Claims ratio, net of ceded business 72.3 71.5 70.3 70.9 70.7 70.4 71.0
Stable and increasing dividend to shareholders Tryg has a strong focus on ensuring that shareholders receive a nominal and stable increase in dividends. A total dividend of DKK 7.00 per share will be paid for 2020 (DKK 6.80 in 2019). After the significant negative impact of COVID-19 in Q1 2020, Tryg announced an annual dividend decision instead of quarterly dividend payment. However, despite challenging times, Tryg's business model proved very resilient, and it was therefore decided on 9 November 2020 to pay out a dividend of DKK 5.25 per share for the first three quarters of 2020. In Q4, Tryg will pay a dividend per share of DKK 1.75.
to the very efficient set-up. At the end of 2020, Tryg reported an expense ratio of 14.1, which is in line with the target of ~14. In comparison, most international insurers report expense ratios between 25 and 30.
Tryg has an employee satisfaction level above the average of the Nordic sector. Source: Global Employee and Leadership Index
Claims excellence is the most important strategic initiative for improving the technical result. The target was to reduce claims costs by DKK 600m in 2020, and during the three-year period accumulated savings of DKK 640m has been realised.
The improvement has primarily been driven by improving the distribution channel mix in the Private and Commercial businesses. The optimisation has supported an improvement in the customer experience and lowered the cost of sales in the strategy period. An important element in the optimisation of the channel mix has been the introduction of independent sales agents during the strategy period in Private Denmark and Commercial Denmark, inspired by the franchise channel in Norway, selling exclusively on behalf of Tryg.
Claims The claims ratio, net of ceded business, was 70.3 (70.9), while the underlying claims ratio saw an improvement of 0.6 percentage points for the Group and 0.2 percentage points for the Private segment, driven by price adjustments and 'claims excellence' initiatives. It is worth remembering that 'new' business is normally less profitable than 'old' business, due to structurally higher claims frequencies of approximately 3% and higher distribution costs. The underlying claims ratio for Private is currently impacted by the initial adverse effect on profitability of the robust growth. However, in the longer term the initial drag will be offset by higher profitability. At the same time, profitability initiatives in the Corporate segment should also help sustain the improvement in the underlying claims development. The underlying claims ratio is therefore expected to improve in 2021.
In 2020, large claims totalled DKK 500m (DKK 455m), while weather claims totalled DKK 368m (DKK 416m). In Q4, weather claims were impacted by a landslide in Norway on 30 December with an impact of approximate DKK 100m for Tryg. Levels of large and weather claims were below normalised expectations of DKK 550m and DKK 600m a year. The overall run-off result was DKK 1,145m (DKK 1,194m) or 5.1% (5.5%) on the combined ratio. The run-off result was driven mainly by run-off gains in the long-tail segments.
Expenses The expense ratio for Commercial was 17.1 (17.5). The lower level was helped by improved distribution efficiency, especially in Denmark through the use of independent sales agents with much lower costs per sale. In Norway, the improved retention rate and high acceptance of price adjustments supported a positive development in the expense ratio. Total employee numbers were up from 495 at the end of 2019 to 538 in 2020.
Claims The gross claims ratio was 66.5 (66.6), and the claims ratio, net of ceded business was 66.4 (67.3). In 2020, prices for motor insurance were adjusted to improve profitability, and this led to an improved underlying claims ratio for Private Sweden. Profitability, assuming a normalised run-off level, remains challenging, and initiatives to improve profitability will therefore continue in 2021. The strong run-off result reflects a very solid reserves position in the long-tail motor segment.
The overall investment result in Q4 was DKK 513m (DKK 198m) with approximately 50% of the performance swing being explained by changes in equity market performance, 14.0% in Q4 2020 against 7.5% in Q4 2019. 513m
Risk management is based on Tryg’s targets and strategies and the risk exposure limits decided by the Supervisory Board. Tryg’s supervisory Board defines the framework for the company ’s target risk appetite and thereby the capital which must be available to cover any losses.
Solvency II The Solvency II regime (introduced at the beginning of 2016) emphasises the need for sound risk management and has introduced additional requirements concerning risk governance, consistency across the Group and top management reporting and involvement. Tryg has implemented a risk governance structure in full compliance with Solvency II. In addition to the Solvency II requirements, Tryg has chosen to appoint a special Risk Committee consisting of members from the Supervisory Board. Tryg has chosen to implement a partial internal model, approved by the Danish FSA, which models insurance risk while all other modules are based on the standard formula.
The Tryg share started the year at a price of DKK 196.4 and ended 2020 at DKK 192.1. The total return (price and dividends) of the share was a positive 1.4% (for comparison purposes the European insurance index (SXIP) had a reported total return of -10.9% in 2020). The insurance sector’s key attraction is its dividend yield. Earnings and solvency are always carefully scrutinised by investors. In the world of Solvency ll, changes in solvency levels can be more difficult to predict and often difficult to understand. Tryg has a relatively simple business model and a transparent capital position, which is highly appreciated by analysts and investors.
Board committees Tryg has an Audit Committee, a Risk Committee, a Nomination Committee, a Remuneration Committee and an IT-Data Committee. The frameworks for the committees’ work are defined in their terms of reference.
The Executive Board’s remuneration consists of a fixed basic salary, a pension contribution of 25% of the base salary and other benefits. The base salary must be competitive and appropriate for the market and provide sufficient motivation for all members of the Executive Board to do their best to realise the company’s defined targets.
The principal purpose of the incentive programme is to ensure the congruence of the financial interest of the participants and the company ’s shareholders and to create a correlation between remuneration and performance results. Secondly, the programme should contribute to retaining the participants in Tryg.
The allotted conditional shares are deferred for four years from the time of allotment. After the end of the deferral period, the participant will receive free shares in Tryg A/S corresponding to the numbers of conditional shares allotted. The granting of free shares is conditional upon the fulfilment of additional conditions such as continued employment and back-testing (testing prior to granting, to ensure that the criteria on which the variable salary is based are still met at the time of granting of free shares).
Born in 1960. Joined the Supervisory Board in 2017. Finnish citizen.
Born in 1959. Joined the Supervisory Board in 2019. Danish citizen.
Members of the Supervisory Board are elected for a term of one year. Employee representatives are, however, elected for a term of four years. a) Dependent member of the Supervisory Board. b) Independent member of the Supervisory Board, as per the definition in Recommendations on Corporate Governance. c) Joined the Supervisory Board in March 2020
Education: MSc in Economics, University of Copenhagen Board member: J. Lauritzen, Nordsøenheden and Kapitalforeningen Tryg Invest Funds Committee memberships: Audit Committee in J. Lauritzen (Chair) Number of shares held: 13,532 Change in portfolio in 2020: +7,775
climate-related risks and by including it in our underwriting and reinsurance. Also, insurance risk is controlled by limiting the size of single exposures, through geographical limitations and by refraining from offering certain types of insurance.
Whistleblower cases Tryg’s whistleblower hotline is available for all its stakeholders to report violations or potential violations of our Code of Conduct or other issues falling within the scope of Tryg's whistleblower hotline and is reviewed by the chair of the Audit Committee, assisted by Tryg’s Legal and Compliance Director. In 2020, two cases were reported and investigated compared to three cases in 2019. One case led to a warning.
In 2020, the screening led to three companies being flagged for controversial behaviour. In line with the escalation process, dialogue was initiated with the relevant external managers, which have yielded satisfactory explanations and actions. Thus, no companies were excluded.
Our materiality assessment indicates that there is a risk of violations of human and labour rights in our supply chain through our outsourcing activities. To mitigate any violations, we actively monitor our outsourcing suppliers for compliance with the Ten Principles outlined in the UN Global Compact.
The Supervisory Board and the Executive Board have today considered and adopted the annual report for 2020 of Tryg A/S and the Tryg Group.
Total equity and liabilities 60,916 59,059 1 Risk and capital management 25 Contractual obligations, collateral and contingent liabilities 26 Acquisition of activities 27 Related parties 28 Financial highlights 29 Accounting policies
In addition to the above-mentioned risks, Tryg is exposed to credit, counterparty and concentration risk. These risks primarily relate to exposures in high-yield bonds, emerging market debt exposures as well as Tryg’s investments in AAA-rated Nordic and European government and mortgage bonds. These risks are also managed through the investment policy and the framework for reinsurance defined in the insurance policy.
For a non-life insurance company like Tryg, liquidity risk is practically non-existent, as premium payments fall due before claims payments. The only significant assets on Tryg’s balance sheet, which by nature is somewhat illiquid, are the property portfolio.
Compliance risk Compliance risk is the risk of loss as a result of lack of compliance with rules, regulations, market standards or internal guidelines. The handling of compliance risk is coordinated centrally via the Compliance function, which, among other things, sits on industry committees in connection with legislative monitoring, ensures implementation of regulation in Tryg through business procedures, provides ongoing training in compliance matters and performs compliance controls within the organisation. Compliance risks and the result of the
The valuation of the investment assets can be distributed in the fair value hierarchy model, which is determined in accordance with IFRS 13. The model distributes the total investments assets based on the price at which the investment assets are set. Reference is made to note 15 for further description of the fair value hierarchy.
Claims provisions The volatility introduced by the outbreak of COVID -19 affects some of Trygs claims provisions, particularly travel insurance but also several other insurance products due to significant changes in behavior. The effects are incorporated in Trygs reserving models. The statistical uncertainty related to these changes is insignificant compared to the total provisions and balance sheet.
Notes a) Amounts relating to eliminations and one-off items. Please refer to note 2 'Geographical segments ' for details. Other assets and liabilities are managed at Group level and are not allocated to the individual segments but are included under ‘Other’
Reinsurers' share of claims provisions 15 149 1,114 7 0 1,285
Impairment losses and write-downs for the year 0 0 -147 0 -147
Impairment test Goodwill The value in use method is used when testing the Goodwill for impairment.
The impairment test shows a calculated value in use of approximately DKK 31.1bn (26.4bn) relative to a recognised goodwill of DKK 4.2bn (4.2bn) and does not indicate any impairment in 2020. According to the sensitivity informations below a change in the required return rate will have the highest effect on the equity. An increase in the required return of approx. 4.6% will result in a write down of goodwill.
The impairment test shows a calculated value in use of approximately DKK 2.2bn (1.5bn) relative to a recognised goodwill of DKK 0.5bn (0.5bn) and does not indicate any impairment in 2020. According to the sensitivity informations below a change in the required return rate will have the highest effect on the equity. An increase in the required return of approx. 4.1% will result in a write down of goodwill.
Specification of write-downs on receivables from insurance contracts: Write-downs at 1 January 136 139
The sensitivity analysis is based on a change in one of the assumptions, assuming that all other assumptions remain constant. In reality, this is rarely the case, and changes to some assumptions may be subject to covariance. The sensitivity analysis has been carried out using the same method as the actuarial calculation of the pension provisions in the statement of financial position.
Risk-takers independent control functions 5 8 0 0 1 9 a) Total expenses in 2019 for matching shares programs allocated in 2019 and previous year. b) Barbara Plucnar Jensen took up the position as CFO on 1 March 2019.
Notes 29 Accounting policies The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU on 31 December 2020 and the additional Danish disclosure requirements of the Danish Financial Business Act on annual reports prepared by listed financial services companies The annual report of the parent company is prepared in accordance with the executive order on financial reports presented by insurance companies and lateral pension funds issued by the Danish FSA. The deviations from the recognition and measurement requirements of IFRS are: • The Danish FSA’s executive order does not allow provisions for deferred tax of contingency reserves allocated from untaxed funds. Deferred tax and the other comprehensive income of the parent company have been adjusted accordingly on the transition to IFRS.
Enterprises in which the Group directly or indirectly holds between 20% and 50% of the voting rights and exercises significant influence but no controlling influence are classified as associates.
The operational business segments in the Tryg are Private, Commercial, Corporate and Sweden. Private encompasses the sale of insurances to private individuals in Denmark and Norway. Commercial encompasses the sale of insurances to small and medium sized businesses, in Denmark and Norway. Corporate sells insurances to industrial clients primarily in Denmark, Norway and Sweden. In addition, Corporate handles all business involving brokers. Sweden encompasses the sale of insurance products to private individuals in Sweden as well as sale of Product insurances in the Nordic region.
Statement of financial position Intangible assets Goodwill Goodwill is acquired in connection with acquisition of business. Goodwill is calculated as the difference between the cost of the undertaking and the fair value of acquired identifiable assets, liabilities and contingent liabilities at the time of acquisition. Goodwill is allocated to the cash-generating units under which management manages the investment and is recognised under intangible assets. Goodwill is not amortised but is tested for impairment at least once per year.
• The group has the right to direct the use of the asset
Other comprehensive income which cannot subsequently be reclassified as profit or loss