest rate level reduced the pre-tax profit by DKK 342m in 2009.
Fluctuations in the exchange rates of NOK and SEK to DKK
affect profits which are reported in DKK. TrygVesta does not include expected exchange rate developments in the outlook and therefore states growth rates in local currencies. Norway and Sweden account for 38% and 6%, respectively, of earned premiums in TrygVesta.
Earned premiums are expected to increase by 3-4% in local currency, assuming a gradual economic recovery and no major changes in competition relative to end 2009. Premium growth is expected to originate from continued strong organic growth in Sweden and Finland and the implementation of announced premium increases in all four countries.
Most of TrygVesta’s insurances are for private individuals. The economic downturn did not affect the portfolio of insurances within this customer segment. However, the rising unemployment and the number of business bankruptcies in 2009 had an adverse impact on the volume of commercial insurances, for which we recorded a decline within workers’ compensation, vans, liability and building insurance. Assuming a gradual economic recovery in 2010, the development in volumes in the areas that are most sensitive to economic conditions should stabilise. Growth within Corporate exceeded expectations in 2009, but with a declining trend over the year and indications of a lower premium growth in 2010.
Competition from non-Nordic insurance companies through brokers in the Nordic market mainly targets the largest corporations, thus only affecting part of the market.
The combined ratio was in 2009 generally affected by interest rate levels and increasing claims expenses. For 2010, the combined ratio before run-off is expected to be in the range of 93-95 compared with 96.2 for 2009 before run-off. Thus, an improvement of the combined ratio is very likely, mainly due to an increase in gross earned premiums and indexation.
est rates increased by 1 percentage point to 4.6%, the combined ratio would improve by around 1.2 percentage points.
If interest rates declined further, this would have the same proportionate effect. Run-off had a positive impact of 3.54. 6% on the combined ratio from 2006 to 2009, for example, with a combined ratio in 2009 of 92.3 after run-off and 96.2 before run-off.
In 2010, focus on costs will continue. Ongoing efficiency and rationalisation measures are expected to ensure an unchanged expense ratio in Denmark and Norway. This cost reducing process is expected to create room for further investments in expansion and growth. To this should be added increased costs in 2010 in connection with a multi year improvement of business processes and supporting IT systems (see also the section Strategy) and higher costs in connection with the preparation and implementation of Solvency II. Furthermore, one-off costs for branding and marketing will increase by DKK 80-100m in connection with marketing of the Group as a Nordic peaceof -mind provider with a shared brand platform. Overall, the expense ratio for 2010 including investments is expected to be 0.5 percentage point higher than the expense ratio of 16.9 recorded in 2009.
Expectations regarding claims ratios are based on historical performance in the form of average claims ratios for the past five years, with recent years’ trends generally being weighted stronger than those of prior years. Trends in the pricing of our insurance premiums, claims frequencies and the discount rate applied are the most important factors that may affect overall performance. Assumptions for storm events and large
Rate at the end of 2009Rate at the start of 2009
The outlook for 2010 assumes weather-related claims for 2010 of DKK 200-300m and large claims of DKK 500-600m gross. The outlook assumes no run-off losses or gains in 2010 on the provisions for claims. The outlook regarding gross expenses reflects the projected number of employees in 2010 and the related costs. The projected number of employees incorporates the effect of measures launched to improve efficiency and in-house rotation of vacant positions.
TrygVesta initiated a division of the investment portfolio into two portfolios at the beginning of 2010. One is called the matching portfolio and amounts to approximately DKK 27bn.
Currency exchange rates, which have a major impact on the results of the insurance operations, were volatile in 2008 and 2009. TrygVesta’s insurance operations are directly exposed to fluctuations in NOK, SEK and EUR. Based on the expectation of a positive profit contribution from the Norwegian and
Swedish part of the business, a depreciation of NOK and SEK
Group which has DKK as its reporting currency. The currency risk on the part of equity tied up in NOK and SEK is hedged.
The effective tax rate is affected by the corporate tax rate of 25% in Denmark and 28% in Norway. TrygVesta expects an effective tax rate of 26 in 2010, depending, however, on the amount of tax-exempt or non-deductible gains or losses on equities in the Norwegian part of the equity portfolio.
results – the right balance between premiums and risk is the basis for results results
2,602m from DKK 1,347m for 2008, reflecting an improved investment return and a lower technical result. The lower technical result was attributable to lower interest rates and rising claims expenses, in particular for house and contents insurances, making premium increases necessary on a number of insurances. This was the first time since the period 2002-2004 that TrygVesta implemented premium increases on this scale. The premium increases are expected to improve earnings in 2010 and 2011, and further premium increases will be implemented in 2010.
Finland, which affected costs, but a focused effort with respect to process enhancement measures and Lean resulted in a declining expense ratio overall.
The profit after tax increased to DKK 2,008m, more than double the 2008 figure. The performance was affected by the positive performance of the investment activities, which reversed the negative result of 2008 to a positive result in 2009, as well as by a positive contribution of
The technical result amounted to DKK 1,554m in 2009 against DKK 2,384m in 2008. In addition to the effect of lower interest rates of DKK 342m, the result was adversely affected by a fall in the contribution from prior-year claims.
Developments within house and contents insurances, primarily in the Danish market, also had an adverse impact on the result. Strong increases in the number of break-ins and an increase in the number and severity of cloudburst claims had an adverse impact on earnings and made premium increases necessary.
18,283m in 2009, which was an increase of DKK 960m, or 9.6% in local currency (5.5% in DKK). Premium growth was favourably impacted by the acquisition of Moderna
Försäkringar (Moderna), which was included with effect for three quarters in 2009, or DKK 768m. Excluding Moderna, premium growth was 4.7% in local currency. Current premium increases and sustained high customer renewal rates also lifted growth.
in Sweden excluding Moderna and 34% in Finland, respectively. Taken alone, Moderna grew by 12.2%, exceeding
The gross claims ratio of 72.2 in 2009 against 67.9 in 2008 was adversely impacted by the lower discount rate which, seen in isolation, had a negative effect of 1.7 percentage points on the claims ratio, while the remaining increase was mainly attributable to higher claims expenses in the private lines of the Danish part of the business.
Higher claims expenses, particularly for contents and house insurances, had an impact of DKK 456m on the underlying claims development with DKK 293m stemming from the private lines in the Danish part of the business.
December 2009. Sweden and Finland accounted for 6.9 percentage points and Denmark and Norway accounted for 2.7 percentage points of the Group’s total premium growth of 9.6% in local currency. The total Nordic bank portfolio increased 21%, with Sweden and Finland accounting for the largest growth.
ins, more expensive average claims due to contents being more expensive after the private consumption boom from 2004 to 2007, a worrying development in water and piping claims under house insurances, and rising expenses for fire claims. Positive trends included a slight decline in average claims for small house claims (less than DKK 100,000). This was due to the economic downturn which within a short period of time reduced demand for craftsmen’s services.
Even if the economic slowdown had a limited effect on the results in 2009, it was necessary to adjust the cost structure because higher unemployment and economic recession are expected to impact the future volume of business until economic recovery sets in. The ongoing improvement of business efficiency and recruitment restraint had the overall effect of reducing the expense ratio in Denmark and Norway from 16.4 in 2008 to 15.4 in 2009.
Furthermore, this made it possible to begin sales of corporate insurances ahead of expectations.
Read more about the acquisition of Moderna in the section Sweden.
sions for claims fell in 2009 which, seen in isolation, triggered an increase of 1.7 percentage points in the combined ratio. Run-off gains had a favourable impact of 3.9 percentage points on the combined ratio in 2009 as compared with 4.6 percentage points in 2008. Run-off gains came from personal lines, whereas reserves for house and contents policies were strengthened. Large claims were a gross amount of DKK 534m in 2009 against
Positive trends in the equity markets, generally falling interest rates, and a narrowing credit spread produced a significantly higher investment result in 2009. The gross return on investment assets totalled DKK 1,931m in 2009 against DKK 440m in 2008, corresponding to a gross return of 6.6% in 2009 compared with 3.5% in 2008.
Investment activities generated a profit of DKK 1,086m after transfer of technical interest compared with a loss of DKK 988m in 2008.
TrygVesta invested in High Yield bonds, which accounted for 2.2% of the Group’s total investment assets at 31
December 2009. The Investment Grade portfolio increased by DKK 500m in the spring, but the entire portfolio was sold at the end of the year. Furthermore, TrygVesta completed a major restructuring of the mortgage bond portfolio in the second half of 2009, switching from callable bonds to non-callable bonds. The total investment portfolio stood at around DKK 40bn at 31 December 2009 compared with DKK 34.2bn at 1 January 2009. TrygVesta recognises all investment assets at market value, and value changes have a direct impact on the income statement.
The tax expense of continuing business was DKK 623m in 2009 compared with DKK 501m in 2008, equalling a fall in the effective tax rate from 37% in 2008 to 24% in 2009.
Total assets increased from DKK 38,445m to DKK 44,740m in 2009, primarily due to the consolidation of Moderna and the appreciation of NOK against DKK.
9,666m and technical provisions of DKK 29,002m. Technical provisions increased by DKK 3,809m relative to 31 December 2008, primarily due to the addition with respect to Moderna and the appreciation of NOK against DKK.
Equity stood at DKK 9,666m at 31 December 2009, an increase of DKK 1,422m in the year. The increase was composed of the profit for the year, dividends paid out in the amount of DKK 410m, own shares bought back in the amount of DKK 334m and other adjustments. The return on equity was 22% in 2009 against 9% in 2008.
average house claim (less than DKK 100,000) was reported, but due to an increase in expensive house claims, the total claims expenses rose.
Overall, gross premiums rose by 4.0% to DKK 6,866m in 2009, which was significantly better than the year before and in line with expectations. The economic downturn resulted in a reduced number of workers’ compensation insurances and reduced premiums. The ongoing restructuring of the motor portfolio, which accounted for a third of the total portfolio in Private & Commercial Denmark, produced a slight drop of 1% in the average premium.
Claims ratio, net of ceded business 63.6 68.6 76.6 Gross expense ratio 16.7 17.5 15.5
parameters sooner than expected. At 31 December 2009, most of the motor portfolio had been transferred to the new tariff parameters, which include the age of the car, the annual mileage and the age and gender of the driver, all of which facilitates a better risk selection. The average premium is expected to see a flat trend in 2010. Indexation for 2010 amounts to 4.2%, but the positive impact will be offset by the conversion of the remaining portfolio.
Personal accident, holiday home and travel insurance premiums were also increased by 10-20% in 2009. The effect of the many premium initiatives is expected to restore balance in earnings during 2010 and 2011, and new measures will be introduced as required.
When TrygVesta, as the first Danish company, implemented necessary premium increases in the Danish market, an adverse trend in customer renewal rates had been expected. In connection with the premium increases, the net outflow of customers increased slightly, but this trend was reversed as other companies in the market also increased their premiums. For 2009 as a whole, the renewal rate for private customers was stable at around 91, which means that on average, customers will remain with TrygVesta for 11 years. The high renewal rate made a positive contribution to the performance, as a high renewal rate is important in relation to the development of premiums, claims and costs.
Lower run-off gains and the lower level of interest rates in combination with higher claims expenses for contents and house insurances triggered an increase in the claims ratio from 67.3 in 2008 to 74.8 in 2009. Run-off gains amounted to DKK 303m in 2009, which was DKK 87m lower than in 2008 due to lower run-off gains on motor.
As TrygVesta discounts provisions for claims, the lower interest rate level had an adverse impact on the present value of the provisions for claims, increasing the claims ratio by 1.2 percentage points.
Another contributory factor was the performance of contents and house insurances, for which it was necessary to strengthen reserves significantly by the end of the year in order to reflect the higher claims level.
More break-ins, fire claims and piping claims caused claims expenses to increase in 2009. The higher number of break-ins affected contents as well as house insurances. Around 41% of the contents insurance claims was related to break-ins, and the related cost increased from 2008 to 2009. This development was also seen because customers have acquired more, new and more expensive furniture. Inadequate police efforts and falling detection rates have made it easier for thieves. The development in the number of break-ins is not caused solely by the recession as the upward trend has been recorded over a longer period of time. One of the reasons is that organised foreign gangs more frequently commit more serious crimes and serial break-ins.
The higher number of fire claims under house insurances mainly related to claims in excess of DKK 100,000 and was caused by more large fire claims and short circuit claims related to an increased number of lightning strikes in 2009. Higher expenses for piping and service piping claims impacted claims expenses adversely by around DKK
The claims frequency for house insurances increased by around 6 percentage points, related to more break-ins, short circuit claims and a minor increase in piping and service piping claims.
The claims frequency for motor increased by around 1 percentage point in 2009, favourably impacted by a drop in mileage, but adversely impacted by the winter weather at the end of the year. The average motor claim increased by 1 percentage point. With respect to car repairs,
TrygVesta works closely with selected garages, which helps keep average claims expenses down and ensure high quality and service to customers.
Gross earned premiums 4,490 4,636 4,445 Gross claims incurred -2,962 -3,371 -3,224
Norway at the beginning of the year, which increased the number of motor claims and claims relating to holiday houses. However, the high claims level early in 2009 improved during the year and both the third and fourth quarters were better than the year before.
Claims inflation decreased in 2009 after increasing claims inflation in 2007 and 2008, which saw rising prices for craftsmen and materials. Unlike in Denmark, where the initial premium increases were implemented from 1 January
Sales are handled by some 80 franchise offices with 300 employees, own sales agents, call centres, car dealers and Nordea’s branches.
TrygVesta introduced a number of changes to the distribution platform in 2009, including a strengthening of sales via call centres. Furthermore, focus remained on strengthening the market share in areas with a market share below the national average.
The average premium for motor insurances increased by 4.9%, and house insurances increased by 8.1% in 2009.
Norwegian market, TrygVesta has since mid-2007 increased premiums in order to improve profitability. The premium increases implemented during 2009 are expected to improve earnings when fully incorporated in the portfolio.
in local currency, the performance was well balanced. The claims ratio, net of ceded business improved from 74.2 to 73.7 relative to 2008. In light of the adverse impact of the lower discount rate which, seen in isolation, lifted the claims ratio by 1.1 percentage points in 2009 compared with 2008, the performance was in line with expectations.
2009, the premium increases in Norway have been implemented since mid-2007. The effect of the semi-annual premium initiatives began to materialise in 2009 and will improve the performance going forward.
1m) under house insurances in Private & Commercial Norway developed favourably in 2009, accounting for NOK
Gross claims ratio 88.9 96.8 80.9 Business ceded as % of gross premiums 0.0 0.0 1.4
Skadeförsäkring brand. Moderna has several sub-brands; the best known are Atlantica and Bilsport&MC. Insurances are sold through Nordea’s branches, own sales agents, call centre, the Internet and car and boat dealers.
TrygVesta acquired Swedish company Moderna in April 2009 for a total acquisition price of DKK 939m, including goodwill on acquisition of DKK 310m. Moderna reported a pre-tax profit of DKK 117m (nine-months profit) corresponding to approximately 6% of the Group’s total pre-tax profit in the second to fourth quarters of 2009. The performance was satisfactory and better than expected. At the time of acquisition, Moderna was expected to raise the total earnings per share by 5% in 2010. The acquisition strengthened TrygVesta’s position and distribution power significantly in the Swedish private market, adding call centres, group insurance schemes, sales agents, a car channel and an online solution for all customers in Sweden. The acquisition is a good match to TrygVesta’s strategy of increasing the market share in Sweden.
SEK 517m at 31 December 2009 against SEK 370m at 1
which were implemented in Vesta Skadeförsäkring in 2009 will improve profitability in 2010 and 2011. However, these measures also had a negative impact on customer renewal rates as premium increases for unprofitable customer segments caused a number of such customers to leave the company.
reserves of SEK 50m. The improved claims ratio was mainly attributable to the consolidation of Moderna, which improved the performance significantly. In addition to critical mass, the acquisition of Moderna also contributed strong underwriting competences to the Swedish business, which are expected to strengthen the overall
The combined ratio for 2009 was 105.5 as against 143.9 for 2008. Moderna had a combined ratio of 90.8 for 2009. The remaining Swedish portfolio had a combined ratio of 141.9, which was adversely impacted by the strengthening of reserves. The technical result for 2009 was a loss of DKK 52m against a loss of DKK 90m in 2008. This was the best performance to date of the
Group’s Swedish activities and mainly attributable to the consolidation of Moderna’s profit of DKK 75m.
Gross claims ratio 74.9 72.9 85.2 Business ceded as % of gross premiums 0.4 0.3 0.2
Claims ratio, net of ceded business 75.3 73.2 85.4 Gross expense ratio 49.8 43.5 41.1
Gross premiums in Finland increased by 33.3%. Sales were intentionally held back due to increased focus on profitable growth. In that connection, earnings in Finland were affected by non-recurring expenses of approximately
In 2009, sales made through own sales agents and own call centre were strengthened. Nordea accounted for 18%
Weeks network and netbank, while 31% of sales were made through TrygVesta’s affiliated sales force based on, among other things, referrals from Nordea.
The Finnish portfolio totalled DKK 554m at 31 December 2009 and grew by 28% in 2009.
154m in 2008, were impacted by the higher number of employees. Costs were futhermore impacted by nonrecurring costs of around DKK 20m in relation to The
DKK 113m for 2009 against a loss of DKK 42m in 2008.
Gross claims ratio 73.9 63.3 66.1 Business ceded as % of gross premiums 3.3 9.4 7.0
Corporate is a Nordic business area which sells insurances to corporate customers under the TrygVesta brand. Corporate ’s products are sold through its own sales force and through insurance brokers. Corporate has more than 12,000 customers each paying annual premiums of more than DKK 900,000 or having more than 50 employees, and around 70 customers each paying annual premiums of more than DKK 10m. Corporate has around 400 employees. TrygVesta Garanti is included in the financial results of Corporate. TrygVesta Garanti is a subsidiary whose principal activity is to guarantee, in relation to third parties, its customers’ performance under agreements made, such as construction contracts where guarantee is provided in respect of risks during the construction period and remedying of defects after the project has been handed over.
The Norwegian part of the Corporate business was able to implement premium increases, while the Danish part experienced fiercer competition and pressure on prices.
As in previous years, TrygVesta Garanti was particularly aware of the sensitivity of the construction industry and the consequences of the economic crisis. TrygVesta Garanti pursues a restrictive underwriting and reinsurance policy, and the number and size of claims were therefore satisfactory in 2009. The company recorded a combined ratio of 75.3 in 2009, which was in line with 2008, and contributed
Corporate business. This was not possible in Denmark due to the competitive environment. Competition and the price/risk relationship in Denmark intensified during 2009, and, focusing on profitability, TrygVesta refrained from submitting quotations on a number of contracts.
TrygVesta has since 2009 had a partnership with AXA, a large international insurer, relating to AXA customers’
insurance requirements in the Nordic region and TrygVesta customers’ insurance requirements outside the Nordic region. Globalisation, relocation of production facilities, and sales offices, etc. in all parts of the world require that
The Swedish part of the Corporate business, which started up in September 2008, gained momentum in 2009 and made a positive contribution to growth. The portfolio amounted to SEK 64m at 31 December 2009.
Gross claims expenses rose by 2.7%, or DKK 94m, to DKK
In 2009, the run-off result amounted to DKK 387m net and was mainly attributable to the personal lines. By way of comparison, the run-off result was DKK 394m in 2008.
When the claims ratio is adjusted for the interest rate effect, run-off, large claims and storm, the underlying claims development was unchanged from 2008.
Investment activities result Investment assets DKKm 2007 2008 2009 End-2008 End-2009
The balancing item is recognised in “Other financial income and expenses” to the effect that the total return shown corresponds to the investment return according to the income statement which does not include return on owner-occupied property.
*** The item comprises interest on operating assets, bank debt and reinsurance deposits, exchange rate adjustment of insurance items, costs of investment activities and offsetting of return on owner-occupied property.
Funds are placed pursuant to guidelines defined by legislation, regulators and the Supervisory Board.
Generally falling interest rates, a narrowing credit spread and positive equity markets produced a good investment performance in 2009. The return on TrygVesta’s investment activities totalled DKK 1,931m before transfer to technical interest, but after other financial income and expenses. This was DKK 1,491m more than in 2008. The return on investment activities before other financial income and expenses was DKK 2,513m, equal to a return of 6.6%. The return was 5.9% including changes in provisions for claims due to lower interest rates.
Net investments in the year amounted to DKK 644m. The bond portfolio made up an almost unchanged proportion of total assets of 86.2% in 2009 compared with 86.1% in 2008. The proportion of High Yield bonds increased by
DKK 686m to stand at 2.2% of total investment assets at 31 December 2009. The Investment Grade portfolio was increased by around DKK 500m in the spring,
but the entire portfolio was sold at the end of the year.
1,850m in 2009, equal to 5.6% for the full year. The return was affected by declining interest rates and the narrowing credit spread. A large part of TrygVesta’s bond portfolio is invested in Danish mortgage bonds, which benefited from the general credit spread narrowing. The smaller portfolio of company corporate bonds also contributed strong investment return with High Yield bonds yielding 57.5%.
DKK 1.5bn at 31 December 2009, and a well-diversified portfolio of investment properties of some DKK 2.4bn, consisting of quality buildings, typically office property in prime locations in major cities in Denmark and Norway.
The match portfolio is composed so as to create an optimum match with cash flows from the portfolio and expected insurance payables within the legislative framework. The market value of the provisions for claims is measured by discounting them with an official interest rate curve defined by the Danish Financial Supervisory Authority. The match portfolio will comprise bonds, fixed-income derivatives and money market investments correlating to the development in the official interest rate curve. The proportion of fixed-income derivatives will be increased to reduce risk. The components of the match portfolio will change if the official interest rate changes in the future.
The investment portfolio consists of the investment assets not included in the match portfolio. The assets in the investment portfolio comprise equities, real estate, bonds, money market products and various derivatives.
at TrygVesta we focus on strong capitalisation and risk management to ensure we can always pay our debts
TrygVesta relies on its capital base and financial strength to assume risks from customers and for customers to be confident that the company is able to meet its obligations if and when they report a claim. The aim is for the capital base to match the Group’s risk profile and support natural growth. Basically, TrygVesta’s capital base is the result of risk assessments and risk management because
Capital requirement Given TrygVesta’s rating of ‘A-’, the capital requirement currently amounts to around 50% of net premiums.
TrygVesta assesses its individual solvency need on the basis of the Group’s internal capital model, which estimates the necessary capital taking into account the actual business composition, profitability, reserving profile, reinsurance protection and the investment mix chosen. The assessment takes into account the geographic diversification effect and the effect of the defined investment policy, under which interest rate risk on the bond portfolio matches the corresponding interest rate risk on the discounted provisions, thereby ensuring that, for practical purposes, TrygVesta’s net interest rate risk is negligible.
Authority. The assessment is based on a 99.5% security level on a one-year horizon, equivalent to the security level required under the future Solvency II rules.
In 2009, the European Parliament and the Commission adopted the directive setting out future solvency rules for insurance companies. The directive is expected to be implemented in the individual member states by the end of 2012. The directive, which defines quantitative as well as qualitative requirements for insurance companies, will require an extensive review of existing legislation. This will impact the capital structure of insurance companies and make greater demands on the companies’ skills with respect to risk management, control, capital planning and follow-up. In quantitative terms, TrygVesta has taken part in the test calculations for a standard model under Solvency II since 2005. QIS 4, the latest official test calculation carried out in 2008, suggested a weighted average capital requirement for Danish insurance companies of around 50% of net premiums, with small companies generally being subject to higher capital requirements and large companies to requirements lower than 50%.
effect of risk-reducing measures such as hedging of inflation risk, matching of interest rate risk on assets and liabilities, diversification etc. Based on the internal capital model, the capital requirement for TrygVesta would be somewhat lower than the latest estimate of a Solvency II
requirement. In future under Solvency II, TrygVesta intends to use the internal capital model for capital planning rather than the standard model referred to above.
TrygVesta’s capital structure comprises equity and subordinated loan capital. The relationship between the two components is assessed on a regular basis in order to maintain the optimum structure that takes into account return on equity, cost of capital and flexibility. Regulators and rating agencies assess the actual capital differently.
In 2005, TrygVesta raised a 20-year EUR 150m subordinated bond loan, listed on the London Stock Exchange.
TryghedsGruppen, which owns 60% of TrygVesta. This brought TrygVesta’s total subordinated debt to approximately EUR 215m. Furthermore, approximately DKK 600m of short-term senior debt was raised, but this debt is not included in the capital calculation made by Standard &
around DKK 1.4bn in 2010. Furthermore, there would be room for increasing the capital base by raising additional subordinated loan capital. In relation to the Danish solvency rules the full potential for including subordinated loan capital has already been utilised (around DKK
Dividend is determined on the basis of the Group’s profit distribution policy. TrygVesta distributes 50% of the profit for the year as ordinary cash dividends.
TrygVesta distributes DKK 991m by way of cash dividend and DKK 799m by way of a share buy back.
TrygVesta’s investment policy allows for an equity proportion of up to 6.5% as defined in the Supervisory
Board’s instructions to the Executive Management. The equity proportion at 31 December 2009 was 4.0%. Given a capital base that accommodates the investment policy limits, DKK 1,790m may be distributed at 31 December 2009 in the form of share buy backs and the cash dividend.
The introduction of Solvency II in 2012 will introduce stricter requirements with respect to the way in which insurance companies work with and control risk, including the Supervisory Board’s involvement in risk and capital management.
Provisioning risk We make technical provisions at the end of a financial period to cover expected future payments for claims already incurred. Reserving risk is the risk that future payments deviate significantly from our assumptions when making the provisions.
past ten years. In addition, we make an annual mapping of risk to identify new risks that cannot currently be assessed using statistical analyses. Such data is compiled in TrygVesta’s risk data base, forming the basis for an annual risk report to the Executive Management and the Supervisory Board. The assessment of selected risk scenarios based on this work is incorporated directly in the Group’s calculation of the necessary solvency need
Underwriting risk is the risk related to entering into insurance contracts and thus the risk that premiums charged do not adequately cover the claims TrygVesta has to pay.
This risk is assessed and managed based on statistical analyses of historical experience for the various lines of business. The insurance premium must be adequate to cover expected claims, but must also comprise a risk premium equal to the return on the part of the company’s capital that is used to protect against random fluctuations. All other things being equal, this means that insurance lines or areas which, from experience, are subject to major fluctuations, must comprise a larger risk premium.
Example of fluctuations in historical claims experience for lines subject to a large degree and a minor degree, respectively, of random fluctuations (risk).
Reinsurance is used to reduce underwriting risk in areas where this is particularly required. The need for reinsurance is assessed on the basis of TrygVesta’s internal capital model, which compares the price of buying reinsurance with the reduced capital need that could be achieved.
No similar arrangement has as yet been set up in Norway,
The size of the provisions for claims is determined both through individual assessments and actuarial calculations.
At 31 December 2009, the provisions for claims amounted to DKK 22,430m. The duration of the provisions, that is, the average period until such amounts are paid out to the customer, was 3.3 years at 31 December 2009.
The largest single risks in the corporate portfolio with respect to property risks are protected by reinsurance cover of DKK 1.7bn with a retention of DKK 100m for the first claim and DKK 50m for subsequent claims. Property risks exceeding the upper level are protected by facultative reinsurance. Other lines covered by reinsurance include liability, motor, marine, fish farms and guarantee insurance.
Investment risk is the risk that volatility in the financial markets will impact the results of operations and thus the financial position. Investment assets as well as provisions for claims are exposed to interest rate changes. If interest rates fall, the value of the bond portfolio would rise, but at the same time it would cause the provisions for claims to rise, thereby reducing net interest rate exposure.
The investment assets are partly made up of assets matching the technical provisions and partly of the company’s equity. At the beginning of 2010, TrygVesta explicitly initiated a division of the investment assets into two investment portfolios. The part of the portfolio matching the technical provisions will be placed exclusively in interestrelated assets, and the sole purpose is to hedge interest rate sensitivity with respect to discounted provisions. The part of the portfolio that matches equity will be a free investment portfolio intended to generate an optimum return relative to the risk involved. The figure on the next page illustrates how interest rate risk on assets and liabilities varies before and after the division of the portfolio.
In 2008, TrygVesta bought the head office in Ballerup, thereby increasing the proportion of real estate significantly. This proportion is expected to be reduced over
Annual report 2009 l Capitalisation and risk management l * Provisions for claims are excluding Finland, Sverige (Vesta Skadeförsäkring ) og TrygVesta Garanti.
time. Besides the owner-occupied properties, TrygVesta’s real estate port-folio consists of office and rental properties comprising 3.8% and 5.9% respectively of the total investment activities.
TrygVesta uses currency derivatives to hedge the risk of a loss of value of balance sheet items due to exchange rate fluctuations in accordance with a general hedge ratio of 90-100 for each currency. The aim is to hedge 98-100%
After the division, fluctuations in the hedging portfolio will in principle perfectly match fluctuations in liabilities. The investment portfolio will
TrygVesta’s receivables in Danish banks are covered by a government guarantee under the Act on Financial Stability
Many businesses, in particular financial businesses, have had their access to liquidity significantly impaired during the financial crisis. TrygVesta is not exposed to the same risk of a lack of liquidity since premiums are due for payment before claims have to be paid out. Most of the payments received are placed in cash accounts or liquid securities ensuring that TrygVesta will be able to procure the necessary liquidity at all times.
Equity market Decrease of equity markets of 15% -257 Effect arising from derivatives 19 real estate market Decrease of real estate markets of 15% -584
SENSITIVITy IN CaSE OF SELECTED CHaNGES IN uNDErWrITING, rESErVING aND MarKET CONDITIONS
Committee memberships: Chairman of the audit committee of TrygVesta A/S. Advisory
Ms Nyboe andersen has competencies within the areas of management, strategy, treasury and financial business from her former positions as Chairman of the Board of Governors of
Professional board member and interim management projects. Former CFO, Arla Foods amba.
Economics), IMD Executive Development Programme, IMD ‘Strategy in Action’ Programme, and
Mr Wendel andersen has experience in international management, strategy, finance, treasury, IT and project management from his former position as CFO of Arla Foods and from Tulip International and Foss.
Capital Explorer AB and chairman of the nomination committee of East Capital Exlorer AB.
Mr Bergqvist has international management experience in strategic development, complex transactions, development of new markets, marketing, sales and financial management. Being a Swedish citizen, Mr Berggvist has special insight into Swedish market conditions.
Technology Group AS, HV IV Invest Alfa AS, Helicopter Network AS, Fortissimo AS, Line Consult AS,
CEO, Danfoss A/S. Former Executive Vice President and COO, GN Store Nord A/S.
Mr Frederiksen has experience within management, strategy and finance from serving as a CEO
and most recently as a board member of a number of companies, including property companies.
John r. Frederiksen Born 1948. Joined the Supervisory Board in 2002.
Board member: TrygVesta A/S, TrygVesta Forsikring A/S, Dagrofa A/S, DSV A/S, Kemp & Lauritzen A/S, Nordea Liv og Pension Livsforsikringsselskab A/S.
Niels Bjørn Christiansen John R. Frederiksen Rune Torgeir Joensen Peter Wagner Mollerup Birthe Petersen Per Skov Berit Torm
Trade), MSc (Engineering) and management training programmes at Wharton and Stanford.
Committee memberships: member of the audit committee of TTS Marine ASA.
In 2009, TrygVesta’s Supervisory Board focused on organising the Group’s further strategic development with a healthy balance between short-term and long-term activities and action plans. Profitable growth was very much in focus during the year, and TrygVesta benefited from the economic slowdown to acquire Moderna Försäkringar after following the company for some years.
Find information in relation to the recommendations on trygvesta.com > Our Business > Corporate Governance
Se TrygVesta’s Investor Relations policy on trygvesta.com > Investor > Contact IR
The Supervisory Board monitors that TrygVesta’s capital structure is in line with the needs of the Group and its shareholders, and that the capital structure is in compliance with the requirements applicable to TrygVesta as a financial undertaking. The Supervisory Board optimises capitalisation on an ongoing basis while duly safeguarding the interests of policyholders and shareholders and leaving the Group sufficient scope for development and growth.
In 2009, the shareholders at the annual general meeting authorised the Supervisory Board to let TrygVesta acquire own shares within 10% of the share capital in the period up to the next annual general meeting. Based on the
Group’s 2009 performance, the Supervisory Board proposes that TrygVesta implements a share buy back programme in 2010/11 totalling DKK 799m.
TrygVesta holds its annual general meeting of shareholders each year before the end of April. The Supervisory
Board convenes the annual general meeting in accordance with the Danish Companies Act and the company’s articles of association, giving not less than three weeks’
The Supervisory Board makes an annual assessment of the competencies required for the Supervisory Board to perform its duties in the best possible way. Focus is on competencies within financial business, marketing, IT and management. In connection with an evaluation of the
The Board members are aged between 44 and 69 years, and there are three female members. Looking forward,
Members - Bodil Nyboe Andersen, chairman - Per Skov - Rune Joensen responsibilities > To ensure the accuracy of financial information disclosed in the Group’s financial reports, including the application of accounting policies.
Members - Mikael Olufsen, chairman - John R. Frederiksen - Paul Bergqvist - Birthe Petersen responsibilities > To support the Supervisory Board in considerations and decisions with respect to issues of remuneration to the Supervisory Board, Board committees and the Executive Management, and to discuss the framework for the Group Executive Management’s remuneration in consultation with the Group CEO.
activities in 2009 > Discussed and adopted the remuneration structure for 2009. > Prepared a recommendation to the Supervisory Board concerning variable salary for 2008 and remuneration for 2009.
A few Supervisory Board members hold more than the recommended number of directorships. However, the Supervisory Board considers that each member has adequate time and resources to serve as a member of the Supervisory
The Supervisory Board carries out an annual evaluation of the work and results of the Executive Management and of the cooperation between the Supervisory Board and the
Read more in the section Risk management and at trygvesta.com > Our business > Risk management.
TrygVesta’s internal audit department regularly reviews the quality of the Group’s internal control systems and business procedures. The department is responsible for planning, performing and reporting the audit work to the
In connection with the Supervisory Board’s review of the annual report, it discusses the accounting policies, among other issues. The results of the audit are discussed with the audit committee and in Supervisory Board meetings for the purpose of assessing the auditors’ observations and conclusions.
The responsibility for the Group’s internal controls and risk management systems in connection with the financial reporting process rests with the Supervisory Board and the
The Supervisory Board and the Executive Management approve and monitor the Group’s general policies, procedures and controls in key areas in relation to the financial reporting process, including compliance with relevant legislation and regulations, internal business procedures and segregation of duties, continuous monitoring of significant risks, etc.
In connection with major acquisitions, a general risk analysis is performed, and the significant business procedures and internal controls are reviewed.
Members of the Supervisory Board receive a fixed fee and are not covered by incentive programmes or severance schemes. Their remuneration is fixed on the basis of trends in the company’s peer group, taking into account competencies and efforts as well as the scope of the
Board work. The Chairman of the Supervisory Board receives triple the fee of the other members, and the
Chairman 150,000 Two other members, each 100,000 Total remuneration of the audit committee 350,000 rEMuNEraTION OF THE rEMuNEraTION COMMITTEE IN 2009
Specific benchmarks are defined within all four perspectives of the balanced scorecard (financial, customer, processes and learning), reflecting the strategic focus areas of the Group and the individual business areas or organisational units, including growth, profitability, cost reduction, customer satisfaction, customer loyalty, image, processes, communication, employee satisfaction and development, and innovation. The bonus is paid out in cash. Part of the
Members of the Executive Management are entitled to company cars, and a contribution equal to 25% of the basic salary is paid into a pension scheme. Each member of the Executive Management is entitled to 12 months’
However, the Group CEO is entitled to 12 months’ notice and to 18 months’ severance pay plus pension contributions during such period.
DKK Basic salary Bonus Pension Car Total rEMuNEraTION OF THE ExECuTIVE MaNaGEMENT IN 2007
TOTaL NuMBEr OF STOCK OPTIONS OuTSTaNDING aT THE END OF 2009
Total number of outstanding stock options 114,350 142,596 242,971 181,944 681,861
TrygVesta emphasises openness, transparency and accommodation of stakeholder information requirements, thereby providing investors, equity analysts and advisers with a good basis for forming a correct picture of the
Group’s market and financial position, its performance and its opportunities and risks.
From the beginning of 2008 to the end of 2009, the period of the financial crises, TrygVesta shares fell 6%
FINaNCIaL CaLENDar 2010 15 April 2010 at 14:00 Annual general meeting 2010 16 April 2010 TrygVesta shares trade ex-dividend 21 April 2010 Payment of dividend 21 May 2010 at 7:30 Interim report for Q1 2010 17 August 2010 at 7:30 Interim report for H1 2010 16 November 2010 at 7:30 Interim report for Q1-Q3 2010
Copenhagen was 6.7bn in 2009 compared with 11.1bn in 2008. New trading platforms such as Chi-X, Turquise and Burgundy accounted for around 8% of all trades in
25 nominal value each), and all shares rank pari passu. The principal shareholder, TryghedsGruppen smba, Kgs. Lyngby,
Denmark, holds 60% of the issued shares and is the only shareholder with a holding of more than 5%. Trygheds-
At 31 December 2009, the 40% free float was distributed among approximately 27,900 registered shareholders.
The Executive Management and Investor Relations meet with institutional investors and equity analysts after publication of all financial statements. In 2009, TrygVesta held around 270 investor meetings and participated in 15 investor conferences. TrygVesta also participated in five events for private shareholders in both Denmark and Sweden. The
COMPaNy aNNOuNCEMENTS PuBLISHED IN 2009 26.01.2009 No. 04 TrygVesta comments on market rumours about acquisition of Moderna Försäkringar 02.02.2009 No. 06 TrygVesta extends length of share buy back programme 17.02.2009 No. 10 TrygVesta ends negotiations with Moderna without result 02.03.2009 No. 13 TrygVesta acquires Moderna Försäkringar Sak in Sweden 03.03.2009 No. 14 Fourth quarter 2008 report 03.03.2009 No. 15 Annual report 2008 27.03.2009 No. 19 TrygVesta ends share buy back programme 31.03.2009 No. 20 Notice of the annual general meeting of TrygVesta A/S
02.04.2009 No. 21 TrygVesta closes acquisition of Moderna 22.04.2009 No. 22 Resolutions from annual general meeting 12.05.2009 No. 23 First quarter 2009 results 18.08.2009 No. 24 Half-year 2009 report 28.08.2009 No. 25 Cancellation of TrygVesta shares 28.08.2009 No. 26 TrygVesta issues guarantee for Moderna Försäkringar Sak AB
TrygVesta’s annual general meeting will be held on 15 April 2010 at Falconer Center, Falkoner Alle 9, 2000 Frederiksberg, Denmark. The invitation to attend the meeting will aNy quErIES rELaTING TO THE aNNuaL GENEraL MEETING May BE aDDrESSED TO
Bjarne Lau Pedersen, Chief Legal Adviser Tel.: +45 44 20 30 65. bjarne.lau@tryg.dk
be advertised in the daily press and will be sent to shareholders who so request. Notice of the meeting will also be posted at trygvesta.com.
Read about dividends for 2009 in the section Capital management and profit distribution
Notes page Statement by the Supervisory Board and the Executive Management 82 Independent auditors’ report 83
Notes – TrygVesta koncernen 1 accounting policies 91 2 Earned premiums, net of reinsurance 101 3 Technical interest, net of reinsurance 101 4 Claims incurred, net of reinsurance 101 5 Insurance operating expenses, net of reinsurance 101 6 Technical result, net of reinsurance, by line of business 108 7 Interest and dividends 110 8 Value adjustment 110 10 Profit/loss on discontinued and divested business 111 11 Intangible assets 111 12 Property, plant and equipment 113 13 Investment property 114 14 Investments in associates 115 15 Fair value hierarchy for financial instruments measured at fair value in the balance sheet 116 16 Reinsurers’ share 120 17 Current tax 120 18 Shareholders’ equity 121 19 Capital adequacy 121 20 Subordinated loan capital 122 21 Provisions for claims 123 22 Pensions and similar obligations 126 23 Deferred tax 128 24 Other provisions 129 25 Debt to credit institutions 129 26 Other debt 129 27 Earnings per share 129 28 Contractual obligations, contingent liabilities and collateral 130 29 Acquisition of subsidiary 131 30 Related parties 132 31 Financial highlights and key ratios of TrygVesta 133
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 2009 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 2009.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated and parent company financial statements and the management’s report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated and parent company financial statements and the management’s report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal controls relevant to the preparation and fair presentation of consolidated and parent company financial statements and to the preparation of a management’s report that includes a fair review in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated and parent company financial statements and the management’s report.
Opinion In our opinion, the consolidated financial statements give a true and fair view of the Group’s assets, liabilities and financial position at December 31, 2009, and of the results of the Group’s operations and the Group’s cash flows for the financial year starting on January 1 and ending on December 31, 2009 in accordance with International Financial Reporting Standards as adopted by the EU and in accordance with additional Danish disclosure requirements for listed companies.
Furthermore in our opinion, the parent company financial statements give a true and fair view of the parent company’s assets, liabilities and financial position at December 31, 2009, and of the results of the parent company’s operations for the financial year starting on January 1 and ending on December 31, 2009 in accordance with the Danish Financial Business Act and in accordance with additional Danish disclosure requirements for listed companies.
Notes General insurance Gross premiums written 17,629 18,315 Ceded insurance premiums -926 -914 Change in provisions for unearned premiums -134 85 Change in reinsurers’ share of provisions for unearned premiums 66 -60 2 Earned premiums, net of reinsurance 16,635 17,426 3 Technical interest, net of reinsurance 499 157
Investment activities 14 Income from associates -2 0 Income from investment properties 128 136 7 Interest income and dividends 1,523 1,287
Profit/loss on continuing business 846 1,979 10 Profit/loss on discontinued and divested business 0 29
Notes Revaluation of owner-occupied properties for the year 0 9 Tax on owner-occupied properties for the year 0 -2 Exchange rate adjustment of foreign entities for the year -640 505 Hedging of currency exposure in foreign entities for the year 615 -474 Tax on hedging of currency exposure in foreign entities for the year -154 119 Actuarial gains/losses on defined benefit pension plans -196 28 Tax on actuarial gains/losses on defined benefit pension plans 53 -7
Total receivables in relation to direct insurance contracts 838 967 Receivables from insurance enterprises 250 271 Other receivables 601 1,190 17 Current tax assets 111 0 23 Deferred tax assets 0 86 15 Cash in hand and at bank 282 512
Accrued interest and rent earned 626 417 Other prepayments and accrued income 142 158
Debt related to direct insurance 311 383 Debt related to reinsurance 172 168 25 Debt to credit institutions 709 611 17 Current tax liabilities 248 303
Total liabilities and equity 38,445 44,740 1 accounting policies 19 Capital adequacy 27 Earnings per share 28 Contractual obligations, contingent liabilities and collateral 29 acquisition of subsidiary 30 related parties 31 Financial highlights and key ratios of TrygVesta
Proposed dividend per share DKK 15.5 (in 2008 DKK 6.50) Dividend per share is calculated as the total dividend proposed by the Supervisory Board after the end of the financial year divided by the number of shares, year end (63,931,573). The dividend is not paid until approved by the shareholders at the annual general meeting of the subsequent year.
TrygVesta Forsikring A/S’ Norwegian branch, has in its branch financial statements included provisions for contingency funds in the amount of NOK 2,906m (in 2008 NOK 2,743m) In TrygVesta Forsikring A/S, these provisions, due to their nature as additional provisions, are included in shareholders’ equity (retained earnings), net of deferred tax. TrygVesta Forsikring A/S’ option to pay dividend to TrygVesta A/S is influenced by this amount. The dividend payment is also affected by a contingency fund provision of DKK 670m, which is included in shareholders’ equity in TrygVesta Forsikring A/S. TrygVesta Garanti insurance has a similar contingency amounting to DKK 139m, which is also included in the company’s shareholders’ equity.
Statement of cashflows - TrygVesta Group l Statement of cashflows – TrygVesta Group l Annual report 2009
Cash generated from operations Premiums 17,412 18,438 Claims paid -12,934 -13,501 Ceded business -22 -603
Change in cash and cash equivalents, gross -16 230 Cash and cash equivalents, beginning of period 298 282
The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU on 31 December 2009 and in accordance with the Danish Statutory Order on Adoption of IFRS.
The financial statement of the parent company is prepared in accordance with the executive order on financial reports presented by insurance companies and lateral pension funds issued by the Danish FSA. The deviations from the recognition and measurement requirements of IFRS are: > Investments in subsidiaries are valued according to the equity method, whereas under IFRS valuation is made at cost or fair value. Furthermore the requirements regarding presentation and disclosure are less comprehensive than under IFRS.
Changes in accounting policies Accounting policies are unchanged from the annual report 2008.
Measurement – Eligible Hedged Items’ > Amendments to IAS 39 and IFRIC 9 ‘Embedded Derivatives’ > IFRIC 9 ‘Reassessment of Embedded Derivatives’, IFRIC 12 ‘Service
A more detailed description of primary assumptions about the future and other primary sources of estimation uncertainty is given in the Capitalisation and profit distribution section in the management’s report.
For discounting of provisions for claims, the Group generally applies a risk-free market rate composed of a risk-free euro-denominated interest rate and a country-specific spread to the German government bond yield. As a result of the adoption of the temporary ‘Package to ensure financial stability’, from the end of October 2008 the Group has applied a synthetic interest rate that includes a certain mortgage yield spread, for liabilities denominated in Danish kroner. Liabilities in Norwegian kroner are still discounted using a Norwegian risk-free interest rate composed as described above. Liabilities in Swedish kroner with a swedish risk-free interest rate and euro are discounted using a Danish risk-free interest rate.
The net obligation with respect to the defined benefit plan is based on actuarial calculations involving a number of assumptions. These assumptions include discount rate, salary adjustment and mortality.
Fair value of financial assets Measurements of financial assets 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 to credit and liquidity premiums.
recognition and measurement The annual report has been prepared under the historical cost convention, as modified by the revaluation of owner-occupied properties, where increases are credited to equity and revaluation of investment property, financial assets held for trading and financial assets and financial liabilities (including derivative instruments) at fair value through the income statement.
Assets are recognised in the balance sheet when it is probable that future economic benefits will flow to the Group and the value of the asset can be reliably measured. Liabilities are recognised in the balance sheet when the Group has a legal or constructive obligation as a result of a prior event, and it is probable that future economic benefits will flow out of the Group, and the value of the liabilities can be measured reliably.
On initial recognition assets and liabilities are measured at cost, with the exception of financial assets, which are recognised at fair value. Measurement subsequent to initial recognition is effected as described below for each financial statement item. Anticipated risks and losses that arise before the time of presentation of the annual report and that confirm or invalidate affairs and conditions existing at the balance sheet date are considered at recognition and measurement.
Unrealised gains on transactions between consolidated companies (including associates) are eliminated to the extent of the Group’s interest in the companies. Unrealised losses are eliminated in the same way as unrealised gains unless impairment has occurred.
The purchase method is applied on acquisitions if the TrygVesta Group gains control of the company acquired. Identifiable assets, liabilities and contingent liabilities in companies acquired are measured at the fair value at the date of acquisition. The tax effect of revaluations is taken into account.
Share-based payment The TrygVesta Group’s incentive programmes comprise share option programmes and employee shares.
The options are issued at an exercise price that corresponds to the market price of the Group’s shares at the time of allocation. No other vesting conditions apply. Special provisions are in place concerning sickness and death and in case of change to the Group’s capital position, etc.
The fair value of the options granted is estimated using the Black & Scholes option model. The calculation takes into account the terms and conditions of the share options granted.
The comparative figures, including five-year financial highlights and key ratios, have been restated to reflect discontinued business. Discontinued and divested business in the income statement includes the post-tax profit of TrygVesta’s business in run-off as well as divested enterprises. Business in run-off comprises the results of the business in run-off in Tryg Forsikring A/S. No enterprises were divested in the year. The subsidiary Chevanstell Ltd. UK was divested in 2006.
After completion of the development the asset is amortised on a straight-line basis over the expected useful life, however with a maximum period of four years. The basis of amortisation is reduced by any impairment writedowns.
Land and buildings Land and buildings are divided into owner-occupied property and investment property. The TrygVesta Group’s owner-occupied properties consist of the head office buildings at Ballerup and Bergen and a few summer houses. The remaining properties are classified as investment properties.
Depreciation on owner-occupied property is calculated using straightline method using the estimated useful lives up to 50 years. Land is not depreciated.
assets under construction In connection with the refurbishment of the owner-occupied properties, costs to be capitalised are recognised at cost under owner-occupied property. On completion of the project, depreciation will be made on a straight-line basis over the expected useful life, up to the number of years stated under the individual categories.
Investment property is carried at fair value. Fair value is based on market prices, adjusted for any difference in the nature, location or condition of the specific asset. If this information is not available, the Group uses alternative valuation methods such as discounted cash flow projections and recent prices on less active markets.
The fair value is calculated on the basis of market-specific rental income per property and typical operating expenses for the upcoming year. The resulting operating income is divided by the percentage return requirement of the property, which has been adjusted to reflect market interest rates and property characteristics, corresponding to the present value of a perpetual annuity. The value is subsequently adjusted with the value in use of the return on prepayments and deposits and adjustment for specific property issues such as vacant premises or special tenant terms and conditions.
The recoverable amount is generally calculated as the present value of the future cash flows expected to be derived from the activity to which the asset belongs.
Financial assets at fair value through income Financial assets are classified as financial assets available for trading at inception if acquired principally for the purpose of selling in the short term, or if they form part of a portfolio of financial assets in which
there is evidence of short-term profit-taking. Derivatives are also classified as financial assets available for trading unless they are designated as hedges.
receivables Receivables are non-derivative financial instruments with fixed or determinable payments that are not quoted in an active market other than receivables that the Group intends to sell in the short term. Receivables arising from insurance contracts are classified in this category and are reviewed for impairment as part of the impairment review of receivables.
l Notes – TrygVesta Group l Annual report 200998 of 148
revaluation reserves Revaluation of owner-occupied properties is recognised in equity unless the revaluation offsets a previous impairment loss, and relates primarily to owner-occupied properties.
Exchange adjustment reserve Assets and liabilities of foreign entities are recognised at the exchange rate at the balance sheet date. Income and expense items are recognised at the average exchange rates for the period. Any resulting exchange rate differences are recognised in equity. When an entity is wound up, the balance is transferred to the income statement. The hedging of the exchange rate risk concerning foreign entities is also offset in shareholders’ equity in respect of the part that concerns the hedge.
Dividends Proposed dividend is recognised as a liability at the time of adoption by the shareholders at the annual general meeting (the date of declaration ). Dividends expected to be paid in respect of the year are stated as a separate line item under equity.
Provisions for insurance contracts Premiums are recognised in the income statement (earned premiums) proportionally over the period of coverage and, where necessary, adjusted to reflect any time variation of the risk. The portion of premiums received on in-force contracts that relates to unexpired risks at the balance sheet date is reported as unearned premium provisions. Unearned premium provisions are generally calculated according to a best estimate of expected payments throughout the agreed risk period. However, as a minimum to the part of the premium calculated using the pro rata temporis principle until the next payment date. Adjustments are made to reflect any variations in the risk. This applies to gross as well as ceded business.
Provisions for claims are discounted. Discounting is based on a yield curve reflecting duration applied to the expected future payments from the provision. Discounting affects the motor liability, professional liability, workers’ compensation and personal accident classes, in particular.
Liability adequacy test Tests are continuously performed to ensure the adequacy of the technical provisions. In performing these tests, current best estimates of future cash flows of claims, gains and direct and indirect claims handling costs are used. Any deficiency is charged to the income statement by raising the relevant provision and the adjustment is recognised in the income statement.
Employee benefits Pension obligations The Group operates various pension schemes. The schemes are funded through payments to insurance companies or trustee-administered funds. In Norway, the Group operates a defined benefit plan. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, dependent on age, years of service and compensation. In Denmark, the Group operates a defined contribution plan. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions. In Sweden, the Group complies with the industry pension agreement, FTP-Planen. The FTP plan is primarily a defined benefit plan in terms of the future pension benefits. FPK is unable to provide sufficient information for the Group to use defined benefit accounting. The plan is therefore accounted for as a defined contribution plan.
The defined benefit obligation is calculated annually by actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by a duration that matches the conditions of the underlying pension obligation.
Deferred income tax is provided on temporary differences concerning investments, except where TrygVesta controls when the temporary difference will be realised, and it is probable that the temporary difference will not be realised in the foreseeable future.
Provisions Provisions are recognised when, as a consequence of an event that has occurred before or on the balance sheet date, the Group has a legal or constructive obligation, and it is likely that an outflow of resources will be required to settle the obligation. Provisions are measured as the management’s best estimate of the amount with which the liability is expected to be settled.
Gross Ceded Gross Ceded 3 Technical interest, net of reinsurance Interest on insurance provisions 1,428 844 Transferred from provisions for claims concerning discounting -926 -686 Return on discontinued business -3 -1 4 Claims incurred, net of reinsurance Claims incurred -12,634 -13,883 Run-off previous years, gross 868 677
Reinsurance recoveries 194 270 Run-off previous years, reinsurers’ share -75 36
5 Insurance operating expenses, net of reinsurance Commission regarding direct business -429 -445 Other acquisition costs -1,818 -1,799
Remuneration for the Supervisory Board and Executive Management is disclosed in note 30 ‘Related parties’.
Share option programmes In 2009, TrygVesta awarded share options to the Executive Management (3 persons) and other senior employees (98 persons) and other employees (40 persons). At 31 December 2009, the share option plan comprised 681,861 share options (at 31 December 2008 572,367 share options). Each share option entitles the holder to acquire one existing share of DKK 25 nominal value in the company. The share option plan entitles the holders to buy 1.1% of the share capital if all share options are exercised.
DKK m 5 Share option programmes Specification of outstanding options: TOTaL NuMBErS FaIr VaLuE
Total fair Other Per value per Per option Total fair Group senior Other option option at at 31 value at 31 Executive em- em- at grant grant date December December Management ployees ployees Total date DKK DKKm DKK DKKm
Employee shares In 2009, TrygVesta granted employee shares at a discount to the market price to employees at all levels in the Group. Employees of non-
Danish branches were offered employee shares or alternatively a cash consideration. Each employee was offered 17 shares at a discount to the market price equal to DKK 25 DKK per share, equivalent to a total of 38,829 shares or around DKK 11.2m being granted to the employees. Senior executives received part of their bonus in the form of shares at a discount to the market price. In 2009, a total of 31,713 shares were granted at discount to the market price of DKK 25 per share or DKK 9.9m. The grant of shares equalled 0.1% of the share capital.
The amount was provided in 2008 and did not affect the profit for 2009.
6 Operating segments P&E P&E P&E P&E 2009 Denmark Norway Finland Sweden Corporate Other Group
Profit/loss on business ceded -89 -68 -1 0 -516 5 -669 Technical interest, net of reinsurance 180 122 17 7 173 0 499
Reinsurers’ share of provision for unearned premiums 0 0 0 0 176 0 176 Reinsurers’ share of provision for claims 49 99 0 0 712 0 860 Other assets 37,395 37,395
Försäkringar are included in ‘P&E Sweden’ from 2 April 2009. Amounts relating to TrygVesta A/S, Tryg Ejendomme A/S, Ejendomsselskabet af 8. maj and eliminations are included in ‘Other’. Depreciation/amortisation is included in gross operating expenses. Other assets and liabilities are managed at Group level and allocation to the individual segments would therefore not provide a true and fair view. These amounts are thus included under ‘Other’. Costs are allocated according to specific keys, which are believed to provide the best estimate of assessed resource consumption. A presentation of segments broken down by geography is provided in ‘Financial highlights and key ratios by geography.’
l Noter l TrygVesta Årsrapport 2009108 af 152 l Notes – TrygVesta Group l Annual report 2009108 of 148
Average claims DKK ** 12,065 9,973 46,185 45,981 12,448 18,193 48,025 51,511 1,228,333 843,571 4,608 6,876 Total claims 203,858 319,222 35,651 40,925 6,732 6,186 8,489 9,422 28 45 61,021 50,274
Profit/loss on ceded business 2 - 13 0 0 - 47 - 47 - 16 - 36 0 - 12 - 104 - 95 Technical interest, net of reinsurance 58 5 5 3 63 23 65 11 72 32 25 5
l Noter l TrygVesta Årsrapport 2009110 af 152 l Notes – TrygVesta Group l Annual report 2009110 of 148 7 Interest and dividends Dividends 39 14 Interest income cash in hand and at bank 49 67 Interest income bonds 1,404 1,197 Interest income other 31 9
Exchange rate adjustments concerning financial assets or liabilities which cannot be valuated to market value is in total DKK 1.4m (in 2008 DKK 129m) Under market value adjustment the adjustment of inflation swaps totals DKK 13m (in 2008 DKK -46m).
See ‘TrygVestas ‘Financial performance 2009’ in the Management report for further information regarding the tax expense.
Amortisation for the year 0 -12 -121 -133 Impairment writedowns for the year 0 0 -10 -10
Transferred to operating equipment 0 0 -1 -1 Additions during the year 0 0 154 154 Disposals during the year 0 0 -15 -15 amortisation and writedowns Balance 1 January 0 0 -193 -193
Amortisation for the year 0 0 -31 -31 * Addition on acquisition of subsidiary relates to the acquisition of Moderna Försäkringar, see note 29. Intangible assets under development amount to a total of DKK 114m in the total software (in 2008 DKK 198m). Additions for internally generated software expenses amount to DKK 28m (in 2008 DKK 21m). Amortisation is recognised in the income statement under insurance operating expenses and claims incurred.
Insurance activities in Sweden In 2009, TrygVesta acquired Moderna Försäkringar Sak AB, Moderna Re S.A., Netviq AB and MF Bilsport & MC specialfösäkringar.
The acquisition is expected to enhance efficiency in the distribution of insurances in the Swedish market and to contribute to growth, in particular in the Swedish market.
In the impairment test, the carrying amount is compared with the estimated present value of future cash flows.
l Notes – TrygVesta Group l Annual report 2009114 of 148
Total rental income for 2009 was DKK 173m (in 2008 DKK 168m).
Total expenses for 2009 amount to DKK 37.3m (in 2008 DKK 40m). Of this amount, unlet property represented DKK 0.8m (in 2008 DKK
AS Eidsvåg Fabrikker AS, Norway 32 3 29 12 3 28
DKK m 15 Fair value hierarchy for financial instruments measured at fair value in the balance sheet quoted market Observable unobservable 2009 prices input input Total
Financial assets at fair value with value adjustment in the income statement 2009 Bonds Shares Property Total
Investment assets as per the section ‘Investment activities’ in the Management’s report 34,248 1,589 3,893 39,730 Consisting of: Cash in hands allocated to portefolio management -50 0 0 -50
Investment assets as per the section ‘Investment activities’ in the Management’s report 29,417 1,172 3,561 34,150 Consisting of: Cash in hands allocated to portefolio management -71 0 0 -71
Investment assets according to balance sheet 28,721 422 2,246 31,389 Unit trust units 940 Deposits, Derivatives etc. 389
Investment assets at fair value according to balance sheet recognised through profit and loss 32,718
Total investment assets according to balance sheet 32,745 adjusted duration of bond portfolio Bond portfolio Duration 1 year or less 18,550 19,198 Duration 1 year through 5 years 8,535 11,875 Duration 5 years through 10 years 2,316 2,869 Duration more than 10 years 16 306
Effective adjusted 2008 0-1 year 1-5 years > 5 years Total interest rate duration
The note should be seen in connection with the expected cash flow from the Group’s provisions for unearned premiums and provisions for claims, see note 21. Please refer to the section on ‘Investment and interest rate risk’ in ‘Risk management’ in the ‘Management’s report’.
United Kingdom 103 134 Rest of Europe 298 336 United States 244 354 Asien etc. 152 219
15 Sensitivity information Impact on shareholders’ equity from the following changes: Interest rate increase of 0.7-1.0 pct. point 23 26 Interest rate fall of 0.7-1.0 pct. point -57 -42 Equity price fall of 12% -141 -191 Fall in property prices of 8% -315 -336 Exchange rate risk (VaR 99.5) -4 -12 Loss on counterparties of 8% -219 -218
Derivative financial instruments used in connection with hedging of foreign entities for accounting purposes: Gains Losses Net
Gains and losses on hedges charged to equity at 1 January 759 -254 505 Gains and losses on hedges charged to equity in the period 91 -565 -474
Exchange rate adjustments of foreign entities recognised in equity in the amount of: Balance at 1 January 75 -510 Exchange rate adjustment during the year -585 487
Balance at 31 December -510 -23 15 receivables Receivables from insurance enterprises 1,088 1,238 Exchangerate and inflation derivatives 383 27 Unsettled transactions 136 1,051 Other receivables 82 112
17 Current tax Current tax, beginning of year 243 137 Exchange rate adjustment -66 25 Addition on acquisition of subsidiary* 0 24 Current tax for the year 434 576 Current tax on equity entries 154 -118 Adjustment of prior-year current tax 0 8 Tax paid during the year -628 -349
Current tax is recognised in the balance sheet as follows: Under assets, current tax 111 0 Under liabilities, current tax 248 303
No. of Nominal value % of share No. of Nominal value % of share Treasury shares shares (DKK’000) capital shares (DKK’000) capital
Cancellation in connection with buyback programme. 0 0 0 -4,068,427 -101,711 -6.02 Used in connection with issue of employee shares -85,815 -2,145 -0.13 -70,354 -1,759 -0.11 Used in connection with exercise of stock options 0 0 0 -66,430 -1,661 -0.1
The capital base and the solvency ratio are calculated in accordance with the Danish Financial Business Act. TrygVesta manages its capital requirement as described in ‘Capitalisation and profitdistribution’ in the Management’s report’
DKK m 20 Subordinated loan capital Loan terms: Subordinated bond loan* Subordinated loan capital
** TrygVesta Forsikring A/S has subscribed the subordinated loan capital in connection with acquisitions made in April 2009, see note 29. Prices used for determination of fair value in respect of both loans are based on an assessment of the credit spread of the loans provided by Nordea.
The fair value of the loan at the balance sheet date 908 893 - 485 The fair value of the loan at the balance sheet date is based on a price of 81.23 80 - 103 Total capital losses and costs the balance sheet date 16 14 - 0 Interest expenses of the year 50 51 - 24
End of year 8,373 8,977 11,010 10,452 10,797 11,530 11,321 12,257 12,886 14,217 1 year later 8,695 9,208 11,343 10,558 10,810 11,426 11,579 12,863 14,179 2 year later 8,902 9,397 11,348 10,234 10,671 11,264 11,098 13,377 3 year later 9,104 9,506 11,404 10,229 10,559 10,876 11,273 4 year later 9,191 9,440 11,398 10,261 10,294 10,970 5 year later 9,318 9,432 11,305 10,235 10,341 6 year later 9,070 9,642 11,289 10,144 7 year later 9,189 9,618 11,155 8 year later 9,175 9,656 9 year later 9,242 9,242 9,656 11,155 10,144 10,341 10,970 11,273 13,377 14,179 14,217 114,554
End of year 1,394 1,398 1,982 904 829 937 288 509 173 291 1 year later 1,504 1,413 2,083 867 843 831 287 474 235 2 year later 1,471 1,419 1,970 864 884 836 273 485 3 year later 1,496 1,433 1,964 921 882 830 302 4 year later 1,528 1,408 1,962 842 867 849 5 year later 1,524 1,395 1,975 837 872 6 year later 1,519 1,403 1,981 847 7 year later 1,527 1,383 1,915 8 year later 1,530 1,408 9 year later 1,599 1,599 1,408 1,915 847 872 849 302 485 235 291 8,803
Reserves from 1999 and prior years 270 Other reserves 75 Provisions for claims, end of year 1,125
End of year 6,979 7,579 9,028 9,548 9,968 10,593 11,033 11,748 12,713 13,926 1 year later 7,191 7,795 9,260 9,691 9,967 10,595 11,292 12,389 13,944 2 year later 7,431 7,978 9,378 9,370 9,787 10,428 10,825 12,892 3 year later 7,608 8,073 9,440 9,308 9,677 10,046 10,971 4 year later 7,663 8,032 9,436 9,419 9,427 10,121 5 year later 7,794 8,037 9,330 9,398 9,469 6 year later 7,551 8,239 9,308 9,297 7 year later 7,662 8,235 9,240 8 year later 7,645 8,248 9 year later 7,643 7,643 8,248 9,240 9,297 9,469 10,121 10,971 12,892 13,944 13,926 105,751
Reserves from 1999 and prior years 1,677 Other reserves 582 Provisions for claims, net of reinsurance, end of the year 21,305 Estimated accumulated claims regarding Moderna Försäkringar 39 86 102 116 214 307 378 461 574 673 2,952
The amounts in foreign currency in the table are translated to Danish kroner using the exchange rate at 31 December 2009 to prevent the impact of exchange rate fluctuation.
The combined impact of the acquisitions amounts to DKK 737m gross and DKK 657m net of reinsurance.
Effect of change to yield curve Gross claims incurred 0 2 Interest on insurance provisions -8 -2
Paid in the financial year in respect of the current year -6,975 -152 -6,823 Paid in the financial year in respect of prior years -6,225 -204 -6,021
Change in claims in the financial year in respect of the current year 13,359 355 13,004 Change in claims in the financial year in respect of prior years -683 35 -718
Expected cash flow Carrying amount 2009 0-1 year 1-2 years 2-3 years > 3 years Total
The table consists of figures for TrygVesta Forsikring A/S, TrygVesta Forsikring, Norwegian branch of TrygVesta Forsikring A/S,
Employers’ nat. ins. contribution 14.1 14.1 Take up of the AFP Early Retirement Plan 20.0 20.0 Mortality table Adjusted K2005 Adjusted K2005
Actuarial gains/losses associated with the pension obligation 90 104 -23 70 Actuarial gains/losses associated with pension assets 26 -10 -173 -42
l Noter l TrygVesta Årsrapport 2009128 af 152 l Notes – TrygVesta Group l Annual report 2009128 of 148 23 Deferred tax Tax asset Operating equipment 65 56 Debt and provisions 133 161 Capitalised tax loss 0 91
Unaccrued timing difference of shares 126 134 Unaccrued timing difference of balance sheets items 1 68 reconciliation of deferred tax Deferred tax, beginning of year 1,109 949 Exchange rate adjustment -164 133 Addition on acquisition of subsidiary* 0 97 Change in deferred tax previous years -51 -3 Change in capitalised tax loss 0 -80 Change in deferred tax taken to the income statement 122 138 Change in deferred tax taken to equity -67 10
Non-capitalised tax loss Denmark 72 72 * Addition on acquisition of subsidiary relates to the acquisition of Moderna Försäkringar, see note 29
The total current and deferred tax relating to items recognised in equity is recognised in the balance sheet in the amount of DKK 110m
24 Other provisions Other provisions, beginning of year 57 36 Exchange rate adjustment -10 6 Change in provisions -11 4
Other provisions primarily includes own insurance contracts 25 Debt to credit institutions Bank loans 598 600 Bank overdrafts 111 11
Debt falling due within one year 111 611 Debt falling due after more than five years 0 0
DKK 600m had been utilised at 31 December 2009. In 2009, the loan carried interest at CIBOR plus a margin, totalling approximately 2.5 % p.a. The unutilised part of the loan facility is measured at amortised cost, and an amount of DKK 5m was deducted from the loan proceeds upon signing the loan agreement. The cost are depreciated linear until the loan facility expires in July 2010. The fair value of the loan is considered to be the utilised part of the facility of DKK 600m.
Earnings per share - continuing business of DKK 25 12.8 31.2 Basic earnings per share of DKK 25 12.8 31.7 Diluted earnings per share (DKK) - 31.7
l Noter l TrygVesta Årsrapport 2009130 af 152 l Notes – TrygVesta Group l Annual report 2009130 of 148
DKK m 28 Contractual obligations, contingent liabilities and collateral Payment due by period 2009 0-1 year 1-3 years 3-5 years > 5 years Total
Operating leases 65 68 10 9 152 Other contractual obligations 375 55 45 0 475
The Danish companies in TrygVesta group are jointly taxed with TryghedsGruppen smba.
In connection with the sale of Chevanstell Limited, TrygVesta Forsikring A/S issued few specific guarantees towards the buyer. Management believes that it is unlikely that these guarantees will result in a financial loss for TrygVesta Forsikring A/S.
Companies of the TrygVesta Forsikring group are part of some disputes. Management believes that the outcome of these legal proceedings will not affect the Group’s financial position beyond those receivables and obligations recognised in the balance sheet at 31 December 2009.
DKK m 29 acquisition of subsidiary 2009 In 2009 TrygVesta Forsikring A/S acquired Moderna Försäkringar Sak AB, Modern Re S.A., Netviq AB og MF Bilsport & MC Specialförsäkring
*The carrying amount prior to acquisition has been made up in accordance with the TrygVesta Group’s accounting policies.
Costs for advisors in connection with the preparation, conclusion and performance of the agreement was DKK 0.2m. The carrying amount prior to acquisition amounts to DKK 1.085,5m. Fair value at the date of acquisition amounts to DKK 1.085,5m.
Claims paid - Parent company (TryghedsGruppen smba) 0.0 0.7 - Other related parties 9.6 6.2
Guarantee agreements with related parties - Account 1,200 1,470 - Exercised, end of year 726 538
Parent company Tryghedsgruppen smba TryghedsGruppen smba controls 60% of the shares in TrygVesta A/S.
Intra-group trading involved - Providing and receiving services 1 0 - Subordinated loancapital 0 485
Transactions between TryghedsGruppen smba and TrygVesta A/S are on market terms.
Intra-group trading involved Administration fee, etc. is fixed on a cost-recovery basis.
The companies in TrygVesta Group have entered into reinsurance contracts on market terms.
Notes Investment activities 2 Income from subsidiaries 757 2,079 Interest income 22 2 Value adjustment 0 -2 Interest expenses -32 -14 Investment management charges -6 -7
Total receivables 293 65 6 Current tax assets 18 17 7 Deferred tax assets 0 1 Cash in hand and at bank 1 0
Total liabilities and equity 8,882 10,295 1 accounting policies 9 Capital adequacy 10 Contractual obligations, contingent liabilities and collateral 11 related parties
Annual report 2009 l Balance sheet – TrygVesta A/S (parent company) l
Dividend paid -1,156 -1,156 Dividend own shares 12 12 Purchase of own shares -1,197 -1,197 Issue of employee shares 37 37 Issue of share options 14 14
Profit for the year 1,470 -432 991 2,029 Revaluation of owner-occupied properties 9 9 Exchange rate adjustment of foreign entities 505 505 Hedge of foreign currency risk in foreign entities -474 -474 Tax on equity entries 117 117
Proposed dividend per share DKK 15.5 (in 2008 DKK 6.50). Dividend per share is calculated as the total dividend proposed by the Supervisory Board after the end of the financial year divided by the number of shares year end (63,931,573). The dividend is not paid until approved by the shareholders at the annual general meeting of the subsequent year.
Tryg Vesta Forsikring A/S’ Norwegian branch, has in its branch financial statements included provisions for contingency funds in the amount of NOK 2,906m (in 2008 NOK 2,743m) In TrygVesta Forsikring A/S, these provisions, due to their nature as additional provisions, are included in shareholders’ equity (retained earnings), net of deferred tax. TrygVesta Forsikring A/S’ option to pay dividend to TrygVesta A/S is influenced by this amount. The dividend payment is also affected by a contingency fund provision of DKK 670m, which is included in shareholders’ equity in TrygVesta Forsikring A/S.TrygVesta Garanti insurance has a similar contingency amounting to DKK 139m, which is also included in the company’s shareholders’ equity.
l Statement of changes in equity (parent company) l Annual report 2009
2 Income from subsidiaries TrygVesta Forsikring A/S 757 2,079 3 Other expenses Administrative expenses -56 -46
Of which services other than audit: Deloitte 0.0 0.0 0.0 0.0 In addition, expenses have been incurred for the Group’s Internal Audit Department.
Refer to the section ‘The Groups Financial performance 2009’ in the management report for further mention of the tax.
5 Investments in subsidiaries Cost Balance 1 January 6,987 6,987 revaluations and impairment writedowns at net asset value Balance 1 January 3,745 1,559 Revaluations during the year 575 2,238 Dividend paid -2,761 -611
DKK 600m had been utilised at 31 December 2009. In 2008, the loan carried interest at CIBOR plus a margin, totalling approximately 5.3 % p.a. The unutilised part of the loan facility is measured at amortised cost, and an amount of DKK 5m was deducted from the loan proceeds upon signing the loan agreement. The cost are depreciated linear until the loan facility expires in July 2010. The fair value of the loan is considered to be the utilised part of the facility of DKK 600m.
Weighted items 3,945 5,022 10 Contractual obligations, contingent liabilities and collateral The Danish companies in TrygVesta group are jointly taxed with TryghedsGruppen smba.
Companies of the Tryg Forsikring Group are part of some disputes the outcome of which is not estimated to affect the financial position of the Group. Management believes that the outcome of these legal proceedings will not affect the Group’s financial position beyond those receivables and obligations recognised in the balance sheet.
Claims payments - Key management 0.2 0.2 - Other related parties 9.6 6.2
Members of the Supervisory Board of TrygVesta A/S do not receive bonuses and are not participants in any severance plans.
Intra-group trading involved - Providing and receiving services -59 -49 - Intra-group account 297 65
Profit reconciliation Profit – IFRS 846 2,008 Current priods effect of actuarial gains and losses on pension obligation after tax -143 21
Equity reconciliation Shareholders’ equity – IFRS 8,244 9,666 Deferred tax provisions for contingency funds 21 21
Danish general insurance Gross premiums earned 8,764 9,084 9,346 9,620 9,736
Number of full-time employess, end of period 2,215 2,231 2,242 2,377 2,311
Norwegian general insurance Gross premiums earned 6,810 6,738 6,919 7,129 6,905
Key ratios Gross claims ratio 63.0 64.3 64.0 71.0 71.7 Business ceded as % of gross premiums 5.2 3.6 4.9 3.8 3.9 Claims ratio, net of ceded business 68.2 67.9 68.9 74.8 75.6
Number of full-time employess, end of period 1,431 1,460 1,384 1,455 1,403
Key ratios Gross claims ratio 80.9 78.1 74.9 72.9 84.2 Business ceded as % of gross premiums 0.2 0.2 0.4 0.3 0.6 Claims ratio, net of ceded business 81.1 78.3 75.3 73.2 84.8
Number of full-time employess, end of period 48 77 127 154 194
Financial highlights and key ratios by geography l Financial highlights and key ratios by geography l Annual report 2009
Number of full-time employess, end of period - 40 61 105 428
adjusted gross expense ratio Calculated as the ratio of gross insurance operating expenses including adjustment to gross earned premiums. The adjustment involves the deduction of depreciation and operating costs on the owner-occupied property and the addition of a calculated cost (rent) concerning the owner-occupied property based on a calculated market rent.
Business ceded as a percentage of gross premiums Calculated as the ratio of the net result of business ceded to gross earned premiums.
Combined ratio Calculated as the sum of the gross claims ratio, the net result of business ceded as a percentage of gross earned premiums and the gross expense ratio.
Profit for the year x 100 Average equity run-off result The difference between provisions for claims at the beginning of the financial year (adjusted for currency translation differences and discounting effects) and the sum of claims paid in the financial year plus the part of the provisions for claims at the end of the financial year that relates to claims incurred in prior financial years.
Swedish general insurance Comprises TrygVesta Forsikring A/S, Swedish branch and the Swedish branch of TrygVesta Garantiforsikring A/S.
unwinding Unwinding of discounting takes place with the passage of time as the expected time to payment is reduced. The closer the time of payment, the smaller the discount. This gradual increase of the provision is not recognised under claims, but in technical interest in the income statement.
TrygVesta is not under any duty to update any of the forwardlooking statements or to conform such statements to actual results, except as may be required by law.
TrygVesta’s organisational structure, which became effective on 1 January 2010, creates a distinct Nordic organisation with well-defined roles and responsibilities. The organisational structure is designed to ensure that we meet the market with the best solutions within our products and services and establish the best conditions for collaboration across the Group. At the same time, the organisation supports the implementation of the Group’s strategy. The organisation chart symbolises the Group’s evolution and should be viewed as a heart which is the origin of all activities springing to the market/the external community.