Tryg
Annual Report 2007

Plain-text annual report

A n n u a l R e p o r t 2 0 0 7 Annual Report 2007 TrygVesta A/S Klausdalsbrovej 601 DK-2750 Ballerup TrygVesta@trygvesta.com www.trygvesta.com Phone +45 70 11 20 20 CVR no. 26460212 Fax +45 44 20 67 00 (cid:73)(cid:103)(cid:110)(cid:92)(cid:75)(cid:90)(cid:104)(cid:105)(cid:86)(cid:21)(cid:54)(cid:36)(cid:72) (cid:73)(cid:103)(cid:110)(cid:92)(cid:75)(cid:90)(cid:104)(cid:105)(cid:86)(cid:21) (cid:59)(cid:100)(cid:103)(cid:104)(cid:94)(cid:96)(cid:103)(cid:94)(cid:99)(cid:92)(cid:21)(cid:54)(cid:36)(cid:72) (cid:75)(cid:90)(cid:104)(cid:105)(cid:86)(cid:21) (cid:72)(cid:96)(cid:86)(cid:89)(cid:90)(cid:91)(cid:142)(cid:103)(cid:104)(cid:126)(cid:96)(cid:103)(cid:94)(cid:99)(cid:92) (cid:29)(cid:72)(cid:108)(cid:90)(cid:89)(cid:94)(cid:104)(cid:93)(cid:21)(cid:87)(cid:103)(cid:86)(cid:99)(cid:88)(cid:93)(cid:30) (cid:73)(cid:103)(cid:110)(cid:92)(cid:75)(cid:90)(cid:104)(cid:105)(cid:86)(cid:21)(cid:59)(cid:100)(cid:103)(cid:104)(cid:94)(cid:96)(cid:103)(cid:94)(cid:99)(cid:92)(cid:21) 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Statements regarding TrygVesta’s formance or the insurance industry. future results of operations, financial condition, cash flows, business strategy, plans and future objectives Should one or more of these risks or uncertainties other than statements of historical fact can generally materialise or should any underlying assumptions be identified by terminology such as “targets”, prove to be incorrect, TrygVesta’s actual financial “believes”, “expects”, “aims”, “intends”, “plans”, condition or results of operations could materially “seeks”, “will”, “may”, “anticipates”, “would”, “could”, differ from that described herein as anticipated, “continues” or similar expressions. believed, estimated or expected. A number of different factors may cause the actual TrygVesta is not under any duty to update any of the performance to deviate significantly from the forward-looking statements or to conform such forward-looking statements in this annual report, statements to actual results, except as may be including but not limited to general economic required by law. developments, changes in the competitive environ- ment, developments in the financial markets, extra- ordinary events such as natural disasters or terrorist attacks, changes in legislation or case law and reinsurance. This is a translation of the Danish annual report 2007. In case of any discrepancy between the Danish and the English version of the annual report 2007, the Danish version shall apply. Editors: Investor Relations Design: Bysted A/S Printers: Arco Grafisk A/S Paper: Munken Lynx Photos: Mads Armgaard/gab.dk and Getty Images We want to be perceived as the leading peace-of-mind provider in the Nordic region and we aim to prevent concerns from over- shadowing our customers’ lives. Throughout 2007, our roughly 3,900 employees and our products interacted to provide peace of mind on a daily basis to more than 2.2 million private custom- ers and more than 100,000 businesses. We are the second-largest general insurer in the Nordic region with activities in Denmark, Norway, Finland and Sweden. We are the largest general insurer in Denmark and Norway’s third largest general insurer. We have operated our rapidly growing activities in Finland and Sweden since 2002 and 2006, respectively. We sell the great majority of our products through our own distribution channels. We also have a strong strategic partner- ship with Nordea, the largest bank in the Nordic region. TrygVesta Annual Report 2007 l Profile l 1 of 152 Contents Management’s report Foreword Financial highlights and key ratios of TrygVesta 2007 in review TrygVesta and the external community Our business Strategy 2007-2010 TrygVesta’s financial performance in 2007 Private & Commercial Denmark Private & Commercial Norway Corporate Finnish general insurance Swedish general insurance Investment activities Financial outlook for 2008 Capitalisation and profit distribution Risk management Corporate governance Supervisory Board Group Executive Management Our customers Our employees Our shareholders Financial calendar Announcements in 2007 Feature: Innovation and social responsibility Accounts Statement by the Supervisory Board and the Executive Management Independent auditors’ report Income statement and balance sheet for the TrygVesta Group Statement of changes in equity Cash flow statement Notes to the financial statements Income statement and balance sheet for TrygVesta A/S (Parent company) Statement of changes in equity (Parent company) Notes to the financial statements (Parent company) Financial highlights and key ratios by geography Organisation chart Glossary of technical terms 2 of 152 l Contents l TrygVesta Annual Report 2007 Page 3 4 6 8 10 12 16 19 22 25 28 30 32 36 40 42 48 56 60 62 68 74 78 79 80 94 95 96 97 100 102 103 140 142 143 148 150 151 Prepared to meet future challenges Challenges and opportunities go hand in hand, and the A decision was changes happening around us in the market and in soci- made in 2007 to ety in general present a number of business opportunities change the Group’s for us. Indeed, the year 2007 presented several chal- profit distribution lenges, including a growing focus on health care systems, policy to the effect an awareness of climate change that has truly asserted that TrygVesta now itself, and unemployment falling to an all-time low leading pays cash dividends at to an intensified battle to attract employees. We launched the rate of 50% of the profit for the new initiatives in these areas in 2007 which, going for- year after tax and also buys back treasury shares. The ward, will benefit our Group and all our stakeholders. amount used for share buybacks is calculated on the basis of TrygVesta’s capital model. Accordingly, our Supervisory The technical result we produced for 2007 was DKK 2.8bn, Board intends to recommend to the shareholders at the an improvement of some 12% on 2006 and DKK 770m annual general meeting to be held on 3 April 2008 that higher than our expectations at the beginning of 2007. cash dividends for 2007 be paid at the rate of DKK 17 per The improved technical result was the reward of several share, equivalent to a total of DKK 1,156m. In addition, years of efforts to build a strong foundation for our insur- we intend to buy back shares for DKK 1,405 million, com- ance operations; our prices are now set based on risk con- prising an ordinary and an extraordinary amount attributa- siderations, the structure of our reinsurance programme ble to circumstances described in more detail in the sec- reflects our risk profile, and we focus strongly on innova- tion on capitalisation and profit distribution. The total tion and growth. The stronger technical results of recent amount being distributed to shareholders in 2007 is DKK years make us less dependent on financial income, which 2,561m, equivalent to 113% of the profit for the year was lower in 2007 relative to 2006. Furthermore, we pur- after tax. The total amount distributed reflects TrygVesta’s sue a conservative investment policy, refraining from invest- strong capital position and the Group’s targeted rating of ing in structured financial products, the alleged cause of A- from Standard & Poor’s. the financial turmoil prevailing since the summer of 2007. In addition to reporting good results, we have also built a Our good technical performance in 2007 has caused us to solid foundation for maintaining the strong momentum of upgrade our medium-term expectations from a combined recent years. In 2007, we extended our Health Care area ratio of around 92 to the 89-91 range before run-off. to include Norway, we began selling commercial insur- ances in Finland, and we plan to launch corporate insur- We have supplemented our annual report this year with a ances in Sweden in 2008. feature section focusing on some of our challenges and describing how at TrygVesta we have launched a range of A structured approach to innovation is key at TrygVesta. Inno- new initiatives to meet these challenges. Our initiatives vation is first and foremost a matter of securing the future include boosting the creative potential of our employees development of our Group, creating and exploiting business and finding new ways of working with product develop- opportunities and achieving our vision of being perceived as ment. You can read about these and other initiatives in the the leading peace-of-mind provider of the Nordic region. It feature section at the end of the Management’s report. is about developing new ways of servicing customers, offer- ing new products and launching new initiatives that support We hope you will enjoy reading our annual report. growth. The results of these efforts will materialise clearly in the years ahead. Mikael Olufsen Stine Bosse Chairman of the Supervisory Board Group CEO TrygVesta Annual Report 2007 l Foreword l 3 of 152 Financial highlights Financial highlights and key ratios of TrygVesta DKKm IFRS 2007 2006 2005 Danish GAAP 2004 2003 2004 Income statement Gross premiums earned Gross claims incurred Total insurance operating expenses Profit/loss on gross business Profit/loss on ceded business Technical interest, net of reinsurance Change in equalisation provisions 16,606 -11,175 -2,769 2,662 -343 501 0 16,021 -10,564 -2,697 2,760 -591 343 0 15,705 -11,159 -2,662 1,884 -7 170 0 15,266 -10,425 -2,611 2,230 -708 185 0 16,308 -11,020 -3,462 1,826 -814 537 -93 Technical result 2,820 2,512 2,047 1,707 1,456 Return on investment activites after transfer to Insurance activities Other income Other expenses 340 121 -172 Profit/loss for the year before tax 3,109 Extraordinary items and minority interests Tax 0 -842 1,228 118 -149 3,709 0 -624 894 126 -154 2,913 0 -788 371 121 -147 2,052 0 -556 517 121 -147 1,947 0 -485 Profit/loss for the year, continuing business Profit/loss on discontinued and divested business after tax Profit/loss for the year Run-off gains/losses, net of reinsurance Relative run-off gains/losses 743 3.6 2,267 3,085 2,125 1,496 1,462 -1 2,266 126 3,211 555 3.0 -28 2,097 283 1.8 -75 1,421 -71 -0.5 -55 1,407 3 - 16,702 -11,940 -3,745 1,017 -1,135 595 -101 376 685 115 -131 1,045 1 -87 959 -217 742 -516 - Balance sheet Total provisions for insurance contracts Total reinsurers’ share of provisions of insurance contracts Total shareholders’ equity Total assets Key ratios Gross claims ratio Business ceded as a percentage of gross premiums Claims ratio, net of ceded business Gross expense ratio Combined ratio Claims ratio, net Expense ratio, net Combined ratio, net Operating ratio 26,916 25,957 26,757 25,212 26,599 25,955 1,587 10,010 43,830 1,561 9,951 42,783 2,630 8,215 40,811 3,292 6,802 37,824 3,132 6,117 33,553 3,480 5,360 31,337 67.3 2.1 69.4 16.7 86.1 68.1 17.1 85.2 83.5 65.9 3.7 69.6 16.8 86.4 68.4 17.2 85.6 84.6 71.1 0.1 71.2 17.0 88.2 69.7 17.6 87.3 87.1 68.3 4.6 72.9 17.1 90.0 71.2 17.6 88.8 89.0 67.6 5.0 72.6 21.2 93.8 70.9 22.2 93.1 90.8 71.5 6.8 78.3 22.4 100.7 76.6 24.3 100.9 97.2 4 of 152 l Financial highlights and key ratios of TrygVesta l TrygVesta Annual Report 2007  DKKm Other data IFRS 2007 2006 2005 Danish GAAP 2004 2003 2004 Return on equity before tax and discontinued and divested business Return on equity after tax and discontinued and divested business Earnings per share (continuing business) Net asset value per share Dividend per share Share price 31.12 Quoted price/net asset value Price Earnings Average number of shares (1,000) 1) Number of shares, year end (1,000) 1) Solvency 31 23 33.5 148 17 388.0 2.6 11.6 67,648 67,638 81 41 35 45.5 147 33 431.5 2.9 9.5 67,824 67,790 58 39 28 31.3 121 21 319.2 2.6 10.2 68,000 68,000 72 33 23 22.0 100 10 - - - 68,000 68,000 78 34 25 21.5 90 10 - - - 68,000 68,000 79 22 15 14.1 79 1 - - - 68,000 68,000 86 Number of full-time employees, end of period Continuing business Discontinued and divested business 3,814 0 3,808 0 3,694 24 3,728 34 3,728 34 3,750 670 1) Calculated in accordance with ‘Recommendations & Financial Ratios 2005’ issued by the Danish Society of Financial Analysts except for per shares data, which is based on 68,000,000 shares as if such number of shares was outstanding during the periods presented. The 68,000,000 shares reflect the number of outstanding shares after giving effect to the four-to-one share split set forth in the company’s amended articles of association. Accounting policies From 1 January 2005, the accounting policies of TrygVesta follow the IFRS standards. The comparative figures for 2004 have been restated to IFRS, but in addition to IFRS restatements, the figures for 2004 are net of divested business, which is henceforth included in ‘Profit/loss on discontinued and divested business’. By IFRS (International Financial Reporting Standards) means that the accounting policies are based on the international accounting standards and interpretations as adopted by the EU. By Danish GAAP means that the accounting policies are in accordance with the Danish Financial Business Act and the executive order issued by the Danish Financial Supervisory Authority on financial reports presented by insurance companies and profession-specific pension funds. Comparative figures for 2004, 2005 and 2006 have been restated to the new method of unwinding. See note 1 ‘Changes in Accounting policies’. TrygVesta Annual Report 2007 l Financial highlights and key ratios of TrygVesta l 5 of 152 2007 in review 2007 in review February May TrygVesta’s Finnish operation started selling TrygVesta’s first-quarter pre-tax profit was DKK 683m commercial insurance to small businesses. compared with DKK 700m in the first quarter of 2006. Credit rating agency Moody’s upgraded TrygVesta to A2 from A3. TrygVesta launched a lower-priced motor insurance for young women below 29 years in Denmark. TrygVesta reported profit before tax of DKK 3.7bn for the full year 2006 compared with the forecast of DKK 3.2bn announced in the third-quarter interim report. TrygVesta introduced a new children’s insurance in Norway covering all children, including those who have a disability or suffer from a serious illness. March June TrygVesta began offering stress consultancy to TrygVesta organised its first capital markets day at employees working in Denmark. StressStop is a the Ballerup head office, attended by 36 investors stress prevention scheme incorporated in the and analysts. At the same time, Tryg Vesta general health insurance. At the head office in Ballerup, TrygVesta opened an innovation centre – a creative space with room to create and stimulate the development of ideas. TrygVesta held its second annual general meeting as a listed company. Christian Brinch was elected as a new member of the Supervisory Board. upgraded its premium growth forecast from 3.0% to 3.3% and supplemented the profit distribution policy with share buybacks. Vesta Forsikring in Norway became a branch of Tryg Forsikring. At the same time Tryg Forsikring changed its name to TrygVesta Forsikring. The Norwegian branch also changed its name to TrygVesta, the future brand in Norway. April August TrygVesta introduced LEAN to offer enhanced quality to TrygVesta’s first-half pre-tax profit was DKK customers, improve employee satisfaction and make 1,745m, an improvement of DKK 394m compared work processes better and more efficient. with the first-half of 2006. 6 of 152 l 2007 in review l TrygVesta Annual Report 2007 September Credit rating agency Standard & Poor’s affirmed Vesta Skadeförsäkring in Sweden reached a TrygVesta’s rating of A-. milestone with 100,000 insurances sold. TrygVesta won a major arbitration case against a TrygVesta introduced a new annual travel insurance number of reinsurers. The favourable outcome had in Denmark. Coverage under the Danish public a positive impact of DKK 41m on the third-quarter travel and health insurance will be curtailed effec- financial statements. tive 1 January 2008, and TrygVesta’s new annual travel insurance will provide coverage for the areas TrygVesta launched a large-scale training pro- subject to future restrictions. gramme for sales and customer service staff under the heading “Your role as a peace-of-mind pro- vider”. The programme will run from September 2007 to May 2008. November TrygVesta extended the successful health insurance in Denmark to the Norwegian market, introducing the sale of treatment insurance. October TrygVesta entered into a Nordic collaboration with two firms of architects to be in charge of upgrading the offices in Ballerup and Bergen. The collaboration is intended to create a lasting workplace layout and an even more value-based corporate culture. TrygVesta implemented two web-based peace- of-mind initiatives focusing on prevention and Dansk Kaution changed its name to TrygVesta advice. The websites tryghedsraadgiveren.dk and Garantiforsikring A/S. The new name makes the trygghets raadgiveren.no offer advice to everybody affiliation with TrygVesta clear and is connected on how to prevent damage and injuries at home, with the Group’s new Nordic strategy. while tryghedsbutik.dk and trygghetsbutikk.no offer products that improve safety at home and in TrygVesta’s third-quarter pre-tax profit was DKK the traffic. 726m compared with DKK 1,110m in the third quarter of 2006. Peter Falkenham, member of the Group Executive Management in charge of Private & Commercial Denmark, was appointed Chief Operating Officer (COO). TrygVesta Annual Report 2007 l 2007 in review l 7 of 152 TrygVesta and the external community TrygVesta and the external community The year 2007 was characterised by discussions about At 31 December 2007, some 700,000 Danes were cov- public health care systems, record-low unemployment, cli- ered by private health care insurance, around 65% more mate changes and topics such as financial crisis, risk than at the beginning of 2006. Demand is rising, and we management and stricter capital requirements were also see great potential within this area in the years ahead. high on the agenda during the year. We began selling health care insurance in Norway in late 2007, and we plan to start selling health care insurance The market shares among the largest companies in Den- in Sweden and Norway within the next few years. mark did not change significantly in 2007. In motor insur- ance, where the competition is fiercest, focus is on addi- Challenging Nordic labour markets tional parameters such as annual mileage. In Norway, Unemployment in the Nordic region reached record lows, TrygVesta increased its share of the market in 2007. The and many businesses found it difficult to recruit the earnings profile for the market overall showed decreased number of new employees they required. The challenge of profitability, however, TrygVesta had the best earnings recruiting qualified employees may lead to wage pressure, capacity among the large companies. A new player impacting corporate expenses negatively. The pay to skilled entered the market in 2007, and Norway’s largest bank craftsmen makes up a large part of the companies’ total will also start selling insurances in 2008. TrygVesta has claim expenses. Recession in construction in Denmark may small, but rapidly growing market shares in Sweden and consequently have a positive effect in the medium term. Finland. The markets are characterised by the four top insurers in each market holding more than 70% of the At TrygVesta, we pay a lot of attention to labour market market between them. trends. Over the next few years, we intend to upgrade the workplaces in Denmark and Norway, ensuring that the Private health care insurance physical facilities of our workplace make it attractive to be The populations in the Nordic countries are aging, and at work. We have also launched an employee branding citizens making increasingly heavy demands on the qual- project to ensure that we focus strongly on recruitment ity of public services. Businesses are also taking an ever and employee retention. As part of the project we will look stronger interest in this area. Businesses are prepared to at obstacles that may prevent some potential employee pay for health care insurance to ensure that their employ- groups from becoming part of the labour market. ees return sooner to work if they fall ill or are hit by an accident. Being an insurance business, it is obvious that Climate focus we should explore the possibilities of developing products As an insurance group, we have an obvious interest in and services to supplement the public systems and help following climate developments. Our business has exten- close the growing gap between the public’s expectations sive records describing historic performance of storm and to health care systems and the current situation. other weather-related claims in the Nordic countries. Such knowledge may be useful for charting areas with 8 of 152 l TrygVesta and the external community l TrygVesta Annual Report 2007 increased risk of, for instance, flooding and for improving the earliest, with final implementation in the individual building regulations or setting up early warning systems countries being completed by 2012. Solvency II will for areas with high risk exposure. impact the capital structure of insurance companies and impose stricter requirements with respect to risk manage- The growing awareness of climate issues induced several ment and risk control. We have for several years taken investment funds to set up climate indices, and a number part in the Solvency II hearings through the Danish Insur- of pension funds began screening their portfolios to ance Association, Forsikring & Pension, and in 2007 we ensure environmentally responsible conduct. So far, only were involved in drafting QIS3 (Quantitative Impact a small proportion of Danish businesses prepare climate Study), part of the preparatory work for the final Solvency accounts, but we see a growing trend towards and inter- II directive. With these efforts and the work with our est in working systematically with and reporting about internal models we aim to provide the best possible prep- corporate environmental issues. aration for the introduction of the new solvency rules. TrygVesta established an environmental organisation in The Danish Financial Business Act was amended to the 2007, defining climate targets for the Group, including a effect that, as from 1 January 2008, companies are reduction of CO2 emissions by 10% from 2008 to 2010. required to make their own determination of their capital requirements, the socalled Individual Solvency Require- The sub-prime crisis ments. The rules are intended as a first step towards the It became increasingly clear during 2007 that the USA implementation of Solvency II. While the Individual Sol- had seen aggressive lending during the property market vency Requirement rules allow companies to apply their boom over several years. The property market began to own methods, we expect Solvency II to impose stricter show signs of weakness with an increasing number of requirements. The Individual Solvency Requirement rules non-performing mortgages, thus triggering sub-prime aim at ensuring that Danish companies have the necessary crisis. Spreading like ripples in water since the summer of capital available and, in relation to the insurance industry, 2007, the financial crisis triggered the widespread expec- to minimise the risk of customers incurring losses. Compa- tations of an economic slowdown in several parts of the nies must report their Individual Solvency Requirements to Western world towards the end of 2007, causing financial the Danish Financial Supervisory Authority at least twice a markets to become increasingly unstable. year. The first reporting will be in March 2008. For pur- poses of determining the Individual Solvency Requirement Solvency II and Individual Solvency we use a number of calculations in the ALM model and In recent years, a new EU Solvency II regime has been Standard & Poor’s capital model in combination with sev- prepared. In 2007, the EU Commission issued the first eral other quantitative assessments. We furthermore add a draft of the directive that will regulate the implementa- buffer to ensure with reasonable probability that we tion of Solvency II in the individual member states. The remain solvent in the event of adverse fluctuations. new rules are expected to come into effect in 2010, at TrygVesta Annual Report 2007 l TrygVesta and the external community l 9 of 152 Our business “In relation to peace of mind, customers are refocusing from concerns for tangi- ble objects to concerns for people: concerns about what could happen to themselves, their families or colleagues” 10 of 152 l Our business l TrygVesta Annual Report 2007 Our business TrygVesta Annual Report 2007 l Our business l 11 of 152 Our business Strategy 2007-2010 In 2006, we carried out a comprehensive strategic analy- intend to meet our ambition by focusing even more on sales sis and review of our business during the period to 2010. and adding new sales channels. We also consider the possi- This has enabled us to develop a clear, shared perception bilities for expanding our strategic focus area to the Baltics. of our future potential, and of the ways in which we can secure sustained high value creation for customers, The private market for welfare services needs cutting- shareholders and employees. In 2007, we focused on edge peace-of-mind solutions and the development implementing the strategy plan, and these efforts will of these as markets mature. continue in the years ahead. OUR STRATEGY PLAN CONTAINS FOUR STRATEGIC THEMES Growth The peace-of-mind provision Self-service Human competencies “In relation to peace of mind, customers are refocusing from concerns for tangible objects to concerns for people: concerns about what could happen to themselves, their families, friends or colleagues. A large part of our business deals with human peace of mind and security. This propor- tion will increase steeply in the years ahead and come to represent our largest growth area. We will see growing demand within health care, in particular. Many people require access to treatment, prevention and rehabilitation services beyond those financed by taxes, and they are prepared to pay for such services. We are confident of Tryg Vesta’s ability in all four Nordic countries to develop strong health care and welfare solutions that are in har- Growth mony with and continuation of the publicly funded welfare We intend to secure the right balance between growth systems, and in a way that does not question the welfare and earnings in all our initiatives. systems or create first-rate and second-rate citizens.” We want to strengthen our market positions in the four Nordic countries where we have a presence. We already rank one and three, respectively, in Denmark and Norway, and we intend to expand our positions in these countries by Stine Bosse Group CEO, TrygVesta strengthening our sales power, improving our products and The peace-of-mind provision focusing strongly on selected geographical areas. We are Our customers should be confirmed in their choice of still a relatively new player in Finland and Sweden, and we insurer on an ongoing basis. 12 of 152 l Strategy 2007-2010 l TrygVesta Annual Report 2007 MISSION Our mission is to secure a stable, high-quality supply of products and services offering peace of mind to private households and businesses VISION We want to be perceived as the leading peace-of-mind provider in the Nordic region We focus on solutions that are sustainable in the long Self-service term, both financially and for the people affected. Our We intend to meet customers on their own terms. point of departure is helping people, and our ambition is that their contact with us will help our customers build Our ambition is to be the best to communicate with our peace of mind before, during and after a possible claim. customers, in writing as well as in speech. Therefore, we We want to eliminate concerns, rather than just send a must express ourselves clearly and communicate to be cheque, in order to add perceived value for customers understood. We intend to enhance customer experience while at the same time reducing our claims expenses. through consistent communication that is plain, relevant and straightforward, and which supports the position we We acknowledge our responsibility in relation to our cus- desire as a peace-of-mind provider. tomers, our employees, the environment, our products and society. Our dedication to our community and to We focus on the experience and value to customers, and social projects and activities confirms this commitment. we trust our customers. Accordingly, we intend to expand We want to be among those who set the agenda within the personal dialogue and also communicate increasingly Corporate Social Responsibility (CSR), and we see oppor- with customers on the Internet. In 2007, we set up a tunities and business potential in being socially responsi- Nordic e-business centre to highlight our commitment to ble and securing sustainable development of the Group. this area. The e-business centre is intended to drive future developments within self-service solutions and “TrygVesta should constantly challenge our understand- other e-business initiatives. ing of how we retain and attract customers to ensure our continued success going forward. We all have a growing “IT makes sense as a vehicle for change and when it is number of options today and this requires businesses to of use to customers. If we do not see things from our differentiate their products and services. In the long-term customers’ point of view, we will not make a successful perspective, the most competitive company may be the sale. TrygVesta is in the process of setting up an online company that is able to redefine what insurances are all system for customers allowing them to communicate, about and how insurances are perceived by customers. buy insurance and handle claims online. This initiative will A key driver in working with innovation is to constantly greatly enhance openness and flexibility for customers as offer our customers more than they expect. This is what well as for us.” makes going to work fun and meaningful.” Stig Ellkier-Pedersen Member of the Group Executive Management in charge of New Markets Jens Galatius E-business Director TrygVesta Annual Report 2007 l Strategy 2007-2010 l 13 of 152 Our business “E-business is an integral part of TrygVesta’s business. We have to think innovatively and be open to new ideas Customers choose the channel that is most convenient and ways of doing things, if we are to grow and develop to them. Many of our customers will increasingly tend to our business in terms of added sales, new business and use the Internet, while others find it easier to pick up the new areas of generating earnings. We intend to use the phone and call customer service. In some cases, personal creative potential of our employees by supporting and contact would be desirable. We believe in giving our setting up a framework for nurturing innovation and good customers a choice to suit their preferences and the ideas and facilitating their further development, with specific situation.” respect to major innovations as well as small current Kjerstin Fyllingen, improvements. Member of the Group Executive Management Measures that simplify our working processes and methods in charge of Private & Commercial Norway are key to our ability to provide optimum service to our cus- tomers. We always strive for simplicity and high quality and Human competencies the coming years will see a continuation of our work to We intend to focus on our employees and to be an implement the LEAN principle throughout the Group. attractive workplace. “We consider our managers to be the drivers implement- We must strengthen our capabilities in step with changes ing our strategy. This way of thinking makes heavy in the development of distribution, products and services. demands on managers’ ability to communicate the strat- We intend to ensure that skills are developed on a regular egy in a simple and straightforward manner, to define basis through in-house and external training courses, frameworks and facilitate working processes, and to create experience sharing and networking groups. We intend to opportunities for personal and professional development. focus on management and employee development and In order to strengthen these skills, we intend to increase strengthen dialogue across the organisation, including by our focus on management development through a new using theme packages that build on our values and by development programme for our managers in 2008.” continuing to use the balanced scorecard (BSC) as a tool for benchmarking and dialogue throughout the Group. Vered Gilboa Jacobsen, A project to modernise the offices in Ballerup and Bergen Head of Development, TrygVesta Management Academy up to 2010 and the launch of a new intranet are other initiatives intended to facilitate knowledge sharing within the organisation. 14 of 152 l Strategy 2007-2010 l TrygVesta Annual Report 2007 Turning words into results We use the balanced scorecard to implement our strategy and retain our strategic focus areas. Selected BSC-benchmarks for TrygVesta IFRS 2007 IFRS 2006 IFRS 2005 IFRS 2004 2003 2002 2001 23 35 28 86.1 16.7 86.4 16.8 88.2 17.0 110 108 139 105 112 108 131 107 109 108 133 105 23 90.0 17.1 109 106 129 104 15 -47 1 100.7 22.4 107.2 23.6 104.4 24.3 106 102 124 102 101 98 116 100 100 100 100 100 Financial perspective Return on equity after tax Combined ratio - gross method Expense ratio, gross Customer perspective, private customers (index) Customer loyalty 1) Proportion of customers with concept agreement Processes perspective (index) Portfolio (nominal prices) per full-time employee Customer satisfaction in claims handling Learning perspective (index) Employee satisfaction 100 102 N/A 105 102 101 100 1) Expected customer loyalty based on customer surveys. Benchmarks in the Customer/Processes/Learning perspective are primarily based on the data for the activities in Denmark and Norway. TrygVesta Annual Report 2007 l Strategy 2007-2010 l 15 of 152 Our business TrygVesta’s financial performance in 2007 Our technical result for 2007 was a clear improvement ment of 3.8% in local currency (3.7% in DKK terms) and by 12.3% over 2006. The increase was attributable to in line with our expectations for the full year. Gross the great efforts which our almost 3,900 employees put earned premiums continued the upward trend during in every day. Their efforts make a difference to our cus- 2007 and the fourth quarter 2007 recorded a growth in tomers, and they serve to benefit all our stakeholders. local currency of 5.1% (7.1% in DKK terms) at Group Equity markets took a negative turn in the second half of level. The performance in 2007was favourably affected by 2007, affecting our profit adversely. However, the insur- an increase in the number of new customers and higher ance business continued recent years’ positive trend. renewal rates among existing customers in all business Financial results in 2007 premium growth of 7.4%, or DKK 364m. In addition to In 2007, TrygVesta’s technical result improved by 12.3% more new customers and high renewal rates, the strong to DKK 2,820m. The DKK 308m increase over 2006 was growth recorded by Corporate was attributable to price achieved despite the fact that 2007 saw the biggest increases for workers’ compensation insurance in Den- areas. Corporate was a major growth driver, recording number of large claims ever, exceeding a gross amount of mark. DKK 1bn. Outperforming the forecast announced in our third-quarter 2007 interim report by DKK 120m primarily As the only major insurer in Norway we increased our due to run-off gains from previous years’ claims, our market share in 2007 (in terms of earned premiums), by technical result was significantly better than expected. 0.7 percentage point, to 18.2%. The improvement was The pre-tax profit of DKK 3,109m was in line with our driven by our Norwegian commercial business and the expectations for the full year. Due to a reduced return on Norwegian part of the Corporate business. investments, the pre-tax profit was DKK 600m lower relative to 2006. Finland and Sweden likewise contributed strong premium growth totalling 68.8%, continuing to perform in line with The profit after tax at DKK 2,266m was DKK 945m lower our targets and growth strategies. Focused efforts within due to the lower investment result and higher taxes. Health Care triggered portfolio growth of more than 80%. The high proportion of tax-free gains on shares we had We began selling health care insurance in Norway at the in 2006 was not repeated in 2007 due to the unstable end of 2007, and we intend to continue to focus on equity markets. growth and on introducing new health care services Premium growth driven by Corporate and New Markets Continuing decline in combined ratio Gross earned premiums were DKK 16,606m, an improve- The combined ratio fell by 0.3 percentage point to 86.1 in over the coming year. 16 of 152 l TrygVesta’s financial performance in 2007 l TrygVesta Annual Report 2007 (cid:73)(cid:58)(cid:56)(cid:61)(cid:67)(cid:62)(cid:56)(cid:54)(cid:65)(cid:21)(cid:71)(cid:58)(cid:72)(cid:74)(cid:65)(cid:73)(cid:21)(cid:55)(cid:78)(cid:21)(cid:55)(cid:74)(cid:72)(cid:62)(cid:67)(cid:58)(cid:72)(cid:72)(cid:21)(cid:54)(cid:71)(cid:58)(cid:54) (cid:73)(cid:58)(cid:56)(cid:61)(cid:67)(cid:62)(cid:56)(cid:54)(cid:65)(cid:21)(cid:71)(cid:58)(cid:72)(cid:74)(cid:65)(cid:73) (cid:57)(cid:64)(cid:64)(cid:98) (cid:38)(cid:33)(cid:42)(cid:37)(cid:37) (cid:38)(cid:33)(cid:39)(cid:37)(cid:37) (cid:46)(cid:37)(cid:37) (cid:38)(cid:33)(cid:41)(cid:41)(cid:37) (cid:46)(cid:46)(cid:41) (cid:44)(cid:42)(cid:44) (cid:43)(cid:37)(cid:37) (cid:42)(cid:39)(cid:41) (cid:40)(cid:37)(cid:37) (cid:37) (cid:45)(cid:40)(cid:38) (cid:45)(cid:44)(cid:37) (cid:44)(cid:42)(cid:44) (cid:43)(cid:46)(cid:39) (cid:45)(cid:41)(cid:39) (cid:45)(cid:41)(cid:39) (cid:41)(cid:43)(cid:38) (cid:40)(cid:46)(cid:37) (cid:57)(cid:64)(cid:64)(cid:98) (cid:39)(cid:35)(cid:37)(cid:37)(cid:37) (cid:38)(cid:35)(cid:42)(cid:37)(cid:37) (cid:38)(cid:35)(cid:37)(cid:37)(cid:37) (cid:42)(cid:37)(cid:37) (cid:37) (cid:38)(cid:33)(cid:43)(cid:40)(cid:46) (cid:38)(cid:33)(cid:40)(cid:44)(cid:44) (cid:38)(cid:33)(cid:39)(cid:38)(cid:41) (cid:38)(cid:33)(cid:40)(cid:40)(cid:42) (cid:38)(cid:33)(cid:37)(cid:40)(cid:39) (cid:46)(cid:42)(cid:43) (cid:38)(cid:33)(cid:38)(cid:40)(cid:38) (cid:44)(cid:39)(cid:37) (cid:69)(cid:27)(cid:56)(cid:21)(cid:57)(cid:64) (cid:69)(cid:27)(cid:56)(cid:21)(cid:67)(cid:68) (cid:56)(cid:100)(cid:103)(cid:101)(cid:100)(cid:103)(cid:86)(cid:105)(cid:90) (cid:39)(cid:37)(cid:37)(cid:41) (cid:39)(cid:37)(cid:37)(cid:42) (cid:39)(cid:37)(cid:37)(cid:43) (cid:39)(cid:37)(cid:37)(cid:44) (cid:39)(cid:37)(cid:37)(cid:41) (cid:39)(cid:37)(cid:37)(cid:42) (cid:39)(cid:37)(cid:37)(cid:43) (cid:39)(cid:37)(cid:37)(cid:44) (cid:57)(cid:90)(cid:99)(cid:98)(cid:86)(cid:103)(cid:96) (cid:67)(cid:100)(cid:103)(cid:108)(cid:86)(cid:110) 2007. Large claims and weather-related claims had an Run-off gains were a gross amount of DKK 744m (DKK negative impact of 3.8 and 2.0 percentage points, respec- 743m net) with a positive impact of 4.5 percentage tively, on the combined ratio compared with 2.1 and 1.3 points on the claims ratio. Gross run-off gains in 2006 percentage points, respectively in 2006. Run-off gains were DKK 618m (DKK 555m net), which had an impact of improved the combined ratio by 4.5 percentage points 3.5 percentage points on the claims ratio. The run-off while in 2006 run-off gains had an impact of 3.5 percent- gains mainly related to motor, accident and liability insur- age points on the combined ratio. Finally, a higher dis- ance, while increased provisions were still required for count rate had a favourable effect of 1.7 percentage points workers’ compensation in 2007. on the combined ratio. Expenses Claims experience The gross expense ratio improved by 0.1 percentage The overall claims ratio, net of ceded business, for 2007 point to 16.7 in 2007. We reduced the expense ratio by was 69.4, which was an improvement relative to 2006 0.7 percentage point to 15.4 in the established markets despite many large claims. Large claims amounted to DKK in Denmark and Norway, while the investments in Finland 1,042m in 2007, more than double the amount of 2006. and Sweden continued to have a negative impact of 1.3 However, the net expense for large claims was reduced to percentage points on the expense ratio. DKK 637m in 2007 due to the large number of Marine claims, an area with a high proportion of reinsurance Investment return cover. Weather-related claims were up by DKK 130m in The return on investment activities was DKK 1,740m 2007 to DKK 332m, which was also higher than before transfer to technical interest, but after other expected. In a normal year, weather-related claims are financial income and expenses. The return was DKK 519m expected to total DKK 225m. lower than in 2006, mainly due to unstable equity markets. DKKm 2007 2006 2005 Storm and weather, gross Storm and weather, net Large claims, gross Large claims, net 332 332 1042 637 202 202 501 340 911 177 416 275 Normal year* 225 170 410 330 * Normal year is a weighed average of the last ten years. TrygVesta Annual Report 2007 l TrygVesta’s financial performance in 2007 l 17 of 152 Our business (cid:56)(cid:68)(cid:66)(cid:55)(cid:62)(cid:67)(cid:58)(cid:57)(cid:21)(cid:71)(cid:54)(cid:73)(cid:62)(cid:68)(cid:21)(cid:39)(cid:37)(cid:37)(cid:43)(cid:21)(cid:54)(cid:67)(cid:57)(cid:21)(cid:39)(cid:37)(cid:37)(cid:44)(cid:21) (cid:54)(cid:67)(cid:57)(cid:21)(cid:68)(cid:74)(cid:73)(cid:65)(cid:68)(cid:68)(cid:64)(cid:21)(cid:57)(cid:74)(cid:71)(cid:62)(cid:67)(cid:60)(cid:21)(cid:39)(cid:37)(cid:37)(cid:44) (cid:60) (cid:71)(cid:68)(cid:72)(cid:72)(cid:21)(cid:58)(cid:54)(cid:71)(cid:67)(cid:58)(cid:57) (cid:21)(cid:69)(cid:71)(cid:58) (cid:66) (cid:62)(cid:74) (cid:66) (cid:72)(cid:21) (cid:55)(cid:78)(cid:21)(cid:55)(cid:74)(cid:72) (cid:62)(cid:67)(cid:58)(cid:72)(cid:72)(cid:21) (cid:54)(cid:71)(cid:58)(cid:54)(cid:21)(cid:39)(cid:37)(cid:37)(cid:44) (cid:26) (cid:38)(cid:37)(cid:37) (cid:46)(cid:43) (cid:46)(cid:39) (cid:45)(cid:45) (cid:45)(cid:41) (cid:45)(cid:37) (cid:39)(cid:37)(cid:37)(cid:43) (cid:70)(cid:38) (cid:39)(cid:37)(cid:37)(cid:44) (cid:70)(cid:39) (cid:39)(cid:37)(cid:37)(cid:44) (cid:70)(cid:40) (cid:39)(cid:37)(cid:37)(cid:44) (cid:70)(cid:41) (cid:39)(cid:37)(cid:37)(cid:44) (cid:39)(cid:37)(cid:37)(cid:44) (cid:54)(cid:88)(cid:105)(cid:106)(cid:86)(cid:97)(cid:21)(cid:90)(cid:109)(cid:88)(cid:97)(cid:106)(cid:89)(cid:94)(cid:99)(cid:92)(cid:21)(cid:103)(cid:106)(cid:99)(cid:34)(cid:100)(cid:91)(cid:91) (cid:54)(cid:88)(cid:105)(cid:106)(cid:86)(cid:97)(cid:21)(cid:94)(cid:99)(cid:88)(cid:97)(cid:106)(cid:89)(cid:94)(cid:99)(cid:92)(cid:21)(cid:103)(cid:106)(cid:99)(cid:34)(cid:100)(cid:91)(cid:91) (cid:67)(cid:90)(cid:92)(cid:86)(cid:105)(cid:94)(cid:107)(cid:90) (cid:68)(cid:106)(cid:105)(cid:97)(cid:100)(cid:100)(cid:96) (cid:69)(cid:100)(cid:104)(cid:94)(cid:105)(cid:94)(cid:107)(cid:90) (cid:39)(cid:26) (cid:38)(cid:26) (cid:40)(cid:39)(cid:26) (cid:40)(cid:45)(cid:26) (cid:39)(cid:44)(cid:26) (cid:69)(cid:27)(cid:56)(cid:21)(cid:57)(cid:90)(cid:99)(cid:98)(cid:86)(cid:103)(cid:96) (cid:56)(cid:100)(cid:103)(cid:101)(cid:100)(cid:103)(cid:86)(cid:105)(cid:90) (cid:72)(cid:108)(cid:90)(cid:89)(cid:90)(cid:99) (cid:69)(cid:27)(cid:67)(cid:21)(cid:67)(cid:100)(cid:103)(cid:108)(cid:86)(cid:110) (cid:59)(cid:94)(cid:99)(cid:97)(cid:86)(cid:99)(cid:89) The return on investment activities after transfer to tech- Shareholders’ equity nical interest was DKK 888m lower than in 2006. Besides Shareholders’ equity stood at DKK 10,010m at 31 the lower return on equities, the performance was nega- December 2007. Shareholders’ equity increased by DKK tively affected by a larger transfer to technical interest. 59m, made up of the profit for the year less dividends Tax paid in respect of the 2006 financial year, and including adjustments mainly for actuarial gains and losses on the The tax charge was DKK 842m in 2007 against DKK 624m pension provision under IAS 19 and other minor adjust- in 2006. The effective tax rate was exceptionally low in ments. 2006 due to the reversal of a provision for deferred tax. The tax charge in 2007 was adversely affected by lower Events after the balance sheet date tax-free gains on shares, and favourably affected by the On 21 January 2008 we announced that TrygVesta had reduction of the Danish corporate tax rate from 28% reduced the proportion of equities in its investment port- to 25% with effect from 1 January 2007. In 2007, folio to around 4% or some DKK 1.8bn. The proportion of TrygVesta’s effective tax rate was 27. equities was DKK 5.0bn at 30 September 2007 and DKK 4.4bn at 31 December 2007. During 2007, we sold equi- Balance sheet and cash flow ties worth some DKK 0.7bn as a result of Management’s Total assets increased by DKK 1,047m to DKK 43,830m in assessment of the size of the equity portfolio and its 2007. Liabilities comprised mainly shareholders’ equity of impact on the Group’s overall performance. Management DKK 10,010m and technical provisions of DKK 26,916m. assessed that an equity proportion of 8-10% of the investment portfolio would provide a good long-term bal- Provisions for insurance contracts were increased by a total ance between return and volatility in our overall perform- of DKK 959m relative to 2006. The ratio of provisions for ance. The equity proportion was reduced to around 4% claims, net of reinsurance to earned premiums, net of giving equities a lower weighting than is normal. The reinsurance was unchanged at 124 from with 2006, which decision to have a lower proportion of equities was based equals an increase in provisions for insurance contracts of on expected continued strong instability, uncertainty and 3.7%. high equity risk premiums in the first six months of 2008. The very unstable equity market in January and until TrygVesta generated a cash inflow from operating activi- 18 February 2008 resulted in a loss of around DKK 400m ties of DKK 2.7bn in 2007 compared with DKK 3.2bn in less equity return than expected. 2006. Investments amounted to DKK 0.4bn in 2007, and there was a cash outflow from financing activities of DKK 2.4bn mainly relating to dividends. 18 of 152 l TrygVesta’s financial performance in 2007 l TrygVesta Annual Report 2007 Private & Commercial Denmark DKKm Gross earned premiums Gross claims incurred Gross expenses Profit/loss on gross business Profit/loss on ceded business Technical interest, net of reinsurance Technical result Key ratios Gross claims ratio Business ceded as % of gross premiums Claims ratio, net of ceded business Gross expense ratio Combined ratio 2007 2006 2005 6,490 -4,041 -1,086 1,363 -87 164 1,440 62.3 1.3 63.6 16.7 80.3 6,390 -4,215 -1,109 1,066 -200 128 994 66.0 3.1 69.1 17.4 86.5 6,276 -4,927 -1,113 236 467 54 757 78.5 -7.4 71.1 17.7 88.8 Private & Commercial Denmark sells insurances to private The renewal rate was 1 percentage point higher at 91, households and small and medium-sized enterprises in meaning that out of every 100 private customers, 91 Denmark under the Tryg brand name. Sales are handled elected to renew their policies with us in 2007. The high by five customer centres, 16 local service centres, affinity renewal rate also contributed to the positive results groups, car dealers, real estate agents and Nordea’s because it is important with respect to the performance branches. Private & Commercial Denmark has around of premiums and expenses: selling and administrative 1,400 employees, and contributes some 40% of total expenses are relatively lower when more customers earned premiums. renew their policies. Performance improvement in 2007 Earned premiums Private & Commercial Denmark continued the positive Gross earned premiums at DKK 6,490m were 1.6% higher performance in 2007, lifting the technical result by DKK in 2007. Premium growth picked up in the fourth quarter 446m to DKK 1,440m. The improvement was attributable of 2007, increasing at a rate of 2.4. Various premium to a low level of claims, cost reductions and higher inter- reductions on motor insurance in the summer of 2006 est rates. continued to have an adverse effect on growth. Among TrygVesta Annual Report 2007 l Private & Commercial Denmark l 19 of 152 Our business (cid:54)(cid:75)(cid:58)(cid:71)(cid:54)(cid:60)(cid:58)(cid:21)(cid:69)(cid:71)(cid:58)(cid:66)(cid:62)(cid:74)(cid:66)(cid:72)(cid:21)(cid:62)(cid:67)(cid:21)(cid:57)(cid:58)(cid:67)(cid:66)(cid:54)(cid:71)(cid:64) (cid:57)(cid:64)(cid:64) (cid:42)(cid:33)(cid:37)(cid:37)(cid:37) (cid:41)(cid:33)(cid:44)(cid:42)(cid:37) (cid:41)(cid:33)(cid:42)(cid:37)(cid:37) (cid:41)(cid:33)(cid:39)(cid:42)(cid:37) (cid:41)(cid:33)(cid:37)(cid:37)(cid:37) (cid:40)(cid:33)(cid:44)(cid:42)(cid:37) (cid:40)(cid:33)(cid:42)(cid:37)(cid:37) (cid:40)(cid:33)(cid:39)(cid:42)(cid:37) (cid:40)(cid:33)(cid:37)(cid:37)(cid:37) (cid:63)(cid:86)(cid:99)(cid:36)(cid:37) (cid:42) (cid:66) (cid:86)(cid:103)(cid:36)(cid:37) (cid:42) (cid:66) (cid:86)(cid:110)(cid:36)(cid:37) (cid:42) (cid:63)(cid:106)(cid:97)(cid:36)(cid:37) (cid:42) (cid:72)(cid:90)(cid:101)(cid:36)(cid:37) (cid:42) (cid:67) (cid:100)(cid:107)(cid:36)(cid:37) (cid:42) (cid:63)(cid:86)(cid:99)(cid:36)(cid:37) (cid:43) (cid:66) (cid:86)(cid:103)(cid:36)(cid:37) (cid:43) (cid:66) (cid:86)(cid:110)(cid:36)(cid:37) (cid:43) (cid:63)(cid:106)(cid:97)(cid:36)(cid:37) (cid:43) (cid:72)(cid:90)(cid:101)(cid:36)(cid:37) (cid:43) (cid:67) (cid:100)(cid:107)(cid:36)(cid:37) (cid:43) (cid:63)(cid:86)(cid:99)(cid:36)(cid:37) (cid:44) (cid:66) (cid:86)(cid:103)(cid:36)(cid:37) (cid:44) (cid:66) (cid:86)(cid:110)(cid:36)(cid:37) (cid:44) (cid:63)(cid:106)(cid:97)(cid:36)(cid:37) (cid:44) (cid:72)(cid:90)(cid:101)(cid:36)(cid:37) (cid:44) (cid:67) (cid:100)(cid:107)(cid:36)(cid:37) (cid:44) (cid:66)(cid:100)(cid:105)(cid:100)(cid:103) (cid:55)(cid:106)(cid:94)(cid:97)(cid:89)(cid:94)(cid:99)(cid:92) other things, we reduced premiums for new cars by up to points and large claims had a negative impact of 1.2 per- 15% because the improved safety equipment of new cars centage points compared with 1.7 and 1.4 percentage provides for a better risk profile. We also reduced motor points in 2006. Weather-related claims were, among premiums for women under 29 years, while we increased other factors, adversely affected by some 2,200 hailstorm premiums for young men considerably. Implementing the claims reported on one single day in Denmark. Hailstorm reductions in our motor portfolio, which accounts for claims cost a total of some DKK 42m or an average of around 30% of the total portfolio of Private & Commercial some DKK 19,000 per claim. Denmark, lasted a year and caused the average premium in motor insurance to drop by around 4%. Run-off gains from prior-year losses were a gross amount of DKK 551m and had a positive impact of 8.5 percent- Industry agreements and workers’ compensation policies age points on the claims ratio. Run-off gains were mainly lifted premium growth. Sales of industry agreements, attributable to our motor and accident lines in 2007, which are sold in the business-to-business market, while workers’ compensation continued to require higher increased by 16,8% in 2007. Our portfolio of workers’ provisions for claims. In 2006, gross run-off gains compensation policies increased by more than 20%, amounted to DKK 206m with a positive impact of 3.2 mainly due to an extraordinary premium increase of percentage points on the claims ratio. 12.5% which took effect on 1 July 2007 as a result of new Danish workers’ compensation legislation. Workers’ In order to secure the right balance between price and compensation insurance increased by around 7% net of earnings we closely follow developments in average this extraordinary increase. claims and claims frequencies in our large business areas such as building and motor. The average building claim in The number of private policies sold performed favourably 2007 was largely unchanged from 2006. The average in 2007. There was a net inflow of 38,000 new policies, motor claim, on the other hand, increased by around 4%, 10,000 more than in 2006. The inflow was very much among other things because more advanced cars with attributable to existing customers buying more policies. more expensive spare parts now form a greater part of Each customer had an average of 2.3 policies in 2007. the Danish car fleet. The hailstorm claims in the summer Claims expenses of 2007 also had a negative impact on the average motor claim. In order to counter the increasing average claim on Total claims expenses fell by a nominal amount of DKK motor policies, we arrange for as many repairs as possi- 174m to DKK 4,041m in 2007, improving the claims ratio ble to be performed by garages we cooperate with. Our by 3.7 percentage points to 62.3 in 2007. Weather- size in the market allows us to provide a stable inflow of related claims had a negative impact of 3.7 percentage assignments to such garages, giving us advantages with 20 of 152 l Private & Commercial Denmark l TrygVesta Annual Report 2007 (cid:54)(cid:75)(cid:58)(cid:71)(cid:54)(cid:60)(cid:58)(cid:21)(cid:56)(cid:65)(cid:54)(cid:62)(cid:66)(cid:72)(cid:21)(cid:62)(cid:67)(cid:21)(cid:57)(cid:58)(cid:67)(cid:66)(cid:54)(cid:71)(cid:64) (cid:56)(cid:65)(cid:54)(cid:62)(cid:66)(cid:72)(cid:21)(cid:59)(cid:71)(cid:58)(cid:70)(cid:74)(cid:58)(cid:67)(cid:56)(cid:62)(cid:58)(cid:72)(cid:21)(cid:62)(cid:67)(cid:21)(cid:57)(cid:58)(cid:67)(cid:66)(cid:54)(cid:71)(cid:64) (cid:62)(cid:99)(cid:89)(cid:90)(cid:109) (cid:38)(cid:38)(cid:37) (cid:37) (cid:37) (cid:38) (cid:21) (cid:50) (cid:21) (cid:42) (cid:37) (cid:37) (cid:39) (cid:21) (cid:47) (cid:109) (cid:90) (cid:89) (cid:99) (cid:62) (cid:38)(cid:37)(cid:42) (cid:38)(cid:37)(cid:37) (cid:46)(cid:42) (cid:46)(cid:37) (cid:62)(cid:99)(cid:89)(cid:90)(cid:109) (cid:38)(cid:39)(cid:37) (cid:38)(cid:38)(cid:42) (cid:38)(cid:38)(cid:37) (cid:38)(cid:37)(cid:42) (cid:38)(cid:37)(cid:37) (cid:46)(cid:42) (cid:46)(cid:37) (cid:37) (cid:37) (cid:38) (cid:21) (cid:50) (cid:21) (cid:42) (cid:37) (cid:37) (cid:39) (cid:21) (cid:47) (cid:109) (cid:90) (cid:89) (cid:99) (cid:62) (cid:39)(cid:37)(cid:37)(cid:42) (cid:39)(cid:37)(cid:37)(cid:43) (cid:39)(cid:37)(cid:37)(cid:44) (cid:39)(cid:37)(cid:37)(cid:42) (cid:39)(cid:37)(cid:37)(cid:43) (cid:39)(cid:37)(cid:37)(cid:44) (cid:66)(cid:100)(cid:105)(cid:100)(cid:103) (cid:55)(cid:106)(cid:94)(cid:97)(cid:89)(cid:94)(cid:99)(cid:92) (cid:66)(cid:100)(cid:105)(cid:100)(cid:103) (cid:55)(cid:106)(cid:94)(cid:97)(cid:89)(cid:94)(cid:99)(cid:92) DKKm Storm and weather, gross Large claims, gross 2007 2006 2005 242 78 109 25 739 23 respect to repairs which benefit both customers and We have defined ambitious growth targets, and we will Tryg Vesta. focus strongly on sales in 2008. We intend to implement a range of sales activities in 2008, introduce customer The claims frequency on building policies was higher in benefits and relaunch several products in more attractive 2007, mainly due to weather-related claims. Motor poli- versions. Our focus in 2008 also includes sustaining the cies also recorded a higher claims frequency, primarily significant growth in Health Care, including launching attributable to vandalism and a greater number of thefts new products. of GPS and other equipment. Historically low combined ratio The combined ratio improved by 6.2 percentage points to 80.3 in 2007. Run-off gains had a favourable impact of 8.5 percentage points and the combined ratio was also favourably impacted by the expense ratio, which improved by 0.7 percentage point to 16.7 in 2007. The large number of water-damage claims had a negative impact of 3.7% on the combined ratio. Focus areas in 2008 We began implementing the LEAN principle in parts of our organisation in 2007 with a view to making our pro- cesses even more efficient and create added value for customers and employees alike. We will continue to implement LEAN over the next few years. TrygVesta Annual Report 2007 l Private & Commercial Denmark l 21 of 152 Our business Private & Commercial Norway DKKm 2007 2006 2005 NOK/DKK, average rate for the period 92.81 93.04 92.85 Gross earned premiums Gross claims incurred Gross expenses Profit/loss on gross business Profit/loss on ceded business Technical interest, net of reinsurance Technical result Key ratios Gross claims ratio Business ceded as % of gross premiums Claims ratio, net of ceded business Gross expense ratio Combined ratio 4,490 -2,962 -936 4,509 -2,866 -922 4,632 -2,823 -945 592 -82 182 692 66.0 1.8 67.8 20.8 88.6 721 -75 111 757 63.6 1.7 65.3 20.4 85.7 864 -61 67 870 60.9 1.3 62.2 20.4 82.6 Private & Commercial Norway sells insurances to private ness performed favourably in Q4 2007, generating households and small and medium-sized enterprises in premium growth of 1.0% in local currency (6.0% in DKK) Norway under the TrygVesta and Enter brand names. and a technical result that was DKK 2m higher than in Sales are handled by 85 franchise offices, our own sales 2006. However, the technical result for the full year was agents, three regional customer centres, 35 local sales reduced by DKK 65m to DKK 692m in 2007, mainly due centres, car dealers and Nordea’s branches. Private & to more claims and falling average premiums at the Commercial Norway has around 1,100 employees exclud- beginning of the year. ing some 300 franchise office staff. The business area contributes around 30% of the Group’s total gross earned The renewal rate was up from 84.4 at the beginning of premiums. 2007 to 85.8 at the end of the year. The improvement was driven, in particular, by a customer benefit pro- Financial results in 2007 gramme we launched in the summer of 2006. Imple- Private & Commercial Norway reported results during mented over a year, the benefit programme now helps 2007 that were among the best in the market. The busi- retain customers by offering additional benefits. 22 of 152 l Private & Commercial Norway l TrygVesta Annual Report 2007 (cid:54)(cid:75)(cid:58)(cid:71)(cid:54)(cid:60)(cid:58)(cid:21)(cid:69)(cid:71)(cid:58)(cid:66)(cid:62)(cid:74)(cid:66)(cid:72)(cid:21)(cid:62)(cid:67)(cid:21)(cid:67)(cid:68)(cid:71)(cid:76)(cid:54)(cid:78) (cid:57)(cid:64)(cid:64) (cid:42)(cid:33)(cid:37)(cid:37)(cid:37) (cid:41)(cid:33)(cid:44)(cid:42)(cid:37) (cid:41)(cid:33)(cid:42)(cid:37)(cid:37) (cid:41)(cid:33)(cid:39)(cid:42)(cid:37) (cid:41)(cid:33)(cid:37)(cid:37)(cid:37) (cid:40)(cid:33)(cid:44)(cid:42)(cid:37) (cid:40)(cid:33)(cid:42)(cid:37)(cid:37) (cid:40)(cid:33)(cid:39)(cid:42)(cid:37) (cid:40)(cid:33)(cid:37)(cid:37)(cid:37) (cid:63)(cid:86)(cid:99)(cid:36)(cid:37) (cid:42) (cid:66) (cid:86)(cid:103)(cid:36)(cid:37) (cid:42) (cid:66) (cid:86)(cid:110)(cid:36)(cid:37) (cid:42) (cid:63)(cid:106)(cid:97)(cid:36)(cid:37) (cid:42) (cid:72)(cid:90)(cid:101)(cid:36)(cid:37) (cid:42) (cid:67) (cid:100)(cid:107)(cid:36)(cid:37) (cid:42) (cid:63)(cid:86)(cid:99)(cid:36)(cid:37) (cid:43) (cid:66) (cid:86)(cid:103)(cid:36)(cid:37) (cid:43) (cid:66) (cid:86)(cid:110)(cid:36)(cid:37) (cid:43) (cid:63)(cid:106)(cid:97)(cid:36)(cid:37) (cid:43) (cid:72)(cid:90)(cid:101)(cid:36)(cid:37) (cid:43) (cid:67) (cid:100)(cid:107)(cid:36)(cid:37) (cid:43) (cid:63)(cid:86)(cid:99)(cid:36)(cid:37) (cid:44) (cid:66) (cid:86)(cid:103)(cid:36)(cid:37) (cid:44) (cid:66) (cid:86)(cid:110)(cid:36)(cid:37) (cid:44) (cid:63)(cid:106)(cid:97)(cid:36)(cid:37) (cid:44) (cid:72)(cid:90)(cid:101)(cid:36)(cid:37) (cid:44) (cid:67) (cid:100)(cid:107)(cid:36)(cid:37) (cid:44) (cid:66)(cid:100)(cid:105)(cid:100)(cid:103) (cid:55)(cid:106)(cid:94)(cid:97)(cid:89)(cid:94)(cid:99)(cid:92) Average premiums affect premium growth Claims expenses Gross earned premiums fell by 0.2% in local currency Total claims expenses were up by DKK 96m in 2007 to (0.4% in DKK) in 2007. Premium growth in H1 2007 was DKK 2,962m. The claims ratio continued at a low level but adversely affected by declining average premiums while increased by 2.4 percentage points to 66.0. The increase Q4, saw positive premium growth driven, among other was mainly attributable to expenses relating to large things, by the effect of recent years’ sales initiatives and claims, which were DKK 121m in 2007 compared with premium increases from 1 July 2007. This was the first DKK 20m in 2006. Thus, large claims had an adverse time since 2004 we increased premiums in Norway, and impact of 2.7 percentage points on the claims ratio we will continue this trend in 2008, increasing premiums in 2007 compared to 0.4 percentage point in 2006. in selected building segments with effect from 1 January Weather-related claims had a negative impact of 0.8 2008. percentage point against 0.9 percentage point in 2006. Premium growth in 2007 was mainly driven by our com- Run-off gains from prior-year losses amounted to DKK mercial business which recorded premium growth of 3.3% 91m with a positive effect of 2.0 percentage points on and a high growth in sales through Nordea. The negative the claims ratio compared to 2.2 percentage points in growth of 1.4% in the private business was still affected 2006. Run-off gains mainly related to motor and accident by the abolition in late 2005 of introductory discounts to insurance, while increased provisions were still required new customers. We subsequently recorded higher for workers’ compensation. We discounted the provisions renewal rates, an indication that customers prefer to have for claims during 2007, resulting in a positive impact from a better overview of what they pay for. As from 1 January higher interest rates and improving the claims ratio by 2008 insurers are required to inform customers of pre- around 0.6 percentage point relative to 2006. mium changes from year to year. We expect that the new rules will make the market more transparent, which we The average building claim increased by some 9% in 2007 believe will benefit TrygVesta’s transparent pricing system. due to general pressure in the building sector, pushing up prices of building materials and skilled craftsmen. The The number of policies sold performed favourably in 2007 average motor claim rose by only a few percentage points with a net inflow of 39,500 new private policies, includ- in 2007, which was in line with inflation in the industry. ing a large affinity group which left us in early 2007. The Building insurance saw a flat development in the claims inflow of new policies was attributable to new customers, frequency, while it was slightly lower for motor. focus on selected geographical areas, and existing cus- tomers buying more policies. On average, each customer Continued low combined ratio has 3.4 policies. The combined ratio was lower than expected in 2007 at 88.6, but increased 2.9 percentage points on 2006 due TrygVesta Annual Report 2007 l Private & Commercial Norway l 23 of 152 Our business (cid:54)(cid:75)(cid:58)(cid:71)(cid:54)(cid:60)(cid:58)(cid:21)(cid:56)(cid:65)(cid:54)(cid:62)(cid:66)(cid:72)(cid:21)(cid:62)(cid:67)(cid:21)(cid:67)(cid:68)(cid:71)(cid:76)(cid:54)(cid:78) (cid:56)(cid:65)(cid:54)(cid:62)(cid:66)(cid:72)(cid:21)(cid:59)(cid:71)(cid:58)(cid:70)(cid:74)(cid:58)(cid:67)(cid:56)(cid:62)(cid:58)(cid:72)(cid:21)(cid:62)(cid:67)(cid:21)(cid:67)(cid:68)(cid:71)(cid:76)(cid:54)(cid:78) (cid:62)(cid:99)(cid:89)(cid:90)(cid:96)(cid:104) (cid:38)(cid:39)(cid:37) (cid:38)(cid:38)(cid:42) (cid:38)(cid:38)(cid:37) (cid:38)(cid:37)(cid:42) (cid:38)(cid:37)(cid:37) (cid:46)(cid:42) (cid:46)(cid:37) (cid:62)(cid:99)(cid:89)(cid:90)(cid:96)(cid:104) (cid:38)(cid:38)(cid:37) (cid:38)(cid:37)(cid:42) (cid:38)(cid:37)(cid:37) (cid:46)(cid:42) (cid:46)(cid:37) (cid:39)(cid:37)(cid:37)(cid:42) (cid:39)(cid:37)(cid:37)(cid:43) (cid:39)(cid:37)(cid:37)(cid:44) (cid:39)(cid:37)(cid:37)(cid:42) (cid:39)(cid:37)(cid:37)(cid:43) (cid:39)(cid:37)(cid:37)(cid:44) (cid:66)(cid:100)(cid:105)(cid:100)(cid:103) (cid:55)(cid:106)(cid:94)(cid:97)(cid:89)(cid:94)(cid:99)(cid:92)(cid:21) (cid:66)(cid:100)(cid:105)(cid:100)(cid:103) (cid:55)(cid:106)(cid:94)(cid:97)(cid:89)(cid:94)(cid:99)(cid:92) DKKm Storm and weather, gross Large claims, gross 2007 2006 2005 34 121 42 20 35 37 to an increased number of claims. Weather-related and Focus areas in 2008 large claims had a negative impact of 3.2 percentage In line with Private & Commercial Denmark, Private & points on the combined ratio, while run-off gains had a Commercial Norway also began implementing the LEAN positive impact of 2 percentage points. The correspond- principle in parts of the organisation in 2007. We will ing impact from large claims and run-off gains was 0.4 continue to implement LEAN over the next few years. and 2.1 percentage points, respectively, in 2006. Expenses In order to achieve the ambition of increasing our market share in 2008 we intend to focus on Health Care, on The gross expense ratio was 20.8 in 2007, which was developing our sales channels further and introduce 0.4 percentage point higher, mainly due to the relatively several targeted sales efforts to new as well as existing high wage inflation of 5.6%. A new IT supported process customers. In this context, we intend to focus on specific will be implemented in early 2008 to make our sales geographical areas, including in particular the Oslo area. processes more efficient and enable us to finalise 90% of all sales at the customer’s premises. The process will entail cost reductions of around DKK 60m over the next two years. 24 of 152 l Private & Commercial Norway l TrygVesta Annual Report 2007 Corporate DKKm 2007 2006 2005 NOK/DKK, average rate for the period 92.81 93.04 92.85 Gross earned premiums Gross claims incurred Gross expenses Profit/loss on gross business Profit/loss on ceded business Technical interest, net of reinsurance Technical result Key ratios Gross claims ratio Business ceded as % of gross premiums Claims ratio, net of ceded business Gross expense ratio Combined ratio 5,285 -3,904 -504 877 -172 137 842 73.9 3.3 77.2 9.5 86.7 4,921 -3,322 -539 1,060 -316 98 842 67.5 6.4 73.9 11.0 84.9 4,666 -3,296 -534 836 -421 46 461 70.6 9.0 79.6 11.4 91.0 Corporate is a Nordic business area which provides insur- Performance in 2007 at sustained high level ances to corporate customers under the TrygVesta brand. The Corporate business area recorded a technical result The Corporate business area serves customers with our of DKK 842m in 2007, which was in line with the 2006 own sales force and through brokers. We define corporate level despite a significantly higher level of large claims. customers as customers paying annual premiums of more We also continued the positive trend in gross earned than DKK 500,000 or having more than 50 employees. premiums. The Corporate business area has some 10,000 customers. The number would be around 50 customers by inter- Premium growth national standards, which define corporate customers as Gross earned premiums in Corporate were 7.4% higher customers paying annual premiums of more than DKK than in 2006, and the portfolio passed the DKK 5bn mark 10m. Corporate has around 500 employees, and contri- in 2007. The Norwegian part of the Corporate business butes some 30% of the Group’s total earned premiums. was a major growth driver, contributing 9.3% in local cur- TrygVesta Garantiforsikring, the leading provider of rency. The Danish business also generated strong growth guarantee insurance in the Nordic region, is included in of 6.1% over 2006. the Corporate business area. TrygVesta Annual Report 2007 l Corporate l 25 of 152 Our business Corporate outperformed the market substantially in terms in 2007, we increased prices by about 15% at the begin- of growth, driven by dedicated risk consultancy efforts ning of 2008, causing a few marine customers to leave with corporate customers being served by cross-discipli- the Group. However, the marine business continued to be nary customer teams. In 2007, more than 250 employees slightly unsatisfactory. completed our pan-Nordic risk consultancy training, a major contributor to the improvement of our service and Combined ratio of 86.7 despite many large claims consultancy standards. Combined ratio for 2007 was 86.7 compared to 84.9 in 2006. Large claims had a negative impact of 8.3 percent- As far as our insurance lines are concerned, the personal age points in 2007 compared to 6.0 percentage points lines in particular recorded strong growth, supported by the year before. Weather-related claims also rose but to the new act on workers’ compensation insurance in Den- a lesser extent, which had a negative impact of 1.1 per- mark which took effect on 1 July 2007. The new act trig- centage points compared to 1.0 percentage points in gered extraordinary premium increases of 12.5%, equiva- 2006. Large losses amounted to DKK 843m and had a lent to premiums of around DKK 60m in 2007 and a significant negative impact on the financial results. similar amount in 2008. After a few years with a deliber- ate reduction of market shares in unprofitable segments The higher level of large claims resulted in a gross claims of workers’ compensation insurance in Norway, we once ratio of 73.9 in 2007 against 67.5 in 2006. There were again increased our market share in 2007 within the per- seven marine claims with a gross expense of DKK 453m sonal lines of the Norwegian part of the Corporate busi- and a net expense of DKK 133m, the difference being ness. We did this as recent years’ price increases in the that reinsurers contribute a much greater proportion of Norwegian market made it attractive to increase the mar- large marine claims. This is also reflected in the net rein- ket share again in selected segments. surance ratio of 3.3, which was much lower than the ratio of 6.4 recorded in 2006. Thus, the overall claims ratio, net of ceded business was 77.2 in 2007 against 73.9 in 2006. Large inflow of customers and high renewal rates Corporate recorded a large inflow of new customers in 2007, while also continuing to record high renewal rates. Nine out of 10 corporate customers renewed their poli- cies in 2007. Generally, customer renewals at 1 January 2008 were satisfactory. As marine had negative earnings 26 of 152 l Corporate l TrygVesta Annual Report 2007 DKKm 2007 2006 2005 Storm and weather, gross Large claims, gross Large claims, net 57 843 439 51 456 294 136 356 224 The result was favourably impacted by gross run-off gains In order to ensure sustained growth, we also intend to of DKK 102m with motor and liability insurance being the specialise further in relation to international customers, major contributors, while we continued to strengthen and we intend to develop our products further to create provisions for prior-year claims in workers’ compensation an even better match to customer requirements. during 2007. Continued fall in expenses The Corporate business was able to reduce expenses despite strong premium growth in 2007. Expenses were some DKK 35m lower, equivalent to a 1.5 percentage points reduction of the gross expense ratio to 9.5. The positive performance was partly attributable to our continued focus on making the business more efficient, and partly to a greater proportion of insurances being sold through brokers in 2007. We do not incur costs to any considerable extent from sales through brokers because brokers charge their fees directly to the customers. Focus areas in 2008 Setting up a Swedish corporate business is a focus area for 2008, and we expect to start sales to Swedish corpo- rate customers in late 2008. TrygVesta Annual Report 2007 l Corporate l 27 of 152 Our business Finnish general insurance DKKm 2007 2006 2005 EUR/DKK, average rate for the period 745.11 745.94 745.07 Gross earned premiums Gross claims incurred Gross expenses Profit/loss on gross business Profit/loss on ceded business Technical interest, net of reinsurance Technical result Key ratios Gross claims ratio Business ceded as % of gross premiums Claims ratio, net of ceded business Gross expense ratio Combined ratio 251 -188 -125 -62 -1 14 -49 74.9 0.4 75.3 49.8 198 -155 -83 -40 0 6 -34 78.1 0.2 78.3 41.7 140 -113 -70 -43 -1 3 -41 80.9 0.2 81.1 50.2 125.1 120.0 131.3 Our Finnish branch provides insurances to private house- late 2007. More than 100,000 policies were sold, equiva- hold customers and small enterprises under the brand lent to an average of around 2,000 policies sold every name of Nordea Vahinkovakuutus. Insurances are sold by week. By comparison, we sold some 80,000 policies in Nordea’s branches, our own sales people, own sales 2006. The higher sales were very much attributable to centre, car dealers and via the Internet. The Finnish our good ongoing collaboration with Nordea’s branches business has some 127 employees, and together with and a new concept which Nordea’s customer advisers the Swedish branch, it contributes around 1% of total began applying in 2007, and which helps advisers provide gross earned premium growth. The Finnish business was broader consultancy services, thereby strengthening set up in 2002 and is still being developed. Our ambition motivation and insurance sales. We increased the number is to hold 8% of the private market by 2010. of employees from 93 to 127 in 2007 to maintain the high level of sales activity. Another sales record Gross earned premiums at DKK 251m were 26.8% higher In early 2007 we began selling commercial insurances to in 2007. The portfolio amounted to some DKK 300m in small commercial customers. Setting up a commercial 28 of 152 l Private & Commercial Finland l TrygVesta Annual Report 2007 (cid:55) (cid:71)(cid:58)(cid:54)(cid:64)(cid:57) (cid:68)(cid:76)(cid:67)(cid:21)(cid:68)(cid:59)(cid:21) (cid:57)(cid:62)(cid:72)(cid:73)(cid:71)(cid:62)(cid:55)(cid:74)(cid:73)(cid:62)(cid:68) (cid:67)(cid:21) (cid:62)(cid:67)(cid:21) (cid:59)(cid:62)(cid:67)(cid:65)(cid:54)(cid:67)(cid:57) (cid:39)(cid:40)(cid:26) (cid:40)(cid:26) (cid:42)(cid:37)(cid:26) (cid:39)(cid:41)(cid:26) (cid:67)(cid:100)(cid:103)(cid:89)(cid:90)(cid:86) (cid:62)(cid:99)(cid:105)(cid:90)(cid:103)(cid:99)(cid:90)(cid:105) (cid:68)(cid:108)(cid:99)(cid:21)(cid:104)(cid:86)(cid:97)(cid:90)(cid:104) (cid:56)(cid:86)(cid:103)(cid:21)(cid:89)(cid:90)(cid:86)(cid:97)(cid:90)(cid:103)(cid:104) sales organisation and effecting commercial sales through (cid:54)(cid:56)(cid:56)(cid:74)(cid:66)(cid:74)(cid:65)(cid:54)(cid:73)(cid:58)(cid:57)(cid:21)(cid:76)(cid:58)(cid:58)(cid:64)(cid:65)(cid:78)(cid:21)(cid:72)(cid:54)(cid:65)(cid:58)(cid:72)(cid:21)(cid:62)(cid:67)(cid:21)(cid:59)(cid:62)(cid:67)(cid:65)(cid:54)(cid:67)(cid:57)(cid:21) Nordea took longer than expected, limiting sales of com- mercial insurance in 2007. We expect sales to become stronger going forward in step with the implementation of Nordea’s commercial sales and thanks to Nordea’s large share of the commercial market. Financial results in 2007 The private business improved the technical result for 2007 by DKK 32m and recorded a loss of DKK 2m. The (cid:69)(cid:100)(cid:97)(cid:94)(cid:88)(cid:94)(cid:90)(cid:104) (cid:38)(cid:37)(cid:33)(cid:37)(cid:37)(cid:37) (cid:45)(cid:37)(cid:33)(cid:37)(cid:37)(cid:37) (cid:43)(cid:37)(cid:33)(cid:37)(cid:37)(cid:37) (cid:41)(cid:37)(cid:33)(cid:37)(cid:37)(cid:37) (cid:39)(cid:37)(cid:33)(cid:37)(cid:37)(cid:37) (cid:37) improvement was primarily attributable to positive pre- (cid:38)(cid:37) (cid:39)(cid:37) (cid:40)(cid:37) (cid:41)(cid:37) (cid:42)(cid:37) (cid:74)(cid:92)(cid:90)(cid:103) mium growth. The commercial business recorded a loss on the technical account of DKK 47m due to significant costs of launching commercial sales. For the total busi- ness the technical result was thus a loss of DKK 49m. (cid:39)(cid:37)(cid:37)(cid:39) (cid:39)(cid:37)(cid:37)(cid:42) (cid:39)(cid:37)(cid:37)(cid:40) (cid:39)(cid:37)(cid:37)(cid:43) (cid:39)(cid:37)(cid:37)(cid:41) (cid:39)(cid:37)(cid:37)(cid:44) Expenses (cid:69)(cid:71)(cid:161)(cid:66)(cid:62)(cid:58)(cid:74)(cid:57)(cid:75)(cid:62)(cid:64)(cid:65)(cid:62)(cid:67)(cid:60)(cid:21)(cid:62)(cid:21)(cid:59)(cid:62)(cid:67)(cid:65)(cid:54)(cid:67)(cid:57) The expense ratio for the private business fell by 12.7 percentage points to 29 in 2007. The overall business (cid:66)(cid:94)(cid:100)(cid:35)(cid:21)(cid:57)(cid:64)(cid:64) (Private & Commercial) reported an expense ratio of 49.8. The expense ratio was adversely impacted by the costs of the launch of the commercial business. Focus areas in 2008 We had a 3% share of the Finnish private market at the end of 2007. In 2008, we will continue to focus on growth, aiming to achieve our ambition of holding an 8% share of the private market by 2010. We intend to expand our sales channels while also focusing on sales through Nordea. Continued strong growth requires us to continue to give high priority to new recruitment and retention of current employees in 2008. (cid:40)(cid:37)(cid:37) (cid:39)(cid:42)(cid:37) (cid:39)(cid:37)(cid:37) (cid:38)(cid:42)(cid:37) (cid:38)(cid:37)(cid:37) (cid:42)(cid:37) (cid:37) (cid:39)(cid:37)(cid:37)(cid:39) (cid:39)(cid:37)(cid:37)(cid:40) (cid:39)(cid:37)(cid:37)(cid:41) (cid:39)(cid:37)(cid:37)(cid:42) (cid:39)(cid:37)(cid:37)(cid:43) (cid:39)(cid:37)(cid:37)(cid:44) TrygVesta Annual Report 2007 Private & Commercial Finland 29 of 152 Our business Swedish general insurance DKKm 2007 2006 2005 SEK/DKK, average rate for the period 80.73 80.37 Gross earned premiums Gross claims incurred Gross expenses Profit/loss on gross business Profit/loss on ceded business Technical interest, net of reinsurance Technical result Key ratios Gross claims ratio Business ceded as % of gross premiums Claims ratio, net of ceded business Gross expense ratio Combined ratio 90 -80 -95 -85 0 3 4 -6 -39 -41 0 0 -82 -41 88.9 0.0 88.9 105.6 194.5 144.9 0.4 145.3 1,003.8 1,149.1 - - - - - - - - - - - - - Our Swedish branch provides insurances to private house- Large inflow of new customers hold customers under the brand name of Vesta Skade- Sales by the Swedish business grew at a rapid rate, försäkring. Insurances are primarily sold through Nordea’s enabling us to welcome customer number 50,000 in late branches, our own call centre and via the Internet. The 2007. We have sold close to 115,000 policies since start- Swedish business has 58 employees, and together with ing up the business in 2006, equivalent to an average of the Finnish branch, it contributes around 1% of the around 1,700 policies each week. In Q4 2007 we saw Group’s total earned premiums. The branch was set up in premium growth of 2,500 new insurances each week. July 2006, and our ambition is to hold 8% of the private Overall, we sold a total of almost 87,000 insurances in market by 2012. 2007 compared with some 26,500 insurances in H2 In 2007, gross earned premiums for the Swedish 2006. business were DKK 90m, and the total portfolio passed Nordea sold two thirds of the policies in 2007, while our SEK 200m. own staff sold the last third. The chart on the next page 30 of 152 l Swedish general insurance l TrygVesta Annual Report 2007 compares the level of sales from the start-up in Sweden with the start-up in Finland. Sweden has significantly higher sales because we were able to use our experience from the start-up in Finland and set up our own sales centre in Sweden immediately. We increased the number of employees from 42 to 58 in 2007 in order to retain the high growth rate. Sales continued to be in line with our targets and strategy for the Swedish market. Focus areas in 2008 In 2008, the Swedish business will focus on sustained growth and on developing the rapidly growing branch fur- ther. Due to our high ambitions a special key area in 2008 will be to increase the number of qualified and motivated employees in order to keep up with the strong development in sales. (cid:55) (cid:71)(cid:58)(cid:54)(cid:64)(cid:57) (cid:68)(cid:76)(cid:67)(cid:21)(cid:68)(cid:59)(cid:21) (cid:57)(cid:62)(cid:72)(cid:73)(cid:71)(cid:62)(cid:55)(cid:74)(cid:73)(cid:62)(cid:68) (cid:67)(cid:21) (cid:62)(cid:67)(cid:21) (cid:72)(cid:76)(cid:58)(cid:57) (cid:58)(cid:67)(cid:21) (cid:39)(cid:26) (cid:40)(cid:40)(cid:26) (cid:43)(cid:42)(cid:26) (cid:67)(cid:100)(cid:103)(cid:89)(cid:90)(cid:86) (cid:56)(cid:86)(cid:97)(cid:97)(cid:88)(cid:90)(cid:99)(cid:105)(cid:103)(cid:90) (cid:62)(cid:99)(cid:105)(cid:90)(cid:103)(cid:99)(cid:90)(cid:105) (cid:72)(cid:73)(cid:54)(cid:71)(cid:73)(cid:34)(cid:74)(cid:69)(cid:21)(cid:62)(cid:67)(cid:21)(cid:72)(cid:76)(cid:58)(cid:57)(cid:58)(cid:67)(cid:21)(cid:75)(cid:72)(cid:35)(cid:21)(cid:59)(cid:62)(cid:67)(cid:65)(cid:54)(cid:67)(cid:57)(cid:21) (cid:54)(cid:107)(cid:90)(cid:103)(cid:86)(cid:92)(cid:90)(cid:21) (cid:98)(cid:100)(cid:99)(cid:105)(cid:93)(cid:97)(cid:110)(cid:21)(cid:104)(cid:86)(cid:97)(cid:90)(cid:104)(cid:21) (cid:94)(cid:99)(cid:21)(cid:59)(cid:94)(cid:99)(cid:97)(cid:86)(cid:99)(cid:89)(cid:21)(cid:39)(cid:37)(cid:37)(cid:44) (cid:69)(cid:100)(cid:97)(cid:94)(cid:88)(cid:94)(cid:90)(cid:104) (cid:38)(cid:37)(cid:33)(cid:37)(cid:37)(cid:37) (cid:45)(cid:33)(cid:37)(cid:37)(cid:37) (cid:43)(cid:33)(cid:37)(cid:37)(cid:37) (cid:41)(cid:33)(cid:37)(cid:37)(cid:37) (cid:39)(cid:33)(cid:37)(cid:37)(cid:37) (cid:37) (cid:39) (cid:41) (cid:43) (cid:45) (cid:38)(cid:37) (cid:38)(cid:39) (cid:38)(cid:41) (cid:38)(cid:43) (cid:38)(cid:45) (cid:39)(cid:37) (cid:39)(cid:39) (cid:39)(cid:41) (cid:66)(cid:100)(cid:99)(cid:105)(cid:93)(cid:104) (cid:72)(cid:108)(cid:90)(cid:89)(cid:90)(cid:99) (cid:59)(cid:94)(cid:99)(cid:97)(cid:86)(cid:99)(cid:89) TrygVesta Annual Report 2007 Swedish general insurance 31 of 152 Our business Investment activities DKKm Bonds etc. Equities Real estate Total Other financial income and expenses *) 2007 2006 Investment assets 2005 31.12.2007 31.12.2006 1,103 180 240 1,523 217 788 966 317 687 819 175 30,294 4,445 2,569 28,663 5,384 2,453 2,071 1,681 37,308 36,500 188 -80 Total return on investment activities 1,740 2,259 1,601 Transferred to technical interest Return on investment activities -1,400 340 -1,031 1,228 -707 894 *) The item comprises gains and losses as a result of a changed discount rate, interest on operating assets, bank debt and reinsur- ance deposits, exchange rate adjustment of insurance items and costs of investment activities. TrygVesta’s investment activities comprise any placement Investment result in 2007 of the Group’s funds in investment assets, bonds, equity In 2007 the return on TrygVesta’s investment activities investments, land and buildings or cash. Funds are placed before transfer to technical interest, but after other finan- pursuant to guidelines defined by legislation, regulators cial income and expenses totalled DKK 1,740m. This was and the Supervisory Board. The overall allocation of assets DKK 519m less than in 2006, mainly due to lower returns is made by us based on risk and cash management con- on the equity portfolio. The return on investment activities siderations, while specific securities are mainly selected after transfer to technical interest was DKK 888m lower by external asset managers within the defined framework. than in 2006 due to lower equity returns and higher transfer to technical interest. Higher bond yields of 3.7% Financial markets became increasingly unstable during against 2.8% in 2006 lifted the investment performance. 2007 as a result of the sub-prime crisis, becoming more and more impacted by developments in the US housing Other financial income and expenses were DKK 29m market and borrowers’ inability to service and repay their higher. The improvement was attributable to an increase mortgages towards the end of 2007. Equities were reas- in other items including interest income on operating sessed in 2007 with increasing risk premiums relative to assets. This was, however, partly offset by capital gains the risk-free interest. TrygVesta reduced the Group’s being reduced from DKK 368m in 2006 to DKK 298m in equity portfolio in June as well as in December 2007. 2007 as a result of a changed discount rate because The equity portfolio was further reduced in January 2008. interest rates increased less in 2007. The return on 32 of 152 l Investment activities l TrygVesta Annual Report 2007 investment activities before other financial income and The return was impacted by an increase in the general expenses was DKK 1,523m, equal to a return of 4.1%. level of interest rates of 0.3-0.5 percentage point and a The return was 4.9% including changes in provisions for widening yield spread between swap and government claims due to higher interest rates. This performance was yields of around 0.1-0.3 percentage point during the better than had been expected at the beginning of 2007 year, causing an adverse impact on value adjustments, despite the unstable financial markets but lower than the but higher current returns. guidance provided in our Q3 2007 interim report. About 75% of the bonds, or DKK 23bn, are issued by Asset allocation banks or mortgage credit institutions, and 23% are issued Our bond portfolio increased during 2007 to account for by Western European and North American governments 81.2% of total assets against 78.5% at 1 January 2007. or regional authorities. 82% of the portfolio is rated AAA The higher proportion of bonds was a result of new or AA. The unrated 15% of the portfolio comprises mainly investments and a switch-over from equities to bonds. short-term Norwegian money market certificates issued The proportion of equities fell from 14.8% to 11.9%, or by banks. We have diversified exposure to banks, mainly by DKK 939m. The value of the portfolio of real property Nordic banks with little or no involvement in the financial increased by some DKK 116m in 2007, lifting its propor- products that triggered the sub-prime crisis. We currently tion to 6.9% from 6.7%. monitor the performance of credits with the banks to which our bonds portfolio is exposed. Net investments amounted to about DKK 613m in 2007, of which DKK 1,461m was invested in bonds, while equi- Interest rate sensitivity measures changes in the value of ties and real property were reduced by DKK 839m and the bond portfolio and the provisions for claims, respec- DKK 9m, respectively. tively, at a parallel yield increase, of 1 percentage point. The sensitivity gap was DKK 21m at 31 December 2007. For security and rating considerations, our investment port- We monitor interest rate sensitivity on an ongoing basis folio has a high proportion of highly liquid securities carry- to match asset and liabilities as far as possible in order to ing low interest rate and credit risk. We do not invest in minimise the impact of changing interest rates on our structured fixed income products such as CDOs, CLOs and income statement. The duration including cash of the hedge funds, nor does our portfolio include US mortgages. Group’s total bond portfolio was 1.9 years at 31 Decem- Bonds ber 2007 compared to 1.3 years at 31 December 2006. The duration increase occurred because TrygVesta’s Dan- The overall bond portfolio including cash yielded a return ish business has begun using a variable rate for discount- of DKK 1,103m in 2007, equal to 3.7% for the full year. ing provisions for workers’ compensation insurance, TrygVesta Annual Report 2007 l Investment activities l 33 of 152 Our business thereby increasing the opposing interest rate risk on lia- Real property bilities to maintain the Group’s net interest rate risk at a The investment return on real property was DKK 240m, fairly unchanged level. including revaluation of DKK 103m and 6.1% from opera- tions. The occupancy rate was 97.5 at 31 December 2007 Equities compared with 94.9 at 1 January 2007. The total return on the equity portfolio was DKK 180m, or 2.0%, for the financial year. The return level for 2007 The portfolio is well-diversified and consists of quality was lower than in previous years with reported returns of property, typically in prime locations in major cities in more than 20%. Equity markets were impacted by the Denmark and Norway. The portfolio mainly comprises sub-prime crisis referred to earlier and indications of office premises, but also includes a small proportion of declining economic activity in the Western world. other commercial property and residential property. Danish equities generated a negative return of 4.5%, while Norwegian equities generated a return of 13% compared with 8.0% for OMXC Capped and 11.5% for OSBX. The return on international equities was 1.0%, which was 0.5% below the benchmark return. Currency risks relating to international equities were hedged during the year. Unlisted shares accounted for DKK 237m at 31 December 2007. Royal Dutch Shell was the largest stake, accounting for 2.8% of the portfolio of listed equities and 0.3% of total investment assets. The 25 largest equities in our portfolio accounted for 31% of the total listed equity portfolio. We reduced our equity exposure during 2007, cutting back the equity portfolio by around DKK 0.6bn in June 2007 and by 0.2bn in December. The Group’s equity port- folio had a total value of DKK 4,445m at 31 December 2007 compared with DKK 5,384m at 31 December 2006. We reduced our equity exposure further in January 2008 to stand at DKK 1.7bn at 31 January 2008. 34 of 152 l Investment activities l TrygVesta Annual Report 2007 (cid:65)(cid:62)(cid:72)(cid:73) (cid:58)(cid:57)(cid:21)(cid:58)(cid:70) (cid:74) (cid:62)(cid:73)(cid:62)(cid:58) (cid:72)(cid:21) (cid:55)(cid:78)(cid:21)(cid:60) (cid:58)(cid:68)(cid:60) (cid:71)(cid:54) (cid:69)(cid:61)(cid:78) (cid:71)(cid:58)(cid:73)(cid:74)(cid:71)(cid:67)(cid:21)(cid:55)(cid:78)(cid:21)(cid:54)(cid:72)(cid:72)(cid:58)(cid:73)(cid:21)(cid:56)(cid:65)(cid:54)(cid:72)(cid:72) (cid:38)(cid:38)(cid:35)(cid:44)(cid:21)(cid:26) (cid:39)(cid:39)(cid:35)(cid:43)(cid:21)(cid:26) (cid:38)(cid:46)(cid:35)(cid:45)(cid:21)(cid:26) (cid:38)(cid:44)(cid:35)(cid:39)(cid:21)(cid:26) (cid:39)(cid:45)(cid:35)(cid:44)(cid:21)(cid:26) (cid:26) (cid:39)(cid:42) (cid:39)(cid:37) (cid:38)(cid:42) (cid:38)(cid:37) (cid:42) (cid:37) (cid:39)(cid:39)(cid:35)(cid:40) (cid:39)(cid:37)(cid:35)(cid:40) (cid:38)(cid:42)(cid:35)(cid:37) (cid:38)(cid:37)(cid:35)(cid:41) (cid:46)(cid:35)(cid:41) (cid:40)(cid:35)(cid:44) (cid:39)(cid:35)(cid:44) (cid:39)(cid:35)(cid:45) (cid:39)(cid:35)(cid:37) (cid:42)(cid:35)(cid:42) (cid:42)(cid:35)(cid:45) (cid:41)(cid:35)(cid:38) (cid:55)(cid:100)(cid:99)(cid:89)(cid:104)(cid:21)(cid:90)(cid:105)(cid:88) (cid:58)(cid:102)(cid:106)(cid:94)(cid:105)(cid:94)(cid:90)(cid:104) (cid:71)(cid:90)(cid:86)(cid:97)(cid:21)(cid:101)(cid:103)(cid:100)(cid:101)(cid:90)(cid:103)(cid:105)(cid:110) (cid:73)(cid:100)(cid:105)(cid:86)(cid:97) (cid:67)(cid:100)(cid:103)(cid:89)(cid:94)(cid:88)(cid:21)(cid:103)(cid:90)(cid:92)(cid:94)(cid:100)(cid:99) (cid:74)(cid:64) (cid:71)(cid:90)(cid:104)(cid:105)(cid:21)(cid:100)(cid:91)(cid:21)(cid:58)(cid:106)(cid:103)(cid:100)(cid:101)(cid:90) (cid:39)(cid:37)(cid:37)(cid:42) (cid:39)(cid:37)(cid:37)(cid:43) (cid:39)(cid:37)(cid:37)(cid:44) (cid:74)(cid:72)(cid:54) (cid:54)(cid:104)(cid:94)(cid:86)(cid:21)(cid:90)(cid:105)(cid:88)(cid:35) (cid:55)(cid:68)(cid:67)(cid:57)(cid:72)(cid:21)(cid:55)(cid:78)(cid:21)(cid:60) (cid:58)(cid:68)(cid:60) (cid:71)(cid:54)(cid:69)(cid:61)(cid:78) (cid:55)(cid:68)(cid:67)(cid:57)(cid:72)(cid:21)(cid:55)(cid:78)(cid:21)(cid:71)(cid:54)(cid:73)(cid:62)(cid:67)(cid:60) (cid:38)(cid:38)(cid:35)(cid:39)(cid:21)(cid:26) (cid:38)(cid:42)(cid:35)(cid:40)(cid:21)(cid:26) (cid:37)(cid:35)(cid:41)(cid:21)(cid:26) (cid:37)(cid:35)(cid:41)(cid:21)(cid:26) (cid:39)(cid:35)(cid:40)(cid:21)(cid:26) (cid:39)(cid:44)(cid:35)(cid:43)(cid:21)(cid:26) (cid:43)(cid:38)(cid:35)(cid:21)(cid:39)(cid:21)(cid:26) (cid:38)(cid:44)(cid:35)(cid:44)(cid:21)(cid:26) (cid:43)(cid:40)(cid:33)(cid:46)(cid:21)(cid:26) (cid:57)(cid:86)(cid:99)(cid:94)(cid:104)(cid:93)(cid:21)(cid:87)(cid:100)(cid:99)(cid:89)(cid:104) (cid:67)(cid:100)(cid:103)(cid:108)(cid:90)(cid:92)(cid:94)(cid:86)(cid:99)(cid:21)(cid:87)(cid:100)(cid:99)(cid:89)(cid:104)(cid:21)(cid:86)(cid:99)(cid:89)(cid:21)(cid:98)(cid:100)(cid:99)(cid:90)(cid:110)(cid:21)(cid:98)(cid:86)(cid:103)(cid:96)(cid:90)(cid:105) (cid:68)(cid:105)(cid:93)(cid:90)(cid:103) (cid:54)(cid:54)(cid:54) (cid:55)(cid:55)(cid:55) (cid:54)(cid:54) (cid:49)(cid:55)(cid:55)(cid:55) (cid:54) (cid:67)(cid:100)(cid:105)(cid:21)(cid:103)(cid:86)(cid:105)(cid:90)(cid:89) TrygVesta Annual Report 2007 l Investment activities l 35 of 152 Our business Outlook for 2008 DKKm Premium growth * Technical result Technical result before run-off Investment result Profit before tax Profit after tax Combined ratio *In local currency Actual Outlook Favourable scenario 2008 2007 Negative scenario 4% 2,820 2,077 340 3,109 2,266 86.1 5% 2,200 2,200 400 2,500 1,900 90 2,350 2,050 2,000 89 1,800 91 TrygVesta is committed to providing the market with pre- proportion of equities of around 4%. TrygVesta has no cise profit guidance. We attach great importance to using exposure to structured debt securities (CDOs/subprime). the very extensive records of previous performance which are very important when making financial forecasts. Higher premium growth expected for 2008 Earned premiums are expected to increase by some 5% in Our outlook for 2008 is based on a normal performance local currency terms, assuming no major changes in com- for the year, but circumstances in the financial markets petitive conditions relative to 31 December 2007. We will and, in particular, the equity markets at the beginning of continue our strategy of generating profitable growth. 2008 have caused us to take the extraordinary step of Earned premium growth of 5% will originate from organic expanding our comments on our outlook for the full-year growth in Finland and Sweden, which together are 2008, see page 38. The table shows our outlook for 2008 expected to contribute 1.5%, while Denmark and Norway based on developments up to 31 December 2007 and a contribute 3.5% equal to about 0.5% real growth. Outlook at the begining of January 2008 At the begining of January 2008, assuming an equity pro- portion of around 4% of our investment portfolio, we TrygVesta’s outlook for 2008 is composed of expected profit before tax of DKK 2,500m compared with the areas insurance activities, investment activities DKK 3,109m in 2007. This expectation corresponded to a and tax. return on equity of just over 26% before tax and around 20% after tax. 36 of 152 l Outlook for 2008 l TrygVesta Annual Report 2007 (cid:65)(cid:54)(cid:71)(cid:60)(cid:58)(cid:21)(cid:56)(cid:65)(cid:54)(cid:62)(cid:66)(cid:72) (cid:72)(cid:73)(cid:68)(cid:71)(cid:66)(cid:21)(cid:54)(cid:67)(cid:57)(cid:21)(cid:76)(cid:58)(cid:54)(cid:73)(cid:61)(cid:58)(cid:71)(cid:21)(cid:71)(cid:58)(cid:65)(cid:54)(cid:73)(cid:58)(cid:57)(cid:21)(cid:56)(cid:65)(cid:54)(cid:62)(cid:66)(cid:72) (cid:57)(cid:64)(cid:64)(cid:98) (cid:38)(cid:33)(cid:39)(cid:37)(cid:37) (cid:38)(cid:33)(cid:37)(cid:37)(cid:37) (cid:45)(cid:37)(cid:37) (cid:43)(cid:37)(cid:37) (cid:41)(cid:37)(cid:37) (cid:39)(cid:37)(cid:37) (cid:37) (cid:41)(cid:43)(cid:38) (cid:40)(cid:37)(cid:37) (cid:41)(cid:38)(cid:43) (cid:39)(cid:44)(cid:42) (cid:42)(cid:37)(cid:38) (cid:40)(cid:41)(cid:37) (cid:39)(cid:40)(cid:43) (cid:38)(cid:44)(cid:43) (cid:38)(cid:33)(cid:37)(cid:41)(cid:39) (cid:43)(cid:40)(cid:44) (cid:57)(cid:64)(cid:64)(cid:98) (cid:38)(cid:33)(cid:37)(cid:37)(cid:37) (cid:45)(cid:37)(cid:37) (cid:43)(cid:37)(cid:37) (cid:41)(cid:37)(cid:37) (cid:39)(cid:37)(cid:37) (cid:37) (cid:46)(cid:38)(cid:38) (cid:38)(cid:45)(cid:41) (cid:44)(cid:40) (cid:38)(cid:38)(cid:38) (cid:40)(cid:40)(cid:39) (cid:39)(cid:37)(cid:39) (cid:39)(cid:37)(cid:37)(cid:39) (cid:39)(cid:37)(cid:37)(cid:40) (cid:39)(cid:37)(cid:37)(cid:41) (cid:39)(cid:37)(cid:37)(cid:42) (cid:39)(cid:37)(cid:37)(cid:43) (cid:39)(cid:37)(cid:37)(cid:44) (cid:39)(cid:37)(cid:37)(cid:39) (cid:39)(cid:37)(cid:37)(cid:40) (cid:39)(cid:37)(cid:37)(cid:41) (cid:39)(cid:37)(cid:37)(cid:42) (cid:39)(cid:37)(cid:37)(cid:43) (cid:39)(cid:37)(cid:37)(cid:44) (cid:65)(cid:86)(cid:103)(cid:92)(cid:90)(cid:21)(cid:88)(cid:97)(cid:86)(cid:94)(cid:98)(cid:104)(cid:33)(cid:21)(cid:99)(cid:90)(cid:105) (cid:65)(cid:86)(cid:103)(cid:92)(cid:90)(cid:21)(cid:88)(cid:97)(cid:86)(cid:94)(cid:98)(cid:104)(cid:33)(cid:21)(cid:92)(cid:103)(cid:100)(cid:104)(cid:104) (cid:58)(cid:109)(cid:101)(cid:90)(cid:88)(cid:105)(cid:90)(cid:89)(cid:21)(cid:97)(cid:90)(cid:107)(cid:90)(cid:97)(cid:21)(cid:29)(cid:57)(cid:64)(cid:64)(cid:21)(cid:39)(cid:39)(cid:42)(cid:98)(cid:30) (cid:58)(cid:109)(cid:101)(cid:90)(cid:88)(cid:105)(cid:90)(cid:89)(cid:21)(cid:97)(cid:90)(cid:107)(cid:90)(cid:97)(cid:21)(cid:29)(cid:57)(cid:64)(cid:64)(cid:21)(cid:42)(cid:37)(cid:37)(cid:98)(cid:30) Combined ratio of 90 before run-off We generally base our expectations with respect to claims The combined ratio for 2008 is estimated to be at the incurred on assumptions for the various products in the level of 89-91 with an expectation of 90 before run-off. individual business areas. Expectations regarding claims The past three years have recorded run-off of 2.3-4.5% ratios are based on historical performance in the form of of gross earned premiums, for example, with a combined average claims ratios for the past five years, with recent ratio in 2007 of 86.1 and 90.6 before run-off. years’ trends generally being weighted stronger than those of prior years. Trends in the pricing of our insur- Continued decline in expense ratio ance premiums, claims frequencies and the discount rate We expect to reduce the expense ratio slightly in 2008 applied are the most important factors that may affect relative to the expense ratio of 16.7 achieved for 2007, our overall performance. Assumptions for storm events despite expansion in Finland and Sweden that is expected and large claims are based on historical experience for to have an adverse impact on the expense ratio in 2008 not less than ten years, with recent years’ trends being and the next few years. The Finnish and Swedish activi- weighted stronger than those of prior years. In addition, ties affected the expense ratio with around 1.5 % in we incorporate the effect of profitability initiatives and 2008, we expect an impact of 1 percentage point. the effect of any legislative measures in the anticipated Assumptions for insurance activities related claims for 2008 of around DKK 225m and large The outlook for the result for 2008 is based on assump- claims of around DKK 500m gross. claims level. The outlook for 2008 assumes weather- tions with respect to gross earned premiums, gross claims incurred, gross expenses, result of business ceded The outlook assumes no run-off gains or losses in 2008 and technical interest. on the provisions for claims established. Our outlook for gross earned premiums is based on the The outlook regarding gross expenses reflects the pro- Group’s portfolio at 31 December 2007 and assumptions jected number of employees during 2008 and the related with respect to sales and loss of policies and price adjust- costs. The projected number of employees incorporates ments of existing policies. Assumptions for sales and loss the effect of measures launched to improve efficiency and of policies are based on historical levels, planned initia- recruitment of new employees in Finland and Sweden. tives and the market situation. Assumptions for price The outlook further includes other expenses such as adjustments are primarily based on agreements relating those relating to IT, operations and our corporate head- to adjustments of individual insurance policies. The out- quarters, which are predominantly based on agreements look is expressed in local currency. that are known to us. TrygVesta Annual Report 2007 l Outlook for 2008 l 37 of 152 Our business (cid:71)(cid:74)(cid:67)(cid:34)(cid:68)(cid:59)(cid:59) (cid:57)(cid:64)(cid:64)(cid:98) (cid:38)(cid:35)(cid:37)(cid:37)(cid:37) (cid:45)(cid:37)(cid:37) (cid:43)(cid:37)(cid:37) (cid:41)(cid:37)(cid:37) (cid:39)(cid:37)(cid:37) (cid:37) (cid:34)(cid:39)(cid:37)(cid:37) (cid:34)(cid:41)(cid:37)(cid:37) (cid:34)(cid:43)(cid:37)(cid:37) (cid:34)(cid:45)(cid:37)(cid:37) (cid:34)(cid:41)(cid:38)(cid:37)(cid:34)(cid:41)(cid:42)(cid:45) (cid:34)(cid:42)(cid:38)(cid:43) (cid:34)(cid:42)(cid:45)(cid:45) (cid:44)(cid:41)(cid:41) (cid:44)(cid:41)(cid:40) (cid:43)(cid:38)(cid:45) (cid:42)(cid:42)(cid:42) (cid:40)(cid:43)(cid:38) (cid:39)(cid:45)(cid:40) (cid:43)(cid:45) (cid:34)(cid:44)(cid:38) (cid:39)(cid:37)(cid:37)(cid:39) (cid:39)(cid:37)(cid:37)(cid:40) (cid:39)(cid:37)(cid:37)(cid:41) (cid:39)(cid:37)(cid:37)(cid:42) (cid:39)(cid:37)(cid:37)(cid:43) (cid:39)(cid:37)(cid:37)(cid:44) (cid:71)(cid:106)(cid:99)(cid:34)(cid:100)(cid:91)(cid:91)(cid:33)(cid:21)(cid:99)(cid:90)(cid:105) (cid:71)(cid:106)(cid:99)(cid:34)(cid:100)(cid:91)(cid:91)(cid:33)(cid:21)(cid:92)(cid:103)(cid:100)(cid:104)(cid:104) The result of business ceded is based on contracts made equities and real property yielded returns of 3.7%, 2.0% with reinsurers to cover claims events and events such as and 6.1% (10.4% including value changes), respectively. storms and large claims. The expected result of business ceded is calculated on the basis of such contracts and Assumptions for tax historical data. The corporate tax rate is 25% in Denmark and 28% in Norway. The effective tax rate is to some extent attributa- Technical interest is based on interest rate assumptions ble to gains or losses on equities which are tax-exempt or applicable at 31 January 2008. non-deductible. Previously, we expected a tax rate of 24% going forward. We have changed this to 25% based on Assumptions for investment activities the composition of our business. The outlook for the return on investment activities for 2008 is based on the following assumptions with respect Equity market performance in 2008 impacts the to investment assets. The return outlook for 2008 is full-year 2008 outlook based on an assumed proportion of equities of 4% The volatile equity markets and the equity losses have against previously 12-14% as TrygVesta cut back the pro- caused us to change our outlook for 2008 to profit portion of equities to around 4% in January 2008. The before tax of DKK 2,100m compared with DKK 3,109m in proportion of bonds was increased correspondingly from 2007. The profit outlook comprises a stronger technical around 82% to 90%. The outlook for 2008 is based on result before run-off and a lower investment result, the level of interest rates prevailing at 31 January 2008. emphasising the importance of maintaining good and stable insurance operations as the foundation for our Bonds are thus expected to account for around 90% of earnings in periods of adverse financial markets. total investment assets and to yield a return of 4.7% based on interest rates at 31 January 2008. Equities are The very unstable equity market in January and until expected to account for around 4% of total assets and to 18 February 2008 resulted in a loss of around DKK 400m yield a return of 7.0% including dividends, but this may less equity return than expected. This loss on equities will vary considerably between periods. Finally, the portfolio have an adverse impact on our effective tax rate, which is of real property is expected to account for 6% of assets attributable to the amount of gains or losses on equities and to yield a return of 6.1%. Real property returns corre- which are tax-exempt or non-deductible. We assume an spond to annual rental income less administrative effective tax rate for 2008 of 32% based on the assump- expenses and do not incorporate any appreciation or tions described and the realised loss on equities. depreciation of real property values. In 2007, bonds, 38 of 152 l Outlook for 2008 l TrygVesta Annual Report 2007 The equity market performance alone results in an outlook for 2008 at 18 February that provides a return on equity of around 23% before tax and around 16% after tax. Outlook for the medium term The composition of our business and an assessment of market conditions cause us to upgrade our medium-term expectations from a combined ratio of around 92 to the 89-91 range. About half of the improvement is attributa- ble to a change in our accounting policies on unwinding. A combined ratio of 89-91 results in a targeted improved return on equity from the earlier outlook of 19-21% after tax to 21-23%. Our outlook for the medium-term assumes that we return to having an equity share of 8-10% of total assets, assuming a return on equities of 7%. TrygVesta Annual Report 2007 l Outlook for 2008 l 39 of 152 Our business Capitalisation and profit distribution TrygVesta had the following ratings at 31 December 2007: TrygVesta Forsikring A/S TrygVesta Garantiforsikring A/S Standard & Poor’s A-/stable A-/stable Moody’s A2 n.a. TrygVesta has the capital resources necessary to operate Subordinate loan capital and develop the Group. We refer to this as our capital In 2005, the Group raised a 20-year bond loan in the requirement. amount of EUR 150m, which was listed on the London Stock Exchange. The loan, which carries a coupon of Two rating agencies, Standard & Poor’s and Moody’s, fol- 4.5%, is included in the capital base for rating purposes low TrygVesta’s performance and financial position closely and to a limited extent in the regulatory capital base. for rating purposes. Our management reviews the Subordinate loan capital accounted for 10% of the capital Group’s strategies, plans and performance at annual rat- calculated according to Standard & Poor’s capital model for ing meetings. The rating agencies use these meetings as credit purposes in 2007, with the present limit being 25%. a basis for their assessment of the Group, and subse- quently announce the rating. In 2007, Moody’s upgraded Credit facility us from A3 to A2, which signifies excellent financial The Group raised a five-year revolving credit facility of DKK strength, while Standard & Poor’s affirmed their rating of 2,000m subscribed with 10 Danish and international banks A- based on the Group’s strong financial position. in 2005. At 31 December 2007, DKK 600m had been uti- We determine the Group’s capital requirements based on loan capital were DKK 88m in 2007, which means that our Standard & Poor’s capital model, aiming to maintain our interest expenses were covered 36 times by earnings. Our current rating of A-. This rating reflects strong creditwor- total debt ratio was 14.5 at 31 December 2007. lised under the facility. Total interest expenses incurred on thiness and excellent financial strength and is a preferred rating among large corporate customers requiring that Profit distribution policy their insurer is rated. Dividends in respect of the 2007 financial year are deter- mined on the basis of the Group’s capitalisation strategy Standard & Poor’s implemented a new capital model in the and profit distribution policy: autumn of 2007. Redefining the measurement of capital, Standard & Poor’s new model measures available capital • TrygVesta distributes 50% of the profit for the year as relative to a minimum requirement for each rating cate- ordinary cash dividends. gory. Going forward, we intend to apply the new calcula- tion method, targeting the level of an A rating and a small • Any excess capital after distribution of ordinary buffer. Standard & Poor’s new model calculates the buffer dividends and taking into consideration the minimum at 4-5% of the capital requirement, equivalent to the pre- capital requirement, strategy and growth, will be vious practice of a CAR of 130. Given the current structure returned to shareholders in the form of a share buy- of our business and our investment profile, a rating of A- back programme. reflects a ratio of capital to net premiums of 52-56. 40 of 152 l Capitalisation and profit distribution l TrygVesta Annual Report 2007 Share buyback 2007 2006 2005 Profit for the year, DKKm Cash dividends, DKKm Cash dividends per share, DKK Cash pay-out ratio Ordinary share buyback Extraordinary share buyback Total buyback, DKKm Buyback per share Total distribution per share, DKK Total distribution, DKKm Total pay-out ratio CAR Buffer to A level Solvency 2,266 1,156 17 51% 660 745 1,405 21 38 3,211 2,244 33 70% 2,097 1,428 21 68% 33 21 2,561 2,244 1,428 113% N/A 5% 318% 70% 128% 2.4% 383% 68% 128.5% 2.8% 362% • The dividend policy reflects our long-term earnings and method results in capital being released while at the same cash flow potential, while maintaining an appropriate time allowing TrygVesta to maintain its strong capital posi- level of capitalisation. tion and rating of A-. Read more about the capital model in Risk management and view a quarterly updated version In practice, we determine dividends by comparing the of a simplified capital model at www.trygvesta.com capital requirement of Standard & Poor’s capital model with our goal of a rating of A-. Any capital in excess of Dividends for the 2007 financial year this amount will be distributed to shareholders in the Profit after tax amounted to DKK 2,266m in 2007. Pursu- form of cash dividends and share buybacks. ant to the profit distribution policy, this entails a cash dis- tribution of dividends of DKK 17 per share, for a total The proposed share buyback programme after ordinary amount of DKK 1,156m. dividends for 2007 will thus be determined by the earn- ings level and, extraordinarily, by two one-off effects Share buybacks relating to a new capital model and discounting method. After the annual calibration of our capital requirement after payment of cash dividends we will return an addi- Standard & Poor’s implemented a new capital model in the tional DKK 660m to shareholders in the form of a share autumn of 2007, redefining the measurement of capital. buyback. To this should be added the two one-off effects The main change is that investment risk is now included in relating to Standard & Poor’s new capital model and the capital requirement rather than deducted in the calcu- changed discounting method, which increase the share lation of capital. A number of other elements were also buyback programme by DKK 745m. updated, including that the individual rating requirements are now based on risk allocation. The total share buyback thus amounts to DKK 1,405m. A cornerstone for TrygVesta’s risk management is to match Tryg Vesta will thus return a total amount of DKK 2,561m the duration of the bond portfolio with that of the dis- to shareholders. The overall distribution corresponds to a count on technical provisions in order to minimise net buffer at the minimum level for an A rating, that is, 5%. interest rate risk. Standard & Poor’s applies a model-based This is more than the previous buffer which was around Together with ordinary dividends of DKK 1,156m, discount approach, causing fluctuations relative to TrygVes- 2.5-3% of the minimum level. ta’s discounting model. During 2007, TrygVesta had con- tacts with Standard & Poor’s in this respect and has now The share buyback will be implemented pursuant to the adapted the capital model in accordance with the dis- safe harbour rules when approved by the shareholders at counting method regulated and approved by the Danish TrygVesta’s annual general meeting on 3 April 2008 and Financial Supervisory Authority. The changed discounting is expected to run over four quarters. TrygVesta Annual Report 2007 l Capitalisation and profit distribution l 41 of 152 Our business Risk management FINANCIAL RISK Market risk Being an insurance business, our concept is to create peace of mind for our customers by helping them manage and handle risk. Risk management is at the core of our business, and it is therefore only natural that we also The risk that volatility of financial markets impacts focus in-house on managing the risks our operations our results. Interest rate risk constitutes a major expose us to. Structured and competent risk management part of market risk. Interest rate risk is the risk of is fundamental to maintaining our customers’ confidence fluctuating market interest rates. and living up to our vision of being perceived as the leading peace-of-mind provider in the Nordic region. Credit risk The risk that we incur a loss due to failure by our counterparties to meet their obligations Insurance risk Strategic risk The risk of changes to the conditions under which we operate, including changed legislation Insurance risk is the financial risk we assume when we sell insurance contracts. Insurance or market conditions. risk comprises: Underwriting risk The risk that claims at the end of an insurance contract deviate significantly from our assumptions when pricing at inception of the contract. Operational risk The risk of errors or failures in internal procedures, systems and processes, and risks that are not covered by the financial risks and strategic risks. Provisioning risk We make technical provisions at the end of a Capital and risk period to cover expected future payments for We rely on our capital base and financial strength to losses already incurred. Provisioning risk is assume risks from our customers and for our customers the risk that future payments deviate signifi- to be confident that we are able to meet our obligations cantly from our assumptions when making if and when they report a claim. Our aim is for our capital the provisions. base to match our risk profile and support natural growth. 42 of 152 l Risk management l TrygVesta Annual Report 2007 Risk management committee Market and credit risk Investment risk committee Insurance and credit risk Operational risk Underwriting/ reinsurance risk committee Provisioning risk committee Operational risk committee We base our capital resources on relevant regulatory • underwriting and reinsurance requirements and our wish to maintain a rating of • provisioning A- from Standard & Poor’s. We regularly assess our • investments, and capital resources, including calculate our capital require- • operational risk and security. ment based on a model used by Standard & Poor’s. The results of these calculations are posted quarterly at The special committees report to the risk management www.trygvesta.com. We also regurlarly assess capital and committee, and their chairmen are also members of the risk in our internal model, which simulates results of risk management committee. investments, insurance operations and reinsurance. We use the model as the basis to evaluate investment strate- The investment risk committee primarily handles areas of gies and purchases of reinsurance and to determine risk- risk related to the portfolio on the asset side, mainly mar- based return requirements for the individual business ket and credit risk. The underwriting and reinsurance com- areas based on their specific risk profile. mittee handles risk management in connection with deter- mination of tariffs and reinsurance, mainly of an insurance Risk management and control and credit nature. The provisioning risk committee handles Our Supervisory Board has overall responsibility for the issues related to the determination of provisions, and the Group’s risk management (see also the section on Corpo- operational risk committee handles issues within fields such rate governance). In 2007, our Supervisory Board revised as errors or breakdowns of internal systems and processes. the structure of its instructions in which it defines our risk All committees focus on risk management and have no management framework with the purpose of optimising commercial responsibility. the control, monitoring and handling of our present and future risk exposure. The supreme body of this structure Solvency II and Individual Solvency is the risk management committee which, in addition to The new EU solvency rules, Solvency II, which are the Group CEO and Group CFO, consists of the persons expected to come into force in 2012, will make it possible responsible for the various risk management areas: for companies such as TrygVesta with operations in sev- insurance risk, investment risk and operational risk. eral countries to benefit from the risk diversification that In addition to the risk management committee we have when determining their solvency requirements. We have set up a number of special committees to handle the risk for several years taken part in the Solvency II hearings management process within the areas of through the Danish Insurance Association, Forsikring & Pension, and in 2007 we were involved in drafting QIS3 typically exists between different geographical areas TrygVesta Annual Report 2007 l Risk management l 43 of 152 Our business (cid:62)(cid:66)(cid:69)(cid:54)(cid:56)(cid:73)(cid:21)(cid:68)(cid:67)(cid:21)(cid:59)(cid:62)(cid:77)(cid:58)(cid:57)(cid:34)(cid:62)(cid:67)(cid:73)(cid:58)(cid:71)(cid:58)(cid:72)(cid:73)(cid:21)(cid:72)(cid:58)(cid:56)(cid:74)(cid:71)(cid:62)(cid:73)(cid:62)(cid:58)(cid:72) (cid:39)(cid:37)(cid:37)(cid:37) (cid:38)(cid:42)(cid:37)(cid:37) (cid:38)(cid:37)(cid:37)(cid:37) (cid:42)(cid:37)(cid:37) (cid:37) (cid:37) (cid:34)(cid:42)(cid:37)(cid:37) (cid:34)(cid:39)(cid:37)(cid:37)(cid:37) (cid:34)(cid:38)(cid:42)(cid:37)(cid:37) (cid:34)(cid:38)(cid:37)(cid:37)(cid:37) (cid:34)(cid:42)(cid:37)(cid:37) (cid:34)(cid:38)(cid:37)(cid:37)(cid:37) (cid:34)(cid:38)(cid:42)(cid:37)(cid:37) (cid:34)(cid:39)(cid:37)(cid:37)(cid:37) (cid:42)(cid:37)(cid:37) (cid:38)(cid:37)(cid:37)(cid:37) (cid:38)(cid:42)(cid:37)(cid:37) (cid:39)(cid:37)(cid:37)(cid:37) The figure illustrates the impact on the fixed-rate securities and discounted provisions for claims based on simulated interest rate scenarios in TrygVesta’s ALM model with the portfolios of bonds and provisions at 31 December 2007. The calculation of the impact on our liabilities does not include provisions for claims for TrygVesta Garanti, the Finnish and Swedish business and the provision for the Norwegian pension liability. The figure is based on simulation of 5,000 scenarios with a one-year horizon, with 90% of scenarios being within the light-blue frame. The red line illustrates scenarios in which the impacts of interest rate changes on assets and liabilities are mutually offsetting. The figure shows that 90% of all scenari- os fall within a band corresponding to interest rate risk of less than DKK 140m. The scenarios are scattered around a line sloping slightly less than that indicated. This is because the portfolio of fixed-interest assets exceeds our provisions, and that the provisions referred to above are excluded. The Norwegian pension provision is discounted using a fixed rate, and interest rate changes therefore have no direct (cid:69)(cid:90)(cid:103)(cid:91)(cid:90)(cid:88)(cid:105)(cid:21)(cid:98)(cid:86)(cid:105)(cid:88)(cid:93) (cid:42)(cid:42)(cid:21)(cid:100)(cid:106)(cid:105)(cid:21)(cid:100)(cid:91)(cid:21)(cid:38)(cid:37)(cid:37)(cid:21)(cid:110)(cid:90)(cid:86)(cid:103)(cid:104) impact on profits. (cid:46)(cid:37)(cid:21)(cid:100)(cid:106)(cid:105)(cid:21)(cid:100)(cid:91)(cid:21)(cid:38)(cid:37)(cid:37)(cid:21)(cid:110)(cid:90)(cid:86)(cid:103)(cid:104) (cid:46)(cid:37)(cid:21)(cid:100)(cid:106)(cid:105)(cid:21)(cid:100)(cid:91)(cid:21)(cid:38)(cid:37)(cid:37)(cid:21)(cid:110)(cid:90)(cid:86)(cid:103)(cid:104) (Quantitative Impact Study), part of the preparatory work cause us to incur losses on our insurance operations. An for the final Solvency II directive. With these efforts and excessive premium relative to the risk may cause us to the work with our internal models we aim to provide the lose competitive advantages and have an adverse effect best possible preparation for the introduction of the new on our business platform. Accordingly, we strive to strike solvency rules. the correct balance between risk and premium, and we regularly follow up on our tariffs and pricing methods. In preparation for the introduction on Solvency II, compa- nies are required as from 1 January 2008 to make their Provisioning risk own determination of the necessary capital, the Individ- After the period of the policy’s cover has expired, insur- ual Solvency Requirement, and report it to the Danish ance risk relates to the provisions for claims made to Financial Supervisory Authority. For purposes of deter- cover future payments on claims already incurred. The mining the Individual Solvency Requirement we use our size of the provisions for claims is determined both internal model and Standard & Poor’s capital model in through individual assessments and actuarial calculations. combination with several other quantitative assessments. We manage the risk that provisions for claims are incor- Read more about Solvency II and Individual Solvency in rectly determined by sophisticated models, controls and the section TrygVesta and the external community. follow-up in order to create the most exact match possi- RISK TYPES Insurance risk ble between provisions and claims expenses and to reduce unforeseen liabilities. Up to December 2007, provisions for claims relating to Insurance risk is the risk relating to our insurance opera- annuities in Danish workers’ compensation insurance tions. It is the most important risk that we are exposed were calculated using the fixed-rate method, corres- to. The risk comprises underwriting risk, that is, the risk ponding to a real interest rate of 1%. As from December related to the determination of premiums, and provision- 2007, the provisions for claims are discounted using the ing risk, that is, the risk related to the assessment of current market rate. This change exposes TrygVesta and future payments to be covered by premiums received. TrygVesta’s financial statements to explicit inflation risk in case of changes in Danish wage inflation. We hedge such Underwriting risk risk using an inflation swap. To manage underwriting risk we use tariffs as well as business procedures and authorities for risks not covered Our provisions for claims amounted to DKK 21,104m at by a tariff. We use reinsurance to hedge large fluctuations 31 December 2007. resulting from single events. Inadequate premiums may 44 of 152 l Risk management l TrygVesta Annual Report 2007 (cid:69)(cid:58)(cid:71)(cid:59)(cid:68)(cid:71)(cid:66)(cid:54)(cid:67)(cid:56)(cid:58)(cid:21)(cid:68)(cid:59)(cid:21)(cid:73)(cid:71)(cid:78)(cid:60)(cid:75)(cid:58)(cid:72)(cid:73)(cid:54)(cid:28)(cid:72)(cid:21)(cid:72)(cid:61)(cid:54)(cid:71)(cid:58)(cid:21) (cid:69)(cid:68)(cid:71)(cid:73)(cid:59)(cid:68)(cid:65)(cid:62)(cid:68)(cid:21)(cid:71)(cid:58)(cid:65)(cid:54)(cid:73)(cid:62)(cid:75)(cid:75)(cid:58)(cid:21)(cid:73)(cid:68)(cid:21)(cid:76)(cid:58)(cid:62)(cid:60)(cid:61)(cid:73)(cid:58)(cid:57)(cid:21)(cid:62)(cid:67)(cid:57)(cid:58)(cid:77) (cid:38)(cid:46)(cid:42) (cid:38)(cid:45)(cid:42) (cid:38)(cid:44)(cid:42) (cid:38)(cid:43)(cid:42) (cid:38)(cid:42)(cid:42) (cid:38)(cid:41)(cid:42) (cid:38)(cid:40)(cid:42) (cid:38)(cid:39)(cid:42) (cid:38)(cid:38)(cid:42) (cid:38)(cid:37)(cid:42) (cid:46)(cid:42) (cid:40) (cid:38)(cid:35)(cid:37) (cid:45)(cid:35)(cid:39) (cid:37) (cid:37) (cid:43) (cid:40) (cid:38)(cid:35)(cid:38) (cid:39)(cid:35)(cid:39) (cid:37) (cid:37) (cid:43) (cid:39) (cid:45)(cid:35)(cid:37) (cid:39)(cid:35)(cid:39) (cid:37) (cid:37) (cid:44) (cid:40) (cid:38)(cid:35)(cid:37) (cid:45)(cid:35)(cid:39) (cid:37) (cid:37) (cid:44) (cid:40) (cid:38)(cid:35)(cid:37) (cid:45)(cid:35)(cid:39) (cid:37) (cid:37) (cid:42) (cid:40) (cid:38)(cid:35)(cid:38) (cid:39)(cid:35)(cid:39) (cid:37) (cid:37) (cid:42) (cid:39) (cid:45)(cid:35)(cid:37) (cid:39)(cid:35)(cid:39) (cid:37) (cid:37) (cid:43) (cid:40) (cid:38)(cid:35)(cid:38) (cid:39)(cid:35)(cid:39) (cid:37) (cid:37) (cid:44) (cid:40) (cid:38)(cid:35)(cid:38) (cid:39)(cid:35)(cid:39) (cid:37) (cid:37) (cid:41) (cid:39) (cid:45)(cid:35)(cid:37) (cid:39)(cid:35)(cid:39) (cid:37) (cid:37) (cid:42) (cid:40) (cid:38)(cid:35)(cid:38) (cid:39)(cid:35)(cid:39) (cid:37) (cid:37) (cid:40) (cid:39) (cid:46)(cid:35)(cid:37) (cid:39)(cid:35)(cid:39) (cid:37) (cid:37) (cid:41) (cid:40) (cid:38)(cid:35)(cid:37) (cid:45)(cid:35)(cid:39) (cid:37) (cid:37) (cid:41) (cid:40) (cid:38)(cid:35)(cid:38) (cid:37)(cid:35)(cid:39) (cid:37) (cid:37) (cid:43) (cid:40) (cid:38)(cid:35)(cid:38) (cid:37)(cid:35)(cid:39) (cid:37) (cid:37) (cid:42) (cid:40) (cid:37)(cid:35)(cid:37) (cid:41)(cid:35)(cid:39) (cid:37) (cid:37) (cid:43) (cid:40) (cid:37)(cid:35)(cid:37) (cid:43)(cid:35)(cid:39) (cid:37) (cid:37) (cid:43) (cid:40) (cid:37)(cid:35)(cid:37) (cid:41)(cid:35)(cid:39) (cid:37) (cid:37) (cid:44) (cid:40) (cid:37)(cid:35)(cid:37) (cid:43)(cid:35)(cid:39) (cid:37) (cid:37) (cid:44) (cid:40) (cid:38)(cid:35)(cid:38) (cid:37)(cid:35)(cid:39) (cid:37) (cid:37) (cid:44) (cid:40) (cid:37)(cid:35)(cid:37) (cid:41)(cid:35)(cid:39) (cid:37) (cid:37) (cid:42) (cid:40) (cid:37)(cid:35)(cid:37) (cid:43)(cid:35)(cid:39) (cid:37) (cid:37) (cid:42) (cid:40) (cid:38)(cid:35)(cid:38) (cid:37)(cid:35)(cid:39) (cid:37) (cid:37) (cid:41) (cid:40) (cid:37)(cid:35)(cid:37) (cid:41)(cid:35)(cid:39) (cid:37) (cid:37) (cid:41) (cid:40) (cid:37)(cid:35)(cid:37) (cid:43)(cid:35)(cid:39) (cid:37) (cid:37) (cid:41) Weighted index (incl. dividend) in local currency TrygVesta's share portfolio Reinsurance retention on a single claim of DKK/NOK 50m and with We use reinsurance as an important element of our day- cover up to a maximum of DKK1.4 bn/NOK 1.6bn. For to-day risk management supported by the internal model, property risks exceeding the upper level, we buy individ- which we use for assessing the impact of different rein- ual reinsurance. Other lines covered by reinsurance surance alternatives. include liability and motor, marine, fish farms and guaran- In order to have protection against natural disaster risks, we tee insurance. maintain cover in 2008 of up to DKK 4.5bn with retentions Although we have systematically used reinsurance to elim- of DKK 100m in Denmark and NOK 100m in Norway. The inate unwanted insurance risk, one single area remains. level of cover was determined based on the risk exposure Exposure to terrorist losses of a biological, chemical or of the Group’s portfolio, using simulation models. These radioactive character can only be covered partly by reinsur- models suggest that a loss in excess of DKK 4.5bn occurs ance today. Although we deem the occurrence of this less often than once every 250 years. Our exposure to nat- type of losses with a catastrophic scope very unlikely, we ural disasters in Norway is furthermore limited through our are working actively within the Danish Insurance Associa- participation in the Norwegian Pool of Natural Perils. tion with a view to establishing a national arrangement for such losses. We expect a solution during 2008. Our catastrophe reinsurance programme also covers other catastrophe events, including terrorist-related events, for Market risk up to DKK 3.75bn, with terrorist events being covered for Market risk is the risk that volatility in the financial markets buildings, building contents and consequential loss for will impact our results of operations and thus our financial risks with a total insured value of up to DKK 500m. We position. We define the asset mix based on the instruc- have bought catastrophe reinsurance up to DKK 1.5bn for tions approved by the Supervisory Board, including limits our personal accident and workers’ compensation policies on types of assets and the geographic distribution and risk with a retention of DKK 50m, covering the risk of multiple profile of bonds, equities and real property for each com- injuries from the same cause, including terror. pany in the Group. Our asset mix and investment activities focus mainly on interest rate risk, security and liquidity. In addition to reinsuring catastrophe events, we also buy protection for certain lines for which experience has Interest rate risk shown that claims vary considerably. The Group’s Corpo- Fluctuating interest rate levels is a very important market rate portfolio includes very large property risks in Den- risk to which we are exposed. Interest rate changes affect mark and Norway. We have bought reinsurance in the our investment assets as well as our provisions for claims, Danish and Norwegian markets for these policies with a both of which are stated at market values. If interest rates TrygVesta Annual Report 2007 l Risk management l 45 of 152 Our business (cid:55)(cid:71)(cid:58)(cid:54)(cid:64)(cid:57)(cid:68)(cid:76)(cid:67)(cid:21)(cid:68)(cid:59)(cid:21)(cid:69)(cid:71)(cid:58)(cid:66)(cid:62)(cid:74)(cid:66)(cid:72)(cid:21) (cid:56)(cid:58)(cid:57)(cid:58)(cid:57)(cid:21)(cid:55)(cid:78)(cid:21)(cid:71)(cid:58)(cid:62)(cid:67)(cid:72)(cid:74)(cid:71)(cid:58)(cid:71)(cid:188)(cid:72)(cid:21)(cid:71)(cid:54)(cid:73)(cid:62)(cid:67)(cid:60) (cid:55)(cid:71)(cid:58)(cid:54)(cid:64)(cid:57)(cid:68)(cid:76)(cid:67)(cid:21)(cid:68)(cid:59)(cid:21)(cid:55)(cid:54)(cid:65)(cid:54)(cid:67)(cid:56)(cid:58)(cid:72)(cid:21)(cid:76)(cid:62)(cid:73)(cid:61)(cid:21) (cid:71)(cid:58)(cid:62)(cid:67)(cid:72)(cid:74)(cid:71)(cid:58)(cid:71)(cid:72)(cid:21)(cid:55)(cid:78)(cid:21)(cid:71)(cid:58)(cid:62)(cid:67)(cid:72)(cid:74)(cid:71)(cid:58)(cid:71)(cid:188)(cid:72)(cid:21)(cid:71)(cid:54)(cid:73)(cid:62)(cid:67)(cid:60) (cid:55)(cid:55)(cid:55) (cid:44)(cid:26) (cid:54)(cid:54)(cid:54) (cid:39)(cid:26) (cid:54) (cid:41)(cid:41)(cid:26) (cid:54)(cid:54) (cid:41)(cid:44)(cid:26) (cid:55)(cid:55)(cid:55) (cid:40)(cid:26) (cid:55)(cid:55) (cid:37)(cid:26) (cid:67)(cid:100)(cid:105)(cid:21)(cid:103)(cid:86)(cid:105)(cid:90)(cid:89) (cid:45)(cid:26) (cid:54)(cid:54)(cid:54) (cid:43)(cid:26) (cid:54) (cid:40)(cid:39)(cid:26) (cid:54)(cid:54) (cid:42)(cid:38)(cid:26) The figure shows the distribution on ratings of premiums ceded The figure shows the distribution of receivables including under the reinsurance programmes in 2007. We primarily cede receivables from reinsurers, in aggregate DKK 1,189m. Of these, premiums to reinsurers rated A or above. 89% are held by companies rated A or above. fall, the value of the Group’s bond portfolio would rise, The equity portfolio primarily focuses on the large, liquid while a lower interest rate would at the same time cause equity markets in Europe, the USA and Japan. We have the provisions for claims to rise. Fluctuating interest rates defined a strategy with relatively little exposure in the thus impact the financial results in two opposite directions, Nordic region (around 23% at 31 December 2007) in and the risk of profit variations depends on the degree to order to reduce company risk, because a few companies which these two movements offset each other. account for large parts of the markets in the two coun- tries. Furthermore, we have tied each equity mandate to Our portfolio of fixed-interest securities stood at DKK a recognised benchmark, which we monitor closely. As 30.3bn at 31 December 2007, while the provisions for shown in the graph on the previous page, the Group’s claims discounted using a market rate amounted to DKK portfolio tracks the benchmark, even outperforming it 19.7bn, net of reinsurance. The respective durations were over time. The 25 largest equities in our portfolio account 1.9 and 3.0 years. The variation in duration is attributable for some 31% of the total listed equity portfolio. to our bond portfolio being significantly larger than the discounted provisions. A parallel shift of interest rates of Currency risk 1% would reduce the market value of our securities by We are not subject to any significant currency risk. The DKK 568m, while the opposite impact on provisions would Group’s premium income in foreign currency is mostly be DKK 547m, triggering a net impact of DKK 21m. matched by claims and expenses in the same currencies, primarily NOK, EUR, SEK and USD. We do not hedge the In connection with the switch to discounting annuities in remaining, limited currency risk in connection with future Danish workers’ compensation using a market rate, the cash flows in foreign currencies. average duration of provisions discounted using a market rate increased by 0.7 years to 3.0 years per 31 December We use currency derivatives to hedge the risk of loss of 2007 with a corresponding increase in the duration of the value of balance sheet items due to exchange rate fluctu- bond portfolio to ensure continued matching interest rate ations in accordance with a general hedge ratio of sensitivity for assets and liabilities. 90-100 for each currency. We aim to hedge 98-100% of the net book value of the Norwegian entity. Other market risk The equity and real property portfolios are exposed to Based on the actual amount of balance sheet items in changes in equity markets and real property markets, foreign currencies and hedging as at 31 December 2007, respectively. We manage such risk through investment lim- 15% depreciation in the exchange rate of an exposed its for various asset classes. In certain circumstances, we currency relative to DKK would result in a net loss of DKK also use interest rate and equity derivatives in our invest- 39m because the loss on the balance sheet items of DKK ment activities. 46 of 152 l Risk management l TrygVesta Annual Report 2007 Effect on equity of market changes at 31 December 2007 DKKm Interest rate market – increase in interest rates of 1% Impact on fixed interest securities 1) Higher discounting of provisions for claims Impact on Norwegian pension obligation Equity market Decrease of equity markets of 15% 2) Impact arising from derivatives Real property market Decrease of real property markets of 15% Currency market Decrease of exposed currencies versus Danish kroner of 15% Impact arising from derivatives -568 547 193 -667 0 -385 -728 690 1) The impact is calculated on the basis of the option adjusted duration without correction for convexity. 2) See the section on Outlook regarding exposive to equity markets since mid January 2008. 729m would be offset by a gain of DKK 690m on the cur- We have set up a data base for systematic registration of rency hedging. Credit risk the major risks in the Group. Based on the data base, we chart risks and draft contingency plans to handle key areas each year such as the contingency plans in the We are exposed to credit risk in connection with the col- individual parts of the business to handle an event of lection of receivables. In the case of the insurance opera- prolonged IT breakdown. tions, counterparties may be customers, suppliers or rein- surers, while in connection with the investment activities, Strategic risk our primary counterparties are issuers of bonds and Strategic risk is managed through a strategic planning counterparties in other financial instruments. process. The Supervisory Board defines the overall strat- egy in the middle of the year within the framework of Receivables from policyholders arise on an ongoing basis the Group’s corporate vision, and the Group Executive and amounted to DKK 901m or 5.3% of gross premiums Management uses this as the basis for further strategy at 31 December 2007. The risk related to receivables from work. The balanced scorecard is used as a tool in this customers is limited because the insurance cover lapses if work to ensure current follow-up on the strategy and the they fail to pay. initiatives launched in the business areas. During the year, the strategy is managed in Executive Management The sub-prime crisis in 2007 emphasised the importance meetings and meetings to follow up on the balanced of managing risk, including credit risk. The crisis affected scorecard performance by business areas and staff func- the financial markets, but TrygVesta has no investments tions. We also continuously monitor the market to ensure in sub-prime loans, CDOs and similar products. Read more that we have an up-to-date basis for our assessment of in the section on Investment activities. external conditions, be it our competitors’ market initia- tives, new legislation or other external factors that may Operational risk impact the Group. As operational risks are mainly internal, we focus on establishing a satisfactory controlling environment in the Group’s operations. In practice, we organise this work through a structure of procedures and guidelines that cover different aspects of the Group’s operations. TrygVesta Annual Report 2007 l Risk management l 47 of 152 Corporate governance “We emphasise open and honest communication with all stakeholders, and we reply to all enquiries in a accommodating manner” 48 of 152 l Corporate governance l TrygVesta Annual Report 2007 Corporate governance TrygVesta Annual Report 2007 l Corporate governance l 49 of 152 Corporate governance Corporate governance In 2007, TrygVesta’s Supervisory Board focused on creating at www.trygvesta.com, which also offers stakeholders more room for forward-looking activities at Board meet- to receive the latest news as RSS feeds or to download ings and at the annual Board seminar. This was done webcasts and teleconferences as Podcasts. TrygVesta without neglecting the Board’s follow-up and supervisory continuously seeks to make the website more user- duties. In its work, the Group Executive Management friendly and improve its contents. focused on involving the Group’s other management staff in the strategic efforts to ensure quality and ownership TrygVesta has adopted a number of guidelines and policies and to facilitate implementation of the strategy at an in order to ensure that we provide correct and adequate even faster pace. information to all the Group’s stakeholders. In 2007, Tryg Vesta worked on defining a CSR (Corporate Social The Supervisory Board believes that TrygVesta complies Responsibility) policy and set up a CSR organisation with with the corporate governance recommendations pub- a CSR board chaired by our Group CEO. The CSR board will lished by OMX Nordic Exchange Copenhagen. The Super- report to the Supervisory Board once a year. visory Board considers that each Board member has ade- quate time and resources to serve as a Board member of The Supervisory Board regularly considers the adequacy TrygVesta in a satisfactory manner. of TrygVesta’s capital structure to align it with the inter- Stakeholders ests of the Group and of our shareholders and to ensure compliance with the requirements applicable to TrygVesta TrygVesta strives to develop and maintain strong relations as a financial undertaking. The Supervisory Board opti- to all relevant stakeholders as they are key to the Group’s mises our capitalisation on an ongoing basis while duly future performance and potential. This includes that we safeguarding the interests of our policyholders and emphasise open and honest communication, and that we shareholders and leaving the Group sufficient scope in reply to all enquiries in an accommodating manner. which to develop and grow. TrygVesta issues press releases and company announce- The Supervisory Board intends to consider any public ments on a regular basis and publishes quarterly and takeover bid that may be made as prescribed by legisla- half-year interim reports and annual reports in order tion and, depending on the nature of such bid, to con- to best enable stakeholders to form an adequate impres- vene an extraordinary general meeting of shareholders in sion of the Group and its performance. All financial accordance with applicable requirements and rules. announcements are released simultaneously in Danish TrygVesta’s annual general meeting is held every year and English. Management organises regular investor before the end of April. The Supervisory Board convenes presentations, live teleconferences and webcasts in a the annual general meeting giving not less than eight partnership with Investor Relations. All material is available days’ notice. Shareholders may register to receive an elec- 50 of 152 l Corporate governance l TrygVesta Annual Report 2007 tronic notice of the general meeting. The notice includes the time and place of the meeting and sets out the agenda, The composition of the Supervisory Board which as a minimum comprises the following items: The Supervisory Board has 12 members, including eight members elected by the shareholders for a term of one • Report of the Supervisory Board on the activities year. Four of the eight members are non-affiliated. The of the company during the past financial year Supervisory Board is composed as follows: • Presentation of the annual report for approval, including determination of the Supervisory Board’s • four members are elected among the members remuneration of the Supervisory Board of Tryg i Danmark smba • Adoption of a resolution as to the distribution of • four members are elected among candidates without profit or covering of loss, as the case may be, any affiliation with Tryg i Danmark smba, and according to the annual report • four representatives are elected among the employees, • Any proposals from the Supervisory Board or who according to agreement in 2007 between the from shareholders Danish and Norwegian employee associations include • Election of members to the Supervisory Board two representatives of the Group’s Danish employees • Appointment of auditors • Any other business and two representativeS of the Norwegian employees. The chairman and the deputy chairman are in charge of Further details to the notice of the meeting can be found the Supervisory Board’s work. in the complete proposals, which are available for down- load at www.trygvesta.com and to all shareholders on To ensure replacement on the Supervisory Board, mem- request. The complete proposals also include the Supervi- bers elected by the shareholders may hold office for a sory Board’s proposed dividend payment with respect to maximum of nine years. Furthermore, members of the the past financial year. Supervisory Board must retire at the first general meeting following their 70th birthday. All shareholders are urged to attend the annual general meeting. Shareholders may vote in person at the general Prior to the election of new members, the Supervisory meeting or appoint the Supervisory Board or a third party Board prepares a description of the candidates’ background as their proxy. TrygVesta makes a proxy form to the Super- as part of the final proposals to be submitted to sharehold- visory Board available, which allows shareholders to decide ers at the annual general meeting. The description outlines on the individual items of the agenda. The proxy form will the recruitment criteria established, including requirements be available at www.trygvesta.com from 14 March 2008. with respect to the candidates’ professional qualifications and international experience. When taking up office, new TrygVesta Annual Report 2007 l Corporate governance l 51 of 152 Corporate governance Board members are given an introduction to the Group. The audit committee works with historical data, and it is Information about Board members’ profiles and sharehold- not involved in forward-looking events such as outlook and ings is set out in the section on Members of the Supervisory budgets. The audit committee shall to a reasonable extent Board and is also available at www.trygvesta.com. discuss and review with management significant financial information in the Group’s financial statements. Board committees The Supervisory Board has set up an audit committee. The audit committee meets at least four times a year and The three-member committee is chaired by an independ- reports to the Supervisory Board on a regular basis. The ent member of the Supervisory Board. In 2007, members committee makes an annual assessment of the preceding of the audit committee were Bodil Nyboe Andersen year’s work to assess if any changes should be made to its (chairman), Per Skov and Håkon J. Huseklepp. areas of responsibility. The audit committee supports the Supervisory Board in The Supervisory Board does not have a nomination committee, its work with and supervision of: but in 2007 the chairman and deputy chairman functioned as the nomination committee without receiving any fees. • the annual report, including checking the accuracy of financial information disclosed in the annual report, Tasks and responsibilities of the Board and ensuring that accounting policies are relevant The Supervisory Board is responsible for the overall man- and applied consistently agement and financial control of TrygVesta. In this work, • internal control and risk management. In this context the Supervisory Board uses targets and framework man- the audit committee reviews and assesses manage- agement based on regular and systematic consideration of ment’s guidelines for identifying, monitoring and strategies and risks. managing the most important risks at least once a year, including an assessment and review of internal The Executive Management reports regularly to the Supervisory control and risk management systems Board on strategies and action plans, market developments • internal and external audit, including a review and dis- and the Group’s performance, funding issues, capital resources cussion of the results of the work of the internal and and special risks. The Supervisory Board cooperates with the external auditors and the auditors’ observations and Executive Management on a regular basis to ensure develop- conclusions. The committee supervises management’s ment of and follow-up on the Group’s strategies. follow-up on the recommendations to management reported by the internal and external auditors The Supervisory Board holds at least six annual meetings • the Group being monitored by independent auditors. and an annual strategy seminar to discuss and define strat- egies and goals for the years ahead. 52 of 152 l Corporate governance l TrygVesta Annual Report 2007 The Supervisory Board carries out an annual evaluation of Risk management the work and results of the Executive Management and TrygVesta is an insurance group subject to the require- of the cooperation between the Supervisory Board and ments of the Danish Financial Business Act on risk man- the Executive Management. The Supervisory Board also agement and the involvement of the Supervisory Board reviews and approves the rules of procedure of the and the Executive Management. The Supervisory Board Supervisory Board and the Executive Management each defines the framework for risk management in TrygVesta year to ensure they are consistent with TrygVesta’s with respect to insurance risk/reinsurance, investment risk requirements. In the rules of procedure, the Supervisory and operational risk, including IT security. This framework Board has defined an evaluation procedure providing for is then implemented in risk policies that define detailed the work and results of the Supervisory Board, the chair- guidelines for the Group’s risk management. The risk man of the Supervisory Board and the individual members management committee comprising the Group CEO, and for the composition of the Supervisory Board to be Group CFO and selected senior executives monitors the assessed for the purpose of optimising the Board’s work. risk management environment. The Executive Manage- The evaluation procedure includes individual interviews to ment reports to the Supervisory Board on how the frame- be held in January between the chairman of the Supervi- work for the Group’s risk management is implemented. sory Board and the individual members and a discussion A more detailed review of the Group’s risk management of the overall results of these interviews at the first principles is set out in the section on Risk management subsequent Board meeting. and at www.trygvesta.com. The duties of the chairman and the deputy chairman of Audit the Supervisory Board are defined in the rules of procedure The Supervisory Board ensures that the Group is moni- of the Supervisory Board, and include preparing Board tored by competent and independent auditors. Each year, meetings and performing evaluations of the Supervisory the annual general meeting appoints external auditors Board’s work and the cooperation with the Executive Man- recommended by the Supervisory Board. The Supervisory agement. The chairman acts as spokesman for the Super- Board, the audit committee and the Executive Manage- visory Board for external purposes. ment make a critical assessment of the auditors’ inde- pendence and competence. In 2007 the shareholders at the annual general meeting authorised the Supervisory Board to buy own shares within TrygVesta also has an internal audit department which 10% of the share capital up to the next annual general reviews the quality of the Group’s internal control sys- meeting. The Supervisory Board is also authorised to dis- tems and business procedures on a regular basis and is tribute extraordinary dividends pursuant to the rules of responsible for planning, performing and reporting the the Danish Public Companies Act. audit work to the Supervisory Board. The internal and TrygVesta Annual Report 2007 l Corporate governance l 53 of 152 Corporate governance ExEcUTIVE MANAgEMENT AND gROUP ExE cUTIVE MANAgEMENT References to the Executive Management are to the tive Management of TrygVesta and the Executive Man- Executive Management of TrygVesta, consisting of Stine agement of TrygVesta Forsikring. In addition to Stine Bosse, Morten Hübbe and Peter Falkenham. The guide- Bosse, Morten Hübbe and Peter Falkenham, the Execu- lines for incentive pay comprise only these persons. tive Management of TrygVesta Forsikring consists of The Group Executive Management comprises the Execu- Lars Bonde, Kjerstin Fyllingen and Stig Ellkier-Pedersen. external auditors’ long-form reports are reviewed by the The remuneration includes an element of performance- Supervisory Board. related bonus and comprises a bonus plan providing for up to three months’ additional salary (four months’ for Remuneration policy for the Supervisory Board and the Group CEO). The bonus is directly linked to achieve- the Executive Management ment of pre-defined benchmarks. The assessment of the TrygVesta has adopted a policy with respect to remunera- individual member’s target achievement includes the tion of the members of the Supervisory Board and the Exec- TrygVesta Group’s overall performance as well the indivi- utive Management of TrygVesta A/S and has also prepared dual member’s performance within the business area he overall guidelines for an incentive structure, which will be or she is responsible for. Specific benchmarks are defined submitted for shareholder approval at the annual general within all four perspectives of the balanced scorecard meeting to be held on 3 April 2008. The complete text of (financial, customer, processes and learning). These the remuneration policy is posted at www.trygvesta.com. benchmarks reflect the strategic focus areas of the Group REMUNERATION OF THE SUPERVISORY BOARD 2007 Chairman Deputy Chairman Board member each Total renumeration in total* DKK 750,000 DKK 500,000 DKK 250,000 DKK 3,687,500 * Christian Brinch joined the Supervisory Board in March, and his remuneration therefore only covers the last three quarters of 2007. and the individual business areas, including growth, prof- itability, cost reduction, customer satisfaction, customer loyalty, image, processes, communication, employee sat- isfaction and development, and innovation. Members of the Executive Management may chosse to receive their bonus by acquiring TrygVesta shares at a discount to the market price or they may elect to receive a cash payment. Members of the Executive Management who elect to Members of the audit committee received a fee of DKK receive their bonus by acquiring shares at a discount to 100,000 in 2007, and the chairman of the audit commit- the market price can buy the shares at par with a total tee received DKK 150,000. discount equal to the bonus for which the individual member is eligible. TrygVesta believes it is appropriate Remuneration of the Executive Management that part of the Executive Management’s remuneration The Executive Management comprises three members. consists of stock option based payment in order to The remuneration paid to the Executive Management ensure focus on share price performance and build loyalty reflects a wish to secure a profitable and stable perform- and motivation. ance for the Group in the short term as well as in the longer term, including to induce the Executive Manage- Any grant of stock options is based on the principle that ment to focus on increasing value creation for shareholders. the exercise price may not be lower than the market price. The most recent grant was based on the market price plus 10%. The annual dividends are deducted from the exercise 54 of 152 l Corporate governance l TrygVesta Annual Report 2007 REMUNERATION TO THE ExE cUTIVE MANAgEMENT FOR 2007 DKK Basic salary Bonus Pension car Total Stine Bosse Morten Hübbe Peter Falkenham 5,200,000 3,000,000 2,575,000 1,734,000 750,000 644,000 1,300,000 750,000 644,000 113,000 156,000 106,000 8,347,000 4,656,000 3,969,000 Share options 13,527 7,101 5,072 price. Options cannot be exercised earlier than three years TrygVesta are offered a performance-related bonus of up to after the date of grant and not later than five years after three months’ salary. Executives may elect to receive the the date of grant. Exercise must take place during the bonus as shares at a discount to the market price or in cash. open trading windows in connection with the full-year and Furthermore, TrygVesta has set up a stock option pro- half-year profit announcements. On exercise, the value of gramme for certain senior executives and employees to the options calculated as the difference between the exer- reward outstanding performance. cise price and the market price must not exceed 200% of the recipient’s fixed annual salary. In 2007, TrygVesta granted 91,039 stock options to the Group Executive Management and senior executives and The Supervisory Board granted 25,700 stock options to 18,000 stock options to employees to reward outstand- the Executive Management in 2007, entitling the holders ing performance. Options granted in 2007 entitle the to acquire shares at the average price of TrygVesta shares holders to acquire shares at the average price of (“all trades”) on OMX Nordic Exchange Copenhagen on TrygVesta shares (“all trades”) on OMX Nordic Exchange 27 February 2007 which was DKK 456.76 plus a 10% Copenhagen on 27 February 2007 plus a supplement of supplement. The options were granted on 28 February 10%, and each option entitles the holder to acquire one 2007, and each option entitles the holder to acquire one share at the exercise price. Options cannot be exercised share at the exercise price. We buy treasury shares to earlier than three years after the date of grant and not cover our stock option programmes. later than five years after the date of grant. TrygVesta expects to grant a stock option programme of a similar Members of the Executive Management are also entitled to value in 2008. company cars. A contribution of 25% of the fixed salary of the Executive Management is paid into a pension scheme. Employee bonus It is important to TrygVesta that all employees see their Members of the Executive Management are entitled to 12 own efforts relative to the Group’s overall targets, and for months’ notice of termination and to 12 months’ sever- this purpose we have an employee bonus programme for ance pay. However, the Group CEO is entitled to 12 all employees. Employee bonus benchmarks were com- months’ notice of termination and to 18 months’ sever- bined ratio and growth in 2007, and our performance ance pay plus pension contributions during such period. triggered shares at a discount to the market price with a discount element equal to DKK 10,000 to each employee. Incentive pay to the group Executive Management A similar programme will be offered in 2008. and senior executives Like the Executive Management, the remaining members of the Group Executive Management and senior executives of TrygVesta Annual Report 2007 l Corporate governance l 55 of 152 Corporate governance Supervisory Board Peter Wagner Mollerup Mikael Olufsen Chairman Niels Bjørn Christiansen John R. Frederiksen Håkon J. Huseklepp Bodil Nyboe Andersen Deputy Chairman Birthe Petersen 56 of 152 l Supervisory Board l TrygVesta Annual Report 2007 Christian Brinch Paul Bergqvist Per Skov Trond Christiansen Jørn Wendel Andersen TrygVesta Annual Report 2007 l Supervisory Board l 57 of 152 Corporate governance Supervisory Board Mikael Olufsen Chairman Born 1943 Joined the Supervisory Board in 2002 Ms Nyboe Andersen has competencies within Mr Bergqvist has international and Nordic the areas of management, strategy, treasury management experience in strategic develop- and financial business from her former positions ment, complex transactions, development of as Chairman of The Board of Governors of new markets, marketing, sales and financial Danmarks Nationalbank and Managing Director management. of Andelsbanken in the 1980s. Number of shares held in TrygVesta: 100 Professional board member. Former CEO of Toms Chokoladefabrikker A/S. Educational background: MSc (Forestry); PMD Harvard Business School. Chairman of Tryg i Danmark smba, TrygVesta A/S, TrygVesta Forsikring A/S, Mala Plast Co. Ltd. Bangkok, Advisory Board of Care- Works Africa Ltd. and The Danish Rheumatism Association. Number of shares held in TrygVesta: 100 Jørn Wendel Andersen CFO, Arla Foods amba Born 1951 Joined the Supervisory Board in 2002 Deputy chairman of the Board of Trustees Educational background: MSc (Business Eco- of the Egmont Foundation. Deputy chairman of nomics), IMD Executive Development Programme, Christian Brinch Born 1946, Norwegian citizen Joined the Supervisory Board in 2007 Chief executive of his own business. Professional board member. Former President and CEO of Helicopter Services Group ASA and Executive Vice President Egmont International Holding A/S, Ejendoms- IMD “Strategy in Action” Programme, and of ABB Norge. selskabet Gothersgade 55 ApS and Ejendoms- Leader ship Assessment – Heidrick & Struggles. selskabet Vognmagergade 11 ApS. Chairman of Arla Insurance Company Board member of WWF in Denmark, British (Guernsey) Ltd. (Captive), Arla Foods Finance Import Union and Danmark-Amerika Fondet. A/S and Fidan A/S. Mr Olufsen has experience in managing large Board member of Tryg i Danmark smba, Educational background: Norway’s naval academy, PMD Harvard Business School. Chairman of Hafslund ASA and Scandinavian Property Development ASA. Deputy chairman of Prosafe ASA, Technor international companies, including in strategic Tryg Vesta A/S, TrygVesta Forsikring A/S, ASA and NSB AS. development. In addition, Mr Olufsen has Arla Foods AB, AF A/S, Tholstrup Cheese A/S, experience as a board member of Danish and Tholstrup Cheese Holding A/S, Tholstrup international companies. Taulov A/S and Medipharm AB. Number of shares held in TrygVesta: 1,918 Mr Wendel Andersen has experience in inter- Bodil Nyboe Andersen Deputy Chairman Born 1940 Joined the Supervisory Board in 2006 Former Chairman of the Board of Governors, Danmarks Nationalbank (Danish Central Bank) Educational background: MSc (Economics). Chairman of The University of Copenhagen, The Danish Red Cross and The Laurids Ander- sens Foundation. national management, strategy, finance, treasury, IT and project management from his current position as CFO of Arla Foods. Number of shares held in TrygVesta: 1,078 Paul Bergqvist Born 1946, Swedish citizen Joined the Supervisory Board in 2006 Professional board member. Former CEO of Carlsberg A/S. Educational background: Economist, engineer. Chairman of Carlsberg, Sweden, and Svenska Deputy chairman of TrygVesta A/S, TrygVesta Byggareföreningen, East Capital Explorer AB Forsikring A/S and The Danish Film Institute. and HTC AB. Board member of The Villum Kann Rasmussen Board member of TrygVesta A/S, TrygVesta Foundation, The Danish-Norwegian Collaboration Foundation and Energiteknologisk udviklings- og Demonstrations Program. Chairman of the audit committee of TrygVesta A/S. Forsikring A/S, Baltica Beverages Holding (BBH), Telenor ASA, City mail AB, Amber Fund, Lantmän- nen, Pieno Zyaigzdios, Nova Linija and Unibake. Board member of TrygVesta A/S, TrygVesta Forsikring A/S, Steen & Strøm ASA, Sørco Gruppen ASA and Thor Dahl Shipping AS. Mr Brinch runs his own business providing strategic consulting and board services. Mr Brinch has experience and knowledge within the areas of strategic development, branding, distribution and consulting services, including with respect to board work. Number of shares held in TrygVesta: 500 Trond Christiansen Born 1945, Norwegian citizen Joined the Supervisory Board in 2003 Senior corporate adviser and shop steward of TrygVesta Forsikring A/S. Educational background: Certified insurer. Board member of TrygVesta A/S and Tryg Vesta Forsikring A/S. Number of shares held in TrygVesta: 0 58 of 152 l Supervisory Board l TrygVesta Annual Report 2007 Niels Bjørn Christiansen Born 1966 Joined the Supervisory Board in 2006 Executive Vice President and COO, Danfoss A/S. Former Executive Vice President and COO, GN Store Nord A/S. Educational background: B.Sc., E.E., MSc (Engineering), MBA Insead. Chairman of Danfoss Compressors Holding A/S and Danfoss Industries Private Limited, India. Deputy chairman of Danfoss (Tianjin) Limited, China. Board member of TrygVesta A/S, TrygVesta Forsikring A/S, Bang & Olufsen A/S, Axcel A/S, The Danish Management Society, Danfoss Uni- verse, Foss A/S, Business Minds, Danfoss Distri- bution Services A/S, Danfoss Drives A/S, Dan- foss Ejendomsselskab A/S, Danfoss innovation A/S, Danfoss International A/S, Danfoss Com- mercial Compressors S.A., France, Danfoss Bau- er GmbH, Germany, Thermia Värme AB, Sweden. Mr Christiansen has experience with interna- tional businesses, including from his work at Danfoss and GN Store Nord A/S. This experi- ence has provided him with competencies with- in management, strategy, IT, processes, distri- bution, innovation, production, finance and private and listed companies. Number of shares held in TrygVesta: 100 John R. Frederiksen Born 1948 Joined the Supervisory Board in 2002 CEO, Fortunen A/S, Oak Property Invest A/S and Berco ApS. Former chief executive of Jacob Holm & Sønner A/S and Bastionen A/S. Educational background: Business training. Chairman of Hellebo Park A/S, Ejendomssel- skabet Storken A/S and Uglen A/S, Renoflex- Gruppen A/S, Renholdningsselskabet af 1898, SBS Rådgivning A/S, SBS Byfornyelse Smba, Sjælsø Enterprise A/S, Sjælsø Gruppen A/S, Ejen- domsforeningen Danmark and Komplementar- selskabet Uglen ApS. Board member of Tryg i Danmark smba, TrygVesta A/S, TrygVesta Forsikring A/S, Fortunen A/S, Freja Ejendomme A/S (Statens Ejendomssalg A/S), Højgård Ejendomme A/S, Oak Property Invest A/S, Renoflex-Gruppen A/S, Chairman of The Association of Insurance C.W. Obel Ejendomme A/S, C.W. Obel Projekt Agents and Account Managers in TrygVesta A/S, Ejendomsaktieselskabet Knud Højgaards Forsikring A/S and The Association of Danish Hus, Ejendomsaktieselskabet Helleholm, BERCO Certified Insurers. Deutschland GmbH, Invista Foundation Holding Board member of TrygVesta A/S, TrygVesta For- Company Limited SIPA (Scandinavian Interna- sikring A/S and The Danish Financial Services Union. tional Property Association) and Invista Founda- Number of shares held in TrygVesta: 191 tion Property Trust Limited, Invista Foundation Property Limited, Invista Foundation Property No. 2 Limited, Invista European Real Estate Trust SICAF, Grundejernes Investeringsfond and Grundejernes Ejendomsselskab af 1972 ApS. Member of the advisory board for Sparinvest Property Fund K/S and the advisory board of Ejendomsselskabet Norden 1 K/S. Mr Frederiksen has experience within man- Birthe Petersen Elected by the employees Born 1949 Joined the Supervisory Board in 1996 agement, strategy and finance from serving as Principal administrative officer of chairman of a number of companies and other TrygVesta Forsikring A/S. positions, including with property companies. Educational background: Diploma in business Number of shares held in TrygVesta: 280 studies, management training programme of Håkon J. Huseklepp Elected by the employees Born 1955, Norwegian citizen Joined the Supervisory Board in 2003 Senior corporate adviser of TrygVesta Forsikring A/S. Educational background: Five-year public training with the Norwegian postal services, certified insurer. Board member of TrygVesta A/S, TrygVesta Forsikring A/S, The Finance Sector Union of TrygVesta, The Finance Sector Union of Norway and Sogn og Fjordane Bustadbyggelag. Member of the audit committee of TrygVesta A/S. Number of shares held in TrygVesta: 100 Peter Wagner Mollerup Elected by the employees Born 1966 Joined the Supervisory Board in 2002 Commercial insurance agent with TrygVesta Forsikring A/S Educational background: Certified insurer, travel agency guide, psychotherapist. The Organisation of Danish Insurance Employees. Board member of TrygVesta A/S, TrygVesta Forsikring A/S and The Organisation of Danish Insurance Employees. Number of shares held in TrygVesta: 43 Per Skov Born 1941 Joined the Supervisory Board in 2002 Professional board member. Former CEO of FDB. Educational background: MSc (Economics), management training at MIT. Chairman of Utility Development A/S, Nordlux A/S and Nordlux Holding A/S. Deputy Chairman of Tryg i Danmark smba. Board member of TrygVesta A/S, TrygVesta Forsikring A/S, Dagrofa A/S, DSV A/S, Kemp & Lauritzen A/S, Nordea Liv og Pension Livsfor- sikringsselskab A/S. Member of the audit committee of TrygVesta A/S. From his board work and former positions, including as CEO of FDB, Mr Skov’s experience emphasises management, strategy and finance. Number of shares held in TrygVesta: 2,468 Unless otherwise stated, the Board Members are Danish citizens. TrygVesta Annual Report 2007 l Supervisory Board l 59 of 152 Corporate governance Group Executive Management Morten Hübbe Lars Bonde Peter Falkenham Stine Bosse Stig Ellkier-Pedersen Kjerstin Fyllingen 60 of 152 l Group Executive Management l TrygVesta Annual Report 2007 Stine Bosse Group CEO Born 1960 Joined TrygVesta in 1987 Joined the Group Executive Management in 1999 Educational background: LL.M., several management training programmes, including Insead and Wharton Board seats: The Danish Insurance Associa- tion (chairman), Hjertebarnsfonden (chairman), TrygVesta IT A/S (chairman), TrygVesta Ejen- domme A/S, Grundfos Management A/S, Poul Due Jensens Fond Number of shares held in TrygVesta: 2,244 Morten Hübbe Group CFO Born: 1972 Joined TrygVesta in 2002 Joined the Group Executive Management in 2003 Educational background: BSc (International Business Administration and Modern Languages), MSc (Finance and Accounting), management training at Wharton Board seats: TrygVesta Garantiforsikring A/S (chairman), Enter Forsikring AS (chairman), Try- gVesta IT A/S (deputy chairman), Tryg Ejendom- me A/S, Høyteknologisentret AS. Number of shares held in TrygVesta: 1,896 Peter Falkenham Member of the Group Executive Management in charge of Private & Commercial Denmark Born 1958 Joined TrygVesta in 2000 Joined the Group Executive Management in 2000 Kjerstin Fyllingen Member of the Group Executive Management in charge of Private & Commercial Norway Born 1958 Joined TrygVesta in 2006 Joined the Group Executive Management in 2006 Educational background: BCom (Internation- Educational background: Bachelor of al Trade), MSc (Engineering), management Business Administration and Master of training programmes, including St. Gallen and Management, Handelshøyskolen BI Wharton. Board seats: Enter Forsikring AS, Board seats: Glunz & Jensen (chairman), Finansnæringens Hovedorganisation, Solar A/S (deputy chairman), Tryg Ejendomme TrygVesta Almennyttige Stiftelse. A/S, TrygVesta Garantiforsikring A/S, Number of shares held in TrygVesta: 377 Danmarks Skibskredit A/S. Number of shares held in TrygVesta: 224 Lars Bonde Member of the Group Executive Management in charge of Corporate Born 1965 Joined TrygVesta in 1998 Joined the Group Executive Management in 2006 Educational background: Insurance training, LL.M. Stig Ellkier-Pedersen Member of the Group Executive Management in charge of New Markets Born 1947 Joined TrygVesta in 1999 Joined the Group Executive Management in 2001 Educational background: Mechanical engineer, several management training programmes at Insead Board seats: Forsikringsakademiet A/S Number of shares held in TrygVesta: 483 (chairman), Fonden Forsikringsakademiet af 26/2 2003 (chairman), Enter Forsikring A/S, The Danish Employers’ Association for the Financial Sector, SOS International A/S. Number of shares held in TrygVesta: 805 TrygVesta Annual Report 2007 l Group Executive Management l 61 of 152 Our customers “We want our customers to feel well-informed and confident in their communication with us. We have launched a Nordic communication project with the aim of improving and systematising written customer communication throughout our Group” 62 of 152 l Our customers l TrygVesta Annual Report 2007 Our customers TrygVesta Annual Report 2007 l Our customers l 63 of 152 Our customers Our customers We want our customers to perceive our peace-of-mind Peace-of-mind provider – on a daily basis provision every time they are in contact with us. To In addition to setting written communication on the achieve this, we need to have insight into and be con- agenda in 2007, we also made an effort to enhance the scious of our customers’ need for peace of mind and to way we deal with customers on the telephone. All sales give a high priority to loss prevention. We want to help and customer service staff will attend in-house training eliminate concerns and promote peace of mind for our during 2007 and 2008 under the heading “Your role as a customers. Focusing on this ambition, we launched a peace-of-mind provider”. This training programme builds number of initiatives in 2007 aimed at improving dialogue on the success of our risk consultants training pro- with our customers and helping them take action to pre- gramme in the Corporate business area. The training pro- vent damage and injury. gramme is intended to provide all employees with a capa- Nordic project to improve customer communication bility to act as a peace-of-mind provider that feeds through to customers in day-to-day communications. Customer perception of the advice and service provided is The insurance industry is notorious for writing complex an important element of the training process, and a sentences and using fine print. We want to change that. number of customers are therefore invited to evaluate We want our customers to feel well-informed and confi- their adviser after each call. dent in their communication with us. Many customers know us from our written communication only, and it is Broadened range of customer concepts therefore important for us that our customers understand Our customer concepts are an important tool in enhan- what we write. cing customer loyalty. We develop our customer concepts In the autumn of 2007 we launched a Nordic communica- special insurance cover, additional benefits and discounts tion project with the aim of improving and systematising for customers who take out more than one product with written customer communication throughout our Group. TrygVesta. Surveys indicate that concept customers are We intend for the project to lead to the formulation of characterised by greater loyalty. on an ongoing basis and add new benefits such as corporate language guidelines which will be reflected in all our future written communication. As part of the project, we intend to establish a language organisation and train a number of local language ambassadors who will be able to support local communication projects in the Group. The project will ensure that all customer docu- ments have been systematically reviewed by 2010. 64 of 152 l Our customers l TrygVesta Annual Report 2007 We launched a number of new customer concepts in 2007: EPSI surveys in 2007 Our ratings in the 2007 EPSI customer satisfaction surveys • We launched the Peace-of-Mind Adviser in Denmark improved for the entire Group. and Norway at www.tryghedsraadgiveren.dk and www. trygghetsraadgiveren.no, respectively. This is an inter- In Denmark, we came in at the top half among our peers. active advisory service offering good advice to every- Our customer satisfaction ratings improved greatly from one on how to prevent damage and injuries at home 2006. Our loyalty ratings were largely unchanged from and how to protect your family. You can print check last year’s ratings. lists from the Peace-of-Mind Adviser and ask to receive an SMS when the battery in your smoke alarm needs In Norway, we scored second highest among our peers, replacing. The website is also a good learning experi- and we were the only large company that improved cus- ence for children who may test themselves as fire tomer satisfaction significantly from 2006. In particular, chiefs or challenge others on their knowledge of fires customers rated us better in the ‘value for money’ cate- in the home. gory. Our actual loyalty as measured in terms of renewal rates increased steeply, while loyalty in the EPSI survey • The Peace-of-Mind Shop is a service offered in decreased slightly compared with 2006. Denmark and Norway at www.tryghedsbutik.dk and www.trygghetsbutikk.no, respectively. The site sells Our customers in Finland remained some of the most high-quality security products selected and tested loyal and satisfied customers in the market. Compared by our experts. with the previous survey, we also improved our ratings significantly in a number of other areas, such as satisfac- • In October 2007 we launched an enhanced travel tion which rated above the market average. insurance to cover events that become excluded with the reduced Danish public travel and health coverage. 2007 was the first time we participated in the EPSI rating We also extend our annual travel insurance to cover in Sweden. Our customer satisfaction rating in the Swedish family members not living in the household who travel market was very close to the market average. Our ‘value together with the customer. Furthermore, it will for money’ and loyalty ratings were higher than those improve the possibilities for concept customers to recorded by other players in the market. cover travel companions. Only three companies have a presence in more than one market of the Nordic region: TrygVesta, Codan/Trygg- Hansa and If. TrygVesta continued to record the highest TrygVesta Annual Report 2007 l Our customers l 65 of 152 Our customers overall customer satisfaction and loyalty score among the In 2007, our websites www.tryg.dk and www.trygvesta. Nordic companies. no had 2.6m visitors against 3m in 2006, consisting of 1.7m at tryg.dk against 1.9m in 2006 and some 1m at Major e-communication and self-service initiatives trygvesta.no against 900,000 in 2006. We want to offer our customers a much wider range of self-service solutions and possibilities of communicating Our Swedish website www.vesta.se, which was launched electronically with us in the future. To drive this develop- in June 2006, had some 182,000 visitors in 2007 against ment we set up a Nordic e-business centre in 2007. In some 23,000 in 2006. In Finland, we had a total of addition to driving the Group’s self-service and electronic 88,532 visitors to Nordea’s TrygVesta pages against communication projects, our e-business centre is in the 101,978 visitors in 2006. process of creating a new common design for all our cor- porate websites. In order to further promote its profile, TrygVesta’s guaran- tee business in Denmark, Norway and Sweden launched We measure trends in the number of visitors to our new websites in 2007. The guarantee business in Denmark websites in all markets. A total of some 64,000 visitors also changed its legal name from Dansk Kaution to accessed www.trygvesta.com in 2007 compared with TrygVesta Garantiforsikring to emphasise its affiliation with some 51,000 in 2006. We will be relaunching the rest of the Group. A website for the Finnish business www.trygvesta.com in early 2008. This site primarily will be launched in connection with the start-up of activi- targets the financial community, the press, Nordic job ties within guarantee business in Finland as from 2008. seekers and others requiring information about the Group. Features of the new website include more detailed information about the Group’s performance, strategy and business areas and make it easier for users to stay updated. 66 of 152 l Our customers l TrygVesta Annual Report 2007 (cid:56)(cid:74)(cid:72)(cid:73)(cid:68)(cid:66)(cid:58)(cid:71)(cid:21)(cid:72)(cid:74)(cid:71)(cid:75)(cid:58)(cid:78)(cid:21)(cid:183)(cid:21)(cid:57)(cid:58)(cid:67)(cid:66)(cid:54)(cid:71)(cid:64)(cid:21) (cid:183)(cid:21)(cid:69)(cid:71)(cid:62)(cid:75)(cid:54)(cid:73)(cid:58)(cid:21)(cid:56)(cid:74)(cid:72)(cid:73)(cid:68)(cid:66)(cid:58)(cid:71)(cid:72)(cid:21)(cid:38)(cid:30) (cid:56)(cid:74)(cid:72)(cid:73)(cid:68)(cid:66)(cid:58)(cid:71)(cid:21)(cid:72)(cid:74)(cid:71)(cid:75)(cid:54)(cid:78)(cid:21)(cid:183)(cid:21)(cid:67)(cid:68)(cid:71)(cid:76)(cid:54)(cid:78) (cid:183)(cid:21)(cid:69)(cid:71)(cid:62)(cid:75)(cid:54)(cid:73)(cid:58)(cid:21)(cid:56)(cid:74)(cid:72)(cid:73)(cid:68)(cid:66)(cid:58)(cid:71)(cid:72)(cid:21)(cid:38)(cid:30) (cid:110) 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(cid:56)(cid:100)(cid:98)(cid:101)(cid:90)(cid:105)(cid:94)(cid:105)(cid:100)(cid:103)(cid:21)(cid:38)(cid:21)(cid:39)(cid:37)(cid:37)(cid:44) (cid:56)(cid:100)(cid:98)(cid:101)(cid:90)(cid:105)(cid:94)(cid:105)(cid:100)(cid:103)(cid:21)(cid:39)(cid:21)(cid:39)(cid:37)(cid:37)(cid:44) 1) Satisfaction and loyalty is reassured on a scale from 1-100. Industry = average for all companies surveyed. Source: EPSI Rating (EPSI is an independent non-profit organisation for measuring customer satisfaction in the Nordic region). 2) The benchmarks in the Nordic comparison are simple averages of official EPSI country results for companies with a presence in more than one Nordic market. TrygVesta Annual Report 2007 l Our customers l 67 of 152 Our employees “The need to work with employee well-being and competency development and to make these efforts an integral part of our business strategy has never been greater” 68 of 152 l Our employees l TrygVesta Annual Report 2007 Our employees TrygVesta Annual Report 2007 l Our employees l 69 of 152 Our employees Our employees Our employees are TrygVesta’s most important asset Optimising the physical working environment because they are our face to the customers in their eve- TrygVesta wants to be a modern workplace that promotes ryday experience of our provision of products and serv- innovation, collaboration and our corporate values. Over ices that offer peace of mind. The labour market contin- the next two years, Danish and Norwegian firms of archi- ued to tighten in 2007, and employers intensified their tects and designers will work with TrygVesta to transform efforts to retain and recruit the best employees. We the physical office framework in Ballerup and Bergen into launched a range of activities in 2007 designed to pre- modern workplaces. Key words for the project are trust, pare ourselves to meet the employees of the future and security and transparency, which translate our values into strengthen the Group as an attractive workplace. a design framework. The modernisation efforts aim to forge closer relations between employees and improve TrygVesta’s HR efforts in the future the work situation of individual employees. These aims The need to work with employee well-being and compe- will be reflected in open-plan office environments, quiet tency development and to make these efforts an integral rooms and café environments. The project is scheduled part of our business strategy has never been greater. We for completion by the end of 2010. restructured the Group’s HR efforts in early 2007 with a view to strengthening the HR area, creating a framework Working with values and theme packages for the classic HR disciplines that ensure management We continued to work with our corporate values in 2007. focus on employees and their skills. The new structure The entire Group worked with theme packages of topical enhances focus on management, competency and organ- interest, the 2007 focus being on dilemmas, well-being isational development, making HR work and the Group’s and stress. The theme package dealing with dilemmas in strategy and action plans more coherent. everyday life aimed to make visible the relationship between the Group’s values and actions using a dilemma The new structure links TrygVesta’s Management Academy game that was played locally in all departments. The closely with our management secretariat, which is respon- theme package dealing with well-being during a busy sible for ensuring that developing our management working day comprised an e-learning module about stress resources ties in with our business strategy. Employee and stress management as well as a game on well-being. training has been moved to Corporate Branding to ensure Both theme packages comprised a board game, which a direct connection between branding and employee devel- has proved to be an efficient tool to promote important opment. HR administration, whose tasks include salary and dialogue in the departments. The theme package dealing negotiations, has been moved to Group Finance, which is with well-being and stress also enhanced knowledge already in charge of budgets and financial matters. about how to handle busy periods and stress in the Group and increased awareness of the risk of negative 70 of 152 l Our employees l TrygVesta Annual Report 2007 Group Finance Corporate branding Group staff Salary & negotiations DK Salary & negotiations NO TrygVesta Academy Organisational Development TrygVesta Management Academy stress, enabling colleagues to help each other before • In the autumn of 2007 we launched a large-scale stress develops further. A theme package in 2008 will training programme under the heading “Your role as a deal with environmental issues. peace-of-mind provider”, which will initially be attended Status survey 2007 by customer service and sales staff. Subjects taught include showing empathy and being attentive when TrygVesta’s ambition is to be a development workplace talking to customers. After the new peace-of-mind where everybody is open to learning and improving on a providers have completed the programme, we will continuous basis. We conduct a status survey every two follow up on their competencies with initiatives such as years to stay focused on the activities launched in the status talks and role plays. The programme will run Group, determine employee satisfaction and follow up on from September 2007 to May 2008. our employees’ knowledge about the Group’s strategy, values and balanced scorecard benchmarks. The status • In the autumn of 2007 we also introduced a new survey is also used as a tool in the follow up on results training programme that is intended to contribute to from the full-scale employee survey made in the intermedi- promoting innovation competencies throughout the ate years. The 2007 status survey indicated, among other Group. The Innovation Driver programme was com- things, that 90% of the Group’s employees were very pleted by 16 employees in 2007. Our Innovation satisfied or satisfied with working at TrygVesta. Further- Drivers are intended to support innovation processes more, employee knowledge of the Group’s strategy and throughout the Group. Read more about Innovation use of the balanced scorecard had increased significantly Driver training in the feature articles. compared with the 2006 employee survey. A full-scale employee survey will be conducted in September 2008. • In 2008, we intend to launch a Nordic talent develop- ment programme for qualified and ambitious employees Competency building with good potential for building a career in our Group. Today, nurturing employees is very much about creating We will use a systematised process to identify, develop the right basis for facilitating the development of the and incentivise employees with management and project competencies of each individual employee. At the same management potential. The programme targets young time, competency building helps us achieve our strategic talented employees with management potential. The goals and remain competitive. At TrygVesta, we want programme is intended to build a Nordic talent pool of human competencies to be on the agenda of all manag- highly qualified candidates with potential to perform key ers, and we want all employees to have a development functions in the Group. plan. We created several new employee training pro- grammes in 2007, and we intend to continue this devel- opment in the years ahead: TrygVesta Annual Report 2007 l Our employees l 71 of 152 Our employees New attractive employee initiatives and We intend to perform an in-depth review of our recruit- employee bonus ment processes in all four Nordic countries in 2008. This We want to be a healthy workplace where employees will include charting the requirement for present and thrive and enjoy working. We intend to launch a number future skills and employee profiles. The project is carried of initiatives in 2008 to enhance employee health and out in a collaboration between a number of departments well-being. These initiatives include making fruit available in the Group. for employees in all departments, an agreement with a Nordic fitness chain, an extended health care plan and The project is intended organising family days and a corporate party in 2009. • to simplify the process of recruiting the right employ- ees and make it more efficient As was the case in 2006, the 2007 employee bonus • to reduce the number of employees who leave the benchmarks were combined ratio and growth. For 2007 Group to join other companies the bonus per employee will be DKK 10,000, which will • to enhance the profiling of the Group’s values and primarily be paid in the form of shares in Denmark. Read communicate them better more about TrygVesta’s bonus and incentive programme • to enhance awareness of the Group as an attractive in the section on Corporate governance. workplace among students and other job seekers. Recruitment and employee branding in the future Initiatives designed to achieve these goals include We want to improve our ability to retain and attract restructuring our recruitment process, working with the employees because this is vital in the present competitive content and layout of job advertisements and being a labour markets in the Nordic countries. more pro-active participant at career fairs organised by universities and business schools. Key data 2007 2006 2005 2004 Number of employees (full-time) Seniority (years) Employee turnover (%) Sickness absence (%) 3,814 12.0 9.99 4.38 3,808 12.8 7.15 4.31 3,694 13.1 6.14 4.24 3,728 13.1 4.15 4.18 72 of 152 l Our employees l TrygVesta Annual Report 2007 (cid:57)(cid:62)(cid:72)(cid:73)(cid:71)(cid:62)(cid:55)(cid:74)(cid:73)(cid:62)(cid:68)(cid:67)(cid:21)(cid:68)(cid:59)(cid:21)(cid:66)(cid:54)(cid:67)(cid:54)(cid:60)(cid:58)(cid:71)(cid:72)(cid:21)(cid:62)(cid:67)(cid:21)(cid:57)(cid:58)(cid:67)(cid:66)(cid:54)(cid:71)(cid:64) (cid:57)(cid:62)(cid:72)(cid:73)(cid:71)(cid:62)(cid:55)(cid:74)(cid:73)(cid:62)(cid:68)(cid:67)(cid:21)(cid:68)(cid:59)(cid:21) (cid:66) (cid:54)(cid:67)(cid:54)(cid:60) (cid:58)(cid:71)(cid:72)(cid:21) (cid:62)(cid:67)(cid:21) (cid:67)(cid:68) (cid:71)(cid:76)(cid:54)(cid:78) (cid:41)(cid:38)(cid:35)(cid:39)(cid:21)(cid:26) (cid:40)(cid:40)(cid:35)(cid:40)(cid:21)(cid:26) (cid:42)(cid:45)(cid:35)(cid:45)(cid:21)(cid:26) (cid:43)(cid:43)(cid:35)(cid:44)(cid:21)(cid:26) (cid:66)(cid:86)(cid:97)(cid:90) (cid:59)(cid:90)(cid:98)(cid:86)(cid:97)(cid:90) (cid:66)(cid:86)(cid:97)(cid:90) (cid:59)(cid:90)(cid:98)(cid:86)(cid:97)(cid:90) (cid:66) (cid:54)(cid:65) (cid:58)(cid:21)(cid:54)(cid:67) (cid:57)(cid:21)(cid:59)(cid:58) (cid:66) (cid:54) (cid:65)(cid:58)(cid:21) (cid:58) (cid:66) (cid:69)(cid:65)(cid:68)(cid:78)(cid:58) (cid:58)(cid:72)(cid:21)(cid:62)(cid:67) (cid:21)(cid:57)(cid:58) (cid:67)(cid:66) (cid:54)(cid:71)(cid:64) (cid:66) (cid:54)(cid:65)(cid:58)(cid:21) (cid:54)(cid:67)(cid:57)(cid:21)(cid:59)(cid:58) (cid:66) (cid:54)(cid:65)(cid:58)(cid:21)(cid:58) (cid:66) (cid:69)(cid:65)(cid:68)(cid:78)(cid:58)(cid:58)(cid:72) (cid:21) (cid:62)(cid:67)(cid:21) (cid:67)(cid:68) (cid:71)(cid:76)(cid:54)(cid:78) (cid:42)(cid:37)(cid:35)(cid:40)(cid:21)(cid:26) (cid:41)(cid:46)(cid:35)(cid:44)(cid:21)(cid:26) (cid:42)(cid:37)(cid:35)(cid:45)(cid:21)(cid:26) (cid:41)(cid:46)(cid:35)(cid:39)(cid:21)(cid:26) (cid:66)(cid:86)(cid:97)(cid:90) (cid:59)(cid:90)(cid:98)(cid:86)(cid:97)(cid:90) (cid:66)(cid:86)(cid:97)(cid:90) (cid:59)(cid:90)(cid:98)(cid:86)(cid:97)(cid:90) TrygVesta Annual Report 2007 l Our employees l 73 of 152 Our shareholders “TrygVesta shares closed the year at DKK 388, equivalent to a market capitalisation of DKK 26.4bn. The shares provided a negative return including dividends of 2.9% for 2007” 74 of 154 l Our shareholders l TrygVesta Annual Report 2007 Our shareholders TrygVesta Annual Report 2007 l Our shareholders l 75 of 152 Our shareholders Our shareholders TrygVesta builds and maintains good relations with share- between DKK 440 and DKK 480 until mid-June. The holders and other financial stakeholders by emphasising announcement of a new profit distribution policy on the openness, transparency and a fundamental understand- Group’s first capital markets day held on 22 June 2007 ing of stakeholder information requirements. We strive to triggered a 2% increase in the share price. maintain a high level of information by: Over the summer of 2007 financial markets became • being available and answering queries as promptly increasingly jittery due to a liquidity and loan crisis trig- as possible gered by non-performing US sub-prime loans. The period • preparing plain and relevant written communication from mid-July to end-August 2007 saw equity markets • being proactive in our dealings with investors drop by some 12%, with financial equities being hit par- ticularly hard. The financial unrest continued during the We publish information that may influence the pricing of remainder of the year with TrygVesta shares trading at our shares pursuant to the rules applicable to distribution DKK 375 in November, the lowest price recorded in 2007. of information in the EU and also update the Group’s However, equity markets began to pick up towards the website www.trygvesta.com. In addition, we distribute end of 2007. information directly to the London Stock Exchange, the press, equity analysts, investors and other stakeholders. TrygVesta shares closed the year at DKK 388, equivalent In accordance with the recommendations issued by OMX vided a negative return including dividends 2.9% for 2007. to a market capitalisation of DKK 26.4bn. The shares pro- The Nordic Exchange Copenhagen, we refrain from com- menting on matters relating to our financial performance Competing insurance shares performed as follows in or outlook during a period of three weeks prior to the 2007: Alm. Brand minus 28.5%, Sampo minus 4.9% and release of financial reports. Topdanmark minus 21.4%. Codan was delisted on 31 Juli 2007. The share increased by 11.4% up to the delisting. TrygVesta shares TrygVesta shares opened 2007 at DKK 431.5. On 9 January The European insurance share index, DJ Euro Insurance 2007 we announced that the Group expected to report a Index, fell by 11.9% in 2007. preliminary pre-tax profit for 2006 of DKK 3.7bn against the previous forecast of DKK 3.2bn provided in the TrygVesta shares had average daily turnover of DKK 117m announcement of our financial results for the nine in 2007. The total volume traded on OMX The Nordic months ended 30 September 2006. Subsequently, the Exchange Copenhagen was DKK 47.9bn. The ten most price increased to DKK 480 during the spring, ranging active traders in 2007 in terms of turnover were: 76 of 152 l Our shareholders l TrygVesta Annual Report 2007 (cid:59)(cid:71)(cid:58)(cid:58)(cid:21)(cid:59)(cid:65)(cid:68)(cid:54)(cid:73)(cid:21)(cid:40)(cid:38)(cid:21)(cid:57)(cid:58)(cid:56)(cid:58)(cid:66)(cid:55)(cid:58)(cid:71)(cid:21)(cid:39)(cid:37)(cid:37)(cid:44) (cid:72)(cid:61)(cid:54)(cid:71)(cid:58)(cid:61)(cid:68)(cid:65)(cid:57)(cid:58)(cid:71)(cid:72)(cid:21)(cid:40)(cid:38)(cid:21)(cid:57)(cid:58)(cid:56)(cid:58)(cid:66)(cid:55)(cid:58)(cid:71)(cid:21)(cid:39)(cid:37)(cid:37)(cid:44) (cid:38)(cid:33)(cid:45)(cid:21)(cid:26) (cid:41)(cid:33)(cid:40)(cid:21)(cid:26) (cid:45)(cid:33)(cid:39)(cid:21)(cid:26) (cid:46)(cid:33)(cid:44)(cid:21)(cid:26) (cid:43)(cid:37)(cid:21)(cid:26) (cid:44)(cid:43)(cid:21)(cid:26) (cid:38)(cid:45)(cid:21)(cid:26) (cid:44)(cid:21)(cid:26) (cid:38)(cid:42)(cid:21)(cid:26) (cid:57)(cid:90)(cid:99)(cid:98)(cid:86)(cid:103)(cid:96) (cid:74)(cid:64) (cid:74)(cid:72)(cid:54) (cid:72)(cid:88)(cid:86)(cid:99)(cid:89)(cid:94)(cid:99)(cid:86)(cid:107)(cid:94)(cid:86) (cid:68)(cid:105)(cid:93)(cid:90)(cid:103)(cid:104) (cid:72)(cid:98)(cid:86)(cid:97)(cid:97)(cid:21)(cid:104)(cid:93)(cid:86)(cid:103)(cid:90)(cid:93)(cid:100)(cid:97)(cid:89)(cid:90)(cid:103)(cid:104) (cid:66)(cid:86)(cid:95)(cid:100)(cid:103)(cid:21)(cid:94)(cid:99)(cid:105)(cid:90)(cid:103)(cid:99)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:86)(cid:97)(cid:21)(cid:104)(cid:93)(cid:86)(cid:103)(cid:90)(cid:93)(cid:100)(cid:97)(cid:89)(cid:90)(cid:103)(cid:104) (cid:66)(cid:86)(cid:95)(cid:100)(cid:103)(cid:21)(cid:57)(cid:86)(cid:99)(cid:94)(cid:104)(cid:93)(cid:21)(cid:104)(cid:93)(cid:86)(cid:103)(cid:90)(cid:93)(cid:100)(cid:97)(cid:89)(cid:90)(cid:103)(cid:104)(cid:31) (cid:73)(cid:103)(cid:110)(cid:92)(cid:21)(cid:94)(cid:21)(cid:57)(cid:86)(cid:99)(cid:98)(cid:86)(cid:103)(cid:96)(cid:21)(cid:104)(cid:98)(cid:87)(cid:86) * Holding more than 10,000 shares. Danske Bank SEB Enskilda Morgan Stanley Nordea Bank Carnegie Bank Merril Lynch International Glitnir AB Lehman Brothers International Svenska Handelsbanken Jyske Bank 21% 10% 10% 8% 5% 4% 4% 3% 3% 2% basis. The target is to hold 250-300 investor meetings each year. Our aim is for 10-15 equity analysts to actively follow TrygVesta’s performance, and that three to five of these analysts should be based in London. In 2007, we held 250 meetings with investors and equity analysts and took part in 15 investor conferences. We organised our first capital markets day on 22 June 2007 at the Ballerup head office, an opportunity for Manage- ment to present the Group’s performance, opportunities, Shareholder structure challenges and targets to 36 analysts and investors. TrygVesta has a single class of shares, and all shares rank pari passu. Our principal shareholder, Tryg i Danmark The Group’s website at www.trygvesta.com is an impor- smba (Kgs. Lyngby, Denmark), holds 60% of the issued tant vehicle for providing information about the Group’s shares and is the only shareholder with a holding of more performance to prospective investors. The website will be than 5%. Tryg i Danmark smba is a company with limited relaunched in early 2008 in a more user-friendly version liability investing in businesses that promote peace of and with improved content. Teleconferences and web- mind, health and security in the Nordic region and a sup- casts can be downloaded as podcasts from the new web- porter of benevolent activities. site, and interested parties can stay updated on the latest At 31 December 2007, the remaining 40% of the ment focuses strongly on making updated and relevant TrygVesta shares (free float) was held by 28,420 regis- information easily accessible to investors, and urges all tered shareholders. Of the 40% free float shares, the 200 interested parties to use the website. news through RSS feeds. Our Investor Relations depart- largest shareholders held 66%. Some 24% of the free float shares was held by international investors, and 76% by Danish investors. TrygVesta holds treasury shares corresponding to 0.53% of the share capital. Dialogue with investors The Group Executive Management and our Investor Rela- tions department hold meetings with investors and equity analysts in Europe and the USA on a quarterly TrygVesta Annual Report 2007 l Our shareholders l 77 of 152 Our shareholders FINANCIAL CALENDAR 2008 25 February Annual report 2007 3 April at 14:00 Annual general meeting 2008 5 May Interim report for the first quarter of 2008 18 August Interim report for the first half of 2008 10 November Interim report for the third quarter of 2008 Annual general meeting Any queries relating to the annual general meeting may TrygVesta’s annual general meeting will be held on 3 April be addressed to: 2008 at Øksnehallen, Halmtorvet 11, DK-1700 Copenha- gen V, Denmark. The invitation to attend the meeting will Bjarne Lau Pedersen, Chief Group Legal Adviser be advertised in the press and will be sent to all share- Telephone +45 4420 3065 holders who so request. Notice of the annual general E-mail bjarne.lau@tryg.dk meeting will also be posted on www.trygvesta.com. Ole Søeberg, IRO Telephone +45 4420 4520 E-mail ole.soeberg@tryg.dk. 78 of 152 l Our shareholders l TrygVesta Annual Report 2007 ANNOUNCEMENTS IN 2007 04.01.2007 No. 01 Financial calendar 2007 09.01.2007 No. 02 TrygVesta introduces share-based payment 05.02.2007 No. 03 TrygVesta starts selling commercial insurance in Finland 28.02.2007 No. 04 Annual report 2006 28.02.2007 No. 05 TrygVesta’s fourth quarter 2006 report 09.03.2007 No. 06 Notice of the Annual General Meeting of TrygVesta A/S 27.03.2007 No. 07 Articles of association of TrygVesta A/S 28.03.2007 No. 08 Resolutions from the annual meeting of shareholders (AGM) 09.05.2007 No. 09 TrygVesta’s Q1 2007 results 09.05.2007 No. 10 Change of name 01.06.2007 No. 11 Change in share capital and votes 21.06.2007 No. 12 TrygVesta – Higher premium growth in 2007, revised return policy and Capital Markets Day 09.11.2007 No. 13 TrygVesta’s interim report for the first half of 2007 04.09.2007 No. 14 TrygVesta receives DKK 85m in an arbitration case regarding reinsurance 23.11.2007 No. 15 Third quarter 2007 report 23.11.2007 No. 16 Financial calendar 2008 23.11.2007 No. 17 Peter Falkenham promoted to COO 19.12.2007 No. 18 TrygVesta launches Corporate in Sweden TrygVesta Annual Report 2007 l Our shareholders l 79 of 152 Feature: Innovation and social responsibility “Insurance is based on the idea that everyone accepts their responsibility and contributes to the shared burdens. CSR is therefore a very natural topic of conversation. We’re very serious when we say we provide peace of mind” 80 of 154 l Feature l TrygVesta Annual Report 2007 Innovation and social responsibility TrygVesta Annual Report 2007 l Feature l 81 of 152 Feature: Innovation and social responsibility Providing peace of mind TrygVesta’s vision is to be perceived as the leading peace of mind provider in the Nordic region. This year’s annual report features a themed section with four articles that describe four areas where we will launch new initiatives - for customers, employees, the environment, and society. As the basis for the other articles, Stine Bosse, Group CEO, talks about the current challenges and recent developments in the Group. How has the past year measured up to the expectations The focus on our customers and employees has increased you had 12 months ago? and is on the rise. In all four Nordic countries where we provide peace of mind, the labour market has changed in The past year went according to plan and expectations, recent years. The competition for the available workforce though with some positive surprises. Growth rates in our is intense. Fortunately, we still attract and retain the best Corporate business and Swedish business exceeded my employees, so we can provide the highest level of cus- expectations. I was also positively surprised by our ability tomer service. We need to find new talent groups with to innovate: While creating solutions for our own needs, new ideas and competencies. And we must always main- we have developed solutions for our customers. To illus- tain and develop TrygVesta as an attractive workplace. trate, like many workplaces, we’ve felt the need to This also involves employee participation in work proc- address the issue of stress, and have put this topic on esses, our physical work environment and our scope for the agenda throughout the organisation. One initiative enjoying a good social atmosphere at work and a good was to develop an e-learning programme that provides work-life balance. employees with more information on stress, relaxation techniques to help alleviate the problem, and the chance Many companies are talking a lot about Corporate Social to communicate with colleagues on the subject via games Responsibility (CSR). How do you see TrygVesta’s position and other initiatives. Originally, we wanted to find a solu- in this field? tion for our own use, but have actually developed a new product that will also benefit our customers. The product CSR has always existed in TrygVesta. It’s intrinsic to our StressStop is a telephone line with stress consultants way of thinking. We provide peace of mind. Our product ready to give advice and guidance on stress. We have is a direct provision to society and we’re an integral part so far launched the product for employees on Danish of the Nordic welfare system. Insurance is based on the workplaces. idea that everyone accepts their responsibility and con- tributes to the shared burdens. CSR is therefore a very What would you say is special about the current period? natural topic of conver sation. We’re very serious when we What does TrygVesta do in order to be abreast of the say we provide peace of mind. development? 82 of 152 l Feature l TrygVesta Annual Report 2007  TrygVesta Annual Report 2007 l Feature l 83 of 152 Feature: Innovation and social responsibility How does TrygVesta differentiate from other players in Another point is that in a company with an innovative the market? mindset, you have to accept that mistakes can be made. There could be occasions when, with hindsight, we may That question brings us back to our employees. The point say we probably shouldn’t have done that. But innovation of difference is our employees because they decide how requires courage and learning from mistakes. We can’t we meet the customers. By that I mean the way they have a “no mistakes” culture and also be an innovative talk, write and communicate with customers. We need company at the same time. the most skilled and friendly employees and that is exactly what we have. Many of TrygVesta’s customers need increasingly individu- alised health and peace-of-mind services that are not BusinessLab is the name of TrygVesta’s centre for innova- covered by the public sector. What do you think of the tion and product development. Although a lot of the relationship between public-sector and private services? innovative work takes place online, in physical terms Busi- nessLab is based in Ballerup, Denmark. And “the labora- We’re already a part of the welfare structure. We’re used tory” certainly doesn’t look like the other offices in the to providing welfare services and will be doing so even Group. What do you think about BusinessLab? more. We’re well aware that this responsibility is based I enjoy BusinessLab. I like slightly off-the-wall scenarios. provide are increasing, but taxes probably won’t. This With its own special colour scheme and interior design it development opens up new opportunities. Over the past probably looks more like a theatre stage or a studio than few years, I’ve seen unique opportunities to develop new anything, but as the name suggests, we use it to explore models that expand the solid public foundation of the on trust. Expectations about what the welfare system can business opportunities. I think BusinessLab stimulates Nordic welfare society. good ideas. You’re confronted with the fact that you can think outside the box. In a way, the setting cleverly sym- As well as social welfare, the environment and climate bolises that off-the-wall thinking is allowed. The manage- change are issues that seriously concern TrygVesta’s cus- ment wants to encourage lateral thinking and creativity in tomers. What impact do you think the climate and envi- its employees. Innovation is a leadership style. We must ronment will have for TrygVesta in the years ahead? also embrace diversity. I believe diversity is exactly what we need to integrate tradition and renewal. Both are vital I believe the environment and climate change will mean a for continued growth. great deal - in a number of areas. Naturally, we should make sure we remain a sustainable company that cares BusinessLab is also the physical setting for the new Inno- about the environment. But climate change also has a vation Driver training programme. A programme that serious effect on our customers. In recent years, we’ve teaches employees to use the creative side of their brains experienced violent storms, and high levels of rainfall that as much as the logical side. How seriously do you take have caused extensive damage. First and foremost, we the Innovation Driver principles? Is it an isolated experi- want to help our customers prevent damage by advising ment or is the idea that this should spread? customers on what precautions to take and focusing attention on sub-standard building, bad drainage and We definitely want this idea to spread. I’m convinced that other factors that can contribute to wind and water dam- this way of facilitating other dimensions is crucial for age. We specialise in this field and it would be irresponsi- future success. We must use feelings and intellect in ble not to share this knowledge with the general public every development process. This area contains great and our customers in particular. We also make sure that scope for innovation. our own emergency systems are constantly upgraded so that we can deal with a wider and more extensive range of damages. 84 of 154 l Feature l TrygVesta Annual Report 2007 What do you consider the major challenges facing ers, new products and new initiatives that reinforce prof- TrygVesta in the coming year? itable growth. Providing – that is clearly my focus for the year ahead. TrygVesta’s vision to provide peace of mind Challenges and opportunities go hand in hand. We must applies to our customers, shareholders, employees and do a lot to maintain the momentum we already have. As I society at large – all four perspectives are included. A mentioned, innovation will be a larger and larger part of totally solid financial foundation is vital if we are to pro- our mindset. We develop new ways of servicing custom- vide peace of mind. TrygVesta Annual Report 2007 l Feature l 85 of 152 Feature: Innovation and social responsibility When employees change cerebral hemispheres Innovation Driver is the name of TrygVesta’s new in-house training programme, which aims to develop employees’ ability to think along new lines. Monica Rydland Anundsen was one of the first employees to take part in the programme. An experience that has raised activity levels in the creative side of her brain. Monica Rydland Anundsen works with strategic develop- Growth and new beginnings ment of Corporate at the divisional management group in Fear anxiety insecurity Norway. Today, for the very first time she will be taking Poetry romance love part in the new Innovation Driver programme at TrygVes- ta’s BusinessLab in Ballerup, Denmark. The menu has more than 10 different core moods. Monica Rydland Anundsen imagines that she will be pre- become poetic and romantic – not exactly the traditional Choose Poetry romance love, and the lighting and music sented with a tightly structured programme. That she will mood in a business lab: be given some methodical tools and instructions on how and when to use them. “I’d expected some more structured methods and tools, Monica Rydland Anundsen can think again. something else. If you want new ideas, you have to be but with hindsight, I can see that innovation requires jogged out of your traditional setting, methods and proc- In Ballerup, she’s welcomed to a meeting room that is esses. The programme has developed my mindset in nothing like the meeting rooms she normally sees at terms of how ideas are developed, managed and real- work. The ceiling has disco lighting. Soft warm colours ised,” explains Monica Rydland Anundsen. add to the atmosphere created by the tea lights on the small round coffee tables. The walls are not straight, but New mindset and world view curved in round, female forms. Like a surrealistic picture. It’s all about simultaneously acknowledging what factors There are no windows. She is underground. The music is make the organisation a success and what factors pre- emotive. Romantic. vent the organisation moving ahead. According to the head of the new programme, the answers to the two Welcome to TrygVesta’s BusinessLab. Welcome to the questions are often the same. What creates success can new Innovation Driver training programme. Welcome to a also create difficulties. We must therefore think along new way to think and work. new lines. Malene Bendtsen is a coach for the Innovation From the logical to the creative side of the brain Driver programme: At BusinessLab in Ballerup, the music and lighting system “The idea is to come up with something that none of us menu offers a choice of different moods: has thought of before and that we can only think together. The course participants are trained in making new discoveries. And coming up with new ideas is very 86 of 152 l Feature l TrygVesta Annual Report 2007 difficult if you are anchored in an “old” mindset. That’s backgrounds in economics, philosophy, theology, infor- why we put Monica and the other participants in a com- mation sciences, datalogy, management and design. But pletely new setting. We challenge traditional knowledge. first and foremost they are experienced in and under- We present something that doesn’t match the organisa- stand learning processes. They use experiences from the tion’s world view. We develop employees’ horizons by world of performing arts: encouraging them to take a lateral perspective, explore peripheral opportunities. ” “In the world of business, we’re used to devising plans first and then realising them. But if you’ve sealed the As the participants begin to relax and use their creative envelope before you start, then you can’t push yourselves grey matter, they begin to notice the opportunities pro- outside these limits. Dramaturges and performers are vided by unconventional work processes. So, the pro- good at thinking and creating at the same time. Our own gramme also includes a form of personal development: dramaturge on the programme involves the body’s way of thinking by building insurance products out of card- “For me, development, increased interaction, and security board, for example. Is the new insurance product blue or are what drive my work. Both in relation to teamwork red, triangular or square? Considerations like these lead with my colleagues and the products we can develop for to more than just spreadsheets and wordy documents. A our customers. The Innovation Driver programme proved cardboard insurance product is a tangible prototype. We to be right for me. This new way of working gives me transform ideas into words and make them tangible. This more strings to by bow,” explains Monica Rydland is what theatrical and artistic processes can do,” explains Anundsen. Malene Bendtsen, who has a background in economy, marketing, innovation management and adult education Pushing the envelope theory. Working with statistics, focus groups and risk assess- ments is one thing. Working with emotions and your Two and a half months of cerebral gymnastics imagination is quite another: The programme for the first team of course participants lasted two and a half months. After the programme is “We tell employees to trust their intuition. They join the completed, the “Drivers” allocate time for solving tasks project without knowing what they’ll get out of it. That that take the equivalent of two days every six weeks. takes courage. Employees may not appreciate the link Altogether they spend seven days in the BusinessLab. between what they’re doing today and what it will lead to in three months’ time. Accepting insecurity is a challenge. After challenging their creative hemisphere, the Drivers It pushes the envelope,” explains Malene Bendtsen. are ready to take the driving seat and steer the Group’s product development. Business development through theatre The coaches on the Innovation Driver programme have TrygVesta Annual Report 2007 l Feature l 87 of 152 Feature: Innovation and social responsibility The customer is always right The customer is always right. An old saying, but it’s part of the formula for future user-driven and customer-oriented innovation. Constant product development on customers’ terms is vital if TrygVesta is to maintain and expand its position as the leading peace-of-mind provider in the Nordic Region. “We know that in five years’ time, some of our business New investigative methods will come from something we’re not doing today. And As well as recruiting employees with new skills, TrygVesta what might that be?” is the rhetorical question posed by is also using new methods for developing products. When Stig Ellkier-Pedersen, who is responsible for New Markets. you take a different approach, you get results that are He quickly gets to the point: different to those reached using traditional investigative “We believe it will have more to do with people and less methods: to do with possessions. It’s about personal peace of “We normally use focus groups, surveys, and statistics, mind and security more than insuring things. It’s about but we’ve invited youngsters in from various fields, includ- insuring yourself, your closest relatives, and your family, ing the theatre. We have not asked them what they want against claims from third parties. It’s about your right to from us, but have discovered how they view themselves.” the good life,” explains Stig Ellkier-Pedersen. In his view, this is a new tendency among customers and therefore For Stig Ellkier-Pedersen, the new investigative methods an obvious business opportunity. represent a new level of user-driven innovation. They are less direct. The target group is not confronted with ques- People in the Nordic region are interested in new kinds of tions about what they want, but instead the methods insurance products. This is evident from the enormous give a realistic picture of the psychological universe that growth in health insurance, for example, and in the gen- young people inhabit. eral demand for healthcare. The health sector is con- stantly developing new treatments and new training “In the insurance business there is a belief that young methods that probably cannot be financed through taxes. people are bad customers. However, we have looked into Individual citizens can rely on insurance to make sure they the matter and have found out that this is not generally get the newest and best treatment on offer. This develop- the case. On the contrary. In general, young people are a ment has been under way for the past five to ten years: very interesting customer group with needs such as accident insurance and other personal insurances. Young “It’s not something that happens overnight. It’s a gradual customers want to be met in a new way where they are accumulation of many small changes over time and we experts on their own lives, and where they are respon- need help to spot these trends. So we’ve hired people sible for their own lives. We shouldn’t play the role of with backgrounds outside the insurance industry. People parent. In the future, we will adapt our communication who are used to working with design and theatre, for and service patterns to match young people’s wishes and instance. These new kinds of employees ask new kinds of needs,” says the head of New Markets. questions. And we need help answering uncomfortable questions. We must therefore bring in people and new references that challenge us,” says Stig Ellkier-Pedersen. 88 of 152 l Feature l TrygVesta Annual Report 2007 User-driven insurance trends Blazing new trails with TrygVesta At TrygVesta’s BusinessLab, a variety of employees are The new product development and user-driven innovation working on innovation. The alternative style of working at initiatives are not earmarked for specific products or tar- BusinessLab often results in very specific products being get groups. Target groups might be young, middle-aged developed. Participants in various workshops are often or senior citizens. Women and men. Customers with real customers. Instead of writing reports on what steps flooded basements or water on the knee: TrygVesta can take long term, the customers are encour- aged to get to grips with tangible solutions and models. “Just implementing what is safe isn’t good enough. We For example, one group of youngsters came up with the must stimulate our urge to experiment. We mustn’t take idea of texting your insurance company if your bike was chances – not the kind that could backfire – but we must stolen. And with that idea in mind, they immediately have the courage to launch products that may not be began developing a system that could be used in real life. best sellers,” says Stig Ellkier-Pedersen. This was done by drawing an “I’m-reporting-my-bike-sto- len-via-an-text-message” system. This puts the customer At the end of the day, it’s the customer who determines in focus from the very start of the development process. the success achieved by a product. After all, the customer is always right. “There is a lot of potential to explore here. It generates a whole new energy. Instead of asking, we get customers to show us, so that product development is on their terms as much as possible,” says Stig Ellkier-Pedersen. TrygVesta Annual Report 2007 l Feature l 89 of 152 Feature: Innovation and social responsibility Everyone is talking about the weather For years, the subject of “global warming” has caused a cold war between experts in the area, but there is an increasing consensus that climate change is a reality that we all have to deal with. TrygVesta is hard at work finding solutions to the new challenges that climate change involves. In 1728, the city of Copenhagen burned down. This “If the number of claims continues to rise, insurance pre- prompted a number of citizens to establish “the fire miums will follow suit, but we’re not there yet. We’ve fund” to counteract the consequences of the fire. Now, at now reached a point where we must face certain ques- the beginning of the 21st century, alarm bells are ringing tions: Should we involve ourselves in how houses are again. This time due to global warming: built? What houses should we insure? What demands should we make? Can we develop products that encour- “It’s not just a hypothetical question about what will hap- age customers to reduce pollution, or can we assess the pen in the future. It’s a question of what has already damage in a particular way that inspires environmental happened: In recent years, we’ve had warmer weather, awareness?” says Lars Bonde, before adding: “We must more rainfall, more wind – and more claims. TrygVesta also ask ourselves what we can do to be more environ- has already faced considerable additional expenses in mentally friendly. We want sustainability to be a key word both Denmark and Norway,” explains Lars Bonde, Chief at all levels of our company – from product development Executive of Corporate. He glances at his watch and through transport.” notices that it’s 3 December: Focus on climate initiatives – policy, science and “Exactly eight years ago today, on 3 December 1999, a the business community terrible storm hit Denmark. The storm of the century, as it For some years, environmental and climate changes have was called, resulted in 94,000 claims and cost TrygVesta been a controversial political topic in Denmark and inter- DKK 2.5 billion. And although it was a storm of the cen- nationally, but the subject is being given increasing prior- tury, in January 2005 a new storm whipped up another ity on political and scientific agendas. After the general 53,000 claims and cost DKK 733 million. Weather dam- election in November 2007, Denmark now has a new Cli- age has brought considerable costs both for our custom- mate Ministry, and in December 2009, Denmark will host ers and for us. And we will do everything we can to the UN Climate Summit. ensure our customers are as well prepared as possible for the new weather conditions,” explains Lars Bonde. TrygVesta always strives to make a positive contribution to society. Naturally, this also applies to the environment New weather conditions raise new questions and climate. TrygVesta is a member of the Council for During the wet summer of 2007, many basements were Sustainable Business Development, along with about 20 flooded, and it became clear at TrygVesta that weather other major companies such as Danfoss, Grundfos and damage is a challenge for the entire logistics system. The Novo Nordisk. The council is currently working on a char- Group has therefore allocated reinforcements to this area, ter of eco-guidelines that will be finalised and passed in including extra backup from claims experts and additional spring 2008. suppliers who can help repair the damage. New initia- tives, however, lead to higher costs: 90 of 152 l Feature l TrygVesta Annual Report 2007 Concerns and expectations among “Our job is to provide peace of mind, and when so many the general public people are concerned about the climate it has a major Climate change has been the subject of intense media impact on us. We’ve found that concerns in this field have interest in recent years. And many insurance customers risen significantly in recent years. We’ve also realised that already have an opinion on this issue. A survey conducted people expect us to solve the problems. The Norwegian by TrygVesta in Norway showed that three out of four survey shows that customers expect a great deal from Norwegians are concerned about how climate change will their insurance company. They expect us to have the ultimately affect life on Earth: skills required to find solutions. That’s why we’re working hard to adapt to the new situation – and find new solutions,” says Lars Bonde. Intensified environmental focus In 2007, TrygVesta devised a system for its environmental work and established an interdepartmental corporate steering committee to drive the Group’s climate and environmental commitments. The Supervisory Board approved an environmental and climate policy that came into force on 1 January 2008. This policy defines a number of specific climate goals for the Group in 2008, including a 10% reduction in the Group’s CO2 emissions in 2008-2010. TrygVesta will also screen environmental and climate issues throughout the entire Group in 2008 as the basis for an annual measurement and reporting in the future. TrygVesta Annual Report 2007 l Feature l 91 of 152 Feature: Innovation and social responsibility When companies take responsibility CSR, Corporate Social Responsibility, will come to mean even more at TrygVesta in the next few years. TrygVesta has joined an extensive Nordic cooperation on CSR-driven innovation – a project that is set to last for some years. TrygVesta has joined a new Nordic project to support and with intellectual and financial capacity are obliged to con- develop the business potential of small and medium sized duct business with consideration. And show social respon- businesses. sibility. Out of the ruins of the great fire of Copenhagen in 1728 grew the desire to take care of each other. To show Helle Kjærgaard works with strategy and management at consideration. A group of citizens decided to establish the TrygVesta Management Secretariat. She is also the “the fire fund”. Some 300 years later, the same mindset company’s contact person for the new project with the formed the basis of TrygVesta’s Corporate Social Responsi- Danish Commerce and Companies Agency, Nordic Innova- bility policy. tions Centre, Region Zealand and TrygVesta: CSR creates value for the company “CSR, which stands for Corporate Social Responsibility the Within its three CSR areas, TrygVesta has set up various term covers the company’s social responsibility and steering groups. One environment group is investigating involves how a company cares for the environment we live what action TrygVesta can take in relation to purchasing, in, cares for its people and plays an active role in society. air-conditioning systems, employee cars, environmentally- It’s a matter of maintaining a long-term and sustainable friendly products, green products and insurance products. approach,” explains Helle Kjærgaard: Another group is focusing on employees, in terms of diversity, for example. The goal is to define some guide- “We work with a CSR umbrella concept that covers three lines for the company’s employment policy: areas: The environment. Employees. And society. We’ve always worked with CSR at TrygVesta. What’s new is that “Like many other companies, we’re facing the challenge of we now have one specific concept and work towards sys- attracting employees, especially in IT, where we’d like to tematising our activities in this field. We want to make make work easier for employees with reduced working sure that our experiences are collected and outlined to capacity, for example. Employees with impaired hearing benefit the whole organisation. We used to do this but and vision should also be welcome at TrygVesta,” says without really considering why. We put our thoughts into Helle Kjærgaard. action but not into words.” Stine Bosse receives an invitation Tryg – still providing peace of mind The invitation to take part in a long-term Nordic project on Corporate Social Responsibility fits in well with TrygVesta’s CSR-driven innovation came from the Danish Commerce history and values. A history that’s about determination, and Companies Agency. The project is being financed by initiative and solidarity. And about a responsible company TrygVesta, the Nordic Innovation Centre and Region Zea- that focuses on human potential – and its employees. Try- land. The aim is to support and develop the business gVesta believes that large, well-consolidated companies potential of Nordic small and mediumsized businesses. 92 of 152 l Feature l TrygVesta Annual Report 2007 A panel of business executives is also being set up to “Citizens and consumers, banks and suppliers are so sensi- make recommendations, compare practical experience with ble and responsible that companies who actually take on theory in the area, and map new trends: responsibility and invest in projects that might not appear to benefit the company initially, actually make good “The next two years will be a long learning process. The returns on their investments or the costs of social respon- entire project depends a great deal on the companies that sibility activities,” says Steen Hildebrandt, Professor at the will actually form the basis for the research. We will proba- Institute for Management, Århus School of Business, Århus bly invest in a combination of various kinds of companies University (From a book entitled Company Karma, 2007). and people. There will be entrepreneurs, individuals with good ideas, more traditional thinkers and others,” says TrygVesta bases its business on core elements anchored in Helle Kjærgaard, adding: “TrygVesta would like to have the company’s history and in conscious choices. It’s been someone to play with. We know from the Danish Com- that way for several hundred years. A long time before it merce and Companies Agency that small and mediumsized became “trendy”: businesses are very effective in this area. Possibly because they keep the path from idea to practice reasonably short. “Today, nearly 300 years after the great fire of Copenha- Naturally, we would also like to find out why they’re so gen, we’re all citizens of the global village. TrygVesta good at CSR-driven innovation in particular. And we want belongs to a global eco-system where everything is linked to learn the techniques and tools they use.” and intertwined. In this globalised world, CSR will be a CSR in a global era competitive parameter because consumers, employees and society in general will choose companies that take Research from the Copenhagen Business School show that their responsibility seriously,” says Helle Kjærgaard. social responsibility makes sound business sense: TrygVesta Annual Report 2007 l Feature l 93 of 152 Contents Contents Notes Statement by the Supervisory Board and the Executive Management Independent auditors’ report 1 2 3 4 5 6 6 7 8 9 10 11 12 13 14 15 16 17 18 19 19 20 21 22 23 24 25 26 27 28 29 Income statement and Balance Sheet for TrygVesta Group Statement of changes in equity Cash flow statement - TrygVesta Group Accounting policies Earned premiums, net of reinsurance Technical interest, net of reinsurance Claims incurred, net of insurance Insurance operating expenses, net of reinsurance Segments Technical result, net of reinsurance, by line of business Interest and dividens, etc. Market value adjustment Reconciliation of tax expenses Profit/loss on discontinued and divested business Intangible assets Operating equipment Owner-occupied property Investment property Investments in associates Financial investment assets Reinsurer’s share Current tax Share capital Capital adequacy, etc. Subordinated loan capital Provisions for claims Pensions and similar obligations Deferred tax Other provisions Debt to credit institutions Other debt Earnings per share Contractual obligations, contingent liabilities and collateral Related parties Income statement for TrygVesta A/S (parent company) Statement of changes in equity (parent) Notes (parent company) Financial highlights and key ratios by geography Organisation chart Glossary 94 of 152 l Contents l TrygVesta Annual Report 2007 Page 95 96 97 100 102 103 113 113 113 113 116 118 120 120 120 121 121 122 122 123 124 125 128 128 128 129 129 130 133 135 136 136 136 136 137 138 140 142 143 148 150 151 Statement by the Supervisory Board and the Executive Management The Supervisory Board and the Executive Management have today considered and adopted the annual report for 2007 of TrygVesta A/S and the TrygVesta Group. The consolidated financial statements have been prepared in accordance with the International Financial Reporting Stand- ards as adopted by the EU, and the financial statements of the parent company have been prepared in accordance with the Danish Financial Business Act. In addition, the annual re- port has been presented in accordance with additional Danish disclosure requirements for the annual reports of listed finan- cial enterprises. In our opinion, the accounting policies applied are appropri- ate, and the annual report gives a true and fair view of the Group’s and the parent company’s assets, liabilities, and fi- nancial position at 31 December 2007 and of the results of the Group’s and the parent company’s operations and the cash flow of the Group for the financial year ended 31 De- cember 2007. The management’s report gives a true and fair view of devel- opments in the activities and financial position of the com- pany and describes significant risk and uncertainty factors that may affect the company. We recommend that the annual report be adopted by the shareholders at the annual general meeting. Ballerup, 25 February 2008 Executive Management Christine Bosse Group CEO Supervisory board Mikael Olufsen Chairman Morten Hübbe Group CFO Peter Falkenham Group COO Bodil Nyboe Andersen Deputy Chairman Jørn Wendel Andersen Paul Bergqvist Christian Brinch Niels Bjørn Christiansen John R. Frederiksen Per Skov Trond Christiansen Peter Wagner Mollerup Birthe Petersen Håkon J. Huseklepp TrygVesta Annual Report 2007 l Statement by the Supervisory Board and the Executive Management l 95 of 152 Accounts Independent auditors’ report To the shareholder of TrygVesta A/S We have audited the annual report of TrygVesta A/S for the financial year starting on January 1 and ending on December 31, 2007, which comprises the management’s report, the statement by management, accounting policies, income statement, balance sheet, capital and notes for the Group as well as the parent company and the cash flow statement for the Group. The consolidated financial statements have been prepared in accordance with International Financial Re- porting Standards as adopted by the EU, and the parents fi- nancial 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. Management’s responsibility for the annual report Management is responsible for preparing and presenting an annual report that gives a true and fair view in accordance with the International Financial Reporting Standards as adopted by the EU in respect of the consolidated financial statements and in accordance with the Danish Financial Busi- ness Act in respect of the parent company’s financial state- ments and in accordance with additional Danish disclosure requirements for annual reports of listed financial enterprises. This responsibility includes; designing, implementing and maintaining internal control relevant to the preparation and fair presentation of an annual report that is free from mate- rial misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making ac- counting estimates that are reasonable in the circumstances. Basis of opinion Our responsibility is to express an opinion on the annual report based on our audit. We conducted our audit in accordance with Danish auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual report is free from materiel misstatement. An audit involves performing procedures to obtain audit evi- dence about the amounts and disclosures in the annual re- port. The procedures selected depend on the auditor’s judg- ment, including the assessment of the risks of material misstatement of the annual report, whether due to fraud or error. In making those risk assessments, the auditor consid- ers internal controls relevant to the preparation and fair pres- entation of the annual report in order to design audit proce- dures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control. An audit also includes evaluating the appro- priateness of accounting policies used and the reasonable- ness of accounting estimates made by management, as well as evaluating the overall presentation of the annual report. We believe that the audit evidence we have obtained is suffi- cient and appropriate to provide a basis for our audit opinion. Our audit did not result in any qualification. Opinion In our opinion, the annual report gives a true and fair view of the Group’s assets, liabilities and financial position at Decem- ber 31, 2007, and of the results of the Group’s operations and the Group’s cash flows for the financial year starting on January 1 and ending on December 31, 2007 in accordance with International Financial Reporting Standards as adopted by the EU and in accordance with additional Danish disclosure requirements for annual reports of listed financial enterprises. Furthermore in our opinion, the annual report gives a true and fair view of the parent company’s assets, liabilities and financial position at December 31, 2007, and of the results of the parent company’s operations for the financial year starting on January 1 and ending on December 31, 2007 in accordance with the Danish Financial Business Act and in ac- cordance with additional Danish disclosure requirements for annual reports of listed financial enterprises. Ballerup, 25 February 2008 Deloitte Statsautoriseret Revisionsaktieselskab Lone Møller Olsen State Authorised Public Accountant Leif Zilmer State Authorised Public Accountant 96 of 152 l Independent auditors’ report l TrygVesta Annual Report 2007 Income statement DKKm Notes General insurance Gross premiums written Ceded insurance premiums Change in provisions for unearned premiums Change in reinsurers’ share of provisions for unearned premiums 2 Earned premiums, net of reinsurance 3 Technical interest, net of reinsurance Claims paid Reinsurance recoveries Change in provisions for claims Change in the reinsurers’ share of provisions for claims 4 Claims incurred, net of reinsurance Bonus and premium rebates Acquisition costs Administrative expenses Acquisition costs and administrative expenses Commission and profit commission from the reinsurers 5 Total insurance operating expenses, net of reinsurance 6 Technical result 15 Investment activities Income from associates Income from investment properties Interest income and dividends, etc. 7 8 Value adjustment Interest expenses 7 Investment management charges Total return on investment activities 3 Interest on insurance provisions Total return on investment activities after technical interest Other income Other expenses Profit/loss before tax 9 Tax Profit/loss on continuing business 10 Profit/loss on discontinued and divested business Profit/loss for the year 27 Earnings per share – continuing business Earnings per share 2007 2006 16,959 -893 -130 -46 15,890 501 -11,336 495 161 6 -10,674 -223 -1,821 -948 -2,769 95 -2,674 2,820 1 116 1,382 415 -88 -86 1,740 -1,400 340 121 -172 3,109 -842 2,267 -1 2,266 33.5 33.5 16,296 -945 -61 3 15,293 343 -10,064 550 -500 -301 -10,315 -214 -1,719 -978 -2,697 102 -2,595 2,512 6 101 1,105 1,226 -94 -85 2,259 -1,031 1,228 118 -149 3,709 -624 3,085 126 3,211 45.5 47.3 TrygVesta Annual Report 2007 l Income statement l 97 of 152 Accounts Balance sheet DKKm Notes Assets 11 Intangible assets 12 Operating equipment 13 Owner-occupied property Total property, plant and equipment 2007 2006 335 80 306 386 220 98 326 424 14 Investment property 2,263 2,127 15 Investments in associates Total investments in associates Equity investments Unit trust units Bonds Deposits in credit institutions 16 Total other financial investment assets Deposits with ceding undertakings, receivable 19 19 2,961 1,629 30,654 302 35,546 19 18 18 5,308 306 30,100 0 35,714 18 Total investment assets 37,847 37,877 Reinsurers’ share of provisions for unearned premiums 21 Reinsurers’ share of provisions for claims 17 Total reinsurers’ share of provisions for insurance contracts Receivables from policyholders Total receivables in relation to direct insurance contracts Receivables from insurance enterprises Receivables from subsidiaries Other receivables 16 Total receivables Temporarily acquired assets 18 Current tax assets Cash in hand and at bank Other Total other assets Accrued interest and rent earned Other prepayments and accrued income Total prepayments and accrued income 159 1,428 1,587 901 901 509 0 1,145 2,555 0 93 298 4 395 666 59 725 185 1,376 1,561 840 840 647 27 262 1,776 6 43 338 7 394 474 57 531 Total assets 43,830 42,783 98 of 152 l Balance sheet l TrygVesta Annual Report 2007 DKKm Notes Liabilities 19 Shareholders’ equity 20 Subordinated loan capital 21 Provisions for unearned premiums 21 Provisions for claims Provisions for bonuses and premium rebates Total provisions for insurance contracts 22 Pensions and similar obligations 23 Deferred tax liability 24 Other provisions Total provisions Debt related to direct insurance Debt related to reinsurance 25 Debt to credit institutions Current tax liabilities 26 Other debt Total debt Accruals and deferred income 2007 10,010 1,101 5,403 21,104 409 26,916 403 1,109 57 1,569 358 253 599 336 2,597 4,143 91 2006 9,951 1,099 5,173 20,410 374 25,957 503 959 50 1,512 358 214 665 229 2,689 4,155 109 Total liabilities and equity 43,830 42,783 19 Capital adequacy 27 Earnings per share 28 Contractual obligations, contingent liabilities and collateral 29 Related parties TrygVesta Annual Report 2007 l Balance sheet l 99 of 152 Accounts Statement of changes in equity DKKm Reserve for tion exchange capital reserves rate adj. Revalua- Share Equali- sation Other Retained Proposed reserve reserves earnings dividends Total Shareholders’ equity at 1 January 2006 1,700 5 46 63 800 4,173 1,428 8,215 Equity entries in 2006 Profit for the year Change in equalisation provision Revaluation of owner-occupied properties Exchange rate adjustment of foreign entities Hedge of foreign currency risk in foreign entities Actuarial gains and losses on pension obligation Tax on equity entries Total comprehensive income Dividend paid Dividend own shares Purchase of own shares Issue of employee shares Issue of share options Total equity entries in 2006 Shareholders’ equity at 31 December 2006 Shareholders’ equity at 1 January 2007 Equity entries in 2007 Profit for the year Change in equalisation provision Revaluation of owner-occupied properties Exchange rate adjustment of foreign entities Hedge of foreign currency risk in foreign entities Actuarial gains and losses on pension obligation Tax on equity entries Total comprehensive income Dividend paid Dividend own shares Purchase of own shares Issue of employee shares Issue of share options Total equity entries in 2007 0 0 1,700 1,700 0 0 Shareholders’ equity at 31 December 2007 1,700 -143 107 -30 -66 -5 967 5 2,244 116 -32 3,211 0 3 -143 107 116 -63 -5 0 1,056 2,244 3,231 -1,428 -1,428 5 -88 13 3 5 -88 13 3 -66 -5 0 989 816 1,736 -20 58 800 5,162 2,244 9,951 -20 58 800 5,162 2,244 9,951 49 -40 10 19 75 1,035 1,156 35 -58 94 -11 2,266 0 -3 84 -98 94 2 0 75 1,095 1,156 2,345 -2,244 -2,244 14 -96 32 8 14 -96 32 8 19 0 75 1,053 -1,088 59 -1 58 875 6,215 1,156 10,010 3 -1 2 2 7 7 -3 3 0 0 7 100 of 152 l Statement of changes in equity l TrygVesta Annual Report 2007  Dividend paid per share DKK 17 (total for 2006 DKK 33 DKK) Dividend per share is calculated as the total dividend proposed by the Supervisory Board after the end of the financial year divided by the average number of shares 67,648,000. The dividend is not paid until approved by the shareholders at the annual general meeting of the subsequent year. TrygVesta Forsikring, the Norwegian branch of TrygVesta Forsikring A/S, has in its branch financial statements included provisions for contingency funds in the amount of NOK 2,564m (2006: NOK 2,251m) under provisions for insurance contracts. In TrygVesta Forsikring A/S, these provisions, due to their nature as additional provisions, are included in shareholders’ equity, net of deferred tax. TrygVesta For- sikring A/S’ option to pay dividend to TrygVesta A/S is influenced by this amount. The dividend payment is also affected by a contingency fund provision of DKK 670m, which is included in shareholders’ equity in TrygVesta Forsikring A/S. TrygVesta Garantiforsikring A/S has a similar contingency amounting to DKK 139m, which is also included in the company’s shareholders’ equity. STATEMENT OF RECOGNISED INCOME AND EXPENSES DKKm Revaluation of owner-occupied properties for the year Tax on owner-occupied properties for the year Exchange rate adjustment of foreign entities for the year Hedging of currency exposure in foreign entities for the year Tax on hedging of currency exposure in foreign entities for the year Actuarial gains/losses on defined benefit pension plans Tax on actuarial gains/losses on defined benefit pension plans Net income/expense taken directly to equity Profit for the year Total recognised income and expenses 2007 -3 3 84 -98 24 94 -25 79 2,266 2,345 2006 3 -1 -143 107 -30 116 -32 20 3,211 3,231 TrygVesta Annual Report 2007 l Statement of change in equity l 101 of 152 Accounts Cash flow statement – TrygVesta Group DKKm 2007 2006 Cash generated from operations Premiums Claims paid Ceded business Expenses Change in other payables and other amounts receivable Cash flow from insurance operations Interest income Interest expenses Dividend received Taxes Other items Cash generated from operations, continuing business Cash generated from operations, discontinued and divested business Total cash generated from operations Investments Acquisition of real property Sale of real property Acquisition of equity investments and unit trust units (net) Purchase/Sale of bonds (net) Deposits in Credit institutions Purchase of operation equipment Sale of operation equipment Sale of subsidiares Sale of associated Foreign currence hedging Investments, continuing business Investments, discontinued and divested business Total investments Funding Purchase of own shares Share options Dividend paid Change in debt to credit institutions Funding, continuing business Funding, discontinuied and divested business Total funding Change in cash an cash equivalents, net Price adjustment of cash and cash equivalents, beginning of period Additions relating to purchase of associate Change in cash and cash equivalents, gross Cash and cash equivalents, begining of period Cash and cash equivalents, end of period 102 of 152 l Cash flow statement – TrygVesta Group l TrygVesta Annual Report 2007 16,800 -11,376 -122 -2,705 -316 2,281 1,164 -186 169 -693 -55 2,680 0 2,680 -16 17 1,062 -856 -303 -187 5 0 0 -98 -376 0 -376 -50 8 -2,244 -65 -2,351 0 -2,351 -47 7 0 -40 338 298 15,935 -9,902 -153 -2,698 13 3,195 886 -207 261 -718 -31 3,386 -139 3,247 -240 10 163 -1,925 0 -188 82 142 14 107 -1,835 0 -1,835 -83 16 -1,428 -121 -1,616 0 -1,616 -204 -2 1 -205 543 338 Notes Note 1 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 2007 and in accordance with the Danish Stat- utory Order on Adoption of IFRS. The financial statements of the parent company are prepared in ac- cordance with executive order no. 1467 dated 13 December 2006 is- sued by the Danish FSA on the presentation of financial reports by in- surance companies and profession-specific pension funds, which is largely identical to IFRS. The deviations from the recognition and measurement requirements of IFRS are: • Investments in subsidiaries and associates are valued according to the equity method, whereas under IFRS valuation is made at cost or fair value. Furthermore the requirements regarding presentation and disclosure are less comprehensive than under IFRS. • Unlike IAS 19, the Danish FSA’s executive order does not allow for actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions to be taken to equity. Actuarial gains and losses will therefore be recognised in the parent compa- ny’s income statement. • The Danish FSA’s executive order does not allow provisions for de- ferred tax of contingency reserves allocated from untaxed funds. De- ferred tax and the equity of the parent company have been adjusted accordingly on the transition to IFRS. The executive order on application of international financial reporting standards for companies subject to the Danish Financial Business Act is- sued by the Danish FSA requires disclosure of differences between the format of the annual report under international financial reporting stand- ards and the rules issued by the Danish FSA. The following is a reconcilia- tion of differences in the profit for the year and shareholders’ equity. DKKm 2007 2006 Profit reconciliation Profit for the year ended 31 December - IFRS Current-year effect of actuarial gains and losses on pension obligation after tax Change in deferred tax relating to contingency funds 2,266 3,211 69 -2 84 -4 Profit for the year ended 31 December - Danish FSA executive order 2,333 3,291 Equity reconciliation Shareholders’ equity at 31 December - IFRS Deferred tax provisions for contingency funds Change in deferred tax relating to contingency funds 10,010 9,951 27 23 -2 -4 Equity at 31 December - Danish FSA executive order 10,031 9,974 Changes in accounting policies TrygVesta introduced a simpler model for unwinding effective on 1 Jan- uary 2007. Unwinding means that the discount on the provision is un- wound as the settlement date gets closer and the amount is trans- ferred from claims to technical interest in the income statement. The new method relies solely on market interest rates and provisions at the beginning of the relevant period, thus providing a more stable and predictable outcome. For 2006, the change involved a reduction of the combined ratio of 1.4% (a total of 0.9% for 2005). In connection with the discounting, a larger share of claims incurred is thus trans- ferred to technical interest. The change has no effect on the profit for the year, the balance sheet or on shareholders’ equity. All comparative figures are restated and the effect is shown in the ta- ble next page. In 2007, the Group implemented: • IFRS 8 ’Segment information’. Replacing IAS 14, the standard will en- ter into force on 1 January 2009. Implementation of the standard will entail a change in the identification of segments from primary and secondary segments to operating segments. The standard has no ef- fect on recognition and measurement in the annual report. • IFRIC 8 concerning ‘Scope of IFRS 2’ comes into force for financial years commencing on or after 1 May 2007. The group already treats group transactions concerning share-based payment in accordance with these principles. The interpretation has not changed the ac- counting treatment currently applied. • IFRIC 10 concerning ‘Interim Financial Reporting and Impairment’. The interpretation prohibits the reversal of impairment losses in in- terim financial statements on goodwill and financial assets carried at cost. The implementation has not had any financial effect. • IFRIC 11 concerning ‘Group and Treasury Share Transactions’. The in- terpretation 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 has not changed the accounting treatment currently applied. Apart from the changes described above, the accounting policies are unchanged from the annual report 2006. TrygVesta Annual Report 2007 l Notes l 103 of 152 Accounts DKKm Gross premiums earned Gross claims incurred Gross expenses FY 2006 FY 2005 Former unwind. ajust- New acc. policies ments policies policies ments policies policies ments policies New Former unwind. ajust- acc. acc. acc. FY 2004 New Former unwind. ajust- acc. acc. 16,021 -10,796 -2,697 232 16,021 -10,564 -2,697 15,705 -11,304 -2,662 145 15,705 -11,159 -2,662 15,266 -10,572 -2,611 147 15,266 -10,425 -2,611 Profit/loss on gross business 2,528 232 2,760 1,739 145 1,884 2,083 147 2,230 Profit/loss on ceded business -578 -13 -591 -9 2 -7 -718 10 -708 Interest on insurance provisions Transferred from provisions for claims concerning discounting Technical interest, net of reinsurance 1,040 -457 583 1,040 701 701 636 -240 -240 -697 -378 343 323 -153 -153 -531 -301 170 335 -150 -150 636 -451 185 Technical result Return on investment activites after transfer to Insurance activities Other income and expenses Tax Profit/loss on discontinued and divested business after tax 2,533 -21 2,512 2,053 -6 2,047 1,700 7 1,707 1,207 -31 -624 126 21 1,228 -31 -624 888 -28 -788 6 894 -28 -788 378 -26 -556 -7 126 -28 -28 -75 371 -26 -556 -75 Profit/loss 3,211 0 3,211 2,097 0 2,097 1,421 0 1,421 Run-off gains/losses, net of reinsurance 372 67.4 Gross claims ratio Business ceded as a percentage of gross premiums 3.6 Claims ratio, net of ceded business Gross expense ratio Combined ratio Claims ratio, net Expense ratio, net Combined ratio, net 71.0 16.8 87.8 69.9 17.2 87.1 183 -1.5 0.1 -1.4 0.0 -1.4 -1.5 0.0 -1.5 555 181 65.9 3.7 69.6 16.8 86.4 68.4 17.2 85.6 72.0 0.1 72.1 17.0 89.1 70.7 17.6 88.3 102 -0.9 0.0 -0.9 0.0 -0.9 -1.0 0.0 -1.0 283 -161 71.1 0.1 71.2 17.0 88.2 69.7 17.6 87.3 69.3 4.7 74.0 17.1 91.1 72.4 17.6 90.0 90 -1.0 -0.1 -1.1 0.0 -1.1 -1.2 0.0 -1.2 -71 68.3 4.6 72.9 17.1 90.0 71.2 17.6 88.8 Executive orders, standards and interpretations not yet in force The International Accounting Standards Board (IASB) has issued a number of revised international accounting standards and the Interna- tional Financial Reporting Interpretations Committee (IFRIC) has issued a number of interpretations that have not yet come into force. Other interpretations, including IFRIC 12 ’Service Concession Arrange- ments’, IFRIC 13 ’Customer Loyalty Programmes’ and IFRIC 14 ’The limit on a Defined Benefit Asset’ are not expected to have any financial re- porting impact. • IAS 1 concerning ’Presentation of Financial Statements – Capital Dis- closures’, which is effective for financial years commencing on or after 1 January 2009. The amendment contains an adjustment to the type of information disclosed about the capital base. The implementation is not expected to give rise to any material changes to information in Try- gVesta’s annual report (IAS 1 remains to be adopted by the EU). • IAS 23 (updated 2007) concerning ‘Borrowing costs, which is effec- tive for financial years commencing on or after 1 January 2009. IAS 23 (updated 2007) requires the recognition of borrowing costs in the cost of a qualifying asset (intangible assets, property, plant and equipment and inventories). The standard is not expected to have fi- nancial reporting impact (IAS 23 remains to be adopted by the EU). 104 of 152 l Notes l TrygVesta Annual Report 2007 Changes in accounting estimates • The TrygVesta Group’s defined benefit plan in Norway is impacted by DKK 99m due to a change in discount rate assumptions from 4.7% to 5.2%. Accounting estimates and judgments The preparation of financial statements under IFRS requires the use of certain critical accounting estimates and requires management to exer- cise its judgment in the process of applying the company’s accounting policies. The areas involving a higher degree of judgment or complex- ity, or areas where assumptions and estimates are significant to the consolidated financial statements, are: • Liabilities under insurance contracts • Valuation of defined benefit plans A more detailed description of primary assumptions about the future and other primary sources of estimation uncertainty is given in the risk management section in the management’s report. Liabilities under insurance contracts Estimates of provisions for insurance contracts represent the group’s most critical accounting estimates, as these provisions involve a number of uncertainty factors. Liabilities for unpaid claims are estimates that involve actuarial and statistical projections of the claims and the administration of the claims. The projections are based on the TrygVesta Group’s knowledge of historical developments, payment patterns, reporting delays, dura- tion of the claims settlement process and other effects that might in- fluence the future development of the liabilities. The TrygVesta Group establishes claims reserves covering both case re- serves and estimated claims that have been incurred by its policyhold- ers but not yet reported to the company (known as “IBNR” reserves) and future developments on claims which are known to the TrygVesta Group but have not been finally settled (IBNER-provisions). The group also includes in its claims reserves direct and indirect claims settlement costs or loss adjustment expenses that arise from events that have occurred up to the balance sheet date even if they have not yet been reported to the TrygVesta Group. The projection for claims reserves is therefore inherently uncertain and, by necessity, relies upon the making of certain assumptions as to fac- tors such as court decisions, changes in law, social inflation and other economic trends, including inflation. The TrygVesta Group’s actual lia- bility for losses may therefore be subject to material positive or nega- tive deviations relative to the initially estimated provisions for claims. Provisions for claims are discounted. As a result, initial changes in dis- count rates or changes in duration of the claims provisions could have positive or negative effects on earnings. Discounting affects the motor liability, professional liability, workers’ compensation and personal acci- dent classes, in particular. Several assumptions and estimates underlying the calculation of the provisions for claims are mutually dependent. Most importantly, this can be expected to be the case for interest rate and inflation assumptions. Defined benefit pension schemes The company operates a defined benefit plan in Norway. A “defined benefit” plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, depending on age, years of service and compensation. The liability recognised in the bal- ance 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 unrecog- nised actuarial gains or losses and past service costs. The projected unit credit method is a cash-flow calculation, which calculates the obli- gation as the present value of benefit attributed to current and prior years. The defined benefit obligation is calculated periodically by actu- aries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting estimated fu- ture cash outflows. Changes in the present value are primarily made due to changes in as- sumptions about discount rate, expenses, return on plan assets, future salary increases and future pension increases. Since the provision for pension funds is based on actuarial calculations involving statistics and cash flow from such factors as investments, changes in interest rates, inflation and expectation of life, it may mean that the TrygVesta Group’s provision may be inadequate to cover its actual liability to- wards employees and current pensioners. BASIS OF PRESENTATION Recognition and measurement The annual report has been prepared under the historical cost conven- tion, as modified by the revaluation of owner-occupied properties, where increases are credited to equity and revaluation of investment property, financial assets held for trading and financial assets and fi- nancial liabilities (including derivative instruments) at fair value through the income statement. Assets are recognised in the balance sheet when it is probable that fu- ture economic benefits will flow to the group and the value of the asset can be reliably measured. Liabilities are recognised in the balance sheet when the group has a legal or constructive obligation as a result of a prior event, and it is probable that future economic benefits will flow out of the group, and the value of the liabilities can be measured reliably. 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. Income is recognised in the income statement as earned, whereas costs are recognised by the amounts attributable to this financial year. Value adjustments of financial assets and liabilities are recorded in the income statement unless otherwise described below. All amounts in the notes are shown in millions of DKK, unless other- wise stated. Consolidation The consolidated financial statements comprise the financial state- ments of TrygVesta A/S (the parent company) and enterprises (subsidi- aries) controlled by the parent company. Control is achieved where the parent company directly or indirectly holds more than 50% of the vot- ing rights or is otherwise able to exercise or actually exercises a con- trolling influence. The consolidated financial statements are prepared on the basis of the financial statements of the parent company and its subsidiaries by TrygVesta Annual Report 2007 l Notes l 105 of 152 Accounts adding items of a uniform nature. The financial statements of subsidi- aries that present financial statements under other legislative rules are restated to the accounting policies applied by the group. Segment reporting Segment information is based on the group’s management and inter- nal financial reporting system and is prepared in accordance with the group’s accounting policies. Enterprises in which the group exercises significant influence but not control are classified as associates. Significant influence is typically achieved through direct or indirect ownership or disposal of more than 20% but less than 50% of the votes. Investments in joint ventures are recognised using the pro rata consoli- dation method. Using pro rata consolidation, the group’s share of joint venture assets and liabilities is recognised in the balance sheet. The share of income and expenses and assets and liabilities are presented on a line by line basis in the consolidated financial statements. On consolidation, intra-group income and expenses, shareholdings, in- tra-group accounts and dividends, and gains and losses arising on transactions between the consolidated enterprises are eliminated. The operational business segments in the TrygVesta Group are the Per- sonal & Commercial (Denmark) segment, the Personal & Commercial (Norway) segment, the Corporate segment and the General Insurance (Finland and Sweden) segment. Geographical information is presented on the basis of the economic environment in which the TrygVesta Group operates. The geographical areas are Denmark, Norway, Finland and Sweden. Segment income and segment costs as well as segment assets and lia- bilities comprise those items that can be directly attributed to each in- dividual segment and those items that can be allocated to the individ- ual segments on a reliable basis. Unallocated items primarily comprise assets and liabilities concerning investment activity. Newly acquired or divested subsidiaries are consolidated at the results for the period subsequent to achieving or surrendering control, respec- tively. Profit and loss in divested subsidiaries and profit and loss on dis- continued activities are included under discontinued and divested busi- ness in the income statement. Ratios Earnings per share (EPS) are calculated according to IAS 33. Other key ratios are calculated in accordance with “Recommendations and Ratios 2005” issued by the Danish Society of Financial Analysts. Unrealised gains on transactions between the group and its subsidiar- ies and associates are eliminated to the extent of the group’s interest in the companies. Unrealised losses are eliminated in the same way as unrealised gains unless impairment has occurred. In accordance with IFRS 1 TrygVesta Group has elected not to apply IFRS 3 retrospectively to past business combinations (business combi- nations that occurred before the date of transition to IFRS). Currency translation A functional currency is determined for each of the reporting entities in the group. The functional currency is the currency in the primary economic environment in which the reporting entity operates. Transac- tions in currencies other than the functional currency are transactions in foreign currencies. INCOME STATEMENT Premiums Earned premiums represent gross premiums earned during the year, net of outward reinsurance premiums and adjusted for changes in the provision for unearned premiums, corresponding to an accrual of pre- miums to the risk period of the policies, and in the reinsurers’ share of the provision for unearned premiums. Premiums are recognised as earned premiums according to the expo- sure of risk over the period of coverage, computed separately for each insurance contract using the pro rata method, and adjusted if neces- sary to reflect any variation in the incidence of risk during the period covered by the contract. On initial recognition, transactions in foreign currencies are translated into the functional currency at the exchange rate ruling at the trans- action date. Assets and liabilities denominated in foreign currency are trans lated at the exchange rates at the balance sheet date. Translation differences are recognised in the income statement under value adjustments. The portion of premiums received on contracts that relates to unex- pired risks at the balance sheet date is reported under provisions for unearned premiums. The portion of premiums paid to reinsurers that relate to unexpired risks at the balance sheet date is reported as the reinsurers’ share of provisions for unearned premiums. On consolidation, the assets and liabilities of the group’s foreign oper- ations are translated at exchange rates of the balance sheet date. In- come and expense items are translated at the average exchange rates for the period. Exchange differences arising on translation are classi- fied as equity and transferred to the group’s translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of. All other currency translation gains and losses are recognised in the income statement. Technical interest According to the Danish FSA’s executive order, technical interest is pre- sented as a calculated return on the year’s average insurance liability provisions, net of reinsurance. The calculated interest return for grouped classes of risks is calculated as the monthly average provision plus a co-weighted interest from the present yield curve for each indi- vidual group of risks. The interest is weighted according to the ex- pected run-off pattern of the provisions. 106 of 152 l Notes l TrygVesta Annual Report 2007 Technical interest is reduced by the portion of the increase in net pro- visions that relates to unwinding. Claims incurred Claims incurred represent claims paid during the year and adjusted for changes in provisions for unpaid claims less the reinsurers’ share. In addition, the item includes run-off results regarding previous years. The portion of the increase in provisions which can be ascribed to un- winding is transferred to technical interest. Claims are shown inclusive of direct and indirect claims handling costs, including costs of inspecting and assessing claims, costs to combat and contain claims incurred and other direct and indirect costs associ- ated with the handling of claims incurred. Changes in claims incurred due to changes in the yield curve and exchange rates are recognised as a market value adjustment. TrygVesta Group hedges the risk of changes in future wage and price figures for provisions for workers’ compensation and annuities for accident and health insurance. For 90-100% of this risk, TrygVesta Group uses swaps specifically acquired with a view to hedging the inflation risk. Value adjustment of these swaps are included in claims incurred, thereby reducing the effect of changes to inflation expecta- tions under claims incurred. Bonus and premium rebates Bonus and premium rebates represent anticipated and reimbursed premiums where the amount reimbursed depends on the claims record, and for which the criteria for payment have been defined prior to the financial year or when the business was written. Insurance operating expenses Insurance operating expenses represent acquisition costs and adminis- trative expenses less reinsurance commissions received. Expenses re- lating to acquiring and renewing the insurance portfolio are recognised at the time of writing the business. Administrative expenses are ac- crued to match the financial year. The share option agreement entitles the employee to the options un- less the employee resigns his position or is dismissed due to breach of the employment relationship. In case of termination due to restructur- ing or retirement, the employee is still entitled to the options. The share options are exercisable exclusively during a two-week period following the publication of full-year or half-year reports and in ac- cordance with TrygVesta Group’s in-house rules on trading in the com- pany’s shares. The options are settled in shares. A part of the compa- ny’s holding of treasury shares is reserved for settlement of the options allocated. On initial recognition of the share options, the number of options expected to vest is estimated. Subsequently, adjustment is made for changes in the estimated number of vested options to the effect that the total amount recognised is based on the actual number of vested options. The fair value of the options granted is estimated using the Black & Scholes option model. The calculation takes into account the terms and conditions of the share options granted. Employee shares When employees are given the opportunity to subscribe shares at a price below the market price, the discount is recognised as an expense in staff costs. The balancing item is recognised directly in equity. The discount is calculated at the grant date as the difference between fair value and the subscription price of the subscribed shares. In accordance with Danish law, the shares are held in restricted ac- counts until expiry of the seventh calendar year after they were sub- scribed. Employees cannot sell or otherwise dispose of the shares dur- ing the period they are subject to selling restrictions, but the shares will be released in case of the employee shareholder’s death or disability. Investment activities Income from associates includes the group’s share of the associates’ net profit. Share-based payment The TrygVesta Group’s incentive programmes comprise a share option programme and employee shares. Income from investment properties before fair value adjustment repre- sents the profit from property operations less property management expenses. Share option programme The value of services received as consideration for options granted is measured at the fair value of the options. Equity-settled share options are measured at the fair value at the grant date and recognised under staff costs over the period from the grant date until vesting. The balancing item is recognised directly in equity. Interest, dividends, etc. represent interest earned, dividends received, etc. during the financial year. In addition, the item includes gains and losses on bonds drawn for redemption. Realised and unrealised investment gains and losses, including gains and losses on derivative financial instruments, value adjustment of land and buildings, exchange rate adjustments and the effect of move- ments in the yield curve used for discounting, are recognised as value adjustments. The options are issued at an exercise price that corresponds to the market price of the company’s shares at the time of allocation plus 10 %. No other vesting conditions apply. Special provisions are in place concerning sickness and death and in case of change to the compa- ny’s capital position, etc. Investment management charges represent expenses relating to the management of investments. TrygVesta Annual Report 2007 l Notes l 107 of 152 Accounts Other income and expenses Other income and expenses includes income and expenses which can- not be ascribed to TrygVesta Group’s insurance portfolio or investment assets, including the sale of products for Nordea Liv og Pension. Increases in the revalued carrying amount of owner-occupied proper- ties are credited to the properties’ revaluation reserve in equity. De- creases that offset previous increases of the same asset are charged against the properties’ revaluation reserves directly in equity; all other decreases are charged to the income statement. Discontinued and divested business Discontinued and divested activities are consolidated in one line item in the income statement and supplemented with disclosure of the dis- continued and divested activities in a note to the financial statements. Recognition of the balance sheet items in respect of the discontinued activities remains unchanged in the respective items whereas assets and liabilities from divested activities are consolidated in one line as “assets concerning divested business” and “liabilities concerning di- vested business”, respectively. The comparative figures, including financial highlights and key ratios, have been restated to reflect discontinued business. Discontinued and divested activities in the income statement include the post-tax profit of TrygVesta Group’s business in run-off as well as divested enterprises. Business in run-off comprises the results of the business in run-off in TrygVesta Forsikring A/S. Divested subsidiaries comprise the activities in Chevanstell Ltd. UK, Poland, Estonia and Tryg Baltica International A/S. BALANCE SHEET Intangible assets - software Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on the basis of the expected useful life (four years). Costs that are directly associated with the production of identifiable and unique software products, for which there is sufficient certainty that future earnings will exceed costs for more than one year, are rec- ognised as intangible assets. Direct costs include the software devel- opment team’s employee costs and an appropriate portion of relevant overheads. All other costs associated with developing or maintaining software are recognised as an expense as incurred. After completion of the development the asset is depreciated on a straight-line basis over the expected useful life, however with a maxi- mum period of 4 years. The basis of amortisation is reduced by any impairment writedowns. Owner-occupied property and operating equipment 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 accumu- lated impairment writedowns. Revaluations are performed regularly to avoid the carrying amount differing materially from the owner-occu- pied property’s fair value at the balance sheet date. The fair value is calculated on the basis of market-specific rental income per property and typical operating expenses for the upcoming year. The resulting operating income is divided by the percentage return requirement of the property, which has been adjusted to reflect market interest rates and property characteristics, corresponding to the present value of a perpetual annuity. 108 of 152 l Notes l TrygVesta Annual Report 2007 Subsequent costs are included in the asset’s carrying amount or rec- ognised as a separate asset, as appropriate, when it is probable that future economic benefits associated with the item will flow to the group, and the cost of the item can be reliably measured. Ordinary re- pair and maintenance costs are charged to the income statement dur- ing the financial period in which they are incurred. Fixtures and operating equipment are measured at cost less accumu- lated depreciation and any accumulated impairment losses. Cost en- compasses the purchase price and costs directly attributable to the ac- quisition of the relevant assets until the time when the asset is ready to be brought into use. 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 • Vehicles, 3-5 years • Furniture, fittings and equipment, 3-5 years Land is not depreciated. The assets’ residual values and useful lives are reviewed at each bal- ance sheet date and adjusted if appropriate. Gains and losses on disposals and retirements are determined by com- paring proceeds with carrying amount. Gains and losses are recog- nised in the income statement. When revalued assets are sold, the amounts included in the revaluation reserves are transferred to re- tained earnings. Investment property Properties held for renting yields that are not occupied by the group are classified as investment properties. Investment property is carried at fair value. Fair value is based on mar- ket prices, adjusted for any difference in the nature, location or condi- tion of the specific asset. If this information is not available, the group uses alternative valuation methods such as discounted cash flow pro- jections and recent prices on less active markets. The fair value is calculated on the basis of market-specific rental in- come per property and typical operating expenses for the upcoming year. The resulting operating income is divided by the percentage re- turn requirement of the property, which has been adjusted to reflect market interest rates and property characteristics, corresponding to the present value of a perpetual annuity. The value is subsequently ad- justed with the value in use of the return on prepayments and depos- its and adjustment for specific property issues such as vacant premises or special tenant terms and conditions. Changes in fair values are recorded in the income statement. Impairment of intangible assets, equipment, owner-occupied property and investment property The carrying amount of intangible assets, operating equipment, owner-occupied property and investment property are tested at least once a year for impairment in the cash-generating unit to which the asset belongs, and the asset is written down to the recoverable amount through the income statement if the carrying amount is higher. The recoverable amount is generally calculated as the present value of the future cash flows expected to be derived from the activity to which the asset belongs. Investments in subsidiaries The parent company’s investments in subsidiaries are recognised and measured under the equity method. The parent company’s share of the enterprises’ profits or losses after elimination of unrealised intra- group profits and losses is recognised in the income statement. In the balance sheet, investments are measured at the pro rata share of the enterprises’ equity. Subsidiaries with a negative net asset value are measured at zero value. Any receivables from these enterprises are written down by the parent company’s share of such negative net asset value where the re- ceivables are deemed irrecoverable. If the negative net asset value ex- ceeds the amount receivable, the remaining amount is recognised un- der provisions if the parent company has a legal or constructive obligation to cover the liabilities of the relevant enterprise. Net revaluation of investments in subsidiaries is taken to reserve for net revaluation under the equity method if the carrying amount exceeds cost. The results of foreign subsidiaries are based on translation of the items in the income statement at average exchange rates for the pe- riod. Income and expenses in domestic enterprises denominated in for- eign currency are translated at the exchange rate ruling on the date of the transaction. Investments in associates Associates are enterprises over which the group has significant influ- ence but not control, generally accompanying a shareholding of be- tween 20% and 50% of the voting rights. Investments in associates are measured according to the equity method of accounting so that the carrying amount of the investment represents the group’s propor- tionate share of the enterprises’ net assets. Income after taxes from investments in associates is included as a sep- arate line in the income statement. Associates with a negative net asset value are measured at zero value. If the group has a legal or constructive obligation to cover the associ- ate’s negative balance, such obligation is recognised under liabilities. Financial assets measured at fair value with recognition of value changes in the income statement comprise assets that form part of a trading portfolio and financial assets designated at fair value with value adjustment through profit and loss. Financial assets at fair value through income Financial assets are classified as financial assets available for sale at in- ception if acquired principally for the purpose of selling in the short term, or if they form part of a portfolio of financial assets in which there is evidence of short-term profit-taking. Derivatives are also clas- sified as financial assets available for trading unless they are desig- nated as hedges. Financial assets are derecognised when the rights to receive cash flows from the financial asset have expired, or if they have been transferred, and the group has also transferred substantially all risks and rewards of ownership. Financial assets are recognised and derecognised on a trade date basis – the date on which the group commits to purchase or sell the asset. Financial assets are recognised at fair value at the transaction date. Realised and unrealised gains and losses arising from changes in the fair value of the financial assets at fair value through income are in- cluded in the income statement in the period in which they arise. The fair values of quoted investments are based on stock exchange prices at the balance sheet date. For securities that are not listed on a stock exchange, or for which no stock exchange price is quoted that reflects the fair value of the instrument, the fair value is determined using valuation techniques. These include the use of similar recent arm’s length transactions, reference to other instruments that are sub- stantially the same and a discounted cash flow analysis. Derivative financial instruments and hedge accounting The group’s activities expose it to financial risks, including changes in share prices, foreign currency exchange rates, interest rates and infla- tion. Forward exchange contracts and currency swaps are used for cur- rency hedging of portfolios of shares, bonds, hedging of foreign enti- ties and insurance balance sheet items. Interest rate derivatives in the form of futures, forward contracts, repos, swaps and FRAs are used to manage cash flows and interest rate risks related to the portfolio of bonds and technical provisions. Equity derivates are used from time to time to adjust equity exposures. Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently measured at their fair value. The valuation is performed in securities systems with data usually provided by Nordea, and the valuation is verified using own valuation methods. Derivatives which include expected future cash flows are discounted on the basis of market interest rates. Investments Investments include financial assets at fair value through the income statement. The classification depends on the purpose for which the in- vestments were acquired. Management determines the classification of its investments on initial recognition and re-evaluates this at every re- porting date. Derivatives are recognised from the trade date and measured at fair value in the balance sheet. Positive fair values of derivatives are recog- nised as bonds and shares or other receivables if they cannot unam- biguously be attributed to the former. Negative fair values of deriva- tives are recognised under other payables. Positive and negative values are only offset when the company is entitled or intends to make net settlement of more financial instruments. TrygVesta Annual Report 2007 l Notes l 109 of 152 Accounts Recognition of the resulting gain or loss depends on whether the de- rivative is designated as a hedging instrument and, if so, the nature of the item being hedged. The group designates certain derivatives as hedges of investments in foreign operations. Changes in the fair value of derivatives that are designated and qualify as net investment hedges in foreign entities and which provide effective currency hedg- ing of the net investment are recognised directly in equity. The net as- set value of the foreign entities is estimated in an ongoing process and is hedged 90-100% by entering into short-term forward exchange contracts. Changes in the fair value relating to the ineffective portion are recognised in the income statement. Gains and losses accumulated in equity are included in the income statement on disposal of the for- eign operation. Reinsurers’ share of provisions for insurance contracts Contracts entered into by the group with reinsurers under which the group is compensated for losses on one or more contracts issued by the group and that meet the classification requirements for insurance contracts are classified as reinsurers’ share of provisions for insurance contracts. Contracts that do not meet these classification requirements are classified as financial assets. The benefits to which the group is entitled under its reinsurance con- tracts held are recognised as assets and reported as reinsurers’ share of provisions for insurance contracts. Amounts recoverable from reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract. Changes due to unwinding are recognised in technical interest. Changes due to changes in the yield curve or foreign currency ex- change rates are recognised as value adjustments. The group assesses continuously its reinsurance assets for impairment. If there is objective evidence that the reinsurance asset is impaired, the group reduces the carrying amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in the income statement. Impairment write-downs are recognised in the income statement. Receivables Receivables are non-derivative financial instruments with fixed or de- terminable payments that are not quoted in an active market other than receivables that the group intends to sell in the short term. Re- ceivables arising from insurance contracts are classified in this category and are reviewed for impairment as part of the impairment review of receivables. On initial recognition, receivables are measured at fair value, and they are subsequently measured at amortised cost. Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the asset is impaired. The allowance recognised is measured at the difference between the asset’s carrying amount and the present value of estimated future cash flows. 110 of 152 l Notes l TrygVesta Annual Report 2007 Prepayments and accrued income Prepayments include expenses paid in respect of subsequent financial years and interest receivable. Share capital Shares are classified as equity when there is no obligation to transfer cash or other assets. Incremental costs directly attributable to the is- sue of equity instruments are shown in equity as a deduction from the proceeds, net of tax. Exchange adjustment reserve Assets and liabilities of foreign entities are recognised at the exchange rate at the balance sheet date. Income and expense items are recog- nised at the average exchange rates for the period. Any resulting ex- change rate differences are taken to equity. When an entity is wound up, the balance is transferred to the income statement. Contingency fund reserves Contingency fund reserves are recognised as part of retained earnings under equity. The funds may only be used when so permitted by the Danish FSA and when it is to the benefit of the policyholders. Dividend distribution Proposed dividend is recognised as a liability at the time of adoption by the shareholders at the annual general meeting (the date of decla- ration). Dividends expected to be paid in respect of the year are stated as a separate line item under equity. Treasury shares The purchase and sale sums of treasury shares and dividends thereon are taken directly to retained earnings under equity. Proceeds from the sale of treasury shares in connection with the exer- cise of share options or employee shares are taken directly to equity. Subordinated loan capital Subordinated loan capital is recognised initially at fair value, net of transaction costs incurred. Subordinated loan capital is subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the in- come statement over the period of the borrowings using the effective interest method. Provisions for insurance contracts Premiums are recognised in the income statement (premium income) proportionally over the period of coverage and, where necessary, ad- justed to reflect any time variation of the risk. The portion of premium received on in-force contracts that relates to unexpired risks at the bal- ance sheet date is reported as unearned premium provisions. Un- earned premium provisions are generally calculated according to a best estimate of expected payments throughout the agreed risk period. However, as a minimum to the part of the premium calculated using the pro rata temporis principle until the next payment date. Adjust- ments are made to reflect any variations in the risk. This applies to gross as well as ceded business. Claims and claims handling costs are charged to income as incurred based on the estimated liability for compensation owed to contract holders or third parties damaged by the contract holders. They include direct and indirect claims handling costs and arise from events that have occurred up to the balance sheet date even if they have not yet been reported to the group. Provisions for claims are estimated using the input of assessments for individual cases reported to the group and statistical analyses for the claims incurred but not reported and the expected ultimate cost of more complex claims that may be af- fected by external factors (such as court decisions). The provisions in- clude claims handling costs. Provisions for claims are discounted. Discounting is based on a yield curve reflecting duration applied to the expected future payments from the provision. Discounting affects the motor liability, professional liabil- ity, workers’ compensation and personal accident classes, in particular. Provisions for bonus and premium rebates represent amounts expected to be paid to policyholders in view of the claims experience during the financial year. Provisions for claims are determined for each product line based on ac- tuarial methods. In cases where product lines encompass more than one business unit, the claims provisions are distributed, as a main rule, based on reported number of claims in Denmark and individual claims in Norway. The models currently used are Chain-Ladder, Bornhuetter- Ferguson, the Loss Ratio method, De Vylder’s credibility method and a proprietary collective reserve model for use in private business lines in Denmark. Chain-Ladder techniques are used for business lines with a stable run-off pattern. The Bornhuetter-Ferguson method, and some- times the Loss Ratio method, are used for claims years in which the previous run-off provides insufficient information about the future run- off performance. De Vylder’s credibility method is used for areas that are somewhere in between the Chain-Ladder and Bornhuetter-Fergu- son/Loss Ratio methods, and may also be used in situations that call for the use of exposure targets other than premium volume, for exam- ple the number of insured. The proprietary collective model is based exclusively on actual pay- ments and is therefore only used for provisions for small claims, below DKK 200,000 for motor, or DKK 100,000 for other. The model is so dy- namic that, to the greatest extent possible, it captures changes in the run-off pattern. It consists of two modules, with the first module esti- mating 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 cal- culations are based on a generalised hierarchic De Vylder model. The provision for annuities in workers’ compensation insurance is cal- culated on the basis of a mortality corresponding to the G82 calcula- tion basis (official mortality table). In some instances, the historic data used in the actuarial models is not necessarily predictive of the future development of claims. Specifically, this is the case with legislative changes where in each specific case an estimate used for premium increases related to the relevant risk in- crease is derived. For legislative changes this estimate is used also in determining the level of claims – and hence reserves. Subsequently, this estimate is updated when new loss history materialises. Several assumptions and estimates underlying the calculation of the provisions for claims are mutually dependent. Most importantly, this can be expected to be the case for interest rate and inflation assump- tions. Workers’ compensation is an area in which explicit inflation assump- tions are used, with annuities for the insured being indexed with the workers’ compensation index. An inflation curve that reflects the mar- ket’s inflation expectations plus a real wage spread is used as an ap- proximation to the workers’ compensation index. For other lines of business, the inflation assumptions, because present only implicitly in the actuarial models, will cause a certain lag in pre- dicting the level of future losses when a shift in inflation occurs. On the other hand, the effect of discounting will show immediately as a consequence of inflation changes to the extent that this change af- fects the interest rate. Other correlations are not significant. Liability adequacy test Tests are continuously performed to ensure the adequacy of the tech- nical provisions. In performing these tests, current best estimates of future cash flows of claims, gains and direct and indirect claims han- dling costs are used. Any deficiency is charged to the income state- ment by raising the relevant provision. Any positive deviations are also recognised in the income statement. Employee benefits Pension obligations The group operates various pension schemes. The schemes are funded through payments to insurance companies or trustee-administered funds. In Norway, the group operates a defined benefit plan. A defined benefit plan is a pension plan that defines an amount of pension ben- efit that an employee will receive on retirement, dependent on age, years of service and compensation. In Denmark, the group operates a defined contribution plan. A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions. The liability recognised in the balance sheet in respect of defined ben- efit 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 annually by actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the esti- mated future cash outflows by a duration that matches the conditions of the underlying pension obligation. TrygVesta Annual Report 2007 l Notes l 111 of 152 Accounts Notes The actuarial gains and losses arising from experience adjustments and changes in actuarial estimates is charged or credited to equity. Other employee benefits Employees of the group are entitled to a fixed payment when they reach retirement and when they have been employed with the group for 25 and for 40 years. The group recognises this liability as soon as the employment begins. In special instances the employee can enter a contract with the group to receive compensation for loss in pension benefits caused by re- duced working hours. The group recognises this liability based on sta- tistical models. Income tax and deferred tax The group provides current tax expense according to the tax law of each jurisdiction in which it operates. Current tax liabilities and current tax receivables are recognised in the balance sheet as estimated tax on the taxable income for the year, adjusted for change in tax on prior years’ taxable income and for tax paid under the on-account tax scheme. Deferred tax is measured according to the balance sheet liability method on all timing differences between the tax and accounting value of assets and liabilities. Deferred income tax is measured using tax rules and tax rates that apply in the relevant countries by the bal- ance sheet date when the deferred tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets, including the tax value of tax losses car- ried forward, are recognised to the extent that it is probable that fu- ture taxable profit will be available against which the temporary differ- ences can be utilised. Deferred income tax is provided on temporary differences concerning investments, except where TrygVesta Group controls when the tempo- rary difference will be realised, and it is probable that the temporary difference will not be realised in the foreseeable future. Provisions Provisions are recognised when, as a consequence of an event that has occurred before or on the balance sheet date, the group has a le- gal or constructive obligation, and it is likely that an outflow of re- sources will be required to settle the obligation. Provisions are meas- ured as the management’s best estimate of the amount with which the liability is expected to be settled. Financial liabilities Bond loans, debt to credit institutions, etc. are recognised at the rais- ing of the loan as the proceeds received less transaction costs. In the subsequent periods, financial liabilities are measured at amortised cost, applying the ‘effective interest rate method’, to the effect that the difference between the proceeds and the nominal value is recog- nised in the income statement under financial expenses over the term of the loan. Transaction costs in connection with floating-rate loans or floating-rate credit facilities are amortised over the loan period using straight-line amortisation. Other liabilities are measured at net realisable value. Cash flow statement The cash flow statement of the group is presented using the direct method and shows cash flows from operating, investing and financing activities as well as the group’s cash and cash equivalents at the be- ginning and the end of the financial year. No separate cash flow state- ment has been prepared for the parent company because it is included in the consolidated cash flow statement. Cash flows from acquisition and divestment of enterprises are shown separately under cash flows from investing activities. Cash flows from acquired enterprises are recognised in the cash flow statement from the time of their acquisition, and cash flows from divested enterprises are recognised up to the time of sale. Cash flows from operating activities are calculated whereby major classes of gross cash receipts and gross cash payments are disclosed. Cash flows from investing activities comprise payments in connection with acquisition and divestment of enterprises and activities as well as purchase and sale of intangible assets, property, plant and equipment as well as fixed asset investments. Cash flows from financing activities comprise changes in the size or composition of TrygVesta’s share capital and related costs as well as the raising of loans, instalments on interest-bearing debt, and pay- ment of dividends. Cash and cash equivalents comprise cash and demand deposits. 112 of 152 l Notes l TrygVesta Annual Report 2007 DKK m 2007 2006 2 Earned premiums, net of reinsurance Direct insurance Indirect insurance Unexpired risk provision Ceded direct insurance Ceded indirect insurance 16,764 78 16,842 -13 16,829 -891 -48 15,890 Direct insurance, by location of risk 2007 2006 Gross 9,334 469 6,961 16,764 Ceded -521 -29 -350 -891 Gross 9,115 269 6,718 16,102 Denmark Other EU countries Other countries 3 Technical interest, net of reinsurance Interest on insurance provisions Transferred from provisions for claims concerning discounting Return on discontinued business 4 Claims incurred, net of insurance Claims incurred Run-off previous years, gross Reinsurance recoveries Run-off previous years, reinsurers’ share Under claims incurred, the value adjustment of inflation swaps to hedge the inflation risk concerning annuities on workers’ compensation insurance totals DKK 22m (in 2006 DKK 0m). 5 Insurance operating expenses, net of reinsurance Commission regarding direct business Other acquisition costs Total acquisition costs Administrative expenses Insurance operating expenses, gross Commission, etc. from reinsurers Administative expenses include fee to the auditors appointed by the Annual General Meeting: Deloitte Of which services other than audit: Deloitte In adddition, expenses have been incurred for the Group´s Internal Audit Department. TrygVesta Annual Report 2007 l Notes l 113 of 152 16,102 88 16,190 45 16,235 -890 -52 15,293 Ceded -480 -15 -395 -890 1,031 -697 9 343 -11,182 618 -10,564 312 -63 -10,315 -339 -1,380 -1,719 -978 -2,697 102 -2,595 -8 -8 -2 -2 1,400 -896 -3 501 -11,919 744 -11,175 502 -1 -10,674 -406 -1,415 -1,821 -948 -2,769 95 -2,674 -8 -8 -2 -2 Accounts Notes DKKm 2007 2006 5 Insurance operating expenses, gross, classified by type Commision Staff expenses Other staff expenses Office expenses and fees, headquarter expenses Operating and maintenance costs IT, software expenses etc. Depreciation, amortisation and impairment writedowns Other income Total expenses for lease amounts to 106 DKKm (2006 101 DKKm). Insurance operating expenses and claims include the following staff expenditure: Salaries and wages Commision Allocated share options Pensions Other social security costs Payroll tax, etc. -406 -1,594 -198 -462 -198 -102 191 -2,769 -1,832 -21 -8 -257 -5 -249 -2,372 -341 -1,581 -174 -402 -271 -76 148 -2,697 -1,890 -25 -3 -208 -24 -217 -2,367 Remuneration for Supervisory Board and Group Executive Management appears in the note 29 ‘Related parties’. Average number of full-time employees during the year (continuing business) 3,813 3,740 Share option programmes In 2007, TrygVesta awarded share options to the Executive Management (6 persons) and other senior employees (88 persons). At 31 December 2007, the share option plan comprised 329,902 share options (at 31 December 2006 186,020 share options). Each share option entitles the holder to acquire one existing share of DKK 25 nominal value in the company. The share option plan enti- tles the holders to buy 0.49 % of the share capital if all share options are exercised. Specification of outstanding options: Share options Total Numbers Fair Value Total fair Group Executive Management Other senior em- ployees Other em- ployees option at grant Per value per Per option Total fair at 31 value at 31 at grant December December DKK option DKK Total date DKK date DKK 2006 Outstanding options 1 January 2006 Allocated concerning 2005 Exercised Cancelled Expired Outstanding options from allocation 2006 1 Dec 2006 Number of options exercisable end of 2006 2007 Allocated concerning 2005 Exercised Cancelled 2006 Expired Outstanding options from allocation 2006 31 Dec 2007 Number of options exercisable end of 2007 0 44,540 0 0 0 0 141,480 0 0 0 0 0 0 0 0 0 186,020 0 0 0 44,540 141,480 0 186,020 0 0 44,540 0 0 0 141,480 0 -2,620 0 0 0 0 0 0 0 186,020 0 -2,620 0 44,540 138,860 0 183,400 0 0 0 0 114 of 152 l Notes l TrygVesta Annual Report 2007 0 64 0 0 0 - 0 64 0 64 0 - 0 0 12 0 0 0 12 0 12 0 0 0 12 0 0 150 0 0 0 - 0 119 0 119 0 - 0 0 28 0 0 0 28 0 22 0 0 0 22 0 Group Executive Management Other senior em- ployees Other em- ployees option at grant Per value per Per option Total fair at 31 value at 31 at grant December December DKK option DKK Total date DKK date DKK Total fair Allocated concerning 2006 Exercised Cancelled 2007 Expired 40,916 0 0 91,039 0 -1,453 0 18,000 0 -2,000 0 149,955 0 -3,453 0 Outstanding options from allocation 2007 31 Dec 2007 Number of options exercisable end of 2007 40,916 89,586 16,000 146,502 0 0 0 0 99 0 99 0 - 0 15 0 -1 0 14 0 49 0 49 0 - 0 7 0 0 0 7 0 Total Numbers allocated Exercised Cancelled Expired Total share options Out- standing Period of exercise Outstanding share options at exercise date Allocated in 2006 concerning 2005 186,020 Allocated in 2007 concerning 2006 149,955 0 0 -2,620 -3,453 0 0 183,400 146,502 February 2009 - February 2011 February 2010 - February 2012 Total outstanding options 31 December 2007 335,975 0 -6,073 0 329,902 In 2007, the fair value of share options for the Group amounted to DKK 8m. The fair value in 2007 for the programme allocated in 2006 are DKK 7m and for the programme allocated in 2007 the fair value are DKK 4m. Fair values at the time of allocation are based on the Black & Scholes option pricing formula. The following assumptions were applied in calculating the market value of outstanding share options at the time of allocation: DKKm Average share price (DKK) at the time of allocation Exercise price (DKK) Expected volatility Expected maturity Risk-free interest rate 2007 456.76 0 24.10% 4 years 3.90% 2006 355.83 0 17.90% 4 years 3.30% The expected volatility is based on the average volatility of TrygVesta shares in 2007. The expected maturity is 4 years, corresponding to the average of the exercise period of 3 to 5 years. The risk-free interest rate is based on a bullet loan with the same maturity as the expected maturity for the options at the time of allocation. The calculation is based on the strike price as set out in the option agreement and the average share price at the time of grant. The dividend payout ratio is not included in the calculation as the strike price is reduced by dividends paid in order to prevent recipients of option payments from being penalised for the company’s dividend payments. The assumptions for calculating the market value at the end of the period are based on the same principles as for the market value at the time of allocation. For outstanding options at 31 December 2007, the average term to maturity is 2.2 years and 3.2 years. Employee shares In 2007, TrygVesta granted employee shares at a discount to the market price to employees at all levels in the parent company and Dan- ish subsidiaries. Employees of non-Danish branches were offered employee shares or alternatively a cash consideration. Each employee was offered 23 shares at a discount to the market price equal to DKK 25 DKK per share, equivalent to a total of 49,338 shares or around DKK 23m being granted to the employees. Senior executives received part of their bonus in the form of shares at a discount to the mar- ket price. In 2007, a total of 20,321 shares were granted at discount to the market price of DKK 25 per share or DKK 9m. The grant of shares equalled 0.1% of the share capital. The amount was provided in 2006 and did not affect the profit for 2007. In 2007, TrygVesta offered its employees employee shares at a discount to the market price equal to DKK 25 per share subject to achieve- ment of specific financial benchmarks for 2007. Employees of non-Danish branches were offered employee shares or an alternative cash consideration. Senior executives of TrygVesta may elect to receive part of their bonus for 2007 in the form of shares at a discount to the- market price. Bonus will be granted in early 2008. Provisions have been made for the above obligations in 2007. TrygVesta Annual Report 2007 l Notes l 115 of 152 Accounts Notes DKKm SEGMENTS 6 Operating segments Private and Commercial Denmark Private and Commercial Norway Corporate Finnish general insurance Swedish general insurance Other Total 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Gross premiums earned Gross claims Gross operating expenses Profit/loss on business ceded Technical interest, net of insurance Technical result 6,490 -4,041 -1,086 -87 164 1,440 6,390 -4,215 -1,109 -200 128 994 4,490 -2,962 -936 -82 182 692 4,509 -2,866 -922 -75 111 757 5,285 -3,904 -504 -172 137 842 4,921 -3,322 -539 -316 98 842 251 -188 -125 -1 14 -49 198 -155 -83 0 6 -34 90 -80 -95 0 3 -82 4 -6 -39 0 0 -41 0 0 -23 -1 1 -23 -1 0 -5 0 0 -6 Total return on investment activities after technical interest Other income and expenses Profit before tax Tax Profit on continued business Loss on discontinued and divested business Profit for the year Private and Commercial Denmark Private and Commercial Norway Corporate Finnish general insurance Swedish general insurance 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Investments in associates Reinsurers’ share of provision for unearned premiums Reinsurers’ share of provision for claims Other assets 0 13 62 Total assets 0 0 -35 0 0 139 0 0 238 0 0 146 1,227 185 1,173 Provisions for unearned premiums Provisions for claims 2,485 7,092 2,416 7,354 1,505 3,417 1,520 3,287 1,317 10,292 1,182 9,507 Provisions for bonuses and premium rebates Provisions Debt Accruals and deferred income Total liabilities 268 256 0 0 141 118 Description of segments Please refer to ‘Our business areas’ for a description of our Operating segments. Depreciation/amortisation is included in gross operating expenses. The group has decided not to present depreciation/amortisation separately, because they are managed at grouplevel and are therefore not allocated to the individual segments. Other assets and liabilities are managed at group level and are therefore not allocated to the individual segments. These amounts are thus included under ‘Other’. Costs are allocated according to specific keys, which are believed to provide the best estimate of assessed resource consumption. A presentation of segments broken down by geography is provided in ‘Financial highlights and key ratios by geography’. 116 of 152 l Notes l TrygVesta Annual Report 2007 16,606 -11,175 -2,769 -343 501 2,820 340 -51 3,109 -842 2,267 -1 2,266 159 1,428 42,224 43,830 5,403 21,104 409 1,569 4,143 91 16,021 -10,564 -2,697 -591 343 2,512 1,228 -31 3,709 -624 3,085 126 3,211 185 1,376 41,204 42,783 5,173 20,410 374 1,512 4,155 109 32,719 31,733 Other Total 19 18 0 0 0 64 172 0 0 0 0 43 132 0 0 0 0 32 33 0 0 0 0 12 4 0 42,224 41,204 19 0 0 0 98 0 1,569 4,143 91 18 0 0 0 126 0 1,512 4,155 109 DKKm SEGMENTS 6 Operating segments Total return on investment activities after technical interest Other income and expenses Profit before tax Tax Profit on continued business Loss on discontinued and divested business Profit for the year Other assets Total assets Provisions for unearned premiums Provisions for claims Provisions for bonuses and premium rebates Provisions Debt Accruals and deferred income Total liabilities Description of segments Private and Commercial Denmark Private and Commercial Norway Corporate Finnish general insurance Swedish general insurance Other Total 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Gross premiums earned Gross claims Gross operating expenses Profit/loss on business ceded Technical interest, net of insurance Technical result 6,490 -4,041 -1,086 -87 164 1,440 6,390 -4,215 -1,109 -200 128 994 4,490 -2,962 -936 -82 182 692 4,509 -2,866 -922 -75 111 757 5,285 -3,904 -504 -172 137 842 4,921 -3,322 -539 -316 98 842 251 -188 -125 -1 14 -49 198 -155 -83 0 6 -34 90 -80 -95 0 3 -82 4 -6 -39 0 0 -41 0 0 -23 -1 1 -23 -1 0 -5 0 0 -6 16,606 -11,175 -2,769 -343 501 2,820 340 -51 3,109 -842 2,267 -1 2,266 16,021 -10,564 -2,697 -591 343 2,512 1,228 -31 3,709 -624 3,085 126 3,211 Private and Commercial Denmark Private and Commercial Norway Corporate Finnish general insurance Swedish general insurance Other Total 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Investments in associates Reinsurers’ share of provision for unearned premiums Reinsurers’ share of provision for claims 0 13 62 0 0 -35 0 0 139 0 0 238 0 0 146 1,227 185 1,173 2,485 7,092 2,416 7,354 1,505 3,417 1,520 3,287 1,317 10,292 1,182 9,507 268 256 0 0 141 118 Please refer to ‘Our business areas’ for a description of our Operating segments. Depreciation/amortisation is included in gross operating expenses. The group has decided not to present depreciation/amortisation separately, because they are managed at grouplevel and are therefore not allocated to the individual segments. Other assets and liabilities are managed at group level and are therefore not allocated to the individual segments. These amounts are thus included under ‘Other’. Costs are allocated according to specific keys, which are believed to provide the best estimate of assessed resource consumption. A presentation of segments broken down by geography is provided in ‘Financial highlights and key ratios by geography’. 0 0 0 64 172 0 0 0 0 43 132 0 0 0 0 32 33 0 0 0 0 12 4 0 19 18 19 18 0 0 42,224 0 0 41,204 0 98 0 1,569 4,143 91 0 126 0 1,512 4,155 109 159 1,428 42,224 43,830 5,403 21,104 409 1,569 4,143 91 185 1,376 41,204 42,783 5,173 20,410 374 1,512 4,155 109 32,719 31,733 TrygVesta Annual Report 2007 l Notes l 117 of 152 Accounts Notes 6 Technical result, net of reinsurance, by line of business Accident and health Workmen’s compensation Healthcare Motor TPL Motor comprehensive Marine aviation, and cargo 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 Gross premiums written 1,615 1,401 Gross premiums earned Gross claims Bonuses and premium rebates Gross operating expenses Profit/loss on ceded business Technical interest, net of reinsurance Technical result 1,551 - 841 - 16 - 249 12 53 510 1,379 - 983 - 11 - 234 - 13 38 176 1,487 1,424 - 1,514 0 - 150 13 58 - 169 1,207 1,181 - 1,071 0 - 133 - 1 39 15 112 74 - 108 0 - 23 0 4 - 53 60 54 - 50 0 - 18 0 1 - 13 2,416 2,402 - 757 - 13 - 386 - 13 76 1,309 2,380 2,419 - 1,668 - 14 - 366 - 23 48 396 3,094 3,100 - 1,982 - 93 - 461 0 71 635 3,070 3,084 - 1,816 - 133 - 423 - 2 46 756 Frequency Average Total 8.0% 22,582 74,723 7.2% 26,010 66,339 24.2% 70,177 15,688 21.0% 72,056 13,492 23.0% 20,942 5,294 8.8% 9,319 5,201 5.9% 20,817 75,637 6.5% 24,291 78,586 20.7% 10,759 186,909 20.8% 10,120 176,489 10.0% 81,703 6,781 11.6% 61,779 7,393 Fire & contests (Private) Fire and contests (commercial) Change of ownership Liability insurance insurance Credit & guarantee Tourist assistance 2007 2006 2007 2006 2007 2006 2007 2006 2007 Gross premiums written Gross premiums earned Gross claims Bonuses and premium rebates Gross operating expenses Profit/loss on ceded business Technical interest, net of reinsurance Technical result 3,195 3,189 - 2,331 - 40 - 704 - 102 113 125 3,135 3,112 - 2,005 - 31 - 695 - 134 80 327 2,451 2,471 - 1,760 0 - 398 - 280 61 94 2,428 2,422 - 1,288 - 1 - 426 - 311 38 434 98 86 - 72 -1 - 11 0 9 11 96 81 - 86 0 - 11 0 6 - 10 699 699 - 586 - 11 - 92 156 1 167 2007 261 268 - 214 0 - 54 - 1 7 6 2006 634 628 - 454 - 14 - 92 - 63 9 14 2006 287 282 - 219 0 - 39 - 2 6 28 724 712 - 271 - 48 - 126 - 88 21 200 701 709 - 451 - 9 - 140 - 3 14 120 146 146 1 0 - 41 - 32 4 78 2006 138 140 24 0 - 42 - 36 4 90 Frequency Average Total 12.8% 11,239 199,579 11.5% 10,839 180,385 20.7% 49,224 36,529 19.6% 44,212 33,882 14.8% 8,193 7,702 14.3% 9,621 6,533 10.6% 46,661 8,589 11.1% 50,958 8,787 0.7% 1.1% 48,061 925,145 19 26 7.1% 7,192 10,435 11.7% 3,949 16,567 Other insurance Total Norwegian Group Life 1) One-year policies 2007 2006 2007 2006 2007 2006 Gross premiums written Gross premiums earned Gross claims Bonuses and premium rebates Gross operating expenses Profit/loss on ceded business Technical interest, net of reinsurance Technical result 147 147 - 327 - 1 - 8 - 5 0 - 194 154 152 - 27 - 1 - 8 0 - 1 115 16,445 15,691 16,269 - 10,762 - 223 - 2,703 - 340 478 2,719 15,643 - 10,094 - 214 - 2,627 - 588 328 2,448 514 560 - 413 0 - 66 - 3 23 101 605 592 - 470 0 - 70 - 3 15 64 Average Total 377,446 834 43,397 824 118 of 152 l Notes l TrygVesta Annual Report 2007 6 Technical result, net of reinsurance, by line of business Accident and health Workmen’s compensation Healthcare Motor TPL Motor comprehensive Marine aviation, and cargo 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 Gross premiums written Gross premiums earned Gross claims Bonuses and premium rebates Gross operating expenses Profit/loss on ceded business Technical interest, net of reinsurance Technical result 1,615 1,551 - 841 - 16 - 249 12 53 510 1,401 1,379 - 983 - 11 - 234 - 13 38 176 1,487 1,424 - 1,514 0 - 150 13 58 - 169 1,207 1,181 - 1,071 0 - 133 - 1 39 15 2,416 2,402 - 757 - 13 - 386 - 13 76 1,309 2,380 2,419 - 1,668 - 14 - 366 - 23 48 396 3,094 3,100 - 1,982 - 93 - 461 0 71 635 3,070 3,084 - 1,816 - 133 - 423 - 2 46 756 699 699 - 586 - 11 - 92 156 1 167 2006 634 628 - 454 - 14 - 92 - 63 9 14 Frequency Average Total 8.0% 22,582 74,723 7.2% 26,010 66,339 24.2% 70,177 15,688 21.0% 72,056 13,492 23.0% 20,942 5,294 8.8% 9,319 5,201 5.9% 20,817 75,637 6.5% 24,291 78,586 20.7% 10,759 186,909 20.8% 10,120 176,489 10.0% 81,703 6,781 11.6% 61,779 7,393 Fire & contests Fire and contests (Private) (commercial) Change of ownership Liability Credit & guarantee insurance Tourist assistance insurance 2007 2006 2007 2006 2007 2006 2007 2006 2007 Gross premiums written Gross premiums earned Gross claims Bonuses and premium rebates Gross operating expenses Profit/loss on ceded business Technical interest, net of reinsurance Technical result 3,195 3,189 - 2,331 - 40 - 704 - 102 113 125 3,135 3,112 - 2,005 - 31 - 695 - 134 80 327 2,451 2,471 - 1,760 0 - 398 - 280 61 94 2,428 2,422 - 1,288 - 1 - 426 - 311 38 434 724 712 - 271 - 48 - 126 - 88 21 200 701 709 - 451 - 9 - 140 - 3 14 120 146 146 1 0 - 41 - 32 4 78 2006 138 140 24 0 - 42 - 36 4 90 2007 261 268 - 214 0 - 54 - 1 7 6 2006 287 282 - 219 0 - 39 - 2 6 28 Frequency Average Total 12.8% 11,239 199,579 11.5% 10,839 180,385 20.7% 49,224 36,529 19.6% 44,212 33,882 14.8% 8,193 7,702 14.3% 9,621 6,533 10.6% 46,661 8,589 11.1% 50,958 8,787 0.7% 48,061 19 1.1% 925,145 26 7.1% 7,192 10,435 11.7% 3,949 16,567 Other insurance Total Norwegian Group Life 1) One-year policies 2007 2006 2007 2006 2007 2006 Gross premiums written Gross premiums earned Gross claims Bonuses and premium rebates Gross operating expenses Profit/loss on ceded business Technical interest, net of reinsurance 147 147 - 327 - 1 - 8 - 5 0 154 152 - 27 - 1 - 8 0 - 1 16,445 15,691 16,269 - 10,762 - 223 - 2,703 - 340 478 15,643 - 10,094 - 214 - 2,627 - 588 328 Technical result - 194 115 2,719 2,448 Average Total 377,446 834 43,397 824 112 74 - 108 0 - 23 0 4 - 53 98 86 - 72 -1 - 11 0 9 11 514 560 - 413 0 - 66 - 3 23 101 60 54 - 50 0 - 18 0 1 - 13 96 81 - 86 0 - 11 0 6 - 10 605 592 - 470 0 - 70 - 3 15 64 TrygVesta Annual Report 2007 l Notes l 119 of 152 Accounts Notes DKKm 2007 2006 7 Interest and dividends, etc. Dividends Interest expenses Interest income 8 Market value adjustment Equity investments Unit trust units Bonds Interest derivatives Investment property Owner-occupied property Discounting Other balance sheet items Market value gains Market value losses Market value adjustment, net 168 -88 1,214 1,294 99 -80 25 -56 107 14 298 8 427 415 1,861 -1,446 415 Exchange rate adjustments concerning financial assets or liabilities at fair value with value adjustment in the income statement amounts to DKK 73m (2006 DKK 1m). 9 Reconciliation of tax expenses Tax on profit for the year Difference between Danish and foreign tax rate Prior-year tax adjustment Change in tax rate in Denmark Tax on non-taxable income and expenses Change in valuation of tax assets Other taxes Tax on ledger account Effective tax rate Tax on profit for the year Difference between Danish and foreign tax rate Prior-year tax adjustment Change in tax rate in Denmark Tax on non-taxable income and expenses Change in valuation of tax assets Other taxes Tax on ledger account -777 -39 13 20 -2 -42 -15 0 -842 % 25 1 0 -1 0 1 1 0 27 cf ‘TrygVestas Financial performance 2007’ in ’Management’s report’ for further information regarding the tax expense. 120 of 152 l Notes l TrygVesta Annual Report 2007 183 -94 922 1,011 764 26 -115 5 190 0 368 -12 546 1,226 1,757 -531 1,226 -1,037 0 28 0 226 -22 0 181 -624 % 28 0 -1 0 -6 1 0 -5 17 DKKm 2007 2006 10 Profit/loss on discontinued and divested business Earned premiums, net of reinsurance Technical interest, net of reinsurance Claims incurred, net of reinsurance Insurance operating expenses, net of reinsurance Technical result Return on investment activities after technical interest Profit/loss before tax Tax 0 3 -1 -3 -1 0 -1 0 -1 4 -1 119 -25 97 63 160 -34 126 Claims incurred includes in 2006 a DKK 139m gain in connection with the commutation of the reinsurance agreement with Chevanstell Limited. The technical result of discontinued and divested business is specified by lines of business as follows: Accident and health Marine, aviation and cargo Other insurance 1) Total 2007 2006 2007 2006 2007 2006 2007 2006 Gross premiums written Gross premiums earned Gross claims Gross operating expenses Profit/loss on ceded business Technical interest, net of reinsurance Technical result 0 0 0 0 0 0 - 0 0 7 -1 -7 0 -1 0 0 0 0 0 0 - 1 1 15 -2 -14 3 3 0 0 -1 -3 0 3 -1 2 2 232 -21 -113 -5 95 0 0 -1 -3 0 3 -1 3 3 254 -24 -134 -2 97 1) The line of business ‘Other insurance’ includes indirect insurance. DKKm 11 Intangible assets Cost Balance 1 January Exchange rate adjustment Transferred to operating equipment Additions during the year Disposals during the year Balance 31 December Amortisation and writedowns Balance 1 January Exchange rate adjustment Amortisation for the year Reversed amortisation Balance 31 December Carrying amount 31 December 2007 2006 373 4 -1 175 -23 528 -153 -3 -56 19 -193 335 238 -4 0 139 0 373 -103 3 -53 0 -153 220 Intangible assets under development amounts to total DKK 220m (DKK 125m in 2006). Additions for internally developed expenses amount to DKK 22m (DKK 5m in 2006). Amortisation is recognised in the income statement under insurance operating expenses and claims incurred. TrygVesta Annual Report 2007 l Notes l 121 of 152 Accounts Notes DKKm 2007 2006 12 Operating equipment Cost Balance 1 January Exchange rate adjustment Transferred from intangible assets Additions during the year Disposals during the year Balance 31 December Depreciation and impairment writedowns Balance 1 January Exchange rate adjustment Depreciation for the year Reversed depreciation Balance 31 December Carrying amount 31 December 243 1 1 43 -59 229 -145 -1 -31 28 -149 80 Amortisation is recognised in the income statement under insurance operating expenses and claims incurred. 13 Owner-occupied property Cost Balance 1 January Exchange rate adjustment Additions during the year Disposals during the year Balance 31 December Accumulated value adjustments Balance 1 January Value adjustment for the year at revalued amount in profit and loss Value adjustment for the year at revalued amount in equity Balance 31 December Accumulated depreciation Balance 1 January Depreciation for the year Balance 31 December Balance at revalued amount at 31 December 317 10 0 -9 318 12 -17 -3 -8 -3 -1 -4 306 Amortisation is recognised in the income statement under insurance operating expenses and claims incurred. External experts were not involved in valuing owner-occupied property. 303 -1 0 49 -108 243 -194 1 -43 91 -145 98 322 -9 4 0 317 8 0 4 12 -1 -2 -3 326 122 of 152 l Notes l TrygVesta Annual Report 2007  In establishing the market value of the properties, the following return percentages were used for each property category: Office property 7.00 7.83 7.90 Lowest percentage 2007 Average percentage 2007 Highest percentage 2007 Office property DKKm 14 Investment property Fair value 1 January Exchange rate adjustment Additions during the year Disposals during the year Value adjustment for the year Fair value 31 December Lowest percentage 2006 7.00 Average percentage 2006 Highest percentage 2006 7.20 2007 2,127 13 23 -5 105 2,263 7.20 2006 1,726 -13 235 -5 184 2,127 Total rental income for 2007 was DKK 160m (DKK 145m in 2006). Total expenses for 2007 were DKK 43m (DKK 44m in 2006). Of this amount, unlet property represented DKK 1m (DKK 2m in 2006), so the total expenses for investment property generating rental income were DKK 42m (DKK 42m in 2006). External experts were not involved in valuing investment property. In establishing the market value of the properties, the following return percentages were used for each property category. Business property Office property Residential property Business property Office property Residential property Lowest percentage 2007 7.00 3.75 4.00 Lowest percentage 2006 7.00 3.80 3.50 Average percentage 2007 7.27 6.57 5.30 Average percentage 2006 7.30 6.50 4.80 Highest percentage 2007 7.50 7.50 6.00 Highest percentage 2006 7.50 7.50 6.00 TrygVesta Annual Report 2007 l Notes l 123 of 152 Accounts Notes DKKm 2007 2006 15 Investments in associates Cost Balance 1 January Additions during the year Balance 31 December Revaluations at net asset value Balance 1 January Revaluations during the year Balance 31 December Carrying amount 31 December 0 0 0 18 1 19 19 14 -14 0 16 2 18 18 Shares in associates according to the lastest financial statements: 2007 Name and registered office Assets Liabilities Shareholders’ Equity Revenue Profit/Loss of the year Ownership share in % Komplementarselskabet af 1. marts 2006 ApS, DK Bilskadeinstituttet AS, Norway Edsvåg Fabrikker AS, Norway 0 4 40 0 0 5 0 4 35 0 1 17 0 0 5 50 30 28 2006 Name and registered office Assets Liabilities Shareholders’ Equity Revenue Profit/Loss of the year Ownership share in % Komplementarselskabet af 1. marts 2006 ApS, DK Bilskadeinstituttet AS, Norway Edsvåg Fabrikker AS, Norway 0 5 34 0 0 3 0 4 31 0 1 14 0 0 3 50 30 28 A individual estimate of the degree of influence referring to the agreed contracts are made. 124 of 152 l Notes l TrygVesta Annual Report 2007 DKKm 2007 2006 16 Financial investment assets Financial assets at fair value with value adjustment in the income statement, cf. IAS 39 Receivables at amortized costs Financial assets at fair value with value adjustment in the income statement Trading porfolio: Bonds Contains of: Cash allocated to portfolio management Unsettled securities trading Deposits, derivatives etc. Shares Cash in hand, Deposits and other investment assets 35,844 2,555 38,399 30,294 -246 1,063 -302 30,809 4,445 609 36,052 1,776 37,828 28,663 -228 1,158 749 30,342 5,384 344 Total other financial investment assets, cash and investments in associates in accordance with the balance sheet 35,863 36,070 The Bond and share portfolio includes unit trusts in which the underlying assets are bonds and shares. In addition, the amounts include liquid assets allocated to the portfolio manager, money market deposits and debt and receivables from unsettled investment transactions. Bond portfolio Due in 1 year or less Due after 1 years through 5 years Due after 5 years through 10 years Due after more than 10 years Total The Bond portfolio includes unit trusts in which the underlying assets are bonds. The option adjusted duration is used to measure duration. The option adjustment relates primarily to Danish mortgage bonds and reflects the expected duration-shortening effect of the borrower’s option to cause the bond to be redeemed through the mortgage institution at any point in time. Adjusted duration of bond portfolio 2006 19,220 9,698 1,291 133 30,342 2007 12,112 15,293 3,386 18 30,809 TrygVesta Annual Report 2007 l Notes l 125 of 152 Accounts Notes DKKm 16 Maturity of the group’s interest-bearing financial assets and debt 2007 Total 0-1 year 1-5 years > 5 years Bonds Cash in hand and at bank Debt Receivables 30,809 601 -1,700 2,555 32,265 5,257 601 -2 2,555 8,411 18,326 0 -597 0 17,729 7,226 0 -1,101 0 6,125 Maturity of the group’s interest-bearing financial assets and debt 2006 Total 0-1 year 1-5 years > 5 years Bonds Cash in hand and at bank Debt Receivables 30,342 338 -1,764 1,776 9,321 338 -65 1,776 13,882 0 -600 0 30,692 11,370 13,282 7,139 0 -1,099 0 6,040 Effective interest rate Adjusted duration 5.3 4.2 5.6 - 1.9 0 0 - Effective interest rate Adjusted duration 4.2 3.7 5.1 - 1.3 0 0 - The duration of interest-bearing debt is stated at zero as such debt is measured at amortised cost and is not subject to value adjustment. The note should be seen in conjunction with the expected cash flow from the Group’s provisions for unearned premiums and provisions for claims, see note 21. Please refer to the part ‘Interest risk’ in ‘Risk management’ in the ‘Management report’. Listed shares Scandinavia United Kingdom Rest of Europe United States Asien etc. Total The portfolio of unlisted shares totals Unlisted Equity investments is measured on estimated fair value, cf ‘Accounting policies’ Exposure to exchange rate risk 2007 Properties Bonds Shares USD EUR GBP NOK Other Total 0 0 0 786 0 786 1,116 2,018 472 8,352 4 11,962 688 1,308 570 1,007 642 4,215 Exposure to exchange rate risk 2006 Properties Bonds Shares USD EUR GBP NOK Other Total 0 0 0 724 0 724 1,217 1,987 537 8,947 0 12,688 1,245 1,443 873 432 611 4,604 2007 975 718 1,160 828 527 4,208 237 2006 1,161 874 1,477 1,245 418 5,175 209 Insurance, etc. -251 -1,136 -1 -5,756 -9 -7,153 Insurance, etc. -184 -913 103 -5,230 53 Hedge Exposure -1,535 -2,101 -983 -4,256 -619 -9,494 18 89 58 133 18 316 Hedge Exposure -2,080 -2,214 -1,432 -4,449 -595 198 303 81 424 69 -6,171 -10,770 1,075 Please refer to Market risk in the section headed Risk management in the Management’s report. 126 of 152 l Notes l TrygVesta Annual Report 2007 DKKm 16 Sensitivity information Impact on shareholders’ equity from the following changes. Interest rate increase of 0.7-1.0 pct. point Interest rate fall of 0.7-1.0 pct. point Equity price fall of 12% Fall in property prices of 8% Exchange rate risk (VaR 99.5) Loss on counterparties of 8% 2007 2006 -2 27 533 214 8 220 The impact on the income statement is similar to the impact on shareholders’ equity. The calculation is made in accordance with the disclosure requirements of the executive order issued by the Danish FSA on the presentation of financial reports by insurance companies and profession-specific pension funds. Please refer to the part ‘Risk management’ for an elaboration of risk management and risk exposure Derivative financial instruments 2007 2006 Derivatives with value adjustment in the income statement according to IAS 39: Fair value: Interest derivatives inflation derivatives Exchange rate derivatives Derivative financial instruments used in connection with hedging of foreign subsidiaries: Gains and losses on hedges charged to equity at 1 January Reversed hedges in profit and loss Gains and losses on hedges charged to equity in the period Gains and losses on hedges charged to equity at 31 December Gross 3,659 681 9,494 Net -7 26 205 Gains 107 37 0 144 Gross 15,903 0 11,201 Losses -119 0 -135 -254 Receivables Receivables from insurance enterprises Receivables from subsidiaries Exchange and inflation rate derivatives Unsettled transactions Other receivables Specification of writedowns on receivables Balance at 1 January Writedowns and reversed writedowns for the year Balance at 31 December 2007 1,410 0 190 794 161 2,555 129 -23 106 Reversed impairment losses are estimated at around DKK 20-30m annually, but may vary due to major cases/disputes. Please refer to the part ‘Credit risk’ in ‘Risk management’ in the ‘Management report’. 68 -56 646 201 17 220 Net 0 0 114 Net -12 37 -135 -110 2006 1,487 27 73 0 189 1,776 148 -19 129 TrygVesta Annual Report 2007 l Notes l 127 of 152 Accounts Notes DKKm 2007 2006 17 Reinsurer’s share Reinsurer’s share Writedowns after impairment test Writedowns during the year include reversed writedowns totalling DKK 12m (2006: DKK 6m). 18 Current tax Current tax, beginning of year Exchange rate adjustment Current tax for the year Tax booked on equity Tax paid during the year Net current tax, end of year Current tax is recognised in the balance sheet as follows: Under assets, current tax Under liabilities, current tax Net current tax, end of year 19 Shareholders’ equity 1,609 -22 1,587 186 8 746 -24 -673 243 93 336 243 1,592 -31 1,561 277 -6 649 30 -764 186 43 229 186 Share capital 2007 2006 Issued shares Balance at 1 January Bought during the year Sold during the year Balance at 31 December Treasury shares Balance at 1 January Bought during the year Used in connection with issue of employee shares Balance at 31 December No. of shares 67,790,001 -221,200 69,677 Nominal value (DKK’000) No. of shares Nominal value (DKK’000) 1,694,750 -5,530 1,742 68,000,000 -247,440 37,441 1,700,000 -6,186 936 67,638,478 1,690,962 67,790,001 1,694,750 2007 Nominal value (DKK’000) 5,250 5,530 -1,742 9,038 No. of shares 209,999 221,200 -69,677 361,522 % of share capital 0.30 0.33 -0.10 0.53 No. of shares 0 247,440 -37,441 209,999 2006 Nominal value % of share capital (DKK’000) 0 6,186 -936 5,250 0 0.36 -0.06 0.30 Pursuant to the authorisation granted by the shareholders in general meeting, TrygVesta A/S may acquire up to a maximum of nom. DKK 170m worth of treasury shares, corresponding to 10.0% of the share capital in the period until the next annual general meeting in 2008. In 2007, Tryg Vesta acquired treasury shares worth nom. DKK 5,530k, corresponding to 221,200 shares at a total cost of DKK 96,533k. Treasury shares are acquired for use in the Group’s incentive programme. 128 of 152 l Notes l TrygVesta Annual Report 2007 DKKm 19 Capital adequacy Shareholders’ equity according to annual report Subordinate loan capital Proposed dividend Solvency requirements to subsidiary undertakings Own shares Capital base Weighted assets Solvency pct. 2007 2006 10,010 637 -1,156 -3,681 -143 5,667 7,030 81 9,951 365 -2,244 -4,557 0 3,515 6,064 58 The capital base and the solvency ratio are calculated in accordance with the Danish Financial Business Act. TrygVesta manages its capital requirement as described in “Capitalisation” in the management’s report. 20 Subordinated loan capital In december 2005, TrygVesta Forsikring A/S raised a subordinate bond loan for EUR 150m at the price of 99,017. The loan carries a fixed rate og interst at 4,5 % p.a. untill 2015, where it can be repaid. After that time, it will carry interest at 2.1% above EURIBOR untill it expires in 2025. The loan is measured at amortised cost, and when the loan was raised capital losses and costs were deducted with DKK 18m at the balance sheet date. The fair value of the loan at the balance sheet date is DKK 1,041m (in 2006 DKK 1,071m) based on a price of 93,12 (in 2006 a price of 95.79). The price is sourced from Bloomberg, which applies a group of market players as its data sources. The loan is an interest-only loan, and the lender has no option to call the loan or otherwise terminate the loan agreement with TrygVesta Forsikring A/S. The loan is automatically accelerated upon the liquidation or bankruptcy of TrygVesta Forsikring A/S. TrygVesta Annual Report 2007 l Notes l 129 of 152 Accounts Notes DKKm 21 Provisions for claims Gross 2007 2006 2005 2004 2003 2002 2001 2000 Estimated accumulated claims 0 1 2 3 4 5 6 7 Cumulative payments to date Discounting Reserves from 1999 and prior years Other reserves 12,585 11,533 11,789 11,736 11,001 11,635 11,008 11,464 10,865 10,751 10,663 11,234 10,769 11,587 10,434 11,589 10,431 11,644 10,459 11,636 11,544 9,168 9,403 9,598 9,709 9,640 9,631 9,843 8,537 8,863 9,072 9,277 9,364 9,494 9,246 9,366 12,585 -5,787 -770 11,789 -7,695 -591 11,464 -8,554 -463 10,751 -8,389 -380 10,459 11,544 -9,976 -8,643 -296 -329 9,843 -8,746 -225 9,366 -8,598 -169 Gross provisions for claims, end of year Ceded business 2007 2006 2005 2004 2003 2002 2001 2000 Estimated accumulated claims 0 1 2 3 4 5 6 7 Cumulative payments to date Discounting Reserves from 1999 and prior years Other reserves Provisions for claims, end of year 513 294 293 944 838 843 861 874 915 914 938 898 895 955 872 2,035 2,142 2,025 2,019 2,017 2,031 1,446 1,460 1,466 1,481 1,455 1,441 1,449 1,435 1,550 1,514 1,539 1,573 1,568 1,564 1,572 513 -139 -7 293 -147 -7 843 -721 -16 914 -736 -36 872 -769 -20 2,031 -1,768 -34 1,449 -1,371 -17 1,572 -1,506 -7 Net of reinsurance 2007 2006 2005 2004 2003 2002 2001 2000 Estimated accumulated claims 0 1 2 3 4 5 6 7 Cumulative payments to date Discounting Reserves from 1999 and prior years 12,072 11,239 11,496 10,792 10,140 10,797 10,134 9,950 10,621 9,837 9,725 9,871 9,539 9,476 9,587 9,199 9,445 9,564 9,625 9,619 9,514 7,722 7,943 8,132 8,228 8,185 8,190 8,394 7,102 7,313 7,558 7,738 7,791 7,926 7,682 7,794 12,071 -5,647 -764 11,496 -7,548 -585 10,621 -7,833 -446 9,837 -7,653 -344 9,587 -7,875 -309 9,514 -8,208 -262 8,394 -7,375 -208 7,794 -7,092 -161 Other reserves Provisions for claims, net of reinsurance, end of the year 87,801 -66,388 -3,223 2,571 343 21,104 8,487 -7,157 -144 180 62 1,428 79,314 -59,231 -3,079 2,391 281 19,676 The table consists of figures for TrygVesta Forsikring A/S and TrygVesta Forsikring, norwegian branch of TrygVesta Forsikring A/S. Other group units are included in the item “Other”, which comprises the provisions for claims for TrygVesta Garantiforsikring A/S, travel and health insurance and the Finnish and Swedish business units. 130 of 152 l Notes l TrygVesta Annual Report 2007  21 The amounts in foreign currency in the table are converted to Danish kroner according to the exchange rate at 31 December to prevent the impact of exchange rate fluctuation. The accident-year 2000 is influenced by Chevanstell, which at that time operated under the name TBi UK in the London market. The impact derives from the stop-loss agreement between Tryg Forsikring A/S and Chevanstell Ltd. in 2000 to cover business written before 2000, and which was terminated after the divestment of Chevanstell. Until 2005, there was an increase in claims incurred, and in 2006 the divestment had a positive impact. The inclusion of the Zurich portfolio acquired in 2002 and, to a minor extent, the Allianz portfolio acquired in 2001, has an impact on the figures. When the liabilities of these portfolios appear in the triangulation the ultimate liability for the preceding accident years is increased with effect from the financial year in question, whereas already existing liabilities concerning previous financial years remain unchanged. The combined impact of the two acquisitions amounts to DKK 210m gross and DKK 200m net of reinsurance. After the introduction of variable interest rate discounting of danish Workers Compensation annuities, inflatoin explicitly influence claim ultimates from 2007 onwards. In previous calender years the inflation element is partially offset by the use of discounting with a real rate of interest. Hence undiscounted claim ultimates are adversely affected in 2007 by totally DKK 1,271m. DKKm Provisions for claims Total, beginning of period Market value adjustment of provisions, beginning of period Paid in the financial year in respect of the current year Paid in the financial year in respect of prior years Change in claims in the financial year in respect of the current year Change in claims in the financial year in respect of prior years Discounting 3) Provisions for claims, end of year 1) Other 2) Total, beginning of period Market value adjustment of provisions, beginning of period Paid in the financial year in respect of the current year Paid in the financial year in respect of prior years Change in claims in the financial year in respect of the current year Change in claims in the financial year in respect of prior years Discounting 3) Provisions for claims, end of year 1) Other 2) Gross 20,068 276 20,344 -5,786 -5,343 -11,129 11,680 -740 10,940 606 20,761 343 21,104 2007 Ceded 1,312 38 1,350 -139 -348 -487 504 -11 493 10 1,366 62 1,428 2006 Ceded Gross 19,788 -266 19,522 -5,030 -4,895 -9,925 10,834 -453 10,381 90 20,068 342 20,410 1,644 -42 1,602 -107 -421 -528 283 -41 242 -4 1,312 64 1,376 Net 18,756 238 18,994 -5,647 -4,995 -10,642 11,176 -729 10,447 596 19,395 281 19,676 Net 18,144 -224 17,920 -4,923 -4,474 -9,397 10,551 -412 10,139 94 18,756 278 19,034 1 ) The table consists of figures for TrygVesta Forsikring A/S and TrygVesta Forsikring, norwegian branch of TrygVesta Forsikring A/S. 2) Comprises provisions for claims for TrygVesta Garantiforsikring A/S, travel and health, and our Finnish and Swedish business units. 3) Discounting also includes exchange rate adjustments. Comparative figures for 2006 have been restated to method of new unwinding. See note 1 ‘Changes in Accounting policies’. TrygVesta Annual Report 2007 l Notes l 131 of 152 Accounts Notes DKKm 21 2007 Carrying amount Expected cash flow Total 0-1 year 1-2 years 2-3 years > 3 years Provisions for unearned premiums, gross Provisions for unearned premiums, ceded Provisions for claims, gross Provisions for claims, ceded 5,303 -158 20,761 -1,366 5,100 -158 7,906 -534 68 0 3,644 -196 41 0 2,380 -137 94 0 6,831 -499 2006 Total 0-1 year 1-2 years 2-3 years > 3 years Carrying amount Expected cash flow Provisions for unearned premiums, gross Provisions for unearned premiums, ceded Provisions for claims, gross Provisions for claims, ceded 5,116 -184 20,068 -1,312 4,879 -184 7,422 -525 54 0 3,948 -167 36 0 2,507 -125 147 0 6,191 -495 The table consists of figures for TrygVesta Forsikring A/S and TrygVesta Forsikring, norwegian branch of TrygVesta Forsikring A/S, The note should be seen in conjunction with the maturity of the group’s interest-bearing financial assets and liabilities, see note 16. Please refer to the part ‘Risk management’ for an elaboration of risk management and risk exposure. 132 of 152 l Notes l TrygVesta Annual Report 2007 DKKm 2007 2006 22 Pensions and similar obligations Other benefits Recognised obligation, end of year Defined benefit pension plans Present value of pension obligations funded through operations Present value of pension obligations funded through establishment of funds Gross pension obligation Fair value of plan assets Net pension obligation Specification of change in recognised pension obligations: Recognised pension obligation, beginning of year. Exchange rate adjustment Present value of amounts accumulated during the year Capital costs of previously accumulated pensions Actuarial gains/losses Paid during the period Change in recognised employers’ nat. ins. contribution Effect associated with optional shift to contribution pension plan Recognised pension obligation, end of year Change in carrying amount of plan assets: Carrying amount of plan assets, beginning of year Exchange rate adjustment Investments in 2006 Estimated return on pension funds Actuarial gains/losses Paid during the period Effect associated with optional shift to contribution pension plan Carrying amount of plan assets, end of year Total pensions and similar obligations, end of year Total recognised obligation, end of year Pension cost recognised in the income statement: Pension costs concerning current financial year Calculated interest concerning obligation Expected return on plan assets Pension costs concerning previous financial years Effect associated with optional shift to contribution pension plan Total amount recognised The premium for the following financial year is estimated at: Estimated distribution of plan assets: Shares Bonds Property Average return on plan assets 43 43 129 1,163 1,292 932 360 1,298 43 60 56 -105 -46 2 -16 1,292 825 27 87 43 -9 -32 -9 932 360 403 60 56 -43 10 -7 76 103 % 18 66 16 8.2 30 30 123 1,175 1,298 825 473 1,362 -41 65 49 -91 -44 -2 0 1,298 727 -22 92 33 26 -31 0 825 473 503 67 51 -34 11 0 95 103 % 20 64 16 7.6 TrygVesta Annual Report 2007 l Notes l 133 of 152 Accounts Notes 22 Assumptions used Discount rate Estimated return on pension funds Salary adjustment Pension adjustment G Adjustment Turnover Employers’ nat. ins. contribution Take up of the AFP Early Retirement Plan Mortality table DKKm Pension obligation Plan assets Surplus/deficit Actuarial gains/losses associated with the pension obligation Actuarial gains/losses associated with pension assets 2007 2006 % % 4.7 5.8 4.5 4.3 4.3 8.0 14.1 20.0 Adjusted K1963 Adjusted K1963 5.2 6.2 4.5 4.3 4.3 7.0 14.1 20.0 2007 2006 2005 1,292 932 360 104 -10 1,298 825 473 90 26 1,362 727 635 -136 18 The pension liability related to participation by the Norwegian member of the Group Executive Management in the Norwegian defined benefit pension plan is DKK 1.7m, 31.12. 2007. “The Group’s Swedish branch complies with the industry pension agreement, the FTP plan, which is insured with Försäkringsbranschens Pensionskassa - FPK. Under the terms of the agreement, the Group’s Swedish branch has undertaken, along with the other businesses in the collaboration, to pay the pensions of the individual employees in accordance with the applicable rules. The FTP plan is primarily a defined benefit plan in terms of the future pension benefits. FPK is unable to provide sufficient information for the Group to use defined benefit accounting. For this reason, the Group has accounted for the plan as if it were a defined contribution plan in accordance with IAS 19.30. The premium paid to FPK in 2007 amounted to DKK 1.0m, which is less than 1 % of the annual premium in FPK (2006). FPK writes in its half-year report for 2007 that it had a collective consolidation ratio of 131 at 30 June 2007 (118 at 30 June 2006). The collective consoli- dation ratio is defined as the market value of the plan assets relative to the total collective pension obligations. 134 of 152 l Notes l TrygVesta Annual Report 2007 DKKm 2007 2006 23 Deferred tax Tax asset Operating equipment Debt and provisions Bonds and loans secured by mortgages Tax liability Land and buildings Contingency funds Debt and provosions Shares etc. Intellectual property rights Deferred tax, end of year Unaccrued deferred tax assets of liability of shares ect. Unaccrued deferred tax assets of liabiliaty of balancesheets items Reconciliation of deferred tax, beginning of year Deferred tax, beginning of year Exchange rate adjustment Change in tax rate in Denmark Change in deferred tax taken to the income statement Change in deferred tax taken to equity Non-capitalised tax loss Denmark Sweden Finland The loss in TrygVesta A/S cannot be utilised in the Danish joint taxation scheme. The loss can be carried forward indefinitely. Under Finnish rules, losses may be carried forward for ten years and under Swedish rules, losses may be carried forward indefinitely. The total current and deferred tax relating to items recognised in equity is recognised in the balance sheet in the amount of DKK -4m (2006 DKK 35m). No deferred tax is associated with investments in subsidiaries (2006 DKK 0m). 84 0 84 168 157 1,021 35 0 64 1,277 1,109 102 6 959 27 -20 119 24 1,109 72 105 142 104 122 9 235 111 945 0 99 39 1,194 959 -102 0 939 -20 73 0 -33 959 72 41 84 TrygVesta Annual Report 2007 l Notes l 135 of 152 Accounts Notes DKKm 2007 2006 24 Other provisions Other provisions, beginning of year Change in provisions Other provisions, end of year Other provisions primarily includes own insurance contracts 25 Debt to credit institutions Bank loans Bank overdrafts Debt falling due within one year Debt falling due after more than five years In 2005, a consortium of banks granted TrygVesta A/S a loan facility for DKK 2,000m, of which DKK 600m had been utilised at 31 December 2007. In 2007, the loan carried interest at CIBOR plus a margin, totalling approximately 4,4% p.a. The unutilised part of the loan facility is measured at amortised cost, and an amount of DKK 5m was deducted from the loan proceeds upon signing the loan agreement. The cost are depreciated linear until the loan facility expires in July 2010. The fair value of the loan is considered to be the utilised part of the facility of DKK 600m. 26 Other debt Unsettled transactions Interest derivatives Repo debt Other debt Debt falling due after more than five years 27 Earnings per share Basic earnings per share is calculated by dividing the profit for the year and the profit/loss from discontinued and divested business by the total average number of shares. The company has not issued warrants, convertible debt instruments or the like. The issued share options will not be exercised before at least in 2009, therefore, there is no difference between basic EPS and diluted EPS. Profit/loss for the period from continuing business Average number of shares Basic earnings per share of DKK 25 Profit/loss for the period from discontinued and divested business Average number of shares Basic earnings per share of DKK 25 50 7 57 597 2 599 2 0 1,857 8 0 732 2,597 0 2,267 67,648 34 -1 67,648 0 41 9 50 596 69 665 69 0 1,160 5 750 774 2,689 0 3,085 67,824 45 126 67,824 2 136 of 152 l Notes l TrygVesta Annual Report 2007 DKKm 28 Contractual obligations, contingent liabilities and collateral Payment due by period < 1 year 1-3 years 3-5 years More than 5 years Operating leases Other contractual obligations 108 348 456 213 314 527 187 0 187 1,260 0 1,260 The amounts include the following. TrygVesta Forsikring A/S and TrygVesta Forsikring, norwegian branch of TrygVesta Forsikring A/S have signed an operating agreement with CSC for an amount of DKK 558m for a period of 5 years. Total 1,768 662 2,430 TrygVesta Forsikring A/S has an annual obligation to Danica Pension with respect to the lease of the head office in Ballerup. The annual rent and taxes currently amount to DKK 80m. The remaining lease period is 18 years. The leasing contract contains the right to completely or partly rent out or completely or partly disposal by providing guarantee. TrygVesta Forsikring A/S has signed a portfolio management contract for DKK 60m. The contract expires in 2010. TrygVesta Forsikring A/S has signed a car leasing contrakt with NF Fleet for DKK 30m. The contract expires in 2012. The Danish companies in TrygVesta group are jointly taxed with Tryg i Danmark smba. Until 2004, the companies were jointly and severally liable for the entire amount. From 2005, the companies are only liable for their own part of the tax amount. Most of the Danish companies in TrygVesta group are commonly registered for VAT and payroll tax and are jointly and severally liable for payment of all such direct and indirect taxes. In connection with the sale of Chevanstell Limited, TrygVesta Forsikring A/S issued few specific guarantees towards the buyer. Management believes that it is unlikely that these guarantees will result in a financial loss for TrygVesta Forsikring A/S. Companies of the TrygVesta group are part of some disputes. Management believes that the outcome of these legal proceedings will not affect the Group’s financial position beyond those receivables and obligations recognised in the balance sheet. TrygVesta Annual Report 2007 l Notes l 137 of 152 Accounts Notes DKK m 29 Related parties Supervisory Board and Group Executive Management 2007 2006 Premium income - Parent company (Tryg i Danmark smba) - Key management - Other related parties Claims paid - Parent company (Tryg i Danmark smba) - Key management - Other related parties Guarantee agreements with related parties - Account - Exercised, end of year - Premium Outstanding guarantees cover the policyholders’ financial obligations pursuant to the contract. Following an individual assessment, all guarantees are issued without additional security. The company has full recourse against the individual companies. No provisions have been made for non-performing guarantees and no expenses were incurred during the financial year. Guarantee agreements are made on market terms. Leases with related parties Transactions with related parties also comprise rental income as premises are being let to a member of the board on market terms. Specification of remuneration, etc. Supervisory Board Group Executive Management Remuneration, etc. includes pension contributions Supervisory Board Group Executive Management 0.2 0.4 17.3 0.2 0.3 43.6 1,950 885 3 -4 -25 -29 0 -5 -5 0.1 0.4 6.2 0.1 0.0 0.5 1,645 1,265 3 -4 -26 -30 0 -3 -3 138 of 152 l Notes l TrygVesta Annual Report 2007 DKK m 29 Members of the Supervisory Board of TrygVesta A/S do not receive bonuses and are not participants in any severance plans. The Group Executive Management has a bonus scheme for up to 3 months’ salary, however, the CEO has up to 4 months’ salary, and participate ind the share option programme as mentioned in Corporate governance. Other than that, there are no incentive plans for the Supervisory Board and Group Executive Management. If a member of the Group Executive Management is given notice of termination by TrygVesta and such termination is not due to breach on the part of the member of the Group Executive Management, such member is entitled to cash severance pay equal to 12 to 18 months’ fixed salary inclusive of pension contribution and taxed benefits. Severance pay is paid at expiry of the period of notice. Members of the Group Executive Management can raise no further claims in this respect, including claims for compensation pursuant to sections 2a and/or 2b Salaried Employees Act, as such claims are included in the severance pay. Parent company Tryg i Danmark smba Tryg i Danmark smba controls 60% of the shares in TrygVesta A/S. Intra-group trading involved - Providing and receiving services - Intra-group account - Interest - Sale of unlisted shares Insurance products are purchased and sold on market terms Assets are transferred on market terms Administration fee, etc. is fixed on a cost-recovery basis. Intra-group accounts are offset and carry interest on market terms. The TrygVesta companies have entered into reinsurance contracts on market terms. 0 0 0 15 4 27 1 0 Transactions with subsidiaries have been eliminated in the consolidated financial statements in accordance with the accounting policies. TrygVesta Annual Report 2007 l Notes l 139 of 152 Accounts Income statement for TrygVesta A/S (parent company) DKKm Notes 2 Investment activities Income from subsidiaries Income from associates Interest income, etc. Value adjustment Interest expenses Investment management charges Total return on investment activities 3 Other expenses Profit before tax 4 Tax Profit on continuing business 5 Profit/loss on discontinued and divested business Profit for the year Proposed distribution for the year: Dividend Transferred to Net revaluation as per equity method Transferred to Retained profits 2007 2,396 0 0 -1 -30 -4 2,361 -48 2,313 21 2,334 -1 2,333 1,156 79 1,098 2,333 2006 3,219 5 1 -1 -35 -5 3,184 -36 3,148 17 3,165 126 3,291 2,244 1,782 -735 3,291 140 of 152 l Income statement for TrygVesta A/S (parent company) l TrygVesta Annual Report 2007 Balance sheet for TrygVesta A/S (parent company) DKKm Notes Assets 6 7 Investments in subsidiaries Investments in associates Total investments in subsidiaries Total investment assets 8 Current tax assets Cash in hand and at bank 9 Deferred tax assets Total other assets Total prepayments and accrued income Total assets Liabilities Shareholders’ equity 10 Debt to credit institutions Debt to subsidiaries Other debt Total debt 2007 2006 10,732 0 10,732 10,732 21 1 0 22 7 10,643 0 10,643 10,643 3 3 0 6 0 10,761 10,649 10,031 9,974 599 131 0 730 596 74 5 675 Total liabilities and equity 10,761 10,649 11 Capital adequacy, etc. 12 Contractual obligations, contingent liabilities and collateral 13 Related parties TrygVesta Annual Report 2007 l Balance sheet for TrygVesta A/S (parent company) l 141 of 152 Accounts Statement of changes in equity (parent company) DKKm Revaluation equity method capital Share capital Retained earnings Proposed dividends Shareholders’ equity at 1 January 2006 1,700 1,938 3,176 1,428 Equity entries in 2006 Profit for the year Revaluation of owner-occupied properties Exchange rate adjustment of foreign entities Hedge of foreign currency risk in foreign entities Tax on equity entries Total comprehensive income 0 1,782 3 -143 107 -31 1,718 Dividend paid Dividend own shares Purchase of own shares Issue of employee shares Issue of share options -735 2,244 -735 2,244 -1,428 5 -88 13 3 Total equity entries in 2006 0 1,718 -802 816 Total 8,242 3,291 3 -143 107 -31 3,227 -1,428 5 -88 13 3 1,732 Shareholders’ equity at 31 December 2006 1,700 3,656 2,374 2,244 9,974 Shareholders’ equity at 1 January 2007 1,700 3,656 2,374 2,244 9,974 Equity entries in 2007 Profit for the year Revaluation of owner-occupied properties Exchange rate adjustment of foreign entities Hedge of foreign currency risk in foreign entities Tax on equity entries Total comprehensive income 0 79 -3 84 -98 27 89 Dividend paid Dividend own shares Purchase of own shares Issue of employee shares Issue of share options 1,098 1,156 1,098 1,156 -2,244 14 -96 32 8 Total equity entries in 2007 0 89 1,056 -1,088 2,333 -3 84 -98 27 2,343 -2,244 14 -96 32 8 57 Shareholders’ equity at 31 December 2007 1,700 3,745 3,430 1,156 10,031 Dividend paid per share DKK 17 (total for 2006 DKK 33 DKK). Dividend per share is calculated as the total dividend proposed by the Supervisory Board after the end of the financial year divided by the average number of shares (67,648,000). The dividend is not paid until approved by the shareholders at the annual general meeting of the subsequent year. TrygVesta Forsikring, the Norwegian branch of TrygVesta Forsikring A/S, has in its branch financial statements included provisions for con- tingency funds in the amount of NOK 2,564m (2006: NOK 2,251m) under provisions for insurance contracts. In TrygVesta Forsikring A/S, these provisions, due to their nature as additional provisions, are included in shareholders’ equity, net of deferred tax. TrygVesta For- sikring A/S’ option to pay dividend to TrygVesta A/S is influenced by this amount. The dividend payment is also affected by a contingency fund provision of DKK 670m, which is included in shareholders’ equity in TrygVesta Forsikring A/S. TrygVesta Garanti forsikring A/S has a similar contingency amounting to DKK 139m, which is also included in the company’s shareholders’ equity. 142 of 152 l Statement of changes in equity (parent) l TrygVesta Annual Report 2007 Notes (parent company) DKKm 2007 2006 1 Accounting policies Please refer to TrygVesta Groups ‘Accounting police’ 2 Income from subsidiaries TrygVesta Forsikring A/S Profit on continuing business Profit/loss on discontinued business after tax 3 Other expenses Administrative expenses 2,396 2,396 -1 2,395 -48 -48 Remuneration of the Executive Management is paid by TrygVesta Forsikring A/S and TrygVesta Forsikring, norwegian branch of TrygVesta Forsikring A/S and is charged to TrygVesta A/S by the cost allocation. Remuneration for Supervisory Board and Group Executive Management appears in th note 12 ‘Related parties’. Average number of full-time employees during the year Administrative expenses include fee to the auditors appointed by the Annual General meeting: Deloitte In addition, expenses have been incurred for the Group’s Internal Audit Department. 4 Reconciliation of tax expenses Tax on financial loss before profit/loss in subsidiaries and tax Changes to previous year Tax on non-taxable income and expenses Effective tax rate Tax on financial loss Changes to previous year Tax on non-taxable income and expenses 0 -0.9 -0.9 -21 0 0 -21 % 25 0 0 25 cf ‘TrygVestas Financial performance 2007‘ in ’Management’s report’ for futher information regarding the tax. 3,219 3,219 126 3,345 -36 -36 0 -0.9 -0.9 -21 3 1 -17 % 28 -4 -2 22 TrygVesta Annual Report 2007 l Notes (parent company) l 143 of 152 Accounts Notes (parent company) DKKm 2007 2006 5 Profit/loss on discontinued and divested business Earned premiums, net of reinsurance Technical interest, net of reinsurance Claims incurred, net of reinsurance Insurance operating expenses, net of reinsurance Technical result Return on investment activities after technical interest Loss before tax Tax 0 3 -1 -3 -1 0 -1 0 -1 Claims incurred includes a DKK 139m gain in 2006 in connection with the commutation of the reinsurance agreement with Chevanstell Limited. The technical result of discontinued and divested business is specified by lines of business as follows: Accident and health Marine, aviation Other and cargo insurance insurance 1) Total 2007 2006 2006 2007 2007 2006 2007 Gross premiums written Gross premiums earned Gross claims Gross operating expenses Profit/loss on ceded business Technical interest, net of reinsurance Technical result 0 0 0 0 0 - 0 0 7 -1 -7 0 -1 0 0 0 0 0 - 1 1 15 -2 -14 3 3 0 0 -1 -3 0 3 -1 2 2 232 -21 -113 -5 95 0 0 -1 -3 0 3 -1 4 -1 119 -25 97 63 160 -34 126 2006 3 3 254 -24 -134 -2 97 1) The line of business ‘Other insurance’ includes indirect insurance. 6 Investments in subsidiaries Cost Balance 1 January Balance 31 December Revaluations and impairment writedowns at net asset value Balance 1 January Revaluations during the year Dividend paid Balance 31 December 6,987 6,987 3,656 2,407 -2,318 3,745 6,987 6,987 1,938 3,282 -1,564 3,656 Carrying amount 31 December 10,732 10,643 Name and registered office 2007 TrygVesta Forsikring A/S, Ballerup 2006 TrygVesta Forsikring A/S, Ballerup 144 of 152 l Notes (parent company) l TrygVesta Annual Report 2007 Ownership shares in % 100 Equity 10,732 100 10,643 DKKm 2007 2006 7 Investments in associates Cost Balance 1 January Additions during the year Balance 31 December Revaluations and impairment writedowns at net asset value Balance 1 January Balance 31 December Carrying amount 31 December TrygVesta held a ownership of 28% of the company Nordisk Flyforsikring A/S. In 2006 the ownership share was disposed. 8 Current tax Current tax, beginning of year Current tax for the year Tax paid durring the year 9 Deferred tax Non-capitalised tax loss TrygVesta A/S The loss in TrygVesta A/S can only be utilised in TrygVesta A/S. The loss can be carried forward indefinitely. The losses are not recognised as tax assets until it has been substantiated that the company can generate sufficient future taxable income to utilise the tax loss. 10 Debt to credit institutions Bank loans Overdraft facility 0 0 0 0 0 0 3 20 -3 20 72 597 2 599 In 2005, a consortium of banks granted TrygVesta A/S a loan facility for DKK 2,000m, of which DKK 600m had been utilised at 31 December 2007. In 2007, the loan carried interest at CIBOR plus a margin, totalling approximately 4.4 % p.a. The unutilised part of the loan facility is measured at amortised cost, and an amount of DKK 5m was deducted from the loan proceeds upon signing the loan agreement. The cost are depreciated linear until the loan facility expires in July 2010. The fair value of the loan is considered to be the utilised part of the facility of DKK 600m. 14 -14 0 0 0 0 21 20 -38 3 72 596 0 596 TrygVesta Annual Report 2007 l Notes (parent company) l 145 of 152 Accounts Notes (parent company) DKKm 11 Capital adequacy Shareholders’ equity according to annual report Subordinate loan capital Proposed dividend Solvency requirements to subsidiary undertakings Own shares Capital base Weighted assets Solvency pct. 2007 2006 10,031 637 -1,156 -3,681 -143 5,688 7,051 81 9,974 365 -2,244 -4,557 0 3,538 6,087 58 12 Contractual obligations, contingent liabilities and collateral The Danish companies in TrygVesta group are jointly taxed with Tryg i Danmark smba. Until 2004, the companies were jointly and severally liable for payment of imposed corporation tax. From 2005, the companies are liable for the company’s own share of the imposed corpora- tion tax. Most of the Danish companies in Tryg Forsikring group are commonly registered for VAT and payroll tax and are jointly and severally liable for payment of all such direct and indirect taxes. Companies of the Tryg Forsikring Group are part of some disputes. Management believes that the outcome of these legal proceedings will not affect the Group’s financial position beyond those receivables and obligations recognised in the balance sheet. 13 Related parties Supervisory Board and Group Executive Management Premium income - Parent company (Tryg i Danmark smba) - Key management - Other related parties Claims payments - Key management - Other related parties Guarantee agreements with related parties - Account - Exercised, end of year - Premium 0.2 0.4 17.3 0.3 43.6 1,950 885 3 0.1 0.4 6.2 0.1 0.5 1,645 1,265 3 Outstanding guarantees cover the policyholders’ financial obligations pursuant to the contract. Following an individual assessment, all guarantees are issued without additional security. The company has full recourse against the individual companies. No provisions have been made for non-performing guarantees and no expenses were incurred during the financial year. Guarantee agreements are made on market terms. 146 of 152 l Notes (parent company) l TrygVesta Annual Report 2007  DKKm 2007 2006 Leases with related parties Transactions with related parties also comprise rental income as premises are being let to a member of the board on market terms. Specification of remuneration, etc. Supervisory Board Executive Management Remuneration, etc. includes pension contributions Supervisory Board Executive Management -4 -16 -20 0 -3 -3 Members of the Supervisory Board of TrygVesta A/S do not receive bonuses and are not participants in any severance plans. The Group Executive Management has a bonus scheme for up to 3 months’ salary and participate ind the share option programme as mentioned in Corporate governance. Other than that, there are no incentive plans for the Supervisory Board and Group Executive Management. Parent company Tryg i Danmark smba Tryg i Danmark smba controls 60% of the shares in TrygVesta A/S. Intra-group trading involved - Providing and receiving services - Intra-group account - Interest - Sale of unlisted shares Administration fee, etc. is fixed on a cost-recovery basis. Intra-group accounts are offset and carry interest on market terms. Subsidiaries and associates TrygVesta A/S controls TrygVesta Forsikring A/S 100%. Intra-group trading involved - Providing and receiving services - Intra-group account - Interest Assets are transferred on market terms Administration fee, etc. is fixed on a cost-recovery basis. Intra-group accounts are offset and carry interest on market terms. 0 0 0 15 49 131 4 -4 -11 -15 0 -2 -2 4 27 1 0 38 74 3 TrygVesta Annual Report 2007 l Notes (parent company) l 147 of 152 Accounts Financial highlights and key ratios by geography DKKm IFRS 2007 2006 2005 Danish GAAP 2004 2003 2004 Danish general insurance Gross premiums earned Technical result Return on investment activities Other income Other expenses Profit/loss before tax Key ratios Gross claims ratio Business ceded as % of gross premiums Claims ratio, net of ceded business Gross expense ratio Combined ratio Number of full-time employess, end of period Norwegian general insurance Gross premiums earned Technical result Return on investment activities Other income Other expenses Profit/loss before tax Key ratios Gross claims ratio Business ceded as % of gross premiums Claims ratio, net of ceded business Gross expense ratio Combined ratio Number of full-time employess, end of period Finnish general insurance Gross premiums earned Technical result Return on investment activities Profit/loss before tax Key ratios Gross claims ratio Business ceded as % of gross premiums Claims ratio, net of ceded business Gross expense ratio 9,346 1,639 225 68 -66 1,866 69.3 0.0 69.3 15.3 84.6 9,084 1,377 723 65 -63 2,102 66.8 3.9 70.7 16.1 86.8 8,764 956 567 77 -70 1,530 77.1 -3.9 73.2 16.6 89.8 8,525 720 378 76 -72 1,102 73.0 3.5 76.5 16.3 92.8 8,570 790 450 76 -71 1,245 71.6 3.5 75.1 19.0 94.1 8,242 443 393 71 -68 839 70.4 6.1 76.5 20.4 96.9 2,242 2,231 2,215 2,223 2,223 2,248 6,919 1,335 118 52 -59 1,446 64.0 4.9 68.9 15.8 84.7 6,738 1,214 483 53 -50 1,700 64.3 3.6 67.9 16.5 84.4 6,810 1,131 361 49 -47 1,494 63.0 5.2 68.2 16.7 84.9 6,653 1,032 24 45 -43 1,058 62.1 6.2 68.3 17.2 85.5 6,614 722 94 45 -44 817 62.7 6.9 69.6 21.2 90.8 7,161 41 316 44 -42 359 72.9 7.8 80.7 22.4 103.1 1,384 1,460 1,431 1,454 1,454 1,460 251 -49 -10 -59 74.9 0.4 75.3 49.8 198 -34 -4 -38 78.1 0.2 78.3 41.7 140 -41 -2 -43 80.9 0.2 81.1 50.2 97 -45 -2 -47 75.3 0.2 75.5 73.0 97 -45 -2 -47 68.5 0.2 68.7 79.8 61 -48 -1 -49 77.5 1.0 78.5 102.8 181.3 Combined ratio 125.1 120.0 131.3 148.5 148.5 Number of full-time employess, end of period 127 77 48 51 51 42 148 of 152 l Financial highlight and key ratios by geography l TrygVesta Annual Report 2007  Number of full-time employess, end of period 61 40 DKKm Swedish general insurance Gross premiums earned Technical result Return on investment activities Profit/loss before tax Key ratios Gross claims ratio Business ceded as % of gross premiums Claims ratio, net of ceded business Gross expense ratio Combined ratio Other Gross premiums earned Technical result Return on investment activities Other income Other expenses Profit/loss before tax Number of full-time employess, end of period TrygVesta Gross premiums earned Technical result Return on investment activities Other income Other expenses Profit/loss before tax Key ratios Gross claims ratio Business ceded as % of gross premiums Claims ratio, net of ceded business Gross expense ratio Combined ratio Number of full-time employess, end of period IFRS 2007 2006 2005 Danish GAAP 2004 2003 2004 90 -82 -1 -83 88.9 0.0 88.9 105.6 194.5 4 -41 0 -41 144.9 0.4 145.3 1,003.8 1,149.1 0 -23 8 1 -47 -61 -3 -4 26 0 -36 -14 - - - - - - - - - 0 -9 1 -32 0 -37 -68 - - - - - - - - - 0 -9 0 -29 0 -32 -61 - - - - - - - - - - - - - - - - - - - - 1,027 -11 -25 0 -32 -68 1,238 -60 -23 0 -21 -104 0 0 24 34 34 670 16,606 2,820 340 121 -172 3,109 67.3 2.1 69.4 16.7 86.1 16,021 2,512 1,228 118 -149 3,709 65.9 3.7 69.6 16.8 86.4 15,705 2,047 894 126 -154 2,913 71.1 0.1 71.2 17.0 88.2 15,266 1,707 371 121 -147 2,052 68.3 4.6 72.9 17.1 90.0 16,308 1,456 517 121 -147 1,947 67.6 5.0 72.6 21.2 93.8 16,702 376 685 115 -131 1,045 71.5 6.8 78.3 22.4 100.7 3,814 3,808 3,718 3,762 3,762 4,420 The comparative figures for Danish general insurance have been restated, and the activities of TrygVesta IT A/S and Tryg Ejendomme A/S are included under ‘’Other’’ together with the parent company TrygVesta A/S. TrygVesta Annual Report 2007 l Financial highlight and key rations by geography l 149 of 152 Accounts Organisation chart GROUP CEO Stine Bosse PRIVATE & COMMERCIAL Peter Falkenham GROUP FINANCE Morten Hübbe PRIVATE & COMMERCIAL CORPORATE NEW MARKETS Kjerstin Fyllingen Lars Bonde Stig Ellkier-Pedersen Sales & Customer Service Manager Martin Nielsen Sales & Customer Service Manager Martin Nielsen Sales & Customer Service Manager Roger Slinning Sales & Customer Service Manager Truls Holm Olsen Martin Hay Schmidt Finland Ville-V. Laukkanen Corporate Finance & Planning Peter Brondt Pedersen Product development, Production & Underwriting Bente Arnesen Product development & Production Birgitte Kartman Produktudvikling & Produktion Bente Arnesen Underwriting Kevin Carlson Trond Thorsen Sweden Peter Appelros Group Controlling Corporate & Reporting Ulrik Andersson Claims-handling & purchase Jesper Joensen Claims Jesper Joensen Claims Karsten Kristiansen Claims Anne Stine Mollestad BusinessLab Yngvar Skar Group Accounting and Administration Fatiha Benali Affinity Groups & Civil Servants Keld Holm Chain Stores & Associations Trond Tepstad UW International Programme business and corporate Sweden Kevin Carlson Group Risk Ole Hesselager Bancassurance Flemming Steen Pedersen Bancassurance Sture Bø Bancassurance Flemming Steen Pedersen Group Investments Torben Jørgensen Health Care & Pensions Health Care & Pensions Health Care & Pensions Health Care & Pensions Jens Stener Domicile & Building Kim Styltsvig Even Berge Document handling Alice Meulengracht E-business Jens Galatius Dec. Pol. Handl. (DOP) Kjetil Johan Ølmheim Salary & Negotiations Ane Jægersborg Bjørn Smørås Group Staff Management Secretariat TV Management Academy Organisation development IT & Process development Martin Bøge Mikkelsen Investor Relations Ole Søeberg Communications Troels Rasmussen Corporate Branding Jens Stener Group Legal Dept. Bjarne Lau Pedersen TrygVesta Garanti Mads Løgstrup Enter Roy Erik Landehagen Business responsible Process responsible Subsidiary Nordic Competence Centre 150 of 152 l Organisation chart l TrygVesta Annual Report 2007 Glossary The financial highlights and key ratios of TrygVesta have been pre- pared in accordance with the executive order issued by the Danish Financial Supervisory Authority on the presentation of financial re- ports by insurance companies and profession-specific pension funds and also comply with “Recommendations & Financial Ratios 2005” issued by the Danish Society of Financial Analysts. Unwinding Unwinding of discounting takes place with the passage of time as the expected time to payment is reduced. The closer the time of payment, the smaller the discount. This gradual in- crease of the provision is not recognised under claims, but in technical interest in the income statement. Gross earned premiums Calculated as gross premiums written adjusted for change in gross provisions for unearned premiums, less bonuses and premium rebates. Gross claims ratio Calculated as the ratio of gross claims incurred to gross earned premiums. Gross claims incurred x 100 Gross earned premiums Business ceded as a percentage of gross premiums Calculated as the ratio of the net result of business ceded to gross earned premiums. Net result of business ceded x 100 Gross earned premiums Gross expense ratio Calculated as the ratio of gross insurance operating expenses to gross earned premiums. Gross insurance operating expenses x 100 Gross earned premiums Combined ratio Calculated as the sum of the gross claims ratio, the net result of business ceded as a percentage of gross earned premiums and the gross expense ratio. Operating ratio Calculated like the combined ratio but adding technical interest in the denominator. Claims incurred + insurance Operating expenses + result of reinsurance x 100 Gross earned premiums + technical interest Provisions for claims to earned premiums Calculated as the ratio of provisions for claims relative to earned premiums. Relative run-off gains/losses Run-off result relative to provisions insurance contract, beginning of year. Discounting Expresses recognition in the financial statements of expected future payments at a value below the nominal amount, as the recognised amount carries interest until payment. The size of the discount depends on the market based discount rate applied and the expected time to payment. Return on equity Calculated as the profit for the year as a percentage of the average shareholders’ equity. Profit for the year x 100 Average equity Net asset value per share Calculated as year-end shareholders’ equity divided by the average number of shares. Year-end equity Average number of shares Earnings per share Calculated as the profit for the year divided by the average number of shares. Profit for the year x 100 Average number of shares Dividends per share Calculated as the total dividend proposed divided by the average number of shares. Proposed dividend Average number of shares Price/net asset value Calculated as the quoted price of the share divided by the net asset value per share. Quoted price Net asset value per share Price/earnings Calculated as the ratio of the price per share to earnings per share. Quoted price Earnings per share Danish GAAP Danish GAAP means that the annual report has been prepared in accordance with the Danish Financial Services Act and the executive order issued by the Danish Financial Supervisory Au- thority on the presentation of financial reports by insurance companies and profession-specific pension funds. Danish general insurance Comprises the legal entities in TrygVesta Forsikring A/S (excluding the Norwegian, Finnish and Swedish branches) and TrygVesta Garantiforsikring A/S. Norwegian general insurance Comprises TrygVesta Forsikring A/S, Norwegian branche and the Norwegian subsidiaries. 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Statements regarding TrygVesta’s formance or the insurance industry. future results of operations, financial condition, cash flows, business strategy, plans and future objectives Should one or more of these risks or uncertainties other than statements of historical fact can generally materialise or should any underlying assumptions be identified by terminology such as “targets”, prove to be incorrect, TrygVesta’s actual financial “believes”, “expects”, “aims”, “intends”, “plans”, condition or results of operations could materially “seeks”, “will”, “may”, “anticipates”, “would”, “could”, differ from that described herein as anticipated, “continues” or similar expressions. believed, estimated or expected. A number of different factors may cause the actual TrygVesta is not under any duty to update any of the performance to deviate significantly from the forward-looking statements or to conform such forward-looking statements in this annual report, statements to actual results, except as may be including but not limited to general economic required by law. developments, changes in the competitive environ- ment, developments in the financial markets, extra- ordinary events such as natural disasters or terrorist attacks, changes in legislation or case law and reinsurance. This is a translation of the Danish annual report 2007. In case of any discrepancy between the Danish and the English version of the annual report 2007, the Danish version shall apply. Editors: Investor Relations Design: Bysted A/S Printers: Arco Grafisk A/S Paper: Munken Lynx Photos: Mads Armgaard/gab.dk and Getty Images A n n u a l R e p o r t 2 0 0 7 Annual Report 2007 TrygVesta A/S Klausdalsbrovej 601 DK-2750 Ballerup TrygVesta@trygvesta.com www.trygvesta.com Phone +45 70 11 20 20 CVR no. 26460212 Fax +45 44 20 67 00 

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