However, sudden downpours and floods can hit with enormous and unpredictable power, transforming water into a force of death. Water is powerful in all its forms. The Christian Bible mentions huge hailstones among the great plagues.
Intelligence, communication and creativity make human beings the most successful race on earth.
Our civilisation, progress and prosperity would not have been possible without the mighty force of fire.
Day by day and year by year, we train and develop our bodies as a tool. A grip. A step. A tender stroke or a powerful punch.
The human body is like a strong machine but it is not invulnerable. Snap. Twist. Suddenly, the helplessness of our infancy returns.
ships, wind has been carrying the heavy load for man for thousands of years. Wind aids us in producing flour from grain, crossing frontiers, experiencing new worlds and creating the energy we need.
We owe wind a great deal, because it shares its propellant force with us.
Financial highlights and key ratios for TrygVesta . . . . . . . . . . . . . . . . . . . . . 42
Financial highlights and key ratios by geographical area . . . . . . . . . . . . . . . . 82
Income statement and balance sheet for TrygVesta A/S (parent company) . . . . 102
Supervisory Board and Executive Management . . . . . . . . . . . . . . . . . . . . . 115
TrygVesta’s prime objective is to provide peace of mind to our two million customers in the Nordic region; both when we advise our customers on insurance and pension and on loss prevention, and when we service customers with a claim. We work on an ongoing basis to make our service even better and to develop even further in order to continue to make our customers feel good and secure every time they are in contact with us. And we will be in touch with them several times a year
preferred supplier of products and services that offer peace of mind. Therefore, it is vital that we always ensure that Tryg -
All the changes that have occurred over the past year affect our employees. They feel their own worth from and take pride in the results they have helped achieve. But we are also aware that all the changes have had a signifi cant impact on their everyday working lives. They need time to adapt and for the changes to sink in.
During 2004 we have reaped the benefi ts of our fi rst wave of
We set up shared staff functions, claims procurement, reinsurance and IT operations. Today, TrygVesta has a sound capital base, restored profi tability and a strong strategic platform. We are riding on the second wave of Nordic synergies, which materialise through our continued efforts to implement effi ciency enhancements and cost savings throughout our organisation.
We reduced costs signifi cantly during the past year. We improved our corporate business substantially. We divested three companies in order to focus on our core business: direct Nordic insurance.
We want to be known for the results we create, and not for the underlying strategy. The Balanced Scorecard is our key tool in realising our strategy and achieving sustained profi tability. It also makes our strategy concrete and measurable and ensures that all employees are aware of their own targets and those of the entire Group.
E A R N E D P R E M I U M S , N E T O F R E I N S U R A N C E
P R O F I T O N O R D I N A R Y A C T I V I T I E S B E F O R E TA X
• The improvement was driven by the Group’s primary operations. Insurance operations reported a technical result of DKK 1,456m for 2004, an increase of almost
• The results reflect a 2.1 point improvement of the expense ratio, generated by a DKK 225m reduction in the nominal amount of operating expenses, and a 5.7 point reduction of the claims ratio, achieved despite a significant strengthening of reserves within personal accident insurance as well as the impact of the fireworks blaze in Kolding, Denmark, and the tsunami in Asia.
• TrygVesta launched three new concepts in Denmark: Tryg Ung, Tryg Senior and Tryg Firma.
• TrygVesta strengthened provisions for workmen’s compensation in Denmark by DKK 175m due to the so-called
• Injuries suffered by Danish and Norwegian tourists and damage to their luggage as a result of the tsunami in
• TrygVesta’s value process led to the formulation of common values for employees and customers.
The Nordic general insurance markets stabilised in 2004 in the wake of large and necessary premium increases in 2002 and 2003. The insurance industry’s profitability has reached a satisfactory level following years of unsustainably low profitability, especially in respect of insuring corporate customers.
Developments in the international insurance markets showed very moderate pressure on prices in the second half of 2004.
We are currently not seeing any signs of significant changes in profitability in the Danish, Norwegian or Finnish markets
The insurance industry has had a history of recording highly fluctuating earnings on insurance operations, due in part to the annual fluctuations in the volume of claims. In addition, we have seen multi-year periods of poor profitability as a result of fierce competition on prices. And these periods have been succeeded by periods of steep price increases in an effort to restore earnings. Historically, cyclical movements cause concern for a decline in earnings. The rationale seems to be that such restored earnings might tempt some insurers to increase their market share at the expense of profitability.
In recent years, insurance companies have given much greater priority to risk management. The approach to risk is moving towards more proactive management and prevention. This has contributed to a change in corporate cultures towards increased focus on profitability. Moreover, the level of interest rates is considerably lower than it was, for example, five years ago.
The welfare debate continued throughout 2004 in the Nordic countries and other European countries, challenging, among other things, the insurance industry. Insurance already contributes to welfare in Denmark, and so far almost 300,000
This brings focus on insurance company credit ratings, that is, an analysis of an insurance company’s financial strength, strategy, management, profitability and risk management, etc.
Due to terrorist activity all over the world, TrygVesta runs the risk of incurring substantial losses in case a major terrorist attack occurs in Denmark or Norway. The section Risk management contains an account of TrygVesta’s reinsurance of the risk of terrorist attacks.
& Pension, have prepared scenarios which show that a terrorist attack could result in Norwegian and Danish insurance companies losing their entire shareholders’ equity. Forsikring & Pension has initiated a dialogue with the Danish government to address this issue, and Finansnæringens Hovedorganisasjon has initiated a similar dialogue with the Norwegian government.
Norwegian stock market rose drastically due, among other things, to high oil prices, whereas the steep increase in the
Danish KBX index was spurred by good returns generated by small and medium-sized shares and favourable companyspecific news.
Haugesund Ventilasjon Service is now back to almost pre-fi re levels. The business has moved into a new building, which is fi tted with modern fi re protection systems, and the backup procedures have been tightened.
Service in Norway, was close to the worst experience a business owner can have in 2003. A fi re broke out in a private home next to the business, and the fi re spread explosively to Paul Edvin Bersaas’
‘All 40,000 square metres burnt down to the ground and we lost everything: our machines, products, furniture and equipment, and, worst of all, all our data and our backups. It felt like a living nightmare. But very quickly, a claims handler came from Vesta in Bergen. He assisted us in getting an overview, which helped us a lot during the fi rst days,’ says Paul Edvin Bersaas.
Considering the circumstances, Paul Edvin Bersaas is satisfi ed with the assistance from Vesta.
The initiatives launched in 2003 and 2004 yielded quicker and better results than expected, thereby giving us the opportunity to make increased investments in improving our customer service in the long term. As a consequence, we have only made few adjustments to our strategic focus areas for 2005.
We intend to maintain our focus on profitability in 2005, but at the same time we will retain our commitment to generating growth and development in our operations.
See Financial perspectives for additional information on the first, second and third waves of Nordic synergies. With the initiatives planned for 2005, we will embark on the next stage of our strategic transformation.
This means that we intend to focus exclusively on our Nordic customers in the future. We will meet our customers’ needs for peace of mind through general insurance and life and pension insurance products in cooperation with our partner Nordea.
In addition, we intend to invest in increased proximity to our customers – also outside claims situations. We will make ongoing efforts to ensure correct insurance for our customers through our service programmes.
Our focus on profitability remains unchanged, and our sales performance in Finland is a case in point that growth can be achieved without resorting to price competition. Our long-term ambition is to grow our market share from 22% to 25% in
In 2004, our focus on direct insurance in the Nordic countries spurred our interest in Swedish insurer Trygg-Hansa, which was put up for sale for a period of time by its owner. TrygVesta is currently contemplating alternative ways for gaining a foothold on the Swedish market.
We intend to strengthen the risk advice we provide to our corporate customers by applying and improving our strong competencies within risk management. Forging closer relations with our customers will position us as an active player in the ongoing efforts by businesses to professionalise their risk management. Our ambition to be an attractive partner within risk management applies to existing and new customers alike.
We use BSC to translate the general goals of our strategy into concrete actions and results within the fields of finance, customers, processes and employees.
BSC enables us to constantly maintain coherence between the strategy’s overall goals and the actions implemented throughout the Group. BSC makes the strategy more concrete and measurable and helps the individual employees prioritise their tasks in accordance with the overall focus of the Group and the business area.
Group as a whole and for their specific business areas. We believe that we will become better at implementing the strategy if all employees contribute to defining the activities required to attain our goals.
Danish, Norwegian and Finnish customers how they perceive the values that currently reflect our Group. In early 2005, our efforts were translated into a set of common values for employees and customers throughout the Group.
One of TrygVesta’s strategic focus areas in 2004 was to preserve and extend the existing profitable customer base.
We know from customer satisfaction surveys that customers having more than one policy with the company are more loyal than customers having only one policy. This is one of the reasons why we continually develop our concept philosophy, which offers customers cash benefits as well as added security when they take out all their policies with the company. You can read more in this section, which also describes all the benefits we derive from our partnership with Nordea.
The Tryg Firma concept targeting small businesses was also launched in 2004.
To the concepts, we add agreements such as Tryg Reparation and Tryg Bygning, under which we cooperate with selected garages, sewerage builders and plumbers. These agreements enable TrygVesta to offer much better services to customers with a claim, while our claims expenses are reduced, and the repairers’ turnover is increased.
S H A R E O F D A N I S H M U LT I P L E - P O L I C Y C U S T O M E R S
Vesta Avtalen is an offer to customers holding at least three policies. In addition to cash benefits, the customers are covered by an under-insurance guarantee. Psychological crisis therapy is available to them, and they are eligible for a rental car for up to ten days if their car is damaged and it is insured under a comprehensive policy with Vesta.
Nordea, which has 40% of the banking market for personal customers in Finland. Insurance sales continue to surge, and sales of new policies increased by 30% to 64,500 in 2004, while gross earned premiums increased by almost 60%. Of total sales, 5% was accounted for by the ‘Solo market’, Nordea’s electronic Internet marketplace. In 2004, the partnership resulted in TrygVesta achieving a market share of over 1.5%.
TrygVesta continuously seeks to meet any new demands that may arise. One example is unemployment insurance, which emerged as an important new business area for the insurance companies in 2003 and 2004.
More than 52,000 customers accepted TrygVesta’s offer of an approved smoke alarm given in a letter to more than 215,000 Danish concept customers in late November 2004.
A survey of Norwegians’ top insurance objects priorities puts children in fifth place – after their home, their car, the contents of their home and themselves. Although as many as 72% of the population were aware of the insurance companies’ children’s insurances, only 37% of the respondents had considered insuring their own children. Among those who had, only a small portion had actually taken out the children’s insurance. Accordingly, 900,000 children in Norway are not adequately insured.
When comparing the results for Denmark and Norway, it is important to consider the impact of diffferences of opinion and cultural differences between the two countries.
Satisfaction Index), the pan-European model for measuring customer satisfaction. The model’s standardised questions can be used by all types of businesses, and the results are therefore comparable with those of other insurance companies and companies in other industries.
This is the first time the survey in Norway was based on the pan-European EPSI model, and we are therefore unable to track a year-on-year trend. This year’s survey shows that compared with our Norwegian competitors, Vesta faces a challenge with respect to customer satisfaction and loyalty. We expect that the upcoming stronger positioning of TrygVesta’s brands both in Denmark and Norway and the further development of the
Group’s concept philosophy in the Norwegian market will provide the necessary boost.
‘Such an accident is annoying – I wish we could undo it. But now that it has happened, it’s a comfort that our insurances were in order and up to date. Imagine if they hadn’t been …,’
On the morning of 16 September 2004, Mogens Povlsen and his long-standing friend and colleague, Kaj Brødsgaard, were repairing a sowing machine. When they lowered the machine, the jack didn’t work properly, and the full weight of the one-and-a-half tonne sowing machine crashed down on
‘It hurt terribly. Normally, when something like this happens, you go into shock, but it just hurt too much. When we got the machine lifted and my boot off, we could see that something was really wrong,’ says Kaj Brødsgaard.
Kaj Brødsgaard, who had never had a work-related injury during his 45 years on the labour market, suffered two open fractures of his mid-foot. He was operated on and stitched up, and has had metal pins in his foot for the past four months.
There’s no doubt in Mogens Povlsen’s and Kaj Brødsgaard’s minds about how they rate Tryg’s handling of the matter: ‘I think that at most two weeks went by after the accident before everything had been settled by Tryg. We got a fair treatment. Kaj got preliminary damages for pain and suffering and for lost earnings. My liability and workmen’s compensation policy covered that. I’m glad we did not have to go to court –
you can easily imagine a lot of arguing, so we were very happy to have the matter settled so quickly,’ says Mogens Povlsen.
‘Once we had reported the claim and submitted the medical report, everything went smoothly. You hear a lot about how diffi cult these things can be, but we didn’t have to fi ght with
One of our strategic focus areas in 2004 was to adjust resources and expand synergies in the Group.
As always, all TrygVesta’s employees participated in an annual employee survey. For the first time, the questionnaire was identical in Denmark and Norway, and we introduced the former Norwegian model throughout the Group. Read about the results of the survey in the section Employees.
Our intranet gives all Norwegian employees access to detailed underwriting guidelines. The fast, electronic access makes it easier to offer a customer the correct insurance and ensures that the price matches the customer’s risk. TrygVesta is in the process of transferring the experience gained to other business areas as part of harmonising the Group’s operational risk management.
We are already generating synergies from using a common software package for customer servicing in both Norway and Denmark. The systems support communications across
Denmark and Norway, and experience from new solutions in one country is transferred to the other.
Surveys show greater satisfaction among customers who have reported a claim than among customers who have not had any claims. Furthermore, it is in the claims situation that TrygVesta must truly prove its ability to supply peace of mind. As a result of many years’ focus on and the continued development of good and competent claims handling, it is a natural part of
TrygVesta’s employees’ professional approach to stay focused on the customer’s needs in a claims situation. This has triggered an increase in customer satisfaction with our claims handling over the past few years, as witnessed by the BSC benchmarks in the section Strategy and goals.
In recent years, TrygVesta has focused on procurement in relation to claims, generating savings of more than DKK 100m in 2004 alone.
Tryg Bygning in Denmark. Under this service, customers with drain or sewer claims are offered to have the repairs made by one of the sewerage builders TrygVesta has a special collaboration with – for the benefit of the customer, TrygVesta and the sewerage builders. The service was extended in January 2005 to include plumbers.
TrygVesta is in the process of developing a similar service for contents insurance in Norway. This service involves that a customer whose personal property has been damaged or lost will be offered to buy a new product through a selected supplier.
The new service was introduced in the autumn of 2004, initially with respect to travel claims involving the customer’s loss of a mobile phone, PC, camera or video camera. The service will later be extended to a much larger range of areas. Eventually, the service will be transferred to Denmark, and similarly, Tryg
Customer servicing and enhanced efficiency are key words in a new process to handle motor claims TrygVesta intends to introduce this process in Denmark in 2005. The process and the underlying IT system support the dialogue between the employee and the customer. IT tools guide the employee through a number of questions when a customer phones to report a motor claim. This leaves more room for the employee to focus on the customer. In addition, the IT tool automatically handles all correspondence with the customer as well as with witnesses, the police and other insurance companies involved.
The request for payment of the deductible and a concluding letter to the customer have also been automated.
The alarm centre handles an increasing number of calls. This is because customers make increased use of the alarm centre, and because psychological and health claims have been included in the alarm centre’s tasks over the past couple of years.
Efforts to limit business interruption continued for all of 2004 and will last until September 2005. TrygVesta and the North Sea
Museum together launched marketing activities, including advertisements about the museum in newspapers and the local community. The aim was for the museum to remain in focus and to achieve a fair number of visitors. The museum had about 50% fewer visitors than normal in the summer of 2004 – despite reduced admission fees. Visitor volumes are expected to return to normal levels after the scheduled reopening of the museum’s large Oceanarium in the summer of 2005.
TrygVesta has had a common alarm centre since 2002, which is open round the clock for calls from Danish, Norwegian and
Alarm assists Danish customers requiring psychological crisis therapy or requesting to use their health insurance. On evenings, nights and weekends, the alarm centre also functions as a 24-hour claims service for Danish customers, who can call for assistance if their roof has been blown off in a storm or the basement is flooded.
December 2004 gave the alarm centre a busy time. The centre normally handles an average of 150 calls a day, but twice as many calls were received during the days following the tsunami.
We now expect claims to be in the lower range of this estimate.
Net of reinsurance, the storm is expected to entail expenses for
In early 2004, TrygVesta changed its overall organisational structure to be better able to act as one business. As a natural extension of the organisational, managerial and commercial integration, the Group launched a value process shortly afterwards.
The value process included an analysis of the position of Tryg-
Vesta brands even more strongly. This includes a comprehensive sales and service training programme throughout the
It is vital that managers themselves are clear about things in such a process in order for them to engage their employees.
TrygVesta’s managers remain one of the primary drivers in formulating and implementing solutions across the organisation.
Regular meetings of managers across Denmark and Norway have helped strengthen our in-house cooperation and knowledge sharing. Our management development programmes also focus on values. The big challenge for TrygVesta’s managers is to seek to achieve the necessary balance between good results and a good, albeit busy working environment. Stress management is also on TrygVesta’s agenda.
Furthermore, large-scale meetings have been organised for all employees in both Denmark and Norway, at which the Group
The launch of a shared intranet and a magazine for all employees after the summer of 2004 made it even more clear to most
High job satisfaction, fast pace – and room for the family
Our working environment was scrutinised in the first common employee satisfaction survey in TrygVesta, which was conducted in 2004. The survey showed that our employees are generally happy about working for the Group. Job satisfaction is high, and employees’ awareness of and expectations for their own role in the organisation is at a fair level, especially considering the relatively large organisational changes we implemented early in the year. The survey also showed a tendency to a fast work pace and a big work load. Like other organisations, we are facing a constant challenge of coping with phenomena such as stress and strain in a time of great demands and rapid change. We aim to achieve a balance between work and family life, and urge the Group’s managers and employees to discuss the distribution of work regularly, handling peak workloads by means of good planning.
TrygVesta’s ambition is to build the most profitable portfolio in the Nordic region within the next three to five years. Profitability remained our primary strategic focus area also in 2004.
A key target was to reduce the combined ratio to 100 in 2004.
Insurance companies have generated lower investment income due to the sharp fall in interest rates over the past five years, and the industry has been forced into a healthy process of refocusing on the profitability of the core business. Tryg-
In our efforts to define financial targets for the business areas, we use calculations from our financial Asset Liability Management model, which is described in the section Risk management.
TrygVesta’s corporate business improved significantly in 2003 and 2004. Since 2003, we have made targeted efforts to reassess the correlation between price and risk for each corporate customer. Premiums were increased for many customers in 2003, and at the same time TrygVesta required more safeguarding measures and higher deductibles. Despite the changes, most corporate customers kept their policies with
An exception from the positive trend is the Norwegian corporate and commercial customers’ workmen’s compensation and industrial diseases policies. Profitability has not yet been restored to these policies. The area is marked by an ever higher incidence of allergy-related diseases and lung diseases due to dust and poisonous substances in the working environment.
T E C H N I C A L R E S U LT I N T R Y G V E S TA
Denmark and Norway over the past few years. Some customers are astonished that premiums go up while claims numbers have fallen. The explanation is that premiums are required to match claims expenses, not the number of claims, and claims expenses have risen considerably because the average claim paid has doubled over the past five years.
This doubling was, in particular, attributable to the new Danish act on workmen’s compensation, which came into effect on 1
The new index, called the ‘Social Inflation Index’, is published by the Danish Insurance Association. It regulates premiums based on developments in private sector salaries, developments in the average occupational disability awarded by the National
In the past year, TrygVesta has enhanced its efforts in seeking subrogation – among other things by hiring employees in Norway who exclusively work with subrogation. These efforts have been successful financially.
TrygVesta. In other words, our active efforts to seek subrogation place the liability for a claim where it properly belongs.
WO R K M E N ’ S CO M P E N S AT I O N I NS U R A N C E W I T H T RYG V E S TA I N D E N M A R K
Part of the credit for the lower average claim is due to Tryg
Reparation. Under this agreement, customers who make a claim under their motor insurance get special service at the garage, while TrygVesta pays less for the repairs. When introducing such new methods we follow the claims calculations closely, and during 2004 the average motor claim among our
However, to ensure customers the greatest degree of peace of mind, we recommended that they keep the 5% limit, which means that they will also be compensated for minor injuries such as a sprained or broken knee, back or foot, or if they lose the tip of a finger.
In 2004, TrygVesta reviewed the products and services which the Group buys from the Norwegian postal service and switched to sending some of its letters by bulk mail, thereby saving several million kroner each year. Furthermore, the IT
As more and more personal and commercial customers prefer quick and efficient service by telephone or via electronic media, we will combine our competencies in five central customer centres in Denmark and three in Norway, which will be supplemented by local offices. Some of the existing offices will be merged, bringing more employees together. Customers will perceive us as being more accessible, as we will be less vulnerable when staff is off due to sickness, training and holidays, and more staff will be available to answer the telephones.
In early 2004, we implemented changes to the sales organisation in Norway. The new regional structure makes for better distribution among the different Norwegian sales channels: sales persons, franchise outlets, Nordea’s branches and car dealers. The change of the organisation has already yielded results in the form of new customers.
TrygVesta’s sale of its reinsurance company, TBi, its Polish subsidiary, Tryg Polska, and its Estonian subsidiary, Nordicum
Vesta, and we are considering ways of positioning TrygVesta in the Swedish market.
(S&P) rated us two grades better. This was very satisfactory since the rating was based on S&P’s knowledge of unpublished material from the TrygVesta Group and therefore much better founded than earlier ratings.
In May 2004, S&P assigned A- ratings with stable outlook to both Tryg and Vesta. In June 2004, Moody’s Investors Service
Group continues to move forward: TrygVesta is more profitable, generates more earnings than before, has enhanced its risk management and strengthened it capital base through positive management decisions.
These ratings were ‘pi-ratings’, which are based on publicly available information.
Looking for shared values Lisbeth Sjursen and Bent Lundorf, Bergen and Lyngby Employees of TrygVesta
‘The Group gets much better value for its money by allowing us to utilise our skills and resources on complicated cases. At the same time, we also fi nd such assignments more exciting and challenging. On the other hand, the number of assessors has fallen. This may result in stress at times,’ says Bent Lundorf.
Lisbeth Sjursen presented the value scouts’ report to management in late 2004.
Lisbeth Sjursen and the other value scouts will be offered to become value coaches from 2005 onwards. Their task will be to help embed the new values throughout the Group.
The storm in Denmark on 8 January 2005 was within the limits of a year’s normal claims experience and is incorporated in the forecast, although it increases the risk that total expenses in relation to storm claims may be greater in 2005 than in a normal year.
As a consequence of the transition to new accounting policies as from 2005, interest rate changes will affect both the technical result and the investment return – in opposite directions.
Under the policies applied so far, such changes only affected the investment result.
AC T UA L A N D FO R EC A S T CO M B I N E D R AT I O, N E T O F R E I N S U R A N C E
Relative to a normal year, 2004 was affected by the following: • Large losses at normal level
• Claims frequency in the mass market significantly better than normal level
• Above-normal performance for property and liability policies in the Corporate business area
In aggregate, these factors had a positive effect of 2 points on the combined ratio, net of reinsurance, relative to a normal year.
The forecast combined ratio, net of reinsurance, of 94 for 2005 thus reflects stricter earnings requirements and incorporates a number of factors intended to improve the performance.
The following factors in particular contribute positively to the forecast for 2005: • The divestment of the Polish and Estonian subsidiaries and the reinsurance company TBi
• The improvement of the correlation between price and risk in the personal area within the Corporate business area
The second wave of Nordic cost synergies will have a positive impact on profits in 2005 and 2006, while also facilitating a number of investments in customer-oriented initiatives. The overall effect is expected to be a reduction of approximately 1 point in the Group’s expense ratio relative to 2004. In addition, following the adoption of IFRS standards in our financial reporting, internal claims handling costs are to be included in the claims ratio and not in the expense ratio. This will further reduce the expense ratio by approximately 3 points, but increase the claims ratio accordingly.
TrygVesta is making targeted efforts to develop methods to measure and manage such risk, in particular in the areas of provisions, investments and reinsurance. As far as operational types of risk are concerned, TrygVesta focuses on management through a coherent structure of policies, business procedures and guidelines.
TrygVesta’s targeted risk management efforts are based on our ambition to operate a profitable insurance business while at the same time meeting our target of being the customers’
Examples of types of risk within the three main areas financial, operational and strategic risks
The Group’s CFO is responsible for the overall financial and operational risk management, comprising management of risks relating to TrygVesta’s investment activities, management and monitoring of operational risk, analyses of tariffs, provisions, Asset Liability Management and reinsurance.
Working together with the business areas, efforts are made to ensure that risk management is developed, coordinated and harmonised throughout the Group.
TrygVesta made targeted efforts in 2004 to define a risk management structure and implement it in the organisation.
The structure is based on a number of overall policies defined by the Supervisory Board. The policies lay down the framework for the circumstances in which TrygVesta will assume risks.
The overall policies are supplemented by detailed guidelines and business procedures prepared by the individual business and staff areas. A number of committees have been set up to ensure implementation of the overall policies in the business areas. These committees have been composed so as to ensure coordination across the Group, and, where required, they approve the implementation by the business areas of the relevant overall policy. The committees report to the Group Executive Management and may also act as an advisory body for the Executive Management in connection with questions within the field of each committee.
A ‘Policy and Strategy Room’ describing each individual policy has been created on the Group’s intranet in order to ensure that TrygVesta’s employees are familiar with the Group’s overall policies. Furthermore, our intranet gives all Norwegian employees access to detailed guidelines for writing individual products. TrygVesta is in the process of transferring the experience gained to other business areas as part of harmonising the Group’s operational risk management.
When the period of the insurance has expired, insurance risk relates to the provisions for claims – also referred to as the reserves – made to cover future payments on claims already incurred. A case in point is industrial injuries discovered many years after the policy was written. If TrygVesta’s provisions for claims are inadequate and have to be increased, the company incurs a run-off loss. Long-tail business is especially exposed to run-off losses, and history has shown that areas involving personal injury are subject to considerable risk. This risk is enhanced by the fact that a change in the claims record several years after the policy was written may be expected to affect all claims in the intervening period, with the result that premiums may lag far behind. Maintaining provisions at the correct level and monitoring developments is therefore a vital element in ensuring profitable insurance operations.
Work with the financial ALM model was given a more systematic structure in 2004. The model has been extended to cover the entire Group, and it describes risks affecting
During the year, we used the ALM model for a number of important aspects of planning and monitoring TrygVesta’s risks: • risk based allocation of capital as a basis for profitability assessments, tariff adjustments and budgeting
TrygVesta’s reinsurance department contributes to strengthening the analysis and model based support in connection with purchasing reinsurance.
The scope of the reinsurance department’s work is defined once a year in TrygVesta’s ‘Reinsurance and Security policy’, which is subject to approval by the Supervisory Board of
A S S E T L I A B I L I T Y M A N A G E M E N T M O D E L
TrygVesta has furthermore bought joint reinsurance in respect of the industrial and commercial customers’ property policies.
The cover is up to DKK 800m with a retention of DKK 50m per event (DKK 100m for the first event) and also comprises one-off events due to terrorist events. TrygVesta buys individual cover
Finally, TrygVesta has set up joint catastrophe reinsurance for its personal accident and workmen’s compensation policies. In early 2004, we reassessed the scenarios – the so-called Realistic Disaster Scenarios – on which our cover is based to include terrorist attacks. As a result of this work, TrygVesta increased its cover per event from DKK 350m to DKK 1,000m. TrygVesta’s retention was DKK 20m in 2004 and from 2005, it has been increased to
DKK 50m. We have increased this cover to DKK 1,500m as from 2005, and we estimate that it will be difficult to buy additional cover in the reinsurance market up to full terrorist cover.
The placing of reinsurance exposes TrygVesta to a credit risk from the reinsurers it contracts with. This risk is managed through TrygVesta’s Reinsurance and Security policy, which defines minimum credit rating requirements that must be met prior to signing a reinsurance treaty. The policy specifies that reinsurers must have at least a Standard & Poor’s BBB or similar rating in order for TrygVesta to cooperate with them on shorttail business up to 2.5 years. In the case of long-tail business over 2.5 years, reinsurers are required to be rated at least A by
BBB is the lowest rating that is considered ‘safe’. The scale is used to rate bonds issued by governments, banks and similar institutions as well as insurance and reinsurance companies. A + or – may be added to the letters for further grading.
S TA N D A R D & P O O R ’ S
As described under the heading Asset Liability Management, an increase in interest rates will trigger a fall in the value of Tryg-
Based on the investment policies, Group Investments define the operational framework for the asset mix, including limits on asset types and the duration, geographic distribution and risk profile of bonds, shares and real property, respectively.
Most of TrygVesta’s investment portfolio is then managed by external portfolio managers.
Most of the portfolio consists of mortgage credit and government bonds with AAA or equivalent ratings from leading credit rating agencies. Only a small part of the portfolio is made up of corporate bonds.
Vesta’s investment portfolio is therefore affected by fluctuations in interest rates, equity prices, exchange rates and real property prices.
The excess of the capital base reflects the low risk involved in
Financial Supervisory Authority’s realistic scenario (red-light scenario). The table ‘Investment risk’ shows investment risk at 31 December 2004 calculated on this basis.
If all the adverse impacts shown occurred simultaneously, the total effect on earnings would be DKK 1,004m or 16% of Tryg-
Vesta’s shareholders’ equity at 31 December 2004. By comparison, the effect would be equal to a 6.7 point deterioration of the combined ratio, net of reinsurance.
An unrealistic, albeit not inconceivable development would threaten the company’s solvency
An unrealistic, but not inconceivable development would not threaten the company’s solvency
‘I’m pleased that Taina Kujanen looks after my insurances as well as my banking requirements. It’s easy that all vital matters are handled in one place. It also seems natural for the bank to sell insurance.’
The policies were needed as late as last summer, when Seija
Korre stayed in her holiday cottage at Kirkkonummi – 50 km west of Helsinki. On a hot summer’s day a storm came on, triggering a thunderstorm. Seija Korre’s house was hit by lightning and caught fi re. Her house, sauna and car were badly damaged, but luckily nobody was hurt.
Profit/loss on gross business 279 95 1,826 1,017 -274 -225 -1,540
Profit/loss on ceded business -133 -204 -814 -1,135 -871 -329 552
Earned premiums, net of reinsurance 3,570 3,672 14,525 14,190 12,497 10,402 9,599 Technical interest, net of reinsurance 129 143 537 595 832 715 755 Claims incurred, net of reinsurance -2,661 -2,918 -10,296 -10,866 -10,422 -8,327 -8,014 Insurance operating expenses, net of reinsurance -763 -863 -3,217 -3,442 -3,220 -2,629 -2,573
Profit/loss for the period, continuing business 432 368 1,462 959 -1,817 73 340
Loss for the period, discontinued business -17 -84 -55 -217 -274 -22 -7
Profit/loss for the period 415 284 1,407 742 -2,091 51 333
Gross claims ratio, net of ceded business 75.4 80.3 72.6 78.3 83.6 80.1 82.9
Combined ratio. net of expenses to reinsurance 96.4 102.5 93.8 100.7 107.2 104.4 108.8
Annualised return on equity Return on equity before tax 33.9 21.7 -46.0 2.6 8.9 Return on equity after tax and discontinued business 24.5 15.4 -47.4 1.2 7.0
TrygVesta improved its financial results markedly in 2004, reporting a profit on ordinary activities of DKK 1,947m before tax and a return on equity of 33.9% before tax and 24.5% after tax.
2,014m relative to 2002 resulting from improved technical results in all of TrygVesta’s business areas.
Tryg-Baltica International (TBi). The profit from these activities was included in the ordinary activities until the time of sale.
Growth in earned premiums in TrygVesta’s three primary business areas was 3.4%. This figure was composed of growth in
& Commercial Norway of 2.1% and slightly weaker growth in the Corporate business area relative to 2003. It should be noted that growth in Personal & Commercial Norway was made up in the local currency. In addition, premium growth in the Corporate business area was influenced by the transition to net prices in business served by brokers, which reduced premiums by approximately DKK 160m, corresponding to just over 3% of the Corporate business area.
In addition, TrygVesta’s Finnish business recorded strong growth in 2004 through an increase in gross earned premiums by approximately 60% to DKK 97m. Since venturing onto the
Restructuring of the Group’s reinsurance programmes and the establishment of pan-Nordic reinsurance procurement reduced the reinsurance premium from DKK 2,512m in 2003 to DKK
In addition, the Group focused on costs during 2003 and 2004 and launched a number of targeted cost saving and efficiency improving measures both in staff functions and in the individual business areas. This contributed significantly to the improved profitability in 2004 and will continue to contribute to improvements during 2005 and 2006.
TrygVesta’s claims ratio, net of reinsurance, was reduced significantly in 2004 as well, now totalling 70.9, down 5.7 points relative to 2003. The reduction can primarily be attributed to recent years’ efforts to ensure a healthier correlation between risk and price, as described above.
Danish town of Kolding and by the tsunami disaster in Asia, which impacted TrygVesta’s claims by a total of DKK 128m, net of reinsurance, thereby increasing the combined ratio by 0.9 point. The flex job ruling by the Danish Supreme Court and the implementation of a broader definition of industrial disease in Norway affected claims adversely by an aggregate of DKK
412m in 2004 – an increase of DKK 140m over 2003.
In the short term, actual costs were reduced by DKK 225m relative to 2003. Likewise, the expense ratio was reduced from
Staff-related expenses make up 66% of total costs, and all things being equal pay increases resulting from collective agreements would have increased costs by DKK 72m in 2004.
Instead, TrygVesta reduced the cost level on a quarterly basis over the past year, thereby achieving in a net reduction of total costs of DKK 225m in 2004.
The cost reduction was implemented without any major staff retrenchment programmes.
L A R G E C L A I M S
TrygVesta laid the groundwork for additional efficiency improvements within our staff functions and continued focus on process improvements within the individual business areas.
This will contribute to a continued reduction of the expense ratio during 2005 and 2006, when the second wave of the
This figure was positively affected by capital gains on shares and bonds, albeit to a much lesser extent than in 2003, whereas it was only mildly affected by the divestments of the Polish and
Estonian subsidiaries and by the divestment of Tryg-Baltica International. The provision of DKK 179m to restructure the
The profit corresponds to a return on investments before divestment of subsidiaries of 4.7%, which was an increase of 0.2 point over TrygVesta’s benchmark. In the fourth quarter of 2004, we saw very favourable developments within shares in particular, which, overall, increased the return for the full year.
Tax on the profit for the year amounted to DKK 485m against
Other ordinary net income and expenses amounted to a loss of DKK 26m against a loss of DKK 16m in 2003. This amount primarily included holding expenses in TrygVesta and commission income less related expenses in connection with the sale and provision of life and pension products on behalf of Nordea.
The loss on discontinued activities amounted to DKK 55m, which was an improvement of DKK 162m over 2003, when the activities in England were put into run-off. This improvement was primarily due to accelerated run-off.
A C T U A L Q U A R T E R LY E X P E N S E S
TrygVesta’s total assets increased from DKK 31,337m in 2003 to DKK 33,553m in 2004. Liabilities included shareholders’
The return on equity was 33.9% before tax and discontinued activities against 21.7% in 2003.
Shareholders’ equity stood at DKK 6,117m at 31 December 2004, an increase of DKK 757m, corresponding to the profit for the year less dividends paid.
Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecJan
The technical result generated by Personal & Commercial Denmark recorded strong growth over the course of 2004, and despite events such as the fireworks factory blaze in Kolding and the tsunami disaster in Asia, the technical result increased by DKK 484m to DKK 604m in 2004.
In addition, TrygVesta made systematic efforts in this business area to reduce costs incurred in distribution and policy issuance in particular. Likewise, TrygVesta launched initiatives expected to reduce administrative claims handling expenses in the coming years.
Profit/loss on ceded business -22 -39 -99 -167 -180 -10 198
Claims ratio, net of reinsurance 82.7 75.2 72.5 76.3 81.2 82.7 85.1
Combined ratio. net of reinsurance 101.0 99.2 93.4 99.8 105.3 108.3 113.2
Ceded business as percentage of gross premiums 1.4 2.7 1.7 3.0 3.5 0.2 -4.4
Gross claims ratio, net of ceded business 82.8 75.9 72.9 77.1 81.9 82.6 85.3
The strong growth in the technical result was reflected in a combined ratio, net of reinsurance, of 93.4 in 2004, corresponding to an improvement of 6.4 points relative to 2003.
The claims ratio was 72.5 in 2004, down 3.8 points relative to 2003.
This improvement was achieved in spite of the profit being adversely affected by claims related to the fireworks factory blaze in Kolding in November 2004 totalling just over DKK 100m before equalisation. In particular, house and contents insurance were affected by these claims. The blaze affected the claims ratio by a total of approximately 1.5 points.
DKK 15m. The amount was reduced through reinsurance contracts, and the impact on TrygVesta’s financial results was therefore around DKK 8m.
The claims performance in workmen’s compensation and personal accident insurance was not satisfactory in 2004, and it was therefore necessary to strengthen TrygVesta’s reserves.
The adverse developments led to a strengthening of reserves in the amount of DKK 175m in these two areas. The unsatisfactory trend in workmen’s compensation is due, among other things, to run-off losses as a result of the ‘flex job ruling’ by the
TrygVesta allocated equalisation provisions as a result of favourable weather conditions.
Expenses developed very satisfactorily with an expense ratio of 20.9, down 2.6 points relative to 2003.
In particular, recent years’ focus on distribution costs proved successful. Moreover, TrygVesta laid the groundwork for future cost savings on claims handling in 2004. In recent years,
aimed at making substantial efficiency improvements within processes related to quotations and policy issuance processes, while improving the level of quality.
This project was carefully planned, and we have therefore been successful in reducing our staff primarily through natural wastage, thereby achieving cost savings without resorting to layoffs to any significant extent.
The explosions and blaze that hit fi reworks plant N.P. Johnsens
Fyrværkerifabrik in Kolding, Denmark, in November 2004 also hit around 275 of Tryg’s personal customers. Many lost their homes in the course of a few hours, and it will take long into 2005 before all houses have been repaired or rebuilt.
In the week that followed, more than 20 claims assessors from
Funen and Jutland went from house to house to assess the extent of the damage. One of them was Henning Holluf Nielsen, who normally works in Svendborg, Funen. It was a challenge meeting so many customers in a crisis: ‘My colleagues and I got an update on psychological crisis therapy to prepare us to meet with the customers. We were told that when we meet people who are in a bad state, they may conceive things we say differently from what they normally do. We were also taught how as colleagues we could help each other get our mind off things at the end of each working day.’
DKK/NOK rate, quartely/annual average 90.71 90.80 88.79 93.68 98.46 92.16 91.71
Profit/loss on gross business 122 152 700 155 43 -172 -2
Key ratios, net of reinsurance Claims ratio, net of reinsurance 57.9 62.0 58.4 72.1 77.4 70.6 65.9 Expense ratio, net of reinsurance 31.5 24.6 25.9 26.3 27.9 26.7 28.9
Gross key ratios Gross claims ratio 58.9 61.4 59.1 71.9 72.0 79.4 71.6 Ceded business as percentage of gross premiums 1.8 1.4 1.9 2.0 5.4 -7.7 -4.4
Combined ratio, net of expenses to reinsurance 90.6 87.7 86.0 98.6 104.4 97.8 95.7
The Norwegian market is influenced by geographical and weather-related conditions, which caused in particular house claims and weather-related claims to affect results very differently from year to year. The 2004 financial year benefited from a combination of highly favourable weather conditions and a very limited number of large fire claims within house insurance.
TrygVesta made substantial equalisation provisions in respect of the Pool of Natural Perils in Norway. The Pool of Natural Perils is primarily used to equalise expenses related to windstorms and flooding.
In 2004, the technical result was affected by falling Norwegian interest rates as expressed by a technical interest, net of reinsurance, of DKK 140m relative to DKK 204m in 2003.
The increase in gross premiums reflected recent years’ premium increases, satisfactory sales growth but also larger than expected customer movements. This trend applies especially to the personal customer segment and should be viewed in conjunction with the highly satisfactory profitability in a competitive market.
The positive development of the technical result was reflected in a combined ratio, net of reinsurance, of 84.3, which was a strong improvement of 14.1 points relative to 2003. As mentioned earlier, the improvement was influenced by the claims frequency for house insurance which cannot be expected to continue unchanged in the years ahead.
Following considerable increases in the claims frequency for motor insurance in 2002 and 2003, we experienced a drop in 2004, which had a positive effect on the claims ratio. Within house insurance, we have seen a trend in recent years towards a declining claims frequency, but the 2004 claims frequency for house insurance was recorded at a mere index 77 as compared with index 100 in 2000. This unusually low figure can be attributed to favourable weather conditions and significantly fewer house fires than in a normal year.
Asia in December 2004 resulted in claims of NOK 28m. Like in
Denmark, the Norwegian claims were covered by reinsurance, and the share payable by Personal & Commercial Norway was around NOK 12m.
In the fourth quarter of 2004, costs were adversely affected by a non-recurring impact from harmonisation of the Group’s depreciation policies.
K irk e n e s L a k s e lv
Gunhild Horn from Vesta’s offi ce in Tønsberg, Norway was spending her Christmas holidays at Patong Beach, Phuket,
‘The earthquake woke us, but we did not give it much thought.
Somebody said a bomb had gone off on the beach. Later we heard about a giant wave. There were very different reactions at the hotel. Some people bathing in a pool that was not affected continued as if nothing had happened. Others helped themselves in the bar when the frightened staff disappeared.’
The locals brought us food and water, and they offered us shelter for the night. Luckily I had my mobile phone. I called TrygVesta
A total of 277 Danish and Norwegian TrygVesta customers were affected by the disaster. Injuries suffered by Danish and
Norwegian tourists and damage to their luggage as a result of the tsunami in Asia will cost TrygVesta DKK 28m after taking into account the reinsurers’ share.
Profit/loss on gross business 188 -2 680 762 -94 341 -629
Key ratios, net of reinsurance Claims ratio, net of reinsurance 78.8 96.5 81.9 82.5 96.2 88.0 100.0 Expense ratio, net of reinsurance 12.5 17.3 15.2 18.6 18.2 17.8 19.0
Gross key ratios Gross claims ratio 70.9 83.5 71.4 68.5 85.3 73.3 101.8 Ceded business as percentage of gross premiums 8.4 9.9 11.9 15.4 7.1 12.9 -6.5 Gross claims ratio, net of ceded business 79.3 93.4 83.3 83.9 92.4 86.2 95.3
Combined ratio. net of expenses to reinsurance 92.9 110.1 97.7 100.7 108.9 104.0 114.0
The performance is satisfactory and to a large extent due to the substantial general price adjustments implemented in 2002 and 2003. These adjustments were necessary to ensure profitability in this market, which showed a highly unsatisfactory underlying profitability in 2000 and 2001. The adjustments enabled TrygVesta to allocate increased resources to dialogue with individual customers concerning risk preventive measures – an area which will also be in focus in 2005.
Relative to 2003, the financial results were affected by falling interest rates in Denmark and Norway as expressed by a technical interest, net of reinsurance, of DKK 190m in 2004 as compared with DKK 209m in 2003.
Gross earned premiums stood at DKK 4,786m in 2004, down 7.8% relative to 2003, with exchange rate developments contributing negatively by DKK 120m, which corresponds to approximately 2.5 percentage points.
Denmark alone increased by 50% in 2004 as a result of new legislation.
Overall, the Corporate business area has become much more profitable, although earnings in this area have yet to reach the level of earnings generated by the mass markets in Denmark and Norway.
The positive development of the technical result was reflected in a combined ratio, net of reinsurance, of 97.1, which was an improvement of 4.0 points relative to 2003. The Corporate business area was furthermore affected by large fluctuations in year-on-year financial results. This is quite natural in a market where single, large claims may have a substantial impact on the financial results in a given year. The underlying business has improved since 2002. The less than satisfactory performance in 2002 was attributable to substantial large claims occurring that year.
As in 2003, provisions for claims in respect of prior years were strengthened significantly. In particular the flex job ruling in
– a fire at a Danish laminated wood factory amounting to DKK
100m. The combined ratio was affected by the full amount of this claim. However, it did not impact the technical result to any noteworthy extent, as part of the claim was covered though equalisation provisions.
The positive trend in the expense ratio was primarily due to lower absolute costs in 2004 compared with 2003, as a result, among other things, of changed principles for settlement to brokers and general cost constraint. Moreover, the corporate business was characterised by a significantly lower level of costs than in the business areas catering to the mass markets.
Long wait in telephone queue when fl ames consumed everything The Stokke family, Oslo Customers with TrygVesta, Norway
‘On the fi rst day after the fi re we did not think highly of Vesta.
We only had the clothes on our backs, and when we called
Vesta from the mobile phone to report the fi re and ask for help, we were told we were number 14 in line. We left a message, but they didn’t call us back. When we fi nally got through, we were told that the staff had gone to lunch,’ says Kjell Torgeir
Torgeir Stokke ended up by sending a letter to Vesta, thanking them for ‘exemplary’ treatment after having met ‘understanding and calm, commendable customer handling.’
‘The house was my childhood home, it was built in 1947 and it had our family’s soul embedded in its walls,’ says Kjell Torgeir
Stokke. ‘It was very diffi cult to walk through 12 ruined rooms.
We were therefore relieved to fi nd that Vesta did not come forward as our adversary, but as a partner with the same cause, just as interested in fi nding good solutions as we were.’
But the process we expected to be a long fi ght against a hostile insurer turned out for the best,’ says Kjell Torgeir Stokke.
Profit/loss on gross business -10 -10 -47 -49 -63 -28 -
The increase was primarily due to a strengthening of the partnership with Nordea, which handles the sale of insurance through its branches and its Internet portal, Solo Market.
Sales of new insurance business developed satisfactorily in 2004. A total of 64,500 insurance policies were sold in 2004, an increase of 30% over 2003. Nordea has a share of some 40%
The technical result amounted to a loss of DKK 45m, which was in line with expectations, and the results returned by the Finnish business should be viewed as an investment. It is therefore extremely encouraging that growth in the volume of business during the company’s short existence has been as planned. The share of the Finnish personal market totals over 1.5%.
The combined ratio, net of reinsurance, improved by 33.4 points relative to 2003.
The expense ratio, net of reinsurance, was 80.0, down 23.8 points relative to 2003. The positive trend was primarily due to the increase in earned premiums.
This increase was mainly attributable to a rise in commissions in step with increased sales and costs related to further development of IT systems supporting the development of the business.
The increase in expenses was furthermore related to the fact that the Finnish business is still in the start-up phase with considerable depreciation of previous investments in an insurancetechnical IT system. Depreciation amounted to 26% of costs.
Business in run-off generated a technical loss of DKK 54m compared with a loss of DKK 246m in 2003.
As was expected, gross earned premiums in respect of business in run-off fell to DKK 30m from DKK 631m in 2003.
The run-off process has progressed as expected in 2004, but is still subject to some uncertainty. The parent company has provided a total amount of DKK 346m in this respect. The provision amounted to DKK 383m in 2003.
(TBi) and of the general insurers Tryg Polska in Poland and Nordicum Kindlustus in Estonia in the autumn of 2004.
The result includes a profit of DKK 17m for TBi until 30 September 2004 against a loss of DKK 10m for 2003. The Polish company is included at a loss of DKK 26m until 30 November 2004 against a loss of DKK 49m for 2003, while the Estonian company is included at a loss of DKK 2m until 17 December 2004 against a loss of DKK 1m for 2003.
Reference is made to the section Financial highlights and key ratios by geographical area for data in respect of the activities in TBi, Poland and Estonia.
Financial communication to the level of listed companies Per Grønborg, København Equity analyst with Alfred Berg ABN AMRO
Even if you are not a listed company, nothing prevents you from acting like one. At any rate not as regards the quality of your fi nancial communication. Equity analyst Per Grønborg of investment bank Alfred Berg ABN AMRO is satisfi ed with Tryg-
Vesta’s communications to the fi nancial market: ‘If TrygVesta were a listed company, its fi nancial market communications would rank high among its peers,’ says
‘Strangely enough, the company actually communicates at a higher level today than when it was part of a listed company.
Per Grønborg has respect for TrygVesta’s strong fi nancial performance: ‘First and foremost, TrygVesta has been extremely competent in streamlining the organisation and becoming more effi cient.
‘Should the company decide to retain the mutually-based ownership structure, or should it prepare for an IPO? Unlike some years ago, the issue of procuring capital is no longer the main factor when considering a possible listing,’ says
TrygVesta’s investments yielded a total return in 2004 before transfer to technical interest and other financial income and expenses of DKK 1,244m, equivalent to 4.7%. The return was affected by positive returns on bonds, shares and real property.
Throughout 2004, TrygVesta maintained a high proportion of highly liquid bonds in its portfolio for security and rating considerations. The share portfolio increased by DKK 820m in 2004 resulting from net investments, divestments and rising share prices. This did not give rise to major changes in the asset location.
Vesta yielded returns of 3.5% and 2.6%, respectively. By comparison, a Danish government bond index with a term to maturity of 1-3 years yielded 3.2% in 2004.
The option-adjusted duration, including cash and cash equivalents, of the entire Group’s bond portfolio was 1.3 years at 31 December 2004 against 1.8 years at 31 December 2003.
Vesta’s strong focus on the money market and expectations that interest rates would increase during the year.
Secondly, international equity mandates are placed in low tracking error portfolios, that is, the portfolio return is expected to more or less match the benchmark return. TrygVesta intends to maintain a diversified international equity portfolio in order to minimise risk relating to any single market or any single company. In both Denmark and Norway, the five largest companies account for some 55% of the index, while the five largest components of TrygVesta’s total equity portfolio account for 9.3%.
The annual report has been presented in accordance with the Danish Insurance Business Act and the Danish Financial Supervisory
Mikael Olufsen Mogens Jacobsen Per Skov chairman deputy chairman deputy chairman
We have audited the annual report of TrygVesta A/S for the financial year 2004. The annual report is presented in accordance with the Danish Insurance Business Act.
Management. Our responsibility is to express an opinion on the annual report based on our audit.
We conducted our audit on the basis of the Danish Financial
Supervisory Authority’s executive order on the presentation of consolidated financial statements by financial enterprises and financial groups and in accordance with Danish Auditing
Standards. These standards require that we plan and perform the audit to obtain reasonable assurance that the annual report is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the annual report. An audit also includes assessing the accounting policies used and significant estimates made by Management, as well as evaluating the overall annual report presentation. We believe that our audit provides a reasonable basis for our opinion.
We agree with Management’s comments on the pro forma figures, including the view that the figures make the annual report more informative with respect to the technical operations.
The consolidated financial statements and the annual report of TrygVesta A/S have been prepared in accordance with the
Danish Insurance Business Act and the Danish Financial Supervisory Authority’s executive orders on the presentation of consolidated financial statements by insurance companies and financial statements by general insurance companies.
Apart from the changes described below, the accounting policies are unchanged from last year.
TrygVesta has adopted IFRS 5 for presentation of discontinuing operations in the annual report 2004. The key provisions of
IFRS 5 are that discontinued activities shall be consolidated in one line in the income statement and supplemented with disclosure of the discontinued activities in a note to the financial statements. Recognition of the balance sheet items in respect of the discontinued activities is unchanged in the respective items. The comparative figures, including financial highlights and key ratios, have been restated accordingly.
Discontinued activities in the income statement include the post-tax profit of TrygVesta’s business in run-off. Business in run-off comprises the wholly-owned subsidiary Chevanstell
The above change in accounting policies does not affect the results for the year or shareholders’ equity. The combined ratio, net of reinsurance, for 2004 and 2003 improved by 0.6 and 1.9 points, respectively.
A few items in the income statement and balance sheet have been reclassified relative to last year. The reclassifications do not affect the results or shareholders’ equity.
Management’s review and the financial highlights and key ratios present pro forma comparative figures for 2000, 2001 and 2002 prior to the formation of TrygVesta A/S as at 28
These sections of the annual report specify where pro forma comparative figures are included. Pro forma comparative figures have been included in the annual report in order to provide more information in the annual report with respect to the technical operations of the general insurance companies forming part of TrygVesta irrespective of the former ownership of these companies.
The pro forma comparative figures are stated on the basis of a consolidation of the companies forming part of the Group as at 31 December 2003.
Tryg-Baltica Forsikring, internationalt forsikringsselskab A/S is included in the pro forma figures until the date of divestment,
Tryg Polska SA and Nordicum Kindlustuse Eesti AS are included from the date the companies were acquired by Tryg Forsikring
The consolidated financial statements comprise the financial statements of TrygVesta A/S (the parent company) and undertakings (subsidiary undertakings) controlled by the parent company. See the section Group overview. Control is achieved where the parent company directly or indirectly holds more than 50% of the voting rights or is otherwise able to exercise or actually exercises a controlling influence.
The proportionate share of the profit and shareholders’ equity of subsidiaries attributable to minority interests is stated separately in the statement of the consolidated profit and consolidated shareholders’ equity.
The results of foreign subsidiary undertakings are based on translation of the items in the income statement at quarterly average exchange rates. Income and expenses in domestic undertakings denominated in foreign currency are translated at the exchange rate ruling on the date of the transaction.
Technical interest represents a calculated return on the average technical provisions. The interest rate applied is the year’s average pre-tax yield to maturity on all bonds with a term to maturity of less than three years.
Amounts to cover expenses incurred to combat and contain losses and to survey and assess claims are included in the item.
In addition, the item includes run-off results regarding previous years. The part of the increase in technical provisions which can be ascribed to discounting is transferred to technical interest.
Costs are based on estimated time consumed or the estimated cost charge and are distributed in the statement by line of insurance and between acquisition and administrative expenses.
Premiums, claims and commissions relating to reinsurance accepted included in the income statement are generally stated on an estimated and assessed basis and accrued relative to expiry of the contracts. Commissions relating to unearned premium provisions are recognised under ‘Prepayments and accrued income’.
Realised and unrealised investment gains and losses, including value adjustment of land and buildings, are recognised in the income statement.
Investment administrative expenses represent expenses relating to the management of investments. Brokerage and commission is included in the purchase and selling price of investment assets.
TrygVesta A/S is jointly taxed with Tryg i Danmark smba and the majority of its subsidiary undertakings. Tax relating to the jointly taxed income is recognised in the jointly taxed Danish companies in proportion to their profit. Changes in deferred taxes or deferred tax assets are recognised in the companies having the liability or the claim.
Discontinued activities represent the parent company’s share of the post-tax profit of TrygVesta’s business in run-off.
Business in run-off comprises the results of the wholly-owned subsidiary Chevanstell Ltd. UK and business in run-off in
Land and buildings are measured at market value in accordance with the guidelines issued by the Danish Financial Supervisory Authority. The guidelines provide for the market value of the Group’s land and buildings to be determined based on a systematic annual assessment of each individual property taking into account the expected future operating returns and a return requirement for each property.
Equity investments in associated undertakings are measured at the parent company’s proportionate share of the shareholders ’ equity of the undertakings at 31 December.
Deposits comprise amounts owed to the company in respect of reinsurance business accepted, and retained by ceding undertakings pursuant to reinsurance contracts.
Amounts owing are measured at nominal value less a provision for any losses.
Computer equipment held under finance leases is treated as if purchased by the company. The lease debt is included in
Other accruals and deferred income comprise prepaid expenses. Prepaid acquisition costs mainly comprise the part of commission expenses to other insurance companies etc.
Provisions for claims represent amounts to cover claims incurred before the balance sheet date, whether reported or not. Provisions for claims are calculated on the basis of information available concerning the extent of the losses plus an amount based on past experience to cover claims incurred but not reported. The provisions include direct costs of combating, containing, inspecting and assessing claims. Long-tail provisions calculated using statistical methods are discounted.
Provisions for annuities relate to compulsory workmen’s compensation insurance in Denmark, which is settled by payment of annuities. The provisions are calculated using the fixed-rate method at the present value by discounting expected future payments.
Financial Supervisory Authority. For workmen’s compensation insurance in Denmark, equalisation provisions are calculated as the difference between the technical provisions made up at basic interest rates of 2.00% and 2.75%, respectively. In addition, equalisation provisions comprise the compulsory Norwegian Pool of Natural Perils in Vesta Forsikring AS, Norway.
It is not expected that future movements in technical provisions will result in a crystallisation of tax on the contingency reserve. The untaxed contingency reserves etc. are disclosed in a note to the financial statements under shareholders’
The cash flow statement shows the actual inflow and outflow of payments for the year divided into cash inflow from operations, and changes in cash and cash equivalents resulting from the purchase or sale of investment assets as well as funding activities. The item ‘Cash and cash equivalents’ comprises cash at bank and in hand and demand deposits.
In 2004, TrygVesta conducted a process with a view to adopting international financial reporting standards (IFRS) beginning 1 January 2005.
Effective from the 2005 financial year, all listed companies in the EU are required to present consolidated financial reporting in accordance with the IFRS standards (IAS standards). Up till now, the financial sector in Denmark has been required to prepare their financial statements in accordance with rules published by the Danish Financial Supervisory Authority.
In order to prepare for the introduction of the EU requirements for the presentation of financial statements by listed companies, the Danish Financial Supervisory Authority issued new accounting rules for financial companies in Denmark in 2004, which are consistent with IFRS.
The rules issued by the Danish Financial Supervisory Authority limits some of the options available under IFRS. Furthermore, the disclosure requirements are less comprehensive, and in a few respects, the rules are inconsistent with IFRS. On the other hand, the statutory order is more farreaching than the present
Some of the rules are still in a draft version and subject to change until 31 December 2005. Furthermore, some standards already published are still subject to interpretation.
Equalisation provisions have so far represented amounts included to equalise future claims, net of reinsurance, in areas where experience has shown that claims vary. Equalisation provisions in TrygVesta comprise
• equalisation provisions in credit and guarantee insurance calculated in accordance with rules laid down by the Danish
• the difference between technical provisions in workmen’s compensation in Denmark made up at basic interest rates of 2.00% and 2.75%, respectively
IFRS requires discounting of provisions for claims, net of reinsurance, if such discounting is sizeable. This requirement will reduce the provisions for claims.
In future, provisions for claims are required to include a provision to cover direct and indirect costs in connection with runoff on the provision for claims. Such costs were previously expensed as incurred.
IFRS requires provisions to be established for long-term employee benefits such as anniversary awards and pension benefits. Such costs were previously expensed as incurred.
The TrygVesta Group recognises untaxed contingency fund provisions in Norway and to a lesser extent untaxed contingency fund provisions in Denmark. Previously, no deferred tax was provided in respect of such provisions.
A tax liability will only materialise in respect of contingency fund provisions if all or part of the insurance portfolio is transferred or sold.
Whether deferred tax must be provided in respect of such provisions is subject to uncertainty. TrygVesta has, however, decided to provide for deferred tax on contingency fund provisions in both Norway and Denmark.
Direct and indirect claims handling costs to be recognised in claims incurred
Claims incurred will in future include direct and indirect claims handling costs – contrary to the previous practice, under which only the costs of claims assessors were included in this item.
It is no longer required to determine the estimated rent of own properties used in the company’s operations. TrygVesta owns a few headquarter properties in Denmark relating to the decentralised organisation as well as the headquarter property in Norway, and the future expense ratio will be reduced by the estimated rent.
The Group Gross earned premiums 3,954 4,209 16,308 16,702 15,792 12,620 11,152
Key ratios. net of reinsurance Claims ratio, net of reinsurance 74.5 79.5 70.9 76.6 83.4 80.1 83.5 Expense ratio, net of reinsurance 21.4 23.5 22.2 24.3 25.8 25.3 26.8
Combined ratio, net of reinsurance 95.9 103.0 93.1 100.9 109.2 105.4 110.3
Combined ratio, net of expenses to reinsurance 96.4 102.5 93.8 100.7 107.2 104.4 108.8
Profit/loss on ordinary activities before tax 336 282 1,245 839 -185 0 407
Key ratios, net of reinsurance Claims ratio, net of reinsurance 84.1 77.4 74.3 75.4 83.3 82.6 83.9 Expense ratio, net of reinsurance 17.1 21.4 19.4 21.2 22.2 24.2 26.6
Combined ratio, net of expenses to reinsurance 101.1 98.9 94.1 96.9 104.7 106.0 109.7
Norwegian general insurance Gross earned premiums 1,701 1,745 6,614 7,161 7,111 5,134 4,170
Profit/loss on ordinary activities before tax 286 107 817 359 -331 160 81
Gross key ratios Gross claims ratio 59.1 73.1 62.7 72.9 75.8 76.1 86.6 Ceded business as percentage of gross premiums 6.0 5.1 6.9 7.8 9.2 3.1 -4.1
Combined ratio, net of expenses to reinsurance 88.5 100.3 90.8 103.1 107.6 101.2 106.9
Combined ratio. net of reinsurance 134.2 151.4 148.6 182.0 493.5 1,886.2 -
Gross claims ratio. net of ceded business 63.3 70.7 68.7 78.5 103.5 91.1 -
Profit/loss on ordinary activities before tax - -69 24 0 -110 -13 -55
Combined ratio, net of expenses to reinsurance - 137.1 99.7 105.3 118.1 103.6 113.7
Polish general insurance Gross earned premiums 98 118 473 491 496 462 361
Combined ratio, net of reinsurance 116.9 140.9 112.6 119.2 111.7 106.3 120.5
Gross key ratios Gross claims ratio 85.1 75.3 69.8 65.2 61.2 59.4 70.7 Ceded business as percentage of gross premiums -9.2 17.6 1.9 9.3 6.5 7.7 1.4
Number of full-time employees at the end of the period 0 523 495 489 494
Gross claims ratio, net of ceded business 80.3 78.7 66.6 69.0 82.1 - -
Number of full-time employees at the end of the period 0 76 82 - -
Business in run-off Gross earned premiums -19 125 30 631 1,211 921 552
Number of full-time employees at the end of the period 34 41 63 55 49
Claims incurred Gross claims paid -9,493 -10,531 Reinsurance recoveries 929 1,716 Change in the gross provisions for claims -1,502 -1,424 Change in the reinsurers’ share of the provisions for claims -205 -642 3 Claims incurred, net of reinsurance -10,271 -10,881
Insurance operating expenses Acquisition costs -1,701 -1,936 Administrative expenses -1,761 -1,809
Total income from investment assets 1,086 1,191 7 Unrealised gains on investment assets 240 489
Total return on investment activities 517 685 4 Other ordinary expenses -26 -16
Investments in associated undertakings 12 Equity investments in associated undertakings 28 14
Other loans 0 70 Deposits in credit institutions 116 415 14 Total other financial investment assets 27,417 22,780
Amounts owing Amounts owing in connection with direct insurance business From policyholders 817 931 From insurance brokers 119 350
Other assets Furniture, equipment, computer hardware, motor vehicles, etc. 173 312 Cash in hand and at bank 490 558
Accounts Income statement, balance sheet and cash flow statement for TrygVesta
Provisions for other risks and charges Provisions for pensions and similar obligations 169 141
Debt Debt related to direct insurance 367 391 Debt related to reinsurance 485 520 Debt to credit institutions 609 656 Debt to subsidiary undertakings 37 0 Corporation tax 95 0 Other debt 607 647 Dividend for the financial year 650 50
Total liabilities 33,553 31,337 23 Capital adequacy 24 Forward transactions, etc. 25 Contingent liabilities 26 Intragroup transactions
Funding Capital increase 0 400 Subordinate loan capital 0 700 Dividend paid -50 0 Change in debt to credit institutions 91 -703
Change in cash and cash equivalents, net 23 -169 Price adjustment of cash equivalents, beginning-of-year -11 -54 Additions relating to sale of subsidiaries -5 0
4 Insurance operating expenses, net of reinsurance Commission regarding direct business -360 -543 Other acquisition costs -1,341 -1,393
Other ordinary items include holding expenses and income and expenses related to the sale of products for Nordea Life and Pension.
Remuneration for the Executive Management is paid by Tryg Forsikring A/S and Vesta Forsikring AS and is charged to TrygVesta A/S via the cost allocation.
Remuneration for the Executive Management 10 7 Remuneration for the Supervisory Board 3 2
Marine, Accident & workmen’s Motor Motor Aviation & health compensation TPL comprehensive cargo 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
Change in other insurance provisions 6 -2 -1 0 -30 10 0 0 0 0
Technical interest, net of reinsurance 104 109 1 12 149 152 50 62 39 14
Balance on the technical account -206 -465 -389 -250 -112 -188 855 690 113 53
Change in other insurance provisions 0 0 0 0 0 0 0 7 0 0
Balance on the technical account 1,456 376 -93 -40 1) Personal accident and health insurance includes one-year group life policies of Vesta Forsikring AS, see above.
10 Intangible assets Acquisition sum Balance 1 January 142 99 Foreign exchange adjustment 1 0 Additions during the year 14 43
Book value 31 December 112 119 11 Land and Buildings Acquisition sum Balance 1 January 1,871 3,091 Foreign exchange adjustment, beginning-of-year 14 -100 Additions during the year 39 289 Disposals during the year -75 -1.409
Depreciation and write-downs Balance 1 January -54 -77 Write-downs during the year 0 -48 Reversal of write-downs 2 5 Write-downs, real property disposed of 0 66
Of which property used by the companies for their operation 263 358
In the year, equity investments in associated undertakings have been transferred from unlisted shares
Shares in associated undertakings according to annual accounts Shareholders’ equity Ownership share %
Nordisk Flyforsikring A/S, Copenhagen, Insurance The company was established at the end of 2004. 50 28 Bilskadeinstituttet, Oslo, property 4 30 Eidsvåg Fabrikker, Bergen, property 31 28 13 Capital participation Book value 3,104 2,309
Shareholding of more than 5% of the company share capital The company shareholders’ equity Ownership share according to the latest annual reports 2004 2004
Account Data A/S, Frederiksberg 1 14 Forsikringsakademiet A/S, Hørsholm Kommune 32 12 A/S Forsikringens Hus, København 42 12 Finansnærings huset, Oslo 36 15 Privathospitalet Hamlet af 1994 A/S, Frederiksberg 24 6 Lofoten Trålerrederi, Stamsund 45 10 Riksheim Henningsvær, Henningsvær -1 10 Minox Technology, Notodden -4 8 Høyteknologisenteret, Bergen 94 8
14 Other financial investment assets Book value Capital participation 3,104 2,309 Unit trust units 246 18
Acquisition value Capital participation 2,884 2,218 Unit trust units 225 25
Other loans 0 70 Deposits in credit institutions 0 100 15 Tax assets Land and buildings 43 63 Bonds and loans secured by mortgage -20 -59 Operating equipment and provisions, etc. 141 227 Other assets 9 36
Tax loss to be carried forward 0 135 16 Shareholders’ equity Share capital Balance 1 January 1,700 1,300 Capital increase during the year 0 400
The share capital is distributed in shares of DKK 100 or multiples thereof
Retained profits Balance 1 January 692 0 Transferred from Share premium account 2,968 0 Transferred in accordance with Distribution of profit 757 692
Including provisions calculated with regard for discounting: Workmen’s compensation (Denmark) 1,146 793
19 Equalisation provisions Financial guarantee insurance 270 270 Workmen’s compensation 119 94 Windstorm and large perils 120 185 Equalisation provisions for Norwegian general insurance 1,021 869 Other insurance 0 6 20 Other insurance provisions, net of reinsurance Provisions for life insurance, indirect insurance 0 1 Provisions for open financial years 1 0 Provision for unexpired risk 48 81 21 Other provisions Costs of restructuring and run-off 0 179
Weighted assets 5,545 3,999 24 Forward transactions, etc. Forward transactions, etc Market value Purchase of interest derivatives 2,583 1,025 Sale of interest derivatives 0 1,218 Forward purchase of foreign currency 9 122 Forward sale of foreign exchange 6,959 5,599 Unsettled deals 1,322 281
Acquisition value Purchase of interest derivatives 2,590 1,026 Sale of interest derivatives 0 1,212 Forward purchase of foreign currency 9 122 Forward sale of foreign exchange 6,974 5,795 Unsettled deals 1,322 299 25 Contingent liabilities Surety, guarantee and lease agreements, etc. beyond insurance obligations do not exceed 325 425
Additional circumstances Tryg Forsikring A/S and Vesta Forsikring AS have signed an operating agreement with CSC for an amount of DKK 634m for a period of 4-5 years.
The companies of TrygVesta have concluded reinsurance treaties and agreements about interest payment on current accounts based on market terms.
Note Investment activities Income from investment activities 1 Income from subsidiary undertakings 2,009 1,104 2 Interest and dividends, etc. 38 43
Unrealised gains on investment assets -1 0 Exchange rate adjustment 0 -12
Total return on investment activities 1,979 1,068 3 Other ordinary expenses -32 -22
Note Assets Investments in group and associated undertakings 6 Capital participation in subsidiary undertakings 6,625 5,771 6 Equity investments in group undertakings in respect of discontinued activities 125 158 6 Loans to subsidiary undertakings 600 600 7 Investments in associated undertakings 14 0
Debt Debt to credit institutions 601 601 Other debt 11 21 Dividend for the financial year 650 50
Total liabilities 8,079 6,732 11 Capital adequacy 12 Contingent liabilities 13 Intragroup transactions
Note 1 Income from subsidiary undertakings Tryg Forsikring A/S 2,009 1,104
Beyond this expenses are defrayed to the Group’s Internal Audit Department.
Note 6 Capital participation in subsidiary undertakings Acquisition sum Balance at 1 January 6,809 6,190 Additions by non-cash contributions 0 2,546 Divestments during the year 0 -2,527 Capital increase during the period 0 600
Write-downs Balance 1 January -880 -1,606 Profit for the year of subsidiaries 1,471 795 Write-downs of subsidiaries divested 0 -19
Share- Ownership Profit for holders’ Name and registered office interest % the year equity
Tryg Forsikring A/S, Ballerup 100 1,471 6,750 The company has advanced a subordinate loan of DKK 600m to Tryg Forsikring A/S.
11 Capital adequacy Shareholders’ equity according to the annual report 6,117 5,360 Capitalise tax assets -3 -6 Solvency requirements to affiliated undertakings -2,447 -2,610
Weighted assets 5,545 3,999 12 Contingent liabilities The company is jointly taxed together with most companies of the TrygVesta Group, and they are jointly and severally liable for payment of imposed tax.
The company is part of some disputes the outcome of which is not estimated to affect the financial position of the company.
13 Intragroup transactions The management fee is fixed on a cost-covering basis.
Tryg Forsikring A/S Ballerup Denmark 1,471 100 1,100 6,750 Vesta Forsikring AS Bergen Norway 624 100 779 3,074 Enter Forsikring AS Bergen Norway 53 100 50 169 Slettebakksveien AS Bergen Norway 0 100 7 29 Respons Inkasso AS Bergen Norway 2 100 0 1 Thunes Vei 2 AS Bergen Norway 5 100 52 55 Dansk Kautionsforsikrings-Aktieselskab Ballerup Denmark 73 100 193 408 ApS SMBK nr. 98 Ballerup Denmark 0 100 0 0 Chevanstell Ltd. London UK -32 100 619 125 ApS KBIL 9 nr. 2032 Ballerup Denmark 0 100 0 0 Tryg Ejendomme A/S Ballerup Denmark 22 100 1 460 TrygVesta IT A/S Ballerup Denmark 0 100 1 1
Claims incurred, net of reinsurance -981 -1,346 -4,133 -4,892 Insurance operating expenses, net of reinsurance -371 -382 -1,336 -1,377
Balance sheet Technical provisions 13,203 12,470 Total shareholders’ equity 1,383 936 Total assets 16,029 14,431
Key ratios Claims ratio, net of reinsurance 62.2 85.5 67.1 81.5 Expense ratio, net of reinsurance 23.5 24.2 21.7 22.9
TrygVesta is the second-largest general insurer in the Nordic region. The Group comprises Tryg, Denmark’s largest general insurer with a market share of just over 22%, Vesta, Norway’s third largest insurer with a market share of around 19%, guarantee insurer Dansk Kaution and a rapidly growing branch in Finland.
TrygVesta furthermore has a partnership with CSC, which handles the Group’s IT operations.
TrygVesta’s some 3,800 employees represent quality, advice and service, both to the individual personal customer and to the large industrial enterprise with several thousand employees.
TrygVesta has about two million customers. The Group generates premiums of DKK 16.3bn annually. Its employees processed 500,000 claims and paid claims in the amount of
Vesta was established in 1880, and the name Vesta is derived from Roman Mythology. Vesta is the goddess of hearth, home and family.
In 1995, Tryg and Baltica merged to become Tryg-Baltica, which name was changed to Tryg in 2001.
Nordea. One year later, Tryg set up a branch in Finland to sell insurance to Nordea’s Finnish banking customers.
Nordicum Kindlustus. These three divestments are in line with TrygVesta’s strategy to focus on direct Nordic general insurance.
Tryg is Denmark’s largest general insurer. Tryg has some 2,230 employees and sells insurance through in-house service centres, insurance brokers in the industrial and upper commercial markets, and through Nordea’s branch network. In addition,
Vesta is Norway’s third-largest general insurer. Vesta has some 1,450 employees and sells insurance through in-house offices, an extensive franchise network, insurance brokers in the industrial and upper commercial markets, and through Nordea’s branch network. In addition, Vesta sells Nordea’s pension products.
Dansk Kaution specialises in guarantee insurance for Danish enterprises concluding major agreements, especially within the construction and contract manufacturing industries.
Sirius International, a member of the White Mountains Insurance Group, Ltd. The transfer is expected to be finalised by 1
TrygVesta’s Polish subsidiary was sold to HDI International, a member of the Talanx Group, in December 2004. The agreement is subject to the usual regulatory approvals, which are expected to be in place by the end of the first quarter of 2005.
Danmark smba, which is referred to as Tryg i Danmark in the following.
The principal objects of Tryg i Danmark are to hold shares in companies that carry on insurance business and any other business permitted under Danish legislation governing financial business. Another object of Tryg i Danmark is to support activities and services that benefit Danish insurance customers. This activity is carried out under the name of
Tryg i Danmark is a company with limited liability registered with the Danish Commerce and Companies Agency. Members of the company are Danish policyholders from time to time in
The Board of Representatives is the supreme authority of the company, and the Supervisory Board of Tryg i Danmark is elected by and among the representatives. The Supervisory
Board is responsible for the overall management of Tryg i Danmark ’s operations, including for exercising the voting rights on the company’ shareholdings. However, matters of material strategic importance for TrygVesta are submitted to the Board of Representatives before the Supervisory Board exercises the voting right on the shares in TrygVesta A/S. Likewise, the annual report of TrygVesta is reviewed by the Board of Representatives prior to the Supervisory Board’s decision to adopt the annual report at the general meeting of TrygVesta A/S.
In January 2004, the Supervisory Board of Tryg i Danmark resolved to simplify the overall management structure and ensure an effective interaction between the supervisory boards and executive managements of the Group’s companies. This was done by arranging total duality of membership on the
The TrygVesta Group was formed in 2002 when Tryg i Danmark bought Nordea’s general insurance operations. During
TrygVesta’s first year, the Supervisory Board devoted many management resources to defining and implementing
In 2004, the Supervisory Board also focused on corporate governance issues and held a two-day seminar to review the
The Committee’s recommendations include the following eight main areas: 1. The role of the shareholders and their interaction with the management of the company 2. The role of the stakeholders and their importance to the company 3. Openness and transparency 4. The tasks and responsibilities of the Supervisory Board 5. The composition of the Supervisory Board 6. Remuneration to the members of the Supervisory Board and the Executive Management 7. Risk management 8. Audit
Being a large financial group, TrygVesta has large corporate social responsibility and has therefore adopted an open communications policy. TrygVesta’s communications generally comply with the requirements for listed companies and make extensive use of the Group’s web site.
TrygVesta’s reporting on the interaction with stakeholders includes the Group’s annual report and the ongoing external and internal dialogue.
As required for listed companies, TrygVesta will also be adopting IFRS standards in its financial reporting beginning in 2005.
things, on regular and systematic discussions of the company’s policies for the relevant main areas with subsequent follow-up.
See also the description in this annual report of the company’s operational management and follow-up.
The duties of the Supervisory Board are laid down in rules of procedure, which specifically describe the duties and the special tasks of the chairman and of the chairman and the deputy chairman acting together.
The Supervisory Board currently comprises eight members elected by the General Meeting. All these members also sit on the Supervisory Board of Tryg i Danmark. In addition, the
In the current situation with Tryg i Danmark being the sole shareholder of TrygVesta, Tryg i Danmark and TrygVesta have coinciding interests, and the Supervisory Board therefore considers the duality of membership appropriate. Similarly, the number of Board members reflects the aggregate competence requirements of the supervisory boards of the two legal entities.
TrygVesta comprises two Danish and one Norwegian employee. TrygVesta is a company registered in Denmark, but as the Group also has substantial operations in Norway it has agreed with the employee organisations to ensure employee representation from both countries.
The members of TrygVesta’s Supervisory Board are up for election each year. They are eligible for re-election.
The Supervisory Board carries out an annual self-assessment of the work of the Supervisory Board and the Executive Management and an evaluation of the work and the efficiency of the cooperation between the Supervisory Board and the
TrygVesta is an unlisted company with only one shareholder, and members of the Supervisory Board and the Executive
Being an insurance group subject to public supervision and continuously monitored by rating agencies, TrygVesta’s risk management is organised professionally and monitored in all relevant dimensions.
Risk is measured and managed centrally at group level for all the Group’s companies.
The Supervisory Board regularly receives and considers detailed audit reports from the appointed auditors and the internal auditors.
The Supervisory Board of TrygVesta A/S consists of eight members elected by the General Meeting and three employee representatives. TrygVesta’s Group Executive Management consists of five members, of whom three are members of the
All five are members of the Executive Management of the operating company Tryg Forsikring A/S.
Danish and Norwegian companies have a 30-year tradition for having board members elected by employees. This tradition is reflected by provisions in the Danish Public Companies Act and the Norwegian Insurance Company Act, respectively, which aim to improve employee influence on and insight into how a company is managed.
Norwegian legislation prescribes that one-third of the board members, including alternates, must be elected by and among a company’s employees, whereas Danish legislation provides that 50% of the remaining board members, but not less than two, and a corresponding number of alternates must be elected from among the employees.
A/S consist of two employees of Tryg Forsikring A/S and one employee of Vesta Forsikring AS. This composition is based on an agreement with TrygVesta’s staff associations that the two employee-elected Board members representing Tryg Forsikring A/S and the one employee-elected Board member representing Vesta Forsikring AS are entitled to be appointed as members of the Supervisory Board of TrygVesta A/S.
The remuneration to the five members of the Executive Management of TrygVesta consists of a fixed salary and a variable salary, which cannot exceed three months’ salary, and which depends directly on the Group’s financial performance. The variable salary of the CFO is much less dependent on financial results than the salaries of the other members of the Executive
Management are subject to 12 months’ notice and are entitled to severance pay corresponding to 12 months’ salary. However, the Group CEO is subject to 18 months’ notice and is entitled to severance pay corresponding to 12 months’ salary.
receive a fixed annual remuneration. Ordinary members receive the same amount, whereas the two Deputy Chairmen and the Chairman receive 75% and 150% more, respectively.
Deputy Chairman of the - Executive Committee of the Danish Rheumatism Association
Vice Chairman of the Board of - Trustees of the Egmont Foundation - Egmont International Holding A/S
Board member of - Britisk Import Union - Danmark-Amerika Fondet - Toptex PLC Borino, Bulgaria - BHJ GARANT s.r.o., The Czech Republic - BHJ FARUTEX Sp.Zo.o., Poland
Chairman of the Board of Directors of - Utility Development A/S
- Renholdningsselskabet af 1898 - Råstof og Genanvendelse Selskabet af 1990 A/S
Chairman of the Board of Representatives of - Sogn og Fjordane Bustadbyggelag
Member of the - Executive Committee of the Danish Financial Services Union
Member of the - Executive Committee of the Organisation of Danish
Ms Stine Bosse, CEO of Tryg and Group CEO of the Tryg Vesta
Member of the Executive Management of - Tryg i Danmark smba - TrygVesta A/S
Chairman of the Supervisory Board of - Tryg Polska Towarzystwo Ubezpieczen SA
‘Accounting policies’ describes the income statement and balance sheet items in more detail.
Claims incurred, net of reinsurance x 100 Earned premiums, net of reinsurance
Danish general insurance comprises the legal entities Tryg Forsikring A/S (excluding the