Focused strategy y Danish player y Stable insurance risks y Low expense ratio y Limited financial risk y Synergy between life and non-life y Efficient capital management y Limited top line growth y Profitable growth - in that order y High net result y Large share buy-back programme y No protection against a take-over in the Articles of Association
Please direct any queries to: Christian Sagild Chief Executive Officer Direct tel.: +45 4474 4450
It is a key feature of Topdanmark’s business model to give priority to profitability over growth.
During 2015, competition in car insurance, in particular, intensified, driven by the existing players in the market. This trend in car insurance is due to the predominance of the sale of smaller and more roadworthy cars, which has resulted in a trend with declining risk and declining average premiums, but maintained profitability. As a result of the trend in car insurance, the Topdanmark Group incurred a 1.0pp decline in premiums earned in 2015.
Claims trend The claims trend was 71.4% in 2015 (2014: 70.3%).
The level of fire claims declined in the agricultural and personal areas, but increased in the SME and industrial area. The fire claims trend improved the overall trend by 0.5pp.
The number of thefts declined, which improved the claims trend by 0.3pp in 2015.
The claims trend improved 0.2pp to 72.7% benefitting from a better claims trend for fire and theft insurance (0.8pp) and from run-off (0.5pp), while weather-related claims and the lower interest rates had an adverse effect on the claims trend of 1.4pp and around 1pp respectively.
The property portfolio comprises mainly owner-occupied property (DKK 857m). The properties are valued in accordance with the rules of the DFSA (Danish Financial Supervisory Authority) i.e. at market value taking into account the level of rent and the terms of the tenancy agreements. Except for a single property, which was sold in 2016, 97.9% of the property portfolio is let.
Non-life insurance In the interim report for Q1-Q3 2015 Topdanmark assumed, for 2016, a decline of 1% in premiums earned and a combined ratio of around 91%, excluding run-off.
Overall, the assumed pre-tax profit on non-life insurance is DKK 850-950m.
Since 1998, when Topdanmark started buying back own shares, it has been decided to cancel DKK 15.0bn of own shares, representing a 74.5% write-down of the share capital. The average price of the shares written down is DKK 48.6 per share.
Non-life insurance risks Personal, liability and property insurance for the personal, SME, industrial and agricultural markets. Most important risks Risk preferences Risk reducing activities Underwriting risk. • Acceptance policy. • Follow-up policy.
Solvency calculation and capital requirements Solvency II took effect on 1 January 2016. Solvency II introduces new common EU rules on the calculation of solvency capital requirements and capital base.
The Danish executive order on solvency for 2015 already recognised the following significant Solvency II elements: • Provision for risk margin is deducted from the capital base. • If the accounting provisions for outstanding claims exceed best estimate, the surplus amount is added to the capital base.
A new Danish executive order on financial reports for insurance companies took effect on 1 January 2016. The order adjusts the accounting provision calculation to reflect the Solvency II principles for calculation of provisions. In 2016, the most significant differences between shareholders' equity and capital base are: • Expected future profit (profit margin) is recognised in the capital base. • Intangible assets are deducted in the capital base.
The necessary capital of DKK 4,700m, as stated above, is based on Topdanmark using the internal model for calculation of the non-life risk, approved by the DFSA. If Topdanmark did not use the internal model, the solvency capital requirement would be at a level of DKK 800m higher.
Topdanmark has signed up to the UN Global Compact intended to ensure, among other things, the prevention of discrimination in businesses.
Life insurance Provisions for w ith-profits schemes - 24.2 Life insurance provisions 22.6 Collective bonus potential 1.7 Provisions for outstanding claims 0.1 Provisions for unit-linked schemes 16.2 16.2 Profit margin - 0.2 Life insurance 40.5 40.5
Education: • Law degree, University of Copenhagen. • Special law programme, Columbia University, NY,
Gross claims paid (7,104) (6,254) Reinsurance cover received 1,185 476 Change in the provisions for claims, gross 796 45 Change in the reinsurers' share of the provisions for claims (697) (68) Claims incurred, net of reinsurance 5 (5,819) (5,801)
Note 3. Gross premiums earned - non-life insurance Gross premiums written 9,121 8,883 Change in gross provisions for unearned premiums 47 134 Gross premiums earned 9,167 9,017
Average value of claim (DKK '000) 24 24 9 9 12 12
Note 9. Change in life insurance provisions Guaranteed benefits (1,982) 852 Bonus potential on future premiums 1,195 313 Bonus potential on paid-up benefits 1,618 (355) Change in life insurance provisions 831 810
Amortisation of intangible assets is primarily included in claims incurred and operating expenses.
Investment properties are measured at fair value (level three). The measurement is based on an expected annual return on operations and a rate of return.
Intra-group transfers (390) (370) Retrospective provisions at 31 December 21,370 20,669 Accumulated revaluation at 31 December 2,392 1,888 Life insurance provisions at 31 December 23,761 22,557
Note 41. Shares analysed by industry and region (%) - life insurance Other North South Other Other Not 2015 Denmark Europe America America Japan Far East countries analysed Total
Note 46. Contingent liabilities Contract liabilities 310 121 Adjustments to VAT liabilities 28 39 Other liabilities 11 13 Capital commitments made to loan funds and private equity funds etc. 701 1,254 Share of associated companies' liabilities: Contract liabilities 48 0 The Group companies participate in technical insurance collaboration where they are jointly liable for the insurance liabilities.
Better replacement purchasing power The claims department's purchasing power in terms of replacement products and services provides financial advantages for customers and shareholders alike.
Investment properties A return model based on market-determined net earnings and rates of return with various parameters such as location, idleness, quality of tenants etc. is used for measuring the fair value of investment properties.
True sale and repurchase transactions and true purchase and resale transactions (repo / reverse transactions) are recognised and measured as secured loans.
Profit / (loss) for the year 1,170 (38) 1,132 Other comprehensive income in affiliated companies 1 0 1 Total comprehensive income for the year 1,171 (38) 1,133
The Board of Directors and the Executive Board have today considered and approved the Annual Report of Topdanmark A/S for 2015.