Deferred tax on security funds (348) (348) (348) (348) (306) (348) (306) Shareholders' equity of Group
Profit in 2013 498B498BTopdanmark’s post-tax profit was DKK 1,468m (2012: DKK 1,823m). This 19.5% decline was due to a higher 499B499Blevel of weather-related claims in 2013 and an extraordinarily high investment return in 2012.
504B504BThe investment return after transfer to the technical result declined DKK 441m to DKK 595m. As referred to above, the investment return was extraordinarily high in 2012. Even though the investment return was lower in 2013 than in 2012, it was higher than a normal level.
508B508BProfit in Q4 2013 509B509BPost-tax profit was DKK 251m in Q4 (Q4 2012: DKK 453m).
533B533BThe interest rate curve used to discount the provisions for outstanding claims was lower in 2013 than in 2012, which had a 0.5pp adverse effect on the claims trend.
100B100BSingle premiums increased 52.6 % to DKK 1,377m in 2013 (2012: DKK 902m) due to the transfer of pension schemes generated by Topdanmark’s improved competitiveness.
Investment return 29 29 144 100 Risk return 37 46 165 164 Transferred, shadow account (28) 22 (117) 171 Other 8 5 18 7 Profit on life insurance 46 102 210 442
556B556BThe investment return after the transfer to the technical result was DKK 684m, which was somewhat higher than the expected return given Topdanmark’s current risk profile. This higher return should be viewed in the light of the highly positive investment year 2013 when the returns on equities and credit products were high.
116B116BThe maturity of the CDO investments is dependent on any changes in the payments made by the underlying 117B117Bassets, which in turn are dependent on changes in the 118B118Bgeneral economy and, therefore, it is not possible to outline the maturity distribution for the portfolio.
575B575BInsurance is a low-interest product, and the low expense ratio (17-18%) is a significant entry barrier for start-up companies.
582B582BNon-life insurance 583B583BIn the interim report for Q1-Q3 2013 Topdanmark assumed premium growth of 2-3 % and a combined ratio of 91-92% in 2014 based on the following assumptions: • 584B584BPremium growth in the personal segment is expected to be higher than the assumed 2-3 % overall premium growth for Topdanmark. Correspondingly, premium growth in the SME and industrial segment is expected to be lower than 2-3 %
598B598BThe results are highly sensitive to fluctuations in the investment return. The risk allowance and shadow account are not finally calculated until the preparation of the 2014 Annual Report.
732B732BA new accounting order is also expected, which will take effect as of 2015. These accounting rules will be amended to comply with the Solvency II principles. The new accounting rules are not expected to materially change the solvency or capital base from the solvency and capital base Topdanmark announced at the end of 2013.
755B755BThe following shareholder owns more than 5% of the share capital (25.18 %): 756B756BIf P & C Insurance Holding Ltd (publ) 757B757BBarks Väg 15, Solna 758B758B10680 Stockholm 759B759BSverige
227B227BIndependence: Annette Sadolin meets the definition of independence set out by the Committee on Corporate Governance 228B228BDesirée Schultz** 229B229BDOB: 11 May 1952 230B230BJoined Topdanmark’s Board of Directors: 2011 231B231BCurrent position held: Head of department 856B856BOffices held: Chairman of Topdanmark's Senior Officers' Association 232B232B*Elected at the AGM,* Elected by employees, *** Member of Topdanmark’s Audit committee, 233B233B****Member of Topdanmark’s Remuneration committee, *****Member of Topdanmark’s Nomination committee
Provisions for insurance and investment contracts: Relative run-off profits, net of reinsurance (%) 2.1 1.8 1.3 1.6 2.4 * Before deducting bonuses and rebates
Shares in associated companies 18 928 892 Loans to associated companies 19 173 416 Total investment in associated companies 1,101 1,309
Cash and cash equivalents comprise: Liquid funds 368 420 Deposits with credit institutions 1,657 1,047
Fair value revaluation for the year taken to to revaluations (49) (68) Investment properties 3,983 3,951
Note 24. Subordinated loan capital Hybrid Subordinated Subordinated core capital loan capital loan capital
Customers' share of technical basis for risk allowance 954 1,362 Share of technical basis for risk allowance allocated to shareholders' equity 102 78 Insurance technical result 1,057 1,440
Employee shares In 2012 Topdanmark issued 472,050 employee shares offset by a reduction in their respective cash salaries. The costs have been calculated to be DKK 43m in accordance with IFRS 2. There was no issue of employee shares in 2013.
Associated companies Premiums ceded 117 107 Commission received (6) (6) Reimbursed claims (100) (240) Reinsurers' share of provisions 187 50
There were no changes in the classification of financial assets or liabilities in 2013. In 2013 the Group invested DKK 71m in financial assets, which are recorded at fair value using valuation models based on non-observable inputs (project financing Carlsberg Byen). The fair value at 31 December 2013 was equivalent to the acquisition price.
Financial liabilities measured at amortised cost Subordinated loan capital 1,153 1,155 Deposits with ceding undertakings 141 143 Creditors arising out of direct insurance operations 95 93 Creditors arising out of reinsurance operations 35 115 Bond loans 74 58 Amounts due to associated companies 7 5 Current tax liabilities 54 15 Other creditors 1,097 1,115 Total financial liabilities measured at amortised cost 2,655 2,700 Total financial liabilities 4,684 5,029
906B906BThe historical profitability of major industrial and SME customers with individual insurance schemes is monitored using customer assessment systems.
1077B1077BThe much higher provisioning risk in long-tail than in shorttail lines is due to the longer period of claims settlement. It is not unusual that claims in long-tail lines are settled three to five years after notification and in rare cases up to 10-15 years.
1086B1086BSpecific reinsurance cover of DKK 100m for rainstorms takes effect if accumulated annual rainstorm claims exceed DKK 50m. For a claim to be accumulated, the event must exceed DKK 10m. The maximum retention in the event of an extreme rainstorm is DKK 75m plus reinstatement premiums.
Terror 1087B1087BWith certain restrictions terror is covered by the reinsurance contracts.
1088B1088BA national guarantee scheme of DKK 15bn covering terror claims including an element of NBCR (nuclear, biological, chemical, radiological) has been established. The national guarantee scheme covers any market retention in excess of DKK 5bn. The Danish non-life insurance companies have established a terror pool to protect the market retention. Industrial injuries caused by any form of terror are covered by the Government with a few exceptions.
918B918BAll policies have been split into contribution groups according to the guaranteed benefit scheme. In each contribution group, the investment policy is intended to ensure the ability to meet the guaranteed benefits, and the market risk is adjusted in accordance with the risk capacity of the contribution groups.
976B976BThe implementation of new IT systems is only effected after extensive testing procedures.
291B291BValuation methods are based on publicly available market data. If there is no active market for the financial instrument, depending on the nature of the asset or liability, the calculation is based on underlying parameters such as interest and foreign exchange rates, volatility or comparison with the market prices of corresponding instruments.
305B305BCalculation of profit in life insurance 306B306BThe calculation of profit for life insurance is regulated by the Danish Financial Business Act. The definition of Topdanmark's policy on the calculation of the profit for the year has been reported to the DFSA.
307B307BThe result of life insurance comprises unconditional and conditional profit elements.
Technical interest net of reinsurance in non-life insurance 325B325BThe technical result on non-life insurance includes a return on the technical provisions net of reinsurance. The interest on the provisions is calculated using the relevant interest rate corresponding to the expected date of settlement. The discount expense of the regular revaluation of the present value of the provisions until the expected time of settlement is offset against the interest income. The interest and discount expense on discounted provisions, primarily provisions for outstanding claims net of reinsurance, are calculated on the same basis. Accordingly the interest and discount expense on discounted provisions are exactly netted off each other. For non-discounted provisions, primarily provisions for unearned premiums net of reinsurance, the interest on the average value of the provisions is calculated using the relevant interest rate corresponding to the weighted average date of settlement.
Provisions for insurance and investment contracts Provisions for unearned premiums 363B363BThese provisions represent the proportion of premiums collected which, based on the spread of risk during the period of cover, relates to the period after the end of the financial year. The provisions for unearned premiums cover future payments of claims not yet incurred in the remaining period of risk as well as administration costs of the insurance contracts written. Therefore, they are calculated per line of business at the present value of these amounts, as a minimum. The sufficiency of the provisions is regularly tested on the basis of the current expectations of future cash flow.
Life insurance provisions 364B364BLife insurance provisions are measured at fair value. Accordingly, the liabilities are calculated on the basis of the market value independent of the original technical base. The fair value of the life insurance provisions is based on the realistically expected future premiums to be received, benefit payments to be made and administrative expenses incurred on the contracts written.
60 year old 60 year old Remaining life expectancy man woman
377B377BProvisions for claims and benefits in workers' compensation insurance comprise provisions for annuities and other provisions for claims and benefits. The assessment of the future annuities is based on the present annuities including the expected wage and salary indexation and a rate of mortality corresponding to G82 with monthly age write-downs. Workers’ compensation claims are often paid as the capitalised value of an annuity. The capitalisation rate at the time of capitalisation is to be calculated as a moving average of the most recent five years’ interest rate on leading mortgage bonds less tax. The capitalisation rate is calculated as the forward swap rates plus 0.85% p.a. and less a deduction for tax corresponding to the base tax rate.
379B379BTopdanmark has purchased derivatives partially hedging the provisions for workers’ compensation and annuities in illness and accident insurance against changes in future wage and price indexation. The revaluation of these derivatives is included in claims incurred.
Note 9. Related parties Topdanmark A/S has no related parties with controlling influence. Related parties with significant influence comprise If P&C Insurance Holding Ltd (publ), the Board of Directors, the Executive Board and their families.
Affiliated companies Expenses charged 26 34 Dividends received 1,388 1,871 Interest charged 1 0
A number of subsidiaries have been liquidated by submitting a statement to the authorities. The Company guarantees that debt in these companies has been paid.
The five-year summary in accordance with Section 91(a) of the Danish executive order on financial reports for insurance companies and lateral pension funds is included in financial highlights on page 3. Risk disclosures in accordance with Section 91(b) are included in Management's review for the Group in Risk management and in Note 50 of the consolidated financial statements.
1032B1032BFurther, in our opinion, the annual financial statements give a true and fair view of the Company's assets, liabilities and financial position at 31 December 2013, and of the results of its activities for the financial year 1 January to 31 December 2013 in accordance with the Danish Financial Business Act.