Tryg is the second-largest non-life insurance company in the Nordic region.
Our 3,300 employees provide peace of mind for more than 3 million customers and handle approximately 950,000 claims annually.
Run-off gains/losses, net of reinsurance 301 241 1,239 1,212 1,131 970 1,015
Return on equity after tax (%) a) 24.1 32.0 26.2 20.0 23.7 21.8 22.3
Net asset value per share (DKK) 34.37 34.16 38.46 37.41 36.18 Ordinary dividend per share (DKK) 6.20 b) 6.00 5.80 5.40 5.20 Proposed extraordinary dividend per share (DKK) 3.54 Premium growth in local currencies 1.7 -1.6 0.1 -0.8 -1.1 -2.7 -0.1
2016 was characterised by many initiatives with a focus on customers. To accelerate decision-making processes for the benefit of customers, our organisational structure was changed with more responsibilities and decision-making powers being delegated to the management teams in the individual countries early in the year. This has, among other things, resulted in the establishment by the Private organisations in both Denmark and Norway of a front-office function, which ensures that customers are met by employees who can process claims, provide advisory services and effect sales. In summer 2016, our Danish customers received the first member’s bonus payout by TryghedsGruppen, amounting to 8% of total premiums for 2015. Tryg is continuously following up on customer satisfaction as reflected in our
We posted a profit of DKK 2,471, which was an improvement compared to 2015. The results were achieved through customer focus, improved products and further optimisation of operations.
Tryg has a strong focus on developing and marketing new products. New products have been launched in areas with growth potential, such as children and pets. Commercial and
Tryg continues to work concertedly to reduce costs and to negotiate favourable agreements for the procurement of claims services, ensuring that Tryg operates as efficiently as possible for the benefit of customers and shareholders. Risk management is in many ways key to running an insurance business – covering everything from the overall risk management of Tryg as a company to the pricing of our products.
2016 was the first year with the Solvency II rules, and according to these rules Tryg has a solid capital base. This creates peace of mind for customers and supports Tryg’s dividend policy.
Being a shareholder in Tryg must be attractive, and we attach importance to distributing stable and increasing dividends to shareholders in accordance with Tryg’s dividend policy.
DKK 3.60 per share for the second half of 2016, resulting in a total payout of DKK 6.20 per share in 2016. Based on our good results and solid capital position, the Supervisory
Board has decided to propose that an extraordinary dividend of DKK 1,000m for 2016 be paid in 2017 concurrently with the introduction of quarterly dividend payments.
Tryg upgraded to ’A1’ Moody’s upgraded Tryg from ‘A2’ to ‘A1’ with a stable outlook.
Denmark hit by storm On 26 December, Denmark was hit by a storm. Tryg received approx. 1,600 claims. Northern Jutland and the Copenhagen area were hit the hardest.
‘A2’ rating from Moody’s Tryg was assigned an ‘A2’ financial strength rating with a positive outlook from Moody’s. At the same time, the rating agreement with Standard & Poor’s was terminated.
Opening of The Camp 5 October 2016 was the official opening of The Camp, a co-work space for start-ups at Tryg’s head office in Ballerup. The Camp contributes to innovation, developing Tryg’s current and new business.
Members’ bonus paid In March 2016, TryghedsGruppen’s Board of Representatives decided to pay out a bonus to its members (Tryg’s Danish customers), corresponding to 8% of the premium paid for 2015. On 1 June 2016, a bonus of DKK 696m was paid to members.
Moderna, best company of the year For the fourth year running, Tryg’s branch in Sweden, Moderna, was named insurance broker of the year in the commercial and corporate segments.
Tryg surpassing the general level of employee satisfaction in the financial sector in the region.
S E G M E N T S Private, Commercial and Corporate
Tryg, part of the company’s profit is returned to customers, who are also members of TryghedsGruppen.
C L A I M S H A N D L I N G
• Expense ratio ≤14 actly the impact will be on the insurance business remains an open question. So far, the development of more technically advanced cars has led to a reduction in the number of people who are injured in car accidents, but at the same time it is also clear that the more advanced cars are much more expensive to repair.
This goes, especially, for the insurance of people, pets and technology. Based on these developments, Tryg has been actively acquiring companies in these areas and developing new child insurance, pet insurance and cyber insurance products.
Norwegian economy remained challenged in 2016, especially in the oil-related areas, although the Norwegian economy is generally very strong.
Tryg has a strong focus on both financials and customers, and targets have therefore been set for both areas. Financial and customer targets are inextricably linked. Loyal customers mean high retention rates, keeping the expenses associated with attracting new customers low, thereby contributing to a low expense ratio. With the financial results posted for 2016, Tryg is on track to meeting the financial targets defined for 2017. In 2016, Tryg had a strong focus on improving the customer experience in all parts of the organisation to improve its performance on customer-related parameters.
Tryg has set up four strategic initiatives to support its financial and customer targets. The strategic initiatives for 2017 are unchanged from 2016.
of 22 as set at the Capital Markets Day in 2014.
To develop the skills and boost the motivation of managers and employees, Tryg continued to use the SuccessFactors suite of tools in 2016, which allows corporate KPIs to be cascaded down throughout all management and employee levels.
The Nordic insurance market is characterised by consumers and businesses that have largely covered their insurance needs, combined with relatively low rates of economic growth. Profitability in the insurance industry is generally high as the vast majority of companies focus on earnings rather than growth. Customers are generally loyal to their insurance company based on good customer service and claims handling processes. For customers looking for a new insurance provider, competition is always intense, generally combined also with a focus on profitability.
Motor insurance accounts for a significant share of the non-life insurance market, and the insurance business therefore closely monitors how technical developments affect this area. With the development of the autonomous car, the motor insurance market is expected to shrink in the future. What ex-
Norway, Tryg has a very high level of digital customers. This is reflected in more than 1 million online visits in 2016. For direct customers, all relevant claims can be filed online. Tryg will continue to develop digital solutions in 2017 and going forward capitalise on the developed solutions to reduce expenses and claims costs.
Corporate Social Responsibility (CSR) is an integrated part of Tryg’s core business. Through insurance, claims handling and prevention, we work to create peace of mind and value for our customers, employees and shareholders. This means that CSR plays a constant role in the decisions we make, in the improvement and development of our products and services, in the optimisation of our operations and in the positive contributions which we make to society at large through our activities. Read more on pages 36-38.
Tryg launched a new efficiency programme in 2015 with the aim of further reducing claims and direct costs by DKK 750m by the end of 2017, with DKK 500m relating to claims and DKK 250m to expenses. The programme is on track, and significant structural changes were implemented in 2016 in both the Norwegian and Danish organisations. In Norway, two major structural initiatives were implemented in 2016, and in Denmark the merger of customer service and claims handling for the less complicated products was a significant initiative. The continued development of digital solutions and initiatives directed against fraud will also support reaching the targets for 2017.
In 2017, weather claims net of reinsurance and large claims are expected to be DKK 500m and
Generally speaking, an interest rate increase of 1 percentage point will increase the pre-tax result by around DKK 300m and vice versa.
DKK 500m relating to the procurement of claims services and administration and
DKK 375m in 2017 after targets for 2015 and 2016 of DKK 125m and DKK 250m.
Some of the claims initiatives relate to previous claims years and will therefore impact the run-off.
The investment portfolio is divided into a match portfolio corresponding to the technical provisions, and a free portfolio. The objective is for the return on the match portfolio and changes in the technical provisions due to interest rate changes to be close to zero.
From 2016, the curve used for discounting technical provisions changed due to the implementation of the Solvency II directive, and this might result in slightly more volatile match portfolio net results. The new curve increases the interest rate risk of the technical provisions, thereby introducing a larger difference between the match return and the changes in the technical provisions.
The return on bonds in the free portfolio will vary, but given current interest rate levels, a low return is expected. For shares, the expected return is around 7% with the MSCI World Index as the benchmark, while the expected return for property is around 6%. Investment activities also include other types of investment income and expenses, especially the cost of managing investments, the cost of currency hedges and interest paid on loans.
The return on equity for 2016 was 26.2%, and the combined ratio was 86.7. Tryg is well-positioned for meeting the targets for 2017.
Tryg expects growth in gross premium income of 0-2% in local currencies in 2017.
Tryg will continue to take an active approach to acquiring smaller portfolios and developing the market for products which are expected to see higher growth rates such as pet and child insurance.
Markets Day in November 2014, Tryg therefore announced that the run-off level going forward was
A result after tax of DKK 2,471m impacted by one-offs. Proposed H2 dividend of DKK 3.60 per share equivalent to a full-year dividend of DKK
(DKK 2,423m), positively affected by the ongoing efficiency programme, which contributed savings of
The efficiency programme and price adjustments of around 3% had a positive impact on profitability as reflected in an improved trend through-out the year.
In 2016, a slightly higher level of claims inflation was observed for the profitable motor insurance area. Tryg believes that this is driven by an increase in accident numbers as well as the use of more expensive spare parts primarily in medium/highend models. For extended warranty insurance of electronic goods, a smaller product area, claims inflation was also observed. To improve the underlying claims level, and following on from the price adjustments made in 2016, Tryg will be implementing further price adjustments corresponding to around 3% in 2017.
• Proposed H2 dividend of DKK 3.60 and DKK 6.20 per share for 2016
The investment result was impacted by the sale of investment properties and domiciles, which had a positive impact on the investment result of
DKKm adjusted Q4 2015 adjusted adjusted 2016 adjusted for DKK 250m, primarily related to write-downs on intangibles and DKK 500m extraordinary capital gain on the sale of properties. 2015 adjusted for the one-off charge of DKK120m related to the effieciency programme.
The Net Promoter Score (NPS) was unchanged at 22 at the end of 2016. There was a positive development for especially Private customers in
Tryg also measures customer satisfaction after customers have been in contact with Tryg, defined as the Transactional Net Promotor Score or TNPS.
At 88.0, the retention rate in 2016 was slightly lower than in 2015 at 88.1. The retention level was more or less unchanged for Private in Denmark and Norway. The retention rate dropped somewhat for Commercial in Denmark due to selected price initiatives whereas for Commercial Norway, the retention rate improved due to improved customer focus.
In 2016, Danish customers received their first members’ bonus from TryghedsGruppen. The 8%
Tryg expects the bonus to provide an important competitive advantage by improving customer loyalty and customer targets. TryghedsGruppen has announced that they expect to make recurring bonus payouts, but that payouts will be decided each year by TryghedsGruppen.
Corporate customers, Tryg launched a cyber insurance product in autumn of 2016. Going forward,
In Private in both Denmark and Norway, a structural initiative was implemented involving the integration of customer service and claims handling for the most simple products. This integration supports Tryg’s overall ambition of first-contact resolution as employees can handle claims and also advise customers about their insurance needs. The integration also supports up-selling and increasing the number of customers with three or more products.
Danish Private business, which posted premium growth of 1.8%. The members’ bonus supported this development, and at the same time the successful conversion of customers to new products resulted in many customers buying add-on covers, thereby increasing premium levels. Premium growth for Private Norway was slightly negative by 0.5%, which was ascribable to the competitive situation and a weakened economic situation in Norway. The development was also due to a lack of distribution power, and several structural initiatives were initiated in 2016 to address this. The initiatives reduced backoffice costs, and some of the savings were invested in more distribution power through an upscale of the
Nordea was strengthened through the establishment of outbound teams in Nordea branches.
Nordea and the delegation of more powers to the sales organisation were important initiatives aimed at increasing Tryg’s distribution power.
The acquisition of Skandia’s child insurance portfolio had a positive impact of approximately 5% in 2016. The Swedish business compensated for the loss of distribution power following the loss of two large affinity agreements through an increase in sales via our own sales channels.
The gross claims ratio was 65.6 (75.4), with a claims ratio, net of ceded business, which covers both claims and business ceded as a percentage of gross premiums, of 71.0 (71.5). Adjusted for one-off effects, the claims ratio, net of ceded business, was 70.5 (71.2). The claims level was positively impacted by the efficiency programme in the amount of
DKK 145m due to a combination of the improved procurement of claims services and claims administration. The negative impact from large claims and weather claims was more than offset by higher run-offs and had a positive 2.8 percentage point net impact on the claims ratio.
In 2016, a number of initiatives were implemented to mitigate the claims inflation seen especially for property claims. A team dedicated to controlling pipe claims had a positive impact on the development in claims, but at the same time, an increase was seen in salaries for construction workers in Denmark due, among other things, to public building projects.
Motor insurance continues to be very profitable, but in 2016 an increased claims frequency was seen, while it is also apparent that average repair costs for cars will increase due to the use of more advanced electronic solutions in cars. As mentioned, the development in claims will be mitigated through price adjustments averaging 3% in 2017.
The claims-related measures implemented in 2016 included initiatives that bring injured policyholders back to work. This initiative is positive for the injured policyholder and for the employer getting the employee back to work, and also for Tryg through a reduction of claims expenses. As these claims typically relate to claims for previous years, the savings support the run-off level. In 2016, the use of the In4mo system continued to generate savings in different areas, for example from cash settlements.
Urd hit Denmark and Norway with an esti mated im pact of DKK 60m. Large and weather claims were approximately DKK 300m lower than average level of DKK 1,050m a year. The run-off level was 7.0%
The expense ratio was 15.7 (15.3). Adjusted for one-off costs, the expense ratio was 14.8 (14.9).
No steep drop in the expense ratio was expected in 2016 as the organisation has been very focused on implementing initiatives that have limited effect in 2016, but which support the target of an expense ratio at or below 14 in 2017. The initiatives have been most visible in the Norwegian part of the organisation. The initiatives introduced in both the first and second half of 2016 generally focused on reducing back-office functions with the aim of reducing expense levels and increasing distribution power. In Denmark, the initiatives centred mostly around the integration of our customer service and claims handling functions. In Q4, the Danish part of
Commercial reduced the number of support functions in sales, while at the same time delegating more powers to the sales force. In the Danish part of Corporate, the number of sales departments were reduced from three to two, reducing the number of back-office employees.
DKK 29,105m and is made up of bonds which match the insurance provisions so that fluctuations resulting from interest rate changes are offset to the greatest possible extent. At 31 December 2016, the value of the free portfolio totalled
The main purpose was to create a more diversified investment portfolio in accordance with Tryg’s overall risk profile, and also to enter into less risky and more flexible agreements for the domiciles.
Other income and costs were primarily impacted by write-down of goodwill of DKK 100m related to the acquisition of Securator.
DKK -1m (DKK 49m) was realised on discontinued business, comprising adjustments on provisions, primarily relating to the marine run-off business.
In 2016, Tryg paid DKK 529m in income tax as well as various payroll taxes totalling DKK 417m, resulting in total tax payments of DKK 946m.
DKK 5.1bn at the end of 2016, which is on a par with the level as at 1 January 2016, when Solvency II went live. At the end of 2016, Tryg’s own funds were DKK 9,850m (after deducting the H2 dividend and the proposed extraordinary dividend of DKK 1bn) against DKK 10.3bn on 1 January 2016. During the year, own funds were mostly impacted positively by net profits and negatively by dividends and buy backs. Additionally, Tryg issued
The Supervisory Board regularly assesses the need for capital adjustments. In 2017, Tryg has decided to announce the payment of DKK 1bn in extraordinary dividend after assessing the company’s capital plan, in which the SCR is projected on the basis of
According to Tryg’s dividend policy, the aim is for the dividend to be steadily increased. For H2 2016, a dividend of DKK 3.60 per share is proposed, corresponding to a total dividend of DKK 6.20
from ‘A2’ to ‘A1’ with a stable outlook. In its press release, Moody’s noted that the ‘A1’ IFSR reflects Tryg’s leadership position in Property & Casualty (P&C)
Profit after tax was positively affected by the ongoing efficiency programme, which had an impact of DKK
Premiums developed positively by 1.7% (-1.6%) in local currencies. In Private, the positive development continued with growth of 1.3% (1.1%) in local currencies, reflecting strong growth of 2.7% in the
(DKK 242m) impacted by sale of investment properties and domiciles and high returns on several asset classes
On 26 December 2016, Denmark was hit by the storm ‘Urd’. Northern Jutland and the Copenhagen area were hit the hardest. The event was officially recognised as a flood event. Tryg received 1,600 claims, which impacted the result by approximately DKK 60m.
Profit/loss on gross business 407 334 1,566 1,438 Profit/loss on ceded business -40 -51 -158 -148 Insurance technical interest, net of reinsurance -1 2 -4 8
Key ratios Premium growth in local currencies 1.3 1.1 0.8 0.3
(85.4). The development was attributable to a combination of positive impacts from the efficiency programme, a lower level of weather claims and a higher level of claims especially from the property lines of business. The development in premiums was positive and improved compared to 2015, and the expense ratio was at a significantly lower level.
The gross premium income development im proved by 0.8% (0.3%) in local currencies, which was in line with the improvements seen since 2013. Premiums increased by 1.8% in Denmark, which was very satisfactory given also that the average price of motor insurance continued to fall by 0.6 percentage points. In Norway, premium income declined by 0.5%
In Denmark, the NPS score improved from 29 to 35, and in Norway there was a slight drop from 22 to 21. The members’ bonus from TryghedsGruppen is expected to have a positive impact on customer loyalty among Private customers in Denmark. In 2016, more than 500,000 insurance policies were converted to new and more updated products. As the products are more correctly priced, this also means that some customers will experience a higher price, and the conversion is therefore expected to have a slightly negative impact on retention rates.
The retention rate in Denmark dropped slightly to 89.7 from 89.9, while in Norway the retention rate was unchanged at 86.4. The number of customers with three or more products increased from 56.7%
The gross claims ratio totalled 67.8 (69.0), with a claims ratio, net of ceded business, of 69.6 (70.7).
The improvement was ascribable to the efficiency programme and a lower level of weather claims.
(Norway), interest organisations, car dealers, estate agents and Nordea branches. The business area accounts for 49% of the Group’s total premium income.
Norwegian economy. The positive development in the NPS score continued in Q4 with an improvement of six percentage points to 35 in Denmark and a slight drop from 22 to 21 in Norway. The retention rate in
The expense ratio was 13.9 (13.4). As mentioned, focus in 2016 was on implementing initiatives that will reduce expenses in 2017. Employee numbers increased by 16 in Q4 2016 to 929 due to the transfer of claims employees to the Private area.
• Tryg Care – Professional help from psychologists for customers experiencing a personal crisis
The development in gross premium income was negative by 1.3% (-2.9%) in local currencies, which was a significant improvement compared with 2015, but at the same time an unsatisfactory development. The drop in premiums was slightly higher in the Norwegian part of Commercial. The development in the Danish part was affected by price hikes to improve profitability for property, which among other things led to a drop in the market share for large agricultural customers. In Norway, the market was generally very competitive and also impacted by the slowdown in the Norwegian economy. In both Norway and Denmark, structural initiatives were implemented to support an improved development in premiums.
The gross claims ratio totalled 61.1 (65.4), with a claims ratio, net of ceded business, of 65.1 (66.5).
The lower claims level was ascribable to a combination of lower weather and large claims, but also a lower run-off result. The claims level for property improved through the selected price and pruning initiatives. Due to price increases, exposure to the segment of large agricultural customers was reduced, which had a positive impact on profitability. There is still a need for selected price adjustments in the Commercial area, especially for property. These price adjustments will be implemented in 2017.
Combined ratio exclusive of run-off 92.2 91.3 89.9 93.3 Run-off, net of reinsurance (%) -9.4 -6.3 -7.8 -9.7 Large claims, net of reinsurance (%) 2.8 1.9 2.2 6.7 Weather claims, net of reinsurance (%) 1.9 4.8 1.6 2.8
Commercial encompasses the sale of insurance products to small and mediumsized businesses in Denmark and Norway.
Total employee numbers were reduced from 527 at the end of 2015 to 474 in 2016.
(85.0). The result was positively affected by a low level of weather claims and large claims, but also a much higher level of run-off gains. Premium growth was negative by 0.8% (-5.0%), and the expense level was 16.5 (17.2).
score dropped in Denmark from 18 to 6. The retention rate in Denmark dropped to 87.1 (87.9), while the retention rate in Norway improved
of the total Corporate business, premium growth was zero (6.2%) due to price increases and pruning of the portfolio. In Corporate, there is a strong focus on the relations with brokers as they constitute an important distribution channel. In Sweden, the
In Denmark, it was possible for customers to be served either by brokers or through direct distribution as customers in some cases find this is the best solution.
The lower claims level was primarily due to a high level of run-off gains as large claims and weather claims declined slightly. In 2016, in Denmark and
Corporate increased prices, adjusted retention levels and changed coverage to improve profitability. In Sweden, more significant steps were taken to improve profitability, especially for some of the large accounts. In 2017, these initiatives will, in general, follow the normal process with individual customer initiatives in all markets although in the
The development in gross premium income saw a drop of 1.2% (0.0%) in local currencies. Premiums increased by around 2.4% in Denmark, whereas in
Norway, premium income declined by 4.9% in local currencies due to the loss of some large customers, a competitive market situation, especially for
Key ratios Premium growth in local currencies 0.9 -2.1 -1.2 0,0
In 2016, Tryg introduced DNA marking for Commercial and Corporate customers. DNA marking is an excellent tool to prevent theft from construction sites, for example. With DNA marking, the owner of stolen copper cables, for example, is easily identified, which saves the contractor having to order new custom-made cables for the job.
Gross premiums increased by 0.9% (-2.1%) in local currencies based on an increase in Denmark and a drop in Norway in local currencies, reflecting a competitive market situation and the weakened Norwegian economy. Competition remains more pronounced in the broker channel, although competition from some of the smaller players has eased somewhat. The quarter was, as always, impacted by preparations for the customer renewals process starting on 1 January 2017.
The high level was primarily due to a high level of large claims in all countries. The high large claims level did not represent a trend, but normal volatility for large-sized claims.
The expense ratio was 10.6 (9.7), which is higher than last year due to normal fluctuations in expense levels. The number of employees was 257, down 8 in Q4 2016.
The gross claims ratio totalled 71.5 (64.7) and was affected by higher claims levels, especially for extended warranty insurance products. Initiatives encompassing price hikes, claims prevention and adjustment of terms have been implemented. The claims level was also impacted by a profit-sharing agreement based on prior-year results, which impacted the claims ratio by 1.7 percentage points.
The number of employees was 337 (338) at the end of 2016, which was almost unchanged despite the acquisition of Skandia.
Key ratios Premium growth in local currencies 12.2 -6.1 3.4 -3.1
The technical result totalled DKK 23m (DKK 85m), with a combined ratio of 92.9 (73.2). In Q4 2015, a harmonisation of claims reserving models led to a run-off of approximately DKK 70m, which is the main reason for the higher result this year.
The expense level improved to 20.2 (21.1), primarily as a result of the acquisition of the
Gross premiums increased by 12.2% (-6.1%) in local currencies, which was due to the acquisition of the Skandia insurance portfolio with an impact of approximately 16%. The portfolio was still impacted by the loss of a number of large agreements. Sales were at a higher level than before the loss of these large agreements.
In 2016, Moderna launched the Moderna Smart MC app. The app records the driver’s driving style, and the motorcycle insurance price is then differentiated accordingly. Driving safely triggers a price discount the following year.
Investment activities 2016 was an eventful year characterised by volatility caused primarily by important political events such as the ‘Brexit’ referendum in the UK and the
US presidential election. After some initial turmoil, equity markets recovered, and overall reactions can be said to be relatively moderate. The highest-ever spread between US and German rates was seen towards the end of December with US 10-year notes yielding more than 230bps compared to
Tryg’s investment activities produced an overall result of DKK 987m (DKK -22m), boosted by a capital gain in Q4 of DKK 500m, plus a DKK 100m increase of shareholders’ equity on the sale of a property portfolio. The purpose of the investment strategy is to support a high and stable technical result and thus to reduce overall volatility to the greatest possible extent. Since 2010, this purpose has been supported by the strategic split of the investment portfolio into a match portfolio (assets matching the insurance reserves) and a free portfolio (the capital of the company). Tryg reported a
The result of the match portfolio is the difference between the return on the portfolio and the amount transferred to the technical result. The ‘net’ result can be split into a ‘regulatory deviation’ and a ‘performance ’ component. The most important driver of the ‘regulatory deviation’ is the yield difference between Euro swap rates and Danish swap rates.
In Norway and Sweden, Tryg hedges using local swaps corresponding to the EIOPA curve; hence, only the Danish exposure is relevant. Since the beginning of 2016, Tryg has started to hedge the interest rate risk of its Danish liabilities, partly using
163m. Spreads narrowed substantially, driven by the so-called ‘quantitative easing’ enabled by the bond-buying programme of the ECB.
Interest rates decreased to historically low levels in 2016. The yield of the 10-year German government bond touched -0.19% at the end of June before moving up to 0.25% in December. High-yield bonds
(approximately 6% of the free portfolio and less than 2% of total investments) produced a return in excess of 10.6%, while emerging-markets bonds (USD-denom inated sovereign bonds) produced a return just below 9.5%. Equity markets had a volatile year, but produced overall solid returns, and Tryg’s equity portfolio was up 8.4%, resulting in an overall DKK 194m return. The sale of three investment properties in central Copenhagen boosted the investment result by DKK 420m; a highly concentrated property portfolio has been swapped for a globally diversified portfolio which is more carefully aligned with Tryg’s overarching investment strategy. The overall property exposure remains unchanged after the aforementioned transaction.
Interest rate and credit exposure -42 -0.6 19 0.3 196 2.8 -10 -0.1 7,268 6,312 a) Senior/Bank deposits less than 1 year and derivative financial instruments hedging interest rate risk and credit risk. b) In addition to the equity portfolio exposure is futures contracts of DKK 97m.
In Q4, the positive sentiment after the US election in November was predominant. Additionally, the financial markets were influenced by the interest rate hike from the US central bank. This led to increasing equity markets, with e.g. MSCI All Countries returning 3.7%, while high-yields also did well.
For the free portfolio, this resulted in a return on the equity and bond portfolio of DKK 115m and
(bonds, shares, properties etc.). A very important element in managing Tryg’s investment risk is the company’s matching strategy, according to which invested assets corresponding to the technical provisions must be invested in interest-bearing assets, where the interest rate sensitivity of these assets matches and thereby hedges the interest rate sensitivity of the discounted provisions as closely as possible. The so-called match portfolio represents approximately 70% of total group investments, while the free portfolio (the capital of the company)
The operational risk covers several different areas of Tryg’s operations. The most important ones are physical security, fraud, whitewash, crisis management, competencies and processes, and IT
security. The Operational Risk Policy is approved by the Supervisory Board while the Operational
IT security policy is based on the ISO 27000 framework, and Tryg has a dedicated secondlevel Corporate Security unit performing security assessments of projects, controlling outsourcing partners and performing regular IT risk analyses.
We also have a strong focus on user awareness as social engineering is the criminals’ preferred way of penetrating company IT systems. Furthermore, Tryg has a whistleblower line, which allows employees, customers and business partners to report any serious wrongdoings or suspected irregularities.
The Solvency II regime emphasises the need for sound risk management and introduces additional requirements concerning risk governance, consistency across the Group and top management reporting and involvement. Tryg has been working towards implementing the principles of Solvency II
Capital management is based on Tryg’s partial internal capital model, which was approved by the supervisory authorities in November 2015.
The Solvency Capital Requirement (SCR) is calculated in such a way that Tryg would statistically be able to honour its obligations in 199 out of 200 years. In other words, Tryg could have a loss greater than DKK 5.1bn
dividend of DKK 1bn) against DKK 10.3bn at 1 January 2016. Own funds during the year have mostly been impacted positively by net profits and negatively by dividends and buy backs.
The Tier 2 capacity has been fully utilised after the SEK 1bn subordinated debt issue in May 2016. Currently, some DKK 200m of Tier 2 instruments are not included in the Own funds as they exceed the 50% SCR cap. Tryg had additional
ATier 1 capacity of DKK 1.0bn at the end of 2016.
In 2016, Tryg also paid a semi-annual dividend of DKK 2.60 per share. The full-year dividend is thus DKK 6.20 per share, equivalent to the total distribution of DKK 1,770m.
In conjunction with the capital plan, a contingency plan is made. It describes specific measures that may be introduced in the near term, should the company’s desired capital position be threatened.
Tryg’s Supervisory Board has approved both the capital plan and the contingency plan. Read more about Tryg’s risk management and Solvency II in note 1 on page 50.
Investor Relations (IR) is responsible for Tryg’s communication with the capital markets. It is important that investors, analysts and other stakeholders are able to form a true and fair view of developments, including Tryg’s financial results.
For this reason, we strive to be as open and transparent as possible to ensure that stakeholders’
information requirements are met at the highest possible level. IR is in charge of communication with equity investors, fixed-income investors and rating agencies. Tryg’s IR policy is available at tryg.com/investor.
After the publication of quarterly and annual reports, Tryg’s management and IR team travel extensively to meet with shareholders and potential investors. Quarterly analyst presentations are also held in Copenhagen and London. Tryg also attends various financial conferences. In 2016, we held almost 300 investor meetings – mostly oneto -ones but also some group meetings in Europe, the USA, Canada and Asia (Japan and Singapore).
In accordance with the recommendations issued by NASDAQ Copenhagen, Tryg does not comment on the company’s financial results or outlook two weeks before the publication of interim reports and four weeks before the publication of the annual report. Company announcements, press releases and transaction statements are published in both Danish and English, whereas interims and annual reports are published in
English. It is possible to subscribe to all financial information on tryg.com. Follow @TrygIR on
NASDAQ Copenhagen accounted for 59.3% of the turnover of the Tryg share. This means that approxi mately 41% of all trading in 2016 was carried out on alternative exchanges (MTF trades), led by Turquoise as the largest alternative exchange. Average daily turnover on NASDAQ was
The numbers were higher in 2015 impacted, amongst other things, by Tryg’s 1:5 share split.
TryghedsGruppen invests in peace-of-mind and healthcare providers in the Nordic region, and supports non-profit-making activities.
At the end of 2016, and after completion of the share buy back programme, Tryg held 7,946,118 own shares, corresponding to 2.7% of the share capital. At the annual general meeting, the
DKK 550m to projects that create peace of mind throughout Denmark in 2016.
Extraordinary dividend b) 1,000 a) Dividend per share includes dividend for H1 of DKK 2.60 paid out in July 2016 and dividend of DKK 3.60 proposed by the Supervisory Board for adoption by the annual general meeting. b) Proposed by the Supervisory Board for adoption by the annual general meeting.
Tryg paid out semi-annual dividends in 2015 and 2016 and will start paying out quarterly dividends in 2017. Tryg’s share has a distinct income profile; the business generally grows in line with GDP, producing high margins, which are mostly returned to shareholders. The prolonged period of very low interest rates means that investors, all else being equal, attach even greater importance to dividends than in more normal environments. From an investment perspective, a quarterly dividend will be a clear reminder of the high profitability of the business and its focus on returning capital to shareholders. Tryg’s dividend policy is based on the following assumptions: • A general objective of creating long-term value for the company’s shareholders.
• An aspiration to distribute steadily increasing dividend in nominal terms on a full-year basis.
Financial calendar 2017 8 Mar. 2017 Annual general meeting 9 Mar. 2017 Tryg shares are traded ex-dividend 13 Mar. 2017 Payment of H2 2016 dividend and extraordinary dividend 7 Apr. 2017 Interim report Q1 2017 10 Apr. 2017 Tryg shares are traded ex-dividend 12 Apr. 2017 Payment of Q1 dividend 11 July 2017 Interim report Q2 and H1 2017 12 July 2017 Tryg shares are traded ex-dividend 14 July 2017 Payment of Q2 dividend 10 Oct. 2017 Interim report Q1-Q3 2017 11 Oct. 2017 Tryg shares are traded ex-dividend 13 Oct. 2017 Payment of Q3 dividend allows such extraordinary payments. Based on many investor meetings in 2016, it has become clear that in general, there is a higher preference for dividends than buy backs. The proposed extraordinary dividend payout in 2017 will total DKK 1bn corresponding to a dividend of DKK 3.54 per share.
Tryg’s annual general meeting will be held on 8 March 2017 at 15:00 CET at Tryg’s head office,
February 2017 and will be sent to shareholders upon request. The annual general meeting will also be announced at tryg.com.
Corporate Governance are available at corporategovernance. dk. At tryg.com, Tryg has published its statutory corporate governance report based on the ‘comply-or-explain’ principle for each individual recommendation. This section on corporate governance is an excerpt of the corporate governance report. Download Tryg’s statutory corporate governance report at tryg.com > Investor > Download.
The Investor Relations (IR) department maintains regular contact with analysts and investors.
Together with the Executive Board, IR organises investor meetings and conference calls and participates in conferences in Denmark and abroad.
IR also communicates with stakeholders in the social media via Twitter@TrygIR. The Supervisory
Tryg holds an annual general meeting (AGM) every year. As required by the Danish Companies Act and the Articles of Association, the AGM is convened via a company announcement and at tryg.com subject to at least three weeks’ notice. Shareholders may also opt to receive the notice by post or email. The notice contains information about time and venue as well as an agenda for the meeting.
Group’s shareholders. Shareholders may propose items to be included on the agenda for the annual general meeting, and may ask questions before and at the meeting. Shareholders may vote in person at the annual general meeting, by post or appoint the Supervisory Board or a third party as their proxy. Shareholders may consider each item on the agenda. The proxy form and form for voting by post are available at tryg.com prior to the AGM.
Depending on the development in results, each year the Supervisory Board proposes the distribution of semi-annual dividend, and possibly an extraordinary share buy back if further adjustment of the capital structure is required. From Q1 2017,
Executive Board reports to the Supervisory Board on strategies and action plans, market developments and Group performance, funding issues, capital resources and special risks. The Supervisory
Board holds one annual strategy seminar to decide on and/or adjust the Group’s strategy with a view to sustaining value creation in the company. The Executive Board works with the Supervisory Board to ensure that the Group’s strategy is developed and
The Supervisory Board specifies its activities in a set of rules of procedure and an annual cycle for its work.
Eight members of the Supervisory Board are elected by the annual general meeting for a term of one year. Of the eight members elected at the annual general meeting, four are independent persons as stated in recommendation 3.2.1 in
Recommendations on Corporate Governance, while the other four members are dependent persons as they are appointed by the majority shareholder TryghedsGruppen. See pages 33-34 for information on when the individual members joined the Supervisory Board, were re-elected and when their current election period ends. To ensure the integration of new talent on the Supervisory
Board, members elected by the annual general meeting may hold office for a maximum of nine years. Furthermore, members of the Supervisory
Board must retire at the first annual general meeting following their 70th birthday. The Supervisory
Board has 12 members, seven men and five women (including two male and two female employee representatives). Women are thus not underrepresented on Tryg’s Supervisory Board.
Denmark, Sweden and Norway. See details about the independent board members in the section Supervisory Board on pages 33-34 and at tryg.com > Governance > Management > Supervisory Board.
Board and the Executive Board with relevant policies, guidelines and instructions describing reporting requirements and requirements for communication with the Executive Board. Financial legislation also requires the Executive Board to disclose all relevant information to the Supervisory
The Supervisory Board considers the composition, development, risk and succession plans of the Executive Board in connection with the annual evaluation of the Executive Board, and regularly in connection with board meetings. Each year, the
Supervisory Board discusses Tryg’s activities to guarantee diversity at management levels. Tryg attaches importance to diversity at all management levels. Tryg has prepared an action plan, which sets out specific targets to ensure diversity and equal opportunities and access to management positions for qualified men and women.
In 2016, the proportion of women at management level was 36.4% against 35.4% in 2015. The target for 2016 of 38% or more women at management level was therefore not met. Tryg maintains the target to increase the total proportion of women at management level to 38% or more in 2017.
Tryg has an Audit Committee, a Risk Committee, a Nomination Committee and a Remuneration
Involvement of the employee representatives in the committees is also considered important.
The special skills of all members are also described at tryg.com.
Supervisory Board in January 2016 and approved by the annual general meeting on 16 March 2016.
Members of Tryg’s Supervisory Board receive a fixed fee and are not comprised by any form of incentive or severance programme or pension
a) The maximum investment opportunity offered under the Matching Shares Programme at the beginning of 2017 (performance year 2016) b) Group CFO as of 15 April 2016 c) Resigned as Group CFO on 15 April 2016. Tor Magne Lønnum’s base salary includes a non-relocation allowance of DKK 191,403.
Board’s work, including the number of meetings held. The remuneration received by the Chairman of the Board is three times that received by ordinary members, while the Deputy Chairman’s remuneration is twice that received by ordinary members of the Supervisory Board.
Members of the Executive Board are employed on a contractual basis, and all terms of their remuneration are established by the Supervisory Board within the framework of the approved remuneration policy. Tryg wants to strike an appropriate balance between management remuneration, predictable risk and value creation for the shareholders in the short and long term.
The Executive Board’s remuneration consists of a base salary, a pension contribution of 25% of the base salary and other benefits. The base salary must be competitive and appropriate for the market and provide sufficient motivation for all members of the Executive Board to do their best to achieve the company’s defined targets.
The Supervisory Board can decide that the base salary should be supplemented with a variable pay element of up to 25% of the fixed base salary including pension.
Shares Programme. The Executive Board may, using taxed funds, buy shares (so-called investment shares) in Tryg A/S at market price for a predefined amount. Four years after the purchase,
Tryg will grant one matching share per investment share free of charge. Matching is conditional upon fulfilment of additional conditions such as continued employment and back testing (a testing prior to matching, to ensure that the criteria forming the basis of the calculation of the variable salary are still met at the time of matching). The purpose of the Matching Shares Programme is to ensure alignment of interests between the Executive
Each year the Supervisory Board evaluates the performance of the Executive Board against the targets set by the Supervisory Board for the fiscal year. The overall fulfilment of the weighted targets determines the number of investment shares offered to each member of the Executive Board. The targets for 2016 were a combination of long-term strategic targets and developmental targets, 60%
Programme in the remuneration policy at tryg.com > Governance > Remuneration.
Financial Business Act and Solvency II. In its a) Fee increased as from 1 April 2016 b) Joined the Supervisory Board in March 2016 c) Resigned from the Supervisory Board in March 2016
Capital and risk management on pages 25-26 and in Note 1 Risk management on page 50.
Tryg engages in ongoing risk identification, mapping insurance risks and other risks which may endanger the realisation of Tryg’s strategy or which may potentially have a substantial impact on Tryg’s financial position. The process involves identifying and continually monitoring the risks identified. As in previous years, Tryg undertook an Own Risk and
Solvency Assessment (ORSA) in 2016. The purpose of the ORSA is to ensure and demonstrate a link between strategy, risk management, risk appetite, solvency and capital planning over the planning period.
Risk Committee. Tryg has a decentralised set-up whereby risk managers in the business areas carry out controlling tasks for the risk management and compliance functions.
Tryg has a whistleblower line, which allows employees, customers and business partners to report any serious wrongdoings or suspected irregularities.
Reporting takes place in confidence to the Chairman of the Audit Committee and the Head of Compliance. Read more about Tryg’s whistleblower line at tryg.com > Governance > Whistleblower line.
Audit Committee deals with any matters that need to be reported to the Supervisory Board.
Governance. The deviation is explained in Tryg’s statutory corporate governance report, which is available at tryg.com > Investor > Download.
Chairman Born in 1952. Joined: 2012. Danish citizen. Professional board member. Adjunct professor, CBS. Former CEO of the FLSmidth Group.
Education: B.Com. (Organisation ), MSc (Civ. Eng.), PhD (Constr. Man.). Chairman: Tryg A/S, Tryg Forsikring A/S, TryghedsGruppen smba, Lundbeckfonden and Lundbeckfond Invest A/S. Deputy Chairman: Terma A/S, Rambøll Group A/S and Haldor Topsøe A/S. Board member: Bladt Industries A/S, Otto Mønsted A/S and Thomas B. Thriges Fond. Committee memberships: Chairman of Tryg's Remuneration and Nomination Committees and the Remuneration Committee in Haldor Topsøe A/S.
Anders Hjulmand is experienced in the counselling of a number of Danish and international, privately and publicly owned companies and foundations, and he is experienced within the areas of law, management, strategy and business development.
Employee representative Born in 1959. Joined: 2010. Swedish citizen. Claims handler in Atlantica (Moderna, Swedish subsidiary). Employed since 2002.
Education: Insurance training. Board member: Tryg A/S and Tryg Forsikring A/S. Number of shares held: 1,500 Change in portfolio 2016: +235
Born in 1958. Joined: 2013. Danish citizen. CEO of Lif (Danish Association of the Pharmaceutical Industry), the subsidiary DLI A/S (Danish Medicine Information) and the subsidiary ENLI ApS (Ethical Board for the Pharmaceutical Industry).
Employee representative Born in 1962. Employed since 1987. Joined the Supervisory Board in 2010. Danish citizen. Officer of Tryg’s Personnel Department.
Education: The A.P. Møller Group International shipping education, Graduate Diploma in Finance and various international management programmes. Chairman: LFI Equity A/S Deputy Chairman: Dong Energy A/S, H. Lundbeck A/S, ALKAbelló A/S and Falck A/S Board member: Tryg A/S and Tryg Forsikring A/S Committee memberships: Audit Committee and Risk Committee in Tryg, the Audit & Nomination Committee in ALK-Abelló A/S and the Audit and Remuneration Committee in H. Lundbeck A/S, Audit Committee in Falck A/S Number of shares held: 5,525 Change in portfolio 2016: 0
Education: MSc in Economic and Business Administration, Lieutenant-Colonel Royal Danish Air Force Reserve, Pathfinder. Chairman: Employers association of Danish utility companies (DEA), Energi Danmark A/S, Fibia P/S, and SEAS-NVE Net A/S Deputy Chairman: Tryghedsgruppen smba Board member: Tryg A/S, Tryg Forsikring A/S, DI Executive Committee and Executive Committee of the Danish Energy Association.
From his positions with SEAS-NVE, Jesper Hjulmand has experience within M&A, strategy, organisational and management development, communication and business development.
Education: Master’s degree in Economy and Business Administration, Chartered Financial Analyst (CFA) as well as Senior Executive Programmes from London Business School and Harvard Business School. Chairman: Seilsport Maritimt Forlag AS, Færder Nasjonalparksenter IKS, ThjømøeKranen AS. Board member: Tryg A/S, Tryg Forsikring A/S, Nordic Mining ASA, Forskningskonsernet Sintef, E-CO Energi and Scatec Solar ASA. Committee memberships: Audit Committee and Risk Committee in Tryg. Audit Committee of E-CO (Chairman), Scatec Solar ASA. Number of shares held: 3,300 Change in portfolio 2016: +1,500
Mari Thjømøe has experience from financial planning and control, restructuring/financing, investment analysis, investor relations, asset management, strategic planning and special knowledge of the insurance market. As a Norwegian citizen, she has special insights into Norwegian markets.
Carl-Viggo Östlund has experience from the packaging industry, logistics, insurance, finance and banking, from leading positions in listed and private companies. As a Swedish citizen, Carl-Viggo Östlund has special knowledge of Swedish market conditions.
Employee representative Born in 1954. Joined: 2016 Norwegian citizen. Employed since 1986.
Born in 1972. Joined Tryg in 2002. Joined the Executive Board in 2003.
Number of shares held: 111,510 Change in portfolio in 2016: +25,770
Annual report 2016 | Tryg A/S | 35| Contents – Management’s review
Education: Insurance training, LL.M. Chairman: Tryg Liv og The Faroe Insurance Company Board member: Danish Employers’ Association for the Financial Sector, Tjenestemændenes Forsikring, Forsikringsakademiet, the Danish Insurance Association and Cphbusiness.
Number of shares held: 42,600 Change in portfolio in 2016: +5,755
It is important for us to engage in prevention, since the potential negative effects of no prevention represents a risk for our customers and society. It is also a risk for Tryg since no prevention can result in an increased number of claims. However, opportunities exist in this area – as the proactive prevention of risks creates opportunities for educating and involving the community in Tryg’s work.
The red and white lifebuoy has become a symbol of safety along the Norwegian coastline since 1952 and has prevented more than 1,000 drownings. This year, the lifebuoys saved three lives. Tryg has donated more than 40,000 lifebuoys over the years and over 2,000 lifebuoys in 2016. Read more at tryg.com >
Break-ins are a concern for the Danish population and pose a great problem for Tryg, our customers and society as a whole, which is why we want to help prevent break-ins from happening. Synthetic
To test the effect of synthetic DNA marking, we started a pilot project in Sønderborg, Denmark, in 2014. Our results from 2016 show an almost 40%
decline in the number of break-ins for the 90 properties using DNA marking throughout the test period compared to an average decline of 24% in the entire city of Sønderborg. These statistics indicate that
Bergen. In collaboration with the police, we have also increased our focus on burglaries in the construction industry, which is seeing an increase in the number of burglaries and thefts of expensive tools from construction sites and from work vans. In an attempt to prevent this problem, Tryg, the police and the construction industry recommend synthetic DNA
As a first major project, construction sites along the E39 between Bergen and Os in Hordaland have started using DNA marking. To encourage more large customers to use DNA marking, Tryg has handed out
We focus on safety for cyclists and road safety in general. In 2016, we further highlighted the importance of wearing a helmet and being visible to others when riding a bike, for example by using reflectors.
To increase awareness of the importance of using reflectors, we launched Facebook campaigns in both Norway and Denmark in 2016. In Denmark, we also created an online universe offering advice and information on bicycle safety. Our ambition is to further develop our focus on bicycle safety with more activities in 2017. Find more information on bicycle safety at tryg.dk > Forebyg skade > Cykel
At the same time, we offer education and training in order to upgrade our employees’ qualifications and improve their career prospects. To monitor developments in employee satisfaction, we conduct an internal employee satisfaction survey each year.
In Tryg, processes are in place to ensure that men and women enjoy equal treatment in terms of pay levels and career opportunities. Our initiatives include, for example, an action plan aimed at ensuring the recruitment and promotion of more women in management roles. Both internal recruiters and external agencies are instructed to work actively to present qualified candidates of both genders.
Danish Diversity Council women’s leadership programme in 2017. With this programme, our ambition is to develop role models and motivate female leaders to reach for the next level of management.
In addition to focusing on equal opportunities for our employees, we also want to engage with the local community in order to share our knowledge and help more people to get a chance to enter the
Code of Conduct, which all employees must know and adhere to. To avoid corruption, Tryg has laid down an anti-corruption policy stating that all employees and everyone acting on behalf of Tryg must comply with existing anti-corruption legislation.
It is important that our employees follow our Code of Conduct at all times. This includes, for example, policies on good practices for marketing, handling of personal data, anti-discrimination, diversity and anti-corruption, including gifts. In order to mitigate innovation workshop focusing on fire prevention.
The ambition is to make people more aware of how to prevent fires from starting, and how to handle fires if they occur. The app has been downloaded close to 1,900 times in 2016 and is also used by the
The carbon emissions chart covers both Norway and Denmark; air travel and train also include Sweden while motor only applies for Denmark.
Tryg is actively working to educate our employees in using the guidelines in the Code of Conduct to ensure that they can handle the risks associated with their position. Find our Code of Conduct here at tryg.com > CSR > CSR strategy > CSR policy
To educate our employees on how to handle information online, in 2016 we launched a campaign focusing on IT security covering everything from hacking and social media to general data protection and phishing. As part of the campaign, we introduced a phishing button which employees can use to report phishing. To test awareness, all users were a part of a major phishing exercise. This showed that employees were more aware than was the case in 2015 since more than 200 reported phishing. In 2017, we are planning to maintain our focus on raising awareness in this area.
To encourage employees and external partners to report any activities that do not comply with our
Code of Conduct or applicable legislation, Tryg has set up a whistleblower line that can be used in confidentiality. In 2016, the whistleblower line was used four times. All incidents are evaluated by the
Legal & Compliance Department before any further action is taken. Find Tryg’s whistleblower line at tryg.com > Governance > Whistleblower Line
when investing. To the best of our knowledge we believe that there are no major challenges nor violations when it comes to our investments.
Tryg contributes to the society of which we are part, and we pay our taxes according to national legislation. To ensure compliance with legislation at all times, internal processes are in place to ensure we pay all relevant taxes. Aiming to be as transparent as possible, we have published our tax policy.
Therefore, Tryg continuously focuses on finding solutions which can prevent damage from happening in the first place. Our aim is to use our knowledge to offer solutions and advice on prevention for society and customers so that everybody is better prepared for more extreme weather events.
Annual report 2016 | Tryg A/S | | Contents – Financial statements
The consolidated financial statements have been prepared in accordance with the International
Group’s and the parent company’s operations and the cash flows of the Group for the financial year 1 January-31 December 2016.
Board of Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and the additional requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements and the parent financial statements for the financial year 1 January to 31 December 2016.
The consolidated financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional
In our opinion, the consolidated financial statements give a true and fair view of the Group’s financial position at 31 December 2016 and of the results of its operations and cash flows for the financial year 1 January to 31 December 2016 in accordance with International Financial Reporting
Management’s estimates of the claims provisions are based on actuarial methods and involve complex statistical methods as well as estimates of future events. Changes in methods and assumptions may result in a material impact on the size of the claims provisions. Consequently, the audit of the claims provisions is considered a key audit matter.
The claims provisions amount to DKK 25,452m at 31 December 2016 (2015: DKK 25,670m).
Management has specified the risks etc. related to the estimates of the claims provisions in note 1 ”Risk and capital management” on pages 51-52 and in ”Accounting policies”, note 31 on pages 90-91. The principles of estimating the claims provisions have been specified in ”Accounting policies”, note 31 on page 97, and further specified in note 1 on pages 53-56 and in note 19.
The most important assessments and assumptions of future events relate to: • Estimated future claims payments, which are based on the completeness and the accuracy of historical claims and payment patterns, among other things.
“Solvency ratio” evident from the statement of financial highlights and key figures on page 44 of the annual report.
As disclosed in the statement of financial highlights and key figures, the solvency ratio is exempt from the requirement to be audited. Consequently, our opinion on the consolidated financial statements and the parent financial statements does not cover the solvency ratio, and we do not express any form of assurance conclusion thereon.
Management’s responsibility for the consolidated financial statements and the parent financial statements
In preparing the consolidated financial statements and the parent financial statements, Management is responsible for assessing the Group’s and the
Auditor’s responsibilities for the audit of the consolidated financial statements and the parent financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements and the parent financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on
• Conclude on the appropriateness of Management ’s use of the going concern basis of accounting in the preparation of the consolidated financial statements and the parent financial statements, and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements and the parent financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the Parent to cease to continue as a going concern.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements.
We also provide Those Charged with Governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
Charged with Governance, we determine those matters that were of most significance in the audit of the consolidated financial statements and the parent financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Other key ratios are calculated in accordance with ‘’Recommendations & Financial Ratios 2015’’ issued by the Danish Society of Financial Analysts.
The adjustment, which is made pursuant to the Danish Financial Supervisory Authority’s and the Danish Society of Financial Analysts’ definitions of expense ratio and combined ratio, involves the addition of a calculated expense (rent) in recpect of owner-occupied property based on a calculated market rent and the deduction of actual depreciation and operating costs on owneroccupied property. The sale of owner-occupied property in December 2016 does not affect the calculation.
Profit/loss on gross business 3,351 1,695 3,313 2,085 2,344 Profit/loss on ceded business -951 710 -341 349 86 Insurance technical interest, net of reinsurance -10 18 60 62 62
Relative run-off gains/losses 5.5 5.1 4.8 3.9 4.1 Return on equity after tax (%) 26.2 20.0 23.7 21.8 22.3
Note Investment activities 14 Income from associates 42 42 Income from investment property 105 94 7 Interest income and dividends 671 794
Profit/loss for the year 2,471 1,969 25 Earnings per share – continuing business 8.84 6.74 Diluted earnings per share – continuing business 8.84 6.73 Earnings per share 8.84 6.91 Diluted earnings per share 8.84 6.91
Note General insurance Gross premiums written 17,842 18,150 Ceded insurance premiums -1,210 -1,165 Change in premium provisions 151 61 Change in reinsurers’ share of premium provisions 13 1 3 Premium income, net of reinsurance 16,796 17,047 4 Insurance technical interest, net of reinsurance -10 18
Other comprehensive income which cannot subsequently be reclassified as profit or loss Change in equalisation provision and other provisions 15 21 Change in taxrates on security provisions 0 141 Sale of owner-occupied property a) 215 0 Sale of owner-occupied property, revaluation from previous years a) -115 4 Tax on sale of owner-occupied property -53 0 Tax on revaluation of owner-occupied property from previous years 29 2 Actuarial gains/losses on defined-benefit pension plans -95 -12 Tax on actuarial gains/losses on defined-benefit pension plans 24 3
Comprehensive income 2,503 2,104 a) Please refer to note 26 Sale of properties.
Operating equipment 49 62 Owner-occupied property 0 1,144 Assets under construction 0 2 12 Total property, plant and equipment 49 1,208 14 Equity investments in associates 218 229
Total other financial investment assets 40,252 40,275 15 Total investment assets 42,793 42,342
Total receivables in connection with direct insurance contracts 1,108 1,261 Receivables from insurance enterprises 183 199 Other receivables 1,646 871 17 Current tax assets 0 118 Cash at bank and in hand 475 471
Debt relating to direct insurance 555 603 Debt relating to reinsurance 426 330 23 Amounts owed to credit institutions 178 64 24 Debt relating to unsettled funds transactions and repos 1,732 4,074 15 Derivative financial instruments 702 612 17 Current tax liabilities 317 357 Other debt 1,203 1,001
Reserve for Share Revaluation- exchange rate Equalisation- Other Retained Proposed DKKm capital reserves adjustment reserve reservesa) earnings dividend Total
Note Financing Exercise of share options/purchase of own shares (net) -999 -1,031 Subordinate loan capital 800 12 Dividend paid -1,714 -2,380 Change in amounts owed to credit institutions 115 -53
Interest income 723 807 Interest expenses -113 -95 Dividend received 25 47
Investments Purchase and refurbishment of property -122 -46 Sale of property 6 10 Purchase/sale of equity investments and unit trust units (net) 147 480 Purchase/sale of bonds (net) 413 1,070 Deposits with credit institutions 0 641 Purchase/sale of operating equipment (net) -1 0 Acquisition of intangble assets -135 0 Hedging of currency risk -50 86
• Risk management • Compliance • Actuarial function 2. Line of defence
Tryg’s risk management is organised into three levels of control. The first level of control is handled in the business where the company’s policies are implemented, and day-to-day compliance is verified. The risk management function is the second level of control, supported by decentralised risk managers affiliated with the individual business areas. The risk management function ensures a consistent approach across the organization, risk assessment at group level and reporting to the management and the Supervisory Board. This involves an ongoing identification and assessment of the most significant risks in the company. Furthermore, the function prepares specific recommendations in relation to capital management, reinsurance, investment risk management and more. Tryg’s risk management function is also responsible for determining the company’s capital requirement. The third level consists of the internal audit which performs independent assessments of the entire control environment.
The model calculates Tryg’s capital requirement with 99.5% solvency level with a 1-year horizon, which means that Tryg will be able to fulfil its obligations in 199 out of 200 years. The partial internal model has been used for a number of years, and was approved by the Danish Financial Supervisory Authority in 2015.
Tryg has three subordinated loans that amount to DKK 2,567m. The first is a NOK 1,400m loan that was issued in November 2015 and the second is a SEK 1,000m loan which was issued in May 2016. Both classified as a Tier 2 element under Solvency II. The third is a NOK 800m loan that was issued in March 2013 and is according to the grandfathering rules treated as a Tier 1 element under Solvency II.
Reserving risk Reserving risk relates to the risk of Tryg’s insurance provisions being inadequate. The Supervisory Board lays down the overall framework for the handling of reserving risk in the insurance policy, while the overall risk is measured in the capital model. The uncertainty associated with the calculation of claims reserves affects Tryg’s results through the run-off on reserves. Long-tailed reserves in particular are subject to interest rate and inflation risk. Interest rate risk is hedged by means of Tryg’s match portfolio which corresponds to the discounted claims reserves. In order to manage the inflation risk of Danish workers’ compensation claims reserves, Tryg has bought zero coupon inflation swaps. Tryg determines the claims reserves via statistical methods as well as individual assessments. At the end of 2016, Tryg’s claims reserves totalled DKK 25,452m with an average duration of approximately 4 years.
Provisioning risk 1% change in inflation on person-related lines of business a) +/- 436 +/- 476 10% error in the assessment of long-tailed lines of business (workers’ compensation, motor liability, liability, accident) +/- 1,800 +/- 1,671
Currency market Equity: 15% decline in exposed currency (exclusive of EUR) relative to DKK -763 -647 Impact of derivatives 728 614 Net impact of exchange rate decline -35 -33 Technical result per year: Impact of 15% change in NOK and SEK exchange rates relative to DKK +/- 158 +/- 176 a) Including the effect of the zero coupon inflation swap.
b) Additional sensitivity information in note 20 ‘Pensions and similar obligations’.
Estimated accumulated claims End of year 10,928 11,853 12,420 13,772 16,008 16,338 13,860 13,710 13,030 15,066 13,130 1 year later 11,188 12,436 13,737 14,413 16,106 16,734 13,831 14,022 13,376 15,003 2 year later 10,723 12,985 13,607 14,431 16,055 16,727 13,768 13,858 13,153 3 year later 10,929 12,961 13,618 14,221 15,934 16,678 13,617 13,666 4 year later 10,865 12,960 13,577 14,103 15,845 16,514 13,356 5 year later 10,856 12,865 13,486 14,002 15,780 16,569 6 year later 10,834 12,739 13,454 13,985 15,778 7 year later 10,797 12,731 13,203 13,867 8 year later 10,613 12,663 13,074 9 year later 10,546 12,613 10 year later 10,444 10,444 12,613 13,074 13,867 15,778 16,569 13,356 13,666 13,153 15,003 13,130 150,652
Provisions before discounting, end of year 496 789 1,032 1,223 1,492 1,825 1,806 2,124 2,672 3,876 6,541 23,874
Reserves from 2005 and prior years 211 Other reserves a) 120 Provisions for claims, end of year 1,820 a) Other provisions comprise the claims provisions for guarantee insurance.
Estimated accumulated claims End of year 10,651 11,351 12,258 13,486 15,336 14,874 13,622 13,155 12,770 12,979 12,955 1 year later 10,911 11,968 13,512 14,058 15,357 14,565 13,561 13,053 13,063 13,109 2 year later 10,458 12,503 13,415 14,098 15,313 14,438 13,459 12,909 12,864 3 year later 10,633 12,474 13,436 13,932 15,215 14,347 13,301 12,720 4 year later 10,569 12,454 13,396 13,811 15,116 14,219 13,045 5 year later 10,565 12,388 13,317 13,705 15,029 14,277 6 year later 10,544 12,233 13,279 13,692 15,023 7 year later 10,506 12,234 13,035 13,575 8 year later 10,324 12,166 12,906 9 year later 10,257 12,116 10 year later 10,156 10,156 12,116 12,906 13,575 15,023 14,277 13,045 12,720 12,864 13,109 12,955 142,744
Expected cash flow, not discounted DKKm 0-1 year 1-2 years 2-3 years > 3 years Other a) Total a) Other comprises guarantee insurance and in 2015 premium provisions in Securator A/S.
Credit risk 2016 2015 Bond portfolio by ratings DKKm % DKKm %
The share of capital included in the calculation of the capital base totals DKK 2,371m (DKK 1,707m in 2015). The loans are initially recognised at fair value on the date on which a loan is entered and subsequently measured at amortised cost.
Subordinate loan capital Bond loan Bond loan Bond loan NOK 800m NOK 1,400m SEK 1,000m
DKKm Private Commercial Corporate Sweden Other a) Group 2 Operating segments
Run-off gains/losses, net of reinsurance 312 304 506 117 0 1,239
Provisions for bonuses and premium discounts 457 54 50 12 0 573 Other liabilities 9,823 9,823
Claims ratio, net of ceded business 69.7 71.3 69.0 72.5 70.9
Run-off, net of reinsurance (%) -2.8 -11.0 -3.3 -0.8 1.0 Number of full-time employees 31 Dec. 385 387 425 458 444
Run-off, net of reinsurance (%) -7.0 -6.7 -6.1 -5.0 -5.0 Number of full-time employees, continuing business at 31 Dec. 3,264 3,359 3,599 3,703 3,913 Number of full-time employees, discontinued and divested business at 31 Dec. 0 0 0 0 189 b) Amounts relating to eliminations and one-off items. In 2012 discontinued business and restructuring expenses were included under ‘Other’. In 2015 costs and claims were negatively affected by DKK 80m and DKK 40m respectively due to provisioning for the efficiency programme. In 2016 costs and claims were negatively affected by DKK 162m and DKK 88m respectively, mainly due to impairment of software.
Average claims DKK b) 25,091 29,968 4,558 3,905 72,474 65,254 17,913 17,846 9,837 10,110 57,384 75,653 Total claims 46,883 40,135 57,186 56,697 11,008 10,469 77,441 77,164 250,450 241,311 2,896 2,871
Profit/loss on ceded business - 129 - 117 - 439 1,438 0 0 - 47 - 67 - 96 - 392 - 2 - 2 Insurance tech. interest, net of reinsurance - 6 2 - 1 2 - 1 0 - 1 1 0 0 0 1
Gross claims ratio 77.0 72.3 61.2 153.6 90.2 184.4 65.8 63.9 21.0 -71.2 76.5 95.6 Combined ratio 94.7 90.0 94.6 109.5 103.3 200.0 85.3 86.8 53.6 54.8 90.6 109.2
Average claims DKK b) 9,036 8,742 53,344 116,003 21,846 26,008 64,807 68,006 765,692 790,685 5,716 5,893 Total claims 363,113 370,685 30,020 32,331 3,807 4,275 10,917 10,454 120 111 96,868 96,774 a) The claims frequency is calculated as the number of claims incurred in the year in proportion to the average number of insurance contracts in the year. b) Average claims are total claims before run-off in the year relative to the number of claims in the year. c) Including the acquired insurance portfolio from Skandia.
Other Total exclusive of Norwegian Group Life DKKm insurance d) Norwegian Group Life one-year policies Total
Profit/loss on ceded business - 23 - 46 - 950 711 - 1 - 1 - 951 710 Insurance tech. interest, net of reinsurance 2 1 - 11 16 1 2 - 10 18
Annual report 2016 | Tryg A/S | | Menu – Financial statements 3 Premium income, net of reinsurance Direct insurance 17,949 18,166 Indirect insurance 43 44
Gross Ceded Gross Ceded a) Mainly Norway 4 Insurance technical interest, net of reinsurance Return on insurance provisions 149 259 Discounting transferred from claims provisions -159 -241 5 Claims, net of reinsurance Claims -13,048 -15,062 Run-off previous years, gross 1,429 1,500
Administrative expenses include fee to the auditors appointed by the annual general meeting: Deloitte -7 -7
The fee is divided into: Statutory audit -3 -3 Other audit assignments -1 0 Tax advice -1 -2 Other services -2 -2
In the calculation of the expense ratio, costs are stated exclusive of depreciation and operating costs on the owner-occupied property but including a calculated rent concerning the owner-occupied property based on a calculated market rent of DKK 36m (DKK 36m in 2015).
Annual report 2016 | Tryg A/S | | Menu – Financial statements 6 Insurance operating costs, gross, classified by type Commissions -296 -368 Staff expenses -1,615 -1,680 Other staff expenses -164 -179 Office expenses, fees and headquarter expenses -416 -364 IT operating and maintenance costs, software expenses -249 -261 Depreciation, amortisation and impairment losses and write-downs -223 -102 Other income 226 234
Insurance operating costs and claims include the following staff expenses: Salaries and wages -2,036 -2,108
Allocated share options and matching shares -3 -5 Pension plans a) -286 -300 Other social security costs -4 -4 Payroll tax -354 -371 a) In 2016 defined benefit plans were included with DKK 33m (DKK 40m in 2015).
Average number of full-time employees during the year (continuing business) 3,306 3,472
Matching shares allocated in 2011-2015 at 31.12.16 37,890 67,425 105,315 94 10 127 13
Value adjustments concerning assets or liabilities that cannot be attributed to IAS 39: Investment property 431 17 Owner-occupied property a) 93 0
Amortisation and write-downs at 31 December -104 -147 -1,252 -92 -1,595
The impairment test shows a calculated value in use of approximately DKK 1.2bn (DKK 1.3bn) relative to a recognised goodwill of DKK 354m (DKK 368m) and Equity of DKK 0.7bn (DKK 0.6bn) and does not indicate any impairment in 2016.
Securator In 2014, Tryg acquired Securator A/S. The insurance activities were incorporated into the Tryg Group’s business structure in 2014 and are reported under Sweden. In 2015, Securator was merged into Tryg Forsikring A/S and is reported as part of the Swedish affinity portfolio. Securator is a Danish market leader within the sale and brokering of multi-annual product insurance via dealers in the electronics and tele- communications sector and supermarket chains.
Sensitivity information Impact on equity from the following changes: CAGR +1.0 percentage point (0-10 years) 6 6 CAGR -1.0 percentage point (0-10 years) -6 -5 Required return +1.0 percentage point -15 -35 Required return -1.0 percentage point 20 48 Combined ratio +1.0 percentage point -11 -16 Combined ratio -1.0 percentage point 10 17
Skandia child and adult accident insurance The impairment test at year-end for Skandia portfolio is based on the valuation at the time of acquisition due to the short ownership period and the lack of indications of impairment since the acquisition. Goodwill recognised DKK 77m. Please refer to note 28.
Depreciation for the year -15 -17 0 -32 Value adjustments for the year at revalued amount in income statement 0 53 0 53 Value adjustments for the year at revalued amount in other comprehensive income 0 100 0 100 Reversed depreciation and value adjustments 0 432 83 515
Depreciation for the year -34 -14 0 -48 Value adjustments for the year at revalued amount in other comprehensive income 0 4 0 4
Annual report 2016 | Tryg A/S | | Menu – Financial statements 13 Investment property Fair value at 1 January 1,838 1,828 Exchange rate adjustments 16 -19 Additions for the year 47 31 Disposals for the year -6 -17 Value adjustments for the year 431 8 Reversed on sale -3 7
Total rental income for 2016 is DKK 129m (DKK 120m in 2015).
Total expenses for 2016 are DKK 24m (DKK 31m in 2015). Of this amount, expenses for non-let property total DKK 0m (DKK 0m in 2015), total expenses for the income-generating investment property are DKK 24m (DKK 31m in 2015).
DKKm 14 Equity investments in associates (continued) Shares in associates according to the latest annual report: Profit/loss Ownership Name and registered office Assets Liabilities Equity Revenue for the year share in %
DKKm 15 Financial assets (Continued) Fair value hierarchy for financial instruments measured at fair value in the statement of financial position
Derivative financial instruments, assets 0 1,000 0 1,000 Derivative financial instruments, debt 0 -702 0 -702
Financial instruments measured at fair value in the statement of financial position on the basis of non-observable input: 2016 2015
Carrying amount at 1 January 139 129 Exchange rate adjustments 3 -1 Gains/losses in the income statement 36 3
Gains/losses in the income statement for assets held at the statement of financial position date recognised in value adjustments -39 2
15 Financial assets Financial assets at fair value with value adjustments in the income statement 40,252 40,220 Derivative financial instruments at fair value used for hedge accounting with value adjustment in other comprehensive income 0 55 Receivables measured at amortised cost with value adjustment in the income statement 3,412 2,920
Information on valuation of subordinate loan capital at fair value is stated in note 1. Other financial liabilities measured at amortised cost only deviate to a minor extent from fair value.
DKKm 15 Financial assets (continued) Derivative financial instruments used in connection with hedging of foreign entities for accounting purposes Gains and losses on hedges charged to other comprehensive income: 2016 Gains Losses Net
Gains and losses at 31 December 2,652 -2,626 26 2015 Gains Losses Net
Gains and losses at 1 January 2,152 -2,162 -10 Reversed hedges in profit/loss Value adjustments for the year 344 -258 86
Value adjustments at 31 December -15 -66 15 Financial assets (continued) Sensitivity information Impact on equity from the following changes: Interest rate increase of 0.7-1.0 percentage point -199 -153 Interest rate fall of 0.7-1.0 percentage point -150 -161 Equity price fall of 12 % -275 -297 Fall in property prices of 8 % (exclusive of property sold). -104 -239 Exchange rate risk (VaR 99) -14 -14 Loss on counterparties of 8 % -466 -372
Derivatives according to statement of financial position 41,231 298 35,455 231 Inflation derivatives, recognised in claims provisions 3,143 -398 2,683 -417
Annual report 2016 | Tryg A/S | | Menu – Financial statements 17 Current tax Net current tax at 1 January -239 -429 Exchange rate adjustments -9 16 Current tax for the year -636 -495 Current tax on equity entries 0 -96 Adjustment of current tax in respect of previous years 38 0 Tax paid for the year 529 765
Current tax is recognised in the statement of financial position as follows: Under assets, current tax 0 118 Under liabilities, current tax -317 -357
Specification of write-downs on receivables from insurance contracts: Write-downs at 1 January 116 107 Exchange rate adjustments 3 -3 Write-downs and reversed write-downs for the year -2 12
Receivables are written down in full when submitted for debt collection. The write-down is reversed if payment is subsequently received from debt collection and amounts to DKK 50m (DKK 53m in 2015).
Receivables in connection with insurance contracts include overdue receivables totalling: Falling due: Within 90 days 116 116
Annual report 2016 | Tryg A/S | | Menu – Financial statements 19 Premium provisions Premium provision at 1 January 5,517 5,767 Adjustment regarding Norwegian Group life beginning of year 0 -124 Addition on acquisition of Skandia activity 35 0 Value adjustments of provisions, beginning of year 32 -54 Paid in the financial year 17,570 17,399 Change in premiums in the financial year -17,742 -17,458 Exchange rate adjustments 13 -13
18 Equity (continued) 2016 Own funds From 1 January 2016 new Solvency II rules are effective: Equity according to annual report 9,437 Proposed dividend -2,017 Intangible assets -884 Profit margin, solvency purpose 970 Taxes -27 Subordinate loan capital 2,371
Capital adequacy For 2015 the calculation is based on the Solvency I rules: Equity according to annual report 9,831 Proposed dividend -1,013 Solvency requirements of subsidiaries – 50% -3,868
Tier 1 Capital 4,950 Subordinate loan capital 1,707 Solvency requirements of subsidiaries – 50% -3,868
DKKm Gross Ceded Net of reinsurance 19 Claims provisions 2016 Claims provisions at 1 January 25,315 -2,852 22,463 Addition, purchase of Skandia portfolio 1,362 0 1,362 Value adjustments of provisions, beginning of year 392 -36 356
Paid in the financial year in respect of the current year -6,812 30 -6,782 Paid in the financial year in respect of prior years -7,045 1,100 -5,945
Change in claims in the financial year in respect of the current year 12,961 -175 12,786 Change in claims in the financial year in respect of prior years -1,432 180 -1,252
DKKm Gross Ceded Net of reinsurance 19 Claims provisions 2015 Claims provisions at 1 January 24,601 -1,272 23,329 Adjustment 1.1.2015 regarding new yield curves. Please refer to note 31 Accounting policies. 226 0 226 Adjustment regarding Norwegian Group life beginning of year 124 0 124 Value adjustments of provisions, beginning of year -464 32 -432
Change in claims in the financial year in respect of the current year 14,606 -2,021 12,585 Change in claims in the financial year in respect of prior years -1,232 15 -1,217
Claims provisions at 31 December 25,315 -2,852 22,463 a) Comprises claims provisions for guarantee insurance.
Annual report 2016 | Tryg A/S | | Menu – Financial statements 20 Pensions and similar obligations (continued) Specification of pension cost for the year: Present value of pensions earned during the year 11 31 Interest expense on accrued pension obligation 22 30 Expected return on plan assets -6 -26 Accrued employer contributions 6 5
Total recognised obligation at 31 December 345 264 a) The change of the pension scheme in Norway is carried out in the same way as has been done for other major financial companies in Norway and causes a reduction in the provision.
Unsettled fund transactions include debt for bonds purchased in 2015 and 2016, however, with settlement in 2016 and 2017, respectively.
Average number of shares (1,000) 279,399 285,073 Diluted number of shares (1,000) 0 28
Earnings per share, continuing business 8.84 6.74 Diluted earnings per share, continuing business 8.84 6.73 Earnings per share 8.84 6.91 Diluted earnings per share 8.84 6.91 Earnings per share, discontinued and divested business 0.00 0.17 Diluted earnings per share, discontinued and divested business 0.00 0.18 21 Deferred tax Tax asset Operating equipment 8 8 Debt and provisions 30 91 Capitalised tax loss 1 1
Tax liability Intangible rights 33 77 Land and buildings 70 96
Unaccrued timing differences of statement of financial position items 0 20
Development in deferred tax Deferred tax at 1 January 645 1,022 Adjustment 1.1.2015 regarding new yield curves. Please refer to note 31 Accounting policies. -51 Exchange rate adjustments 24 -116 Change in deferred tax relating to change in tax rate 0 13 Change in deferred tax previous years 31 0 Change in deferred tax taken to the income statement 60 -63 Change in valuation of tax asset -17 -128 Change in deferred tax taken to equity -41 -32
The losses are not recognised as tax assets until it has been substantiated that the company can generate sufficient future taxable income to offset the tax loss. The total current and deferred tax relating to items recognised in equity is recognised in the statement of financial position in the amount of DKK -30m (DKK 32m at 31 December 2015).
DKKm 26 Sale of properties In December 2016, Tryg signed sales contracts of its two owner-occupied properties in Ballerup and
Bergen and 3 investment properties. The recognition in the accounts in 2016 is: Recognised in
Total property sold 1,741 100 513 1,017 Other estimated costs concerning the sales -13
New lease contracts for the continued rental of both owner-occupied properties have been signed in 2016.
In august 2015 Tryg and Skandia signed an agreement whereby Tryg acquired Skandia’s activities within child and adult accident insurance and integrated them into its Swedish business, Moderna Forsäkringar. The transaction was subject to regulatory approvals and the parties completed it in second half 2016. Thereafter Tryg took over the control of the portfolios. The acquisition had no effect on the financial statement for 2015.
Tryg Forsikring A/S and Tryg Livsforsikring A/S have registered the following assets as having been held as security for the insurance provisions: Equity investments in associates 0 14 Equity investments 36 138 Unit trust units 3,950 3,589
DKKm 27 Contractual obligations, collateral and contingent liabilities (continued) Offsetting and collateral in relation to financial assets and obligations Collateral which is not offset in the statement of financial position
Inflation derivatives, recognised in claims provisions 417 0 417 0 -421 -4
Annual report 2016 | Tryg A/S | | Menu – Financial statements 29 Related parties The group has no related parties with a decisive influence other than the parent company, Trygheds-
Gruppen smba and the subsidiaries of TryghedsGruppen smba (other related parties). Related parties with significant influence include the Supervisory Board, the Executive Board and their members’ family.
Premium income - Parent company (TryghedsGruppen smba) 0.5 0.3 - Other related parties 3.7 1.9
Intangible assets 58 Cash and cash equivalents 1,471 Total provisions for insurance contracts -1,389
Each member of the Executive Board is entitled to 12 months’ notice and severance pay equal to 12 months’ salary plus pension contribution (Group CEO is entitled to severance pay equal to 18 months’ salary).
Intra-group trading involved: 2016 2015 - Providing and receiving services 0 0
Number of Basis Variable 2016 persons salary salary a) Pension Total a) Including charges for matching shares allocated in 2016 for fiscal year 2015. See section “Corporate governance” in Management review for matching shares allocated in 2017 for fiscal year 2016.
The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as per adopted by the EU on 31 December 2016 and in accordance with the Danish Statutory Order on Adoption of IFRS.
a) enters into force for the accounting year commencing 1 January 2019.
b) enters into force for the accounting year commencing 1 January 2018 or later insurance companies are expected to be allowed to postpone the implementation.
The implementation of IFRS 9 ‘financial instruments’ IFRS 16 ‘leases’ is not expected to significantly change the group’s financial position.
Regarding IFRS 9 the assessment of no significant impact on the statement of financial position or profit and loss is based on the assumption that Tryg already carry all financial instruments at fair value through profit and loss. The implementation of IFRS 9, will not effect Trygs recognition and measurement.
The new executive order will only have effect on recognition and measurement in the Group’s financial reporting in the following area.
• It is Tryg’s assessment that the amendments to the Executive Order from 2016 can be accommodated within IFRS, therefore there are not any differences between the Parent Company and the consolidated financial statements as a result of the new accounting regulation.
Changes to accounting estimates There have been no changes to the accounting estimates in 2016.
Significant accounting estimates and assessments The preparation of financial statements under IFRS requires the use of certain critical accounting estimates and requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are: • Liabilities under insurance contracts • Valuation of defined benefit plans • Fair value of financial assets and liabilities • Valuation of property • Measurement of goodwill, Trademarks and Customer relations • Control of subsidiaries
The net obligation with respect to the defined- benefit plan is based on actuarial calculations involving a number of assumptions. The assumptions include discount interest rate, expected future salary and pension adjustments, turnover, mortality and disability.
The purchase method is applied for new acquisitions if the Group gains control of the acquired enterprise. Subsequently, identifiable assets, liabilities and contingent liabilities in the acquired enterprises are measured at fair value at the date of acquisition. Non- current assets which are acquired with the intention of selling them are, however, measured at fair value less expected selling costs. Restructuring costs are recognised in the pre-acquisition balance sheet only if they constitute an obligation for the acquired enterprise. The tax effect of revaluations is taken into account. The acquisition price of an enterprise consists of the fair value of the price paid for the acquired enterprise. If the final determination of the price is conditional upon one or more future events, such events are recognised at their fair values at the date of acquisition. Costs relating to the acquisition are recognised in the income statement as incurred.
On consolidation, the assets and liabilities of the Group’s foreign operations are translated using the exchange rates applicable at the statement of financial position date. Income and expense items are translated using the average exchange rates for the period. Exchange rate differences arising on translation are classified as other comprehensive income and transferred to the Group’s translation reserve. Such translation differences are recognised as income or as expenses in the period in which the activities are divested. All other foreign currency translation gains and losses are recognised in the income statement.
Key ratios Earnings per share (EPS) are calculated according to IAS 33. This and other key ratios are calculated in accordance with Recommendations and Ratios 2015
Annual report 2016 | Tryg A/S | | Menu – Financial statements issued by the Danish Society of Financial Analysts and the Executive Order on Financial Reports for Insurance Companies and Multi-Employer Occupational Pension Funds issued by the Danish Financial Supervisory Authority.
Premiums Premium income represents gross premiums written during the year, net of reinsurance premiums and adjusted for changes in premium pro- visions, corresponding to an accrual of premiums to the risk period of the policies, and in the reinsurers’ share of the premium provisions.
The portion of premiums received on contracts that relate to unexpired risks at the statement of financial position date is reported under premium provisions.
Leasing Leases are classified either as operating or finance leases. The assessment of the lease is based on criteria such as ownership, right of purchase when the lease term expires, considerations as to whether the asset is custom made, the lease term and the present value of the lease payments.
Losses are recognised in the income statement unless it is a reversal of a write up previously recognised in other comprehensive income. Gains are recognised in other comprehensive income unless it is a reversal of write down previously recognise in the income statement.
Share option programme The share option programme was closed in 2012 and the share option plan comprised no share options at the end of 2016.
Equity-settled share options are measured at fair value at the time of allocation and recognised under staff expenses over the period from the time of allocation until vesting. The balancing item is recognised directly in equity.
The options are issued at an exercise price that corresponds to the market price of the Group’s shares at the time of allocation plus 10%. No other vesting conditions apply. Special provisions are in place concerning sickness and death and in case of change to the Group’s capital position etc.
The share options are exercisable exclusively during a 13-day period, which starts the day after the publication of full-year, half-year and quarterly reports and in accordance with Tryg’s in-house rules on trading in the Group’s shares. The options are settled in shares. A part of the Group’s holding of own shares is reserved for settlement of the options allocated.
Annual report 2016 | Tryg A/S | | Menu – Financial statements cash settlement and the right to request delivery of shares. The difference between the value of shares and the cash payment is recognised in equity and is not remeasured. The remainder is treated as a liability and is remeasured until the time of exercise, such that the total recognition is based on the actual number of shares or the actual cash amount.
Land and buildings Land and buildings are divided into owner-occupied property and investment property. The Group’s
Receivables Total receivables comprise accounts receivable from policyholders and insurance companies as well as other accounts receivable. Other receivables primarily contain accounts receivable in connection with property.
Receivables that arise as a result of insurance contracts are classified in this category and are reviewed for impairment as a part of the impairment test of accounts receivable.
Foreign currency translation reserve Assets and liabilities of foreign entities are recognised using the exchange rate applicable at the statement of financial position date. Income and expense items are recognised using the average monthly exchange rates for the period. Any resulting differences are recognised in Other comprehensive income.
Claims and claims handling costs are expensed in the income statement as incurred based on the estimated liability for compensation owed to policyholders or third parties sustaining losses at the hands of the policy - holders. They include direct and indirect claims handling costs that arise from events that have occurred up to the statement of financial position date even if they have not yet been reported to the Group. Claims provisions are estimated using the input of assessments for individual cases reported to the Group and statistical analyses for the claims incurred but not reported and the expected ultimate cost of more complex claims that may be affected by external factors (such as court decisions). The provisions include claims handling costs.
Claims provisions are determined for each line of business based on actuarial methods. Where such business lines encompass more than one business area, shorttailed claims provisions are distributed based on number of claims reported while long-tailed claims provisions are distributed based on premiums earned. The models currently used are Chain-Ladder, BornhuetterFerguson, the Loss Ratio method and De Vylder’s credibility method. Chain-Ladder techniques are used for lines of business with a stable run-off pattern. The Bornhuetter-Ferguson method, and sometimes the Loss Ratio method, are used for claims years in which the previous run-off provides insufficient information about the future run-off performance. De Vylder’s credibility method is used for areas that are somewhere in between the Chain-Ladder and Bornhuetter-Ferguson/ Loss Ratio methods, and may also be used in situations that call for the use of exposure targets other than premium volume, for example the number of insured.
Annual report 2016 | Tryg A/S | | Menu – Financial statements unable to provide sufficient information for the Group to use defined-benefit accounting. The plan is therefore accounted for as a defined-contribution plan.
Provisions for restructurings are recognised as obligations when a detailed formal restructuring plan has been announced prior to or at the statement of financial position date at the latest to the persons affected by the plan.
Note Statement of comprehensive income Profit/loss for the year 2,471 1,969
Other comprehensive income which can subsequently be reclassified as profit or loss Exchange rate adjustments of foreign entities for the year 51 -89 Hedging of currency risk in foreign entities for the year -50 86 Tax on hedging of currency risk in foreign entities for the year 11 -21
Comprehensive income 2,488 2,104 a) Please refer to note 26 Sale of properties in the Tryg Group.
Proposed distribution for the year: Transferred to reserve for net revaluation according to the equity method -25 -1,668 Transferred to retained earnings -274 1,878
Share Revaluation Retained Proposed DKKm capital reserves earnings dividend Total 2016 Profit/loss for the year -25 -274 2,770 2,471 Other comprehensive income 17 17
Tryg Forsikring, a Norwegian branch of Tryg Forsikring A/S and is charged to Tryg A/S via the cost allocation.
Remuneration for the Supervisory Board, the Executive Board and risk-takers can be seen from note 29 concerning related parties of the Tryg Group. Refer to Note 6 for the Tryg Group for a specification of the audit fee.
Effective tax rate Tax on profit/loss for the year 22.0 23.5 Tax adjustment, previous years 0.0 -1.0 4 Equity investments in Group undertakings Cost Cost at 1 January 6,987 6,987
Revaluation and impairment to net asset value Revaluation and impairment at 1 January 3,148 4,681 Revaluations for the year 2,542 2,167 Dividend paid -2,550 -3,700
2015 Capital adequacy Equity according to annual report 2015 9,846 Proposed dividend -1,013 Solvency requirements of subsidiaries – 50% -3,868
Tier 1 capital 4,965 Subordinate loan capital 1,707 Solvency requirements of subsidiaries – 50% -3,868
Solvency ratio (Solvency I – ratio between capital base and weighted assets) 108
The calculation of the 2015 Solvency I – ratio has not been adjusted for the FSA executive order on yield curves from 1 January 2016.
Companies in the Tryg Group are party to a number of disputes in Denmark, Norway and Sweden. Management believes that the outcome of these disputes will not affect the Group’s financial position over and above the receivables and liabilities recognised in the statement of financial position at 31 December 2016.
Intra-group trading involved - Providing and receiving services 16 13 - Intra-group accounts -701 -487
10 Reconciliation of profit/loss and equity The executive order on application of International Financial Reporting Standards for companies subject to the Danish Financial Business Act issued by the Danish FSA requires disclosure of differences between the format of the annual report under International Financial Reporting Standards (IFRS) and the rules issued by the Danish FSA, however, there are no differences on profit/loss. The following is a reconciliation of equity.
Reconciliation of equity Equity – IFRS 9,437 9,644 Deferred tax provisions for contingency funds 15 15 Change during the year of deferred tax provisions for contingency funds -15 0
Equity – Danish FSA executive order 9,437 9,659 11 Accounting policies Please refer to Tryg Group’s accounting policies.
Claims ratio, net of reinsurance 69.7 65.3 67.1 76.4 73.6 67.4 65.4 76.5 67.4
Key ratios Gross claims ratio 58.3 65.5 64.1 56.6 62.3 77.1 55.7 66.3 55.2
Key ratios Gross claims ratio 72.7 72.9 65.7 75.1 51.8 73.2 61.1 72.0 74.6
Combined ratio exclusive of run-off 101.2 92.1 100.3 105.9 94.3 92.4 93.2 100.1 99.2
Key ratios Gross claims ratio 72.0 59.7 64.5 66.3 68.0 76.6 84.8 72.0 64.1
Run-off, net of reinsurance (%) -6.0 -5.0 -5.4 -5.5 Number of full-time employees 31 Dec. 1,839 1,859
Run-off, net of reinsurance (%) 1.5 -17.5 -2.8 -11.0 Number of full-time employees 31 Dec. 385 387
Diluted average number of shares (1,000) 279,399 285,101 292,788 301,295 303,571
Net asset value per share (DKK) 34.37 34.16 38.46 37.41 36.18 Market price/net asset value 3.7 4.0 3.6 2.8 2.4 Ordinary dividend per share (DKK) 6.20 6.00 5.80 5.40 5.20 Extraordinary dividend per share (DKK) 3.54 Price/Earnings 14.4 20.4 15.8 13.3 11.8
Number of full-time employess, continued business, at 31 December 3,264 3,359 3,599 3,703 3,913 Number of full-time employess, discontinued and divested business, at 31 December 0 0 0 0 189
Key ratios are calculated in accordance with ’Recommendations & Financial Ratios 2015’ issued by the Danish Society of Financial Analysts.
Group chart at 1 January 2017. Companies and branches are wholly owned by Danish owners and domiciled in Denmark, unless otherwise stated.
Glossary The financial highlights and key ratios of Tryg have been prepared in accordance with the Executive Order issued by the Danish Financial Supervisory Authority on the Financial Reports for Insurance Companies and Multi-Employer Occupational Pension Funds and also comply with ‘Recommendations & Financial Ratios 2015’ issued by the Danish Society of Financial Analysts.
Health insurance Health insurance represents 2% of total premium income. The insurance covers the costs of examinations, treatment, medicine, surgery and rehabilitation at a private health facility.
Group. It is an important element of Tryg’s distribution strategy to be available in places where customers want it and that most distribution takes place via the company’s own sales channels.
Certain statements in this annual report are based on the beliefs of our management as well as assumptions made by and information currently available to management. Statements regarding
Capital and risk management on page 25-26, and in Note 1 on page 50, for a description of some of the factors which may affect the