and theft claims. On the other hand there was a decline in the claims frequency in motor insurance. However, overall, the adverse effect of the recession on the combined ratio is estimated to have been around 1 - 2pp.
According to information from the insurance industry, there was a 1% increase in the claims frequency in motor insurance. The number of claims from serious traffic accidents involving personal injuries declined 18%.
However, competition in the industrial market was more intense in 2009 due to the establishment of a number of large international companies, Chartis (AIG), Allianz, Zurich and ACE, in the Nordic market targeting the large, international industrial companies, thereby particularly increasing competition in workers' compensation insurance.
The claims trend increased to 75.5% in Q4 2009 from 67.6% in Q4 2008 primarily due to the lower interest rates, fire claims on farm buildings, lower gains on the claims provisions and the effect of price cuts.
Profit on life insurance activities comprises the sum of the profits generated in Life I and Life V net of any financing costs. These profits were calculated in accordance with the stated policy on the calculation of profit for the life insurance www.topdanmark.com → Business → Life insurance → Policy for the calculation of profit.
Co-operation with Nykredit and Sydbank Through its subsidiary Nykredit Livsforsikring, Topdanmark Livsforsikring has expanded its co-operation with Nykredit. Up to now this co-operation has included the provision of certain risk covers and group life but has now been expanded to also include the provision of unitlinked annuity products. The writing of business commenced at the beginning of 2010. Similarly, Topdanmark Livsforsikring has agreed with Sydbank to write annuity policies for those customers of Sydbank who wish to pay more than an annual amount of DKK
Since 31 October 2008 Danish insurance companies and pension funds have calculated the value of provisions by using a discount rate representing the combined
Parent company etc. The parent company Topdanmark has no independent operations besides being the parent company. The result of the parent company includes the result of subsidiaries, excluding insurance (primarily Topdanmark Kapitalforvaltning, asset management company,), and financing costs. The result improved to a DKK 21m loss in 2009 from a DKK 58m loss in 2008 due an increase in the result of Topdanmark Kapitalforvaltning to DKK 54m from DKK 38m. The remainder was due to lower financing costs.
On the face of it, the already notified price increases and a more disciplined market are expected to improve the combined ratios in 2010. However, the severe winter weather in January and February caused major damage.
Also in recent years the life insurance and pension fund sector has been subjected to an increasing number of regulatory measures. The outlook for 2010 does not deviate from this trend and this brings with it high development costs. 2010 will see a continuing of not insignificant resources being spent on changes needed to meet the requirements demanded from companies when Solvency II takes effect in 2012. The next milestone will be in the autumn of 2010 when QIS5 is made, the final test calculation, so far, prior to Solvency II taking effect.
Topdanmark started buying back own shares in 1998. Since then it has decided to cancel DKK 7.8bn of shares representing a 58.7% write-down of the share capital, with an average price of DKK 324 per share that it has decided to write down.
The historical profitability of major industrial and commercial customers with individual insurance schemes is monitored using customer assessment systems.
The other lines are expected to be handled by the new claims system from the beginning of 2011.
Emergency plan Topdanmark has an emergency plan to ensure that prompt, correct and targeted action is taken on an unforeseen weather event such as storm, hurricane, cloudburst or flood, or another unforeseen event that will impact Topdanmark’s customers and employees. The emergency programme is on several levels which enables a proportional response depending on the size of the event. Topdanmark has appointed emergency helpers throughout the company whose claims handling knowledge is regularly kept up-to-date. Furthermore alert drills are held twice a year in order to regularly prepare the employees and improve the emergency programme.
Provisions for claims and benefits a 74.8 276.5 288.2 6.5 18.6
The Board of Directors and the Board of Management have adopted a number of policies, manuals, procedures etc. within significant areas of the accounts preparation.
Topdanmark's Board of Directors comprises nine members, six of them elected by shareholders in general meeting and three by Topdanmark's employees in accordance with the Danish Companies Act.
In accordance with Clause 131 of the executive order on financial reports for insurance companies and lateral pension funds, Topdanmark is liable to outline in its annual report its approach to the recommendations. The outline should follow the "comply-or-explain" principle which has been decided at EU level.
However, Topdanmark does not fully meet the following recommendations: The annual report to disclose information on each Board member's holding of shares etc. in the company and any changes in these holdings.
The options granted for 2010 may not be exercised any earlier than subsequent to the publication of the 2012 Annual Report in 2013 and no later than subsequent to the publication of the 2014 Annual Report in 2015. In the intervening period the options can only be exercised up to three banking days subsequent to Topdanmark's publication of annual, half-yearly and quarterly reports.
• Low volatility in the price of Topdanmark's shares is secured through uniform and consistent information, which helps to reduce the cost of capital
Offices held: Member of the Boards of Directors of: • DSB • DSV A/S • Ratos AB • Lindab International AB • Skodsborg Kurhotel & Spa A/S
Technical interest transferred to non-life insurance business (685) (466) Pension return tax 10 424 (395) Investment return transferred to life insurance business 2,143 (2,443) Other income 6 5
Collective bonus potential 27 66 184 Provisions for bonuses and rebates 108 100 Provisions for unit-linked contracts 28 1,820 2,821 TOTAL PROVISIONS FOR INSURANCE AND INVESTMENT CONTRACTS 38,623 43,360
Guaranteed benefits 3,575 302 Bonus potential on future premiums (822) 874 Bonus potential on paid-up benefits (1,511) 1,653 Compensation for pension return tax (19) 0 Change in life insurance provisions 1,223 2,829
Impairment and amortisation at 31 December (12) (84) (49) 0 (145)
Impairment and amortisation at 1 January (274) 0 (274) Amortisation for the year (61) (1) (62) Transferred on revaluation 0 1 1 Reversal of total impairment and amortisation of assets sold or withdrawn from operations during the year 4 0 4 Impairment and amortisation at 31 December (331) 0 (331)
Restriction on deductability 0 189 98 Restriction on deductible interest 0 43 0 Deferred pension return tax (9) (116) (28)
Gross provisions at 1 January 1,398 422 1,820 Retrospective provisions at 1 January 1,398 422 1,820
Note 33. Financial assets Financial assets at fair value where the revaluation is taken to profit and loss account Held for trading: Loans guaranteed by mortgages and other loans 23 20
Operational finance leases: Shareholders' equity according to Danish rules * 3,243 4,465 Deferred tax assets (44) (1) Hybrid core capital 402 403 Capital adequacy requirements for insurance companies (1,498) (1,535) Core capital 2,103 3,332 Capital adequacy requirements for insurance companies (1,498) (1,535) Capital base 605 1,797
The Group companies participate in technical insurance collaboration where they are jointly liable for the insurance liabilities.
The five-year summary discloses the financial years' gains on / strengthening of provisions. The movement in the provisions for outstanding claims analysed by claims year is also shown in the notes to the accounts. For further details see Management’s review.
Machinery and equipment 5 4 4 TOTAL TANGIBLE ASSETS 4 4
Topdanmark has agreed with the Board of Management and four other members of the executive team that under certain circumstances they will receive compensation in the form of an extended period of notice and an increased severance pay if they resign or are dismissed, or if their position is made redundant because Topdanmark is taken over by or merges with a company outside the Group or if one or more owners take control of Topdanmark. The maximum amount of compensation will represent two years' salary.
Weighted items 1,891 2,617 Core capital as a percentage of weighted items 111.3 127.3 Solvency ratio 32.0 68.7