Management’s review 1 Key figures 3 Financial highlights 4 Results for 2019 4 Results for Q4 2019 4 Non-life insurance in 2019 6 Non-life insurance in Q4 2019 8 Life insurance in 2019 9 Life insurance in Q4 2019 9 Investment activities 11 Parent company etc. 11 Taxation 11 Profit forecast model 12 Risk management 14 Solvency calculation and capital requirements 14 Capital structure and ownership 15 Board of Directors and Articles of Association 16 Severance pay 17 Remuneration structure 18 Distribution of dividend for 2019 18 Corporate Governance 18 CSR 18 Annual General Meeting 18 Financial calendar 19 Company announcements 20 Board of Directors 25 Executive Board
Combined ratio excl. run-off profits 91.1 90.4 85.8 87.5 88.3 88.1 92.1
Claims trend The claims trend was 67.6 in 2019 compared with 67.5 in 2018.
Non-life insurance In the Q3 Report, it was disclosed that Topdanmark assumed premium growth for 2020 in non-life at the same level as the premium growth in 2019. This was based on the following assumptions: • The termination of the distribution agreement with
Topdanmark Forsikring has outstanding subordinated tier 2 notes in two tranches: • DKK 500m, call in 2020, expiry in 2025 • DKK 850m, call in 2021, expiry in 2026.
Shareholders As at 3 February 2020, Topdanmark had 38,172 shareholders registered by name.
The options granted for 2020 are not to be exercised any earlier than subsequent to the publication of the 2022 annual results in 2023, and any later than subsequent to the publication of the 2024 annual results in 2025. In the intervening period, the options can only be exercised up to three banking days after Topdanmark's publication of its annual, half year and interim reports.
The value of issuing the options amounts to DKK 10m, using the Black and Scholes model assuming a share price of DKK 329, an interest rate equivalent to the zero coupon rate based on the swap curve of 30 December 2019, future annual volatility of 22%, a pattern of exercise similar to Topdanmark's previous allocations of share options and otherwise in accordance with IFRS 2 on share-based payments.
Independence: Anne Louise Eberhard meets the definition of independence set out by the Committee on Corporate Governance.
Debt relating to direct insurance operations 373 194 Debt relating to reinsurance operations 18 26 Amounts due to credit institutions 242 155 Current tax liabilities 1 27
Reinsurance ceded (255) (162) Cash flow from non-life insurance 1,615 1,443
Cash and cash equivalents comprise: Liquid funds 253 550 Deposits with credit institutions 4,380 2,745
Pension return non-life insurance (31) 31 0 Return and revaluations of non-life insurance provisions (616) (616) Transferred to technical result (8,357) (8,357)
Note 5. Technical result - non-life insurance 2018 2019 2018 2019 2018 2019
The financial information is according to the companies' most recent available annual reports. *The company was founded in 2019 and the first financial year runs until 31 December 2020. Bornholms Brandforsikring A/S has been recognised on the basis of the most recent financial information at 30 September.
Guaranteed Bonus ratio and return interest rate 2018 2019 2018 2019
Risk groups Risk result after addition of risk bonus 51 59 Risk result after addition of risk bonus (%) 0.2 0.3
Note 28. Provisions for claims Gross Provisions at 1 January 13,013 13,003 Claims paid relating to previous years (2,794) (3,147) Change in expected claims payments relating to previous years (run-off) (319) (388) Claims paid relating to this year (3,251) (3,356) Expected claims payments relating to this year 6,387 6,514 Inflation hedging (118) (149)
Provisions for claims, net of reinsurance 12,476 12,593 Provisions net of reinsurance for business lines being settled in whole or partly as annuities: Workers' compensation insurance 6,033 6,112 Average period of settlement 7 years 6 years Illness and accident insurance, administered by the life insurance business 2,248 2,507 Average period of settlement 13 years 13 years
The number of material risk takers are a calculated weighted average.
Provisioning risk Provisions for outstanding claims Traditionally, the insurance classes are divided into shorttail i.e. those lines where the period from notification until settlement is short and long-tail, i.e. those lines where the period from notification until settlement is long.
Event register Topdanmark monitors and reports on operational risks in order that the organisation will learn from its mistakes. Consequently, a process has been established including a tool to register events, which are then collected centrally in an event log and communicated onwards in the management system.
Return and revaluation of non-life insurance provisions Return and revaluation of non-life insurance provisions includes amortisation and revaluation of premium provisions, claims provisions, profit margin and risk margin, net of reinsurance.
Owner-occupied properties Owner-occupied properties are those properties used for the Group's own operations. The properties are measured at a revalued amount being the fair value on the date of revaluation. The properties are reviewed and assessed annually by the Group's own valuers. No external valuers have been involved. The buildings are depreciated on a straight-line basis, given an expected life of 50 years and an annually re-assessed residual value. Land is not depreciated. The fair value of the revaluation of owneroccupied properties is assessed on the same basis as investment properties. Any revaluation surplus is included in other comprehensive income unless the revaluation is a reversal of a previous impairment. Impairments are included in the income statement unless the impairment is a reversal of previous revaluation included in other comprehensive income.
Provisions for insurance and investment contracts Provisions for unearned premiums Premium provisions are calculated as the best estimate of expected payments for future insurance events covered by insurance contracts concluded. Topdanmark’s insurance contracts are mostly written for a 1-year period.
policies to compensate for the risk of fluctuations in the expected payments. The risk margin is calculated as the increase in guaranteed benefits stressing the biometric risks.
The annuity reserves for disability in illness and accident insurance are calculated using an inflationary structure. Provisions for claims 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 annuities in force including the expected wage and salary indexation, and a rate of mortality corresponding to G82 with monthly age writedowns on annuities based on the act on accidents and an adjusted G82 rate of mortality on annuities on the act on workers´ compensation amended to comply with Topdanmark’s experience base within death intensity for annuitants. 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.
Provisions for claims already incurred for disability in illness and accident insurance are calculated using an inhouse statistical model that is based on the relationship between the possibility of resumption of work and the period passed since the occurrence of the claim.
The run-off result is due to claims provisions at the beginning of the year being settled or reassessed through the current year at different amounts than expected and provided for in last year´s accounts. The run-off result, gross, is included in claims incurred regardless of income or expense. Run-off result on own account is net of reinsurance’s share.
TOTAL TANGIBLE ASSETS 3 3 Equity investments in affiliates 5 6,188 6,431 Total investment in affiliated company 6,188 6,431 TOTAL INVESTMENT ASSETS 6,188 6,431 Receivables from affiliates 639 836 Other receivables 2 0 TOTAL RECEIVABLES 641 836 Current tax assets 39 0 Liquid funds 2 3 TOTAL OTHER ASSETS 40 3 TOTAL ASSETS 6,873 7,274
There have been no events in the period from 31 December 2019 until the presentation of the financial statements which could change the assessment of the annual report.