Our insurance products provide peace of mind every day to more than 2 million private customers and more than 100,000 businesses in the Nordic region. The great majority of our products are distributed through our own strong distribution channels.
Considering our satisfactory performance in 2006, our Supervisory Board recommends that the shareholders at the annual general meeting to be held on 28 March 2007 approve a dividend of DKK
33 per share, equivalent to DKK 2.2bn and a payout ratio of 70% of our profit for the year after tax.
This annual report deals with relevant aspects of 2006. It marks a point in time. It defines us now, but we move forward. In order to achieve our vision of being perceived as the leading peace of mind provider in the Nordic region, we need to have insight into and empathy with people’s feelings and concerns. We have invited seven different persons to share their views of the real world with us. We use their interpretations of peace of mind and concerns, for today, tomorrow and the years ahead, to supplement our financial data for 2006. We hope you will enjoy reading our annual report.
The Group’s first-quarter pre-tax profit was an improvement of DKK 177m over the first quarter of
Extraordinary items and minority interests 0 0 0 0 1 -1,256 profit/loss for the year, continuing business 3,085 2,125 1,496 1,462 959 -1,817
Business ceded as a percentage of gross premiums 3.6 0.1 4.7 5.0 6.8 5.5
Net assets value per share 147 121 100 90 79 63
TrygVesta’s financial performance in 2006 / TrygVesta Annual Report 2006 / Page 17 of 147
• strengthen our sales power to expand the market positions in Denmark and Norway, and
We intend to meet customers on their own terms and improve efficiency and quality by
We intend to focus on our employees and be an attractive workplace by
TrygVesta uses Standard & Poor’s capital model. A simplified version of this model is provided on our website for following the rating requirement for capital relative to actual accumulated capital.
The report the United Nations just released on climate change is a cause of concern for everyone. We saw windstorms and floods in many places in 2006, and it seems such events will become more frequent in the years ahead. This may trigger adjustments in insurance services, covers and premiums to rising claims expenses.
In Denmark, we came in second among the companies we usually consider our peers, and we recorded progress in both customer satisfaction and customer loyalty compared with 2005. The short policy cancellation notice, which was introduced in 2006, resulted in a higher rate of customer turnover, in particular among young customers, while renewal rates and customer satisfaction among our concept customers were at a high level.
ance cover, additional advantages and discounts for customers who take out more than one product with
custoMer survey finland 2006 satisfaction and loyalty - private custoMers 1)
In other words, too much freedom threatens the individual, while too many rules and conventions hamper the individual.
Our processes / TrygVesta Annual Report 2006 / Page 36 of 147
2006 was a year very much characterised by the continued implementation of our values throughout the Group. Three times during the year we worked with themes of topical interest on a Group-wide basis.
It is important that all employees see their own efforts relative to the Group’s overall target, and we use an employee bonus programme as a natural tool in this connection. Employee bonus benchmarks were combined ratio and growth in 2006, and our performance triggered a bonus of DKK 5,000 to each employee, mostly in the form of shares. The Supervisory Board has in addition launched a stock option scheme for management and senior management employees, which is described in the section on Corporate governance elsewhere in this annual report.
Private & Commercial Denmark generated a technical result of DKK 989m in 2006, which was an improvement of DKK 233m over 2005. The improvement was driven by a positive development in claims expenses and the introduction of activities that enabled us to maintain a flat development in nominal costs.
& Commercial Norway effective 1 October 2006. Kjerstin is 48 years old and comes from a position as division manager with Vital Forsikring.
In late 2006, the Norwegian finance ministry approved a conversion of Vesta in Norway into a branch of Tryg.
The claims ratio was also favourably impacted by runoff gains of DKK 216m, equivalent to 4.4 percentage points. In particular, property and motor contributed run-off gains, while workers’ compensation and liability reported run-off losses. Thus, the underlying claims performance was very positive in 2006.
Finnish general insurance / TrygVesta Annual Report 2006 / Page 52 of 147
The bond portfolio had a duration of 1.3 years at 31
TrygVesta has a single class of shares, and all shares rank pari passu. Tryg i Danmark smba holds 60% of the shares and is the only shareholder holding more than 5%. At 31 December 2006, the remaining 40% of the shares (free float) was held by 25,691 registered shareholders. Some 25% of the free float shares was held by international investors, some 50% by large Danish investors, and 25% by Danish investors holding less than 500 shares. The 200 largest shareholders held 84% of the shares in aggregate at 31 December 2006.
In accordance with the recommendations issued by the OMX Copenhagen Stock Exchange, we refrain from commenting on matters relating to our financial performance or forecasts during a period of three weeks prior to the release of financial reports.
Information on Board members profiles and shareholdings is set out in Members of the Supervisory Board in this annual report.
The members of the Supervisory Board receive a fixed annual remuneration of DKK 250,000. However, the deputy chairman receives DKK 500,000 and the chairman receives DKK 750,000. Members of the Supervisory Board receive no bonus and do not participate in any options programmes or severance plans.
Risk management / TrygVesta Annual Report 2006 / Page 72 of 147
model is used to evaluate investment strategies and purchases of reinsurance and to determine risk-based return requirements for the individual business areas.
Both the investment assets and provisions for claims are exposed to fluctuating interest rates. Thus, if interest rates fall, the value of the bond portfolio would rise, while a lower discounting rate would at the same time cause the value of the provisions for claims to rise. Fluctuating interest rates thus impact the financial results in two opposite directions, and the risk of profit variations depends on the degree to which these two movements offset each other.
We have audited the annual report of TrygVesta A/S for the financial year 2006. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU, and the parent financial statements have been prepared in accordance with the Danish Financial Business Act. In addition, the annual report has been presented in accordance with additional Danish disclosure requirements for the annual reports of listed financial enterprises.
Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the annual report is free from materiel misstatement.
The Group has adopted the following standards in 2006: • IFRS 7 regulates financial instruments and is mandatory from 1 January 2007. Implementation of the standard will only change the presentation of financial instruments and will not affect the recognition and measurement of financial instruments.
Transactions” was issued in November 2006. The interpretation specifies that the accounting treatment of share-based payment does not rely on the way in which the shares are acquired by the company at the exercise date. The interpretation does not change the existing accounting treatment (IFRIC 11 remains to be adopted by the EU).
The calculation of the carrying amounts of certain assets and liabilities relies on assessments, estimates and assumptions about future events. A more detailed description of primary assumptions and primary sources of estimation uncertainty are given in the risk management section in the management’s report.
• Norway has issued a consultation paper on assumptions about defined benefit pension plans under IAS 19.
On initial recognition, assets and liabilities are measured at cost, with the exception of financial assets, which are recognised at fair value. Measurement subsequent to initial recognition is effected as described below for each financial statement item.
Anticipated risks and losses that arise before the time of presentation of the annual report and that confirm or invalidate affairs and conditions existing at the balance sheet date are considered at recognition and measurement.
On consolidation, intragroup income and expenses, shareholdings, intragroup accounts and dividends, and gains and losses arising on transactions between the consolidated enterprises are eliminated.
Profit and loss in divested subsidiaries and profit and loss on discontinued activities are included under discontinued and divested business in the income statement.
Unrealised losses are eliminated in the same way as unrealised gains unless impairment has occurred.
Owner-occupied properties are measured in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment writedowns. Revaluations are performed regularly to avoid the carrying amount differing materially from the owner-occupied property’s fair value at the balance sheet date.
Depreciation on property, plant and equipment is calculated using the straight-line method over their estimated useful lives, as follows: • Owner-occupied properties, 50 years
Properties held for renting yields that are not occupied by the group are classified as investment properties.
A financial asset is classified as a financial asset available for sale at inception if acquired principally for the purpose of selling in the short term, or if it forms part of a portfolio of financial assets in which there is evidence of short-term profit-taking, or if so designated by management. Derivatives are also classified as financial assets available for trading unless they are designated as hedges.
The purchase and sale sums of treasury shares and dividends thereon are taken directly to retained earnings under equity.
DKK 100,000 for other. The model is so dynamic that, to the greatest extent possible, it captures changes in the run-off pattern. It consists of two modules, with the first module estimating on a daily basis with due consideration to days off and special high-frequency days such as New Year’s Eve or days with slippery roads. The model also takes the season into consideration, both in terms of claims performance and in claims handling intensity. In the second module, estimates are on a more aggregate level, and the calculations are based on a generalised hierarchic De Vylder model.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses and past service costs. The defined benefit obligation is calculated by actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by a duration that matches the conditions of the underlying pension obligation.
The actuarial gains and losses arising from experience adjustments and changes in actuarial estimates is charged or credited to equity.
Share tion exchange sation other retained proposed capital reserves rate adj. reserve reserve earnings dividends total
Price adjustment of cash and cash equivalents, beginning of year -2 14
Income statement and balance sheet for TrygVesta / TrygVesta Annual Report 2006 / Page 106 of 147
5 technical result, net of reinsurance, by line of business accident and workers’ Motor health 1) compensation Motor tpl comprehensive
Marine, aviation fire & contents fire & contents and cargo (private) (commercial) liability
Additions for internally developed expenses amount to DKK 5m (in 2005 DKK 11m).
Income statement and balance sheet for TrygVesta / TrygVesta Annual Report 2006 / Page 114 of 147
Provisions for claims, net of reinsurance, end of the year 19,034
Paid in the financial year in respect of the current year -5,030 -107 -4,923
Market value adjustment of provisions, beginning of period 290 67 223
Income statement and balance sheet for TrygVesta / TrygVesta Annual Report 2006 / Page 124 of 147
Notes assets 6 Investments in subsidiaries 10,643 8,804 6 Investments in subsidiaries in respect of discontinued business 0 121 7 Investments in associates 0 14 total investments in subsidiaries and associates 10,643 8,939
Income statement and balance sheet for TrygVesta (Parent company) / TrygVesta Annual Report 2006 / Page 133 of 147
Tax on financial loss before profit/loss in subsidiaries and tax -21 19
Additions during the year -14 0 revaluations and impairment writedowns at net asset value carrying amount 31 december 0 14
Chairman of a number of intra-group supervisory boards board member of
Mechanical engineer; several management training programmes at Insead chairman of the board of