This is a translation of the Danish annual report 2011. In case of any discrepancy between the Danish and the English version of the annual report 2011, the Danish version shall apply.
Capital management and risk management 38 Capital management and risk management 40
Fourth quarter of 2011 | Quarterly outline 144 Fourth quarter of 2011 | Geographical segments 146
Our mission | is to secure a stable, high-quality supply of products and services offering peace of mind to private households and businesses.
Our values | We create peace of mind because - we show people respect, openness and trust. - we show initiative, share knowledge and take responsibility. - we provide solutions characterised by quality and simplicity. - we create sustainable results.
Annual report 2011 | Tryg 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. Our products include contents, house, motor, building, workers’ compensation, transport, health and personal accident insurances. In 2011, our 4,300 employees ensured peace of mind for more than 2.7 million private customers and over 140,000 businesses.
Tryg is the second-largest insurance company in the Nordic region present in Denmark, Norway, Sweden and Finland. We are the largest player in Denmark and the third largest in Norway. In Sweden and Finland, however, we have smaller market shares.
Morten Hübbe’s task was therefore to improve profitability in the insurance business during a period of difficult conditions on the investment markets.
The financial result for 2011 therefore supports the view that the target is ambitious yet realistic.
The strategy for achieving the financial medium-term targets is anchored in focusing on profitability in the insurance business, to be achieved via risk-appropriate prices, supported by high customer satisfaction, efficient processes, and skilled and committed staff.
Tryg’s financial strength. In a period characterised by turbulence on the financial markets and in many financial companies, it is vital that Tryg retains strong capitalisation and a solid funding base, which will ensure that Tryg can implement its strategy. In view of the forthcoming regulations governing capital requirements, it is also vital that Tryg retains a strong capital base.
In order to strengthen Tryg’s focus on profitability, in 2011 the
Supervisory Board reviewed all guidelines relating to the operation of the insurance business. The guidelines describe in detail the distribution of work between the Supervisory Board and the
Tryg is a well-run company with a strong brand, and every day more than 4,300 employees ensure that Tryg provides peace of mind to more than 2.7 million customers in Denmark, Norway,
The foundations for Tryg achieving the ambitious financial objectives are thus in place. After my appointment as CEO in
It was in this context that one of my first major decisions was to change the organisational structure at Tryg. The outcome was an organisation which, with the business areas Private, Commercial,
Corporate and Sweden/Finland, is based on how customers are served. The changes meant that the responsibility for profitability in the individual business areas became clearly defined, ensuring that the whole Tryg organisation focuses on profitability.
At the same time, it was a great pleasure to welcome
Tor Magne Lønnum as the new CFO. Tor Magne Lønnum has vast experience in the insurance industry, and with him and my other colleagues in the Group Executive Management, Tryg is well equipped to ensure continued positive development.
For Tryg, profitability and social responsibility go hand in hand. CSR
is a focus area at Tryg and part of the way Tryg does business. For this reason, the reporting of Tryg’s CSR activities is incorporated with the reporting of other results in the annual report.
Total insurance operating expenses -871 -877 -3,304 -3,430 Profit/loss on gross business 278 192 554 843
Balance sheet Total provisions for insurance contracts 32,031 34,257 32,031 34,257 Total reinsurers’ share of provisions for insurance contracts 1,588 2,067 1,588 2,067
Gross expense ratio without adjustment 17.0 16.7 Operating ratio 98.1 92.6 Return on equity after tax (%) 6.6 13.1 Relative run-off gains/losses 3.9 4.0 Number of full-time employess, end of period 4,291 4,318 Solvency ratio 125 112
The gross expense ratio without adjustment is calculated as the ratio of actual gross insurance operating expenses to earned gross premiums. Other key ratios are calculated in accordance with ’’Recommendations & Financial Ratios 2010’’ issued by the Danish Society of Financial Analysts.
Denmark and Norway. Sales are made through call centres, the Internet, tied agents, franchisees (Norway), interest groups, car dealers, real-estate agents and Nordea. The business area represents 44% of Tryg’s total earned premiums.
Commercial | sells insurance products to small and mediumsized companies in Denmark and Norway. This business area represents 20% of Tryg’s total earned premiums.
brand in Sweden. This area serves customers who pay annual premiums of more than DKK 900,000 or have more than 50 employees. All sales through brokers are written in Corporate Nordic regardless of the customer’s size. About one quarter of Corporate’s customers pay annual premiums of more than DKK 10m. Tryg
Sweden/Finland | sells insurance products to private individuals in Sweden and to private individuals and corporate customers in Finland. The business area represents 13% of Tryg’s total earned premiums.
As from the first quarter in 2012, financial statements will reflect the new organisation within the four business areas: Private,
Tryg launches Help 24/7, a customer promises. The idea is to make customers aware that they can safely phone and find help any-where at any time, regardless of a claims’ urgency.
Lønnum comes from a position of CFO and Deputy CEO of
Norwegian National Police Directorate, Kristiansand Municipality and the Norwegian National Crime Prevention Council, Tryg organises regional Peace-of-mind Conferences, which put focus on collaboration between municipalities and the police in order to secure a good, safe framework. The first conference focuses on stimulating better coordination and collaboration between the police, municipalities, trade and industry and the voluntary sector in efforts to create secure, sustainable local environments.
Modernaforsakringar.se is voted Sweden’s best insurance and pensions website in Internetworld’s prestigious ranking of
The result underlines the fact that Tryg is on course to achieve the target of a return on equity of 20%.
The combined ratio was 93.5, as against 98.8 in 2010. The positive development was due to profitability-enhancing measures, as well as storm and cloudburst claims being at a lower level than the winter claims of 2010. The result underlines the fact that Tryg is on course to achieve the target of a return on equity of 20% after tax, corresponding to a combined ratio of 90.
Since 2009, Tryg has initiated significant premium increases in a number of sectors and within all business areas. The premium increases came after a period where the value of claims progressed at a greater rate than that of the premiums, resulting in a gap.
DKK 600m due to premium increases implemented in 2010 and 2011. Tryg believes that premiums are now at a level where, in future, normal premium adjustments that are in line with general price trends will prevail to a greater extent.
• Profit after tax for the year was DKK 1,140m, compared to DKK 593m in 2010.
This includes, among other things, measures that have their basis in claims arising from storm and cloudburst claims. The premium increases implemented in 2012 will have an impact of around
The claims ratio, which includes both the claims costs and the result of reinsurance as a percentage, was 76.7, as against 81.8 in 2010. The improvement in the claims ratio covers both the milder winter and the higher level of weather claims and large claims costs. Weather claims amounted to DKK 1.6bn in total, of which the cloudburst in the Copenhagen area accounted for DKK 1.2bn. The claims from the cloudburst were covered by Tryg’s reinsurance, which limits the value of claims to
DKK 100m, to which is added DKK 96m from renewal premiums to reinstate the cover. The cloudburst therefore had an impact of DKK 196m on the result and a negative impact on the claims ratio of 0.9 percentage points. In addition to the July cloudburst,
The cloudburst in the Copenhagen area differed from previous cloudbursts in that commercial customers were more widely affected. Many companies experienced flooding in basements and storerooms, and since the concentration of value is high in the case of commercial customers, this type of claim is more expensive than for private customers. At the same time, the proportion of very large claims was also significantly higher, and the 50 largest claims represented around 30% of total expenses.
At DKK 858m, the level of large claims before reinsurance was slightly higher in 2011 than in 2010, when they amounted to
2011 saw a range of initiatives implemented in terms of reducing the level of future costs. In the spring, Tryg accordingly signed an agreement with Danish tied agents, resulting in a reduction in salary of an average of 5% with effect from November 2011, with no adjustment over the next two years. Furthermore, Tryg established the ‘Next Level Sourcing’ project, which includes a large number of initiatives focusing on systematically reviewing processes and leveraging Tryg’s size on the procurement side.
The result for discontinued activities was DKK 26m. The result is due to a positive run-off on provisions for claims from the marine business, which Tryg discontinued underwriting in 2010.
In 2011, Tryg’s total investment portfolio of DKK 43.0bn produced a gross return of DKK 2,010m, which corresponds to a return of 4.8% on average invested capital over the period.
Tryg’s investment portfolio is divided into a match portfolio and a free portfolio. The match portfolio accounted for DKK 33.2bn, consisting of bonds that match the insurance provisions, so that, as far as possible, any fluctuation as a result of interest changes is offset. The remaining part of the assets is called the free portfolio and is a diversified portfolio of property assets, equities and bonds. The free portfolio accounted for DKK 9.8bn. Overall, dividing the investment portfolio leads to a low financial risk and reflects Tryg’s focus on the insurance business.
Europe. The equity portfolio, which is a globally diversified portfolio, showed a negative return of 4.2%. Other bond investments
After deduction of other financial expenses, the net investment result for 2011 was DKK 66m.
from Standard & Poor’s. In this regard, Tryg had a buffer of 9% at the end of 2011. Moreover, in accordance with Danish Financial
Supervisory Authority guidelines, Tryg calculates an individual solvency requirement. The individual solvency requirement at 31
In 2011, as a result of the lower interest rate levels, an adjustment of DKK 399m was made to the Norwegian pension liability.
This adjustment is not included in Tryg’s result, but is entered directly under equity in the accounts. In the event of a return to a higher interest rate level, the provision will fall, with an accordingly positive effect on Tryg’s equity. Return on equity after tax was 13.1% in 2011, compared to 6.6% in 2010.
DKK 400m be distributed in the form of a cash dividend.
Profit after tax was DKK 344m for the fourth quarter of 2011, as against DKK 369m for the same period of 2010. The result was made up of a technical result of DKK 271m and an investment result of DKK 163m due to a good return on equities.
The technical result was affected by a high level of large claims in the industrial area, a comparatively high run-off level and storms Berit and Dagmar, which hit Norway in particular.
DKK 196m. As a result of the lower interest rate level, the effect of discounting on combined ratio was 0.6 percentage points lower than in the fourth quarter 2010.
In the fourth quarter, the level of premium in local currency was on a par with the same period of 2010, mainly due to a higher level of bonus and premium discounts and negative growth in the commercial and corporate market. Growth in the private market continued to be at a high level, but it was adversely affected by profit sharing due to a good period for several group agreements.
Private Nordic’s technical result of DKK 886m was almost double its result for 2010 and was due, in particular, to the effects of premium measures.
In 2011, Private Nordic focused on continuing the implementation of the premium increases initiated in 2009 and 2010, and this contributed to the improvement in the technical result. The positive development in the result was also helped by a return to more normal winter conditions. The improvement in the result was achieved in spite of the heavy cloudburst in the Copenhagen area in July and a number of smaller storms in Denmark and Norway. To reduce the risk of cloudburst claims, systematic work was undertaken during the year involving the implementation of a number of claims-reducing measures, such as high water sealing drains and perimeter drainage, as well as changes in terms of the cover provided, e.g. increases in policy excesses and limitations in respect of contents cover in basement areas.
• Technical result improved from DKK 446m to DKK 886m in 2011.
Customers’ reactions to the higher premiums can be seen in the customer retention development, which shows how many, out of 100 customers, opt to renew their policies. In Denmark, after falling slightly in 2010, the retention rate rose during 2011,
ending the year at 90.5. It was mainly single-product customers who left Tryg after the premium increases. Tryg generally tries to attract customers who take out all their policies with Tryg.
In Sweden and Finland, the focus in 2011 was on creating better balance between growth and profitability. A number of measures were implemented, including premium increases within selected segments, and the possibility of giving discounts was reduced. In the Swedish business, niche areas Bilsport
The Finnish part of Private Nordic is approaching profitability, but is still not at a satisfactory level. Growth in Finland in 2011 was 5.6%.
The biggest single event of 2011 was without doubt the cloudburst that hit the Copenhagen area on 2 July. More than 20,000 claims, most of which were from private customers, were reported within a few days and put claims handlers and claims assessor under pressure to help the many customers who had reported a claim. For Tryg, it is crucial to be able to quickly help limit the extent of the claim and provide dehumidification equipment. Subsequently, the focus is on repairing the damage in the most effective way.
The Norwegian part of Private Nordic was also hit by several large claims during 2011, mainly as a result of flooding and landslides. Overall, weather claims accounted for DKK 647m before reinsurance and DKK 237m after reinsurance, as against
mean that anticipated inflation in Norway is higher than in the other Nordic countries. It is therefore important to maintain a focus on the inflation risk. One of the activities that support this is the ‘Next Level Sourcing’ project, which, as stated earlier, is focused on achieving better leveraging of Tryg’s procurement power and on streamlining processes.
In motor insurance, average claims expenses rose, including expenses resulting from glass claims. To mitigate this, Tryg has taken initiatives, in respect of workshops, to increase the proportion of repairs offered as opposed to full replacement of a damaged windscreen or window.
Change of ownership policies in Denmark has been a focus area in recent years, as the claims cost level has been excessive. The premium for new change of ownership policies was therefore increased during both 2010 and 2011, and a more restrictive underwriting policy was introduced. In 2011, the claims level for change of ownership was significantly improved compared to preceding years, and profitability is expected to gradually improve in the coming years. In Sweden, there was an improvement in the claims ratio from 84.7 to 83.2.
In Finland, the claims ratio improved by 1.8 percentage points to 75.8.
Gross premiums rose 2.8% in the fourth quarter, but the growth in premiums was lower than anticipated, due chiefly to profit sharing on a number of group agreements at the end of the year, this being a result of the improved profitability.
The fourth quarter was affected by a number of weather claims.
• Technical result improved from DKK 162m to DKK 184m in the fourth quarter of 2011.
• Run-off gains DKK 106m lower than for the same quarter of 2010.
• Storms Berit and Dagmar respectively had a negative impact of DKK 74m on the result.
Profit/loss on ceded business 0 -19 59 141 Technical interest, net of reinsurance 7 6 30 37
Key ratios Gross claims ratio 76.7 68.4 89.2 77.8 Business ceded as percentage of gross premiums 0.0 1.8 -1.4 -3.3 Claims ratio, net of ceded business 76.7 70.2 87.8 74.5
Commercial Nordic’s technical result of DKK 117m was an improvement on 2010 of DKK 591m, due both to profitability initiatives and the weather conditions, which as a whole were more favourable in 2011.
Denmark in 2012, and Tryg is also working towards further segmenta-
• Combined ratio improved from 112 in 2010 to 98.1 in 2011.
tion of commercial customers in the light of the customers’ differing characteristics. This may result in more differentiated pricing as well as more differentiated service for various customer groups.
The claims ratio was 74.5 in 2011, as against 87.8 in 2010, which was a significant improvement and mainly due to the premium measures implemented. In 2011, Commercial Nordic was hit by higher cloudbursts claims payments, which had a negative impact on the claims ratio of approximately 2.5 percentage points. Large claims accounted for DKK 90m in 2011, compared to DKK 407m in 2010, and affected the claims ratio by almost 2.1 percentage points.
Agriculture has been a challenging area in recent years, and in 2011 as well. The sector is generally under pressure from falling land and property prices, creating a number of challenges, even for strong agricultural businesses who find it difficult to secure finance for the necessary investments and expansion projects.
The improved technical result was aided by premium increases and a higher run-off result. The mild winter also helped the financial result during the fourth quarter of 2011 compared to the extraordinarily tough winter at the end of 2010. On the other hand, the fourth quarter of 2011 was affected by two storms, Berit and
Dagmar, which in particular hit Norway. Weather claims costs totalled DKK 51m. Gross premiums were lower during the fourth quarter of 2011 compared to the same quarter of 2010. The many premium measures were implemented as planned during the year, but with a decrease in number of customers. This is reflected in the retention rate, which fell in both the Danish and the Norwegian part of Commercial Nordic. This negative impact was reinforced by the continuing challenging economic climate in Denmark in particular, with an increase in the number of bankruptcies.
• Technical result improved from DKK 5m to DKK 66m during the fourth quarter of 2011.
• Run-off gains amounted to DKK 95m in the fourth quarter of 2011, compared to DKK 46m in the same quarter of 2010.
• Gross premiums fell by 3.5% in local currency, and were affected by a decrease in number of customers as a result of the premium increases and a challenging economic climate in Denmark in particular.
• Large claims of DKK 40m, compared to DKK 86m during the same quarter of 2010.
Profit/loss on ceded business -31 61 -419 109 Technical interest, net of reinsurance 10 10 27 41
In 2011, Corporate Nordic recorded a good result, which was achieved despite claims relating to cloudbursts and a high level of large claims. However, the financial result was also affected by run-off on previous years’ provisions.
and composed of premium increases for existing customers and a decrease within personal injury insurance in particular. Customers served by Tryg’s own sales team in particular have a high retention rate, due to the use of service concepts and the ongoing risk advicing. These are areas which Tryg will work to develop further in the coming years. In relation to the agents, Corporate Nordic will work with an improved service concept focusing on improved response and production times, among other things. Corporate Nordic implemented premium measures during 2011 and also focused on retaining profitable customer relations without reducing premiums in an otherwise competitive market. This proved very successful. As in 2010, interest rates were low during 2011, which was of particular importance for Corporate Nordic due to a high proportion of personal injury business with a long duration.
The corporate market was characterised by competition during 2011, but Tryg believes there is also a focus on profitability among the major players on the Danish and Norwegian markets. This focus on profitability must be viewed in context with the fact that capital models will generally impose a more demanding requirement for capital for the corporate area. This is particularly due to the proportion of personal injury lines, including workers’ compensation, as there is a far higher capital requirement for these areas than for contents, buildings and motor insurance for example. Over time, this factor is expected to increase the focus on profitability rather than growth for the market as a whole.
the existing portfolio and new business, which also contributed moderate growth in 2011.
The development of workers’ compensation was also a focus area in 2011. Tryg’s provisions for this area give particular consideration to the long-term nature of the workers’ compensation business, and the fact that legislation and changes in practice in connection with awards of workers’ compensation could result in higher claims costs with retrospective effect. In 2011, this trend improved and claim provisions concerning previous years could be released as a result. This also included a reduction in the extraordinary provision of DKK 200m, which was carried out during the third quarter of 2010. The total run-off gains amounted to
DKK 630m in 2011 against DKK 326m in 2010. The run-off gains reflect the fact that the provisions must be sufficient in order to take account of a negative development in claims that have not yet been closed. Excluding run-off gains from previous years, the claims level of workers’ compensation has however remained at too high a level in recent years, taking into account the capital requirement for this type of business. Corporate Nordic will therefore continue to focus on improving profitability within this area through a combination of premium measures and segmentation.
The cost level within Corporate Nordic was further improved in 2011, with an expense ratio of 12.2 compared to 12.9 in 2010.
A low cost level is important in the corporate market, in order to offer a competitive price and deliver a satisfactory result for return on capital, which must be included in this business area.
The lower cost level in 2011 was partly achieved through restraint in the filling of job vacancies. In the future, Corporate Nordic will also be affected by a reduction in salary payments to the sales team, as described under Commercial Nordic.
Dagmar in Norway and the adjustment of cloudburst claims in the
• Technical result of DKK 21m, compared to DKK 94m during the same period of 2010.
• Very high claims level due to large claims of DKK 287m, compared to DKK 149m during the fourth quarter of 2010.
Tryg’s primary focus is to run a profitable insurance business, and Tryg’s investment activities must therefore support this aim insofar as is possible. This means that the investment strategy is based on low investment risk and that the majority of the investment assets are secure investment assets, primarily bonds.
Within the established framework, the aim is to maximise the return from the investment portfolio. In accordance with Tryg’s investment strategy, in 2010 Tryg split the investment portfolio into two sub-portfolios, a match portfolio and a free portfolio.
Thus, the match portfolio is invested so that it matches the insurance provisions. As the provisions are discounted, they are, like the investment assets, influenced by changes in interest rates. The aim of the match portfolio is to neutralise these fluctuations insofar as is possible, so that the impact on Tryg’s net income from interest rate changes is minimised. The free investment portfolio consists of the other investment assets, which correspond to the company’s capital base. This is invested broadly in a portfolio of bonds, shares and property, with the aim of achieving the best possible return with limited risk.
The combined investment result before other financial income and expenses not related to investment was DKK 340m in 2011, compared to DKK 722m in 2010. After the adjustment of insurance items and other financial items, the net investment return amounted to DKK 66m and was on a par with expectations despite the difficult market conditions.
b) Return on properties includes a calculated return on owner-occupied property. 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.
Result of investment activities Return Return 2011 Investment assets DKKm FY 2010 Total Match Free 31.12.10 31.12.11
Value adjustment, changed discount rate -227 -760 -760 Transferred to technical interest -752 -852 -852 Return on investment activities before other financial items 767 398 94 304
Tryg has primarily hedged in the local interest rate markets, particularly in Denmark and Norway. As a result of the unease in the bond markets in 2011, there was strong demand for Nordic bonds, particularly during the third quarter of 2011, resulting in a positive deviation. Other than this extraordinary influence,
Tryg largely achieved a complete matching of the insurance provisions during 2011, as the other three quarters had the anticipated less notable fluctuations around 0. During 2011, the daily and monthly fluctuations have however been larger than is normally the case. The uncertainty in the Euro zone resulted in declining interest rates in Denmark and elsewhere. The Danish Financial
The free investment portfolio primarily consists of shares, property and bonds and generated a total gross return of
DKK 304m during the period, corresponding to 3.4% of the average invested capital. At the end of 2011, the free port folio amounted to approximately DKK 9.8bn.
Although the interest rate declined considerably during 2011, it did not have such a major impact as in 2010 due to developments in the a) DKK -44m sold on futures contracts is included in the equity portfolio.
Value adjustment, changed discount rate 380 -196 -196 Transferred to technical interest -188 -176 -176 Return on investment activities before other financial items 324 231 -6
property market. The bond portfolio was influenced by the significant interest rate change in 2011 and generated a return of DKK 152m, which corresponds to a return of 4.1%. Overall, the portfolio, which has an approximate average duration of just one year and encompasses holdings of global high-interest bonds, has thus performed satisfactorily. All asset classes have contributed a positive performance and collectively the portfolio allocation has made an important contribution to the investment result being largely as expected.
The item ‘Other financial items’ consists of many elements which are included in the investment result. Some of these elements are relatively predictable, while other vary more. As an example, interest expenses on Tryg’s subordinate loans, rent for domicile properties and interest income on operating cash are predictable. Other items with greater variation include currency adjustments and mismatch on the inflation hedging of workers’ compensation provisions.
In 2011, other financial items amounted to DKK -333m, of which
DKK -274m does not concern investment. The currency hedging in particular deviated from the norm and was approx. DKK 100m higher in 2011 than in 2010. This fluctuation is particularly due to higher interest rates in Norwegian kroner.
From 2012, Tryg will no longer recognise the return on domicile property and the corresponding reversal under other financial income and expenses. Net income from inflation swaps will in future also be recognised under claims costs.
Tryg’s target remains a return on equity of 20%, which corresponds to a combined ratio of around 90 including any run-off result and assuming the same interest rate level as in 2010. Tryg expects to have a combined ratio of around 90 in 2013 providing that the level of large claims and weather claims is as expected.
For 2012, further improvements in the combined ratio and technical result are anticipated given the significant measures that have been implemented in recent years, as well as the measures that are planned for 2012.
The isolated effect of the premium measures is estimated at approximately DKK 1.0bn in 2012, made up of DKK 600m relating to the results of previously implemented measures and DKK 400m relating to measures to be taken in 2012. The effetct of the measures will be counteracted by the increase in claims costs. In recent years, the claims costs were in the level of 2-3% per year.
– a match portfolio, which is exclusively intended to match the insurance provisions, and a free investment portfolio. In the event of interest rate changes, price fluctuations in the match portfolio are balanced by a corresponding interest rate effect on the discounted provisions, hence the immediate effect on the financial result is neutral.
On the other hand, a rise in interest rates will give a higher, ongoing insurance result as a result of higher discounting of claims costs.
The anticipated returns from the equity and property portfolio are expected to be 7% and 6% respectively. The bond portfolio is expected to generate a return of 1.4% on the free portfolio, while the match portfolio is expected to generate a return of approx. 2.3%.
II rules. Tryg’s own capital target is based on Standard & Poor’s
Tryg’s vision is to be perceived as the leading peace-ofmind provider in the Nordic region. This vision involves both retaining and developing the correct customer deliveries, securing a skilled, efficient organisation and achieving ambitious financial targets. To achieve this, the strategic initiatives must be targeted and focused.
As a peace-of-mind provider, Tryg offers a complete package of products and services, which places tough demands on distribution, processes, IT systems and claims handling.
Tryg’s primary business is general insurance, and it is from this business that Tryg’s financial results are achieved. The investment business is an integral part of the operations and is run with a focus on supporting the insurance business. This is done primarily by investing in assets with stable returns and low risk, which correspond to insurance obligations.
Profitable insurance products are dependent on the correct relationship between price and risk. Tryg improves and updates tariffs and segmentation models on an ongoing basis, and will place special focus on improving its ability to act quickly in response to developments in the risk profile in 2012.
The relationship between price and risk is also affected by the work on claims reducing initiatives. Claims reducing initiatives aim to reduce Tryg’s claims expenses both by means of preventive work so that they do not arise and by limiting the effects after the claim has happened.
Tryg meets customers on their terms by further exploiting digital communication channels and delivering services that are accessible wherever the customers happen to be.
Tryg’s Corporate Social Responsibility (CSR) commitment covers four areas: climate, inclusion, well-being and prevention. CSR
Focus areas in Tryg’s strategy to achieve the Group’s vision and objectives: • Improve profitability in Commercial Nordic by means of product development, segmenting and efficient processes.
The claims costs will be reduced by means of process improvements, a focus on claims reduction and procurement. The Next
Level Sourcing project initiated in 2011 is part of this effort, and in the next few years, it will result in a number of efficiency improvements.
Costs per sale will be reduced by focusing on partnership agreements, geographical representation, outsourcing and online sales.
Distribution costs must be reduced through the introduction of additional self-service solutions in Private Nordic and Commercial
Nordic, including partnership agreements. Tryg will improve the annual expense ratio by means of a more intensive focus on efficiency improvements and by continuously increasing the portfolio per employee.
Tryg has established a number of targets concerning performance and results known as KPIs (Key Performance Indicators), which give an indication of the direction and speed of fulfilment of the strategic objectives, whilst at the same time ensuring an appropriate balance between short- and long-term targets and between performance and results. Compared to 2010, the number of KPIs has been reduced, so that the targets for Tryg are clear and easy to communicate to the organisation. The choice of KPIs is an ongoing process and they can be replaced or revised. In connection with the change in management during 2011, the strategy was revised, and this is reflected in the selected KPIs. The primary focus is placed on the profitable operation of Tryg, while the ambition of top line growth has diminished.
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.
The Nordic insurance market is characterised by a high level of concentration. The sector is dominated by a small number of companies with relatively high market shares and a presence in a number of Nordic countries.
The four largest companies have a joint Nordic market share of 47%, while the four largest companies in each of the Nordic countries cover between 62% and 79%
of the respective markets. In 2011, total premium income for the entire Nordic market was approximately
2011 was affected by the ongoing debt crisis in the Eurozone and the general economic recession. International investors are increasingly looking towards the Nordic markets, resulting in declining interest rate levels. This has not, however, made it any easier for companies to obtain financing for operations and investments. 2011 was characterised by a growing number of bankruptcies, which had a particular effect on insurance companies in the commercial, agricultural and industrial segments.
In Norway, established insurance companies have in recent years experienced competition from smaller, newly-established companies. Companies such as Frende, DnBNOR and Storebrand have applied comprehensive marketing and pricing strategies and have contributed to an increased competition and pressure on prices, especially in the private market.
The current trend towards better pricing compared to risk will continue, and Tryg will, like many other companies, investigate opportunities more fully in order to take into account more specific risk factors in price setting, including, for example, changes in the weather. The work to improve the balance between price and risk will take place while continuing to offer customers the best products covering their needs and ensuring that customers experience peace of mind and service in their contact with Tryg
Especially in the private segment, the needs of customers for insurance and peace of mind in everyday life were not notably affected by economic fluctuations; quite the opposite in fact.
Tryg views work on innovation as an important strategic tool for growth and enhancement of its position as the Nordic region’s leading peace-of-mind provider. Results achieved through innovative measures renew and develop Tryg. Tryg wants to be perceived as a forward-looking company. Customers must feel that their basic need for peace of mind are covered – also in future society.
The customer benefit programme consists of the following: • Discount on insurance policies
• Benefits (for example Tryg Roadside Assistance, psychological crisis assistance, underinsurance guarantee)
At tryg.dk users can compile their insurance needs, calculate prices, take advantage of special offers and submit claims. At tryghedsraadgiveren.dk, visitors can test their knowledge of burglary, fire and water claims, as well as find good advice about how to secure their home, their family and their valuables.
It is important to follow up continuously on customers’ perceptions of the overall service provided by Tryg. This is conducted by
In 2011, customer satisfaction and customer loyalty surveys in the Nordic region revealed that the industry as a whole rose from 73.0 in 2010 to 73.6 in 2011, with Finland and Denmark having the highest level of customer satisfaction.
Motor insurance Motor insurance accounts for 33% of total premium income, and comprises mandatory third party liability insurance providing cover for injuries to a third party or damage to a third party’s property, and a voluntary comprehensive insurance policy that provides cover for damage to the customer’s own vehicle from collision, fire or theft. In Denmark, motor insurance taken out by concept customers includes Tryg’s roadside assistance, such as towing and battery jump-start.
Fire & contents – Private Fire & contents insurance represents 23% of total premium income and includes for exsamble house and contents insurance. House insurance covers damage to houses caused by, among others, fire, storm or water claims, legal assistance and the customer ’s liability as owner of the house. Contents insurance, however, covers loss of or damage to private contents and contains a number of additional features such as cover for valuables that are temporarily outside the home, legal assistance and the customer ’s liability as user of the house.
Personal accident insurance Personal accident insurance accounts for 9% of total premium income and covers accidental bodily injury or death. Compensation is in the form of a lump sum intended to help the policyholder cope with the financial consequences of an accident, thereby easing the strain of a change to everyday life.
Fire & contents – Commercial Commercial fire & content insurance, which includes building insurance, represents 14% of total premium income and covers the loss of or damage to the buildings, stock or equipment of commercial customers. Tryg also provides cover for business interruption in connection with covered claims.
Workers’ compensation insurance Workers’ compensation insurance accounts for 6% of total premium income and covers employees against bodily injury sustained at work (in Norway, also occupational deseases). Workers’ compensation insurance is mandatory and covers a com pany’s employees (except for public sector employees and persons working as sole traders). Tryg works with the concept of proactive claims handling, pursuing a close dialogue with the claimant to op timise claims handling. Our proactive claims handling team consists of claims handlers, social counsellors, legal experts, occupational health practitioners, orthopaedic surgeons and a network of psy chologists. Proactive claims handling has three winners: the company, the claimant and Tryg in the form of shorter periods of sick leave, enhanced self-esteem for the injured person and reduced expenses.
Transport insurance Transport insurance represents 2% of total premium income and covers damage to goods in transit due to collision, capsizing or crash of the means of transport.
Health insurance Health insurance represents 2% of total premium income. This policy covers the costs of examinations, treatment, medicine, operations and rehabilitation at a private health facility. In recent years, increasing health costs and waiting times in the public system have generated a significant demand for health insurance. The growth in health insurance is expected to decline, as the new government has removed the tax deduction from schemes funded by employers.
The insurance is characterised by simplicity ensuring the customer a good overview. For large industrial companies that operate on a global scale, Tryg has an exclusive partnership with AXA Corporate
Solutions, which is represented in about 90 countries. This partnership satisfies the needs of large corporate customers to be able to issue insurance policies locally and thus comply with local legislation, as well as local rules on taxes and duties. Environmental
The basis for this is that the capital planning is adapted to
Tryg has also commissioned a credit rating by credit rating agency Moody’s. As Standard & Poor’s is the leading credit rating institution within insurance, Tryg has decided solely to use Standard & Poor’s from 2012.
Supervisory Board actively determines the risk aversion and the framework for risk management, and continually assesses the combined risk within Tryg and the derived capital requirement, through follow-up and reporting. In the autumn of 2011, the Supervisory Board also commissioned a so-called ORSA
The Executive Management’s responsibility for the total risk and capital management is managed on a daily basis through a risk management environment where the areas of underwriting and reinsurance, provisions, investment risk and operational risk are managed by separate sub-committees.
See also the Risk management report, which can be found at tryg.com > Download
Tryg’s capital base consists of equity and subordinated loan capital. The relationship between these is evaluated on an ongoing basis in order to maintain an optimal structure which takes into account the return on equity, the capital cost and flexibility. The actual capital is assessed differently by authorities and credit rating agencies. The authorities impose a requirement that companies must determine the base capital, which primarily consists of equity minus intangible assets, discount effect and other statutory corrections plus subordinated loan capital in the amount of up to 25% of the Solvency I requirement.
In 2005, Tryg took out a 20-year subordinated bond loan of
An example of such an assessment is the establishment of sideways reinsurance cover in 2011. This cover covers the coincidence of nature claim events, such as winter claims and cloudbursts, with aggregated retention of DKK 400m and aggregated cover of
Reinsurance is also purchased for individual risks, so that retention does not exceed DKK 125m for the first claim and
The increases in Tryg’s own holdings within catastrophe rein surance and individual risks from DKK 100m to DKK 140m and DKK 125m respectively was approved on the basis of the pricing in the reinsurance market. Additional cover corresponding to the programme in 2010 would largely have the same price as the additional cover.
The financial flexibility must take into account strategic assessments and safeguard the scope for additional capital investment. Every year, the strategic assessments are considered in a capital plan, as part of which a test is performed to determine the extent to which the capital can support Tryg’s strategy. The scope for additional capital investment is described in Tryg’s contingency capital plan, which describes measures which can be implemented in the short term in order to improve Tryg’s solvency if it should prove necessary.
There is also scope to increase the capital base through the further take out of subordinated loan capital. Compared to the local Danish solvency rules, the full potential for subordinated loan capital has already been utilised by DKK 848m. Compared to Standard & Poor’s capital model, the subordinated loan capital at the end of 2011 can be increased by approximately DKK
December 2011. If this calibration of the capital requirements is maintained through to Solvency II, it is considered that many companies will need to strengthen their capital base in order to comply with the new capital requirements. Based on the internal capital model, the capital requirement for Tryg will be somewhat lower than that according to the standard model.
Solvency II gives scope to use internal models either fully or partially. Tryg’s approach is to use the existing internal model for areas where the risk is different from that determined using the standard model. Within the area of insurance risk, the belief is that Tryg will be able to model its own risk more accurately. For example, the standard model does not take into account geographic diversification between the Nordic countries, which is a significant aspect of Tryg’s Nordic exposure. On the other hand, the existing internal model’s treatment of investment risks is very similar to that of the standard model, which must be viewed in the light of the homogenous investment risk, which is generally secured across national borders by effective financial markets. In the future under
Solvency II, the aim is for Tryg to use a partial internal model in its capital planning, rather than the standard model referred to above. The partial internal model will thus be based on the insurance module in Tryg’s current model supplemented by the other modules (investment, operational risk, etc.)
and development, and continuously strives to develop as an attractive workplace. At the same time, job satisfaction is reflected in customer satisfaction and retention.
Board member: Nets Holding A/S (formerly PBS), member of Executive Management at Bombebøssen.
Mr Brinch has experience in the areas of M&A, treasury, communication and business development.
Mr Wendel Andersen has experience in international management, insurance business, finance, treasury and risk management.
Committee memberships: Audit Committee of Tryg A/S (Chairman) and Risk Committee of
Mr Nielsen has special skills within the areas of management, governance, treasury, financial business and risk management from his former role as Governor of Danmarks Nationalbank as well as several board positions.
Being a Swedish citizen, Mr Bergqvist has special insight into Swedish market conditions.
From his positions with SEAS-NVE and his former work with the Danish Air Force, Mr Hjulmand has experience within M&A, strategy, organisational development, communication and business development.
Educational background: The A.P. Møller Group international shipping education, B.Sc. (Finance) and various international management programmes.
Committee memberships: Remuneration Committee of Tryg A/S and Member of Furesø Local Council.
Maersk Company Ltd., UK. Ms Skole has skills in the fields of strategy, financing and communication.
b) Independent board member, see the definition in the corporate governance recommendations.
From left to right: Per Fornander, Birgitte Kartman, Lars Bonde, Morten Hübbe, Tor Magne Lønnum, Kjerstin Fyllingen, Truls Holm Olsen
Tryg focuses on employees’ well-being and development, and strives to continuously develop as an attractive workplace. The ambition is to be the most attractive workplace in the Nordic financial sector.
The employees are Tryg’s most important asset in the company ’s efforts to achieve and adhere to the ultimate vision of being the Nordic region’s leading peace-of-mind provider. A
high level of job satisfaction and a perception of well-being help to develop and maintain qualified employees. At the same time, employees’ job satisfaction is reflected in customer satisfaction and customer retention.
Every year, Tryg conducts an employee satisfaction survey in order to monitor on an ongoing basis our employees’ evaluation of Tryg as a workplace. The status survey for 2011 revealed a rise in job satisfaction by one index point compared with 2010 and two index points higher than other financial companies in the Nordic region. The parameter ’The physical working environment ’ saw a significant improvement in all points in the survey.
Denmark and Norway had undergone not only a physical change, but also a cultural change. Tryg is a workplace that encourages activity and creativity, and that generates energy and inspiration.
In addition to cafe areas, innovation rooms, meeting rooms and quiet rooms, all employees have two PC monitors, laptops and wireless Internet, as an element of a mobile, paperless office.
Qualified motivated employees are Tryg’s most important asset and a prerequisite for achieving our long-term targets. Training, development and the sharing of knowledge aim to contribute to the creation of job satisfaction, well-being and peace of mind for our employees. Tryg’s employees are therefore offered continuous qualification development.
The discussion also includes a confirmation of targets for the next year as well as a development plan, which will support the ability of employees to achieve the defined targets and to develop skills for future needs.
In 2011, Tryg developed a method of evaluating the effect of training activities. Using a goal-oriented questionnaire, the employee’s knowledge is measured several months after the completion of the training course. This gives us an opportunity to guarantee the optimal use of our training resources, to conduct follow-ups and to make sure that training is targeted and is only offered to those employees who need it.
(Rejsen) programme seeks to challenge and develop managers and employees as they interact with people from totally different backgrounds and from cultures other than their own. It is important that our organisation reflects the diversity in society around us. We believe that greater diversity is fundamental to ensuring innovation, more business and the development of good solutions.
Danes with a non-Danish ethnic background to the Norwegian mountains. This interaction with people from a totally different background in terms of their early years, education, experiences and religion forced the managers to work hard to listen, notice, reflect, question, challenge, and be open and inclusive. This is exactly the sort of thing expected of Tryg’s managers, especially when employees’ skills and resources have to be brought into play. Managers develop their abilities to inspire and maintain a presence.
Tryg is committed to bringing women into managerial positions. This commitment serves to increase the potential pool of talented women at all levels by focusing on the recruitment process, working with women at the ’pre-manager’ level as well as current female managers at all levels within Tryg. To this end, 2011 saw the company’s Supervisory Board set a concrete target to increase the total number of women in management by 2% by 2013.
In January 2012, Tryg signed the ‘Charter for more women in management’. We support the charter, one of the aims of which is to guarantee men and women equal managerial career opportunities and to launch concrete, measurable initiatives in companies to increase the proportion of women in managerial roles at all levels.
Find out more about diversity at Tryg in Corporate Governance on page 53.
Tryg places great emphasis on the well-being of employees, and during a hectic day there may be a need to reflect on the events of the day, to pray, to meditate or to have a little peace and quiet. The reflection rooms in Ballerup and Bergen provide an opportunity for this.
At Tryg, we want to make room for faith and religion in everyday life, and to immerse oneself or recharge one’s batteries in meditation and relaxation.
Tryg’s graduates have different educational backgrounds and nationalities. This diversity creates an interesting discussion forum with opportunities to highlight problems from different perspectives.
The Supervisory Board believes that Tryg is complying with all recommendations, except point 5.10.2, as most members of the board committees cannot be considered to be independent.
A complete copy of the Statutory report on corporate governance with respect to each individual recommendation can be downloaded from tryg.com > Download
Tryg issues regular press releases and company announcements, and publishes annual and interim reports, which are available on tryg.com. Tryg issues regular IR newsletters about current topics to shareholders and other stakeholders, and every quarter updates Tryg’s expectations for the future. This material enables all stakeholders to get a reasonable impression of Tryg’s position and performance. The financial Group statements are prepared in accordance with IFRS, and all company announcements and financial statements are published in
Investor Relations maintains regular contact with equity analysts and investors. The Executive Management and Investor Relations also organise investor meetings, teleconferences and webcasts, and participate in conferences in Denmark and abroad. The
Supervisory Board is regularly informed of the dialogue with investors and other stakeholders.
Meeting mandated the Supervisory Board to allow Tryg to acquire its own shares within 10% of the share capital up to 14 April 2015. In the light of the financial result for 2010, no share buy back programme was executed in 2011.
Tryg holds its annual general meeting each year before the end of
Articles of Association, giving not less than three weeks’ notice, by way of a company announcement and at tryg.com. Shareholders also have the opportunity to receive the notice by post, electronically or to download it from tryg.com. The notice contains relevant information about the time and venue, as well as an agenda, which as a minimum includes the following items: • Report of the Supervisory Board on the activities of the company during the past financial year
• Decision on the use of any surplus or coverage of any loss in accordance with the approved annual report
The annual general meeting is also webcasted, enabling stakeholders to view the annual general meeting at tryg.com both during and after the meeting. Shareholders may propose items to be included in the agenda of the annual general meeting, and may ask questions at the actual meeting. Shareholders may vote in person at the annual general meeting, vote by post, or appoint the Supervisory Board or a third party as their proxy. The proxy form and form for voting by post will be available at tryg.com on
Every year, the Supervisory Board discusses the company’s activities to guarantee diversity at management levels. Tryg places great emphasis on diversity at management levels, and in
January 2012 the company signed the ‘Charter for more women in management’. Tryg supports the charter, the aims of which include guaranteeing that men and women have equal career opportunities. Tryg launches concrete, measurable initiatives in the business to increase the proportion of women in management at all levels. Tryg has produced an action plan for this, the aim of which is to guarantee equal opportunities for qualified men and women in access to managerial positions. The number of women at management level in 2011 was 37.5%. The Supervisory Board sets concrete targets to secure diversity. In 2011, the Supervisory Board confirmed an objective to increase the total number of women in management by 2% by 2013.
The financial legislation governing Tryg also defines requirements with respect to reporting by the Executive Management to the Supervisory Board on developments in the most important areas of activity.
Chairman. The Deputy Chairman will act in the Chairman’s absence and in general serves as a discussion partner for the Chairman.
The tasks of the Chairman and the Deputy Chairman are defined in the rules of procedure for the Supervisory Board. The tasks of the Chairman of the Supervisory Board include chairing and assessing the work of the Supervisory Board, organising, convening and chairing Board meetings and being in charge of collaboration with the Executive Management. The Chairman also acts as spokesman for the Supervisory Board for external purposes.
According to the rules of procedure for the Supervisory Board, no Board member may perform work for Tryg without a prior decision to that effect by the Supervisory Board. Furthermore, such tasks must be of a one-off nature.
Supervisory Board includes members from Denmark, Sweden and Norway and has three female members, including two female employee representatives.
Gruppen’s Supervisory Board, and presents a recommendation of the selection of candidates for the Supervisory Board.
The CVs and descriptions of skills of the Supervisory Board are available in the section Supervisory Board on pages 46-47 and at tryg.com>
The Supervisory Board comprises 12 members, and the Supervisory Board deems the number of members adequate to ensure a constructive debate, sufficient diversification and an efficient decision-making process.
The Supervisory Board discusses the number of Supervisory Board members each year when preparing the annual general meeting.
Eight members of the Supervisory Board are elected by the shareholders at the annual general meeting for a term of one year. Of the eight members elected at the annual general meeting, four are independent, cf. recommendation 5.4.1 in Recommendations for Corporate Governance.
The section Supervisory Board on page 46 and at tryg.com describes which Supervisory Board members are considered to be independent members. This is also described in the notice of the annual general meeting.
The Supervisory Board holds at least seven annual meetings and an annual strategy seminar to discuss and define strategies and goals for the years ahead. In 2011, the Supervisory Board held seven Board meetings and the annual strategy seminar. The
Supervisory Board discusses the Supervisory Board’s tasks on a regular basis, and no later than at the last meeting of the year, it schedules the meetings and work for the coming year.
To ensure replacement on the Supervisory Board, members elected by the shareholders may hold office for a maximum of nine years. Furthermore, members of the Supervisory Board must retire at the first annual general meeting in the year following their 70th birthday.
Board members elected by the shareholders at the annual general meeting are elected for terms of one year. See page 46 for when the Supervisory Board members joined the Board, were re-elected and when their term expires in the section Supervisory Board.
Risk Committee, including the chairman of the committees, are independent. One out of four members of the Remuneration
Committee is independent, and one out of two members of the Nomination Committee is independent.
In 2006, Tryg set up an Audit Committee for Tryg A/S. The framework of the Audit Committee’s work is defined in its terms of reference.
The committee consists of four members and is led by an independent Board member, who is at the same time the Deputy
sory Board on a regular basis. The Audit Committee performed an evaluation of the previous year’s work in August 2011.
Tryg set up a Risk Committee in 2010 in accordance with the
Committee is to support the Supervisory Board in its work and supervision of asset management and risk management. The ultimate responsibility rests with the Supervisory Board, while the Risk Committee monitors the risk management environment as well as associated processes.
The committee consists of four members and is led by an independent Board member, who is at the same time the Deputy Chairman of the Supervisory Board. In addition to Torben Nielsen (Chairman, independent), the Risk Committee consists of Lene Skole (independent ), Jørn Wendel Andersen (dependent) and Rune Joensen (employee representative). The committee held four meetings in 2011.
Nomination Committee is primarily tasked with ensuring the correct composition and size of the Executive Management and the Supervisory Board. The committee consists of the Chairman,
(independent). The committee holds meetings as needed, however, at least two meetings each year.
The Remuneration Committee carries out preparatory work on behalf of the Supervisory Board relating to remuneration for the
The Remuneration Committee’s work is described in the terms of reference at tryg.com >
The Chairman is in charge of the evaluation and holds assessment interviews with each member of the Supervisory Board at the beginning of the year, according to an agenda agreed in advance by the Supervisory Board. The outcome is discussed at the first Board meeting of the year.
Board and the Executive Management, including general guidelines for incentive pay. The remuneration policy was adopted by the Supervisory Board in February 2011 and approved by the annual general meeting on 14 April 2011.
The Chairman of the Supervisory Board reports on Tryg’s remuneration policy each year in connection with the presentation of the annual report at the annual general meeting. The Supervisory Board’s proposal for remuneration to the Supervisory Board of
The remuneration policy also covers employees of Tryg whose activities have a significant influence on Tryg’s risk profile, known as risk takers, as well as employees in control functions such as compliance and internal audit.
Members of Tryg’s Supervisory Board receive a fixed fee and are not part of any form of incentive or severance programme. The Board members’ remuneration (basic fee) is fixed on the basis of trends in a peer group, taking into account Board members’ required skills, efforts and the scope of the Board’s work, including the number of meetings. The Chairman of the Supervisory Board receives a triple basic fee and the Deputy Chairman receives a double basic fee. The
Members of the Executive Management are employed under service contracts, and all terms of their remuneration are fixed by the Supervisory Board. The Supervisory Board defines the remuneration of the Executive Management on an annual basis. There is an annual review based on the requirements for attracting and retaining the best qualified Executive Management members.
Director to do his or her best in order to achieve the company’s defined targets. The Excutive Management’s remuneration consists of fixed salary, pension and a variable salary. Variable salary constitutes only a limited part of overall remuneration. The Supervisory Board can decide that the fixed salary be supplemented with a variable salary of up to 10% of the fixed basic salary including pension at the time of allocation at a corresponding current value. The Supervisory Board has decided that the vari-
Total remuneration of the Supervisory Board in 2011 Audit Remuneration DKK Fee Committee Committee Total
Bodil Nyboe Andersen b) 172,638 65,000 237,638 a) Elected on the annual general meeting on 14 April 2011. b) Withdrew from the Supervisory Board on the annual general meeting on 14 April 2011.
Read more about the matching shares programme in the remuneration policy at tryg.com >
Some members of the Executive Management still have unexercised stock options, which were allocated under a previously adopted stock option programme. Please refer to note 6 on page 98 for further details.
However, the Group CEO is entitled to 12 months’ notice and to 18 months’ severance pay plus pension contributions during the same period.
Each member of the Executive Management has 25% of basic salary paid into a pension scheme. Group CFO Tor Magne Lønnum, however, receives a defined benefit pension, which was calculated at DKK 222,863 in 2011. The calculation is based on an actuarial assumption of the current value of the expected pension benefits. The current value is calculated on the basis of, among other things, expectations of future salary and interest trends, date of retirement and mortality.
Supervisory Board considers whether the financial statements have been prepared on the assumption that the business is a going concern, including assumptions and uncertainties.
Being an insurance business, Tryg is subject to the risk management requirements of the Danish Financial Business Act. The
Tryg performs an annual risk identification process, mapping insurance risk and other risks related to the achievement of
‘ORSA’) as a preparation for future requirements for insurance companies under EU law. The purpose of the ORSA is to prepare the risk management process by means ensuring that insurance companies are proactive in managing risk and solvency.
Furthermore, the members of the Executive Management received a bonus from 2010: Morten Hübbe DKK 637,000, Lars Bonde DKK 463,834 and Stine Bosse DKK 1,031,380.
Tor Magne Lønnum (Employed 1 Sep. 2011) 1,557,868 222,863 51,095 1,831,826 400,000 2,231,826
Board on an annual basis. Any non-compliance with limits and guidelines are reported to the Supervisory Board if they occur.
The Supervisory Board’s Risk Committee monitors the company’s work on risk management and control on an ongoing basis and reports on this quarterly to the Supervisory Board.
Tryg publishes interim accounts on a quarterly basis. Tryg’s internal control systems are based on clear organisational structures and guidelines, general IT controls and segregation of functions, which are supervised by the internal auditors.
In October 2011, Tryg set up an Ethical Hotline, which is managed by an external partner, Global Compliance. This allows employees, customers or business partners to report any serious breaches or suspicions of such. Reporting takes place in confidence to the Chairman of the Audit Committee and Tryg’s internal Audit Manager.
Risk management is an integral part of Tryg’s business operations. Tryg continuously seeks to minimise the risk of unnecessary losses in order to optimise returns relative to the Tryg’s capital.
Read more about Tryg’s risk management in the section Capital management and risk management and in the Risk Management Report at tryg.com >
Each year, the annual general meeting appoints external auditors recommended by the Supervisory Board. In connection with the
The audit agreement and associated auditors’ fee are agreed between the Supervisory Board and the auditors on the basis of a recommendation from the Audit Committee. The Audit Committee reviews the limits for the external auditors’ performance of non-audit services each year.
It is also considered important to involve employee representatives in the committees.
It is decisive for Tryg to create and promote sustainable solutions that deal with climate-related challenges that our customers continue to experience. As a peace-of-mind provider, we offer products and advice that help to prevent climate- and environmentrelated claims and reduce vulnerability when claims have occurred.
It is also important for us that we reduce our own CO2 emissions.
In 2011, Tryg’s total CO2 emissions were 6,036 tonnes. This is a reduction of 1.101 tonnes from 2010, corresponding to 15%.
Our target for 2012 is to achieve a total CO2 reduction of 18%
tively. Our work includes practical advice to private, commercial and corporate customers in the form of general information, personal contact and in seminars and presentations.
We use the insight that we gain from contact with customers in new kinds of risks to develop our business. We are also happy to share the knowledge we gain with authorities and research institutions. In 2011, we participated as a partner in a number of conferences and dialogues on the handling of cloudbursts, and contributed DKK 1.1m to research into a new visualisation technology that can help home owners to avoid climate-related claims.
Owls’ in Norway. With about 50 people in each group, this corresponds to just under 19,000 volunteers in 2011. The red and white lifebuoy has become a symbol of reassurance in the Nordic countries. In addition to the more than 33,000 lifebuoys that currently hang along the Norwegian coast, a further 300 lifebuoys were set up along the coast of south west Finland during 2011.
Women Men a) Non-western background estimated by Statistics Denmark. a) Only calculated in Norway.
We work in a targeted way to create an inclusive society that is open to diversity. This is an approach that is commonplace in the Nordic countries, and likewise in Tryg. Tryg is therefore constantly launching new initiatives that ensure diversity among our employees and promote equal opportunity for all, regardless of gender, age, ethnicity, disability, sexual orientation, faith or religion. This contributes to innovation and development of products and solutions that are attractive to our customers.
Tryg wants to contribute to greater well-being for our employees, and we actively work to promote quality of life and create a healthy, safe working environment. This results in improved well-being and reduces levels of sick leave. It is crucial that our products help improve the welfare of our customers in the Nordic countries. For example, we have instituted a programme of initiatives aimed at young people, seeking to create an understanding that insurance is a key element of a responsible life. This is part of our social responsibility and supports Tryg’s position as a leading peace-of-mind provider.
Others, not covered by CSR clause with our suppliers, we make sure that compliance with Tryg’s CSR
Compact and environmental standards. In 2011, this initiative was extended to include a programme that requires suppliers to draw up an action plan and produce an annual report on their CSR work.
The CSR in procurement programme was introduced in 2011 in connection with new contracts in the area of cars. A new partnership agreement with the caravan workshops that repair claims for Tryg’s customers was thus extended to incorporate CSR requirements. Corresponding CSR requirements were introduced into indirect purchases and IT procurement. Tryg organised 22 workshops during the year, at which the CSR programme was introduced to suppliers.
clauses of the car area on an ongoing basis to a requirement of suppliers to participate in CSR in the procurement programme.
COP report in compliance with UN Global Compact and comprise Tryg’s CSR reporting in compliance with the Danish Financial Statement Act, section 99a.
Tryg emphasises openness, transparency and accommodation of stakeholder information requirements, thereby providing investors, equity analysts and other stakeholders with a good basis for forming an accurate picture of the Group’s financial position, its performance and its opportunities and risks.
The Group’s Investor Relations department strives to maintain a high level of information by
• being available and proactive, and answering queries from investors and other stakeholders as promptly as possible,
• having a website that is relevant to professional and private investors alike.
Copenhagen, new information is published there in accordance with the current rules. Tryg.com is updated simultaneously with the publication of new information. Information is also distributed directly to the London Stock Exchange, the press, equity analysts, investors and other stakeholders. All financial information may be downloaded at tryg.com/ Investor, where stakeholders may also order annual reports and subscribe to news and RSS feeds.
The Tryg share closed at a price of DKK 257.5 in 2010 and DKK 319 in 2011. Including a dividend of DKK 4, the share rose by 25% during 2011. Measured excluding dividends, the share performance in 2011 was the best of the twenty shares in the OMX C20 index that had an average yield of -15% in 2011. The index of insurance shares in
Nasdaq OMX Copenhagen continues to be the primary exchange for trading in the Tryg share. The share is, however, increasingly being traded on alternative exchanges and trading platforms (known as
Turnover in the Tryg share 2011 Market Market (’000 shares) share 2011 share 2010
Buy back per share (DKK) 21 0 12.5 0 0 Total distribution per share (DKK) 38 6.5 28 4 6.52 a) Dividend proposed by the Supervisory Board for approval on the annual general meeting.
The dividend is determined on the basis of Tryg’s profit distribution policy. Tryg intends to pursue a risk-based, transparent policy for asset management, and thus also for dividend distribution. At 31 December, a capital requirement was determined based on Standard & Poor’s model, corresponding to the level of an ’A-’ rating plus a buffer of 5% as a minimum. Surplus capital is distributed as a combination of cash dividend and share buyback. The relationship between cash dividend and share buy back is determined by the Supervisory Board.
Date No. a) Company announcement 11.01.2011 3 Stine Bosse resigns 12.01.2011 4 Tryg appoints new Group CEO
com. Shareholders who are unable to attend the annual general meeting can follow it live via a webcast at tryg.com.
On the basis of the annual results 2011, Tryg has decided not to initiate a share buy back programme in 2012.
Note Tryg Group Statement by the Supervisory Board and the Executive Management 68 Independent auditor’s reports 69 CSR report 70 Financial highlights and key ratios 71 Income statement 72 Statement of comprehensive income 73 Statement of financial position 74 Statement of changes in equity 76 Statement of cash flows 77 1 Risk management 78 2 Operating segments 90 2 Geographical segments 92 2 Technical result, net of reinsurance, by line of business 94 3 Earned premiums, net of reinsurance 96 4 Technical interest, net of reinsurance 96 5 Claims incurred, net of reinsurance 96 6 Insurance operating expenses, net of reinsurance 96 7 Interest and dividends 102 8 Value adjustment 102 10 Profit/loss on discontinued and divested business 103 11 Intangible assets 104 12 Property, plant and equipment 106 13 Investment property 108 14 Investments in associates 109 15 Total financial assets 110 16 Reinsurer’s share 114 17 Current tax 115 18 Shareholders’ equity 115 19 Capital adequacy 116 20 Subordinate loan capital 116 21 Provisions for claims 117 22 Pensions and similar obligations 118 23 Deferred tax 120 24 Other provisions 121 25 Debt to credit institutions 121 26 Debt relating to unsettled fund trading and repos 121 27 Earnings per share 121 28 Contractual obligations, contingent liabilities and collateral 122 29 Related parties 123 30 Financial highlights 124 31 Accounting policies 125
Fourth quarter of 2011 Fourth quarter of 2011 | Quarterly outline 144 Fourth quarter of 2011 | Geographical segments 146
The Supervisory Board and the Executive Management have today considered and adopted the annual report for 2011 of Tryg
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 2011 and of the results of the Group’s and the parent company’s operations and the cash flows of the
We recommend that the annual report be adopted by the shareholders at the annual general meeting
Report on the consolidated financial statements and parent financial statements. We have audited the consolidated and parent financial statements of Tryg A/S for the financial year 1 January to 31 December 2011, page 71-143, which comprise the income statement, statement of comprehensive income, balance sheet, statement ‘of changes in equity and notes, including the accounting policies, for the Group as well as for the Parent, and the consolidated cash flow statement. The consolidated financial statements are prepared in accordance with International Financial
Business Act. In addition, the consolidated and parent financial statements are prepared in accordance with Danish disclosure requirements for listed financial services companies.
Management’s responsibility for the consolidated financial statements and parent financial statements
Management is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the
Financial Business Act and Danish disclosure requirements for listed financial services companies, and for such internal control as Management determines is necessary to enable the preparation and fair presentation of consolidated and parent financial statements that are free from material misstatement, whether due to fraud or error.
Moreover, in our opinion, the parent financial statements give a true and fair view of the Parent’s financial position at 31 December 2011, and of the results of its operations for the financial year 1 January to 31 December 2011 in accordance with the Danish
Financial Business Act and Danish disclosure requirements for listed financial services companies.
Based on an assessment of materiality and risks, our work included analytical pro-cedures and interviews as well as a review on a sample basis of evidence supporting the subject matter.
We have compared the CSR data with the Company’s reporting practice as can be seen on tryg.com/CSR/xxx. Additionally, we have made a general comparison with the presentation of the
Profit/loss for the year, continuing business 2,421 882 1,985 676 1,114 Profit/loss on discontinued and divested business after tax a) -155 -36 23 -83 26
Balance sheet Total provisions for insurance contracts 26,969 25,228 29,042 32,031 34,257 Total reinsurers’ share of provisions for insurance contracts 1,587 1,036 1,320 1,588 2,067
Return on equity after tax (%) 22.8 9.3 22.5 6.6 13.1 Relative run-off gains/losses 4.2 4.1 3.6 3.9 4.0 Number of full-time employees, end of period 3,788 4,065 4,310 4,291 4,318
The gross expense ratio without adjustment is calculated as the ratio of actual gross insurance operating expenses to earned gross premiums. Other key ratios are calculated in accordance with ‘’Recommendations & Financial Ratios 2010’’ issued by the Danish Society of Financial Analysts. The adjustment, which is made pursuant to the Danish Financial Supervisory Authority’s and the Danish Society of Financial Analysts’ definition of expense ratio and combined ratio, involves the addition of a calculated expense (rent) concerning owner-occupied property based on a calculated market rent and the deduction of actual depreciation and operating costs on owner-occupied property.
a) Profit/loss on discontinued and divested business after tax includes Marine Hull insurance. Comparative figures are restated to reflect Marine Hull insurance.
Profit/loss on continuing business 676 1,114 10 Profit/loss on discontinued and divested business -83 26
Operating equipment 118 102 Owner-occupied property 1,385 1,745 Assets under construction 353 10 12 Total property, plant and equipment 1,856 1,857 14 Investments in associates 13 14
Deposits in credit institutions 2,755 1,635 Derivative financial instruments 298 651
Total other financial investment assets 40,126 43,251 15 Total investment assets 42,297 45,464 16 Reinsurers’ share of provisions for unearned premiums 154 192 21 Reinsurers’ share of provisions for claims 1,434 1,875 16 Total reinsurers’ share of provisions for insurance contracts 1,588 2,067
Total receivables in relation to direct insurance contracts 1,110 1,158 Receivables from insurance enterprises 211 317 Receivables from subsidiaries 0 1 Other receivables 601 189 17 Current tax assets 196 93 23 Deferred tax assets 104 0 15 Cash in hand and at bank 857 402
Notes Liabilities 18 Shareholders’ equity 8,458 9,007 20 Subordinated loan capital 1,591 1,589
Provisions for unearned premiums 6,819 6,932 21 Provisions for claims 24,883 26,941 Provisions for bonuses and premium rebates 329 384
Total provisions for insurance contracts 32,031 34,257 22 Pensions and similar obligations 671 1,026 23 Deferred tax liability 1,387 1,191
Reserve Revalua- for Equali- Share tion- exchange sation- Other Retained Proposed DKKm capital reserves rate adj. reserve reserves earnings dividents Total
Funding Purchase of own shares -807 -76 Dividend paid -991 -256 Change in debt to credit institutions -581 -19
2. A central risk management function, the actuarial function and a compliance function take care of coordinated risk management and guarantee the balance between Tryg’s overall risk and the capital available.
The control environment consists of a series of business processes that define controls of areas of activity and authorisation levels. To support the organisation’s work, a new structure was established in 2011, in which risk management activities in the business areas are coordinated by decentralised risk managers. Each business area will thus have its own risk manager with responsibility for matters including risk identification, risk control, event registration, contingency plans and compliance. The decentralised risk managers are there to guarantee close interaction between the business and the risk management environment.
ORSA is one of the most important elements of compliance with the Solvency II regime. The ORSA is a top-down process, owned by the Supervisory Board, connecting strategy, risk management and capital planning. The most important purpose of the ORSA is that the business commits to assessing all risks in the business and decides its associated capital requirement. The result of the ORSA should guarantee that over a planning period of three to five years there is a reasonable balance between the company’s risk adoption strategy and the capital available to support the strategy.
The figures for Norwegian buildings/contents and liability insurance policies show how there can be major differences in practice in the fluctuations observed in different sectors and thus in the underwriting risk for the sectors in question. The ongoing assessment of the underwriting risk is based on Tryg’s internal capital model, which defines the target premium levels for each part of the insurance business. This applies partly when defining and updating tariffs, and partly when individually pricing major agreements for the corporate and partner areas. The underwriting risk is also managed by means of ongoing profitability monitoring, business processes, acceptance policy, proxies and reinsurance.
Reinsurance is used to reduce the risk in areas where a special need for this exists. The need for reinsurance is assessed on an ongoing basis using Tryg’s internal capital model, in which the price of purchasing reinsurance is compared with the reduction in the capital requirement that can be achieved. In the light of the major cloudburst claims in Denmark in 2010 and 2011 and corresponding cloudburst claims in the rest of Europe, Tryg adjusted its risk assessment associated with weather-related events upwards in 2011. As a consequence of this, in 2011 Tryg purchased what is known as lateral cover for combinations of small or medium-sized events generating nature-related claims. This covers a total of DKK 500m, with an aggregated retention of DKK 400m.
In the field of buildings and contents insurance, major events in 2011 were covered by catastrophe reinsurance cover of DKK 5.5bn. For gross claims in the range of DKK 100-175m, retention increases from DKK 100m to DKK 141m. For gross claims above DKK 175m, retention is a maximum of DKK 141m. The primary risk for individual events is storms, and the scope of the cover is defined using simulation models such that this cover will prove insufficient in statistical terms less than once every 250 years. The reinsurance programme for catastrophes also covers other disastrous events, including terrorist incidents, up to a maximum of DKK 4bn.
Equity market 15% decline in equity market -290 -279 Effect of derivatives 37 7
Real estate market 15% decline in real estate markets -584 -593
Reinsurance is also bought for a number of sectors in which experience has shown that claims vary considerably. The largest single risks in our corporate portfolio are in the area of buildings and contents insurance, protected by reinsurance cover of DKK 1.7bn and with retention of DKK 50m, but with additional annual retention of DKK 75m. Tryg buys facultative reinsurance for buildings and contents risks above this limit. Other sectors covered by reinsurance include liability, motor, fish farming and guarantee insurance.
In the event of a major insurance event covered by the reinsurance programme, there may be major receivables from reinsurers and thus also a credit risk. This risk is managed through requirements to assess the reinsurers’ credit ratings and to spread reinsurance across several reinsurers.
Provisioning risk When the term of insurance expires, insurance risk relates to the provisions for claims made to cover future payments of claims already incurred. When a claim has occurred, there is a certain delay before the customer submits a claim. Depending on the complexity of the claim, a longer or shorter period of time may pass before the size of the claim is finally agreed. This may be a prolonged process, particularly for personal injuries. Even once the claim has been settled, there is a risk that it will be resumed at a later date, triggering further payments.
End of year 9,277 11,365 10,785 11,119 11,856 11,655 12,600 13,282 14,733 17,081 17,391 1 year later 9,516 11,728 10,891 11,122 11,755 11,910 13,226 14,669 15,408 17,181 2 years later 9,715 11,728 10,550 10,977 11,580 11,417 13,803 14,536 15,437 3 years later 9,828 11,783 10,549 10,863 11,183 11,644 13,784 14,544 4 years later 9,757 11,774 10,574 10,596 11,323 11,576 13,774 5 years later 9,746 11,683 10,546 10,672 11,258 11,564 6 years later 9,961 11,669 10,469 10,452 11,158 7 years later 9,935 11,536 10,337 10,339 8 years later 9,987 11,524 10,253 9 years later 9,917 11,417 10 years later 9,762 9,762 11,417 10,253 10,339 11,158 11,564 13,774 14,544 15,437 17,181 17,391 142,818 Cumulative pay-
Reserves 2000 and prior years 1,858 Other reserves 745 Gross provisions for claims, end of year 26,941
Estimated acc. claims End of year 1,473 2,066 957 879 949 297 515 183 305 714 1,499 1 year later 1,486 2,177 917 892 842 295 479 251 380 793 2 years later 1,494 2,057 913 934 847 281 493 212 358 3 years later 1,509 2,050 974 932 840 313 498 200 4 years later 1,482 2,048 890 917 864 313 519 5 years later 1,469 2,063 885 924 859 308 6 years later 1,476 2,070 895 924 843 7 years later 1,456 1,998 892 912 8 years later 1,482 1,997 954 9 years later 1,576 1,955 10 years later 1,536 1,536 1,955 954 912 843 308 519 200 358 793 1,499 9,878 Cumulative pay- ments to date -1,463 -1,880 -853 -838 -810 -296 -481 -172 -259 -410 -750 -8,214
Provisions before discounting, end of year 73 75 101 74 32 12 38 28 99 383 749 1,664
Reserves 2000 and prior years 147 Other reserves 120 Prov. for claims, end of year 1,875
End of year 766 1.456 1.783 1 year later 652 1.112 1.461 2 years later 524 856 1.116 3 years later 430 596 859 4 years later 351 414 596 5 years later 245 346 414 6 years later 134 243 347 7 years later 118 132 245 8 years later 100 118 133 9 years later 98 119 10 years later 98
’Other reserves’ comprises the provisions for claims for Tryg Garantiforsikring A/S and the Finnish branch of Tryg Forsikring A/S.
Provisions for unearned premiums, gross 6,175 204 199 192 162 6,932 Provisions for unearned premiums, ceded -180 0 0 0 -12 -192
Provisions for unearned premiums, gross 6,111 196 177 174 161 6,819 Provisions for unearned premiums, ceded -138 0 0 0 -16 -154
Maturity of the Group’s financial assets and debt Effective 2010 0-1 year 1-5 years > 5 years Total interest rate
Investment risk Investment risk is the risk that volatility in financial markets impacts on results and thus on the company’s financial position.
Interest rate risk Both investment assets and provisions for claims are exposed to interest rate changes. Tryg aims to match the disbursement profile for discounted provisions for claims with corresponding interestbearing assets as closely as possible. If interest rates fall, this structure would cause a similar increase in the provisions for claims and the value of the bond portfolio, thereby considerably reducing Tryg’s overall exposure to changes in interest rates.
Following this division, fluctuations in the match portfolio will in principle correspond in full to fluctuations in liabilities. In practice it will not be appropriate to strive to achieve a complete match, purely because of the administrative expenses that this would generate. In practice, Tryg expects that it will, as a general rule, be possible to keep the net interest rate in the match portfolio within a limit of DKK +/- 50m per quarter.
Tryg is also exposed to interest rate changes in relation to obligations concerning the Norwegian pension scheme, which covers approximately 800 current employees. This scheme was closed to new employees in 2008, and the total provision was DKK 978m as of 31 December 2011. Changes in the pension provision are not included in the income statement, but are charged directly to changes in equity.
A perfect match means that the match portfolio’s return (coupon and market value adjustment) is identical to the return on provisions (market value adjustment of provisions, taken from interest rate changes plus technical interest). On page 6 there is an illustration of the perfect match, the match achievable in practice (scenario 3), A strategy in which only the duration of assets and liabilities is matched and finally a situation in which no match is made at all.
Equity and real estate risk The equity and real estate portfolios are exposed risks as a consequence of changes in equity markets and real estate
Notes markets respectively. As of 31 December 2011, the equity portfolio accounted for 4.5% of the total investment assets. This proportion is expected to be in the range 2.3%-6.0% in 2012. In 2008, Tryg bought the head office in Ballerup, significantly increasing the proportion of real estate. This proportion is expected to be reduced over time. In addition to owner-occupied properties, Tryg’s real estate portfolio consists of office and rental properties, which account for 17.8% and 22.3% respectively of total investment assets.
Currency risk Currency risk is kept at a low level. Tryg’s premium income in foreign currency is mostly matched by claims and expenses in the same currencies, and it is therefore only the profit for the period that is exposed to currency risk. The risk of a loss of value in balance sheet items as a consequence of exchange rate fluctuations is hedged by means of currency derivatives in accordance with a general hedging rate of 90-100% per currency. The aim is for the net carrying amount of the Norwegian entity to be hedged 98-100% over time.
Exchange rate adjustments and hedging of foreign entities are charged directly to equity. The profit from currency derivatives is included in tax, while adjustments of equity are not included in the taxable amount. In years when there is a value increase in derivatives and a loss in the adjustment of equity, tax must be paid on the value increase without a deduction for the loss on the adjustment of equity. By the same token, in years where there is a loss on derivatives and a positive adjustment of equity, a tax deduction arises. Over time, it is expected that years when tax is paid and years when tax is deducted will balance one another.
Credit risk Credit risk is the risk of incurring a loss if counterparties fail to meet their obligations. In connection with investment activities, the primary counterparties are bond issuers and counterparties in other financial instruments. Tryg uses limits and rating requirements to manage credit risk and concentration risk.
Tryg matches provisions, hence naturally has a high level of exposure to various forms of mortgages, including mortgage bonds in the Nordic region, not least in Demark, where the regulatory curve explicitly contains mortgage elements that must be hedged. In particular, we have exposure of this kind at the short end of the interest curve, partly because the use of derivatives here increases the investment requirement. The risk is primarily AAA, with an AA rated risk in exceptional circumstances, and is diversified with a broad range of issuers, ensuring that Tryg can comply comfortably with the rules of Solvency II for limited concentration risk.
Credit risks from reinsurance counterparties are managed according to framework conditions, such as minimum rating requirements and through the Credit Committee, which monitors the quality of reinsurance counterparties on an ongoing basis. The minimum requirements include a BBB rating from Standard & Poor’s for short-tailed business and an ‘A-‘ rating from Standard & Poor’s for long-tailed business.
Operational risk. Operational risk relates to errors or failures in internal procedures, fraud, breakdown of infrastructure, IT security and similar factors. As operational risks are mainly internal, Tryg focuses on establishing an adequate control environment for its operations. In practice, this work is organised by means of procedures, controls and guidelines that cover the various aspects of Tryg’s operations, including the IT security policy. Tryg has also set up a security and investigation unit to handle internal fraud, IT security, physical security and contingency plans.
Tryg has prepared contingency plans to handle the most important areas, such as the contingency plans in the individual parts of the business to handle an event of a prolonged IT breakdown. We have also set up a crisis management structure to deal with the eventuality that Tryg is hit by a major crisis.
a) In December 2005, Tryg Forsikring A/S raised a subordinated bond loan with no option for the creditor to call the loan before maturity or otherwise terminate the loan agreement with Tryg Forsikring A/S. The loan is automatically accelerated upon the liquidation or bankruptcy of Tryg Forsikring A/S.
Prices used for determination of fair value in respect of both loans are based on an assesment of the credit spread of the loans provided by Nordea.
In 2005, Tryg took out a 20-year subordinated bond loan of EUR 150m listed on the London Stock Exchange. In 2009, in connection with the acquisition of Moderna, Tryg took out a subordinated loan with expiry in 2032 of EUR 65m from TryghedsGruppen, which owns 60% of Tryg. Tryg’s total holding of subordinated debt subsequently amounted to approx. EUR 215m. In total, debt amounted to 18% of equity at the end of 2011, and interest expenses during 2011 amounted to DKK 83m.
Private Commercial Corporate DKKm Nordic Nordic Nordic Other Group 2 Operating segments
Profit on continuing business 676 Profit/loss on discontinued and divested business -83
Run-off gains/losses, net of reinsurance 399 99 326 0 824 Investments in associates 13 13 Reinsurers’ share of provision for unearned premiums 14 0 140 0 154 Reinsurers’ share of provision for claims 232 289 913 0 1,434 Other assets 48,990 48,990
Provisions for bonuses and premium rebates 196 20 113 0 329 Other liabilities 10,102 10,102
Number of full-time employees, end of period 1,379 1,450 1,398 1,338 1,338
Number of full-time employees, end of period 61 105 425 414 423
Key ratios Gross claims ratio 64.2 67.6 72.1 80.2 79.2 Business ceded as % of gross premiums 3.4 3.5 2.9 1.6 -2.5 Claims ratio, net of ceded business 67.6 71.1 75.0 81.8 76.7
Gross claims ratio 90.8 89.7 88.6 111.1 - 158.9 55.1 75.3 30.3 65.0 84.8 101.2 Combined ratio 108.4 101.7 111.0 110.6 - 166.1 80.0 93.2 69.7 98.1 100.0 117.6
Profit/loss on ceded business -44 -58 -309 509 -4 -2 Techn. interest net of reinsurance 5 1 124 173 10 11
Claims Frequency a) Average claims DKK b) 11,315 12,399 Total claims 1,329 1,129
Fire & contents Fire and contents Change of Credit & guarantee Tourist assistance (Private) (Commercial) ownership Liability insurance insurance
Claims Frequency a) Average claims DKK b) 11,315 12,399 Total claims 1,329 1,129 a) The claims frequency is calculated as the number of claims incurred in the year in proportion to the average number of insurance contracts in the year.
b) Average claims are total claims before run-off in the year relative to the number of claims incurred in the year.
3 Earned premiums, net of reinsurance Direct insurance 19,627 20,646 Indirect insurance 36 36
Gross Ceded Gross Ceded 4 Technical interest, net of reinsurance Interest on insurance provisions 752 852 Discounting transferred from provisions for claims -618 -668 5 Claims incurred, net of reinsurance Claims incurred -16,500 -17,338 Run-off previous years, gross 883 1,039
Under claims incurred, the value adjustment of inflation swaps to hedge the inflation risk concerning annuities on workers’ compensation insurance totals DKK 58m (in 2010 DKK -83m).
Outstanding options from 2010 allocation 31 Dec 2011 33,368 139,154 24,679 197,201 - 15 - 10
In 2011, the fair value of share options recognised in the consolidated income statement amounted to DKK 13m (2010: DKK 16m). As at 31 December 2011, a total amount of DKK 69m was recognised for share option programmes issued in 2006-2011. Fair values at the time of allocation are based on the Black & Scholes option pricing formula.
Outstanding options from 2006-2008 allocation 31 Dec 2010 106,608 317,416 32,287 456,311 - 36 - 1
Outstanding options from 2009 allocation 31 Dec 2010 38,258 117,436 20,140 175,834 - 16 - 3
Number of options exercisable end of 2010 54,520 166,700 0 221,220
Group Executive management includes retired managers with a total of 44,112 units at a value of DKK 4mill. upon allocation. Risk takers are included under ’Senior employees’.
The following assumptions were applied in calculating the market value of outstanding share options at the time of allocation: The expected volatility is based on the average volatility of Tryg shares. The expected maturity is 4 years, corresponding to the average of the exercise period of 3 to 5 years.
Profit/loss on discontinued and divested business is excluded in ‘Marine, aviation and cargo’
Amortisation and writedowns Balance 1 January 0 -32 -446 0 -478
DKKm 11 Intangible assets (continued) Impairment test Goodwill As at 31 December 2011, management performed an impairment test of the carrying amount of goodwill based on the allocation of the cost of goodwill to the cash-generating unit. Assumptions for impairment test: The Value-in-use method is used Return Assumed require- annual growth ment 2011 > 5 years before tax
The assumed growth during the terminal period has been estimated based on expectations for general economic growth. The return requirement is based on an assessment of the risk profile for the tested business activities. Higher return requirements or lower growth would entail a lower value of the activities, whereas lower return requirements or higher growth expectations would entail a higher value.
Value adjustment for the year at revalued amount in profit and loss 0 -10 0 -10 Value adjustment for the year at revalued amount in other comprehensive income 0 20 0 20
Operating Owner-occup- Assets under DKKm equipment ied property construction Total 12 Property, plant and equipment (continued)
Total rental income for 2011 is DKK 156m (DKK 166m in 2010).
Revaluations at net asset value Balance 1 January 17 13 Exchange rate adjustment 1 0 Value adjustment for the year -5 1
2011 Komplementarselskabet af 1. marts 2006 ApS, DK 0 0 0 0 0 50
A individual estimate of the degree of influence referring to the agreed contracts are made.
Financial assets at fair value with value adjustment in the income statement 40,126 43,251
Loans and receivables measured at amortised cost Total receivables in relation to direct insurance contracts 1,110 1,158 Receivables from insurance enterprises 211 317 Receivables from subsidiaries 0 1 Other receivables 601 189 Current tax assets 196 93 Cash in hand and at bank 857 402
Financial liabilities at fair value with value adjustment in the income statement Derivative financial instruments 376 35
Financial liabilities measured at amortised cost Subordinated loan capital 1,591 1,589 Debt related to direct insurance 419 410 Debt related to reinsurance 187 191 Debt to credit institutions 30 11 Debt to credit institutions 3,947 4,161 Current tax liabilities 106 260 Other debt 1,030 740
Fair value hierarchy for financial instruments measured at fair value in the balance sheet
Cash in hand and deposits in credit institutions 2,755 0 0 2,755
The risk of the unobservable input group is moderate since the inflation derivatives aim at hedging the by market conditions such as inflation risk of the technical provisions 100 percent, while the unquoted shares and bonds, which are influenced the development in interest rates and expected earnings, is a limited amount.
Investment assets as per the section ‘Investment activities’ in the Management’s report 37,232 1,816 3,954 43,002 Consisting of: Cash in hands allocated to portefolio management -33 0 0 -33
Investment assets according to balance sheet 38,400 187 2,199 40,786 Unit trust units 2,378 Deposits in credit institutions 1,635 Derivative financial instruments 651 Associated shares 14
Investment assets as per the section ‘Investment activities’ in the Management’s report 34,317 2,179 3,897 40,393 Consisting of: Cash in hands allocated to portefolio management -80 0 0 -80
Investment assets according to balance sheet 34,621 184 2,158 36,963 Unit trust units 2,268 Deposits in credit institutions 2,755 Derivative financial instruments 298 Associated shares 13
The impact on the income statement is similar to the impact on shareholders’ equity.
The calculation is made in accordance with the disclosure requirements of the executive order issued by the Danish FSA on the presentation of financial reports by insurance companies and profession-specific pension funds.
Derivative financial instruments Derivatives with value adjustment in the income statement at fair value: 2010 2011
Derivative financial instruments used in connection with hedging of foreign entities for accounting purposes: Gains Losses Net Gains Losses Net
Gains and losses on hedges charged to other comprehensive income at 1 January 850 -819 31 983 -1,280 -297 Gains and losses on hedges charged to other comprehensive income during the year 133 -461 -328 273 -300 -27
Specification of writedowns on receivables from insurance contracts Balance at 1 January 124 135 Exchange rate adjustment 3 0 Writedowns and reversed writedowns for the year 8 8
Including writedowns of due amounts 135 143 16 Reinsurer’s share Reinsurers’ share 1,605 2,086 Writedowns after impairment test -17 -19
Impairment test As at 31 December 2011, management performed a test of the carrying amount of total reinsurers’ share of provisions for insurance contracts. The impairment test resulted in impairment charges totalling DKK 19m (2010: DKK 17m) Writedowns during the year include reversed writedowns totalling DKK 1m (2010: DKK 1m).’
Current tax is recognised in the balance sheet as follows: Under assets, current tax 196 93 Under liabilities, current tax -106 -260
Nominal Nominal No. of value % of share No. of value % of share Treasury shares shares (DKK’ 000) capital shares (DKK’ 000) capital
Pursuant to the authorisation granted by the shareholders, Tryg may acquire up to 10.0% of the share capital until the next annual general meeting in 2012. Treasury shares are acquired for use in the Group’s incentive programme and as part of the share buy back programme.
Total, beginning of year 24,255 1,333 22,922 Market value adjustment of provisions, beginning of year 69 5 64
Paid in the financial year in respect of the current year -8,413 -750 -7,663 Paid in the financial year in respect of prior years -6,921 -341 -6,580
Notes 22 Pensions and similar obligations Jubilees, schemes for elderly employees etc. 50 49
Defined benefit persion plans: Present value of pension obligations funded through operations 108 122 Present value of pension obligations funded through establishment of funds 1,464 1,868
Specification of change in recognised pension obligations: Recognised pension obligation, beginning of year 1,304 1,572 Adjusted prior years regarding expected estimate change 0 57 Exchange rate adjustment 81 13 Present value of amounts accumulated during the year 52 49 Capital costs of previously accumulated pensions 58 58 Acturial gains/losses 181 310 Paid during the period -62 -69 Change in recognised employers’ nat. ins. contribution -42 0
Change in carrying amount of plan assets: Carrying amount of plan assets, beginning of year 856 951 Adjusted prior years regarding expected estimate change 0 -17 Exchange rate adjustment 57 9 Investments in the year 73 88 Estimated return on pension funds 53 41 Acturial gains/losses -47 -15 Paid during the period -41 -44
The premium for the following financial years is estimated at: 66 80
Employers’ nat. ins. contribution 14.1 14.1 Take up of the AFP Early Retirement Plan 0.0 0.0 Mortality table Adj. K2005 Adj. K2005
Sensitivity information Impact on shareholders’ equity from the following changes: Interest rate increase of 0.3 pct. point 68 96 Interest rate decrease of 0.3 pct. point -77 -89
Notes 23 Deferred tax Tax asset Operating equipment 37 31 Debt and provisions 213 284 Capitalised tax loss 70 81
Tax liability Intangible rights 121 136 Land and buildings 206 228 Bonds and loans secured by mortgages 14 49 Contingency funds 1,261 1,174
Unaccrued timing differences of shares 0 0 Unaccrued timing differences of balance sheet items 25 30
The loss in Tryg A/S cannot be utilised in the Danish joint taxation scheme. The loss can be carried forward indefinitely in Denmark. Under Finnish rules, losses may be carried forward for ten years and according to the rules in Sweden, losses may be carried forward indefinitely.
24 Other provisions Other provisions, beginning of year 6 1 Change in provisions -5 10
Other provisions relate to provisions for the Group’s own insurance claims 25 Debt to credit institutions Bank overdrafts 30 11
Debt falling due within one year 30 11 Debt falling due after more than five years 0 0
Debt falling due within one year 3,947 4,161 Debt falling due after more than five years 0 0 27 Earnings per share Profit/loss for the period from continuing business 676 1,114 Profit/loss on discontinued and divested business -83 26
Average number of shares (1,000 shares) 62,362 60,401 Diluted number of shares (1,000) 82 0
The amounts include the following: Tryg Forsikring A/S and Tryg Forsikring, norwegian branch of Tryg Forsikring A/S have signed an operating agreement with CSC for an amount of DKK 531m for a period of 5 years which cannot be cancelled within a year. The contract expires in 2015.
Tryg Forsikring A/S has signed the following contracts with amounts above DKK 50m: Portfolio management contract for DKK 52m, which expires in 2015. Telephony service contract with Telenor for DKK 116m, which expires after 2015. Lease contracts on premises for DKK 347m. The contracts expire after 5 years.
Assets to cover the technical provisions in Tryg Forsikring A/S have been registered in the total amount of 36,923 41,382 Assets to cover the technical provisions in Tryg Garantiforsikring A/S have been registered in the total amount of 311 332
DKK 3.382m (2010: DKK 1.896m) of the Group’s bond portfolio was sold in repo transactions and must be repurchased. The value of the bond portfolio remains recognised in the balance sheet and has been provided as security for financial liabilities concerning repo transactions.
The number of persons in the categories are as follows; the Supervisory Board 14 persons, the Executive Management 5 persons,
(Group CEO is entitled to cash severance pay equal to 18 months’).
Members of the Executive Management can raise no further claims in this respect, including claims for compensation pursuant to sections 2a and/or 2b Salaried Employees Act, as such claims are included in the severance pay.
Risk Takers are defined as employees, whose activities have a significant influence on the business’s risk profile. The Supervisory
No standards or interpretations have been implemented for the first time for the accounting year that began on 1st January 2011 that will have a significant impact on the Group.
New or amended standards and interpretations that have been implemented but have not significantly affected the Group: • Amendments to IFRS 7 ’Financial Instruments: Disclosure’ • Amendments to IAS 1 ’Presentation of Financial Statements’ • Amendments to IAS 24 ‘Related Party Disclosures: Revised definition of related parties’
IFRIC 14 ‘The Limit on a Defined Benefit Asset’ • IFRIC 19 ‘Extinguishing Financial Liabilities with Equity
• Amendments to IAS 1 ‘Presentation of items of other Comprehensive Income’ c)
• Amendments to IAS 12 ‘ Deferred Tax – Recovery of underlying Assets’ d)
• IAS 27 (as revised in 2011) ‘Separate Financial Statements’ b)
• IAS 28 (as revised in 2011) ‘Investments in Associates and Joint Ventures’ b)
d) Effective for annual periods beginning on or after 1 January 2012.
The Financial Supervisory Authority’s adjusted discount curve, which includes both euro swap rates, national differentials and Danish swap rates, and also an option adjusted real credit interest rate differential, is used to discount Danish provisions for outstanding claims.
Several assumptions and estimates underlying the calculation of the provisions for claims are mutually dependent. This has the greatest impact on assumptions with respect to interest rates and inflation.
Fair value of financial assets and liabilities Measurements of financial assets and liabilities for which prices are quoted in an active market or which are based on generally accepted models with observable market data are not subject to material estimates. For securities that are not listed on a stock exchange, or for which no stock exchange price is quoted that reflects the fair value of the instrument, the fair value is determined using a current OTC price of a similar financial instrument or using a model calculation. The valuation models include the discounting of the instrument cash flow using an appropriate market interest rate with due consideration to credit and liquidity premiums.
and the value of the asset can be reliably measured. Liabilities are recognised in the statement of financial position 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.
The consolidated financial statements are prepared on the basis of the financial statements of the parent company and its subsidiaries by adding items of a uniform nature. The financial statements of subsidiaries that present financial statements under other legislative rules are restated to the accounting policies applied by the Group.
Enterprises in which the Group exercises significant influence but not control are classified as associates. Significant influence is typically achieved through direct or indirect ownership or disposal of more than 20% but less than 50% of the votes.
The date of acquisition is the date on which control of the acquired company actually passes to the Tryg Group.
Currency translation A functional currency is determined for each of the reporting entities in the Group. The functional currency is the currency in the primary economic environment in which the reporting entity operates. Transactions in currencies other than the functional currency are transactions in foreign currencies.
On consolidation, the assets and liabilities of the Group’s foreign operations are translated at exchange rates of the balance sheet date. Income and expense items are translated at the average ex-
Segment reporting Segment information is based on the Group’s management and internal financial reporting system supports the management’s decisions on allocation of resources and assessment of the Group’s results divided into segments.
Geographical information is presented on the basis of the economic environment in which the Tryg Group operates. The geographical areas are Denmark, Norway, Finland and Sweden.
Premiums are calculated as premium incomes in accordance with the risk exposure over the cover period, calculated separately for each individual insurance contract. As a starting point, the calculation uses the pro-rata method, although this is adjusted for an unevenly divided risk between lines of business with strong seasonal variations or for policies lasting many years.
Technical interest is reduced by the portion of the increase in net provisions that relates to unwinding.
Leasing Leases are classified either as operating or finance leases. The assessment of the lease is made on the basis of criteria such as ownership, right of purchase when the lease term expires, considerations as to whether the asset is custom-made, the lease term and the present value of the lease payments.
Equity-settled share options are measured at the fair value at the grant date and recognised under staff costs over the period from the grant date until vesting. The balancing item is recognised directly in other comprehensive income.
On initial recognition of the share options, the number of options expected to vest for employees and members of the Executive Management is estimated. Subsequently, adjustment is made for changes in the estimated number of vested options to the effect that the total amount recognised is based on the actual number of vested options. The value for retired employees who hold the right to options is reported for the remaining period in the accounting year in which the employee retires.
Matching shares In 2011, members of Executive Management and risk takers have been allocated shares in accordance with the ’Matching shares’ scheme. Under Matching shares, the individual management member is allocated one share in Tryg A/S for each share the Executive management member or risk taker acquires in Tryg A/S at the market rate for certain liquid cash at a contractually agreed sum in connection with the Matching share programme.
The shares are provided free of charge, four years after the time of purchase. The holder must acquire the shares in the open window following publication of the annual report for the previous year. In 2011, however, the shares were traded in the first ’open window’ after the Tryg A/S annual general meeting. The holder may not sell the shares until six months after the matching time.
The shares are recognised at market value and are accrued over the four-year maturation period, based on the market price at the time of acquisition. Recognition occurs from the end of the acquisition month and is recognised under personnel expenses with a contra entry directly in other comprehensive income. If a Executive management member or risk taker retires during the maturation period but is entitled to shares, the remaining expense is recognised in the current accounting year.
Investment activities Income from associates includes the Group’s share of the associates ’ net profit.
Realised and unrealised investment gains and losses, including gains and losses on derivative financial instruments, value adjustment of investment properties, exchange rate adjustments and the effect of movements in the yield curve used for discounting, are recognised as value adjustments.
Other income and expenses Other income and expenses include income and expenses which cannot be ascribed to the Group´s insurance portfolio or investment assets, including the sale of products for Nordea Liv og Pension.
Recognition of the balance sheet items in respect of the discontinued business remains unchanged in the respective items whereas assets and liabilities from divested activities are consolidated in one line as ’assets concerning divested business’ and ’liabilities concerning divested business’, respectively. The balance sheet items concerning discontinued activities are reported unchanged in the respective entries.
The comparative figures, including five-year financial highlights and key ratios, have been restated to reflect discontinued business. Discontinued and divested business in the income statement includes the profit/loss after tax of the sale of the right to renew the marine hull business in 2010. Discontinued business also comprises the Tryg Forsikring A/S run-off business and.
Trademarks and customer relations Trademarks and customer relations have been identified as intangible assets on acquisition. The intangible assets are recognised at fair value at the time of acquisition and amortised on a straightline basis over the expected economic lifetime of 5–12 years.
Depreciation of plant and equipment is calculated using the straightline method over their estimated economic lifetime, as follows: • IT, 4 years • Vehicles, 5 years • Furniture, fittings and equipment, 5-10 years
Gains and losses on disposals and retirements are determined by comparing proceeds with carrying amount. Gains and losses are recognised in the income statement. When revalued assets are sold, the amounts included in the revaluation reserves are transferred to retained earnings.
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 straight-line method using the estimated economic lifetime up to 50 years. Land is not depreciated.
The results of foreign subsidiaries are based on translation of the items in the income statement at average exchange rates for the period. Income and expenses in domestic enterprises denominated in foreign currency are translated at the exchange rate ruling on
the date of the transaction. Balance sheet items of foreign subsidiaries are translated at the exchange rate ruling at the balance sheet date.
Financial assets at fair value through income Financial assets are recognised at fair value when first reported, if they are entered in a portfolio that is managed in accordance with fair value. Derivative financial instruments are similarly classed as financial assets for commercial purposes, unless they are classified as security.
Derivative financial instruments and hedge accounting The Group’s activities expose it to financial risks, including changes in share prices, foreign currency exchange rates, interest rates and inflation. Forward exchange contracts and currency swaps are used for currency hedging of portfolios of shares, bonds, hedging of foreign entities and insurance balance sheet items. Interest rate derivatives in the form of futures, forward contracts, repos, swaps and FRAs are used to manage cash flows and interest rate risks related to the portfolio of bonds and technical provisions. Share derivates in the form of futures and options are used from time to time to adjust share exposures.
Derivatives are recognised from the trade date and measured at fair value in the statement of financial position. Positive fair values of derivatives are recognised as bonds and shares or derivatives if they cannot unambiguously be attributed to the former. Negative fair values of derivatives are recognised under derivatives. Positive and negative values are only offset when the company is entitled or intends to make net settlement of more financial instruments.
Calculation of value is generally performed on the basis of rates supplied by Nordea with relevant information contractors and is checked by the Group’s valuation technicians. Discounting on the basis of market interest rates is applied in the case of derivative financial instruments, where an expected future payment flow is included.
Amounts receivables from reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract.
Derivative financial instruments are reported from the trading date and are assessed in the balance at fair value. Receivables that arise as a result of insurance contracts are classified in this category and are reviewed for depreciation as a part of the write-down test of accounts receivable.
Receivable that are not derivative financial instruments are recognised for the first time at fair value and are subsequently assessed at amortized cost price. The income statement includes an estimated reservation for an expected unobtainable sum when there is a clear indication that the asset has depreciated. The reservation entered is assessed as the difference between the asset’s balance sheet value and the present value of expected future cash flow.
Revaluation reserves Revaluation of owner-occupied properties is recognised in other comprehensive income 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 monthly average exchange rates for the period. Any resulting exchange rate differences are recognised in other comprehensive income. 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.
Contingency fund reserves Contingency fund reserves are recognised as part of retained earnings under equity. The funds may only be used when so permitted by the Danish FSA and when it is to the benefit of the policyholders. The Norwegian security fund provisions include provisions for the Norwegian Natural Perils Pool, security reserve, administration reserve and guarantee reserve. The Danish and Swedish provisions comprise security fund provisions. Deferred tax from the Norwegian and Swedish security fund provisions is earmarked.
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
The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses and past service costs.
Other provisions Own insurances are included under other provisions. The provisions apply to the Group’s own insurance claims and are reported when the damages occur, and are reported according to the same principle as the Group’s other claim provisions.
Debt Debt comprises debt in connection with direct insurance and re- insurance, debt to credit institutions, current tax obligations and other debt.
Derivative financial instruments are assessed at fair value according to the same practice that applies to financial assets. Other obligations are assessed at amortized cost price with application of ’the effective interest method’.
Cash flows from investing activities comprise payments in connection with purchase and sale of intangible assets, property, plant and equipment as well as fixed asset investments and deposits in Credit institutions.
Notes Investment activities 1 Income from subsidiaries 475 901 Interest income 2 0 Value adjustment -1 1 Interest expenses -2 0 Investment management charges -8 -8
Proposed distribution for the year: Dividend 256 400 Transferred to Net revaluation as per equity method -1,965 623 Transferred to Retained profits 2,134 -171
Total liabilities and equity 8,475 9,025 7 Debt to credit institutions 8 Capital adequacy 9 Contractual obligations, contingent liabilities and collateral 10 Related parties 11 Reconciliation of differences in the profit and the shareholders’ equity 12 Accounting policies
Nullification of own shares -65 65 0 Dividend paid -256 -256 Dividend own shares 14 14 Purchase of own shares -91 -91 Exercise of share options 15 15 Issue of share options 14 14
Proposed dividend per share DKK 6.52 (in 2010 DKK 4.00). Dividend per share is calculated as the total dividend proposed by the Super visory Board after the end of the financial year divided by the number of shares, year end 61,316,103. The dividend is not paid until approved by the shareholders at the annual general meeting. Tryg Forsikring A/S’ Norwegian branch, has in its branch financial statements included provisions for contingency funds in the amount of DKK 2,430m (in 2010 DKK 2,887m) Tryg Forsikring A/S’ Swedish branch, has in its branch financial statements included provisions for contingency funds in the amount of DKK 144m (in 2010 DKK 143m). In Tryg Forsikring A/S, these provisions, due to their nature as additional provisions, are included in shareholders’ equity (retained earnings), net of deferred tax. Tryg Forsikring A/S’ option to pay dividend to Tryg 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 Tryg Forsikring A/S. Tryg Garantiforsikring A/S has a similar contingency amounting to DKK 139m, which is also included in the company’s shareholders’ equity.
Tryg Forsikring A/S, Ballerup 100 100 5 Current tax assets Current tax, beginning of year 17 17 Current tax for the year 17 16 Tax paid durring the year -17 -16 6 Deferred tax assets Capitalised tax loss Tryg A/S 1 0
7 Debt to credit institutions Tryg A/S has established committed credit facilites totalling DKK 800m with a number of Danish banks. These credit facilities expire on 31 December 2012.
Subordinate loan capital 804 848 Solvency requirements to subsidiary undertakings – 50% -2,515 -2,507
Companies of the Tryg 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.
10 Related parties The Group has no other closely related parties with a decisive influence other than the parent company, TryghedsGruppen Smba. Closely related parties with significant influence include the Supervisory Board, the Executive Management, and these persons’ related family.
Administration fee, etc. is fixed on a cost-recovery basis. Intra-group accounts are offset and carry interest on market terms.
Key ratios Gross claims ratio 78.7 92.2 74.0 80.9 76.9 77.2 74.1 87.9 77.0 Business ceded as a percentage of gross premiums 1.1 -0.7 1.7 -3.5 1.0 1.7 1.3 -11.9 0.3 Claims ratio, net of ceded business 79.8 91.5 75.7 77.4 77.9 78.9 75.4 76.0 77.3
Key ratios Gross claims ratio 70.9 117.2 83.3 80.7 76.7 81.2 65.7 95.5 68.4 Business ceded as a percentage of gross premiums 2.1 -2.5 -4.0 0.9 0.0 2.0 6.3 -23.1 1.8 Claims ratio, net of ceded business 73.0 114.7 79.3 81.6 76.7 83.2 72.0 72.4 70.2
Key ratios Gross claims ratio 75.1 72.6 76.7 73.2 Business ceded as % of gross premiums -0.3 5.2 3.1 3.2 Claims ratio, net of ceded business 74.8 77.8 79.8 76.4
Technical result -30 -47 -124 -59 Run-off gains/losses, net of reinsurance 6 16 32 -7
Key ratios Gross claims ratio 83.8 83.4 84.6 82.0 Business ceded as % of gross premiums 2.2 2.9 0.8 2.6 Claims ratio, net of ceded business 86.0 86.3 85.4 84.6
Key ratios Gross claims ratio 81.0 84.2 80.9 79.8 Business ceded as % of gross premiums 0.0 0.0 0.8 0.8 Claims ratio, net of ceded business 81.0 84.2 81.7 80.6
Key ratios Gross claims ratio 77.2 79.0 80.2 79.2 Business ceded as % of gross premiums 1.1 -0.9 1.6 -2.5 Claims ratio, net of ceded business 78.3 78.1 81.8 76.7
Technical interest ratio, net of reinsurance 3.2 3.0 0.9 0.7 0.9 Return on equity before tax on continuing business (%) 33.3 15.3 29.3 10.4 18.0 Return on equity after tax on continuing business (%) 24.3 9.7 22.3 7.5 12.8 Average provisions for unearned premiums 5,288 5,252 5,654 6,514 6,876
The financial highlights and key ratios of Tryg have been prepared in accordance with the executive order issued by the Danish Financial Supervisory Authority on the presentation of financial reports by insurance companies and profession-specific pension funds and also comply with ’Recommendations & Financial Ratios 2010’ issued by the Danish Society of Financial Analysts.
Capital base Shareholders’ equity plus subordinated debt/subordinated loan capital less intangible assets/goodwill and tax asset.
Gross premiums earned Individual Solvency New Danish solvency requirements for insurance companies. With effect from the 1 January 2008, companies are required to make their own determination of their capital requirements applied with own methods. The Individual Solvency shall be reported four times a year.
Solvency II New solvency requirements for insurance companies issued by EU Commission. The new rules are expected to come into effect in 2013/2014.
Certain statements in this annual report are based on the beliefs of our management as well as assumptions made by and information currently available to management. Statements regarding Tryg’s future results of operations, financial condition, cash flows, business strategy, plans and future objectives other than statements of historical fact can generally be identified by terminology such as ’targets’, ’believes’, ’expects’, ’aims’, ’intends ’, ’plans’, ’seeks’, ’will’, ’may’, ’anticipates’, ’would’, ’could’,
Should one or more of these risks or uncertainties materialise or should any underlying assumptions prove to be incorrect,
Tryg’s actual financial condition or results of operations could materially differ from that described herein as anticiparted, believed, estimated or expected.
Results 10 Tryg’s financial performance 12 Private Nordic 16 Commercial Nordic 20 Corporate Nordic 22 Investment activities 24 Outlook 27