Profit forecast model for 2021 • Compared with the profit forecast model for 2021 in the Q3 Report, the assumed combined ratio for 2021 has been improved from about 90 to 89-90 excluding run-off.
The profit on life insurance decreased by DKK 210m to DKK 117m, primarily due to a lower investment return (DKK 167m).
After return on non-life insurance provisions, the investment return in non-life insurance increased by DKK 65m to DKK 277m. The investment return was mainly driven by gains on listed equities.
The increased level of claims on house insurance especially from houses built in the 1960s and 1970s represents a change in the risk picture. Consequently,
As already mentioned, the claims trend in 2020 was impacted by many water claims on houses owing to a record high level of rain. Claims related to the high level of rain impacted the claims trend negatively by 0.5pp.
Non-life insurance in Q4 2020 Premiums earned in Q4 2020 increased by 6.0% to DKK 2,487m. The private segment increased by 3.0%, and the SME segment increased by 9.2%. Adjusted for a change in segmentation, premium growth was 5.0% and 6.9% in the private segment and SME segment, respectively.
The underlying claims trend, which is adjusted for discounting and the impact of COVID-19, improved by 1.3pp to 72.4.
The claims trend deteriorated by 2.2pp to 66.0 caused by a lower level of run-off profits (3.6pp) and a higher level of weather-related claims. By contrast, especially workers’ compensation and motor improved.
Others, such as global equities have fully recovered, and during Q4 reached a new record high.
New IT systems A key element in unfolding Topdanmark’s 1-2-3 strategy is new core IT systems in both life and non-life. In the life division, the new core IT system was implemented in 2019. In non-life, the IT system will start being implemented in 2021. Consequently, Topdanmark will start depreciating the cost in relation to the new non-life system in 2021.
Non-life insurance In the Q3 Report, it was disclosed that Topdanmark assumed premium growth for 2021 of just above 3%. This was based upon the following assumptions: • The change in distribution partner from Danske Bank which was terminated at the end of Q2 2019 and the new distribution agreement with Nordea as at 1 January 2020 will in terms of premium level out during 2021.
Announcement No. 03/2021 from Topdanmark A/S Page 18 of 94 meets its goal: that the Board has a minimum of three persons of each gender. Topdanmark meets the statutory definition of an equal gender distribution.
Severance pay In order to ensure full loyalty, focus and performance for the Topdanmark Group during the period until a potential takeover is finalised, Topdanmark has agreed with a few members of the Executive Board and Orienteringsforum, that under certain circumstances, they will receive compensation in the form of an extended period of notice and increased severance pay, if they resign or are dismissed or if their position is made redundant because Topdanmark and/or the company in the Topdanmark Group where the member is employed is taken over by or merges with a company outside the Group, or if one or more owners take control of Topdanmark and/or the company in the Topdanmark Group where the member is employed. The maximum amount of compensation will represent two years’ remuneration.
Member of: • The Audit Committee of FLSmidth & Co. A/S • The Finance, Risk & Audit Committee of Bavarian
Offices held: Member of the Board of Directors of: • Finans Norge • Euronext N.V. • Hastings Group.
Change in the life insurance provisions and profit margin (6,197) (6,232) (3,352) (13,820) (8,877)
Dividend paid (1,350) (1,350) Dividend, own shares 50 50 Share-based payments 62 62 Exercise of share options 88 88
Note 1. Segment information income statement Eli- Elimin - Parent minPrivate SME ated Non-life Life etc. ated Group
Gross premiums earned, direct business, by location of the risk: Other EU-countries 7 8 Other countries 1 1
Run-off result, net of reinsurance (3) (30) 7 (8) (65) (64) Claims provisions, net of reinsurance 484 563 51 59 445 538
The weighted average of the rates of return on which fair value of individual properties was based 5.0% 4.8%
Note 26. Life insurance provisions unit-linked products - continued Insurance Investment 2020 contracts contracts Total
**STI bonus agreements have been signed for all four executives. The bonus pay for 2020 is calculated and granted in 2021, and will be disclosed in the Annual Report for 2021.
Designated at fair value: Deposits with credit institutions 2,745 4,989 Investment assets unit-linked products excl. property: Equity investments 21,588 20,844 Unit trusts 541 665
Besides CLOs the portfolio consists of construction financing of property projects (DKK 240m) and bonds (DKK 111m), for which current return depends on payment on life annuity contracts. Revaluations are recognised in the income statement in the line "Revaluations". Of the amount of revaluations DKK 22m is unrealised (2019: DKK 2m).
Financial liabilities at amortised cost Other subordinated loan capital 1,747 1,749 Deposits received from reinsurers 69 33 Debt relating to direct insurance operations 194 165 Debt relating to reinsurance operations 26 23 Current tax liabilities 27 60 Other debt 1,867 1,727 Total financial liabilities at amortised cost 3,931 3,757 Total financial liabilities 4,766 6,089
The exposure in listed equity investments has been adjusted by means of financial derivatives and amounts to: 2019 2020 With-profit 3,101 2,556 Unit-linked 18,469 20,398
Customers’ satisfaction with visits and email-, telephone- and internet contact is monitored daily to act immediately on each dissatisfied customer enabling us to help the customer and learn from the incident too.
Topdanmark Livsforsikring does not have significant climate-related insurance risks. Investment risks for the companies related to climate mainly comprise the property portfolios and are hedged through investments in new / newer properties as well as maintenance of existing properties. In addition, the investment policies include an exclusion list which i.a. includes companies with activities within tar sands and thermal coal. In Topdanmark’s active investment management, there is a focus on acquiring attractive investment opportunities in “green companies” and divestments of holdings which in the long run are considered to be unattractive as a result of their climate footprint, etc. Overall, Topdanmark has the necessary focus on climate conditions in relation to the investment company.
The fair value, on the date the option is granted, is included as staff costs in the income statement, with a set-off in shareholders’ equity. The fair value is calculated using the Black & Scholes model.
Life offers products within life insurance and pension funds to both private and SME customers in Denmark.
Profit for the year 1,547 1,124 Other comprehensive income from affiliates (14) 1 Other comprehensive income (14) 1 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,533 1,125
Note 8. Related parties Possessing an ownership interest of 48.00% of the shares outstanding, Sampo plc, Fabianinkatu 27, Helsinki, Finland has a controlling influence of Topdanmark A/S. Related parties with material influence comprise the Board of Directors, the Executive Board and their related parties.
There have been no events in the period from 31 December 2020 until the presentation of the financial statements which could change the assessment of the annual report.
The net asset value of affiliates is calculated without providing for deferred tax on security funds, unless it is probable that a situation creating such a tax liability will arise within the measurable future.
The above description of risk factors is not exhaustive. Investors and others, who may base decisions relating to Topdanmark on statements in relation to the future, should give their own careful consideration to these and other factors of uncertainty.
Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements for the financial year 2020. These matters were addressed during our audit of the financial statements as a whole and in forming our opinion thereon. We do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
Information on unlisted investments is disclosed in notes 17, 34 and 47.