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Annual Report 2008
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 66 00
TrygVesta A/S
TrygVesta
Forsikring A/S
Vesta
Skadeförsäkring
(Swedish branch)
TrygVesta Forsikring
(Norwegian branch)
Nordea
Vahinkovakuutus
(Finnish branch)
Enter Forsikring AS
(Norwegian subsidiary)
Respons Inkasso AS
(Norwegian subsidiary)
Tryg
Ejendomme A/S
Ejendomsselskabet
af 8. maj 2008
Vesta
Eiendom AS
(Norwegian subsidiary)
Other real property
companies
(Norwegian subsidiaries)
TrygVesta
Garantiforsikring A/S
(Dansk Kaution)
TrygVesta Garanti
(Norwegian branch)
Vesta Garanti
(Swedish branch)
Vesta Garanti
(Finnish branch)
Group chart at 31 December 2008. Companies and branches are wholly-owned
by Danish owners and placed in Denmark unless otherwise stated.
Company
Branch
Editors: Investor Relations
Design: Bysted A/S
Content and structure advice: Black Sun Plc London
DTP: AMO design
Printers: Centertryk
Paper: Munken Lynx
Photos: Mads Armgaard/gab.dk and Getty Images
TrygVesta wants to be perceived as the leading peace-of–mind
provider in the Nordic region and our aim is to prevent concerns
from overshadowing our customers’ lives. Throughout 2008,
our 4,000 employees used our products and services to provide
peace of mind on a daily basis to more than 2.2 million private
customers 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 player in Denmark and Norway’s third largest player.
We have operated our rapidly growing activities in Finland and
Sweden since 2001 and 2006, respectively.
TrygVesta’s insurance offering includes the following areas: liability,
workers’ compensation, motor, building, contents, cargo, house,
personal accident and health care. By far most of our customer
relations are handled through our own channels. In addition,
we have a strategic partnership with Nordea, the largest bank in
the Nordic region.
TrygVesta Annual Report 2008 l Profile l
1 of 152
Introduction to TrygVesta
2 of 152
l Introduction to TrygVesta l TrygVesta Annual Report 2008
The future is now
“At TrygVesta, we are seeing major changes on several fronts.
Businesses develop in global markets; life styles and social cultures
are changing – and our customers make new demands on how
we can continue to provide peace of mind in their homes,
at work and in their spare time.
TrygVesta has launched a number of new projects requiring fresh
thinking, development and innovation, and preparing us and our
customers for a changeable future. That’s why we say ‘the future is now’
with this year’s theme.”
Introduction to TrygVesta
TrygVesta Annual Report 2008 l Introduction to TrygVesta l
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Introduction to TrygVesta
Contents
Management’s report
Introduction to TrygVesta
Group overview
Preface by Mikael Olufsen and Stine Bosse
Financial highlights and key ratios of TrygVesta
Highlights of 2008
Markets and strategy
The insurance industry in the Nordic region
The Nordic insurance markets
Our products
Strategy
Strategic themes
Key performance indicators
Financial outlook for 2009
Results
The Group’s financial performance in 2008
Private & Commercial Denmark
Private & Commercial Norway
Finnish general insurance
Swedish general insurance
Corporate
Investment activities
Our customers
Our employees
Capitalisation and risk management
Capitalisation and profit distribution
Risk management
Corporate governance
Supervisory Board
Group Executive Management
Corporate governance
Remuneration
Shareholder information
Accounts
Statement by the Supervisory Board and the Executive Management
Independent auditors’ report
Income statement and balance sheet – TrygVesta Group
Statement of changes in equity – TrygVesta Group
Cash flow statement – TrygVesta Group
Notes
Income statement and balance sheet – TrygVesta A/S (parent company)
Statement of changes in equity (parent company)
Notes (parent company)
Financial highlights and key ratios by geography
Glossary
Organisation chart
Inserts are placed in a separat pocket at the end of the Annual Report 2008
4 of 152
l Introduction to TrygVesta l TrygVesta Annual Report 2008
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Group overview
Per cent of
total business
Principal
activities
PRIVATE & CO M M E RCIA L
CORPORATE
Denmark, Norway
Denmark
Norway
Finland
Sweden
& Sweden
Read more on page 39
Read more on page 43
Read more on page 46
Read more on page 48
Read more on page 50
38%
27%
2%
1%
32%
Insurance to
private individuals
and small busi-
nesses.
The branch was
set up in 2001.
Insurance to pri-
vate individuals.
The branch was
set up in 2006.
Insurance to
private individuals
and small and
medium-sized
businesses.
Insurance to
private individuals
and small and
medium-sized
businesses.
Enter Forsikring,
which sells insu-
rance to private
individuals, is
included in Private
& Commercial
Norway.
Insurance to cor-
porate customers.
Corporate custo-
mers are customers
paying annual
premiums of more
than DKK 900,000
or having more
than 50 employees.
TrygVesta Garanti,
the leading provider
of guarantee insu-
rance, is included
in Corporate.
Employees*
1,861
1,230
180
120
700
Distribution
channels
5 customer
centres
3 regional
customer centres
Nordea’s branches
Nordea’s branches
Own sales force
Own sales force
Own call centre
Insurance brokers
16 local service
centres
35 local sales
centres
Own call centre
Internet
Own sales force
Own sales force
Car dealers
Internet
Car dealers
Real estate agents
Nordea’s branches
Affinity group
85 franchise
offices
Car dealers
Nordea’s branches
Affinity group
Strategic
partnership
Brands
* Staff functions are distributed proportionately among the business areas.
TrygVesta Annual Report 2008 l Introduction to TrygVesta l
5 of 152
Introduction to TrygVesta
Preface
2008 – A challenging year
due to sharp declines in equity returns. Profit for the year
The year 2008 will go down in history as a year of financial
after tax was DKK 846m, which exceeded expectations by
crisis, a rapid slowdown in economic activity and difficult
DKK 246m as set out in TrygVesta’s third quarter interim
conditions for investors, borrowers and banks. Thanks to
report. Based on our 2008 performance and the Group’s
TrygVesta’s focus on profitable insurance operations, strong
policy to distribute 50% of the profit for the year as cash
market positions, conservative investment approach,
dividend, the Supervisory Board recommends that dividends
strong ownership structure and high competence level,
be paid at the rate of DKK 6.50 per share. No share buy
our business model proved its worth in difficult times,
backs are planned based on the 2008 results.
thereby enabling TrygVesta to help provide peace of
mind for customers, employees and shareholders alike.
Growth in 2008 was strengthened by continuing solid
Strategy
performances in Finland and Sweden and the introduction
of a new customer system to promote sales in Norway.
The performance of all TrygVesta’s four strategic themes
Rising average prices indicate that growth and increasing
– profitable growth, peace-of-mind delivery, self-service and
profitability are in pipeline for the coming years. TrygVesta’s
human competencies – continued to support a positive
conservative investment policy and a reduced proportion of
development. Growth in Finland and Sweden outperformed
equities since mid-2007, our investment portfolio generated
expectations. Product improvements such as the extended
a positive return of 3.5% in 2008.
roadside assistance product Udvidet Tryg Vejhjælp and the
new building policy Ny Villaforsikring in Denmark enhanced
Like in 2007, claims expenses continued to increase in
our peace-of-mind delivery while the introduction of online
2008, particularly with respect to buildings and health
sales of travel insurance provided new self-service options.
care. Consequently, we have implemented initiatives to
The management and leadership development programmes
ensure sustained profitability. Changed climate conditions
we introduced in 2008 set the framework for even better
impacted the 2008 performance less than had been
qualifications and good business performance.
expected. However, TrygVesta believes that the number
of claims caused by changed precipitation and windstorm
You can read more about TrygVesta’s strategy and strategic
patterns will rise in the future.
focus areas in the section on Strategy on page 22.
TrygVesta shares
TrygVesta’s performance in 2008
The OMX C20 index including dividends fell by 46% and the
Earned premiums at DKK 17,323m were 4.9% higher in local
DJ Euro Insurance Index including dividends dropped 44% in
currency terms, and the technical result was DKK 2,384m.
2008. Despite these strong price declines the TrygVesta
Profit before tax was down from DKK 3,109m to DKK 1,347m
share yielded a total return of -12% including dividends. A
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l Introduction to TrygVesta l TrygVesta Annual Report 2008
healthy insurance business and conservative investment
are concerned, we have subscribed to the UN Global
strategy were contributory factors in the relatively good
Compact and the Carbon Disclosure Project. Our target
performance of TrygVesta shares.
is to reduce our CO2 emissions by 10% over two years.
Strong Nordic organisation
Corporate governance
TrygVesta is a Nordic insurance group addressing the
TrygVesta’s managers have a special duty to ensure
entire Nordic market. That is why we implemented a
that we continuously work towards our vision. In 2008
new Nordic organisation on 1 January 2009 with clearly
we continued to work with corporate governance and
defined pan-Nordic responsibility and uniformity with
our management profile. Among other initiatives, 192
respect to sales, product development, claims handling,
managers attended in-house development courses such
IT systems and underwriting. Our intention is for the new
as ‘Leading the Brand’ and ‘Managing with BSC’. We
structure to contribute increased efficiency, innovation
promote management behaviour supporting our corporate
and earnings, thereby enhancing our market position.
vision, strategy and handshake, and going forward the
At the same time, our new process-oriented organisation
management profile will be implemented through “The
creates good environments for the professional and
Living House”, “The Living Organisation”, management
personal development of our 4,000 employees, and we
recruitment and talent development.
intensify our in-house cooperation with a view to exploit-
ing our competencies in the best possible manner. We
TrygVesta’s general management is described in the
call our new structure “The Living Organisation”. It reflects
section on Corporate governance on page 80.
our corporate culture and to exploit it to the full, it ties in
with “The Living House”, a change of our physical work-
Outlook for 2009
ing environment designed to enhance innovation, devel-
For 2009, we expect 4% premium growth in local currency
opment, knowledge-sharing and drive.
terms as compared with the previous outlook of around 5%
due to the adverse economic trends. On the earnings side,
Peace-of-mind provider
we expect a combined ratio of 92 before run-off, a profit
“The Living Organisation” and “The Living House” create
after tax of DKK 1.3bn, and a return on equity of 14-16%.
an environment for producing new ideas and developing
We base this outlook on a number of assumptions with
them into profitable products and services supporting our
respect to equity returns and interest rate levels. Due
pan-Nordic peace-of-mind delivery and translatable into
to the volatile financial markets, the impact on profit of
our handshake – Dynamic, Compassionate and Innovative.
these fluctuations is subject to great uncertainty. The
outlook for 2009 and the related assumptions are
Corporate Social Responsibility (CSR)
described in greater detail in the section on Financial
CSR represents good business ethics and common sense
outlook for 2009 on page 28.
and supports our business model. That is why we urge all
TrygVesta managers and employees to commit themselves
Recent years’ favourable performance will not make us
to and familiarise themselves with the value of CSR.
rest on our laurels. We have further potential for improve-
TrygVesta has drawn up a CSR declaration of intent, de-
ment in many areas, and we will face a wide variety of
fining our commitment and describing our responsibility in
future challenges and opportunities to expand our peace-
relation to employees, customers and the external commu-
of-mind delivery and value creation.
nity. For example we have employed maladjusted young
people with an immigrant background in an attempt to
We hope you will enjoy reading our annual report.
give them better opportunities and to meet customer
requirements for a broader customer service interface.
However, we are cautious about new recruitments in order
Mikael Olufsen
to avoid subsequent dismissals. As far as climate issues
Chairman
Stine Bosse
Group CEO
TrygVesta Annual Report 2008 l Introduction to TrygVesta l
7 of 152
Introduction to TrygVesta
Financial highlights and key ratios of TrygVesta
DKKm
2004
2005
2006
2007
2008
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
Technical result
Return on investments after technical interest
Other income and expenses
Profit/loss for the year before tax
Tax
15,266
-10,425
-2,611
2,230
-708
185
1,707
371
-26
2,052
-556
Profit/loss for the year, continuing business
Profit/loss on discontinued and divested business after tax
1,496
-75
Profit/loss for the period
Run-off gains/losses, net of reinsurance
Relative run-off gains/losses
1,421
-71
-0.5
Balance sheet
Total provisions for insurance contracts *
25,212
Total reinsurers’ share of provisions for insurance contracts 3,292
6,802
Total shareholders’ equity
37,824
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 of reinsurance
Expense ratio, net of reinsurance
Combined ratio, net of reinsurance
Operating ratio
Gross expense ratio with adjustment **
68.3
4.6
72.9
17.1
90.0
71.2
17.6
88.8
89.0
17.1
15,705
-11,159
-2,662
16,021
-10,564
-2,697
16,606
-11,175
-2,769
17,323
-11,766
-3,003
1,884
-7
170
2,047
894
-28
2,913
-788
2,125
-28
2,097
283
1.8
26,757
2,630
8,215
40,811
71.1
0.1
71.2
17.0
88.2
69.7
17.6
87.3
87.1
17.0
2,760
-591
343
2,512
1,228
-31
3,709
-624
3,085
126
3,211
555
3.0
25,957
1,561
9,951
42,783
65.9
3.7
69.6
16.8
86.4
68.4
17.2
85.6
84.6
16.8
2,662
-343
501
2,820
340
-51
3,109
-842
2,267
-1
2,266
743
3.6
26,916
1,587
10,010
43,830
67.3
2.1
69.4
16.7
86.1
68.1
17.1
85.2
83.5
16.7
2,554
-669
499
2,384
-988
-49
1,347
-501
846
0
846
793
4.0
25,193
1,036
8,244
38,445
67.9
3.9
71.8
17.3
89.1
70.7
17.8
88.5
86.6
16.9
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l Introduction to TrygVesta l TrygVesta Annual Report 2008
DKKm
2004
2005
2006
2007
2008
Other data
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 (DKK)
Net asset value per share (DKK)
Dividend per share (DKK)
Share price 31.12 (DKK)
Quoted price/net asset value
Price Earnings
Average number of shares (1,000)
Number of shares, year end (1,000)
Solvency
33
39
41
31
15
23
22.0
100
10
-
-
-
68,000
68,000
78
28
31.3
121
21
319.2
2.6
10.2
68,000
68,000
72
35
45.5
147
33
431.5
2.9
9.5
67,824
67,790
58
23
33.5
148
17
388.0
2.6
11.6
67,648
67,638
81
9
12.8
128
6.5
328.0
2.6
25.7
66,184
64,378
100
Number of full-time employees, end of period
Continuing business
Discontinued and divested business
3,728
34
3,694
24
3,808
0
3,814
0
4,091
0
* The reduction from 2007 to 2008 is mainly caused by the decline in NOK versus DKK.
** In the calculation of the gross expense ratio with adjustment pursuant to the order issued by the Danish FSA, costs are stated
exclusive of depreciation and operating costs on the owner-occupied property but including a calculated cost (rent) concerning
the owner-occupied property based on a calculated market rent.
Other key ratios are calculated in accordance with ’’Recommendations & Financial Ratios 2005’’ issued by the Danish Society of
Financial Analysts.
TrygVesta Annual Report 2008 l Introduction to TrygVesta l
9 of 152
Introduction to TrygVesta
Highlights of 2008
M ARCH
J uNE
Leading the Brand
192 managers with personnel responsibilities completed
a Nordic development programme during the year. The
programme Leading the Brand was a strategic initiative
aimed at forging a closer link between managers’ role
and TrygVesta’s vision, strategy and corporate values. In
2009, TrygVesta intends to launch a further management
development programme – Leading by Strategy, designed
for managers who have managers reporting to them.
Self-service in Norway
In Norway, TrygVesta’s customers were given the
option to report claims electronically on the Internet.
The option of electronic claims reporting means that
customers’ claims are handled quicker, and it involves
less forwarding of documents. This solution makes
internal processes more efficient and creates potential
for further automation efforts in claims handling. The
option was received favourably by customers.
APRIL
AuGuST
SundPuls
TrygVesta launched a preventive health care product,
called SundPuls. The product offers Danish businesses a
thorough check of the state of their employees’ health.
Based on the health check, each employee receives an
individual action plan and the business receives an
overall anonymised report. In addition, employees are
offered advice on food, exercise, smoking and alcohol
over the SundPuls telephone service and can read
about health issues at the SundPuls Internet portal.
Employees with special needs, for example substance
abuse problems or a risk of lifestyle diseases, may be
offered additional expert counselling. SundPuls is
offered to businesses with more than 25 employees
and the annual cost is DKK 895 per employee.
New roadside assistance product in Denmark
TrygVesta extended its role as a peace-of-mind provider
with the roadside assistance concept Tryg Vejhjælp in Den-
Antal
mark. Tryg Vejhjælp offers a loan car, towing, battery jump-
start and other services. The extended Tryg Vejhjælp pro-
duct also offers a taxi service, hotel accommodation, an
annual safety check-up and a bi-annual change between
snow tyres and summer tyres. Tryg Vejhjælp was added to
the motor insurance coverage of some 300,000 concept
customers in 2008 at no additional cost.
EXTENDED TRYG VEJHJÆLP
Number of insurances
25,000
20,000
10,500
10,000
5,000
0
M AY
Q2
Q3
Q4
New international network partner
TrygVesta and AXA Corporate Solutions signed a letter
of intent to the effect that by 1 January 2009 TrygVesta
would be using the international network of AXA Corpo-
rate Solutions to meet Nordic customers’ international
insurance requirements. The AXA Corporate Solutions
partnership makes TrygVesta part of a global network
represented in more than 90 countries and with geo-
graphical coverage of 95% of the inhabited world. AXA
is one of the world’s largest insurance companies.
10 of 152
l Introduction to TrygVesta l TrygVesta Annual Report 2008
SEPTE M BER
Oslo achieves milestone
Efforts to lift TrygVesta’s market share in Oslo were on
track. TrygVesta’s shares of the private market in Oslo
have been below those recorded in the rest of Norway.
The goal is to lift TrygVesta’s share of the private mar-
ket in Oslo to the level of the rest of Norway by the end
of 2011.
The first milestone was to reverse the adverse trend
in the Oslo area and lift sales, and in 2008 we out-
performed the growth forecasts for the first time.
TrygVesta is now the company that records the highest
growth rates in the private lines in Oslo. In 2009,
TrygVesta intends to focus on further increasing sales
in Oslo to the private as well as the commercial market.
Corporate in Sweden
As a natural extension of the Group’s Nordic commit-
ment TrygVesta set up a Swedish corporate business,
initially with an office in Stockholm. The Stockholm
office will collaborate with already established under-
writing teams in Denmark and Norway to sell insurance
to large customers in the Swedish business sector
through insurance brokers.
Products initially offered to Swedish corporate
customers include liability, consequential loss, building
(property) and commercial cargo policies.
The office had a staff of five at 31 December 2008.
NemKonto
In Denmark, TrygVesta began transferring repayments
from insurances automatically to customers’ NemKonto,
an ordinary bank account, to which public authorities
and businesses may transfer money. All Danish citizens
have a NemKonto.
TrygVesta used to send several hundred thousands
of cheques to Danish customers each year. Using the
NemKonto saves customers a trip to the bank, and
TrygVesta disposes of the manual work of writing and
sending cheques.
Customers who do not want money paid into their
NemKonto may still opt to receive a cheque.
NOVE M B ER
Nordea partnership extended
TrygVesta and Nordea have extended the successful
partnership, operated since 1999, to 2013.
The partnership provides for Nordea to sell TrygVesta’s
policies on a pan-Nordic basis in its branch network, and
for TrygVesta to sell Nordea’s life and pension products
in Denmark and Norway. The agreement also involves
Nordea’s portfolio management of most of TrygVesta’s
investment assets.
DECE M B ER
TrygVesta in European top league
Consulting firm Arthur D. Little concluded in a survey
that Nordic insurance companies are the most cost-
efficient in Europe. TrygVesta ranked four out of fifty
companies.
The top-fifteen companies in Europe include nine
Nordic-based companies. When comparing countries,
Denmark came in one, Sweden two and Norway three.
TrygVesta Annual Report 2008 l Introduction to TrygVesta l
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Markets and strategy
12 of 152 l Markets and strategy l TrygVesta Annual Report 2008
Markets and strategy
Global is the future
“TrygVesta’s share of the aggregate Nordic market is expected to rise
in the years ahead, including from our rapidly growing market shares
in Finland and Sweden. TrygVesta operates on a pan-Nordic scale,
developing uniform sales channels, products and infrastructure.
Our partnership with Nordea, developing our own sales channels and
entering into partnership agreements with affinity groups and
others enable us to reach wider circles of the Danish, Finnish,
Norwegian and Swedish insurance markets.”
TrygVesta Annual Report 2008 l Markets and strategy l
13 of 152
Markets and strategy
The insurance industry in the Nordic region
The industry in general
although they were adversely impacted by the financial
The Nordic insurance markets have a wide distribution of
market turmoil.
conventional insurance services such as motor, building,
transport, workers’ compensation and personal accident
insurance. Volume growth is largely in line with GDP plus
Challenges
the impact of price changes over time. Profitability
Insurance and economic downturn
fluctuates relative to claims expenses.
The insurance industry is characterised by a robust underlying
The Nordic market is characterised by direct sales of
mind by agreement or because insurance is required by law.
business because consumers and businesses buy peace of
insurances to private and commercial customers. Large
corporate customers are approached either directly by the
An economic downturn will, however, generally result in
insurer or through an insurance broker. Customer contacts
weaker growth as car and real estate sales decline. Likewise,
are based on telephone sales, insurers, insurance brokers,
the number of commercial policies and workers’ compensa-
bancassurance and, on a smaller scale, via the Internet.
tion policies will be affected by cyclical trends. These factors
are to some extent offset by ongoing price increases.
The price of an insurance product is determined on the basis
of estimated claims expenses, selling costs and administra-
Historically, weaker economic activity has generally not had
tive expenses, and the desired level of profitability.
an adverse impact on claims due to the combined effect of
more cautious behaviour, lower mileage and the possibility
The Nordic insurance industry generated aggregate
of cheaper claims procurement. Furthermore, prior periods
estimated earned premiums of around DKK 140bn in
of weak economic activity have only to a limited extent
2008 and accounted for some 1.8% of the region’s
been characterised by unusual increases in the number of,
total GDP. The market is characterised by a few large
for example, burglaries and fraudulent claims.
companies holding relatively large market shares com-
pared with other countries. The four largest companies
Competition in the Nordic insurance industry
in each country thus accounted for a total market
All the large Nordic insurance groups focus on operating
share of between 64% and 87%. As the large compa-
their insurance business in a profitable and financially healthy
nies also work on a pan-Nordic scale, the four largest
way, and for the industry as a whole the past few years have
insurers account for a total market share of around
therefore represented a stable and profitable period. Compe-
46% in the Nordic region. In 2008, the large companies
tition can roughly be classified as price competition and ser-
of the Nordic insurance industry reported sustained
vice competition. Small insurers have in recent years chosen
good core earnings from their insurance operations,
to apply lower prices as a means of attracting customers,
14 of 152
l Markets and strategy l TrygVesta Annual Report 2008
while the large companies have focused on service and
the adverse impact which losses on securities have on a
extended coverage. The competitive environment in each
company’s investment performance and capitalisation.
of the markets is described in more detail on page 17 in
the section on The Nordic insurance markets.
The poor investment performance and in many cases lower
equity will in the years ahead force players with inadequate
Investment performance
financial strength to increase their earnings from insurance
All insurance companies have investment portfolios con-
operations considerably, which will mainly be from prices.
sisting of funds dedicated to payment of claims at a later
date. Such portfolios are generally invested in equities,
TrygVesta has no structured financial products or hedge
real estate and bonds, but some industry players have
funds, and the proportion of equities in the investment
also chosen to invest portfolios in hedge funds and struc-
portfolio was reduced already in 2007 and early in 2008.
tured financial products. Interim reports published by the
Furthermore, the bond portfolio consists of liquid, ordi-
Nordic insurance companies in 2008 clearly demonstrated
nary bonds with an average maturity of two years.
TOTAL MARKET SIZE
DENMARK EUR 6.2BN
TOTAL MARKET SIZE
NORWAY EUR 4.7BN
27.3%
20.6%
13.2%
9.8%
17.8%
4.9%
3.4%
14.0%
30.1%
29.1%
10.3%
19.5%
TrygVesta
If
Alka
Codan
Topdanmark
Alm. Brand
Other
TrygVesta
If
Gjensidige
Sparebank
Other
TOTAL MA RKET SIZE
FINLAND EUR 3.2BN
TOTAL MARKET SIZE
SWEDEN EUR 6.2BN
1.4%
16.8%
25.7%
0.4%
18.6%
19.6%
10.0%
18.3%
13.9%
30.3%
27.8%
17.2%
TrygVesta
If
Pohjola
Tapiola
Fennia
Other
Vesta
If
Länsforsk.
Codan
Folksam
Other
Source: Data based on national statistics and most recent published financial statements for the largest companies.
TrygVesta Annual Report 2008 l Markets and strategy l
15 of 152
Markets and strategy
The Nordic labour markets
The market is nevertheless seeing healthy growth with poli-
In the years up to 2008, the entire Nordic region was chal-
cies being regarded as a supplement to the public system.
lenged by a shortage of labour, partly due to wage pres-
sure and partly due to difficulties in attracting and retain-
Climate change
ing labour. However, 2008 marked a shift towards rising
Insurance companies are, naturally, greatly impacted by
unemployment and, probably, lower rates of wage increases.
weather related claims. The climate has warmed in the Nor-
In the longer term, however, businesses face a number
dic region, and it is expected generally to become warmer,
of challenges with the large post-war generation retiring
damper and windier, thereby likely to increase claims
from the labour market and being replaced by the much
expenses. TrygVesta regularly assesses the risk of changed
smaller number of young people born in the 1980s and
claims patterns in order to price policies such as building
1990s. This is one of the reasons why governments in
and house insurance correctly. However, climate change
the Nordic countries seek to increase the supply of
also presents opportunities as we can advise customers on
labour, for example by enhancing integration and lifting
how to prevent damage, and we adapt our coverage in
employment rates among immigrants from non-Western
order to reduce customers’ concerns.
countries. Read about a new integration initiative and
other initiatives on page 59.
Implementation of Solvency II
Opportunities
TrygVesta has in recent years prepared for the new EU Sol-
vency II regime, which will impact the capital structure of
insurance companies and impose stricter requirements with
Claims procurement
respect to risk management and risk control skills. TrygVesta
Recent years’ strong economic activity has increased
has applied an internal capital model (ALM) since 2002 as
claims expenses due to higher wages and higher costs
the basis for calculating the individual solvency need, supple-
of materials. The weaker economic activity in 2009 will
mented by qualitative assessments of selected risk scenarios
probably improve procurement conditions for companies
from the Group’s in-house risk management environment.
focusing on procurement management. For many suppli-
The Solvency II regime will require enhanced expertise and
ers, insurance companies are a stable and attractive busi-
core competencies, thereby potentially leading to greater con-
ness partner due to the steady procurement of goods
solidation in the market due to smaller players’ need for and
and services in connection with claims. This applies
lack of resources to meet the new sophisticated requirements.
especially in periods of slowing economic activity.
Private health care insurance
The market for private health care insurance has grown
strongly in the Nordic region in recent years, and particularly
in Denmark. The Nordic welfare model is well developed,
but as far as health care is concerned, an increased strain
on public hospitals and the desire for shorter treatment
times have triggered a requirement for private treatment,
and private health care insurance is one way to meet this.
Growth exceeded 70% in 2008. The strong growth was
Solvency II
Column 1
(Quantitative
requirements /
standard model)
Column 2
(Supervision /
Individual model)
Column 3
(Disclosure
requirements)
For a number of
years TrygVesta has
worked with an
internal capital model
(ALM), which is used
attributable to an increasing number of companies offering
TrygVesta participates
for calculating the
health care insurance in their pay packages. TrygVesta
expects the total market for health care insurance in Denmark
to exceed one million policies in 2009. The Norwegian
in QIS calculations
individual solvency
on ongoing basis.
needs, and has
Most recently QIS4
establish its own
from 2008
risk environment.
market for health care insurance is smaller than the Danish
QIS is a term for quantitative studies about the effect from new
market due to the strong public focus on health and welfare.
EU solvency requirements.
16 of 152
l Markets and strategy l TrygVesta Annual Report 2008
The Nordic insurance markets
Competitor behaviour
The aggressive market behaviour of small and medium-
The Nordic insurance markets are characterised by the
sized insurers from 2005 to 2008 is expected to be
customer’s direct contact to the insurance company and
replaced by endeavours to strike a good balance between
large market players, and by large insurers focusing on
price and risk in the years ahead. The price changes
profitability. Insurers compete on price as well as on con-
already announced will gradually feed through as gross
tent and service.
premiums earned in 2009 and 2010.
The situation is expected to change in 2009 and 2010
No new players entered the Danish private market in 2008.
as price competition becomes less important due to
As regards the commercial and corporate market, a foreign
an increased requirement for capital among companies
group opened an office while another announced an
whose capital was reduced in 2008 as a result of losses
intention to offer insurance to large businesses.
on securities, unprofitable insurance operations and
the upcoming tighter solvency rules with larger capital
Norway
requirements. There is a good probability that the market
Competition in the private and commercial markets in
will see reduced price competition from small and medium-
Norway in 2008 was dominated by rising claims expenses
sized companies which have extensively used low prices
and a need to increase prices in order to sustain profita-
as a marketing tool in recent years.
bility. The years 2003-2006 saw unusually low claims
Denmark
expenses, triggering a fall in the prices of a number of
main products. However, the underlying claims inflation
Competition in Denmark from 2005 to 2008 was domi-
continued to rise, and since mid-2007 average prices
nated by aggressive price-driven behaviour by a number
have gone up. Price competition in the form of bundling
of small and medium-sized companies. Claims expenses
discounts is used extensively in the Norwegian mass
were low in those years, permitting market players to
market because it enhances loyalty, while the use of
use increased earnings for competitive purposes. Rising
introductory discounts offering lower prices to new cus-
claims expenses and losses on securities caused price
tomers than to existing customers has declined. TrygVesta
competition to subside during 2008. Several companies
operates a principle of price transparency for all custom-
announced premium increases during 2008 as earnings
ers and accordingly does not use introductory discounts.
came under pressure. For many Danish insurers, rising
claims expenses and declining premiums triggered an
adverse combined ratio performance in 2008.
TrygVesta Annual Report 2008 l Markets and strategy l
17 of 152
Markets and strategy
Small Norwegian insurers have increased their market
By international standards, customers in the Finnish mar-
share in recent years at the expense of larger companies.
ket are among the most loyal insurance customers with
The small players can be divided into two groups:
average relations to their insurer of more than ten years.
1) companies offering a full product portfolio to the
private market; and
TrygVesta has been an active player in the Finnish market
2) niche companies focusing on specific insurances to
since 2001, and has built a portfolio of DKK 432m
a segment or specific geographical areas.
(EUR 58m).
Some of the small companies are expected to retain their
Sweden
growth ambitions despite difficult conditions for invest-
The Swedish market is generally characterised by being
ment portfolios, although all market players are assumed
served by call centres. TrygVesta is growing rapidly in the
to focus on profitable growth and capital.
Swedish market, partly thanks to the bancassurance part-
nership with Nordea and partly to active additional sales
New insurers in the market originate from the banking
to new customers through the company’s own call cen-
sector, but the challenges facing financial institutions in
tre. The partnership with Nordea has contributed to a
2008 are assumed to impact those competitor’s capital
quick penetration in Sweden where bancassurance is a
requirements, hence reducing their incentive to expand
fairly new concept.
unprofitably into new areas in the short and medium term.
Finland
In line with trends in the other Nordic markets, the
underlying claims performance requires price increases in
Competition in Finland in 2008 was marked by rising
order for profitability to be maintained, and TrygVesta has
claims expenses and a consequent need among the large
scheduled price increases in 2009.
insurers to increase prices. Bancassurance is common in
Finland, and TrygVesta/Nordea has two competitors
TrygVesta has been an active player in the Swedish mar-
where the insurance company is part of a banking group.
ket since 2006, and has built a portfolio of DKK 259m
2009 is expected to see rising prices in order to offset
(SEK 380m).
the impact of higher claims expenses on profitability, and
TrygVesta has scheduled price increases for 2009.
PREMIUM GROWTH
COMBINED RATIO
%
15
8
9
6
3
0
-3
-6
100
96
92
88
84
80
2004
2005
2006
2007
2008*
2004
2005
2006
2007
2008*
TrygVesta
Gjensidige (estimated/adjusted for
TrygVesta
Gjensidige
If
aquisition in 2007 and 2008)
Codan
If
Codan (Combined operating ratio)
* Latest published interim report before 3 March 2009
* Latest published interim report before 3 March 2009
18 of 152
l Markets and strategy l TrygVesta Annual Report 2008
Corporate
TrygVesta in 2009
TrygVesta’s corporate business has grown since 2006.
Being the second-largest insurance group in the Nordic
The corporate market is characterised by medium-sized
region, TrygVesta has in-depth knowledge of and closely
and large businesses served directly by the insurer or
follows up on developments in the market. As described
through an insurance broker. Large customers in particu-
earlier, an economic downturn and declining investment
lar see international insurance groups as an alternative to
portfolio values are likely to cause a number of players in
the Nordic insurance companies. In a historical perspec-
the Nordic markets to change their behaviour in various
tive, however, international groups have only to a small
respects. As things stand early in 2009 it is still too early
extent been able to win market shares.
to draw conclusions about the consequences the develop-
Like in 2008, players are expected to see a good deal
to seize any opportunities that contribute to profitable
ments might have on market shares, but TrygVesta intends
of change in 2009. TrygVesta began offering corporate
growth.
insurance to the Swedish market in 2008. A business
partnership with AXA Corporate Solutions meets Nordic
TrygVesta’s share of the overall Nordic market is expected
customers’ insurance requirements outside the Nordic
to rise in the years ahead simply as a result of the rapidly
region and AXA customers’ insurance needs in the Nordic
growing market shares in Finland and Sweden. In addition
region. Furthermore, Allianz has announced a partnership
to the Nordea partnership, TrygVesta is establishing own
with Topdanmark for selling workers’ compensation insu-
sales channels and other partnerships, for example with
rance in Denmark, and Zürich Versicherung intends to offer
affinity groups, thereby gaining a broader foothold in the
direct and broker-based insurance to large corporate cus-
Finnish and Swedish insurance markets.
tomers throughout the Nordic region. Finally, the financial
turmoil seen in 2008 should be expected to induce some
In the Danish and Norwegian markets, TrygVesta aims
of the international groups experiencing challenges in
to retain and develop our market position through our
respect of their capital strength to reconsider the value
behaviour, by striking a good balance between price and
of having a presence in the Nordic market.
risk, and by offering dynamic, compassionate and innova-
tive service to our customers, in claims situations as well
as the ongoing follow-up.
TrygVesta Annual Report 2008 l Markets and strategy l
19 of 152
Markets and strategy
Our products
Motor insurance
House contents insurance
Motor insurance accounts for 32% of total premiums
House contents insurance accounts for 6% of total premiums
earned by the Group. A motor insurance policy consists
earned by the Group. A contents insurance policy provides
of mandatory third party liability comprehensive cover
cover for the loss of, or damage to, the contents of private
and cover for the motorist’s own vehicle. The mandatory
dwellings with a range of additional features, such as
third party liability insurance provides cover against lia-
cover for valuables temporarily located away from the
bility for injuries to a third party and damage to a third
home, legal expenses and liability arising from occupancy
party’s property. The comprehensive vehicle insurance,
of a building.
which is voluntary, provides cover for the motorist’s own
vehicle, for example in connection with collisions, fire
Personal accident insurance
damage and theft. Motor insurance is written for passen-
Personal accident insurance contributes 10% of total
ger cars, motorcycles, mopeds, caravans, lorries, buses
premiums earned by the Group. A personal accident
and trailers. Motor policies taken out by TrygVesta’s con-
insurance policy provides cover against accidental bodily
cept customers in Denmark include roadside assistance,
injury or death. The policy may be taken out with full-time
including services such as towing and battery jump-start,
or spare-time cover. Coverage and sums insured are
at no additional charge.
Building insurance
Building insurance accounts for 11% of total premiums
TRYGV ESTA – PRE M IU M S BY PROD UCT
earned by the Group. A building policy covers damage
to the policyholder’s house caused by events such as fire
and storm and water damage. The policy also provides
legal expenses cover and covers the policyholder’s liabil-
ity as the owner of a building.
TrygVesta introduced a new, extended building insurance
policy in Denmark in November 2008, designed to provide
enhanced peace of mind to customers. It includes, among
other features, a new and extended water damage cover-
age. The price of the new, enhanced building insurance is
higher than previously and differentiated relative to cus-
tomers’ risk profiles based on strong statistical material.
10%
4%
9%
10%
4%
32%
11%
14%
6%
Motor
Buildings
Professional liability
Transport and marine
Contents
Accident
Other
Property, commercial
Workers’ compensation
20 of 152
l Markets and strategy l TrygVesta Annual Report 2008
tailored to customer requirements. Compensation is in
conduct of its business or in connection with its products,
the form of a lump sum intended to help the policyholder
professional liability incurred by professionals such as
cope with the financial consequences of an accident,
lawyers and engineers arising from negligence, and direc-
thereby easing the strain of a changed everyday life.
tors’ and officers’ liability with respect to claims against
board members and key personnel arising from negligent
Many children are not covered by accident insurance.
conduct.
TrygVesta therefore intends to make a special effort in
2009 to market this policy to parents. Profitability in the
Transport and marine insurance
personal accident business will furthermore be enhanced
Transport and marine insurance accounts for 4% of total
by various initiatives in 2009.
premiums earned by the Group. A marine insurance policy
Property – commercial insurance
factors including fire, collision, sinking and third-party
covers damage to the policyholder’s vessel caused by
Commercial insurance comprises Property and accounts
liability.
for 14% of total premiums earned by the Group. A com-
mercial insurance policy provides cover for the loss of,
A transport insurance policy covers damage to the policy-
or damage to, the buildings, inventory or equipment of
holder’s dispatched goods caused by for example collision,
commercial customers. In addition, TrygVesta provides
capsizing or crashing.
cover for financial loss due to business interruption
resulting from covered claims.
Other products, including health care insurance
Other products include coverage in connection with
Workers’ compensation insurance
change of home ownership, unemployment insurance,
9% of total premiums earned by the Group is attributable
health care insurance, travel insurance, insurance for
to workers’ compensation insurance. A workers’ compen-
summer cottages and pleasure boats, and insurance
sation policy provides cover for employees against bodily
for pets.
injury sustained at work and, in Norway, also occupational
diseases. This insurance is mandatory for all employers
Health care insurance, which is a relatively new product
and covers their employees, except for public employees
in the market, experiences strong demand. A health care
and those employed by sole proprietorships.
insurance policy covers expenses involved in examination,
treatment, medicine, surgery and rehabilitation in a pri-
Proactive claims handling is a focus area for TrygVesta,
vate health care facility. The sustained increase in living
which pursues a close dialogue with the claimant to opti-
standards has raised expectations with respect to services
mise claims handling. We have set up a proactive claims
to be provided by the public health care services, and not
handling team consisting of claims handlers, social coun-
least the quality of such services. Combined with increas-
sellors, legal experts, occupational health practitioners,
ing health care costs and waiting times in the public sys-
orthopaedic surgeons and a network of psychologists.
tem, citizens’ higher requirements have generated sub-
Proactive claims handling has three winners: the busi-
stantial demand for health care policies, and this demand
ness, the injured person and TrygVesta in the form of
is expected to continue in the years ahead. The greater
a shorter period of absence from work, enhanced self-
number of insured persons and the increased use of the
esteem for the injured person and reduced expenses.
private health care policies will together generate signifi-
cant growth potential within health care insurance.
Professional liability insurance
Professional liability insurance accounts for 4% of total
premiums earned by the Group. A professional liability
insurance policy provides cover for various types of liability,
such as claims incurred by a company arising from the
TrygVesta Annual Report 2008 l Markets and strategy l
21 of 152
Markets and strategy
Strategy
TrygVesta’s vision is supported by our ongoing assess-
Profitable growth
ment and adaptation of our strategy, and it is imple-
Emphasising that overall growth should be profitable
mented through our activities and action plans.
increases our focus on profitable pricing and on managing
relative costs, as is also reflected by the change of our
Our efforts to implement the strategy in all relevant processes
strategic theme ‘growth’ to ‘profitable growth’ in 2008.
such as budgeting, marketing, utilisation of capital and IT are
We generated 4.9% growth in local currency terms in
clearly and firmly anchored, and the work is organised to a
2008 with a combined ratio of 89.1 (93.7 before run-off).
defined schedule with general targets and sub-targets.
THE STRATEGY PLAN CONTAINS
FOuR STRATEGIC THEMES
Profitable growth
Peace-of-mind delivery
Self-service
Human competencies
We intend to maintain and strengthen our market position
in the Nordic region with due consideration to earnings.
We intend to enhance our sales power by adapting our
sales channels and insurance terms and conditions and by
creating entirely new solutions to specific geographical
areas with a market potential, such as the so-called Oslo
project. Our core focus will be on insurance operations
and capital utilisation in our general efforts with respect
to value creation, including knowing the value of individual
customers and the financial performance of our distribu-
tion channels and claims handling centres.
All sub-targets, activities and action plans contributing to
In Denmark and Norway, where we are the number one and
the general strategic target and the strategic themes are
number three player, respectively, in terms of market posi-
typically based on meeting customer requirements and
tion, we are making adjustments to where and how custom-
expectations. In practice, the strategy is pursued by
ers meet us and to the products and coverage required by
means of improving day-to-day operations, increasing
individual customers. Thus we enhanced our motor policy
productivity, enhancing the quality of our customer service
for concept customers in 2008 by adding the Tryg Vejhjælp
with respect to sales and claims, simplifying processes
roadside assistance feature at no extra cost, but with
and making our communications with customers more
add-on options. We still have relatively modest market
understandable. The strategic efforts are planned and
shares in Finland and Sweden where we focus strongly on
managed centrally, but with clearly defined ownership of
sales. The Finnish sales channels were extended by an
current improvements in the relevant areas.
outbound call centre and our own sales force, and sales in
2008 were the highest since the beginning of 2002.
22 of 152
l Markets and strategy l TrygVesta Annual Report 2008
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 percieved as the leading peace-of-mind
provider in the Nordic region
We continuously seek to have efficient claims handling
peace-of-mind delivery is even more relevant in periods
procedures, always enabling us to provide high quality at
of uncertainty because an unforeseen expense or event
a low cost. We do this by making claims handling processes
that changes everyday life for the claimant may have
more efficient on an ongoing basis and by joint procure-
greater consequences than would otherwise be the case.
ment so that our customers get a quality experience.
TrygVesta’s peace-of-mind delivery aims to alleviate
customer concerns, and we do this by offering easy
Sales costs and administrative expenses in all business
access, clear communication, easy-to-understand
areas and staff functions are regularly reviewed in order
coverage and remedying if a claim occurs.
to reduce unnecessary processes and costs, thereby
gradually reduce relative costs over time. A number
In 2008, the results of our strategic efforts with respect
of our strategic action plans are also intended to
to the peace-of-mind delivery included that we simplified
contribute to this area.
our communications with customers, written as well as
oral. Our corporate values – Compassionate, Dynamic and
Segmentation or structured and consistent use of cus-
Innovative – are reflected in our products and our com-
tomer data will enable us to prioritise and adapt products
munications with customers. We changed the contents of
and service efforts to individual customer needs. We are
our Danish building policies in 2008 to provide extended
in the process of refining our segmentation. When fully
coverage for precipitation claims caused by changed cli-
implemented, it will provide tools for enhanced customer
matic conditions, thereby meeting our customers’ need
loyalty and satisfaction and generate good opportunities
for peace of mind.
for additional sales, thereby supporting profitable growth.
We are in the process of simplifying our written commu-
The peace-of-mind delivery
nications, including letters, brochures and policy texts to
Our peace-of-mind delivery ensures that our customers’
the mass market, targeting them to customer segments
needs are met in the best possible way before, during and
and bringing them closer to customers. The intention is
after they have a claim. Our insurance products and con-
for customers to perceive our communications as relevant
cepts build on advice intended to help prevent claims
and understandable. Enhanced customer communication
events from arising. Should an event nevertheless occur,
is also part of the strategic theme – self-service.
the customer has a sudden need for coverage and service
such as repairs or replacement purchases.
Self-service
A period of economic downturn is a challenge for
self-service options will meet many customers’ needs and
many individuals and businesses. Accordingly, our
wishes to deal with insurance matters at their own pace
Our values are based on quality and simplicity. Online
TrygVesta Annual Report 2008 l Markets and strategy l
23 of 152
Markets and strategy
and whenever it suits them best, the same way as many
reflects that we understand and respect that people are
people now handle their banking matters, travels and
the most important resource in a successful organisation.
purchases of books, electronic products and the like.
Lean is a process driven and customer oriented review of
Online self-service means that customers handle their
work processes and routines for the purpose of reducing
own business, and that the underlying processes and
waste and free resources, making room for development,
products automatically generate policies with the desired
innovation and more efficient work routines. Our Lean
contents, or that claims handling is automated. Self-
efforts were launched in 2007 with three projects, and 16
service options include policy changes, service, advice,
projects were implemented in 2008. 28 new projects are
claims handling and purchase of insurances.
scheduled for 2009.
We already offer various online service options, but this
As an example, Lean has been implemented in our Private
only amounts to a small proportion of our total business
underwriting departments, reducing handling times by more
processes. In order to fully exploit online insurance
than 50% for several tasks within a few weeks. Further-
servicing a number of processes and product contents
more, employee satisfaction has increased, and the day-
have to be adjusted to facilitate end-to-end processes.
to-day collaboration with Sales and Customer Service has
grown much stronger. These factors have also contributed
Our existing solutions comprise sales in Sweden and Finland,
to the growing customer satisfaction. The experience
sales of travel insurance, and an option for commercial cus-
gained in Private underwriting will now be deployed in
tomers to report changes to the persons covered by work-
other departments.
ers’ compensation insurance and changes to their car fleet.
The management academy was set up in 2008, aiming to
Customers currently have online access to an overview of
induce all TrygVesta managers to work in line with the
their policies in Denmark. Further to this, e-mail and text
Group’s corporate values. A total of 192 managers attended
messages will become natural communication platforms
development training in 2008. Systematic follow-up and
with customers together with a personal space on our
development of the Group’s managers will be implemented
website, to be accessed by mobile or via the Internet.
in 2009, making them ambassadors for our corporate values
in relation to employees and the external community.
In 2009, online claims reporting will become available for
private customers in Norway. Customers in Denmark will
“The Living House”, a means to fully exploit the synergies
be able to buy the most common policies, such as motor,
anticipated from project “The Living Organisation”, will
contents and building, and in a few years’ time, custom-
create a new environment in the workplace, intended to
ers will have a full self-service option for changing their
further enhance creative thinking and innovation.
policies and for reporting and handling claims.
The transition to more self-service options will contribute
to the ongoing adjustment of costs of sales, administra-
tive expenses and claims handling costs as well as to
enhancing customer loyalty and satisfaction.
Human competencies
In order to be an attractive partner for customers and
employees alike, employees need to develop and be com-
passionate, and as an organisation we should live up to
our vision. Our strategic focus on human competencies
24 of 152
l Markets and strategy l TrygVesta Annual Report 2008
Organisational change in 2009
Effective as at 1 January 2009, the organisational
change helps embed the four strategic themes more
clearly as ownership to the work processes and rou-
tines that support each strategic theme is more clearly
defined. The organisational change will facilitate better
utilisation of pan-Nordic synergies within efficient sales
processes, customer service, product development, risk
selection and procurement/service in claims handling.
Strategic themes
PROFITAB LE G ROWT H
SELF-SERVI CE
We intend to secure the right balance between growth
and earnings in all our initiatives.
We intend to meet customers on their own terms.
Initiatives and results in 2008
• growing market shares
• Swedish part of the Corporate business
• Oslo efforts
• health care – treatment insurance in Norway,
SundPuls in Denmark
• mergers & acquisitions
Goals and projects for 2009-10
• annual premium growth in excess of market growth
• to increase Nordic market share
• to increase share of the private market in Finland
and Sweden (2012) to 8%
Initiatives and results in 2008
• e-boks & Net ID/Digital signature
• new intranet
• pipeline of new web initiatives
• efficiency improvements through Lean and
new IT systems
Goals and projects for 2009-10
• operational self-service platform
• handling of motor claims in Denmark
THE PEACE-O F-M IND DELIVERY
Hu M A N CO M P ETEN CI ES
Our customers should be confirmed in their choice
of insurer on an ongoing basis.
We intend to focus on our employees and to be an
attractive workplace.
Initiatives and results in 2008
• increase customer loyalty
• satisfaction with claims handling
• risk consultancy for corporate customers
• simplified customer communications
• segmentation/customer commitment
Goals and projects for 2009-10
• to enhance customer loyalty
• to increase the proportion of concept customers
• to increase the retention rate
Initiatives and results in 2008
• “ The Living House”
• lower rates of employee turnover and sickness absence
• Leading the Brand training
• Managing by BSC
• Corporate Social Responsibility (CSR)
• Lean
Goals and projects for 2009-10
• to reduce CO2 consumption by 5% annually
• to be the most attractive workplace in the financial
sector in the Nordic region
• to increase the proportion of employees with an
ethnic background
TrygVesta Annual Report 2008 l Markets and strategy l
25 of 152
Markets and strategy
Key performance indicators 2008
Turning words into results
We use the balanced scorecard (BSC) to implement the Group’s strategy and retain our strategic focus areas.
Note: 2001 = 100 for indexed indicators
T
R
E
N
D
D
E
S
C
R
I
P
T
I
O
N
G
O
A
L
S
A
N
A
L
Y
S
I
S
PRO FI TAB LE G ROWTH
THE PEACE-OF-M IN D DEL IVERY
FINA NCIAL PERSPECTIVE
CuSTO M E R PE RSPECTIVE
Return on equity
Combined ratio
Expense ratio
Customer loyalty
Number of custo-
after tax (%)
(Index)
mers with concept
agreements (Index)
2008:
9
2008: 89.1
2008: 16.7*
2008: 118
2008: 110
2004 2005 2006 2007
2004 2005 2006 2007
2004 2005 2006 2007
2004 2005 2006 2007
2004 2005 2006 2007
23
28
35
23
90.0 88.2 86.4 86.1
17.1 17.0 16.8 16.7
109 109 112 110
106 108 108 108
Profit after tax divided
The ratio of the
Administrative
The proportion of
Index showing the
by equity
technical result
expenses and sales
100 customers staying
proportion of our
exclusive of technical
costs as a percentage
on with the company
private customers
interest to earned
of earned premiums
after one year
having made a
premiums
multiple product/
concept agreement
with TrygVesta
21-23% annually
89-91 in the medium
16.5 with a slowly
Retain in Denmark
To gradually improve
term
falling trend
and improve in Norway
Return on equity
A ratio of 89.1 was
The expense ratio for
Retained in Denmark
This group in-
was 9% in 2008.
achieved for the
2008 was in line with
as expected, higher-
creased following
The relatively low
year due to lower-
expectations when
than-expected
the introduction of
achievement level
than-expected
adjusted for expenses
increase in Norway
more peace-of-mind
was attributable to
claims expenses
for ”The Living House”
due to for example
deliveries for
capital losses on
securities
improved customer
concept customers
loyalty in the Oslo
region
* The cost ratio was 17.3
including costs related to
”The Living House”
26 of 152
l Markets and strategy l TrygVesta Annual Report 2008
SELF-SERVICE
Hu M AN CO M PE TENCIES
PRO CE SS PERSPECTIVE
LE ARNING PERSPECTIVE
Portfolio per full-time employee
Customer satisfaction in claims
Employee satisfaction
(Index)
handling (Index)
(Index)
2008: 134
2008: N/A
2008:
100
2004 2005 2006 2007
2004 2005 2006 2007
2004 2005 2006 2007
129 133 131 139
104 105 107 105
105 N/A 102 100
Index of portfolio
size per employee
Index of customer satisfaction for
Index of employee satisfaction
customers having experienced claims
measured in an annual employee
handling
survey
To increase in line with productivity,
To gradually enhance loyalty and
To be the most attractive workplace
approximately 2% annually
satisfaction
in the financial sector in the Nordic
region
The portfolio per employee decreased
The 2008 survey has too few answers
Employee satisfaction is among
in 2008 by 5% points due to the decline
to give an accurate result
the highest in the financial sector
of NOK relative to DKK
in the Nordic region
T
R
E
N
D
D
E
S
C
R
I
P
T
I
O
N
G
O
A
L
S
A
N
A
L
Y
S
I
S
TrygVesta Annual Report 2008 l Markets and strategy l
27 of 152
Markets and strategy
Financial outlook for 2009
DKKm
Interest rate level
Exchange rate DKK/NOK
Premium growth*
Technical result before run-off
Technical result after run-off
Investment result
Profit before tax
Profit after tax
Combined ratio
Actual
2008
Mid-February
2009**
Favourable Negative
scenario
scenario
Outlook 2009
4.9%
1,591
2,384
-988
1,347
846
89.1
3.93%
0.85
4%
1,500
1,500
300
1,800
1,300
92
1,650
1,350
1,400
91
1,200
93
* In local currency
** Since the autumn of 2008, changes in interest rates and exchange rates have impacted the outlook negatively for the pre-tax
profit for 2009 by DKK 400m, of which DKK 350m is attributable to lower interest rates and DKK 50m to the lower NOK
against DKK. Interest rate changes have had an adverse impact of 1 percentage point on the combined ratio.
The financial crisis and economic downturn have caused
The Outlook for 2009 does not include the impact from
greater uncertainty in a number of areas. TrygVesta is
the acquisition of Moderna Försäkringar Sak, as these
committed to providing profit guidance that is as precise
activities only will be included once the transaction is
as possible. However, with respect to 2009, the outlook
closed and this is expected in first half of 2009. For fur-
is subject to much greater uncertainty.
ther information please refer to separate company
announcement dated 2 March 2009.
Future reporting
TrygVesta’s new process-oriented organisation, which
was implemented on 1 January 2009, will result in future
changes to our reporting so as to reflect the new areas
of responsibility. The geographical reporting of the Danish
and Norwegian businesses will continue unchanged
while, beginning in the first quarter of 2009, Private &
Commercial Denmark and Private & Commercial Norway
will be reported as Nordic private and commercial busi-
ness. Reporting on Corporate, Sweden and Finland will
be unchanged.
Since the end of the third quarter of 2008, the credit and
financial crisis has, among other things, resulted in sig-
nificant changes in interest rates and exchange rates, and
such changes impact TrygVesta’s profit outlook for 2009.
Due to the exceptional circumstances, TrygVesta has
elected to update the outlook to include interest rate and
exchange rate levels at mid-February 2009. Other
assumptions remain unchanged.
28 of 152
l Markets and strategy l TrygVesta Annual Report 2008
Due to the greater uncertainty and large fluctuations
LARGE CLAIMS
in the financial markets we have elected to present a
more detailed picture of our expectations, also adding a
number of sensitivity calculations. This is intended to illus-
trate the impact of falling interest rates and the substantial
depreciation of NOK against DKK.
Lower premium growth expected for 2009
Earned premiums are expected to increase by some 4%
in local currency terms, assuming no major changes in
competitive conditions relative to 31 December 2008.
Earned premium growth is expected to originate from
organic growth and measures already implemented with
respect to premiums. Finland and Sweden together are
expected to contribute 1.8%, while Denmark and Norway
will contribute 2.2%.
DKKm
1,200
1,000
800
600
400
200
0
1,042
637
586
490
416
275
501
340
2005
2006
2007
2008
Large claims, gross
Expected level 2008/2009 (DKK 500m)
Large claims, net
Expected level 2007 (DKK 400m)
STORM AND WEATHER RELATED CLAIMS
Expectations for expected growth in earned premiums
in 2009 have been lowered relative to the 4.9% gross
increase achieved in 2008. This is a consequence of
DKKM
1,000
911
the economic downturn which is expected to affect our
business in several areas; lower sales of new cars, fewer
new single-family houses being built and rising unem-
ployment, reducing the requirement for workers’ compen-
sation insurance. An overall assessment of the various
factors has caused us to reduce the original growth fore-
800
600
400
200
0
332
202
112
cast for 2009 from 5% to 4%.
2005
2006
2007
2008
TrygVesta retains the strategy of generating profitable
growth.
Combined ratio affected by declining interest rates
Our third quarter 2008 interim report released in November
2008 set out a combined ratio forecast for 2009 at the
level prevailing in 2008. This was based on interest rate and
other assumptions as prevailing at 30 September 2008.
The interest rate used to discount provisions for claims fell
by 1.2 percentage points in the period from the fourth
quarter of 2008 until mid-February 2009 (including the
effect of a changed discount curve) with a significant
adverse effect on the combined ratio. Seen in isolation,
a 1 percentage point drop in interest rates would increase
the combined ratio by around 1 percentage point due to
an increase in the discounted technical provisions.
Expected level 2009 (DKK 250m)
Expected level 2008 (DKK 225m)
RUN-OFF (GROSS)
DKKm
1,000
800
600
400
200
0
-200
-400
-400
-600
868
744
618
361
68
-410
-588
2002
2003
2004
2005
2006
2007
2008
TrygVesta Annual Report 2008 l Markets and strategy l
29 of 152
Markets and strategy
Based on the interest rate level prevailing at mid-February
Assumptions for sales and loss of policies are based on
2009, the combined ratio for 2009 before run-off is esti-
historical levels, planned initiatives and the market situa-
mated to be at the level of 91-93 with an expectation of
tion. Assumptions for price adjustments are primarily
92. The past three years had run-offs of 1.8–4.6% of the
based on agreements relating to adjustments of individ-
combined ratio, for example, with a combined ratio in
ual insurance policies. The outlook is expressed in local
2008 of 89.1 after run-off and 93.7 before run-off.
currency terms.
The increase of the outlook in the combined ratio from
the forecast in the autumn of 2008 thus only reflects
We generally base our expectations for claims incurred
the lower interest rate level.
on assumptions for the various products in the individual
business areas. Expectations regarding claims ratios are
Downward trend in expenses
based on historical performance in the form of average
Costs in 2008 were affected by rising wage inflation and
claims ratios for the past five years, with recent years’
substantial investments in “The Living House”. When
trends generally being weighted stronger than those of
adjusted for these factors the expense ratio was 16.7
prior years. Trends in the pricing of our insurance premi-
equal to 2007. The expense ratio for 2009 is expected to
ums, claims frequencies and the discount rate applied
be on a level with 2007. This expectation includes continued
are the most important factors that may affect our overall
expansion in Finland and Sweden. The expense ratio would
performance. Assumptions for storm events and large
be just over 15 for the Danish and Norwegien activities.
claims are based on historical experience for not less
Technical result
than ten years, with recent years’ trends being weighted
stronger than those of prior years. In addition, we incor-
The technical result is expected to be DKK 1.5bn for the
porate the effect of profitability initiatives and the effect
full-year 2009 relative to DKK 1,591m in 2008 and before
of any legislative measures in the anticipated claims level.
run-off. The interest rate used for discounting has risen
and fallen considerably again since the summer of 2008.
The outlook for 2009 assumes weather related claims of
The outlook for the technical result for 2009 is therefore
around DKK 250m and large claims of around DKK 500m
subject to uncertainty due to uncertainty with respect to
gross. The outlook assumes no run-off losses or gains in
interest rates. See also the sensitivity analysis in the sec-
2009 on the provisions for claims.
tion on Risk management on page 69.
The outlook regarding gross expenses reflects the pro-
Assumptions for insurance activities
jected number of employees during 2009 and the related
The outlook for the financial results for 2009 is based
costs. The projected number of employees incorporates
on assumptions with respect to gross earned premiums,
the effect of measures launched to improve efficiency.
gross claims incurred, gross expenses, result of business
The outlook further includes other expenses such as
ceded and technical interest. Our outlook for gross
those relating to IT, operations and our owner-occupied
earned premiums is based on the Group’s portfolio at
properties, which are predominantly based on agree-
31 December 2008 and assumptions with respect to
ments that are known to us.
sales and loss of policies and price adjustments of
existing policies.
30 of 152
l Markets and strategy l TrygVesta Annual Report 2008
The result of business ceded is based on contracts made
Currency risk
with reinsurers to cover claims events and events such as
Currency exchange rates, which have a major impact on
storms and large claims. The expected result of business
the results of the insurance operations, were very volatile
ceded is calculated on the basis of such contracts and
in 2008. TrygVesta’s insurance operations are directly
historical data.
exposed to fluctuations in NOK, SEK and EUR. Based on
the expectation of a positive profit contribution from,
Assumptions for investment activities
the Norwegian part of the business, a depreciation of
Due to the volatile and unusual conditions prevailing in
NOK against DKK would adversely impact the total profit
the financial markets the assumptions for investment
of the Group which presents its financial statements in
return are subject to considerable uncertainty. See the
DKK. The currency risk on the part of equity tied up in
section on Risk management on page 69 for a sensitivity
NOK is hedged. The table shows the impact on premium
analysis.
growth and the result of insurance operations of different
The outlook for the return on investments for 2009 is
based on the following assumptions with respect to
Assumptions for tax
NOK/DKK rates.
investment assets. An equity proportion of 3.6% and a
The effective tax rate is affected by the corporate tax rate
return of 7% including dividend are assumed. Bonds are
of 25% in Denmark and 28% in Norway, and by the fact
expected to account for around 86% of total investment
that tax loss carry-forwards are not utilised in Sweden
assets and to yield a return of 3.93% based on interest
and Finland. We expect an effective tax rate of 27 for
rates mid-February 2009. Finally, the real estate portfolio,
2009. Whether this is achieved depends on the amount
which accounts for 10% of assets including owner-occupied
of gains or losses on equities which are tax-exempt or
properties, is expected to yield a return of 6.1% exclusive
non-deductible.
of any value adjustments. In 2008, bonds, equities and
real estate yielded returns of 6.1%, minus 32.8% and
The return on equity for 2009 is expected to be 14-16%
8.4%, respectively. The investment result after transfer of
after tax.
technical interest for 2009 is expected to be a profit of
DKK 300m against a loss of 988m in 2008.
IMPACT OF EXCHANGE RATE CHANGES ON THE GROuPS’ RESuLTS
DKK/NOK
0.95
0.90
0.85
0.80
0.75
Premium growth change in DKK
Result of insurance (DKKm)
4.7%
70
2.4%
35
0.0%
0
-2.4%
-35
-4.7%
-70
TrygVesta Annual Report 2008 l Markets and strategy l
31 of 152
Results
Development is the future
“Meeting customers on their own terms is another strategic
focus area. Our experience is that customers feel greater accessibility
and peace of mind when they have an online self-service option.
This focus produced a number of benefits for customers in 2008
and will continue to have a major influence on our communications
with customers in the years ahead.”
32 of 152 l Results l TrygVesta Annual Report 2008
Results
TrygVesta Annual Report 2008 l Results l
33 of 152
Results
The Group’s financial performance in 2008
TrygVesta’s focus on profitable growth in the insurance
claims within building insurance, triggered in part by rising
operations was once again the foundation that sustained
claims inflation (higher labour costs and material prices)
the company throughout 2008, which was otherwise a
and a changed claims mix. However, claims inflation sub-
challenging year for the insurance industry.
sided in the second half-year of 2008 due to the economic
Gross earned premiums were 4.9% higher in local currency
introduced in both Denmark and Norway in 2008 to strike
terms (4.3% in DKK terms), the result of a great effort by
a profitable balance between price and claims expenses
slowdown. Premium increases and other measures were
our employees, high customer retention rates and a large
during 2009 and 2010.
inflow of new customers, with the new markets in Sweden
and Finland once again contributing high growth rates. In
Financial results in 2008
2008 we succeeded in reversing the previous negative
The technical result amounted to a profit of DKK 2,384m
growth in Private & Commercial Norway to positive growth
in 2008 compared with DKK 2,820m in 2007. Outper-
of 4.8% in local currency terms, driven by higher customer
forming the forecast announced in our third quarter
retention and premium increases.
interim report in November 2008 by DKK 184m, the
profit was primarily driven by run-off gains on prior-year
However, 2008 was challenging for our insurance opera-
provisions of DKK 191m in the fourth quarter of 2008.
tions. Claims expenses increased due to higher average
Although lower than in 2007, the performance was still
TECHNICAL RESULT, DENMARK AND NORWAY
TECHNICAL RESULT BY BUSINESS AREA
DKKM
2,000
1,500
1,000
500
0
1,131
956
1,032
720
1,639
1,695
1,377
1,214
1,335
DKKm
1,500
1,200
900
1,440
1,098
994
757
815
600
523
300
0
1,092
842
842
836
870
757
692
461
393
315
2004
2005
2006
2007
2008
P&C Denmark
P&C Norway
Corporate
Denmark
Norway
2004
2005
2006
2007
2008
34 of 152
l Results l TrygVesta Annual Report 2008
good in a historic perspective. Higher claims and wage
The profit after tax fell by DKK 1,420m to 846m due to
inflation combined with investments in “The Living
the lower investment return and a slightly lower technical
House” were the primary causes of the technical result
result. Capital losses on equities are non-deductible, and
for 2008 being DKK 436m lower than in 2007. Claims
therefore the tax rate was above normal.
expenses also increased within personal insurance,
including health care insurance, in 2008. The growing
New Markets lifting growth
use of health care insurance has triggered higher claims
TrygVesta recorded gross earned premiums of DKK 17,323m
expenses, and premium increases have been implemented
in 2008, which was DKK 717m, or 4.9% in local currency
to offset this effect.
terms (4.3% in DKK terms), more than in 2007. Premium
growth was in line with expectations. It should be noted,
Investment activities generated a profit of DKK 440m
in particular, that Sweden and Finland recorded aggregate
before transfer of technical interest in 2008 compared
growth of 69%, contributing DKK 234m of the DKK 717m.
with DKK 1,740m in 2007. The reduction was primarily
The total portfolio in the two countries was DKK 691m at
attributable to capital losses on equities amounting to
31 December 2008. Growth was attributable to a sustained
DKK 887m in 2008. TrygVesta recognises all investment
high inflow of customers. In Finland, it was a direct result
assets at market value, and value changes have a direct
of the sales organisation being enhanced and enlarged.
impact on the income statement. The proportion of
Sweden and Finland accounted for 1.4 percentage points
equities in the investment portfolio was reduced from
and Denmark and Norway accounted for 3.5 percentage
DKK 5.4bn in mid-2007 to DKK 1.7bn in January 2008.
points of the Group’s total premium growth of 4.9% in
Capital losses on equities would have been approximately
local currency terms.
DKK 1.2bn higher if the lower allocation to equity invest-
ments had not been implemented.
Private & Commercial Denmark reported 1.8% growth in
The pre-tax profit amounted to DKK 1,347m against
expected, and was affected in 2008 by relatively fierce
DKK 3,109m in 2007. This was DKK 247m more than
competition from smaller companies. More existing cus-
the full-year forecast announced in the third quarter
tomers chose to stay on with TrygVesta in Norway. The
gross earned premiums over 2007. This was less than
2008 interim report.
G ROSS EARN ED PRE M IU M S
BY BUSI NE SS A REA
2%
1%
32%
38%
P&C Denmark
P&C Norway
27%
Corporate
Finland
Sweden
combined effect of this, a fair inflow of new customers
and a large number of premium increases was to lift
premium growth in Private & Commercial Norway to an
annualised 4.8% in local currency terms, thereby exceed-
ing expectations.
Gross earned premiums in the Corporate business
increased by 4.3% over 2007. Gross earned premiums
grew rapidly at the beginning of the year due to the large
inflow of new customers in the second half of 2007, while
the growth rate was somewhat slower in the second half
of 2008. During the period from mid-2007 to 2008, the
Corporate business outperformed the estimated market
growth by a considerable margin, and a more natural
growth level was therefore expected in the second half
of 2008.
TrygVesta expanded its position within health care in
2008. The heavy demand for health care insurance
TrygVesta Annual Report 2008 l Results l
35 of 152
Results
PREMIUM GROWTH IN LOCAL CURRENCY
– TRYGVESTA GROUP
%
8
7
6
5
4
3
2
1
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
YTD 2008
YTD 2007
Large claims – defined as claims of more than DKK 10m
– were a gross amount of DKK 586m in 2008 against a
gross amount of DKK 1,042m in 2007. After reinsurer
contributions, large claims amounted to DKK 490m net
against DKK 637m in 2007. The most widely covered large
claim in 2008 related to a fire on Bryggen in Bergen, Norway
in September, which destroyed several of that city’s his-
toric timber built houses. The level of fires in single-family
houses in Norway amounted to NOK 264m in 2008, sig-
nificantly above 2007, which amounted to NOK 209m.
Weather related claims were DKK 112m in 2008 compared
with DKK 332m in 2007. The reduction was due partly to
the mild winter and partly to fewer cloudbursts in the
summer of 2008 compared with the summer of 2007.
Claims in 2008 were positively impacted by gains on prior
combined with good market timing of the launch of new
year claims. The favourable run-off performance contributed
product initiatives produced portfolio growth of more than
a net amount of DKK 793m (gross amount of DKK 868m)
70% in Denmark.
compared with a net amount of DKK 743m (gross amount
of DKK 744m) in 2007. The motor and personal accident
Combined ratio under pressure
lines were the major contributors of run-off gains, while
from rising claims inflation
building generated run-off losses in 2008, mainly attribut-
The combined ratio was up from 86.1 in 2007 to 89.1 in
able to larger than expected cloudburst claims from 2007.
2008. The adverse performance was triggered by higher
claims expenses for building and personal insurances.
The underlying claims ratio increased when adjusted for
Increasing average claims and high wage increases were
the effect of large claims, weather related claims, run-off
the primary cause of the higher combined ratio, although
results and interest rates. The underlying increase in
in a historic and, in particular, European perspective 89.1
claims expenses was attributable to higher claims expenses
reflected a continued good and sound insurance opera-
in several areas. The average building claim in Denmark was
tions performance.
Large claims were higher than expected in 2008, while
weather related claims were lower than expected. Run-off
gains had a favourable impact of 4.6 percentage points on
the combined ratio in 2008, on a level with 2007.
Claims experience
Gross claims at DKK 11,766m were 5.3% higher, bringing
the claims ratio, net of ceded business, to 71.8 in 2008
compared with 69.4 in 2007. The DKK 591m increase
in gross claims incurred was primarily attributable to
higher claims expenses in relation to building and per-
sonal insurance.
STORM AND WEATHER RELATED CLAIMS
DKKm
1,000
911
800
600
400
200
0
332
202
112
2005
2006
2007
2008
Expected level in 2008 (DKK 225m)
36 of 152
l Results l TrygVesta Annual Report 2008
around 21 percentage points higher, driven by higher prices
EXPENSE RATIO
of labour and materials and by a changed claims mix towards
a larger number of more expensive piping claims and reserve
strengthening. To counter the effect of these factors on the
Group’s financial results, TrygVesta has already launched a
number of initiatives and additional measures have been
scheduled to maintain and improve the earnings level.
Costs impacted by investments in New Markets
and the workplace of the future
As disclosed in the third quarter 2008 interim report,
%
20
18
16
14
12
17.0
16.8
16.7
17.3
16.7
2005
2006
2007
2008
costs in the fourth quarter of 2008 would be adversely
Expense ratio
impacted by costs in connection with “The Living House”
project to create the workplace of the future. The project
will change the physical working environment at Ballerup
and Bergen with a view enhancing innovation, develop-
Expense ratio excluding costs to “The Living House”
ment and knowledge sharing. Previously, all or part of
of expansion in the new markets had an impact of 1.5
such costs would have been capitalised as appreciation
percentage points in 2008 against 1.3 percentage points
of the values of the properties, but the item has been
in 2007 and are financed through ongoing process
recognised in current costs due to the current uncertain
improvements in Denmark and Norway.
situation.
Investment return
Expenses relating to “The Living House” totalled DKK
The investment portfolio amounted to a total of
133m. Excluding “The Living House”, the expense ratio
DKK 34.2bn at 31 December 2008 compared with
was 16.7, in line with 2007. Including costs of this project,
DKK 37.3bn at 1 January 2008. The gross return on
the expense ratio was 17.3 in 2008. In light of high wage
investment assets totalled DKK 1,258m in 2008 against
inflation of around 5-8%, high initial costs in New Mar-
DKK 1,523m in 2007, corresponding to a gross return
kets, and high growth with derived commission expenses,
of 3.5% in 2008 compared with 4.1% in 2007. Invest-
the expense performance is considered satisfactory. Costs
ment activities generated a loss of DKK 988m after
transfer of technical interest compared with a profit
of DKK 340m in 2007.
The performance fell considerably short of expectations
and was mainly attributable to capital losses on equities
of DKK 887m incurred in 2008. The proportion of equities
1,042
in the investment portfolio was reduced from DKK 5.4bn
LARGE CLAIMS
DKKm
1,200
1,000
800
600
400
200
0
416
275
501
340
637
586
490
2005
2006
2007
2008
Large claims, gross
Large claims, net
Expected level in 2008 (DKK 500m)
in 2007 to DKK 1.7bn in January 2008. Capital losses on
equities would have been approximately DKK 1.2bn higher
if the lower allocation to equity investments had not
been implemented.
TrygVesta acquired its head office in Ballerup at a price
of DKK 1,085m in the spring of 2008. The acquisition
replaced the existing lease with Danica from 1995, which
would have expired in 2025. The purchase provides
TrygVesta Annual Report 2008 l Results l
37 of 152
Results
TrygVesta with certain immediate financial benefits as
TrygVesta generated a cash inflow from operating
the annual rent exceeded the yield on bonds sold to
activities of DKK 1.8m 2008 compared with DKK 2.7bn
fund the acquisition. Acquiring the head office also facili-
in 2007.
tates “The Living House” refurbishment project described
in the preface to this annual report.
Investments amounted to a total of DKK 0.5bn in 2008,
Tax
and there was a cash outflow for financing activities of
DKK 2.2bn, primarily relating to cash dividend of DKK
The tax expense was DKK 501m in 2008 compared with
1.6bn and share buy back of own shares of DKK 1.2bn.
DKK 842m in 2007, equalling an increase in the effective
tax rate from 27% to 37%. The effective tax rate in 2007
Equity
was favourably affected by the reduction of the Danish
Equity stood at DKK 8,244m at 31 December 2008,
corporate tax rate from 28% to 25%, which reduced the
a reduction of DKK 1,766m.
deferred tax. The effective tax rate in 2008 was adversely
affected by non-deductible equity losses, which were
The change was attributable to cash dividends paid out
partly offset by a favourable impact from closed tax cases.
in the amount of DKK 1,156m, purchases of own shares
in the amount of DKK 1,197m, profit for the year and
Balance sheet and cash flow
other adjustments.
Total assets decreased from DKK 43,830m to DKK 38,453m
in 2008, primarily due to the depreciation of NOK against
Events after the balance sheet date
DKK.
On 2 March 2009 TrygVesta agreed to acquire Moderna
Försäkringar Sak in Sweden for DKK 427m in transaction
Liabilities mainly comprised shareholders’ equity of
goodwill and a total amount of SEK 1,256m (DKK 810m).
DKK 8,244m and technical provisions of DKK 25,193m.
For further information please refer to separate company
announcement dated 2 March 2009.
Technical provisions decreased from DKK 26,916m to
DKK 25,193m in 2007, equal to 6.4%. The ratio of provi-
sions for claims, net of reinsurance, to earned premiums,
was 112 against 124 in 2007.
38 of 152
l Results l TrygVesta Annual Report 2008
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
2006
2007
2008
6,390
-4,215
-1,109
1,066
6,490
-4,041
-1,086
1,363
6,605
-4,443
-1,155
1,007
-200
-87
-89
128
994
164
1,440
180
1,098
66.0
3.1
69.1
17.4
86.5
62.3
1.3
63.6
16.7
80.3
67.3
1.3
68.6
17.5
86.1
Private & Commercial Denmark sells insurances to private
impacted by significantly lower run-off gains, which were
households and small and medium-sized enterprises in
DKK 164m lower in 2008 than in 2007, and high claims
Denmark under the Tryg brand name. Sales are handled
inflation at the beginning of 2008, which subsided
by five customer centres/call centres, 16 local service cen-
towards the end of 2008.
tres, our own sales agents, Nordea’s branches, affinity
groups, car dealers and real estate agents. Private &
The higher average claims on building insurance presented
Commercial Denmark has around 1,400 employees.
one of the major challenges in 2008 due to higher wage to
skilled craftsmen and higher costs of materials, a changed
Performance at a sustained high level in 2008
claims mix and run-off losses from an increase of provisions
despite rising claims inflation
for cloudburst claims from 2007. However, the rapid eco-
The technical result amounted to DKK 1,098m in 2008,
nomic slowdown reduced demand for craftsmen services
which was DKK 342m lower than in 2007, but around
during the year, thereby curbing claims inflation. TrygVesta
DKK 100m higher than in 2006. The performance was
has implemented price increases on building insurance as a
TrygVesta Annual Report 2008 l Results l
39 of 152
Results
result of the change in claims patterns in connection with
100 private customers chose to renew their policies with
the climate changes.
us. The high retention rate made a positive contribution to
the performance, as a high retention rate is important in
2008 was yet another year with health care in focus
relation to the development of premiums, claims and costs.
Gross earned premiums rose by 1.8% to DKK 6,605m
in 2008, which was lower than anticipated. In 2008,
The implementation of the changed tariff parameters for
growth in gross premiums was affected by lower premiums
motor insurance in Denmark resulted in a decline in the
on motor insurance and competition from small insurers
average motor premium throughout 2008. However, it
in particular. Going forward, price competition from small
stabilised towards the end of the year. Although the
insurers is expected to tail off as a result of changed
implementation of the new tariff parameters began in late
market conditions under which losses on investments
2006, it takes time before the entire portfolio has been
and higher combined ratios are likely to lead to a stronger
transferred. The new parameters are based on the age of
focus on striking the balance between earned premiums/
the car, the annual mileage and the age and gender of the
growth and the related claims expenses.
driver, all of which facilitates a better risk assessment. The
level of average motor insurance premiums is expected to
2008 was yet another year with health care in focus.
remain largely unchanged in 2009. Average premiums will
Health care insurance premiums grew by more than 70%,
be favourably affected by the general increase in prices
and TrygVesta further strengthened its position in this
(index), totalling 4.4% in 2009, but adversely impacted by
market. The Private & Commercial and Corporate portfolios
the ongoing portfolio restructuring and premium reduc-
total more than DKK 200m.
tions to customers as they build up their driving seniority.
Private & Commercial Denmark also recorded strong
of high seniority customers, for whom the continuous shift
growth within so-called industry agreements with the
towards lower premiums is connected with a high degree
The motor portfolio is characterised by a large proportion
business sector as a result of recent years’ efforts to
of loyalty and good profitability.
target selected segments of the business sector. These
agreements are characterised by a high degree of
In 2008, Private & Commercial Denmark launched a number
customer loyalty and good profitability.
of initiatives to further enhance the customer experience.
In 2008, the retention rate for private customers stabilised
surance coverage of some 300,000 concept customers
at a high level of around 91, which means that 91 out of
as a customer benefit at no additional cost. The extended
As a result, Tryg Vejhjælp was added to the motor in-
AVERAGE PREMIUMS
PREMIUMS BY PRODUCT
DKK
5,000
4,750
4,500
4,250
4,000
3,750
3,500
3,250
3,000
8%
5%
13%
13%
34%
2005
2006
2007
2008
27%
Motor
Building
Motor
Property, private
Property, commercial
Personal Lines
Workers’ compensation
Other
40 of 152
l Results l TrygVesta Annual Report 2008
Tryg Vejhjælp provides additional peace-of-mind services,
CUSTOMER RETENTION
such as changing of winter and summer tyres, taxi and
hotel service and safety checks on the car. Sales of the
extended Tryg Vejhjælp have exceeded expectations,
thereby confirming that customers welcome the Group’s
ambition to continuously improve the quality and
service it provides.
In 2008, TrygVesta signed a cooperation agreement with
DLG, Denmark’s leading supplier of feedstuffs for the
agricultural sector, for the distribution of insurance products
in Denmark and Sweden. DLG, which also sells telecom-
munications, food products and machinery, generates
annual revenue of DKK 38bn and has 5,000 employees.
The agreement is expected to contribute to earned
premiums and earnings beginning in 2009.
%
93
92
91
90
89
88
2005
2006
2007
2008
CLAIMS FREQUENCY IN DENMARK
Claims affected by claims inflation
In 2008, total claims expenses at DKK 4,443m were up by
9.9% relative to 2007, and the gross claims ratio increased
from 62.3 to 67.3. Despite the increase we are still at an
acceptable level. In this connection, it should be empha-
sised that the claims ratio was exceptionally low in 2007.
The increase in 2008 was primarily attributable to higher
building and health insurance claims and significantly
reduced run-off gains as compared with 2007.
Index
120
115
110
105
100
95
90
0
0
1
=
5
0
0
2
:
x
e
d
n
I
2005
2006
2007
2008
The average claim in building insurance rose by around
Motor
Building
20 percentage points in 2008, which was one of the
most important reasons for the increase in claims expenses.
Average claims rose as a consequence of higher payroll
and material costs and a change in the claims mix, with
TrygVesta recording a higher number of costly claims,
which gave rise to run-off losses in 2008, primarily
attributable to increased provisions for cloudburst claims
from 2007.
The claims frequency for building policies dropped by
5 percentage points in 2008, mainly as a result of fewer
weather related claims. Due to the higher claims expenses,
premium increases of approximately 11% were implemented
on building policies at the end of 2008. The time lag from
implementation of a price increase until it feeds through
AVERAGE CLAIMS – DENMARK
Index
140
130
120
110
100
90
0
0
1
=
5
0
0
2
:
x
e
d
n
I
2005
2006
2007
2008
as a gross earned premium is up to two years, and the
Motor
Building
effect of such price increases will therefore only begin to
TrygVesta Annual Report 2008 l Results l
41 of 152
Results
DKKm
Storm and weather, gross
Large claims, gross
2005
2006
2007
2008
739
23
109
25
242
78
51
83
materialise in the second half-year of 2009 and be fully
Expenses
recognised in the financial statements for 2010.
Expenses rose to DKK 1,155m in 2008 from DKK 1,086m
in 2007 due to high wage inflation, increased initiation of
The claims frequency for motor policies fell by around
IT projects and expenses of DKK 24m incurred in connec-
3 percentage points in 2008 compared with 2007, and
tion with “The Living House” in the fourth quarter of
the average claim was up by around 4 percentage points.
2008. Excluding the expense in connection with “The
TrygVesta’s cooperation with selected garages helps keep
Living House”, the expense ratio was 17.1 against 16.7
average claims expenses at a competitive level, while
the year before.
ensuring that customers receive high-quality service.
Combined ratio of 86.1
Expenses for weather related claims fell, as 2008 saw
The combined ratio was 86.1, an increase relative to the
fewer cloudburst and storm claims as compared with
exceptionally low level of 80.3 recorded in 2007.
previous years. Large claims totalled DKK 83m in 2008
compared with DKK 78m in 2007.
A large part of this difference was attributable to higher
run-off gains in 2007, as, in relative terms, a 2.6 percent-
Run-off gains from prior-year claims positively impacted
age point higher positive impact was recorded in 2007 as
the 2008 performance by a gross amount of DKK 391m
compared with 2008. Moreover, the underlying claims
(DKK 414m net) against a gross amount of DKK 551m
inflation contributed to the higher combined ratio in 2008
(DKK 578m net) in 2007. Motor and workers’ compensa-
relative to 2007. Premium initiatives already implemented
tion recorded positive run-off gains, whereas reserves for
and additional planned initiatives are intended to enable
building policies were strengthened. Run-off gains had a
the strong earnings to be retained going forward.
favourable impact on the combined ratio of 6.3 percent-
age points compared with 8.9 percentage points in 2007.
42 of 152
l Results l TrygVesta Annual Report 2008
Private & Commercial Norway
DKKm
2006
2007
2008
NOK/DKK, average rate for the period
93.04
92.81
91.74
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
4,509
-2,866
-922
4,490
-2,962
-936
4,636
-3,371
-1,004
721
-75
111
757
63.6
1.7
65.3
20.4
85.7
592
-82
182
692
66.0
1.8
67.8
20.8
88.6
261
-68
122
315
72.7
1.5
74.2
21.7
95.9
Private & Commercial Norway sells insurances to private
of the positive trend, TrygVesta was able to retain
households and small and medium-sized enterprises in
its market share in 2008. This could be viewed as an
Norway under the TrygVesta and Enter brand names.
indication that the many initiatives, particularly in
Sales are handled by 85 franchise offices, our own sales
the Oslo region, are beginning to pay off.
agents, three regional customer centres, 35 local sales
centres, car dealers and Nordea’s branches. Private &
The technical result amounted to a profit of DKK 315m
Commercial Norway has around 1,100 employees and
in 2008 compared with DKK 692m in 2007. The perfor -
some 300 franchise office staff.
mance was adversely affected by high claims inflation and
a higher number of fires in single-family houses as com-
Financial results in 2008
pared with previous years. Moreover, Private & Commer-
In 2008, we succeeded in reversing the negative trend in
cial Norway recorded run-off losses of DKK 32m in 2008
gross premiums from 2005-2007 to growth. As a result
as compared with run-off gains of DKK 81m in 2007.
TrygVesta Annual Report 2008 l Results l
43 of 152
Results
CUSTOMER RETENTION
From minus to plus
%
87
86
85
84
83
82
Private & Commercial Norway recorded a gross premium
increase of 4.8% in local currency terms (3.3% in DKK
terms) to DKK 4,636m, as against a decline in gross pre-
miums of 0.2 percentage point in local currency terms
in 2007. The DKK 146m increase was attributable to a
combination of rising customer loyalty and increased
sales in several regions, particularly in the Oslo area.
2005
2006
2007
2008
mium increases implemented since mid-2007 on motor and
Gross premiums were also favourably affected by the pre-
building policies in particular. Private & Commercial Norway
has scheduled additional premium increases in 2009, which
will contribute to further growth going forward. The reten-
tion rate improved further in 2008 to 86.9 from 85.8 at
31 December 2007, and Private & Commercial Norway
recorded a rising retention rate for large customer rela-
tionships in particular. Customer loyalty has been growing
since Private & Commercial Norway changed its price and
loyalty model in 2005/2006.
In 2008, the net number of policies rose by 58,000. All
TrygVesta’s franchise and sales offices have applied a
new customer system, ‘Salgsnøkkelen’, since the spring
of 2008, which has significantly eased the administrative
selling routines. Moreover, the growth in sales has
entailed an increase in sales and commission expenses.
Going forward, this development will generate higher
premium growth rates, thereby strengthening TrygVesta’s
position and market opportunities in Norway.
Claims
Claims expenses at DKK 3,371m were 13.8%, or
DKK 409m, higher, and the claims ratio, net of ceded
business, increased from 67.8 to 74.2. The increase was
mainly attributable to an increase in medium-sized building
and fire claims. In 2008, expenses for fires in single-family
stantially above the level of previous years, as indicated
in the chart. Fires in single-family houses are far more
frequent in Norway than in Denmark, due to the fact that
many houses and cabins in Norway are made from wood
and heated by electric heating and wood burning stoves or
fireplaces. Large claims, defined as claims in excess of DKK
10m, totalled DKK 131m, as against DKK 121m in 2007.
48%
houses in Norway totalled NOK 264m, which was sub-
AVERAGE PREMIUMS
NOK
5,000
4,750
4,500
4,250
4,000
3,750
3,500
3,250
3,000
2005
2006
2007
2008
Motor
Building
PREMIUMS BY PRODUCT
9%
4%
8%
8%
23%
Motor
Property, private
Property, commercial
Personal Lines
Workers’ compensation
Other
44 of 152
l Results l TrygVesta Annual Report 2008
As a percentage of gross earned premiums, large claims
mission costs, wage inflation of around 8% and expenses of
thus amounted to 2.8% compared with 2.7% in 2007.
DKK 12m incurred in connection with “The Living House” in
the fourth quarter of 2008. Excluding expenses relating to
The claims frequency for motor policies rose by approxi-
“The Living House”, the expense ratio was 21.4 in 2008.
mately 1 percentage point relative to 2007, and the aver-
age claim was up by around 4 percentage points. The
Combined ratio affected by claims inflation
average claim tracks the general development in payroll
Overall, the combined ratio was 95.9 in 2008, as against
and material costs. TrygVesta’s cooperation with selected
88.6 in 2007. A large part of this difference was attributable
garages which repair three out of four motor claims
to the higher run-off gains in 2007. Moreover, the increase
ensures high quality and lower costs per repair.
in the combined ratio relative to 2007 was attributable to
higher expenses for fires in single-family houses and under-
The claims frequency for building policies rose by approxi-
lying claims inflation. The premium initiatives implemented
mately 2 percentage points in 2008, and the average
since mid-2007 in several areas are expected to improve
claim was up by 7 percentage points, driven by higher
profitability in the upcoming period.
payroll and material costs. The index for construction
costs in Norway declined in the second half-year of 2008,
and this development is expected to impact the perform-
ance of average claims in the upcoming quarters. The
provisions for claims increased by a net amount of DKK 32m
in 2008 as compared with a DKK 81m run-off gain in 2007.
This corresponds to an adverse impact on the combined
ratio of 0.7% in 2008 relative to a favourable impact of
1.8% in 2007. In particular, provisions for building and
group life insurances were strengthened.
Expenses
Expenses rose by 7.3% or DKK 68m (6% or DKK 56m exclud-
ing expenses relating to “The Living House”) to DKK 1,004m,
and, as a result, the expense ratio was up from 20.8 to 21.7.
The increase was primarily attributable to higher selling com-
FIRE CLAIMS FOR BUILDINGS
NOKm
300
250
200
150
100
50
0
211
200
209
264
2005
2006
2007
2008
AVERAGE CLAIMS IN NORWAY
CLAIMS FREQUENCY IN NORWAY
Index
140
0
0
1
=
5
0
0
2
:
x
e
d
n
I
130
120
110
100
90
Index
107
103
101
99
97
95
0
0
1
=
5
0
0
2
:
x
e
d
n
I
2005
2006
2007
2008
2005
2006
2007
2008
Motor
Building
Motor
Building
TrygVesta Annual Report 2008 l Results l
45 of 152
Results
Finnish general insurance
DKKm
2006
2007
2008
EUR/DKK, average rate for the period
745.94
745.11
745.63
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
198
-155
-83
-40
0
6
-34
78.1
0.2
78.3
41.7
251
-188
-125
-62
-1
14
-49
74.9
0.4
75.3
49.8
354
-258
-154
-58
-1
17
-42
72.9
0.3
73.2
43.5
120.0
125.1
116.7
Our Finnish branch sells insurances to private household
through a targeted effort to build and strengthen
customers and small enterprises under the brand name of
the sales channels. The rapidly growing portfolio is
TrygVesta Finland and Nordea Vahinkovakuutus. Insurance
attributable partly to sales made through Nordea,
policies are sold by Nordea’s branches, our own sales
but to an increasing extent also to sales made through
force and call centres, car dealers and via the Internet.
own sales channels. Such sales account for around
The Finnish branch has around 150 employees.
three quarters of sales today, a large part of which
Broader distribution platform lifting sales
introduced by Nordea. Sales via the Internet totalled
Gross earned premiums in Finland rose by 41%, or
6% of aggregate sales, a new record in terms of the
concerns additional sales to customers originally
DKK 103m, to DKK 354m driven by an increase in sales.
number of policies.
In 2008, the Finnish business sold around 160,000 insur-
ance policies, as against approximately 100,000 policies
The portfolio totalled DKK 432m at 31 December 2008
in 2007. The sustained high level of sales was achieved
and grew by 45% in 2008 from DKK 299m at 31 Decem-
46 of 152
l Results l TrygVesta Annual Report 2008
ber 2007. The number of customers was approximately
The effects of these price increases will begin to materi-
130,000 at 31 December 2008.
alise from the second half of 2009, but will not feed
The market share was 4.4% at 31 December 2008 in
terms of households, as compared with 3.6% at
Expenses
through until 2011.
1 January 2008.
The high sales level added pressure to expenses, which
rose from DKK 125m in 2007 to DKK 154m in 2008.
The potential for sales of insurance policies to small
Costs are primarily driven by selling commissions, but
commercial customers is strong in Finland, as Nordea
as the proportion of policies sold by the unit’s own call
has a strong position in this customer segment. Sales
centre increases, the charge on the expense ratio will be
through own channels significantly outperformed
gradually reduced for the benefit of future earnings.
expectations in 2008.
In 2008, TrygVesta signed a new agreement with Nordea
The strong growth in the Finnish business and the
on settlement of commission regarding policies sold
plans for continued growth give rise to an ongoing
through Nordea. As a result of this agreement, it is now
requirement for attracting qualified employees. The
possible to accrue commission over the first year of the
number of employees rose in 2008 from 127 to around
policy, as it is actually a prepayment to Nordea, as com-
150. To this number should be added 40 independent
pared with the previous method of charging commission to
insurance agents.
the income statement at the time of writing the business.
Claims ratio improved
The expense ratio was 43.5 in 2008, compared with
The claims ratio, net of ceded business was 73.2 in 2008
49.8 in 2007.
against 75.3 in 2007. Despite a generally satisfactory
claims performance, there are a few lines, which, based
Combined ratio
on an overall evaluation of the competitive situation and
The combined ratio was 116.7 relative to 125.1 for 2007.
the premium and profitability levels, require premium
In the private business, the combined ratio was 101.5
increases. These increases will be implemented in 2009.
against 106.6 for 2007. Looking ahead, the private busi-
ness, which is now well balanced, will focus on reducing
the combined ratio and thus on good profitability.
ACCUMULATED WEEK LY SALES IN FINLAND
FINLAND SALES DISTRIBUTION
Policies
200,000
150,000
100,000
50,000
0
2002
2007
%
100
80
60
40
20
0
10
20
30
40
2004
2008
2006
50
Weeks
2007
2008
Nordea
Other sales channels
TrygVesta Annual Report 2008 l Results l
47 of 152
Results
Swedish general insurance
DKKm
2006
2007
2008
SEK/DKK, average rate for the period
80.37
80.73
78.02
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
-6
-39
-41
0
0
90
-80
-95
-85
0
3
221
-214
-104
-97
0
7
-41
-82
-90
144.9
0.4
145.3
1,003.8
1,149.1
88.9
0.0
88.9
105.6
194.5
96.8
0.0
96.8
47.1
143.9
Vesta Skadeförsäkring sells insurances to private individu-
The overall portfolio amounted to DKK 259m (SEK 380m)
als. Insurance policies are sold by Nordea’s branches, our
at 31 December 2008 and was adversely impacted by the
own call centre and via the Internet. The Swedish branch
weakening of SEK relative to DKK. The number of custom-
has around 100 employees.
ers totalled 107,000 at 31 December 2008 compared
with 50,000 at 1 January 2008.
Further acceleration in Sweden
Gross earned premiums in Sweden were up by 146%, or
Claims
DKK 131m, to stand at DKK 221m. The rapid growth was
The claims ratio, net of ceded business was 96.8 com-
generated principally by strong sales through Nordea, but
pared with 88.9 in 2007. This level is considered satisfac-
increasingly also by employees of the business unit’s own
tory for such a relatively new portfolio. Moreover, the
call centre, which now account for around 50% of sales.
Swedish business was affected by a number of medium-
During 2008, a total of 122,000 policies were sold in
sized fire claims on holiday and single-family houses in
Sweden, an increase of 35,000 policies relative to 2007.
2008, which had a relatively severe impact on ratios and
48 of 152
l Results l TrygVesta Annual Report 2008
generated significant fluctuations, as the size of the
on the expense ratio will be gradually reduced for the
business is still relatively limited.
benefit of future earnings.
The Swedish business had not raised its premiums since
In 2008, TrygVesta signed a new agreement with Nordea
being launched in mid-2006, and automatic annual pre-
on settlement of commission regarding policies sold
mium indexation is not used in the Swedish market in
through Nordea. As a result of this agreement, it is now
the way it is done in Denmark. As a result, Vesta Skade-
possible to accrue commission over the first year of the
försäkring is planning a number of premium related
policy, as it is actually a prepayment to Nordea, as com-
measures in 2009. The effects of these price increases
pared with the previous method of charging commission to
will begin to materialise from the second half of 2009,
the income statement at the time of writing the business.
but will not feed through fully until 2011.
Expenses
The rapid growth entailed a need to strengthen human
resources, and the number of full-time employees was
The increase in nominal costs by 9.5% to DKK 104m
just over 100 at 31 December 2008 relative to 60 at
should be seen in the light of the strong gross premium
1 January 2008.
growth, which led to an overall reduction of the expense
ratio from 105.6 to 47.1. Costs are primarily driven by
Combined ratio
selling commissions, but as the proportion of policies
The combined ratio was 143.9 for 2008, as against
sold by the unit’s own call centre increases, the charge
194.5 for 2007.
MONTHLY SALES SINCE START-UP
IN SWEDEN AND FINLAND
SWEDEN SALES DISTRIBUTION
Policies
15,000
12,000
9,000
6,000
3,000
0
Average monthly sales in Finland 2008
%
100
80
60
40
20
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
2007
2008
Months
Sweden
Finland
Nordea
Own sales channels
TrygVesta Annual Report 2008 l Results l
49 of 152
Results
Corporate
DKKm
Gross earned premiums
Gross claims incurred
Gross expenses
Profit/loss on gross business
2006
2007
2008
4,921
-3,322
-539
1,060
5,285
-3,904
-504
877
5,512
-3,489
-588
1,435
Profit/loss on ceded business
-316
-172
-516
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
98
842
67.5
6.4
73.9
11.0
84.9
137
842
173
1,092
73.9
3.3
77.2
9.5
86.7
63.3
9.4
72.7
10.7
83.4
Corporate is a Nordic business area which sells insurances
Yet another performance improvement
to corporate customers under the TrygVesta brand. Corpo-
The technical result rose by DKK 250m to DKK 1,092m in
rate’s products are sold through its own sales force and
2008, reflecting a strong customer selection approach
through insurance brokers. The Corporate business area
based on pricing risk correctly. In addition, run-off gains
has some 3,000 customers each paying annual premiums
of DKK 486m in gross terms, as against DKK 102m in
of more than DKK 900,000 or having more than 50 emplo-
2007, contributed to the performance improvement.
yees, and around 75 customers each paying annual premi-
ums of more than DKK 10m. Corporate has 535 employees.
Corporate generated strong growth compared
TrygVesta Garantiforsikring is included in the financial re sults
to the market performance
of Corporate. TrygVesta Garantiforsikring is a subsidiary
Gross earned premiums rose by DKK 227m, or 4.3%, to
whose principal activity is to guarantee, in relation to third
DKK 5,512m. Since mid-2007, Corporate has significantly
parties, its customers’ performance under agreements made,
outperformed the estimated market growth due to the
such as construction contracts where guarantee is provided
addition of several new large customers. The Danish part
in respect of risks during the construction period and re-
of the Corporate business recorded growth of 5.6%, and
medying of defects after the project has been handed over.
the Norwegian part recorded growth of 3.4%.
50 of 152
l Results l TrygVesta Annual Report 2008
DKKm
Storm and weather, gross
Large claims, gross
Large claims, net
2005
2006
2007
2008
136
356
224
51
456
294
57
843
439
27
330
255
In 2008, Corporate retained previous years’ overall focus
The gross claims ratio was 63.3 in 2008, as compared with
on generating profitable growth, which resulted in price
73.9 in 2007. The relatively low level of the gross claims
increases in the marine segment due to unsatisfactory earn-
ratio in 2008 resulted in higher payments to reinsurers,
ings. This increase led to a customer outflow in the segment.
which naturally caused the reinsurance ratio to increase
from 3.3 in 2007 to 9.4 in 2008. Overall, this was reflected
It was expected in 2008 that increased competition would
in an improvement of the claims ratio, net of ceded busi-
yield weaker growth going forward. Due to the turbulent
ness from 77.2 in 2007 to 72.7 in 2008.
developments in the financial markets, a number of com-
petitors refocused on profitable insurance operations,
Expenses
which, from a rational perspective, should create more
Expenses rose by 16.7% to DKK 588m, corresponding
stable price trends and a balanced competitive situation
to an expense ratio of 10.7, as against 9.5 in 2007. The
going forward.
Claims
increase was a result of several factors. In 2007, expenses
were favourably influenced by the reversal of a provision
relating to losses on reinsurers. In 2008, relatively high
Gross claims expenses at DKK 3,489m were down by 10.6%,
wage inflation added to the pressure on expenses. More-
or DKK 415m, due to run-off and fewer large claims, which
over, 2008 was impacted by expenses in connection with
amounted to DKK 330m (DKK 255m net) in 2008 compared
“The Living House”. Excluding this expense, the expense
with DKK 843m (DKK 439m net) in 2007. The underlying
ratio was 10.5. The expense ratio produced by the Corpo-
trend was an increase in claims in the personal lines.
rate business is considered competitive and satisfactory.
In 2008, the gross run-off result amounted to DKK 486m
Combined ratio
(DKK 394m net) and was mainly attributable to motor and
The combined ratio was 83.4 in 2008, against 86.7 in
personal lines. In 2007 the gross run-off result totalled
2007. Run-off gains favourably impacted the combined
DKK 102m (DKK 84m net).
ratio by 7.1 percentage points in 2008 compared with
CORPORATE – PREMIUM DISTRIBUTION BY PRODUCT
1.6 percentage points in 2007. Large claims impacted
the combined ratio adversely by 4.6 percentage points
in 2008, as against 8.3 percentage points in 2007.
5%
7%
17%
19%
20%
9%
23%
Motor
Liability
Property, commercial
Personal Lines
Workers’ compensation
Marine
Other
TrygVesta Garantiforsikring was the centre of increased
focus in 2008 as a result of the construction industry, the
company’s main business area, being hit by the financial
crisis. The company pursues a profitability focused under-
writing policy focusing on low risk. The number and size
of claims were satisfactory in 2008. Risks are reinsured to
the effect that the greatest loss cannot exceed DKK
30.0m net of reinsurance. The company recorded a com-
bined ratio of 74.3 in 2008 and contributed DKK 44m to
the overall performance of Corporate.
TrygVesta Annual Report 2008 l Results l
51 of 152
Results
Investment activities
DKKm
Bonds etc.
Equities *
Real estate **
Total
Value adjustment, changed discount rate
Other financial income and expenses ***
Return of investments
2007
2008
2006
Investment assets
End 2007 End 2008
788
966
317
2,071
368
-180
1,103
180
240
1,523
298
-81
1,882
-887
263
30,294
4,445
2,569
29,417
1,172
3,561
1,258
37,308
34,150
-478
-340
440
Total return on investment activities
2,259
1,740
Transferred to technical interest
Return on investment activities
-1,031
1,228
-1,400
340
-1,428
-988
*)
DKK 67m sold on futures contracts has been deducted from the equity portfolio
**) Return on properties includes a calculated return on owner-occupied property (excl. cost concerning ’’The Living House’’). The
balancing item is recognised in ’’Other financial income and expenses’’ to the effect that the total return shown corresponds
to the investment return according to the income statement which does not include return on owner-occupied property.
***) The item comprises interest on operating assets, bank debt and reinsurance deposits, exchange rate adjustment of insu-
rance items, costs of investment activities and offsetting of return on owner-occupied property.
TrygVesta’s investment activities comprise any placement
portions in the autumn with mounting problems in the
of the Group’s funds in investment assets, such as bonds,
liquidity markets, peaking so far with the collapse of
equity investments, land and buildings or cash. Funds are
Lehman Brothers and AIG. Equity markets dropped by an
placed pursuant to guidelines defined by legislation,
aggregate 40%–50%. The proportion of equities in the
regulators and our Supervisory Board.
investment portfolio was reduced from DKK 5.4bn in
mid-2007 to DKK 1.7bn in mid-January 2008.
The overall allocation of assets is made by TrygVesta
based on risk and cash management considerations,
Investment result in 2008
while specific securities are mainly selected by external
In 2008, the return on TrygVesta’s investment activities
asset managers within the defined framework.
before transfer to technical interest totalled DKK 1,258m,
The financial turmoil started in 2007, deepening into a
due to lower returns on the equity portfolio. Capital
financial crisis in 2008. The crisis grew to dramatic pro-
losses on equities would have been DKK 1.2bn higher
equivalent to 3.5%. This was less than in 2007, mainly
52 of 152
l Results l TrygVesta Annual Report 2008
if we had not reduced the equity portfolio during 2007
Bonds
and 2008. The return on investment activities after trans-
The Group’s overall bond portfolio including cash yielded
fer to technical interest was DKK 1,328m lower than in
a return of DKK 1,882m in 2008, equal to 6.1% for the
2007 due to lower equity returns and an increase in the
full year. The return in 2008 was affected by an overall
amount transferred to technical interest.
drop in bond yields of around 1.2% in Denmark and 2.8%
in Norway, with yields rising in the first half-year and
Other financial income and expenses were DKK 259m
dropping significantly in the second half-year. The mort-
lower. The change was attributable to a number of indi-
gage spread widened drastically in Denmark during the
vidual items, none of them particularly dominant, and the
period until 31 October when Danish regulators adopted
most important being non-recurring interest income in
a new yield curve for discounting insurance company lia-
2007, higher currency hedging expenses, lower return
bilities, thereby stabilising demand for Danish mortgage
due to the acquisition of the head office in Ballerup, and
bonds. About 75% of the bonds, or DKK 22bn, are issued
the net result of inflation hedging related to workers’
by banks or mortgage credit institutions, and 23% are
compensation provisions.
issued by the Danish and Norwegian governments. 92%
The return on investment activities before other financial
unrated bonds was reduced from 15% to 5% during the
income and expenses was DKK 1,258m, equal to a return
year. The unrated 5% of the portfolio comprises mainly
of 3.5%. The return was 2.2% including changes in provi-
short-term Norwegian money market certificates issued
sions for claims due to lower interest rates.
by banks. We have diversified exposure to banks, mainly
of the portfolio is rated AAA or AA. The proportion of
Asset allocation
Nordic banks with little or no involvement in the financial
products that triggered the subprime crisis. We currently
The bond portfolio increased during 2008 to account for
monitor the performance of credits with the financial
86.1% of total investment assets against 81.2% at 1 January
institutions to which our bonds portfolio is exposed.
2008. The higher proportion of bonds was a result of new
investments and a switch-over from equities to bonds
Interest rate sensitivity measures changes in the value of
despite the head office acquisition. The proportion of
the bond portfolio and the provisions for claims, respec-
equities fell from 11.9% to 3.4%, or by DKK 3,273m.
tively, at a parallel yield increase of 1 percentage point.
The real estate proportion was 10.5% in 2008 against the
previous 6.9%, primarily attributable to the acquisition of
We conduct ongoing follow-up on interest rate sensitivity
the head office at Ballerup. The head office accounted
to optimise the match between assets and liabilities in
for 3.9% of total investment assets.
order to reduce the impact of interest rate changes on
our income statement. The duration including cash of the
Net investments in the year made up at the exchange
Group’s total bond portfolio was 1.7 years at 31 Decem-
rates ruling at 31 December 2008 amounted to about
ber 2008 compared to 1.9 years at 31 December 2007.
DKK 156m, of which DKK 918m was invested in bonds,
while net investments in equities (excluding hedging)
Equities
were negative at DKK 1,833m and net investments in real
The total return on the equity portfolio was negative at
estate amounted to DKK 1,070m. For security and rating
DKK 887m, or minus 32.8%, for the financial year. The
considerations, TrygVesta’s investment portfolio has a
financial crisis and the resulting global economic recession
high proportion of highly liquid securities carrying low
have triggered equity market drops over the past year
interest rate and credit risk. TrygVesta does not invest in
in line with those seen in previous severe recessions.
structured fixed income products such as CDOs, CLOs,
TrygVesta’s total equity return was 0.5% above the bench-
hedge funds or the like.
mark return. International equities generated a negative
return of 36.6%, which was 2.9% above the benchmark
return. Nordic equities generated a negative return of 48.1%.
TrygVesta Annual Report 2008 l Results l
53 of 152
Results
For comparison, the VINX Benchmark Cap Index generated a
Real estate
negative return of 42.4%. Currency risks relating to interna-
The investment return on real estate was DKK 263m
tional equities were hedged during the year. Unlisted equi-
including revaluation and sales gains of DKK 78m and
ties accounted for DKK 180m at 31 December 2008. Nestle
6.0% from current operations. The occupancy rate was
SA was the largest stake, accounting for 2.9% of the port-
99.0 at 31 December 2008 compared with 97.5 at 1 Janu-
folio of listed equities and 0.09% of total investment
ary 2008. The portfolio comprises the head office proper-
assets. The 25 largest equities in our portfolio accounted
ties at Ballerup and Bergen, amounting to around DKK
for 31.5% of the total listed equity portfolio. After reducing
1.3bn at 31 December 2008, and a portfolio of investment
the equity proportion in June and December 2007 by a
properties of some DKK 2.3bn, consisting of well-diversi-
total of DKK 0.8bn, TrygVesta reduced the equity exposure
fied quality buildings, typically in prime locations in major
by an additional DKK 2.2bn in January. At 31 December
cities in Denmark and Norway. The portfolio mainly com-
2008 the Group’s equity portfolio had a total value of DKK
prises office premises, but also includes a small proportion
1,172m compared to DKK 4,445m at 31 December 2007.
of other commercial property and residential property.
LISTED EQ UITIES BY GEOGRAPHY
RETURN BY ASSET CLASS
15%
20%
25%
10%
30%
Nordic region
UK
Rest of Europe
USA
Asia and others
%
30
20
10
0
-10
-20
-30
-40
20.3
6.1
2.8
3.7
2.0
15.0
10.4
8.4
5.8 4.1 3.5
-32.8
Bonds etc.
Equities
Real estate
Total
2006
2007
2008
BON DS BY G EOG RAPHY
BONDS BY RATING
7%
28%
5%
3%
13%
65%
79%
Danish bonds
Other
Norwegian bonds and money market
AAA
AA
A
Not rated / other
54 of 152
l Results l TrygVesta Annual Report 2008
Our customers
TrygVesta seeks to constantly create added value for our
satisfaction was almost unchanged at 72.2. In Denmark,
customers, confirming them in their choice of peace-of-
we ranked above the average of large companies with
mind provider. Rather than just providing a financial solu-
respect to customer loyalty while we were below average
tion in claims situations, our wish is to provide peace of
in terms of customer satisfaction. Since 2007, we have
mind by eliminating concerns in everyday life and pre-
seen customer loyalty rise by 4.7 points to 76.9 with
venting injury or damage.
satisfaction declining from 75.9 to 74.7. We believe
expectations to TrygVesta are fairly high.
We have defined ambitious targets of enhancing our
already good customer loyalty. The peace-of-mind delivery
Our customer loyalty rating in Norway increased by 5.8
to customers, one of our strategic focus areas, plays an
points in 2008 to 74.1, above the industry average. Cus-
important part in our efforts to enhance customer
tomer satisfaction was at a level with the industry average,
loyalty. The peace-of-mind delivery is embedded in our
but dropped 0.7 point to 68.8. Our actual customer loyalty,
handshake: Compassionate, Dynamic and Innovative.
measured in terms of retention rates, improved significantly.
We believe this is a result of our transparent communica-
Meeting customers on their own terms is another strategic
tion of prices and terms and conditions.
focus area. Our experience is that customers feel greater
accessibility and pece of mind when they have an online
Our customers in Finland are some of the most loyal and
self-service option. This focus resulted in a number of
satisfied customers in the market. Compared with the
benefits to customers in 2008 and will also have a great
previous survey, we also improved our ratings significantly
impact on our communications with customers in the
in a number of other areas, such as customer loyalty
years ahead.
which at 80.6 points rated significantly above the market
Customer surveys in 2008
Customer loyalty is measured on a scale from 1-100 and
the survey is performed by EPSI, an independent non-
profit organisation. Customer loyalty and satisfaction
rates in the insurance sector are generally high in the
Nordic countries compared with other European coun-
tries. The customer satisfaction and loyalty surveys per-
formed in the Nordic region in 2008 showed that the
industry was generally on a level with 2007. TrygVesta’s
customer loyalty surged from 73.2 to 78.4 while customer
average of 75.6.
The peace-of-mind
delivery is anchored in
our handshake:
Compassionate,
Dynamic and
Innovative.
TrygVesta Annual Report 2008 l Results l
55 of 152
Read more about TrygVesta’s customers on the insert
”Our most important handshake”
In Sweden, TrygVesta was included in the survey for the
could, for example, opt to receive mail from TrygVesta in
second time. The survey ranked us second in the market
e-Boks, their electronic mailbox on the Internet, and more
in terms of customer loyalty and above average in terms
than 138,562 Danish customers had registered for this
of customer satisfaction.
service by the end of 2008. Norwegian customers wel-
Only three companies have a presence in more than one
we introduced online sales of travel insurance, one of our
comed the option of reporting claims online. In Denmark,
market of the Nordic region: TrygVesta, Codan/Trygg-
core products.
Hansa and If. TrygVesta continued to record the highest
overall customer satisfaction score among the Nordic
We intend to expand the electronic communication with
companies.
customers further in 2009, emphasising simplicity and
accessibility. In 2009, it will also be possible for Danish
Nordic customer communication project
customers to buy the Group’s four other core products
In 2007, TrygVesta launched a Nordic communication
(motor, building, contents and personal accident) online.
project intended to simplify the Group’s written customer
communications. The language of our insurance terms
International requirements. Several large commercial
and conditions is now more customer-friendly and plain
and corporate customers need to take out insurance
with a clear layout, giving an easy overview of what is
globally. In 2008, TrygVesta extended its partnership with
and what is not included in the policy.
AXA Corporate Solutions. AXA is one of the world’s larg-
est insurers with a network extending to more than 90
New customer initiatives in 2008
countries and with geographical coverage of 95% of the
TrygVesta intends to increase benefits offered to our cus-
inhabited world. TrygVesta’s partnership with AXA enables
tomers on an ongoing basis. Our new initiatives in 2008
us to provide insurance solutions through AXA’s interna-
included:
tional network to customers requiring insurance for foreign
subsidiaries and production units. The partnership also
SundPuls. In 2008, TrygVesta added SundPuls to its
permits us to benefit from AXA’s specialist knowledge
offering of health care products. The philosophy behind
within certain areas. We intend to continue to strengthen
SundPuls is that prevention is better than cure. SundPuls
our international competencies in the years ahead, and in
addresses businesses wanting to offer their employees
2009 we expect to provide international solutions to our
to work actively with their health by having a health
Swedish customers.
check. SundPuls offers advice and guidance, and the
www.sundpuls.dk portal and the SundPuls telephone
line provide lifestyle advice. The product supplements
TrygVesta’s other health care offering to commercial
customers, comprising the SmerteFri and StressStop
products. All products emphasise the importance of
taking action before treatment becomes necessary.
1) The benchmarks in the Nordic comparison are simple averages
of official EPSI country results for companies with a presence in
E-communication and self-service. One of the
more than one Nordic market.
Group’s four strategic focus areas is self-service and
electronic communication. We set up a Nordic e-business
centre in 2007, which launched several self-service solu-
2) Satisfaction and loyalty is measured on a scale from 1-100.
Sector=average for all companies surveyed. Source: EPSI rating
(EPSI is an independent non-profit organisation for measuring
tions and other initiatives in 2008. In Denmark, customers
customer satisfaction in the Nordic region).
56 of 152
l Results l TrygVesta Annual Report 2008
CUSTOMER EXPECTATIONS
CUSTOMER SURVEY – NORDIC REG ION
– PRIVATE CUSTOMERS 1)
Index
84
82
80
78
76
74
72
Denmark
Norway
Sweden
Finland
TrygVesta
Competitor 1
Competitor 2
Competitor 3
Sector
80
78
76
74
72
y
t
l
a
y
o
L
70
68
69
70
71
72
73
74
Satisfaction
TrygVesta 2007
TrygVesta 2008
Sector
Competitor 1
Competitor 2
Competitor 3
CUSTOMER SURVEY – DENMARK
– PRIVATE CUSTOMERS 2)
CUSTOMER SURVEY – NORWAY
– PRIVATE CUSTOMERS 2)
y
t
l
a
y
o
L
80
78
76
74
72
70
70
71
72
73
74
75
76
77
78
Satisfaction
76
74
72
70
y
t
l
a
y
o
L
68
66
67
68
69
70
71
Satisfaction
TrygVesta 2007
TrygVesta 2008
Sector
TrygVesta 2007
TrygVesta 2008
Sector
Competitor 1
Competitor 2
Competitor 1
Competitor 2
CUSTOMER SURVEY – SWEDEN
– PRIVATE CUSTOMERS 2)
CUSTOMER SURVEY – FINLAND
– PRIVATE CUSTOMERS 2)
y
t
l
a
y
o
L
82
80
78
76
74
72
70
66
67
68
69
Satisfaction
70
71
72
82
80
78
76
y
t
l
a
y
o
L
74
73
74
75
76
77
Satisfaction
TrygVesta 2007
TrygVesta 2008
Sector
TrygVesta 2007
TrygVesta 2008
Sector
Competitor 1
Competitor 2
Competitor 1
TrygVesta Annual Report 2008 l Results l
57 of 152
Results
Our employees
It is our employees at TrygVesta who provide peace of
included in the survey. Compared with the financial sector
mind and make a difference for customers. Highly skilled
in the Nordic region, TrygVesta managers had a particularly
and motivated employees are our most important asset
high score, and our ability to provide opportunities for
and a prerequisite for us to achieve our targets. Human
professional and personal development was assessed to
competencies are one of the Group’s four strategic focus
be stronger than for the industry in general.
areas. That means ongoing focus on ensuring our employees
to have the skills and reserves of energy required to handle
We believe that respect, openness and trust are important
everyday challenges. This focus area is also about giving
features for maintaining a good working environment.
managers and employees latitude and responsibility, and
The results of the employee survey are therefore used
we expect managers to create commitment and frame-
proactively in dialogue meetings in all departments. As
works and to generate results. We give high priority to
a consequence of the results, focus in 2009 will be on
innovative thinking and openness towards new ideas,
communication and employee branding, our performance-
and we believe that helps create an attractive and exciting
related pay systems and on performance interviews and
workplace.
development plans.
Employee survey 2008
“The Living House” and “The Living Organisation”
In order to identify areas where we can improve, we
The work of converting TrygVesta’s offices in Ballerup,
conduct bi-annual anonymous employee surveys on topics
Denmark and Bergen, Norway into modern workplaces
that include the working environment, satisfaction and
facilitating innovation, knowledge sharing and a motivating
well-being. In the intermediate years, we perform meas-
working environment started in 2008. The conversion will
urements on a smaller scale, taking stock of the working
be very important for the individual employees, who will
climate and the activities that have been launched.
have improved facilities in the form of innovation, meeting
and quiet rooms as well as recreational and café environ-
The 2008 employee survey showed the same high level of
ments. Individual workplaces will also be improved with
employee satisfaction as the status survey in 2007, that
new equipment and modern design. More than 100
90% of the Group’s employees were very satisfied or satis-
employees and managers were involved in developing
fied with working at TrygVesta. As a new feature in 2008,
the project in 2008, and the first pilot projects were imple-
we compared the results of the employee survey with
mented. The large conversion projects will start in 2009.
the Nordic labour markets in general and specifically with
They will be supported by the roll-out of new IT tools and
the financial sector in the Nordic region. This comparison
training in readiness to change for all employees. The
indicated higher satisfaction levels for TrygVesta than for
project is scheduled for completion by the end of 2010.
Nordic companies in general with respect to all areas
58 of 152
l Results l TrygVesta Annual Report 2008
Read more about TrygVesta’s employees on the insert
”Learning and personal development at TrygVesta”
Recruitment and employee branding
Focus on competence building
TrygVesta performed a thorough analysis of the Group’s
We are aware that development is necessary if we want
recruitment process in 2008, resulting in a large number
to continue to be perceived as the leading peace-of-mind
of initiatives to ensure transparency, flow and high quality
provider in the Nordic region. It is therefore important for
in the recruitment process.
us to make training and development tools available to
enable employees and managers to update and develop
We drafted a Nordic recruitment concept in 2008 to be
their skills at all times. Training and development activities
used on print, the Internet and exhibition stands. We also
are handled by Corporate Learning and TrygVesta Manage-
enhanced the Group’s visibility at career fairs and educa-
ment Academy. The responsibilities of our Corporate
tional institutions throughout the Nordic region in order
Learning training unit include employee training and
to raise our profile in relation to recent graduates. Further-
quality assurance of all in-house and external courses.
more, for the second time we introduced a Nordic man-
TrygVesta Management Academy is a development unit
agement trainee programme comprising eight trainees in
focusing on developing managers and specialists.
the Nordic region. We worked together with various asso-
ciations and organisations in order strengthen diversity in
The Management Academy’s projects in 2008 included
the Group’s recruitment process. In this context, our Group
TrygVesta’s new talent development programme, which
CEO took part in a project intended to help young people
focuses on accelerating the development of a defined
with an immigrant background and a criminal past gain
group of talented, ambitious employees. In relation to our
access to the labour market.
strategic focus areas we intend to develop talent to ensure
In 2009, we intend to further develop the opportunities for
important for adding value to the Group in the years
employees wishing to work internationally, and we intend
ahead. In early 2009 we will complete a programme for
to continue to raise our profile vis-à-vis potential new
talents with management potential and junior project
we have competencies in disciplines that are particularly
employees.
managers with the potential to drive major projects in
TrygVesta. As part of the overall talent development
strategy the next stage of the programme will also
include managers and industry experts.
TRYG TRYK
In 2008 TrygVesta initiated a three-year collaboration with art society
Kunst foreningen Gl. Strand in Copenhagen under the name Tryg Tryk.
As part of the arrangement, a lithograph will be made each year that
will be made available to the Group’s customers and employees.
Under the agreement, 120 lithographs by artist Ivan Andersen were
customised in 2008. Half of them were made available to TrygVesta while
the artist and the art society were entitled to the other half. TrygVesta
distributed 40 of the lithographs available to it to reward outstanding
performance by employees who had been recommended by their
colleagues.
TrygVesta Annual Report 2008 l Results l
59 of 152
Capitalisation and risk management
Risk management is the future
“We consider strategic risk and insurance risk to be the most
important types of risk, both of them closely related to our
business as a general insurer. Our current investment strategy keeps
investment risk at a satisfactory level. We consider operational risk
to be less important than the other risk types.”
60 of 152 l Capitalisation and risk management l TrygVesta Annual Report 2008
Capitalisation and risk management
TrygVesta Annual Report 2008 l Capitalisation and risk management l
61 of 152
Capitalisation and risk management
Capitalisation and profit distribution
TRYGVESTA WAS RATED AS FOLLOWS AT 31 DECEMBER 2008
TrygVesta Forsikring A/S
TrygVesta Garantiforsikring A/S
Standard & Poor’s
Moody’s
“A-“/stable
“A-“/stable
A2
n.a.
Capital and risk
Our internal risk and capital requirement assessments are
TrygVesta relies on its capital base and financial strength
based on the balance sheet model (ALM), which uses
to assume risks from the customers and for the customers
stochastic simulation to calculate the necessary capital
to be confident that TrygVesta is able to meet its obliga-
taking into consideration the actual insurance portfolio
tions if and when they report a claim. The aim is for the
mix and profitability, the actual provisioning profile and
capital base to match the Group’s risk profile and support
the composition of provisions, the existing reinsurance
natural growth. Basically, TrygVesta’s capital base is the
protection and the chosen investment profile. Within this
result of risk assessments and risk management. This
framework, it is also possible to quantify the geographic
basic view thus also determines the dividend policy.
diversification effect and the effect of the investment pol-
Capital requirement
icy under which interest rate risk on the bond portfolio
matches the corresponding interest rate risk on the dis-
TrygVesta wants the risk and capitalisation to be
counted provisions, thereby ensuring that TrygVesta’s net
assessed externally on a regular basis, and therefore
interest rate risk is negligible for practical purposes (see
TrygVesta has rating agencies Standard & Poor’s and
the section on Risk management). TrygVesta calculates its
Moody’s perform annual interactive credit assessments.
Individual Solvency Need on this basis in accordance with
the rules effected for Danish insurance companies at 1 July
This is consistent with TrygVesta’s ambitions and provides
2007. Under these rules, insurance companies and their
a good balance with high creditworthiness and powerful
supervisory boards are required to regularly identify, quan-
financial strength while at the same time avoiding tying
tify and control all forms of risk, and to calculate and
up more capital than can be justified by commercial rea-
report the necessary capital on a quarterly basis. TrygVesta
sons. In practice, an A level rating corresponds to capital
calculates the necessary capital corresponding to a 99.5%
of around 52%-56% of premiums, and the agencies seek
security level on a one-year horizon, equal to the security
to calibrate the rating so that companies at this level
level required under Solvency II in the future. As the wish is
have adequate capital on a one-year horizon with
to continue to maintain a rating of A-, TrygVesta has made
99.5% certainty.
a simplified model based on the Standard & Poor’s capital
62 of 152
l Capitalisation and risk management l TrygVesta Annual Report 2008
model, which is used to determine the capital target and
TrygVesta intends to pursue a risk-based transparent
thus dividends. The model is described in more details at
policy for capital management, and thus also for dividend
www.trygvesta.com, and is updated on a quarterly basis.
distribution. At 31 December, a capital requirement is
determined based on the simplified Standard & Poor’s
In future, the capital requirement will have to be calcu-
model corresponding to the level of an A-rating plus a
lated under the EU Solvency II rules, which are expected to
buffer of 5%. Any capital in excess thereof will be distrib-
be implemented from 2012. See the section on Solvency II
uted as dividend. Dividend is determined once a year
implementation on page 16 for a more detailed description.
while profit is generated on an ongoing basis, and this
The latest version of the Solvency II draft standard model
means that the buffer will grow over the year in excess
was tested in QIS4 (quantitative studies that measure the
of the 5% originally determined. Buffer growth in 2007
impact of the new Solvency rules) in the first half of 2008.
and 2008 was 21.5% and 16.5%, respectively.
Dividend policy
Dividend for the 2008 financial year
Dividend is determined on the basis of the Group’s
and share buy back
profit distribution policy.
Profit after tax amounted to DKK 846m in 2008. Pursuant to
• TrygVesta distributes 50% of the profit for the year
our profit distribution policy, this entails a cash distribution
as ordinary cash dividends.
of dividends totalling DKK 423m or DKK 6.50 per share.
• Any excess capital after distribution of ordinary
TrygVesta’s risk instructions provide for an equity proportion
dividends and taking into consideration the capital,
of up to 8.0%. The equity proportion at 31 December
strategy and growth, will be returned to shareholders
2008 was 3.4%. The present capital base permits the
in the form of a share buy back programme.
increased equity risk within the limits of the risk instruc-
• The dividend policy reflects our long-term earnings and
tions. However, as a consequence of the financial crisis
cash flow potential, while maintaining and appropriate
and the difficulties involved in procuring additional subor-
level of capitalisation.
dinate capital in the financial markets, we have decided
not to buy back treasury shares in respect of 2009 in
order to safeguard TrygVesta’s resources.
Profit for the year, DKKm
Cash dividends, DKKm
Cash dividends per share (DKK)
Cash payout ratio
Total buy back, DKKm
Buy back per share (DKK)
Total distribution per share (DKK)
Total distribution, DKKm
Total payout ratio
CAR
Buffer to A level
Solvency
2008
846
423
6.50
50%
0
0
6
423
50%
N/A
16%
2007
2,266
1,156
17
51%
1,405*
21
38
2006
3,211
2,244
33
70%
2005
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 share buy back programme was based on our 2007 profit, amounted to DKK 1,405m and was initiated on 4 April 2008. On 2 February
2009, the programme was extended up to and including 22 April 2009 due to low trading volumes. The programme had been scheduled
for completion by 2 March 2009.
TrygVesta Annual Report 2008 l Capitalisation and risk management l
63 of 152
Capitalisation and risk management
Capital structure
Credit facility
TrygVesta’s equity amounted to DKK 8,244m at 31
In 2005, TrygVesta raised a five-year revolving credit facility
December 2008, and the capital base was DKK 3,926m
of DKK 2,000m subscribed with eight Danish and inter-
calculated in accordance with legislative requirements.
national banks. At 31 December 2008, DKK 599m had
The actual capital as calculated in the Standard & Poor’s
been utilised under the facility. Interest rate expenses on
capital model (TAC) was DKK 8,952m at 31 December
loan capital totalled DKK 100m for 2008. The total debt
2008. The major differences in the calculation of actual
ratio was 18.0 at 31 December 2008.
capital are the treatment of subordinate loan capital
which is included in the capital base at DKK 685m and
Financial flexibility
in TAC at DKK 1,102m, as well as the recognition of the
As a result of the decision not to implement share buy
discounting effect on provisions. The latter reduced the
backs on the basis of our 2008 performance, the buffer
capital base by DKK 721m at 31 December 2008.
relative to an A-level rating in the simplified Standard &
Poor’s model increases to 16%, 11% or some DKK 850m
In 2005, TrygVesta raised subordinate loan capital in the
more than the 5% buffer target.
form of a 20-year bond loan in the amount of EUR 150m,
which was listed on the London Stock Exchange. The loan,
TrygVesta’s capital contingency plan describes measures
which carries a coupon of 4.5%, is included in the capital
that can be applied in the short term to improve the
base at DKK 685m and in TAC at DKK 1,102m. Subordi-
Group’s solvency, if required. The plan includes restructur-
nate loan capital accounted for 12% of the capital calcu-
ing of assets from equities to bonds and the buying of
lated according to Standard & Poor’s capital model for
proportional reinsurance. These measures together would
credit purposes in 2008, with the present limit being 25%.
substitute for around DKK 1,000m capital. The capital
base could also be increased by the raising of additional
subordinate loan capital of around DKK 1,100m in rela-
tion to the Standard & Poor’s capital model.
TRYGVESTA – PAYOUT PER SHARE IN DKK
CAPITAL
DKK
40
35
30
25
20
15
10
5
0
21
33
21
17
6.5
DKK
12,000
11,000
10,000
9,000
8,000
7,000
6,000
2005
2006
2007
2008
2006
Q1
07
Q2
07
Q3
07
2007
before
distrib.
2007
after
distrib.
Q1
08
Q2
08
Q3
08
2008
before
distrib.
2008
after
distrib.
Cash dividend
Share buy back
Capital requirement
Buffer (5%)
Surplus capital
64 of 152
l Capitalisation and risk management l TrygVesta Annual Report 2008
Risk management
Being an insurance business, TrygVesta’s concept is to
create peace of mind for customers by helping them
manage and handle situations when a claim has occurred.
Risk management is therefore at the core of the business,
and it is only natural that TrygVesta also focuses in-house
on managing the risks that the operations expose the
Group to. Structured and competent risk management is
fundamental to maintaining confidence in TrygVesta and
living up to the vision of being perceived as the leading
peace-of-mind provider in the Nordic region.
Risk management environment
and risk identification
The Supervisory Board has overall responsibility for the
Group’s risk management (see the section on Corporate
governance). The Supervisory Board defines the risk man-
agement framework, including risk appetite, in the Super-
visory Board’s capital and risk management instructions.
TrygVesta has set up a number of risk committees and
drafted policies for the purpose of optimising the control-
ling, monitoring and handling of the present and future
risk exposure. The supreme body of this structure is the
risk management committee which, in addition to the
Group CEO and the Group CFO, consists of the chairmen
of the respective risk committees. In order to support the
risk management environment in the best possible way,
an Enterprise Risk Management (ERM) department has
been set up as a body anchoring and supporting risk
management in TrygVesta.
underwriting risk
The risk related to entering into insurance contracts.
The risk that claims at the end of an insurance
contract deviate significantly from our assumptions
when pricing at inception of the contract.
Handled by the Underwriting reinsurance committee
Provisioning risk
We make technical provisions at the end of a financial
period to cover expected future payments for claims
already incurred. Provisioning risk is the risk that future
payments deviate significantly from our assumptions
when making the provisions.
Handled by the Provisions committee
Investment risk
The risk that volatility of financial markets impacts
our results. Interest rate risk constitutes a major part
of investment risk. Interest rate risk is the risk of
fluctuating market interest rates.
Handled by the Investment risk committee
Strategic risk
The risk of changes to the conditions under which
we operate, including changed legislation, competition,
partnerships or market conditions.
Handled by the Risk management committee
Operational risk
The risk of errors, fraud or failures in internal
procedures, systems and processes.
Handled by the Operational risk committee
TrygVesta Annual Report 2008 l Capitalisation and risk management l
65 of 152
Capitalisation and risk management
In addition to the risk management committee TrygVesta
the adequacy of the control environment. Such data is com-
has set up four special committees to handle the risk
piled in TrygVesta’s risk data base, which forms the basis for
management process within the areas of
further processing in the risk management environment in
• underwriting and reinsurance
the representation of TrygVesta’s overall risk exposure. The
• provisions
• investment risk
risk exposure is supplemented by a number of scenarios
illustrating the consequences of special events that may
• operational risk and security.
impact several risks simultaneously. The Group’s overall risk
exposure is presented in an annual risk report submitted to
The special committees report to the risk management
the Executive Management and the Supervisory Board.
committee, and their chairmen are also members of the
risk management committee.
There is a direct correlation between the scenarios
identified by the risk managers and the Group’s calcula-
The risk management committee is directly responsible
tion of its Individual Solvency Need.
for strategic risk management and capital management.
All committees focus on risk management and have no
business responsibility.
The business units are involved in the risk management
environment through membership of the relevant commit-
tees, as risk managers and as participants in the annual
RISK IDENTIFICATION
AND RISK MANAGEMENT PROCESS
Instructions
& risk appetite
mapping of risk, through compliance with and implementa-
Risk report
I d e n t ification
o f risk
Risk database
tion of policies and controls, including by setting up rules
with respect to authority, binding signatures and implemen-
Data
tation of the relevant system support. A standard project
model is applied for implementing TrygVesta’s strategy in
specific projects, of which risk assessment is an integral ele-
ment. TrygVesta has defined a structured process for map-
ping risk throughout the Group. The risk managers describe
risk, assess the potential impact and probability and evaluate
rting
o
p
e
R
M
a
n
a
Risk
managers
g
e risk M i
t i g
Q
u
s
a
c
l
i
e
f
i
n
c
a
r
i
a
t
i
o
s
o
n
Capital
a tion
Individual
Solvency
Business
contingency plans
Controls
Business
processes
Supervisory
Board
Executive
committee
Risk management environment
Organisation
Risk appetite
Instructions
Risk management committee
Policies
Risk managers
Capital
Strategy
Crisis management
Risk identification
Risk management
Risk reporting
Recommen-
dations
Underwriting
Reinsurance
committee
Provisions
committee
Investment
risk
committee
Operational
risk
committee
Systematic
risk
evaluation
TrygVesta’s risk management environment anchored in the Supervisory Board and business areas, and the risk identification process
66 of 152
l Capitalisation and risk management l TrygVesta Annual Report 2008
The Individual Solvency Need is determined by calculating
INSURANCE RISK
one-year consequences of such risk scenarios and con-
verting them to the level of probability on the basis of
Effect
which the capital is made up. An element covering the
worst case of such sub-scenarios overlapping is added
to the Individual Solvency Need.
The individual risks are grouped into five risk types:
underwriting/reinsurance risk, provisioning risk, invest-
ment risk, strategic risk and operational risk. All risk
types are treated in the risk identification process and
described in the following. The three charts show a
simplified representation of some of these risks.
The mapping process shows that insurance risk and
strategic risk are the most dominanting risks followed
by investment risk. Operational risk is less important
than the other risk types.
Risk types
underwriting and reinsurance risk
underwriting risk
Underwriting risk is the risk related to entering into insur-
ance contracts and thus the risk that premiums charged
do not adequately cover the liabilities TrygVesta has
assumed. The risk may materialise as losses either as a
result of single events or over a period of time due to a
general adverse trend in the performance of claims or to
premiums that are too low. Conversely, there is also a risk
that premiums charged are too high, resulting in a loss
Provisions
Adverse claims development
Under-
reinsurance
Adverse risk selection
Lack of growth
Probability
OPERATIONAL RISK
Effect
Legislation
IT-systems
Fraud
Errors and default in processes
Probability
of competitiveness. TrygVesta manages underwriting
INVESTMENT RISK
risk through tariffs and by monitoring profitability on an
ongoing basis as well as through business procedures,
acceptance policies and authorities. Single events are
controlled and protected, primarily through reinsurance.
The risk related to underlying trends is controlled through
close follow-up and extensive reporting on the most
important key ratios of the individual insurance areas.
Effect
The charts show the distribution of risk types (and individual
risks) in a risk map representing risk according to assessed
probability and potential impact.
Equities
Real estate
Credit and
concentration risk
Liquity
Currency
Interest rate and spread risk
Probability
TrygVesta Annual Report 2008 l Capitalisation and risk management l
67 of 152
Capitalisation and risk management
BREAKDOWN OF PREMIUMS
CEDED BY REINSURER’S RATING
BREAKDOWN OF BALANCES WITH
REINSURERS BY REINSURER’S RATING
BBB
7%
AAA
3%
AA
42%
A
48%
BB
5%
Not rated
8%
AAA
2%
A
33%
AA
52%
Reinsurance
In addition, TrygVesta also buys reinsurance for certain
Reinsurance is an important element of the day-to-day risk
lines for which experience has shown that claims vary
management. The ongoing risk management is supported
considerably. The largest single risks in the corporate
by TrygVesta’s internal ALM model, which is also used for
portfolio are property risks protected by reinsurance cover
assessing the impact of different reinsurance alternatives.
up to DKK 1.5bn/NOK 1.6bn/SEK 1.8bn with a retention of
The Group buys reinsurance for the aggregate Nordic busi-
DKK/NOK/SEK 100m for the first claim and DKK/NOK/SEK
ness, thereby generating substantial price synergies.
50m for subsequent claims. For property risks exceeding
the upper level, facultative reinsurance is bought. Other
For property risks, major events in 2009 are protected by
lines covered by reinsurance include liability and motor,
catastrophe reinsurance of DKK 5bn with a retention up
marine, fish farms and guarantee insurance.
to a maximum of DKK 105m in Denmark and NOK 105m in
Norway. The primary risk of single events is claims caused
Exposure to terrorist losses of a biological, chemical or
by storm. TrygVesta has defined the level of cover using
radioactive character can be covered only partly by rein-
simulation models to the effect that protection would
surance today. TrygVesta has for several years played an
statistically be inadequate less than once every 250 years.
active role under the Danish Insurance Association in the
TrygVesta’s exposure to natural disasters in Norway is
work to establish a national arrangement to address this
furthermore limited through participation in the
issue. The work was finalised in 2008 with the Danish
Norwegian Pool of Natural Perils.
Folketing passing the act on a terrorist insurance arrange-
The catastrophe reinsurance programme also covers other
vides for the government to provide a guarantee of up
catastrophe events, including terrorist-related events, for
to DKK 15bn for the total Danish market to cover such
up to DKK 3.75bn, with terrorist events being covered for
losses in excess of the level that can be protected in
ment in the general insurance area in June. The act pro-
buildings, building contents and consequential loss for risks
the reinsurance market.
with a total insured value of up to DKK 500m. TrygVesta
has bought catastrophe reinsurance up to DKK 1.5bn for
In the event of a major insurance event comprised by the
the personal accident and workers’ compensation policies
reinsurance programme TrygVesta may have large balances
with a retention of DKK 50m, covering the risk of multiple
outstanding with reinsurers, and thus be exposed to credit
injuries from the same cause, including terror.
risk. TrygVesta manages this risk by defining requirements
to reinsurers’ ratings and spreading the reinsurance on
68 of 152
l Capitalisation and risk management l TrygVesta Annual Report 2008
several reinsurers. In addition, TrygVesta has set up a
revalued by the wage inflation rate each year. This exposes
security committee focusing specifically on managing
TrygVesta to explicit inflation risk in case of changes in
credit risk in connection with reinsurance receivables.
Danish wage inflation. TrygVesta hedges such risk using
an inflation swap.
Provisioning risk
After the period of the policy’s cover has expired, in-
surance risk relates to the provisions for claims made
to cover future payments on claims already incurred.
SENSITIVITY IN CASE OF SELECTED CHANGES
IN uNDERWRITING, PROVISIONING AND MARKET
CONDITIONS
Customers generally report claims with a certain delay.
RISKS IMPACTING PROFIT
Depending on the complexity of the claim, a fairly long
period of time may pass until the claim has been finally
calculated. This may be a prolonged process particularly
for personal injuries. Even when the claim has been
settled there is a risk that it will be resumed at a later
date, triggering further payments.
The size of the provisions for claims is determined
both through individual assessments and statistical
calculations. At 31 December 2008, the provisions for
claims amounted to DKK 19,715m with an average
duration of 3.3 years.
EXPECTED CASH FLOWS FROM PROVISIONS FOR
CLAIMS IN DENMARK AND NORWAY , DKK
Total 0-1 years 1-2 years 2-3 years > 3 years
19,271
7,182
3,397
2,202
6,490
Most of the provisions for claims relate to personal injury
claims. They are exposed, among other risks, to changes
in inflation, the discount rate (see also the heading inter-
est rate risk under investment risk), disbursement pat-
terns, economic trends, legislation and court decisions.
The calculation of provisions for claims will always be
subject to considerable uncertainty. TrygVesta manages
this risk through a provisioning policy, model analysis,
control calculations, follow-up and reviews in order to ob-
tain the best possible match between provisions and
claims payments. Historically, many insurers have experi-
enced substantial negative as well as positive impacts on
profit (run-off) resulting from provisioning risk, and that
may also happen in future. Provisions for claims relating
to annuities in Danish workers’ compensation insurance
are discounted using the current market rate and are also
INSuRANCE RISK
underwriting risk
Increase in claims expenses of 1%
Decrease in premium rates by 1%
Weather related claims of DKK 5.5bn
(reinsurance coverage DKK 5bn)
Provisioning risk
Increase in social inflation by 1%
Error estimation of e.g. 10%
on workers’ compensation and motor
DKKm
-129
-176
-600
-520
-1,099
MARKET RISK
Investment risk
Interest rate market – increase in interest rates of 1%
Impact on fixed interest securities -512
562
Higher discounting of provisions for claims
Equity market
Decrease of equity markets of 15%
Impact arising from derivatives
Real estate market
Decrease of real estate markets of 15%
Currency market
Decrease of NOK of 15% relative
to DKK impacts profit
Decrease of exchange rates of balance
sheet items in foreign currencies of 15%
Impact arising from hedging
-186
10
-534
-107
76
-90
RISK ADJuSTED OVER EQ uITY
MARKET RISK
Investment risk
Interest rate market – increase in interest rates of 1%
Impact on Norwegian pension obligation
157
Currency market
Decrease of exchange rates of equity
in foreign currencies of 15%
Impact arising from hedging
-342
342
TrygVesta Annual Report 2008 l Capitalisation and risk management l
69 of 152
Capitalisation and risk management
IMPACT ON FIXED-INTEREST SECuRITIES
AND PROVISIONS
BEFORE THE FINANCIAL CRISIS
2000
Liabilities
1500
1000
500
Assets
-2000
-1500 -1000
-500
500
1000
1500
2000
-500
-1000
-1500
-2000
Perfect match
90 out of 100 years
Investment risk
Investment risk is the risk that volatility in the financial
markets will impact the results of operations and thus the
financial position. TrygVesta defines the asset mix based on
the investment policies approved by the Supervisory Board,
including limits on types of assets and the geographic distri-
bution and risk profile of bonds, equities and real estate for
each company in the Group. The asset mix and investment
activities focus mainly on interest rate risk, security and
liquidity.
Interest rate risk
Fluctuating interest rate levels is one of the most important
elements in determining investment risk. As TrygVesta fur-
thermore discounts provisions for claims in accordance with
the IFRS accounting rules (market value), the provisions for
claims are also exposed to interest rate risk. If interest rates
AFTER INCREASE IN INTEREST RATE SPREAD
fall, the value of the Group’s bond portfolio would increase,
2000
Liabilities
claims to rise. Changes in the level of interest rates thus
but at the same time it would cause the provisions for
1500
1000
500
Assets
have an opposite effect on assets and liabilities. An important
element of TrygVesta’s risk management is to have a bond
portfolio mix ensuring that the two opposite effects are
-2000
-1500 -1000
-500
500
1000
1500
2000
counterbalanced as exactly as possible.
-500
-1000
-1500
-2000
The portfolio of fixed-interest securities stood at DKK 29.5bn
at 31 December 2008, while the provisions for claims dis-
counted using a market rate amounted to DKK 19.7bn, net
Perfect match
90 out of 100 years
of reinsurance. The respective durations were 1.7 and 3.3
AFTER INTRODUCTION OF NEW DISCOUNTING
CURVE (OCTOBER 2008)
2000
Liabilities
1500
1000
500
Assets
-2000
-1500 -1000
-500
500
1000
1500
2000
-500
-1000
-1500
-2000
years. The difference in duration is attributable to the bond
portfolio being significantly larger than the discounted
provisions. A parallel shift of interest rates of 1% would
reduce the market value of the securities by DKK 512m,
while the opposite impact on provisions would be DKK 562m,
triggering a net impact of DKK 50m.
TrygVesta intends to minimise the net interest rate expo-
sure, and will therefore in 2009 start dividing total invest-
ment assets into a hedge portfolio and an active portfolio.
The hedge portfolio will consist exclusively of interest-bear-
ing assets, as far as possible matching the expected cash
flow from the discounted provisions. Accordingly, the net
interest rate exposure of the hedge portfolio together with
Perfect match
90 out of 100 years
the provisions would be approximately nil to a random
change in the yield curve.
70 of 152
l Capitalisation and risk management l TrygVesta Annual Report 2008
The first figure shows by stochastic simulation based on
The equity portfolio primarily focuses on the large, liquid
TrygVesta’s internal model the impact of value adjustment
equity markets in Europe and the USA (see the graph in
on liabilities and on assets in the hedge portfolio. Based
the section on Investment activities). TrygVesta has
on the internal model, the Group has calculated that the
defined a strategy with relatively little exposure to the
net interest rate risk would have a 90% certainty to stay
Nordic region (around 20% at 31 December 2008) in
within a range of +/- DKK 115m.
order to reduce company risk, because a few companies
Value adjustments of assets are determined by yield
Furthermore, TrygVesta has tied each equity mandate to
changes on the actual bond portfolio, which to a great
a recognised benchmark (MSCI), which is monitored
extent comprises Danish mortgage bonds, while the
closely. The 25 largest equities in the portfolio accounted
counteracting adjustments of provisions are determined
for some 32% of the total listed equity portfolio at 31
account for large parts of the markets in these countries.
by changes in the discount curve prescribed by the Dan-
December 2008.
ish Financial Supervisory Authority. Until recently, this
curve was calculated as the Euro zero-coupon yield curve
TrygVesta reduced its proportion of equities significantly
plus a spread between the Danish and German govern-
in January 2008. The equity proportion accounted for
ment zero coupon yield curve. In connection with the
3.4% at 31 December 2008 against 11.9% at the end of
financial crisis the spread between mortgage bond yields
2007 and 15.4% in May 2007. This reduction has limited
and government bond yields has widen significantly.
the Group’s equity losses significantly. Overall, the finan-
When updating the internal model to account for an
cial crisis triggered equity losses of DKK 887m. In 2008,
interest rate scenario as seen in 2008, the net interest
TrygVesta bought the head office in Ballerup, thereby
rate risk is increasing significantly, as illustrated in the
increasing the proportion of real estate significantly. The
second figure on page 70. In this situation, the net inter-
proportion is expected to be reduced over time.
est rate risk would have a 90% certainty to fluctuate
within a range of +/- DKK 260m. In response to the prob-
Currency risk
lems the financial crisis has caused for life insurers in
TrygVesta is exposed to exchange rate fluctuations. This
particular, the Danish Financial Supervisory Authority in
exposure is minimised through currency derivatives, and
October 2008 revised the methodology for calculating
cash flows are mostly matched. The Group’s premium
the yield curve for discounting the provisions of Danish
income in foreign currency is mostly matched by claims
insurance companies. The calculation now considers
and expenses in the same currencies, primarily NOK, EUR,
developments in Danish mortgage bonds to a much
SEK and USD. This means that an expected profit would
greater extent. Using the new methodology, TrygVesta’s
be adversely impacted by depreciating exchange rates rel-
internal model shows a significant reduction in the net
ative to DKK. TrygVesta does not hedge the remaining,
interest rate risk to a level where fluctuations would in
limited currency risk in connection with future cash flows
90% of the cases be within a range of +/- DKK 120m.
in foreign currencies.
Equity and real estate risk
TrygVesta uses currency derivatives to hedge the risk of a
The equity and real estate portfolios are exposed to
loss of value of balance sheet items due to exchange rate
changes in equity markets and real estate markets,
fluctuations in accordance with a general hedge ratio of
respectively. TrygVesta manages such risk through invest-
90–100% for each currency. The aim is to hedge 98–100%
ment limits for various asset classes. In certain circum-
of the net book value of the Norwegian entity.
stances, TrygVesta also uses interest rate and equity
derivatives in the investment activities.
NOK depreciated from 93.51 to 75.72, or 19%, against
DKK in 2008. This was the main reason for the year’s
negative DKK 640m exchange rate adjustment of the
value of the foreign entities. Under the hedge policy, this
TrygVesta Annual Report 2008 l Capitalisation and risk management l
71 of 152
Capitalisation and risk management
currency risk was hedged with a resulting gain of DKK
tice, the work is organised through a structure of
615m. The net effect was thus negative at DKK 25m.
procedures, controls and guidelines that cover the vari-
Both items have been taken directly to equity.
ous aspects of the Group’s operations, including the IT
Credit risk
security policy. TrygVesta has also set up a security and
investigation unit to handle matters such as fraud, IT
Credit risk is the risk of incurring a loss if counterparties
security, physical security and contingency plans.
fail to meet their obligations. In connection with the
investment activities, the primary counterparties are bond
In order to avoid any unintentional violations of competi-
issuers and counterparties in other financial instruments.
tion law, a competition law training programme for the
TrygVesta manages credit risk and concentration risk
entire organisation has been completed.
through investment limits and rating requirements (see
the section on Investment activities for an overview of
TrygVesta has prepared contingency plans to handle the
the bond portfolio distributed on ratings and geography).
most important areas, such as the contingency plans in
Receivables with Danish banks are covered by a govern-
the individual parts of the business to handle an event of
ment guarantee from October 2008 to 2010.
a prolonged IT breakdown. The Group has also set up a
crisis management structure should TrygVesta be hit by a
The financial crisis in 2007 and 2008 emphasised the
major crisis.
importance of managing risk, including credit risk.
TrygVesta has no investments in sub-prime loans,
CDOs or similar products, and accordingly has not
Strategic risk
incurred financial losses in this respect in connection
Strategic risk relates to TrygVesta’s choice of strategic
with the financial crisis.
position, including IT strategy, time-to-market, business
Read more in the section on Investment activities on
tions, including the competitive environment, falling pre-
partners and reputation as well as changed market condi-
page 52.
Debtor risk
mium rates and developments in New Markets.
Strategic risk is managed through a strategic planning
There is a risk that customers fail to pay for their insur-
process. The Supervisory Board defines the overall strategy
ance. Accordingly, TrygVesta has intensified efforts and
within the framework of the Group’s corporate vision, and
processes towards customers with an account arrange-
the Group Executive Management uses this as the basis
ment, large customers and commercial customers in sec-
for further strategy work. The balanced scorecard is used
tors strongly impacted by economic trends. A separate
as a tool to ensure current follow-up on the implementa-
review has been made of ratings for customers with large
tion of the strategy and the initiatives launched in the
premium volumes in order to assess the risk of bankruptcy.
business areas. During the year, the strategy is managed
Provisions for debtor risk were increased in 2008 by 13%
low up on the balanced scorecard performance by busi-
to DKK 120m in 2008.
ness areas and staff functions. TrygVesta maintains full
in Executive Management meetings and meetings to fol-
Operational risk
strategic focus on the business partners, and protects the
reputation through corporate values, by maintaining
focus on handling complaints and through internal and
Operational risk relates to errors or failures in internal
external communication policies. The Group also continu-
procedures, fraud, breakdown of infrastructure, IT security
ously monitors the market to ensure that the assessment
and similar factors. As operational risks are mainly inter-
of external conditions rely on an up-to-date basis, be it
nal, TrygVesta focuses on establishing an adequate con-
competitors’ market initiatives, new legislation or other
trolling environment in the Group’s operations. In prac-
external factors that may impact the Group.
72 of 152
l Capitalisation and risk management l TrygVesta Annual Report 2008
The overall risk exposure
TrygVesta considers strategic risk and insurance risk
(underwriting and provisions) to be the most important
types of risk TrygVesta is exposed to. Both types of risk
are closely related to the operations as a general insurer.
Investment risk is at a satisfactory level due to the current
investment strategy. TrygVesta considers the operational
risk to be less important than the other risk types.
The financial crisis has had an adverse impact on TrygVesta
albeit only to a fairly limited extent, thereby illustrating the
results of effective risk management in the Group. TrygVesta
considers the risk identification process and overall risk
exposure to be satisfactory relative to the risk appetite
defined by the Supervisory Board. However, TrygVesta is
continuously seeking to optimise the relationship between
risk and return and to reduce unwanted risks further.
TrygVesta Annual Report 2008 l Capitalisation and risk management l
73 of 152
Corporate governance
Corporate governance is the future
“At TrygVesta, we promote management behaviour that supports our
business and our peace-of-mind delivery. Managers are responsible for
pursuing our vision and creating value for our stakeholders in a sound
and profitable manner. Our commitment and responsibility to the
world around us support our business further.”
74 of 152 l Corporate governance l TrygVesta Annual Report 2008
Corporate governance
TrygVesta Annual Report 2008 l Corporate governance l
75 of 152
Corporate governance
Supervisory Board
Mikael Olufsen
Bodil Nyboe Andersen
Jørn Wendel Andersen
Paul Bergqvist
Christian Brinch
Mikael Olufsen
Chairman of the Supervisory
Board and chairman of the
remuneration committee
Born 1943. Joined the
Supervisory Board in 2002
Ms Nyboe Andersen has competencies within
the areas of management, strategy, treasury
and financial business from her former positi-
ons as Chairman of the Board of Governors of
Danmarks Nationalbank and Managing Director
of Andelsbanken.
Number of shares held: 100.
Christian Brinch
Born 1946. Joined the
Supervisory Board in 2007
Chief executive of his own business.
Professional board member. Norwegian
citizen. Former President and CEO of
Helicopter Services Group ASA and Executive
Vice President of ABB Norge.
Educational background: Norway’s naval
academy, PMD Harvard Business School.
Chairman of Hafslund AS, Sørco AS, HV IV Invest
Alfa AS, Kjell Ostnes AS, Østnes Aero AS, Østnes
Jørn Wendel Andersen
Born 1951. Joined the Super-
visory Board in 2002
CFO, Arla Foods amba.
Educational background: MSc (Business Eco-
Defence AS, Helicopter Network AS, Fortissimo AS,
nomics), IMD Executive Development Programme,
Line Consult AS, Gluteus AS and Røa Invest AS.
IMD “Strategy in Action” Programme, and
Deputy chairman of Technor AS, Sørcogrup-
Leadership Assessment – Heidrick & Struggles.
pen AS, Technor Holding AS, Norges Statsbaner
Chairman of Arla Insurance Company (Guernsey)
AS, Prosafe AS and Prosafe Production AS.
Ltd. (Captive), Arla Foods Finance A/S and Fidan A/S.
Board member of TrygVesta A/S, TrygVesta
Board member of TryghedsGruppen smba,
Forsikring A/S, STG Engineering AS, Subsea
TrygVesta A/S, TrygVesta Forsikring A/S, Arla
Technology Group AS, STG Products AS, Thor Dahl
Foods AB, Arla Foods International, AF A/S,
Management AS and Thor Dahl Shipping AS.
Tholstrup Cheese A/S, Tholstrup Cheese
Mr Brinch runs his own business providing
Holding A/S and Tholstrup Taulov A/S.
strategic consulting and board services. Mr
Brinch has experience and knowledge within
Mr Wendel Andersen has experience in
the areas of strategic development, branding,
international management, strategy, finance,
distribution and consulting services with re-
treasury, IT and project management from his
spect to board work.
current position as CFO of Arla Foods.
Number of shares held: 500.
Number of shares held: 1,078.
Paul Bergqvist
Member of the remuneration
committee. Born 1946. Joined
the Supervisory Board in 2006
Professional board member. Swedish
citizen. Former CEO of Carlsberg A/S.
Educational background: Economist,
engineer.
Chairman of Sverige Bryggerier AB, East
Capital Explorer ABvaigzdes AB and HTC AB.
Board member of TrygVesta A/S, TrygVesta
Forsikring A/S, Telenor ASA, Lantmännen, Nova
Linija, Björk Eklund Group AB and Svenska Re-
turpack AB.
Mr Bergqvist has international management
experience in strategic development, complex
transactions, development of new markets,
marketing, sales and financial management.
Number of shares held: 100.
Niels Bjørn Christiansen
Born 1966. Joined the
Supervisory Board in 2006
CEO, 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, Danfoss Industries Private Limited, India
and Sea Recovery Inc.
Deputy chairman of Danfoss (Tianjin)
Limited, China.
Board member of TrygVesta A/S, TrygVesta
Forsikring A/S, Bang & Olufsen A/S, Axcel A/S,
Danfoss Universe, Danfoss Drives A/S, Danfoss
Ejendomsselskab A/S, Danfoss Ventures A/S,
Danfoss International A/S, Danfoss Bauer GmbH,
Germany, Danfoss Semco A/S, Danfoss-Murman
Holding A/S, Sauer-Danfoss Inc., Provinsindustri-
ens Arbejdsgiverforening and DI Hovedbestyrelse.
Professional board member. Former CEO
of Toms Chokoladefabrikker A/S.
Educational background: MSc (Forestry);
PMD Harvard Business School.
Chairman of TryghedsGruppen smba,
TrygVesta A/S, TrygVesta Forsikring A/S,
Malaplast Co. Ltd. Bangkok, Advisory Board
of CareWorks Africa Ltd. and The Danish
Rheumatism Association.
Deputy chairman of the Board of Trustees of the
Egmont Foundation. Egmont International Holding
A/S, Ejendomsselskabet Gothersgade 55 ApS and
Ejendomsselskabet Vognmagergade 11 ApS.
Board member of WWF in Denmark and
Danmark-Amerika Fondet.
Mr Olufsen has experience in managing large
international companies, including strategic de-
velopment, and experience as a board member
of Danish and international companies.
Number of shares held: 3,018.
Bodil Nyboe Andersen
Deputy chairman of the Super-
visory Board and chairman of the
audit committee. 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 Andersen
Foundation.
Deputy chairman of TrygVesta A/S, TrygVesta
Forsikring A/S and The Danish Film Institute.
Board member of The Villum Kann Rasmussen
Foundation, The Danish-Norwegian Collaboration
Foundation and The Energy Technological De-
velopment and Demonstration Programme
(Energiteknologisk Udviklings- og Demonstrations
Program).
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l Corporate governance l TrygVesta Annual Report 2008
Niels Bjørn Christiansen
John R. Frederiksen
Rune Torgeir Joensen
Peter Wagner Mollerup
Birthe Petersen
Per Skov
Berit Torm
Mr Christiansen has experience with interna-
tional businesses, including from his work at
Danfoss and GN Store Nord A/S. He has compe-
tencies within management, strategy, IT,
processes, distribution, innovation, production,
finance and private and listed companies.
Number of shares held: 100.
John R. Frederiksen
Member of the remuneration
committee. Born 1948. Joined
the Supervisory Board in 2002
CEO, Fortunen A/S, Oak Property
Invest Aps 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, RenHold A/S,
Renoflex-Gruppen A/S, Renholdningsselskabet
af 1898, SBS Rådgivning A/S, SBS Byfornyelse
Rune Torgeir Joensen
Elected by the employees and
member of the audit committee.
Born 1956. Joined the Super-
visory Board in 2008
Department manager with TrygVesta
Forsikring A/S. Norwegian citizen.
Educational background: Printer, market
economist, HMS adviser.
Per Skov
Member of the audit committee.
Born 1941. Joined the Super-
visory Board in 1998
Professional board member.
Former CEO of FDB.
Educational background: MSc (Economics),
management training programme at MIT.
Chairman of Utility Development A/S and NX
Board member of TrygVesta A/S and
Holding A/S.
TrygVesta Forsikring A/S.
Member of Advisory Board TrygVesta Norge.
Number of shares held: 28.
Peter Wagner Mollerup
Elected by the employees.
Born 1966. Joined the
Supervisory Board in 2002
Deputy chairman of TryghedsGruppen 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 Livs-
forsikringsselskab A/S.
From his board work and former positions,
including as CEO of FDB, Mr Skov has
experience within management, strategy
and finance.
Commercial insurance agent with
Number of shares held: 2,468.
Berit Torm
Elected by the employees.
Born 1959. Joined the Super-
visory Board in 2008
Claims Manager
with TrygVesta Forsikring A/S.
Educational background: LL.M.
Board member of TrygVesta A/S and
TrygVesta Forsikring A/S.
Member of Furesø local council.
Number of shares held: 69.
Smba, Sjælsø Danmark A/S, Sjælsø Gruppen A/S,
TrygVesta Forsikring A/S
Ejendomsforeningen Danmark, Komplementar-
Educational background: Certified insurer,
selskabet Uglen ApS and Grundejernes
Investeringsfond.
Board member of TryghedsGruppen smba,
TrygVesta A/S, TrygVesta Forsikring A/S, Fortunen
A/S, Freja Ejendomme A/S (Statens Ejendoms-
travel agency guide, psychotherapist.
Chairman of The Association of Insurance
Agents and Account Managers in TrygVesta
Forsikring A/S and The Association of Danish
Certified Insurers within the Danish Financial
salg A/S), Højgård Ejendomme A/S, Oak Property
Services Union.
Invest Aps, C.W. Obel Ejendomme A/S, C.W.
Board member of TrygVesta A/S, TrygVesta
Obel Projekt A/S, Ejendomsaktieselskabet Knud
Forsikring A/S and The Danish Financial
Højgaards Hus, BERCO Deutschland GmbH,
Services Union.
Invista Foundation Holding Company Limited,
Number of shares held: 219.
SIPA (Scandinavian International Property
Association), Invista Foundation Property Trust
Limited, Invista Foundation Property Limited,
Invista Foundation Property No. 2 Limited and
Invista European Real Estate Trust SICAF.
Member of the advisory board of Sparinvest
Property Fund K/S and President of European
Property Federation, Brussels.
Mr Frederiksen has experience within
management, strategy and finance from serving
as a CEO and most recently as a board member
of a number of companies, including property
companies.
Number of shares held: 280.
Birthe Petersen
Elected by the employees and
member of the remuneration
committee. Born 1949. Joined
the Supervisory Board in 1996
Principal administrative officer of TrygVesta
Forsikring A/S.
Educational background: Diploma in business
studies, management training programme of
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: 71.
TrygVesta Annual Report 2008 l Corporate governance l
77 of 152
Corporate governance
Group Executive Management
Peter Falkenham
Morten Hübbe
Kjerstin Fyllingen
Stine Bosse
Lars Bonde
Stig Ellkier-Pedersen
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l Corporate governance l TrygVesta Annual Report 2008
Christine (Stine) Bosse
Group CEO. Born 1960.
Joined TrygVesta in 1987.
Joined the Group Executive
Management in 1999
Member of the Executive Management of
TrygVesta A/S. Member of the Executive
Management of TrygVesta Forsikring A/S.
Educational background: LL.M, management tra-
ining programmes, including Insead and Wharton.
Chairman of The Danish Insurance Association,
Hjertebarnsfonden, Tryg Ejendomme A/S and Ejen-
domsselskabet af 8. maj 2008 A/S.
Board member of Nordea Bank, Amlin Plc, Grund-
Board member of Tryg Ejendomme A/S,
Ejendomsselskabet af 8. maj 2008 A/S and
Note:
Changed Group Executive Management
TrygVesta Garantiforsikring A/S.
Number of shares held: 69.
Lars Bonde
Member of the Group Executive
Management in charge of Corpo-
rate. Born 1965. Joined TrygVesta
in 1998. Joined the Group Execu-
tive Management in 2006
as of 1 January 2009
Effective on 1 January 2009, TrygVesta changed
its organisation so that the entire Group will be
based on a pan-Nordic structure with a busi-
ness management comprising nine members,
all of whom will be responsible for the Nordic
region.
The Group Executive Management will be exten-
ded by four members and will be as follows:
Member of the Executive Management of
Christine Bosse, Group CEO, 48 years old.
TrygVesta Forsikring A/S.
Morten Hübbe, Group Executive Vice
Educational background: Insurance training,
President, CFO, 37 years old.
fos Management A/S and Poul Due Jensens Fond.
LL.M.
Peter Falkenham, Group Executive Vice
Number of shares held: 3,237.
Number of shares held: 1,312.
President, Process & IT, and COO, 51 years old.
Morten Hübbe
Group CFO. Born 1972.
Joined TrygVesta in 2002.
Joined the Group Executive
Management in 2003
Member of the Executive Management of
TrygVesta A/S. Member of the Executive
Management of TrygVesta Forsikring A/S.
Educational background: BSc (International
Business Administration and Modern Languages),
MSc (Finance and Accounting), management
training at Wharton.
Chairman of TrygVesta Garantiforsikring A/S
and Enter Forsikring AS.
Board member of Tryg Ejendomme A/S,
Ejendomsselskabet af 8. maj 2008 A/S and
Høyteknologisenteret AS.
Number of shares held: 3,159.
Peter Falkenham
COO and 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
Member of the Executive Management
of TrygVesta A/S. Member of the Executive
Management of TrygVesta Forsikring A/S.
Educational background: BCom (International
Trade), MSc (Engineering) and management training
programmes, including St. Gallen and Wharton.
Chairman of Glunz & Jensen.
Deputy chairman of Solar A/S
Kjerstin Fyllingen
Member of the Group Executive
Management in charge of Private
& Commercial Norway. Born 1958.
Joined TrygVesta in 2006. Joined
the Group Executive Manage-
ment in 2006
Member of the Executive Management
of TrygVesta Forsikring A/S.
Educational background: Bachelor of
Business Administration and Master of
Management, Handelshøyskolen BI.
Board member of Enter Forsikring AS, Finans-
næringens Hovedorganisation, TSS Marine ASA
and TrygVestas Allmennyttige Stiftelse.
Number of shares held: 1,898.
Stig Ellkier-Pedersen
Member of the Group Executive
Management in charge of New
Markets. Born 1947. Joined Tryg-
Vesta in 1999. Member of the
Group Executive Management
2001-2008
Member of the Executive Management
of TrygVesta Forsikring A/S.
Educational background: Mechanical
engineer, management training programmes
at Insead.
Chairman of Forsikringsakademiet A/S.
Board member of Enter Forsikring A/S,
The Danish Employers’ Association for the
Financial Sector and SOS International A/S.
Number of shares held: 1,737.
Lars Bonde, Group Executive Vice President,
Sales and Customer Service Direct and Country
Manager in Denmark, 43 years old.
Kjerstin Fyllingen, Group Executive Vice
President, Customer Service & Sales Partners
and Country Manager in Norway, 50 years old.
New members
Truls Holm Olsen, Group Executive Vice
President, Corporate, 45 years old.
Birgitte Kartman, Group Executive Vice
President, Claims, 48 years old.
Jens Stener, Group Executive Vice President,
Corporate Branding & Business Centres,
42 years old.
Martin Bøge Mikkelsen, Group Executive Vice
President, Strategy & Human Competencies,
46 years old.
Stig Ellkier-Pedersen stepped down from his
position to retire on 31 December 2008.
Mr Ellkier-Pedersen has been with TrygVesta
since 1999 and has been a member of the
Group Executive Management since 2001.
Read more about the organisational
changes and see the new management at
www.trygvesta.com > About us > Management.
TrygVesta Annual Report 2008 l Corporate governance l
79 of 152
Corporate governance
Corporate governance
In 2008, TrygVesta’s Supervisory Board focused on organ-
which also offers stakeholders to receive the latest news
ising the Group’s strategic development with a healthy
as RSS feeds or to download webcasts and teleconfer-
balance between short-term and long-term activities and
ences as podcasts. The Group’s mission and relevant
action plans. The Supervisory Board takes care in prepar-
stakeholder policies, such as the policies for Investor
ing future tasks for the Group, such as new capital
Relations, communications and the environment, are
requirements and capital resources in connection with
available at www.trygvesta.com under Investor, About us,
the future Solvency II rules so as to continuously
Press and CSR > Climate, respectively.
strengthen the Group’s financial and strategic position.
Capital and share structures
TrygVesta’s corporate governance and remuneration poli-
The Supervisory Board monitors that TrygVesta’s capital
cies are based on the corporate governance recommen-
structure is in line with the interests of the Group and our
dations issued by OMX Nordic Exchange Copenhagen.
shareholders, and that the capital structure is in compli-
The Supervisory Board believes that TrygVesta complies
ance with the requirements applicable to TrygVesta as a
with the recommendations.
financial undertaking. The Supervisory Board optimises our
Stakeholders
capitalisation on an ongoing basis while duly safeguarding
the interests of policyholders and shareholders and leaving
TrygVesta issues press releases and company announce-
the Group sufficient scope for development and growth.
ments on a regular basis and publishes interim reports
and annual reports in order to enable stakeholders to
In 2008, the shareholders at the annual general meeting
form an adequate impression of the Group’s position and
authorised the Supervisory Board to let TrygVesta acquire
its performance. The financial statements have been pre-
own shares within 10% of the share capital in the period up
pared in accordance with IFRS. TrygVesta updates its out-
to the next annual general meeting. The Supervisory Board
look for the Group’s performance each quarter. All finan-
is authorised to distribute extraordinary dividends in accord-
cial announcements are released simultaneously in Danish
ance with the rules of the Danish Public Companies Act.
and English. The Group has a number of in-house guide-
lines to ensure that disclosures are made in accordance
The annual general meeting in 2008 decided to initiate a
with the stock exchange rules of ethics. Investor Relations
share buy back programme.
has regular contacts to equity analysts and major investors
and organises investor presentations, teleconferences
At 31 December 2008, around 3.0m shares worth DKK
and webcasts together with the management. The Super-
1,053m had been bought under the total share buy back
visory Board is regularly briefed on the dialogue with
programme of DKK 1,405m, and DKK 352m of the share
investors. All material is available at www.trygvesta.com,
buy back programme was thus outstanding. TrygVesta has
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l Corporate governance l TrygVesta Annual Report 2008
Read more about TrygVesta’s Corporate Governance at
www.trygvesta.com
decided to extend the share buy back programme, originally
The tasks and responsibilities
scheduled for completion on the day before the release of
of the Supervisory Board
the annual report 2008, until the day before the annual
The Supervisory Board is responsible for the overall man-
general meeting, which will be held on 22 April 2009.
agement and financial control of TrygVesta. In this work,
The Supervisory Board intends to consider any public
agement based on regular and systematic consideration
the Supervisory Board uses targets and framework man-
takeover bid that may be made as prescribed by legisla-
of strategies and risks.
tion and, depending on the nature of such bid, to con-
vene an extraordinary general meeting of shareholders
The Executive Management reports to the Supervisory
in accordance with applicable requirements and rules.
Board on strategies and action plans, market develop-
ments and the Group’s performance, funding issues,
Annual general meeting
capital resources and special risks. The Supervisory Board
TrygVesta holds its annual general meeting of sharehold-
cooperates with the Executive Management to ensure
ers each year before the end of April. The Supervisory
follow-up on and development of the Group’s strategies.
Board convenes the annual general meeting by a com-
pany announcement and by advertisement in at least one
The Supervisory Board holds at least six annual meetings
national newspaper, giving not less than eight days’
and an annual strategy seminar to discuss and define
notice. Shareholders may elect to receive an electronic
strategies and goals for the years ahead. The Supervisory
notice of the general meeting, or they may download the
Board discusses the Supervisory Board’s tasks on a regu-
notice at www.trygvesta.com. The notice includes rele-
lar basis, and at the last meeting in the year, it deter-
vant information about the time and place of the meet-
mines the items on the agenda for the coming year.
ing and sets out the agenda, which as a minimum com-
prises the following items:
The Supervisory Board carries out an annual evaluation of
the work and results of the Executive Management and of
• Report of the Supervisory Board on the activities
the cooperation between the Supervisory Board and the
of the company during the past financial year
Executive Management. In addition, the Supervisory Board
• Presentation of the annual report for approval and
reviews and approves the rules of procedures of the
discharge of the Supervisory Board and the Executive
Supervisory Board and the Executive Management each
Management, including determination of the Super-
year to ensure they are aligned with TrygVesta’s require-
visory Board’s remuneration
ments. Under the rules of procedure, the Supervisory
• Adoption of a resolution as to the distribution of profit
Board has defined an evaluation procedure for assessing
or covering of loss, as the case may be, according to
the work and results of the Supervisory Board, the Chair-
the annual report as approved, including proposed
man of the Supervisory Board and the other individual
payment of dividend for the past financial year
members as well as the composition of the Supervisory
• Any proposals from the Supervisory Board or from
Board in order to improve the work of the Supervisory
shareholders
Board. The assessment includes individual interviews
• Election of members to the Supervisory Board
between the Chairman of the Supervisory Board and the
• Appointment of auditors
• Any other business
individual members in January and a discussion of these
interviews at the next following Board meeting.
All shareholders are urged to attend the annual general
The Supervisory Board is headed by the Chairman and
meeting, and shareholders may vote in person at the
the Deputy Chairman. The duties of the Chairman and
general meeting or appoint the Supervisory Board or a
the Deputy Chairman of the Supervisory Board are
third party as their proxy. The proxy form will be available
defined in the rules of procedure of the Supervisory
at www.trygvesta.com from 1 April 2009.
Board and include preparing meetings of the Supervisory
TrygVesta Annual Report 2008 l Corporate governance l
81 of 152
Corporate governance
Board and evaluating the work of the Supervisory Board
To ensure replacement on the Supervisory Board, mem-
and the cooperation with the Executive Management. The
bers elected by the shareholders may hold office for a
Chairman and the Deputy Chairman also plans the future
maximum of nine years. Furthermore, members of the
composition of and replacement in the Supervisory Board.
Supervisory Board must retire at the first general meeting
The Chairman of the Supervisory Board acts as spokesman
following their 70th birthday.
for the Supervisory Board for external purposes.
Prior to the election of new members, the Supervisory
The composition of the Supervisory Board
Board prepares a description of the candidates’ back-
The Supervisory Board makes an assessment of the com-
ground, professional qualifications and experience, and
petencies required for the Supervisory Board to perform
the notice convening the general meeting makes reference
its duties in the best possible way. In connection with the
to this description. Information about the Supervisory Board
evaluation of the Supervisory Board’s work and its mem-
members’ profiles and the number of TrygVesta shares
bers’ competencies, it is assessed whether the Supervisory
held is set out in the section on Members of the Supervisory
Board has the required competencies, or whether the
Board and is also available at www.trygvesta.com. A few
competencies and expertise of its members need to be
Supervisory Board members hold more than the recom-
updated in some respects. A balanced distribution with
mended number of directorships. However, the Supervisory
respect to gender and age is sought in the composition of
Board considers that each member has adequate time and
the Supervisory Board. The Supervisory Board has eight
resources to serve as a member of the Supervisory Board
members elected by the shareholders. They are aged
of TrygVesta in a satisfactory manner.
between 43 and 68 years, and there is one female member.
New board members are offered an introduction course.
CSR/corporate social responsibility
CSR is a focus area for TrygVesta; it supports the com-
The Supervisory Board has 12 members, including eight
pany’s business and peace-of-mind delivery. TrygVesta
members elected by the shareholders for a term of one
has drawn up a CSR declaration of intent, defining our
year. Four of the eight members are non-affiliated. The
commitment and describing our responsibility in relation
Supervisory Board deems that the number of members is
to employees, customers and the external community.
adequate to ensure a constructive debate and an efficient
TrygVesta pursues an open policy with respect to the
decision-making process.
Group’s social commitment and reports on current CSR
THE COMPOSITION OF THE SuPERVISORY BOARD
4 affiliated
members
4 non-affiliated 4 members elected
members
by the employees
candidates
elected among elected among
the members
of the Super- without any
visory Board
of Trygheds-
Gruppen smba. Gruppen smba. distributed on the
elected according
to agreement
between the Danish
and Norwegian
employee associations
affiliation with
Trygheds-
Group’s Danish
employees and one
Norwegian employee.
activities at www.trygvesta.com and in the Annual Report.
TrygVesta is also committed to working with CSR through
the Group’s participation in the Danish Council for Sustain-
able Business Development and the UN Global Compact.
CSR organisation
The Group CEO chairs the TrygVesta CSR Board, and in
addition, the Group Executive Vice Presidents, Customer
Sales & Partners and direct sales, the commnucations
Director and two other senior executives sit on the
Board. The figure shows the three sub-committees in
the CSR work.
Diversity
Read more about the employee representatives on
TrygVesta considers diversity a strength and has there-
TrygVesta’s Supervisory Board at www.trygvesta.com
fore worked towards the goal that the composition of the
under Our business > Corporate governance.
company’s employees should reflect that of society in
82 of 152
l Corporate governance l TrygVesta Annual Report 2008
Read more about CSR at TrygVesta on the insert
”We acknowledge our corporate social responsibility”
general. In the past few years, there has been increased
Management reports to the Supervisory Board on the
focus on ethnicity, both in our current recruitment activi-
Group’s risk management work. A more detailed review of
ties and in projects focusing on recruitment of employees
TrygVesta’s risk management is set out in the section on
with an ethnic background. In 2008, just over 4% of the
Risk management and at www.trygvesta.com.
Group’s employees had a foreign ethnic background,
slightly less than this population group’s proportion of
Audit
the Nordic population.
The Supervisory Board ensures that the Group is moni-
tored by competent and independent auditors. Each year,
At the end of 2008, TrygVesta had seven women at senior
the annual general meeting appoints external auditors
management level. At 1 January 2009, the Group Executive
recommended by the Supervisory Board. The audit agree-
Management comprised nine members, including three
ment with the external auditors, including the auditors’
women. TrygVesta’s Group Executive Management is thus
fees, is concluded between the Supervisory Board and the
one of the most highly gender diversified among large
auditors. The Supervisory Board adopts the framework for
companies in the Nordic region. The age distribution in the
the auditors’ performance of non-audit services each year.
Group Executive Management ranges from 37 to 51 years.
Risk management
TrygVesta’s internal audit department regularly reviews
the quality of the Group’s internal control systems and
Being an insurance business, TrygVesta is subject to the
business procedures. The department is responsible for
requirements of the Danish Financial Business Act on risk
planning, performing and reporting the audit work to
management. In capital and risk management instructions,
the Supervisory Board. The internal and external auditors’
the Supervisory Board defines the framework for risk man-
long-form reports are reviewed by the Supervisory Board.
agement in TrygVesta with respect to insurance risk/rein-
surance, investment risk and operational risk, including
In connection with the Supervisory Board’s review of
IT security. This framework is then implemented in risk
the annual report, it discusses the accounting policies,
policies that define detailed guidelines for the Group’s risk
among other issues, and the results of the audit are
management. A risk management committee comprising
discussed with the audit committee and in Supervisory
the Group CEO, Group CFO and selected senior executives
Board meetings for the purpose of assessing the audi-
monitors the risk management environment. The Executive
tors’ observations and conclusions.
CSR Secretariat
CSR Board
Chairman:
Group CEO
Employee Committee
Chairman: Group Executive Vice
President, Strategy & Human
Competence
Environment and Climate
Committee
Chairman: Group Executive
Vice President, direct sales
Society Committee
Chairman: Group Executive Vice
President, customer service
and sales/partners
TrygVesta Annual Report 2008 l Corporate governance l
83 of 152
Corporate governance
AuDIT COMMITTEE
REMuNERATION COM MITTEE
The remuneration committee has four members elected by
the Supervisory Board. The remuneration committee is
chaired by the Chairman of the Supervisory Board. In
addition, the committee must include at least one mem-
ber of the Supervisory Board of TryghedsGruppen and at
least one non-affiliated member of the Supervisory Board.
The remuneration committee was set up in the spring of
2008. Going forward, the committee intends to hold four
annual meetings. The work of the remuneration commit-
tee is based on TrygVesta’s remuneration policy and
guidelines for incentive pay adopted by the shareholders
at the annual general meeting held on 3 April 2008.
Members
- Mikael Olufsen, chairman
- John R. Frederiksen
- Paul Bergqvist
- Birthe Petersen
Responsibilities
• To support the Supervisory Board in considerations and
decisions with respect to issues of remuneration to the
Supervisory Board, Board committees and the Executive
Management, and to discuss the framework for the
Group Executive Management’s remuneration in con-
sultation with the Group CEO.
• To ensure compliance with the Group’s guidelines for
incentive pay.
• To keep the Supervisory Board informed of the market
level and forms of remuneration paid to members of
the supervisory boards and executive managements
of the company’s peers.
Activities in 2008
• The remuneration committee was set up in May 2008
and held one meeting in the second half of 2008 to
define the strategy and terms of reference for its work.
• The committee’s terms of reference were approved at
a meeting of the Supervisory Board held in November
2008.
The audit committee has three members elected by the
Supervisory Board and is chaired by a non-affiliated
member of the Supervisory Board. The committee held
four meetings in 2008, and it reports to the Supervisory
Board on a regular basis. The audit committee made an
assessment of the preceding year’s work in August
2008, evaluating the need for changes to its areas of
responsibility. The audit committee works with historical
data, and it is not involved in forward-looking events
such as outlook and budgets.
TrygVesta’s audit committee complies with the statutory
requirements of 1 July 2008 for listed companies. As of
31 December 2008, certain unlisted financial businesses
were also required to have an audit committee. However,
it is possible to set up shared audit committees for
several financial businesses within the same group. The
audit committees must be set up immediately following
the companies’ annual general meetings held in the
spring of 2009. TrygVesta will ensure compliance with
the statutory requirements in accordance with the
applicable rules.
Members
- Bodil Nyboe Andersen, chairman
- Per Skov
- Rune Joensen
Responsibilities
• To monitor the financial reporting process, including
the application of accounting policies, and to assess
the adequacy of any changes thereto.
• To monitor that internal control and risk management
systems function efficiently.
• To review and discuss the results of the internal and
external auditors’ work, and to supervise manage-
ment’s follow-up on the recommendations reported
by the internal and external auditors.
• To ensure that the Group’s internal and external
auditors are independent.
Activities in 2008
• Reviewed the Group’s technical provisions.
• Reviewed the methodology for and calculation of
the Group’s Individual Solvency Needs.
• Reviewed the efficiency of the Group’s contingency
plans.
• Assessed the Group’s internal control procedures
to prevent fraud.
• Supervised annual and interim financial statements.
• Supervised the audit work performed by the
external auditors.
84 of 152
l Corporate governance l TrygVesta Annual Report 2008
Remuneration
Remuneration policy for the Supervisory Board
REMuNERATION OF THE AuDIT COMMITTEE
and the Executive Management
TrygVesta has adopted a policy for remuneration of the
Supervisory Board and the Executive Management and
has defined overall guidelines for incentive pay.
DKK
Chairman
Other members, each
Total, audit committee
2008
150,000
100,000
350,000
Read more at www.trygvesta.com > Our business >
REMuNERATION OF THE REMuNERATION COMMITTEE
Corporate governance.
Remuneration of the Supervisory Board
Members of the Supervisory Board receive a fixed fee and are
not covered by incentive programmes or severance schemes.
Their remuneration is fixed on the basis of trends in the com-
DKK
Chairman
Other members, each
Total, remuneration committee
2008*
37,500
25,000
112,500
* In 2008 members recieved remuneration for six months.
pany’s peer group, taking into account competencies and
Remuneration of the Executive Management
efforts as well as the scope of the Board work. The Chairman
TrygVesta’s Executive Management comprises three
receives triple the amount of the other members, and the
members. Their remuneration reflects a wish to secure
Deputy Chairman receives double the amount.
a balanced earnings performance for the Group in the
short as well as the longer term.
In addition, members of the Supervisory Board who par-
ticipate in the audit and remuneration committee receive
The remuneration of the Executive Management includes
remuneration for these duties. The chairmen receive one
performance-related bonus, comprising a bonus plan of up
and a half times the amount of other members. The
to three months’ salary including pension (four months for
shareholders approve the remuneration of the Supervisory
the Group CEO). The plan is directly linked to pre-defined
Board for the current financial year and the remuneration
benchmarks. The assessment of the individual member’s
was unchanged from 2007 to 2008.
achievement includes the Group’s overall performance as
REMuNERATION OF THE SuPERVISORY BOARD
DKK
Chairman
Deputy Chairman
Members, each
Total, Supervisory Board
2008
750,000
500,000
250,000
3,750,000
well as that of the individual members within their areas
of responsibility. Specific benchmarks are defined within
all four perspectives of the balanced scorecard (financial,
customer, processes and learning) and reflect the strategic
focus areas of the Group and the individual business areas
or organisational units, including growth, profitability, cost
reduction, customer satisfaction, customer loyalty, image,
TrygVesta Annual Report 2008 l Corporate governance l
85 of 152
Corporate governance
processes, communication, employee satisfaction and
minus dividend payout in the period. Stock options can
development, and innovation. Members may choose to
only be exercised during the open trading windows for the
receive their bonus in cash or shares at a discount to the
full-year and half-year profit announcements. Own shares
market price. Members who choose shares at a discount to
are bought to cover the stock option programmes.
the market price can buy the shares at par with a total dis-
count equal to the bonus entitlement. Part of the remuner-
ation consists of stock options in order to build loyalty and
motivation. The value of the stock options on grant may
not exceed 50% of the fixed annual salary inclusive of pen-
sion. On exercise the value, calculated as the difference
between the market price on exercise and the price on
granted, may not exceed 200% of the member’s fixed
annual salary inclusive of pension. Members are entitled
to company cars. A contribution equal to 25% of their
fixed salary is paid into a pension scheme. Each member
is entitled to 12 months’ notice of termination and to
12 months’ severance pay. The Group CEO is entitled to
STOCK OPTION PROGRAMME IN 2008
Stine Bosse
Morten Hübbe
Peter Falkenham
Other Group Executive
Management and
senior executives
Granted to reward
outstanding performance
Total granted in 2008
Options
24,597
15,916
11,575
Value on
grant (DKK)
1,700,000
1,100,000
800,000
167,203
11,800,000
28,700
247,991
2,000,000
17,400,000
12 months’ notice and to 18 months’ severance pay plus
In 2008, the stock options entitled the holders to shares
pension contributions during such period.
at the average price of TrygVesta shares (all trades)
Incentive pay
on OMX Copenhagen Stock Exchange on 22 February
2008 plus 10%, equal to an strike price of DKK 416.06.
Like the Executive Management, the Group Executive Man-
TrygVesta expects to grant programme of a similar value
agement and senior employees are offered a performance-
and on similar terms in 2009.
related bonus of up to three months’ salary on similar terms.
Furthermore, TrygVesta has a stock option programme for
Employee bonus
the Executive Management, the Group Executive Manage-
TrygVesta operates an employee bonus programme
ment, senior executives and employees to reward out-
because it is important to the Group that all employees
standing performance. Each option entitles the holder to
see their own efforts relative to the company’s overall
one share at the exercise price. Stock options cannot be
targets. Employee bonus benchmarks are combined ratio
exercised earlier than three years and not later than five
and growth. For 2008, the bonus triggered an offer to
years after the grant. The strike price is the market price
buy shares at a discount to the market price with a dis-
on grant plus 10%. The exercise price is the strike price
count element equal to DKK 5,000 to each employee.
REMuNERATION OF THE EXECuTIVE M ANAGEMENT IN 2008
DKK
Stine Bosse
Morten Hübbe
Peter Falkenham
Basic salary
Bonus
Pension
Car
Total
5,560,000
3,500,000
3,000,000
1,390,000
584,000
250,000
1,390,000
875,000
750,000
247,100
156,000
106,000
8,587,100
5,115,000
4,106,000
REMuNERATION OF THE EXECuTIVE MANAGEMENT IN 2007
DKK
Stine Bosse
Morten Hübbe
Peter Falkenham
Basic salary
Bonus
Pension
Car
Total
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
86 of 152
l Corporate governance l TrygVesta Annual Report 2008
Shareholder information
FINANCIAL CALENDAR 2009
22 April 2009 at 14:00
Annual general meeting 2009
23 April 2009
28 April 2009
TrygVesta shares trade ex-dividend
Payment of dividend
12 May 2009 at 7:30
Interim report for Q1 2009
18 August 2009 at 7:30
Interim report for the first half of 2009
10 November 2009 at 7:30
Interim report for Q1-Q3 2009
TrygVesta emphasises openness, transparency and an
Share price performance in 2008
understanding of stakeholder information requirements.
TrygVesta shares opened 2008 at DKK 388 and closed
The Group’s Investor Relations strive to maintain a high
at DKK 328, thus generating a total negative return for
level of information by
2008 of 12% including dividends of DKK 17. By way of
• being available and answering queries as promptly
comparison, the OMX C20 index fell by 46% and the DJ
as possible
Euro Insurance Index dropped 44%. TrygVesta shares
• preparing plain and relevant written communication
were affected by the general decline in equity prices in
and presentation material
2008 as described in the Preface.
• having a website that is of relevance to professional
and private investors alike
Other listed insurance companies in the Nordic region
• being proactive in dealings with investors
generated returns including dividends as follows in 2008:
Alm. Brand -76%, Sampo -22% and Topdanmark -6%.
Information that may influence the pricing of TrygVesta
shares is published in accordance with the rules applicable
Turnover of TrygVesta shares and share buy back
to distribution of news in the EU. The Group’s website,
TrygVesta shares had an average daily turnover of DKK
www.trygvesta.com, is updated simultaneously. In addi-
44m in 2008. The total volume of TrygVesta shares
tion, TrygVesta distributes information directly to the
traded on OMX Nordic Exchange Copenhagen was DKK
London Stock Exchange, the press, equity analysts, inves-
11.0bn in 2008.
tors and other stakeholders. In accordance with the recom-
mendations issued by OMX Nordic Exchange Copenhagen,
On 4 April 2008, TrygVesta launched a share buy back pro-
TrygVesta refrains from commenting on matters relating to
gramme in a maximum amount of DKK 1,405m. At 31
financial performance or forecasts during a period of three
December 2008, an aggregate of approximately 3.0m shares
weeks prior to the release of financial reports.
worth a total amount of DKK 1,053m had been bought.
TrygVesta Annual Report 2008 l Corporate governance l
87 of 152
Corporate governance
MOST ACTIVE STOCKBROKERS IN TERMS OF PROPORTION
OF TuRNOVER ON OMX NORDIC EXCHANGE COPENHAGEN
conferences. TrygVesta also participated in five events for
private shareholders in Denmark and Sweden. The Group’s
1. Danske Bank
2. SEB Enskilda
3. Nordea
4. Morgan Stanley
5. Carnegie
20%
9%
8%
6%
5%
performance is followed by 18 equity analysts, three of
whom are based in London. The equity analysts’ recom-
mendations with respect to TrygVesta shares are available
at www.trygvesta.com.
Share capital and ownership
is an important vehicle for providing information about the
TrygVesta has a total share capital of DKK 1,700,000,000
Group’s performance to prospective investors. A Danish
comprised of a single class of shares (68m shares of
version of the website was launched in February 2009,
DKK 25 nominal value each), and all shares rank pari passu.
making it more user-friendly for all Danish shareholders.
The website is being developed on an ongoing basis and
The principal shareholder, TryghedsGruppen smba (formerly
Tryg i Danmark smba), Kgs. Lyngby, Denmark, holds 60%
Annual general meeting
of the issued shares and is the only shareholder, apart
TrygVesta’s annual general meeting will be held on
from TrygVesta, with a holding of more than 5%.
22 April 2009 at Falconer Center, Falkoner Allé 9, 2000
Trygheds Gruppen invests in Nordic businesses that promote
Frederiksberg, Denmark. The invitation to attend the
peace of mind and health, and supports benevolent activities.
meeting will be advertised in the daily press and will be
sent to shareholders who so request. Notice of the
At 31 December 2008, the 40% free float was distributed
meeting will also be posted at www.trygvesta.com.
among 28,828 registered shareholders. The 200 largest
shareholders held 57% of the free float. At 31 December
Any queries relating to the annual general meeting may
2008, TrygVesta held own shares corresponding to 5.3%
be addressed to:
of the share capital.
Bjarne Lau Pedersen, Chief Group Legal Adviser,
telephone +45 4420 3065, e-mail bjarne.lau@tryg.dk
Dialogue with investors
Ole Søeberg, IRO, telephone +45 4420 4520,
Following publication of all financial statements, Investor
e-mail ole.soeberg@tryg.dk.
Relations and the Executive Management meet with institu-
tional investors and equity analysts. In 2008, TrygVesta
Reference > Read about dividends for 2008 in the section
held 250 investor meetings and participated in 15 investor
on Capital and profit distribution.
FREE FLOAT 31 DECEMBER 2008
SHAREHOLDERS 31 DECEMBER 2008
2% 4%
8%
10%
76%
7%
16%
17%
60%
Denmark
UK
USA
Nordic
Others
TryghedsGruppen smba
Small shareholders
Major Danish shareholders*
Major international shareholders
* Major shareholders are shareholders holding more than 10,000
shares.
88 of 152
l Corporate governance l TrygVesta Annual Report 2008
ANNO uNCEMENTS PuBLISHED IN 2008
21.01.2008
25.02.2008
25.02.2008
13.03.2008
03.04.2008
03.04.2008
05.05.2008
27.06.2008
19.08.2008
27.10.2008
11.11.2008
11.11.2008
11.11.2008
24.11.2008
TrygVesta has reduced the exposure to equities
Annual report 2007
Q4 2007 report
Notice of the annual general meeting
Resolutions from the annual general meeting
TrygVesta initiates share buy back programme
First quarter 2008 report
Revised financial calendar 2008
Half-year 2008 report
TrygVesta organises towards innovation and development
Interim report for the first nine months of 2008
Fincial calendar 2009
T rygVesta and Nordea extend partnership to 2013
TrygVesta owns 5.0% of own shares
In addition to the above-mentioned anouncements of the share buy back programme which was initiated on 4 April 2008, TrygVesta has
published an announcement of the weekly share buy back amount every Monday.
TrygVesta Annual Report 2008 l Corporate governance l
89 of 152
Accounts
Accounts – contents
Notes
Statement by the Supervisory Board and the Executive Management
Independent Auditor’s Report
Income Statement and Balance Sheet – TrygVesta Group
Statement of Changes in Equity – TrygVesta Group
Cash Flow Statement – TrygVesta Group
Notes – 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 dividends
Market value adjustment
Tax
Profit/loss on discontinued and divested business
Intangible assets
Operating equipment
Owner-occupied property
Assets under construction
Investment property
Investments in associates
Other financial investment assets
Reinsurers’ share
Current tax
Shareholders’ equity
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
Acquisition of subsidiary
Related parties
1
2
3
4
5
6
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
Income Statement and Balance Sheet – TrygVesta A/S (parent company)
Statement of Changes in Equity (parent company)
Notes (parent company)
Financial Highlights and Key Ratios by Geography
Glossary
Organisation Chart
Inserts are placed in a separat pocket at the end of the Annual Report 2008
90 of 152 l Contents l TrygVesta Annual Report 2008
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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 2008 of
TrygVesta A/S and the TrygVesta Group.
The consolidated financial statements have been prepared
in accordance with the International Financial Reporting
Standards 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
report has been presented in accordance with additional
Danish disclosure requirements for the annual reports of
listed financial enterprises.
position at 31 December 2008 and of the results of the
Group’s and the parent company’s operations and the
cash flows of the Group for the financial year 1 January –
31 December 2008.
Furthermore, in our opinion the Management’s report gives
a true and fair view of developments in the activities and
financial position of the Group and the parent company, the
results for the year and of the Group’s and the parent com-
pany’s financial position in general and describes significant
risk and uncertainty factors that may affect the Group and
the parent company.
In our opinion, the accounting policies applied are appropriate,
and the annual report gives a true and fair view of the Group’s
and the parent company’s assets, liabilities and financial
We recommend the annual report to be adopted by the
shareholders at the annual general meeting.
Ballerup, 3 March 2009
Executive Management
Christine Bosse
Group CEO
Morten Hübbe
Group CFO
Peter Falkenham
Group COO
Supervisory Board
Mikael Olufsen
Chairman
Bodil Nyboe Andersen
Deputy Chairman
Jørn Wendel Andersen
Paul Bergqvist
Christian Brinch
Niels Bjørn Christiansen
Peter Mollerup
John R. Frederiksen
Rune Torgeir Joensen
Birthe Petersen
Per Skov
Berit Torm
TrygVesta Annual Report 2008 l Statement by the Supervisory Board and the Executive Management l
91 of 152
Accounts
Independent auditor’s 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, 2008, 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 Reporting
Standards as adopted by the EU, and the parents financial
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 material
misstatement, whether due to fraud or error; selecting and
applying appropriate accounting policies; and making accounting
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 report.
The procedures selected depend on the auditor’s judgment,
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 considers in-
ternal controls relevant to the preparation and fair presenta-
tion of the annual report in order to design audit procedures
that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of in-
ternal control. An audit also includes evaluating the appropri-
ateness of accounting policies used and the reasonableness
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, 2008, 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, 2008 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, 2008, and of the results
of the parent company’s operations for the financial year
starting on January 1 and ending on December 31, 2008 in
accordance with the Danish Financial Business Act and in
accordance with additional Danish disclosure requirements
for annual reports of listed financial enterprises.
Ballerup, 3 March 2009
Deloitte
Statsautoriseret Revisionsaktieselskab
Lars Kronow
State Authorised
Public Accountant
Leif Zilmer
State Authorised
Public Accountant
92 of 152 l Independent auditor’s report l TrygVesta Annual Report 2008
Income statement – TrygVesta Group
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
16
Investment activities
Income from associates
Income from investment properties
Interest income and dividends
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
28 Earnings per share – continuing business of DKK 25
Earnings per share of DKK 25
2007
2008
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
17,629
-926
-134
66
16,635
499
-12,880
605
1,114
-486
-11,647
-172
-2,247
-756
-3,003
72
-2,931
2,384
-2
128
1,523
-1,008
-100
-101
440
-1,428
-988
124
-173
1,347
-501
846
0
846
12.8
12.8
TrygVesta Annual Report 2008 l Income statement – TrygVesta Group l
93 of 152
Accounts
Balance sheet – TrygVesta Group
DKKm
Notes Assets
11
Intangible assets
12 Operating equipment
13 Owner-occupied property
14 Assets under construction
Total property, plant and equipment
15
Investment property
16
Investments in associates
Total investments in associates
Equity investments
Unit trust units
Bonds
Deposits in credit institutions
17 Total other financial investment assets
Deposits with ceding undertakings, receivable
2007
2008
335
80
306
0
386
2,263
19
19
2,961
1,629
30,654
302
35,546
19
450
46
1,315
0
1,361
2,246
14
14
422
940
28,721
389
30,472
13
Total investment assets
37,847
32,745
Reinsurers’ share of provisions for unearned premiums
22 Reinsurers’ share of provisions for claims
18 Total reinsurers’ share of provisions for insurance contracts
Receivables from policyholders
Total receivables in relation to direct insurance contracts
Receivables from insurance enterprises
Other receivables
17 Total receivables
19 Current tax assets
17 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
1,145
2,555
93
298
4
395
666
59
725
176
860
1,036
838
838
250
601
1,689
111
282
3
396
626
142
768
Total assets
43,830
38,445
94 of 152
l Balance sheet – TrygVesta Group l TrygVesta Annual Report 2008
DKKm
Notes Liabilities
20 Shareholders’ equity
21 Subordinated loan capital
22 Provisions for unearned premiums
22 Provisions for claims
Provisions for bonuses and premium rebates
Total provisions for insurance contracts
23 Pensions and similar obligations
24 Deferred tax liability
25 Other provisions
Total provisions
Debt related to direct insurance
Debt related to reinsurance
26 Debt to credit institutions
19 Current tax liabilities
27 Other debt
Total debt
Accruals and deferred income
2007
2008
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
8,244
1,102
5,100
19,715
378
25,193
523
949
36
1,508
311
172
709
248
871
2,311
87
Total liabilities and equity
43,830
38,445
1 Accounting policies
20 Capital adequacy
28 Earnings per share
29 Contractual obligations, contingent liabilities and collateral
30 Acquisition of subsidiary
31 Related parties
TrygVesta Annual Report 2008 l Balance sheet – TrygVesta Group l
95 of 152
Accounts
Statement of changes in equity – TrygVesta Group
DKKm
Shareholders’ equity
at 31 December 2006
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
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
Revalua-
Reserve
for
tion exchange
rate adj.
reserves
Share
capital
Equali-
sation
reserve
Other Retained Proposed
reserves earnings dividends
Total
1,700
7
-20
58
800
5,162
2,244
9,951
-3
3
0
0
7
84
-98
24
10
75
1,035
1,156
94
-25
2,266
-3
84
-98
94
2
0
75
1,104
1,156
2,345
-2,244
-2,244
14
-96
32
8
14
-96
32
8
10
0
75
1,062
-1,088
59
-10
58
875
6,224
1,156
10,010
0
0
Shareholders’ equity
at 31 December 2007
1,700
Equity entries in 2008
Profit for the year
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
0
0
Dividend paid
Dividend own shares
Purchase of own shares
Issue of employee shares
Issue of share options
-585
615
-154
-124
-126
0
-126
423
423
-1,156
549
-55
-196
53
351
12
-1,197
37
14
846
-640
615
-196
-101
524
-1,156
12
-1,197
37
14
Total equity entries in 2008
0
0
-124
0
-126
-783
-733
-1,766
Shareholders’ equity
at 31 December 2008
1,700
7
-134
58
749
5,441
423
8,244
96 of 152
l Statement of changes in equity – TrygVesta Group l TrygVesta Annual Report 2008
Proposed dividend per share DKK 6.50 (in 2007 DKK 17). Dividend per share is calculated as the total dividend proposed by the Supervi-
sory Board after the end of the financial year divided by the number of shares year end (64,377,683). The dividend is not paid until ap-
proved by the shareholders at the annual general meeting of the subsequent year.
TrygVesta Forsikring A/S’ Norwegian branch, has in its branch financial statements included provisions for contingency funds in the
amount of NOK 2,743m (2007 NOK 2,564m). In TrygVesta Forsikring A/S, these provisions, due to their nature as additional provisions,
are included in shareholders’ equity (retained earnings), net of deferred tax. TrygVesta Forsikring 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 recognised in equity
Profit for the year
Total recognised income and expenses
2007
-3
3
84
-98
24
94
-25
79
2,266
2,345
2008
0
0
-640
615
-154
-196
53
-322
846
524
TrygVesta Annual Report 2008 l Statement of changes in equity – TrygVesta Group l
97 of 152
Accounts
Cash flow statement – TrygVesta Group
DKKm
2007
2008
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 operating equipment
Sale of operating equipment
Foreign currency hedging
Investments, continuing business
Investments, discontinued and divested business
Total investments
funding
Purchase of own shares
Dividend paid
Change in debt to credit institutions
funding, continuing business
Funding, discontinuied and divested business
Total funding
Change in cash and cash equivalents, net
Price adjustment of cash and cash equivalents, beginning of period
Change in cash and cash equivalents, gross
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
16,800
-11,376
-122
-2,705
-308
2,289
1,164
-186
169
-693
-55
2,688
0
2,688
-16
17
1,062
-856
-303
-187
5
-98
-376
0
-376
-50
-2,244
-65
-2,359
0
-2,359
-47
7
-40
338
298
17,412
-12,934
-22
-2,890
-591
975
1,573
-135
40
-628
-53
1,772
0
1,772
-1,098
26
2,080
-1,180
-87
0
110
615
466
0
466
-1,160
-1,156
110
-2,206
0
-2,206
32
-48
-16
298
282
98 of 152
l Cash flow statement –TrygVesta Group l TrygVesta Annual Report 2008
Notes
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 2008 and in accordance with the Danish
Statutory Order on Adoption of IFRS.
The financial statements of the parent company are prepared in
accordance with executive order no. 1266 dated 26 October 2007
issued by the Danish FSA on the presentation of financial reports by
insurance companies and profession-specific pension funds. The devia-
tions from the recognition and measurement requirements of IFRS are:
Changes in accounting policies
Accounting policies are unchanged from the annual report 2007.
Implementation of accounting standards in 2008
In 2008, the Group implemented the following standards:
• IAS 1 concerning ‘Presentation of Financial Statements – Capital
Disclosures’ will take effect on 1 January 2009. The standard deals
exclusively with presentation. The implementation has not resulted
in major changes but involves a change in the information to be
presented for the capital base and the presentation of the Group’s
calculation of recognised income and expenses directly in equity.
• IFRS 7 concerning ‘Financial Instruments Disclosures’ will take effect
• Investments in subsidiaries 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.
on 1 January 2009, although the improvements must be imple-
mented in case of early implementation of IAS 1. Replacing IAS 30
and IAS 32, the standard involves additional presentation of interest
income and interest expenses.
• 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.
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.
• 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
issued 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
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
2007 2008
2,266
846
69
-143
-2
0
Profit for the year ended 31 December
– Danish fSA executive order
2,333
703
Equity reconciliation
Shareholders equity at 31 December – IFRS
Deferred tax provisions for contingency funds
Change in deferred tax relating
10,010 8,244
21
23
to contingency funds
-2
0
Equity at 31 December
– Danish fSA executive order
10,031 8,265
• IAS 23 concerning ‘Borrowing costs”, which is effective for financial
years commencing on or after 1 January 2009. IAS 23 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 financial reporting impact
(IAS 23 remains to be adopted by the EU).
• IFRIC 16 concerning hedge accounting is expected to be imple-
mented in 2009. The standard will result in an assessment of
existing hedges. (IFRIC 16 has yet to be adopted by the EU).
The standard is not expected to have financial reporting impact.
• IFRS 2, amendment to ‘Share-based payment’. The amendment
concerns vesting conditions and the cancellation of allotted share
options. The amendment is not expected to have financial reporting
impact. (The amended IFRS 2 has yet to be adopted by the EU).
Amendments to IFRS 3 concerning ‘Business combinations’, and IAS
27 concerning ‘Consolidated and separate financial statements’, IAS 28
concerning ’Investments in assosiates’ and IAS 31concerning ’Interests
in Joint Venture’ are expected to be implemented in 2009. The amend-
ments are applied prospectively for any future business combinations.
Other interpretations, including IFRIC 12 ’Service Concession Arrange-
ments, IFRIC 13 ’Customer Loyalty Programmes’, IFRIC 14 ’The limit on
a Defined Benefit Asset’, IFRIC 15 ‘Agreements for Construction of Real
Estate’ and IFRIC 17 ’Distributions of Non-cash Assets to Owners’,
are not expected to have any financial reporting impact.
Changes in accounting estimates
• The assumptions for the allocation of insurance operating expenses
to acquisition and administrative expenses respectively were re-
assessed with effect from 30 June 2008. As a result, acquisition
expenses total approximately 75% of insurance operating expenses, as
compared with the previous total of approximately 65%. The change
TrygVesta Annual Report 2008 l Notes l
99 of 152
Accounts
Notes
has no impact on the aggregate insurance operating expenses.
• The TrygVesta Group’s defined benefit plan in Norway is impacted by
DKK 53m due to a change in the assumptions that provided the ba-
sis for the value at the end of 2008.
• In October 2008, the Danish FSA changed the discount curve for dis-
counting of provisions. As a result of the change, the discount rate is
determined based on a risk-free interest rate and the mortage bond
yield, enabling a better match between assets and liabilities. The
effect of the change to the new yield curve is:
DKKm
Gross claims incurred
Interest on insurance provisions
Technical result
Return on investment activities
after transfer to insurance activities
Profit/loss before tax
Impact
31 Oct.
Impact
31 Dec.
-5
-6
-11
57
46
0
-8
-8
78
70
Provisions for claims
-52
-78
Profit/loss, shareholders’ equity and capital base are impacted by the
same amount.
Accounting estimates and judgements
The preparation of financial statements under IFRS requires the use of
certain critical accounting estimates and requires management to exer-
cise its judgement in the process of applying the company’s account-
ing policies. The areas involving a higher degree of judgement or com-
plexity, or areas where assumptions and estimates are significant to
the consolidated financial statements, are:
• Liabilities under insurance contracts
• Valuation of defined benefit plans
• Fair value of financial assets
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 know-
ledge of historical developments, payment patterns, reporting delays,
duration of the claims settlement process and other effects that
might influence the future development of the liabilities.
The TrygVesta Group establishes claims reserves covering both case
reserves and estimated claims that have been incurred by its policy-
holders 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. The group also in-
cludes 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.
For discounting of provisions for claims, the Group generally applies a
risk-free market rate composed of a risk-free euro-denominated inter-
est rate and a country-specific spread to the German government bond
yield. As a result of the adoption of the temporary ‘Package to ensure
financial stability’, from the end of October the Group has applied a
synthetic interest rate that includes a certain mortgage yield spread,
for liabilities denominated in Danish kroner. Liabilities in Norwegian
kroner are still discounted using a Norwegian risk-free interest rate
composed as described above. Liabilities in Swedish kroner and euro
are discounted using a Danish risk-free interest rate.
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
obligation as the present value of benefit attributed to current and
prior years. The defined benefit obligation is calculated periodically by
actuaries using the projected unit credit method. The present value of
the defined benefit obligation is determined by discounting estimated
future 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
towards employees and current pensioners.
fair value of financial assets
Measurements of financial assets for which prices are quoted in an ac-
100 of 152 l Notes l TrygVesta Annual Report 2008
tive market or which are based on generally accepted models with ob-
servable market data are not subject to material estimates. 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 a current OTC price of a similar financial instru-
ment or using a model calculation. The valuation models include the dis-
counting of the instrument cash flow using an appropriate market inter-
est rate with due consideration to credit and liquidity premiums.
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.
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
financial liabilities (including derivative instruments) at fair value
through the income statement.
Assets are recognised in the balance sheet when it is probable that
future 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
voting rights or is otherwise able to exercise or actually exercises a
controlling influence.
The consolidated financial statements are prepared on the basis of
the financial statements of the parent company and its subsidiaries by
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.
Enterprises in which the group exercises significant influence but not
control are classified as associates. Significant influence is typically
On consolidation, intra-group income and expenses, shareholdings,
intra-group accounts and dividends, and gains and losses arising on
transactions between the consolidated enterprises are eliminated.
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
discontinued activities are included under discontinued and divested
business in the income statement.
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 has elected not to apply IFRS 3
retrospectively to past business combinations (business combinations
that occurred before the date of transition to IFRS).
Business combinations
Newly acquired companies are recognised in the consolidated financial
statements from the date of acquisition. Comparative figures are not
restated to reflect acquisitions.
The purchase method is applied on acquisitions if the TrygVesta Group
gains control of the company acquired. Identifiable assets, liabilities
and contingent liabilities in companies acquired are measured at the
fair value at the date of acquisition. The tax effect of revaluations is
taken into account.
The date of acquisition is the date on which control of the acquired
company actually passes to the TrygVesta Group.
The cost of a company is the fair value of the agreed consideration paid
plus costs directly attributable to the acquisition. If the final amount of
the consideration is conditional on one or more future events, these
adjustments are only recognised in cost if the event in question is likely
to occur and its effect on cost can be reliably measured.
Any excess of the cost of acquisition over the fair value of the acquired
identifiable assets, liabilities and contingent liabilities is recognised as
goodwill under intangible assets. Goodwill is tested for impairment at
least once a year. If the carrying amount of an asset exceeds its recover-
able amount, the asset is written down to the lower recoverable amount.
TrygVesta Annual Report 2008 l Notes l
101 of 152
Accounts
Notes
Intra-group transactions
Intra-group transactions are settled on market terms. Intra-group
balances carry interest on market terms.
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.
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
translated at the exchange rates at the balance sheet date. Translation
differences are recognised in the income statement under value
adjustments.
On consolidation, the assets and liabilities of the group’s foreign
operations are translated at exchange rates of the balance sheet
date. Income and expense items are translated at the average
exchange rates for the period. Exchange differences arising on
translation are classified 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 rec-
ognised in the income statement.
Prensentation currency in the annual report is DKK.
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.
The operational business segments in the TrygVesta Group are the Pri-
vate & Commercial (Denmark) segment, the Private & 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.
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 and the exec-
utive order no. 1266 dated 26 October 2007 issued by the Danish FSA.
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 premiums 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.
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.
Technical interest
According to the Danish FSA’s executive order, technical interest is
presented 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 individual group of risks. The interest is weighted according
to the expected run-off pattern of the provisions.
Technical interest is reduced by the portion of the increase in net
provisions 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 unwinding 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 associated with the handling of claims incurred.
Changes in provisions for claims due to changes in the yield
curve and exchange rates are recognised as a market value
adjustment.
TrygVesta 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 uses swaps specifically acquired with a view to hedging
the inflation risk. Value adjustment of these swaps is included in claims
incurred, thereby reducing the effect of changes to inflation
expectations under claims incurred.
102 of 152 l Notes l TrygVesta Annual Report 2008
Bonus and premium rebates
Bonus and premium rebates represent anticipated and reimbursed pre-
miums 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.
On initial recognition of the share options, the number of options ex-
pected 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.
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. Underwriting commission is accrued
over the term of the policy when a legal obligation occurs. Administra-
tive expenses are all other expenses attributable to the administration
of the insurance portfolio. Administrative expenses are accrued to
match the financial year.
Leasing
Leases are classified either as operating or finance leases. The assess-
ment of the lease is made on the basis of criteria such as ownership,
right of purchase when the lease term expires, considerations as to
whether the asset is custom-made, the lease term and the present
value of the lease payments.
Assets held under operating leases are not recognised in the balance
sheet, but the lease payments are recognised in the income statement
over the term of the lease, corresponding to the economic life of the
asset, while assets held under finance leases are recognised at fair
value and depreciated according to the same accounting policy as the
group applies for similar owned assets. For assets held under finance
leases, a lease liability is recognised at amortised cost.
Share-based payment
The TrygVesta Group’s incentive programmes comprise a share option
programme and employee shares.
Share option programme
The value of services received as consideration for options granted is
measured at the fair value of the 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 accounts
until expiry of the seventh calendar year after they were subscribed.
Employees cannot sell or otherwise dispose of the shares during 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.
Income from investment properties before fair value adjustment repre-
sents the profit from property operations less property management
expenses.
Interest, dividends, etc. represent interest earned, dividends received,
etc. during the financial year.
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.
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.
Investment management charges represent expenses relating to the
management of investments.
The options are issued at an exercise price that corresponds to the
market price of the company’s shares at the time of allocation. No
other vesting conditions apply. Special provisions are in place concern-
ing sickness and death and in case of change to the company’s capital
position, etc.
The share option agreement entitles the employee to the options unless
the employee resigns his position or is dismissed due to breach of the
employment relationship. In case of termination due to restructuring 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 accordance with
TrygVesta’s in-house rules on trading in the company’s shares. The op-
tions are settled in shares. A part of the company’s holding of treasury
shares is reserved for settlement of the options allocated.
Other income and expenses
Other income and expenses includes income and expenses which can-
not be ascribed to TrygVesta’s insurance portfolio or investment as-
sets, including the sale of products for Nordea Liv og Pension.
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.
TrygVesta Annual Report 2008 l Notes l
103 of 152
Accounts
Notes
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’s business in run-off as well as divested enterprises. Busi-
ness in run-off comprises the results of the business in run-off in Tryg
Forsikring A/S. Divested subsidiaries comprise the activities in Chevan-
stell Ltd. UK (2006), Poland (2004), Nordicum Kindlustus (2004) and
Tryg Baltica International A/S (2004).
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.
fixed assets
Operating equipment
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 plant and equipment is calculated using the straight-
line method over their estimated useful lives, as follows:
• IT, 4 years
• Vehicles, 5 years
• Furniture, fittings and equipment, 5-10 years
Leasehold improvements are depreciated over the expected useful life,
however with a maximum of the term of the lease.
The assets’ residual values and useful lives are reviewed at each bal-
ance sheet date and adjusted if appropriate.
Land and buildings
Land and buildings are divided into owner-occupied property and in-
vestment property. The TrygVesta Group’s owner-occupied properties
consist of the head office buildings at Ballerup and Bergen and a few
summer houses. The remaining properties are classified as investment
properties.
Owner-occupied property
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.
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.
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.
Owner-occupied property is depreciated using the straight-line method
over its expected useful life up to 50 years. Land is not depreciated.
Assets under construction
In connection with the refurbishment of the owner-occupied proper-
ties, part of the costs is recognised at cost under owner-occupied
property. On completion of the project, depreciation will be made on a
straight-line basis over the expected useful life, up to the number of
years stated under the individual categories.
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.
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.
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
104 of 152 l Notes l TrygVesta Annual Report 2008
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.
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.
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, own-
er-occupied property and investment property is tested at least once a
year for impairment in the cash-generating unit to which the asset be-
longs, 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 ex-
ceeds 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
influence but not control, generally accompanying a shareholding of
between 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 pro-
portionate share of the enterprises’ net assets.
Income after taxes from investments in associates is included as a
separate 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 trading at
inception 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 or using OTC prices. These include the use
of similar recent arm’s length transactions, reference to other instru-
ments that are substantially 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
inflation. Forward exchange contracts and currency swaps are used
for currency hedging of portfolios of shares, bonds, hedging of foreign
entities 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. Share derivates are
used from time to time to adjust share 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.
TrygVesta Annual Report 2008 l Notes l
105 of 152
Accounts
Notes
Derivatives are recognised from the trade date and measured at
fair value in the balance sheet. Positive fair values of derivatives are
recognised as bonds and shares or other receivables if they cannot
unambiguously be attributed to the former. Negative fair values of
derivatives 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.
Recognition of the resulting gain or loss depends on whether the
derivative 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 net assets and which provide effective currency
hedging of the net investment are recognised directly in equity. The
net asset value of the foreign entities as estimated in the beginning
of the financial year is hedged 90-100% by entering into short-term
forward exchange contracts according to the requirements of hedge
accounting. 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
foreign 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
exchange 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 recov-
erable amount and recognises that impairment loss in the income state-
ment. Impairment write-downs are recognised in the income statement.
Receivables
Receivables are non-derivative financial instruments with fixed or
determinable payments that are not quoted in an active market other
than receivables that the group intends to sell in the short term.
Receivables 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.
Other assets
Other assets include current tax assets and cash in hand and at bank.
Current tax assets are receivables concerning tax for the year adjusted
for on-account payments and any prior-year adjustments. Cash is rec-
ognised at nominal value at the balance sheet date.
Prepayments and accrued income
Prepayments include expenses paid in respect of subsequent financial
years and interest receivable. Accrued underwriting commission relat-
ing to the sale of insurance is also included.
Equity
Share capital
Shares are classified as equity when there is no obligation to transfer
cash or other assets. Incremental costs directly attributable to the
issue of equity instruments are shown in equity as a deduction from
the proceeds, net of tax.
Revaluation reserves
Revaluation of owner-occupied properties is recognised in equity
unless the revaluation offsets a previous impairment loss, and relates
primarily to owner-occupied properties.
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 recognised in equity. When an entity is
wound up, the balance is transferred to the income statement. The
hedging of the exchange rate risk concerning foreign entities is also
offset in shareholders’ equity in respect of the part that concerns the
hedge.
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
declaration). 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. Treasury shares
include shares acquired as part of the share buyback programme and
shares for employee shares and the share option programmes.
Proceeds from the sale of treasury shares in connection with the exer-
cise of share options or employee shares are taken directly to equity.
106 of 152 l Notes l TrygVesta Annual Report 2008
Subordinate loan capital
Subordinate loan capital is recognised initially at fair value, net of
transaction costs incurred. Subordinate 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,
adjusted to reflect any time variation of the risk. The portion of
premium received on in-force contracts that relates to unexpired risks
at the balance sheet date is reported as unearned premium provisions.
Unearned 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.
Adjustments 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
include 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
actuarial 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
payments and is therefore only used for provisions for small claims,
below DKK 364,000 for motor, or DKK 200,000, for contents and DKK
100,000 for other. The model is so dynamic that, to the greatest ex-
tent possible, it captures changes in the run-off pattern. It consists
of two modules, with the first module estimating 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 calculations are based on a generalised
hierarchic De Vylder model. The provision for annuities in workers’
compensation insurance is calculated on the basis of a mortality
corresponding to the G82 calculation 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 assumptions.
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
approximation 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
technical provisions. In performing these tests, current best estimates
of future cash flows of claims, gains and direct and indirect claims
handling costs are used. Any deficiency is charged to the income
statement 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
TrygVesta Annual Report 2008 l Notes l
107 of 152
Accounts
Notes
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 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 unrecognised actuarial gains or losses and past service
costs. Expectations of returns on plan assets are based on the return
within each asset class and the current allocation thereof. Market expec-
tations of future returns are taken into consideration.
The actuarial gains and losses arising from experience adjustments and
changes in actuarial estimates is recognised in 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.
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.
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.
financial highlights and key ratios
Financial highlights and key ratios for the TrygVesta Group are set out
at the beginning of the Annual Report.
Deferred income tax is provided on temporary differences concerning
investments, except where TrygVesta controls when the temporary dif-
ference will be realised, and it is probable that the temporary differ-
ence 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.
108 of 152
l Notes l TrygVesta Annual Report 2008
DKKm
2007
2008
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
2008
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
Gross
9,321
469
6,961
16,751
Ceded
-512
-29
-350
-891
Gross
9,538
742
7,168
17,448
1,400
-896
-3
501
-11,919
744
-11,175
502
-1
-10,674
Under claims incurred, the value adjustment of inflation swaps to hedge the inflation risk concerning annuities on workers’
compensation insurance totals DKK 8m (in 2007 DKK -22m.)
5
Insurance operating expenses, net of reinsurance
Commission regarding direct business
Other acquisition costs
Total acquisition costs
Administrative expenses
Insurance operating expenses, gross
Commission 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.
-406
-1,415
-1,821
-948
-2,769
95
-2,674
-8
-8
-2
-2
17,465
47
17,512
-17
17,495
-819
-41
16,635
Ceded
-489
-16
-314
-819
1,428
-926
-3
499
-12,634
868
-11,766
194
-75
-11,647
-429
-1,818
-2,247
-756
-3,003
72
-2,931
-8
-8
-1
-1
TrygVesta Annual Report 2008 l Notes l 109 of 152
Accounts
Notes
DKKm
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
Depreciation, amortisation and impairment writedowns
Other income
Total lease expenses amount to DKK 66m (in 2007 DKK 106m).
Insurance operating expenses and claims include the following staff expenditure:
Salaries and wages
Commision
Allocated share options
Pensions
Other social security costs
Payroll tax
2007
2008
-406
-1,594
-198
-462
-198
-102
191
-2,769
-1,832
-21
-8
-257
-5
-249
-2,372
-429
-1,658
-232
-557
-208
-111
192
-3,003
-1,972
-17
-14
-282
-5
-256
-2,546
Remuneration for the Supervisory Board and Group Executive Management is disclosed in note 31 ‘Related parties’.
Average number of full-time employees during the year
3,813
3,985
110 of 152
l Notes l TrygVesta Annual Report 2008
DKKm
5 Share option programmes
In 2008, TrygVesta awarded share options to the Executive Management (3 persons) and other senior employees (69 persons) and other
employees (39 persons). At 31 December 2008, the share option plan comprised 572,367 share options (at 31 December 2007 329,902
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 entitles the holders to buy 0.84% of the share capital if all share options are exercised.
The share option agreement entitles the employee to the options unless the employee resigns his position or is dismissed due to breach of the
employment relationship. In case of termination due to restructuring or retirement, the employee is still entitled to the options. Special provisions
are in place concerning sickness and death and in case of change to the company’s capital position. No other vesting conditions apply.
The share option programmes are classified as equity-settled and recognised directly in equity. Treasury shares are acquired for use and
hedging purposes, se note 20. Specification of outstanding options:
Share options
TOTAL NUMBERS
Group
Executive
Management
Other
senior
em-
ployees
Other
em-
ployees
fAIR VALUE
Total fair
option option at
Per value per Per option Total fair
at 31 value at 31
at grant grant date December December
DKKm
DKKm
DKK
Total date DKK
2007
2006 allocation
Allocated in 2006, 1 January
Exercised
Cancelled
Expired
35,370
0
0
0
150,650
0
-2,620
0
0
0
0
0
186,020
0
-2,620
0
Outstanding options from 2006
allocation 31 Dec 2007
35,370
148,030
0
183,400
2007 allocation
Allocated in 2007
Exercised
Cancelled
Expired
Outstanding options from 2007
allocation 31 Dec 2007
Number of options exercisable
end of 2007
2008
2006 allocation
Allocated in 2006, 1 January
Exercised
Cancelled
Expired
25,700
0
0
0
106,255
0
-1,453
0
18,000
0
-2,000
0
149,955
0
-3,453
0
25,700
104,802
16,000
146,502
0
0
35,370
0
0
0
148,030
0
-2,620
0
0
0
0
0
0
0
183,400
0
-2,620
0
Outstanding options from 2006
allocation 31 Dec 2008
35,370
145,410
0
180,780
2007 allocation
Allocated in 2007, 1 January
Exercised
Cancelled
Expired
25,700
0
0
0
104,802
0
-2,906
0
16,000
0
0
0
146,502
0
-2,906
0
Outstanding options from 2007
allocation 31 Dec 2008
25,700
101,896
16,000
143,596
2008 allocation
Allocated in 2008
Exercised
Cancelled
Expired
52,088
0
0
0
167,203
0
0
0
28,700
0
0
0
247,991
0
0
0
Outstanding options from 2008
allocation 31 Dec 2008
Number of options exercisable
end of 2008
52,088
167,203
28,700
247,991
0
0
0
0
64
0
64
0
-
99
0
99
0
-
0
64
0
64
0
-
99
0
99
0
-
69
0
0
0
-
0
12
0
0
0
12
15
0
-1
0
14
0
12
0
0
0
12
14
0
0
0
14
17
0
0
0
17
0
119
0
119
0
-
49
0
49
0
-
0
83
0
83
0
-
45
0
45
0
-
79
0
0
0
-
0
22
0
0
0
22
7
0
0
0
7
0
15
0
0
0
15
7
0
0
0
7
20
0
0
0
20
0
TrygVesta Annual Report 2008 l Notes l 111 of 152
Accounts
Notes
DKKm
5 Share option programmes
Allocated
Total numbers
share options Exercised Cancelled Expired Outstanding
Period of exercise
Outstanding options
by exercise date:
Allocated in 2006 concerning 2005
Allocated in 2007 concerning 2006
Allocated in 2008 concerning 2007
183,400
146,502
247,991
Outstanding options 31 Dec. 2008 577,893
0
0
0
0
-2,620
-2,906
0
-5,526
0
0
0
0
180,780 February 2009 - February 2011
143,596 February 2010 - February 2012
247,991 February 2011 - February 2013
572,367
In 2008, the fair value of share options for the Group amounted to DKK 13.5m. The fair value in 2008 for the programme allocated in
2006, 20007 and 2008 is DKK 24m. 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:
Share option programmes
Average share price (DKK) at time of allocation
Exercise price (DKK)
Expected volatility
Expected maturity
Risk-free interest rate
2006
355.85
0
17.9%
4 years
3.3%
2007
456.76
0
24.1%
4 years
3.9%
2008
378.24
0
20.3%
4 years
3.6%
The expected volatility is based on the average volatility of TrygVesta shares in 2008.
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 2008, the average term to maturity is 1.2 years for the 2006 programme, 2.2 years for the
2007 programme and 3.2 years for the 2008 programme.
112 of 152
l Notes l TrygVesta Annual Report 2008
DKKm
5
Employee shares
In 2008, TrygVesta granted employee shares at a discount to the market price to employees at all levels in the Group. Employees of non-
Danish branches were offered employee shares or alternatively a cash consideration. Each employee was offered 28 shares at a discount
to the market price equal to DKK 25 per share, equivalent to a total of 59,492 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 market price. In 2008, a total of 26,323 shares
were granted at discount to the market price of DKK 25 per share or DKK 9.3m. The grant of shares equalled 0.1% of the share capital.
The amount was provided in 2007 and did not affect the profit for 2008.
In 2008, 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 2008. 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 2008 in the form of shares at a discount to the
market price. Bonus will be granted in early 2009. Provisions have been made for the above obligations in 2008.
TrygVesta Annual Report 2008 l Notes l 113 of 152
Accounts
Notes
DKKm
SEGMENTS
6 Operating segments
2007
P&C
Denmark
P&C
Norway
Corporate
finland
Sweden
Other
Total
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on business ceded
Technical interest,
net of reinsurance
Technical result
6,490
-4,041
-1,086
-87
164
1,440
Total return on investment
activities after technical interest
Other income and expenses
4,490
-2,962
-936
-82
182
692
5,285
-3,904
-504
-172
137
842
Profit before tax
Tax
Profit on continuing business
Profit/loss on discontinued
and divested business
Profit
Investments in associates
Reinsurers’ share of provision
for unearned premiums
Reinsurers’ share of
provision for claims
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
0
13
62
0
0
0
146
139
1,227
2,485
7,092
268
1,505
3,417
1,317
10,292
0
141
251
-188
-125
-1
14
-49
0
0
0
64
172
0
90
-80
-95
0
3
-82
0
0
0
32
33
0
0
0
-23
-1
1
-23
19
0
0
42,224
0
98
0
1,569
4,143
91
16,606
-11,175
-2,769
-343
501
2,820
340
-51
3,109
-842
2,267
-1
2,266
19
159
1,428
42,224
43,830
5,403
21,104
409
1,569
4,143
91
32,719
Please refer to ‘Our business areas’ in the Annual Report 2008 for a description of our operating segments. Amounts relating to
TrygVesta A/S, Tryg Ejendomme A/S, Ejendomsselskabet af 8. maj and eliminations are included in ‘Other’. Depreciation/amortisation
is included in gross operating expenses, but managed at Group level and allocation to the individual segments would therefore not
provide a true and fair view. 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.’
114 of 152
l Notes l TrygVesta Annual Report 2008
DKKm
SEGMENTS
6 Operating segments
2008
P&C
Denmark
P&C
Norway
Corporate
finland
Sweden
Other
Total
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on business ceded
Technical interest,
net of reinsurance
Technical result
6,605
-4,443
-1,155
-89
180
1,098
Total return on investment
activities after technical interest
Other income and expenses
4,636
-3,371
-1,004
-68
122
315
5,512
-3,489
-588
-516
173
1,092
Profit before tax
Tax
Profit on continuing business
Profit/loss on discontinued
and divested business
Profit
Investments in associates
Reinsurers’ share of provision
for unearned premiums
Reinsurers’ share of
provision for claims
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
0
0
49
0
0
99
0
176
712
2,528
6,780
250
1,202
3,088
1,222
9,489
0
128
354
-258
-154
-1
17
-42
0
0
0
90
207
0
221
-214
-104
0
7
-90
0
0
0
58
84
0
-5
9
2
5
0
11
0
14
0
0
37,395
0
67
0
1,508
2,311
87
17,323
-11,766
-3,003
-669
499
2,384
-988
-49
1,347
-501
846
846
14
176
860
37,395
38,445
5,100
19,715
378
1,508
2,311
87
29,099
TrygVesta Annual Report 2008 l Notes l 115 of 152
Accounts
Notes
DKKm
6 Technical result, net of reinsurance, by line of business
Accident
and health
health care
Worker’s
compensation
Motor
TPL
Motor
comprehensive
Marine aviation
and cargo
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
Gross premiums written
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on ceded business
Technical interest, net of reinsurance
Technical result
1,615
1,535
- 841
- 249
12
53
510
1,691
1,679
- 1,033
- 278
2
58
428
112
74
- 108
- 23
0
4
- 53
195
152
- 215
- 25
0
5
- 83
1,487
1,424
- 1,514
- 150
13
58
- 169
1,525
1,536
- 933
- 176
- 47
63
443
2,416
2,389
- 757
- 386
- 13
76
2,375
2,412
- 994
- 415
- 16
65
1,309
1,052
3,094
3,007
- 1,982
- 461
0
71
635
3,240
3,092
- 2,327
- 498
0
72
339
Claims frequency *
Average claims DKK **
Total claims
8.0%
22,582
74,723
8.4%
21,871
81,213
23.0%
20,942
5,294
67.2%
10,495
20,139
24.2%
70,177
15,688
26.3%
68,748
17,109
5.9%
20,817
75,637
6.3%
16,290
83,569
20.7%
10,759
186,909
22.3%
10,623
212,185
10.0%
81,703
6,781
10.0%
70,555
7,105
fire & contents
(Private)
fire and contents
(Commercial)
Change
of ownership
Liability
insurance
insurance
Credit & guarantee
Tourist assistance
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
Gross premiums written
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on ceded business
Technical interest, net of reinsurance
Technical result
3,195
3,149
- 2,331
- 704
- 102
113
125
3,351
3,258
- 2,734
- 739
- 102
78
- 239
2,451
2,471
- 1,760
- 398
- 280
61
94
2,484
2,474
- 1,672
- 451
- 321
61
91
98
85
- 72
- 11
0
9
11
88
89
- 94
- 12
0
10
- 7
724
664
- 271
- 126
- 88
21
200
745
729
- 428
- 138
- 50
25
138
146
146
1
- 41
- 32
4
78
164
159
- 34
- 50
- 31
4
48
Claims frequency *
Average claims DKK **
Total claims
12.8%
11,239
199,579
12.5%
11,876
202,314
20.7%
49,224
36,529
19.9%
46,185
35,651
14.8%
8,193
7,702
11.8%
12,448
6,732
10.6%
46,661
8,589
10.3%
48,025
8,489
0.7%
0.9%
48,061
1,220,934
19
28
7.1%
7,192
10,435
8.3%
7,303
14,987
699
688
- 586
- 92
156
1
167
261
268
- 214
- 54
- 1
7
6
787
739
- 487
- 98
- 104
25
75
327
323
- 255
- 55
- 1
7
19
Gross premiums written
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on ceded business
Technical interest, net of reinsurance
Technical result
Other
insurance
2007
147
146
- 327
- 8
- 5
0
- 194
2008
114
121
- 26
4
3
- 1
101
Total
Norwegian Group Life
One-year policies
2007
2008
2007
2008
16,445
16,046
- 10,762
- 2,703
- 340
478
2,719
17,086
16,763
- 11,232
- 2,931
- 667
472
2,405
514
560
- 413
- 66
- 3
23
101
543
560
- 534
- 72
- 2
27
- 21
Claims frequency *
Average claims DKK **
Total claims
-
377,446
834
-
15,660
919
* The claims frequency is calculated as the number of claims incurred in proportion to the average number of insurance contracts.
** Average claims are total claims before run-off relative to total number of claims incurred.
116 of 152
l Notes l TrygVesta Annual Report 2008
DKKm
6 Technical result, net of reinsurance, by line of business
Accident
and health
health care
Worker’s
compensation
Motor
TPL
Motor
comprehensive
Marine aviation
and cargo
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
Gross premiums written
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on ceded business
Technical interest, net of reinsurance
Technical result
1,615
1,535
- 841
- 249
12
53
510
1,691
1,679
- 1,033
- 278
2
58
428
112
74
- 108
- 23
0
4
- 53
195
152
- 215
- 25
0
5
- 83
1,487
1,424
- 1,514
- 150
13
58
- 169
1,525
1,536
- 933
- 176
- 47
63
443
2,416
2,375
2,389
- 757
- 386
- 13
76
2,412
- 994
- 415
- 16
65
1,309
1,052
3,094
3,007
- 1,982
- 461
0
71
635
3,240
3,092
- 2,327
- 498
0
72
339
699
688
- 586
- 92
156
1
167
787
739
- 487
- 98
- 104
25
75
Claims frequency *
Average claims DKK **
Total claims
8.0%
22,582
74,723
8.4%
21,871
81,213
23.0%
20,942
5,294
67.2%
10,495
20,139
24.2%
70,177
15,688
26.3%
68,748
17,109
5.9%
20,817
75,637
6.3%
16,290
83,569
20.7%
10,759
186,909
22.3%
10,623
212,185
10.0%
81,703
6,781
10.0%
70,555
7,105
fire & contents
(Private)
fire and contents
(Commercial)
Change
of ownership
Liability
Credit & guarantee
insurance
Tourist assistance
insurance
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
Gross premiums written
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on ceded business
Technical interest, net of reinsurance
Technical result
3,195
3,149
- 2,331
- 704
- 102
113
125
3,351
3,258
- 2,734
- 739
- 102
78
- 239
2,451
2,471
- 1,760
- 398
- 280
61
94
2,484
2,474
- 1,672
- 451
- 321
61
91
724
664
- 271
- 126
- 88
21
200
745
729
- 428
- 138
- 50
25
138
146
146
1
- 41
- 32
4
78
164
159
- 34
- 50
- 31
4
48
261
268
- 214
- 54
- 1
7
6
327
323
- 255
- 55
- 1
7
19
Claims frequency *
Average claims DKK **
Total claims
12.8%
11,239
199,579
12.5%
11,876
202,314
20.7%
49,224
36,529
19.9%
46,185
35,651
14.8%
8,193
7,702
11.8%
12,448
6,732
10.6%
46,661
8,589
10.3%
48,025
8,489
0.7%
48,061
19
0.9%
1,220,934
28
7.1%
7,192
10,435
8.3%
7,303
14,987
98
85
- 72
- 11
0
9
11
514
560
- 413
- 66
- 3
23
101
88
89
- 94
- 12
0
10
- 7
543
560
- 534
- 72
- 2
27
- 21
Other
insurance
Total
Norwegian Group Life
One-year policies
2007
2008
2007
2008
Gross premiums written
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on ceded business
Technical interest, net of reinsurance
2007
147
146
- 327
- 8
- 5
0
2008
114
121
- 26
4
3
- 1
16,445
16,046
- 10,762
- 2,703
- 340
478
17,086
16,763
- 11,232
- 2,931
- 667
472
Technical result
- 194
101
2,719
2,405
Claims frequency *
Average claims DKK **
Total claims
-
377,446
834
-
15,660
919
* The claims frequency is calculated as the number of claims incurred in proportion to the average number of insurance contracts.
** Average claims are total claims before run-off relative to total number of claims incurred.
TrygVesta Annual Report 2008 l Notes l 117 of 152
Accounts
Notes
DKKm
2007
2008
7
Interest and dividends
Dividends
Interest income cash in hand and at bank
Interest income bonds
Interest income other
Interest expenses
Interest expenses subordinated loan capital and credit institutions
Interest expenses other
8 Market value adjustment
168
46
1,112
56
1,382
-76
-12
-88
1,294
Market value adjustments concerning financial assets or liabilities at fair value with value adjustment in the income statement:
Equity investments
Unit trust units
Share derivatives
Bonds
Interest derivatives
Market value adjustments concerning assets and liabilities that cannot be attributed to IAS 39:
Investment property
Owner-occupied property
Discounting
Other balance sheet items
Market value gains
Market value losses
Market value adjustment, net
99
-80
0
25
-56
-12
107
14
298
8
427
415
1,861
-1,446
415
39
49
1,404
31
1,523
-83
-17
-100
1,423
-521
-549
98
456
17
-499
70
8
-478
-109
-509
-1,008
1,656
-2,664
-1,008
Exchange rate adjustments recognised in the income statement concerning assets and liabilities not measured at fair value total DKK
129m (in 2007 DKK 73m). Under market value adjustment the adjustment of inflation swaps totals DKK -46m (in 2007 DKK 4m.)
9 Tax
Reconciliation of tax
Tax on profit for the year
Diffrence between Danish and foreign tax rate
Prior-year tax adjustment
Change tax rate
Tax on non-taxable income and expenses, and tax concerning limitation of deductibility
Change in valuation of tax assets
Other taxes
Effective tax rate
Tax on profit for the year
Diffrence between Danish and foreign tax rate
Prior-year tax adjustment
Change tax rate in Denmark
Tax on non-taxable income and expenses, and tax concerning limitation of deductibility
Change in valuation of tax assets
Other taxes
-777
-39
13
20
-2
-42
-15
-842
%
25
1
0
-1
0
1
1
27
-337
1
72
0
-203
-26
-8
-501
%
25
0
-5
0
15
2
0
37
See TrygVestas financial performance 2008 for futher information in the Management’s report regarding the tax expense
118 of 152
l Notes l TrygVesta Annual Report 2008
DKKm
2007
2008
10 Profit/loss on discontinued and divested business
Technical interest, net of reinsurance
Claims incurred, net of reinsurance
Insurance operating expenses, net of reinsurance
Technical result
Profit/loss before tax
Profit/loss on discontinued and divested business
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
3
-1
-3
-1
-1
-1
373
4
-1
175
-23
528
-153
-3
-56
19
-193
335
Intangible assets under development amount to a total of DKK 198m (in 2007 DKK 220m).
Additions for internally generated expenses amount to DKK 21m (in 2007 DKK 22m).
Amortisation is recognised in the income statement under insurance operating expenses and claims incurred.
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.
3
-1
-2
0
0
0
528
-21
-1
154
-15
645
-193
22
-31
7
-195
450
229
-9
1
3
-39
185
-149
8
-20
22
-139
46
TrygVesta Annual Report 2008 l Notes l 119 of 152
Accounts
Notes
DKKm
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
Exchange rate adjustment
Depreciation for the year
Balance 31 December
2007
2008
317
10
0
-9
318
12
-17
-3
-8
-3
0
-1
-4
318
-57
1,085
-13
1,333
-8
-1
0
-9
-4
1
-6
-9
Balance at revalued amount at 31 December
306
1,315
* Additions during the year include the purchase of owner-occupied property in
Ejendomsselskabet af 8. maj totalling DKK 1,085m.
Amortisation is recognised in the income statement under insurance operating expenses
and claims incurred. External experts were not involved in valuing owner-occupied property.
In establishing the market value of the properties, the following return percentages were
used for each property category:
Office property
Office property
Lowest
percentage
2008
6.80
Lowest
percentage
2007
7.00
Average
percentage
2008
7.00
Average
percentage
2007
7.83
highest
percentage
2008
7.90
highest
percentage
2007
7.90
120 of 152
l Notes l TrygVesta Annual Report 2008
DKKm
2007
2008
14 Assets under construction
Cost
Balance 1 January
Additions during the year
Balance 31 December
Accumulated value adjustments
Balance 1 January
Value adjustment for the year at revalued amount in profit and loss
Balance 31 December
Balance at revalued amount at 31 December
0
0
0
0
0
0
0
Value adjustments for the year relate to costs associated with refurbishment and improvement of
owner-occupied property. It has been assessed that the costs cannot be contained in the future value
of the owner-occupied property, which is the reason why the property has been written down.
15
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
2,127
13
23
-5
105
2,263
Total rental income for 2008 amounts to DKK 168m (DKK 159m in 2007).
Total expenses for 2008 amount to DKK 40m (DKK 43m in 2007). Of this amount, unlet property
represented DKK 0.5m (DKK 1m in 2007). Total expenses for investment property generating
rental income thus amount to DKK 39.5m (DKK 42m in 2007).
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.
0
54
54
0
-54
-54
0
2,263
-96
80
-66
65
2,246
Business property
Office property
Residential property
Business property
Office property
Residential property
Lowest
percentage
2008
7.00
3.80
4.00
Lowest
percentage
2007
7.00
3.75
4.00
Average
percentage
2008
7.30
6.70
5.30
Average
percentage
2007
7.27
6.57
5.30
highest
percentage
2008
7.50
7.80
6.00
highest
percentage
2007
7.50
7.50
6.00
TrygVesta Annual Report 2008 l Notes l 121 of 152
Accounts
Notes
DKKm
16
Investments in associates
Cost
Balance 1 January
Balance 31 December
Revaluations at net asset value
Balance 1 January
Exchange rate adjustment
Revaluations during the year
Reversed depriciation
Balance 31 December
Carrying amount 31 December
2007
2008
0
0
18
0
1
0
19
19
0
0
19
-3
0
-2
14
14
Shares in associates according to the lastest financial statements:
2008
Name and registered office
Assets
Liabilities
Shareholders’
equity
Revenue
Profit/loss
for the year
Ownership
share in %
Komplementarselskabet
af 1. marts 2006 ApS, DK
Bilskadeinstituttet AS, Norway
Edsvåg Fabrikker AS, Norway
2007
0
4
32
0
0
3
0
4
29
0
1
12
0
0
3
50
30
28
Name and registered office
Assets
Liabilities
Shareholders’
equity
Revenue
Profit/loss
for 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
An individual estimate of the degree of influence under the contracts is made.
122 of 152
l Notes l TrygVesta Annual Report 2008
DKKm
2007
2008
17 Other financial investment assets
Financial assets at fair value with value adjustment in the income statement, cf. IAS 39
Total receivables
financial assets at fair value with value adjustment in the income statement
Trading porfolio:
Bonds
Consisting of:
Cash allocated to portfolio management
Unsettled securities trading
Deposits, derivatives
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
30,754
1,689
32,443
29,417
-71
-101
-388
28,857
1,239
672
Total other financial investment assets,
cash and investments in associates in accordance with the balance sheet
35,863
30,768
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
Duration 1 year or less
Duration 1 year through 5 years
Duration 5 years through 10 years
Duration more than 10 years
Total
Adjusted duration of bond portfolio
2008
2007
12,112
15,293
3,386
18
30,809
17,990
8,535
2,316
16
28,857
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.
TrygVesta Annual Report 2008 l Notes l 123 of 152
Accounts
Notes
DKKm
17 Maturity of the Group’s interest-bearing financial assets and debt
2008
Total
0-1 year
1-5 years
> 5 years
Bonds
Cash in hand and at bank
Debt
Receivables
28,857
672
-1,811
1,689
29,407
5,989
672
-111
1,689
8,239
11,473
0
-598
0
11,395
0
-1,102
0
10,875
10,293
2008
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
Effective
interest rate
Adjusted
duration
4.4
4.4
4.6
-
1.7
0.0
0.0
-
Effective
interest rate
Adjusted
duration
5.3
4.2
4.5
-
1.9
0,0
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 connection with the expected cash flow from the Group’s provisions for unearned premiums and provisions for
claims, see note 22. Please refer to the section on ’Interest risk’ in ’Risk management’ in the ’Management’s report’.
Listed shares
Scandinavia
United Kingdom
Rest of Europe
United States
Asien etc.
Total
The portfolio of unlisted shares totals
Sold futures on shares are recognised in the amount at DKK -67m.
Unlisted equity investments are measured at estimated fair value, see ’Accounting policies’.
2007
975
718
1,160
828
527
4,208
237
2008
195
103
298
244
152
992
180
Exposure to exchange
rate risk 2008
Properties
USD
EUR
GBP
NOK
Other
Total
0
0
0
649
0
Bonds
21
723
1
10,113
0
Shares
Insurance
hedge
Exposure
270
337
94
170
294
-232
-1,117
3
-8,616
-13
-73
73
-93
-2,396
-269
14
15
4
81
52
166
Exposure to exchange
rate risk 2007
Properties
Bonds
Shares
Insurance
hedge
Exposure
USD
EUR
GBP
NOK
Other
Total
0
0
0
786
0
1,116
2,018
472
8,352
4
688
1,308
570
1,007
642
-251
-1,136
-1
-5,756
-9
-1,535
-2,101
-983
-4,256
-619
18
89
58
133
18
316
Please refer to the section on Market risk Risk management in the Management’s report.
124 of 152
l Notes l TrygVesta Annual Report 2008
23
-57
-141
-315
-4
-219
Net
27
0
-41
311
297
0
Net
-110
615
505
DKKm
2007
2008
17 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%
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 section on ‘Risk management’ for an elaboration of risk management and risk exposure.
Derivative financial instruments
2007
2008
Derivatives with value adjustment in the income statement according to IAS 39:
Fair value:
Gross
3,659
0
681
9,494
13,153
681
Net
-7
0
26
205
224
0
Gross
3,124
67
3,618
5,253
8,444
3,618
Gains
144
615
759
Losses
-254
0
-254
Interest derivatives
Share derivatives
Inflation derivatives
Exchange rate derivatives
Due within one year
Due after more than five years
Derivative financial instruments used in connection with
hedging of foreign entities for accounting purposes:
Gains and losses on hedges charged to equity at 1 January
Gains and losses on hedges charged to equity in the period
Gains and losses on hedges charged to equity at 31 December
Exchange rate adjustment
Exchange rate adjustments of foreign entities recognised in equity in the amount of:
Balance at 1 January
Exchange rate adjustment during the year
Exchange rate adjustment during the year recognised in profit and loss
Balance at 31 December
Receivables
Receivables from insurance enterprises
Exchange rate and inflation derivatives
Unsettled transactions
Other receivables
Specification of writedowns on receivables from insurance enterprises
Balance at 1 January
Exchange rate adjustment
Writedowns and reversed writedowns for the year
Balance at 31 December
2007
2008
-9
120
-36
75
1,410
190
794
161
2,555
129
0
-23
106
75
-585
0
-510
1,088
383
136
82
1,689
106
-8
22
120
Reversed impairment losses are estimated at around DKK 20-30m annually, but may vary due to major cases/disputes.
Please refer to the section on ‘Credit risk’ in ‘Risk management’ in the ‘Management’s report.’
TrygVesta Annual Report 2008 l Notes l 125 of 152
2007
2008
336
152
488
106
1,609
-22
1,587
186
8
746
-24
-673
243
93
336
243
259
117
376
120
1,051
-15
1,036
243
-66
434
154
-628
137
111
248
137
Accounts
Notes
DKKm
17 Receivables
Receivables in connection with insurance include overdue receivables totalling:
Falling due:
Within 90 days
After 90 days
Including writedowns of due amounts
18 Reinsurers’ share
Reinsurer’s share
Writedowns after impairment test
Writedowns during the year include reversed writedowns totalling DKK 7m (in 2007 DKK 12m).
Please refer to the section on ‘Reinsurance’ in ‘Risk management’ in the ‘Management’s report’.
19 Current tax
Current tax, beginning of year
Exchange rate adjustment
Current tax for the year
Current tax on equity entries
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
20 Shareholders’ equity
Share capital
Issued shares
Balance at 1 January
Bought during the year
Sold during the year
Balance at 31 December
2007
2008
No. of
shares
Nominal
value
(DKK’000)
No. of
shares
67,790,001
-221,200
69,677
1,694,750
-5,530
1,742
67,638,478
-3,346,610
85,815
Nominal
value
(DKK’000)
1,690,962
-83,665
2,145
67,638,478
1,690,962
64,377,683
1,609,442
Tresury shares
Balance at 1 January
Bought during the year
Used in connection with issue
of employee shares
Balance at 31 December
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
No. of
shares
0.30
0.33
361,522
3,346,610
-0.10
-85,815
0.53
3,622,317
2008
Nominal
value
(DKK’000)
9,038
83,665
-2,145
90,558
% of share
capital
0.53
4.92
-0.13
5.32
Pursuant to the authorisation granted by the shareholders in general meeting, TrygVesta 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 2009.
In 2008, Tryg Vesta acquired treasury shares worth nom. DKK 83,665k, corresponding to 3,346,610 shares at a total cost of DKK 1,197m.
Treasury shares are acquired for use in the Group’s incentive programme and as part of the share buy back programme. TrygVesta’s share
buy back programme was launched after the annual general meeting held on 3 April 2008. Until 31 December 2008, shares worth DKK
1,053m had been bought back, corresponding to 75% of the total share buy back programme.
126 of 152
l Notes l TrygVesta Annual Report 2008
DKKm
20 Capital adequacy
Shareholders’ equity according to annual report
Subordinate loan capital
Proposed dividend
Solvency requirements to subsidiary undertakings
Capital base
Weighted assets
Solvency ratio
2007
2008
10,010
637
-1,156
-3,824
5,667
7,030
81
8,244
685
-423
-4,601
3,905
3,924
100
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’
21 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 of interst at 4.5% p.a. until 2015, when
it can be repaid. After that time, it will carry interest at 2.1% above EURIBOR until it expires
in 2025. The loan is measured at amortised cost, and when the loan was raised capital losses
and costs were deducted, amounting to DKK 16m at the balance sheet date. The fair value of the loan
at the balance sheet date is DKK 908m (in 2007 DKK 1,041m) based on a price of 81.23
(in 2007 a price of 93.12). 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. The share of subordinated capital included
in the calculation of the capital base amounts to DKK 685m (in 2007 a total of DKK 637m).
TrygVesta Annual Report 2008 l Notes l 127 of 152
Accounts
Notes
DKKm
22 Provisions for claims
Gross
2000
2001
2002
2003
2004
2005
2006
2007
2008
Estimated accumulated claims 0
1
2
3
4
5
6
7
8
Cumulative payments to date
Discounting
Reserves from 1999 and prior years
Other reserves
Gross provisions for claims, end of year
7,825
8,132
8,332
8,527
8,613
8,728
8,480
8,601
8,587
8,587
-8,003
-116
8,341
8,557
8,721
8,822
8,770
8,764
8,967
8,947
10,257
10,526
10,544
10,601
10,599
10,503
10,481
9,745
9,853
9,562
9,550
9,596
9,575
10,114
10,150
10,022
9,913
9,653
10,840
10,729
10,593
10,225
10,613
10,875
10,422
11,529
12,093
12,046
8,947
-8,094
-164
10,481
-9,348
-201
9,575
-8,180
-246
9,653
-8,006
-268
10,225
-8,316
-288
10,422
-7,911
-359
12,093
-8,541
-462
12,046
-5,745
-625
Ceded business
2000
2001
2002
2003
2004
2005
2006
2007
2008
Estimated accumulated claims 0
1
2
3
4
5
6
7
8
Cumulative payments to date
Discounting
Reserves from 1999 and prior years
Other reserves
Provisions for claims, end of year
1,258
1,351
1,328
1,350
1,379
1,374
1,371
1,379
1,382
1,382
-1,335
-5
1,239
1,259
1,261
1,273
1,252
1,240
1,246
1,230
1,804
1,883
1,786
1,781
1,780
1,789
1,793
790
762
760
807
739
735
725
740
777
776
763
912
807
813
808
269
270
257
497
463
158
1,230
-1,207
-7
1,793
-1,590
-23
735
-675
-10
763
-657
-21
808
-751
-10
257
-230
-4
463
-419
-2
158
-44
-5
Net of reinsurance
2000
2001
2002
2003
2004
2005
2006
2007
2008
92,029
-72,144
-2,729
2,115
444
19,715
7,589
-6,908
-87
200
66
860
Estimated accumulated claims 0
1
2
3
4
5
6
7
8
6,567
6,781
7,004
7,177
7,234
7,354
7,109
7,222
7,205
7,205
-6,668
-111
7,102
7,298
7,460
7,549
7,518
7,524
7,721
7,717
8,453
8,643
8,758
8,820
8,819
8,714
8,688
8,955
9,091
8,802
8,743
8,857
8,840
9,389
9,410
9,245
9,137
8,890
9,928
9,922
9,780
9,417
10,344
10,605
10,165
11,032
11,630
11,888
Cumulative payments to date
Discounting
Reserves from 1999 and prior years
Other reserves
Provisions for claims, net of reinsurance, end of the year
7,717
-6,887
-157
8,688
-7,758
-178
8,840
-7,505
-236
8,890
-7,349
-247
9,417
-7,565
-278
10,165
-7,681
-355
11,630
-8,122
-460
-620
11,888
84,440
-5,701 -65,236
-2,642
1,915
378
18,855
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 reserves”, which comprises the provisions for claims for TrygVesta Garantiforsikring A/S and
the Finnish and Swedish business units.
The amounts in foreign currency in the table are translated to Danish kroner using the exchange rate at 31 December to prevent the im-
pact of exchange rate fluctuation.
128 of 152
l Notes l TrygVesta Annual Report 2008
DKKm
22
Provisions for claims
The accident-year 2000 is influenced by Chevanstell, which at that time operated under the name TBi UK in the London market. The im-
pact derives from the stop-loss agreement between TrygVesta 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 final settelment had a positive impact.
The inclusion of the Zurich portfolio acquired in 2002 and, to a minor extent, the Norwegian Allianz portfolio acquired in 2001, has an im-
pact 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 Worker’s Compensation annuities, inflation explicitly influences claims
from 2007 onwards. In previous calender years the inflation element is partially offset by the use of discounting with a real rate of inte-
rest. Hence undiscounted claims amounts are adversely affected in 2007 by a total of DKK 1,271m.
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)
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)
Gross
20,761
-1,619
19,142
-5,745
-5,904
-11,649
11,178
-787
10,391
1,387
19,271
444
19,715
Gross
20,068
276
20,344
5,786
-5,343
-11,129
11,680
-740
10,940
606
20,761
343
21,104
2008
Ceded
1,366
-171
1,195
-44
-515
-559
145
-55
90
68
794
66
860
2007
Ceded
1,312
38
1,350
-139
-348
-487
504
-11
493
10
1,366
62
1,428
Net
19,395
-1,448
17,947
-5,701
-5,389
-11,090
11,033
-732
10,301
1,319
18,477
378
18,855
Net
18,756
238
18,994
-5,647
-4,995
-10,642
11,176
-729
10,447
596
19,395
281
19,676
1) The table consists of figures for TrygVesta Forsikring A/S and TrygVesta Forsikring, Norwegian branch of TrygVesta Forsikring A/S.
Other units in the Group are included in ‘Other’
2) Comprises provisions for claims for TrygVesta Garantiforsikring A/S and the Finnish and Swedish business units.
3) Discounting also includes exchange rate adjustments.
TrygVesta Annual Report 2008 l Notes l 129 of 152
Accounts
Notes
DKKm
22 Provisions for claims
2008
Provisions for unearned premiums, gross
Provisions for unearned premiums, ceded
Provisions for claims, gross
Provisions for claims, ceded
2007
Provisions for unearned premiums, gross
Provisions for unearned premiums, ceded
Provisions for claims, gross
Provisions for claims, ceded
Carrying amount
Total
0-1 years
Expected cash flow
2-3 years
1-2 years
> 3 years
4,946
-172
19,271
-794
4,763
-172
7,182
-244
23,251
11,529
66
0
3,397
-126
3,337
39
0
2,202
-88
2,153
78
0
6,490
-336
6,232
Carrying amount
Total
0-1 years
Expected cash flow
2-3 years
1-2 years
> 3 years
5,303
-158
20,761
-1,366
5,100
-158
7,906
-534
24,540
12,314
68
0
3,644
-196
3,516
41
0
2,380
-137
2,284
94
0
6,831
-499
6,426
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 connection with the maturity of the Group’s interest-bearing financial assets and liabilities, see note 17.
Please refer to the section on ’Risk management’ for an elaboration of risk management and risk exposure.
130 of 152
l Notes l TrygVesta Annual Report 2008
DKK m
2007
2008
23 Pensions and similar obligations
Jubilees, shemes for older employees etc.
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 the year
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
Specification of pension costs for the year:
Present value of amounts accumulated during the year
Interest expense on accrued pension obligation
Expected return on plan assets
Accrued employers’ nat. insurance contribution
Effect associated with optional shift to contribution pension plan
The year’s cost of defied benefit plans
The premium for the following financial year is estimated at:
Estimated distribution of plan assets:
Shares
Bonds
Real 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
28
28
120
1,003
1,123
628
495
1,292
-246
56
49
23
-51
0
0
1,123
932
-177
31
44
-173
-29
0
628
495
523
58
62
-56
9
0
73
53
%
13
64
23
-1.7
TrygVesta Annual Report 2008 l Notes l 131 of 152
Accounts
Notes
23 Pensions and similar obligations
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
2007
2008
%
5.2
6.2
4.5
4.3
4.3
7.0
14.1
20.0
Adjusted K1963
%
4.0
6.0
4.0
3.8
3.8
7.0
14.1
20.0
Adjusted K2005
DKKm
2005
2006
2007
2008
Pension obligation
Plan assets
Surplus/deficit
Actuarial gains/losses associated with the pension obligation
Actuarial gains/losses associated with pension assets
1,362
727
635
-136
18
1,298
825
473
90
26
1,292
932
360
104
-10
1,123
628
495
-23
-173
The pension liability related to participation by the Norwegian member of the Group Executive Management in the Norwegian defined
benefit pension plan is DKK 2.2m 31. december 2008.
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 2008 amounted to DKK 1m, which is less than 1% of the annual premium in FPK (2007). FPK writes in its
half-year report for 2008 that it had a collective consolidation ratio of 119 at 30 June 2008 (131 at 30 June 2007). The collective consoli-
dation ratio is defined as the market value of the plan assets relative to the total collective pension obligations.
132 of 152
l Notes l TrygVesta Annual Report 2008
DKKm
2007
2008
24 Deferred tax
Tax asset
Operating equipment
Debt and provisions
Bonds and loans secured by mortgages
Tax liability
Land and buildings
Contingency funds
Debt and provisions
Intellectual property rights
Deferred tax, end of year
Unaccrued assets or liabiliaties of equity investments
Unaccrued assets or liabiliaties of balance sheets items
Reconciliation of deferred tax
Deferred tax, beginning of year
Exchange rate adjustment
Change in deferred tax beginning of year
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 101m (in 2007 DKK -4m).
No deferred tax is associated with investments in subsidiaries (in 2007 DKK 0m).
84
0
84
168
157
1,021
35
64
1,277
1,109
102
6
959
27
0
-20
119
24
1,109
72
105
142
65
133
0
198
157
890
0
100
1,147
949
126
1
1,109
-164
-51
0
122
-67
949
72
188
189
TrygVesta Annual Report 2008 l Notes l 133 of 152
Accounts
Notes
DKKm
25 Other provisions
Other provisions, beginning of year
Exchange rate adjustment
Change in provisions
Other provisions, end of year
Other provisions primarily include provisions for own insurance contracts
26 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 2008. In 2008, the loan carried interest at CIBOR plus a
margin, totalling approximately 5.3% p.a. The unutilised part of the loan facility is measured at am-
ortised cost, and an amount of DKK 5m was deducted from the loan proceeds upon signing the loan
agreement. The cost is depreciated on a straight-line basis 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.
27 Other debt
Unsettled transactions
Interest derivatives
Exchange and inflation rate derivatives
Other debt
Debt falling due within one year
28 Earnings per share
2007
2008
50
0
7
57
597
2
599
2
0
1,857
8
0
732
2,597
2,597
57
-10
-11
36
598
111
709
111
0
66
0
31
774
871
871
Basic earnings per share are calculated by dividing the profit for the year and the profit/loss from
discontinued and divested activities 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 2009, therefore, there is no difference between basic EPS and diluted EPS as per 31
December 2008. During a two-year period commencing at the end of February 2009 180,780 share
options from the 2006 share option programmes are exercisable. This could potentially dilute the
earnings per share.
Profit/loss for the period from continuing business (DKKm)
Average number of shares (1,000 shares)
Basic earnings per share of DKK 25
2,267
67,648
33.5
846
66,184
12.8
134 of 152
l Notes l TrygVesta Annual Report 2008
DKKm
29 Contractual obligations, contingent liabilities and collateral
2008
< 1 years
1-3 years
3-5 years
> 5 years
Total
Payment due by period
Operating leases
Other contractual obligations
65
375
440
68
55
123
10
45
55
9
0
9
Payment due by period
2007
< 1 years
1-3 years
3-5 years
> 5 years
Operating leases
Other contractual obligations
108
348
456
213
314
527
187
0
187
1,260
0
1,260
152
475
627
Total
1,768
662
2,430
The amounts include the following:
TrygVesta Forsikring A/S has on 1 february 2008 signed an operating agreement with CSC for an amount of DKK 1bn for a period of
5 years which cannot be cancelled the next 2 years.
TrygVesta Forsikring A/S has signed a portfolio management contract for DKK 126m. The contract expires in 2013.
TrygVesta Forsikring A/S has signed a car leasing contract with NF Fleet for DKK 37m. The contract expires in 2013.
TrygVesta Forsikring A/S has signed on IT leasing contract with IBM for DKK 27m. The contract expires in 2011.
The Danish companies in TrygVesta Group are jointly taxed with TryghedsGruppen smba.
Assets to cover the technical provisions have been registered in a total amount of
2007
33,746
2008
29,690
Most of the Danish companies in TrygVesta Group are jointly 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 a few specific guarantees to 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 Forsikring Group are part of certain 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 2008 l Notes l 135 of 152
Accounts
Notes
DKKm
2007
2008
30 Acquisition of subsidiary
On 8 May 2008, TrygVesta Forsikring A/S acquired all the voting shares (nominally DKK 1m) of Ejendomsselskabet af 8. maj 2008 A/S
through a cash payment of DKK 1,085.5m to Danica Pension. The sole activity of Ejendomsselskabet af 8. maj 2008 A/S is the ownership
of TrygVesta’s Ballerup headquarters. Costs for advisors in connection with the preparation, conclusion and performance of the agreement
was DKK 0.2m.
Acquired net assets
Owner-occupied property
Cash in hand and at bank
Cost
Carrying amount
prior to
acquisition
1,085.0
0.5
1,085.5
fair value
at date of
acquisition
1,085.0
0.5
1,085.5
There have not been any adjustment to the fair value, which is therefore identical to the carrying amount are therefore the same. There is
no difference between cost and the fair value of the identifiable assets, liabilities and contingent liabilities.
The acquisition of Ejendomsselskabet af 8. maj 2008 A/S replaces the existing lease with Danica from 1995, which would expire in 2025.
The purchase enhances the framework for modernising and refurbishing workplaces.
See the section ‘Our employees’ for further details.’
Ejendomsselskabet af 8. maj 2008 A/S
Amounts relating to the period since the acquisition on 8 May 2008
Rental income
Profit/loss after tax
Impact on equity
2008
45.9
8.6
8.6
See ‘Owner-occupied property and operating equipment’ in note 1 ‘Accounting policies’ for a more elaborate description of the valuation
method used.
A pro forma statement of TrygVesta Group’s profit/loss for 2008 as if Ejendomsselskabet af 8. maj 2008 had been acquried as per 1 Janu-
ary 2008 would not be significantly different from the Group’s realised profit/loss for 2008. The Group’s gross premiums earned would
not be affected.
Management estimates that the fair value at 1 January 2008 would have been the same as the fair value at the date of acquisition.
The TrygVesta Group did not make any acquisitions in 2007.
31 Related parties
Supervisory Board and Executive Management
Premium income
- Parent company (TryghedsGruppen smba)
- Key management
- Other related parties
Claims paid
- Parent company (TryghedsGruppen smba)
- Key management
- Other related parties
Guarantee agreements with related parties
- Account
- Utilised, end of year
- Premium
0.2
0.4
17.3
0.2
0.3
43.6
1,950
885
3
0.3
0.4
115.3
0.0
0.2
9.6
1,200
726
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.
136 of 152
l Notes l TrygVesta Annual Report 2008
DKKm
2007
2008
31 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
Supervisoy Board
Executive Management
Remuneration includes pension contributions
Supervisory Board
Executive Management
-4
-16
-20
0
-3
-3
-4
-19
-23
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 Executive Manage-
ment has a bonus scheme for up to 3 months’ salary (Group CEO up to 4 months’ salary) and participate ind the share option programme as men-
tioned in Corporate governance. Other than that, there are no incentive plans for the Supervisory Board and Executive Management.
If a member of the 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 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 Executive Management can raise no fur-
ther claims in this respect, including claims for compensation pursuant to sections 2a and/or 2b of the Salaried Employees Act, as such claims are
included in the severance pay.
Parent company
TryghedsGruppen smba
TryghedsGruppen smba controls 60% of the shares in TrygVesta A/S.
Intra-group trading involved
- Providing and receiving services
- Sale of unlisted shares
Insurance products are purchased and sold on market terms
Assets are transferred on market terms
Intra-group trading
Administration fee, etc. is fixed on a cost-recovery basis.
Intra-group accounts are offset and carry interest on market terms.
0
15
1
0
The TrygVesta companies have entered into reinsurance contracts on market terms.
Transactions with subsidiaries have been eliminated in the consolidated financial statements in accordance with the accounting policies.
TrygVesta Annual Report 2008 l Notes l 137 of 152
Accounts
Income statement – TrygVesta A/S (parent company)
DKKm
2007
2008
Notes
2
Investment activities
Income from subsidiaries
Interest income
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 Reserve for net revaluation as per equity method
Transferred to Retained profits
2,396
0
-1
-30
-4
2,361
-48
2,313
21
2,334
-1
2,333
1,156
79
1,098
2,333
757
22
0
-32
-6
741
-56
685
18
703
0
703
423
-2,007
2,287
703
138 of 152
l Income statement for TrygVesta A/S (parent company) l TrygVesta Annual Report 2008
Balance sheet – TrygVesta A/S (parent company)
DKKm
2007
2008
Notes Assets
6
Investments in subsidiaries
Total investments in subsidiaries
Total investment assets
Receivables from subsidiaries
Total receivables
7 Current tax assets
8 Deferred tax assets
Cash in hand and at bank
Total other assets
Total prepayments and accrued income
10,732
10,732
10,732
0
0
21
0
1
22
7
8,546
8,546
8,546
293
293
18
0
1
19
24
Total assets
10,761
8,882
Liabilities
Shareholders’ equity
9 Debt to credit institutions
Debt to subsidiaries
Other debt
Total debt
10,031
8,265
599
131
0
730
602
0
15
617
Total liabilities and equity
10,761
8,882
1 Accounting policies
10 Capital adequacy
11 Contractual obligations, contingent liabilities and collateral
12 Related parties
TrygVesta Annual Report 2008 l Balance sheet for TrygVesta A/S (parent company) l
139 of 152
Accounts
Statement of changes in equity (parent company)
DKKm
Shareholders’ equity at 31 December 2006
1,700
3,656
2,374
2,244
Share
capital
Revaluation
equity
method
Retained
earnings
Proposed
dividends
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
Total
9,974
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
Equity entries in 2008
Profit for the year
Exchange rate adjustment of foreign entities
Hedge of foreign currency risk in foreign entities
Tax on equity entries
Total comprehensive income
0
-2,007
-640
615
-154
-2,186
Dividend paid
Dividend own shares
Purchase of own shares
Issue of employee shares
Issue of share options
Total equity entries in 2008
0
-2,186
2,287
423
2,287
423
12
-1,197
37
14
1,153
-1,156
-733
703
-640
615
-154
524
-1,156
12
-1,197
37
14
-1,766
Shareholders’ equity at 31 December 2008
1,700
1,559
4,583
423
8,265
Proposed dividend per share DKK 6.50 (total for 2007 DKK 17 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
number of shares year end (64,377,683). The dividend is not paid until approved by the shareholders at the annual general meeting of
the subsequent year.
TrygVesta Forsikring A/S’ Norwegian branch has in its financial statements included provisions for contingency funds in the amount of
NOK 2,743m (2007: NOK 2,564m). In TrygVesta Forsikring A/S, these provisions, due to their nature as additional provisions, are included
in shareholders’ equity (retained earnings), net of deferred tax. TrygVesta Forsikring A/S’ option to pay dividend to TrygVesta A/S is influ-
enced by this amount. The dividend payment is also affected by a contingency fund provision of DKK 670m, which is included in sharehol-
ders’ equity in TrygVesta Forsikring A/S. TrygVesta Garantiforsikring has a similar contingency amounting to DKK 139m, which is also inclu-
ded in the company’s shareholders’ equity.
140 of 152 l Statement of changes in equity (parent company) l TrygVesta Annual Report 2008
Notes (parent company)
DKKm
2007
2008
1 Accounting policies
Please refer to TrygVesta Group’s ’Accounting policies’.
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
757
757
0
757
-56
-56
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 the Supervisory Board and the Executive Management is disposed in note 12 ‘Related parties’.
Average number of full-time employees during the year
0
0
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 Tax
Reconciliation of tax expenses
Tax on financial loss before profit/loss in subsidiaries and tax
Effective tax rate
Tax on financial loss
See ‘TrygVestas financial performance 2008 for further information regarding tax’
-0.9
-0.9
21
21
%
25
25
-0.9
-0.9
18
18
%
25
25
TrygVesta Annual Report 2008 l Notes (parent company) l
141 of 152
Accounts
Notes (parent company)
DKKm
2007
2008
5 Profit/loss on discontinued and divested business
Technical interest, net of reinsurance
Claims incurred, net of reinsurance
Insurance operating expenses, net of reinsurance
Technical result
Loss before tax
Profit/loss on discontinued and divested business
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
Carrying amount 31 December
Name and registered office
2008
TrygVesta Forsikring A/S, Ballerup
2007
TrygVesta Forsikring A/S, Ballerup
7 Current tax assets
Tax payable, beginning of year
Current tax for the year
Tax paid during the year
8 Deferred tax assets
Non-capitalised tax loss
TrygVesta A/S
3
-1
-3
-1
-1
-1
6,987
6,987
3,656
2,407
-2,318
3,745
10,732
Ownership shares in %
100
100
3
21
-3
21
72
3
-1
-2
0
0
0
6,987
6,987
3,745
575
-2,761
1,559
8,546
Equity
8,546
10,732
21
18
-21
18
72
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.
142 of 152 l Notes (parent company) l TrygVesta Annual Report 2008
DKKm
2007
2008
9 Debt to credit institutions
Bank loans
Overdraft facility
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 2008. In 2008, the loan carried interest at CIBOR plus a
margin, totalling approximately 5.3% p.a. The unutilised part of the loan facility is measured at am-
ortised cost, and an amount of DKK 5m was deducted from the loan proceeds upon signing the loan
agreement. The cost is depreciated on a straight-line basis 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.
10 Capital adequacy
Shareholders’ equity according to annual report
Subordinate loan capital
Proposed dividend
Solvency requirements to subsidiary undertakings
Capital base
Weighted items
Solvency ratio
597
2
599
598
4
602
10,031
637
-1,156
-3,824
5,688
7,051
81
8,265
685
-423
-4,601
3,926
3,945
100
11 Contractual obligations, contingent liabilities and collateral
The Danish companies in TrygVesta Group are jointly taxed with TryghedsGruppen smba.
Most of the Danish companies in TrygVesta Group are jointly registered for VAT and payroll tax and
are jointly and severally liable for payment of all such direct and indirect taxes.
Companies of the TrygVesta Group are part of certain disputes the outcome of which is not esti-
mated to affect the financial position of the Group. Management believes that the outcome of these
legal proceedings will not affect the Group’s financial position beyond those receivables and obliga-
tions recognised in the balance sheetat 31 December 2008.
TrygVesta Annual Report 2008 l Notes (parent company) l
143 of 152
Accounts
Notes (parent company)
DKKm
2007
2008
12 Related parties
Supervisory Board and Executive Management
Sales of insurances and claims payments
- Parent company (TryghedsGruppen smba)
- Key management
- Other related parties
Claims payments
- Key management
- Other related parties
Guarantee agreements with related parties
- Commitment
- Utilesed, end of year
- Premium
Outstanding guarantees cover the policyholders’ financial obligations pursuant to the contract. Fol-
lowing 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 dur-
ing 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
Supervisory Board
Executive Management
Remuneration includes pension contributions
Supervisory Board
Executive Management
Members of the Supervisory Board of TrygVesta A/S do not receive bonuses and are not participants
in any severance plans. The Executive Management has a bonus scheme for up to 3 months’ salary
(Group CEO up to 4 months’ salary) and participate in the share option programme as mentioned in
Corporate governance. Other than that, there are no incentive plans for the Supervisory Board and
Executive Management.
0.2
0.4
17.3
0.3
43.6
1,950
885
3
-4
-16
-20
0
-3
-3
0.3
0.4
115.3
0.2
9.6
1,200
726
3
-4
-19
-23
0
-3
-3
144 of 152
l Notes (parent company) l TrygVesta Annual Report 2008
DKKm
12 Parent company
TryghedsGruppen smba
TryghedsGruppen smba controls 60% of the shares in TrygVesta A/S.
Intra-group trading involved
- Providing and receiving services
- 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 has 100% control of TrygVesta Forsikring A/S 100%.
Intra-group transactions
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.
2007
2008
0
15
49
131
4
1
0
59
297
21
TrygVesta Annual Report 2008 l Notes (parent company) l
145 of 152
Accounts
financial highlights and key ratios by geography
DKKm
2004
2005
2006
2007
2008
Danish general insurance
Gross premiums earned
Technical result
Return on investment activities
Other income and expenses
Profit/loss before tax
Fixed assets
Key ratios
Gross claims ratio
Business ceded as % of gross premiums
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
8,525
720
378
4
1,102
903
73.0
3.5
76.5
16.3
92.8
8,764
956
567
7
1,530
1,011
77.1
-3.9
73.2
16.6
89.8
9,084
1,377
723
2
2,102
1,135
66.8
3.9
70.7
16.1
86.8
9,346
1,639
225
2
1,866
1,171
69.3
0.0
69.3
15.3
84.6
9,620
1,695
-435
4
1,264
1,616
64.9
4.2
69.1
16.0
85.1
Number of full-time employess, end of period
2,223
2,215
2,231
2,242
2,377
Norwegian general insurance
Gross premiums earned
Technical result
Return on investment activities
Other income and expenses
Profit/loss before tax
Fixed assets
Key ratios
Gross claims ratio
Business ceded as % of gross premiums
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
6,653
1,032
24
2
1,058
682
62.1
6.2
68.3
17.2
85.5
6,810
1,131
361
2
1,494
721
63.0
5.2
68.2
16.7
84.9
6,738
1,214
483
3
1,700
737
64.3
3.6
67.9
16.5
84.4
6,919
1,335
118
-7
1,446
799
64.0
4.9
68.9
15.8
84.7
7,129
815
-597
3
221
659
71.0
3.8
74.8
16.8
91.6
Number of full-time employess, end of period
1,454
1,431
1,460
1,384
1,455
finnish general insurance
Gross premiums earned
Technical result
Return on investment activities
Profit/loss before tax
Fixed assets
Key ratios
Gross claims ratio
Business ceded as % of gross premiums
Claims ratio, net of ceded business
Gross expense ratio
97
-45
-2
-47
0
75.3
0.2
75.5
73.0
140
-41
-2
-43
0
80.9
0.2
81.1
50.2
198
-34
-4
-38
0
78.1
0.2
78.3
41.7
251
-49
-10
-59
0
74.9
0.4
75.3
49.8
Combined ratio
148.5
131.3
120.0
125.1
Number of full-time employess, end of period
51
48
77
127
354
-44
-4
-48
5
72.9
0.3
73.2
44.1
117.3
154
146 of 152 l Financial highlights and key ratios by geography l TrygVesta Annual Report 2008
DKKm
2004
2005
2006
2007
2008
Swedish general insurance
Gross premiums earned
Technical result
Return on investment activities
Profit/loss before tax
Fixed assets
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
Other *
Gross premiums earned
Technical result
Return on investment activities
Other income and expenses
Profit/loss before tax
Fixed assets
Number of full-time employess, end of period
TrygVesta
Gross premiums earned
Technical result
Return on investment activities
Other income and expenses
Profit/loss before tax
Fixed assets
Key ratios
Gross claims ratio
Business ceded as % of gross premiums
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
-
-
-
-
-
-
-
-
-
-
-
-9
0
-29
-32
-61
588
34
15,266
1,707
371
-26
2,052
2,173
68.3
4.6
72.9
17.1
90.0
-
-
-
-
-
-
-
-
-
-
-
-9
1
-32
-37
-68
432
24
15,705
2,047
894
-28
2,913
2,164
71.1
0.1
71.2
17.0
88.2
4
-41
0
-41
2
144.9
0.4
145.3
1,003.8
1,149.1
40
-3
-4
26
-36
-14
677
0
16,021
2,512
1,228
-31
3,709
2,551
65.9
3.7
69.6
16.8
86.4
90
-82
-1
-83
3
88.9
0.0
88.9
105.6
194.5
61
0
-23
8
-46
-61
676
0
16,606
2,820
340
-51
3,109
2,649
67.3
2.1
69.4
16.7
86.1
225
-93
-2
-95
2
95.1
0.9
96.0
48.4
144.4
105
-5
11
50
-56
5
1,775
0
17,323
2,384
-988
-49
1,347
4,057
67.9
3.9
71.8
17.3
89.1
Number of full-time employess, end of period
3,762
3,718
3,808
3,814
4,091
* Amounts relating to TrygVesta A/S, Tryg Ejendomme A/S, Ejendomsselskabet af 8. maj and eliminations are included in ’Other’.
TrygVesta Annual Report 2008 l Financial highlights and key ratios by geography l
147 of 152
Glossary
Glossary
The financial highlights and key ratios of TrygVesta have been prepared
in accordance with the executive order issued by the Danish Financial
Supervisory Authority on the presentation of financial reports by insur-
ance companies and profession-specific pension funds and also comply
with “Recommendations & Financial Ratios 2005” issued by the Danish
Society of Financial Analysts.
Run-off result
The difference between provisions for claims at the beginning of the fi-
nancial year (adjusted for currency translation differences and dis-
counting effects) and the sum of claims paid in the financial year plus
the part of the provisions for claims at the end of the financial year
that relates to claims incurred in prior financial years.
Gross earned premiums
Calculated as gross premiums written adjusted for change in gross pro-
visions for unearned premiums, less bonuses and premium rebates.
Relative run-off gains/losses
Run-off result relative to provisions insurance contract, beginning of year.
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
Adjusted gross expense ratio
Calculated as the ratio of gross insurance operating expenses including
adjustment to gross earned premiums. The adjustment involves the de-
duction of depreciation and operating costs on the owner-occupied
property and the addition of a calculated cost (rent) concerning the
owner-occupied property based on a calculated market rent.
Discounting
Expresses recognition in the financial statements of expected future pay-
ments 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.
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 increase of the provision is not rec-
ognised under claims, but in technical interest in the income statement.
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
Gross insurance operating expenses incl. adjustment x 100
Gross earned premiums
Earnings per share
Calculated as the profit for the year divided by the average number of
shares.
Combined ratio
Calculated as the sum of the gross claims ratio, the net result of busi-
ness 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.
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
Number of shares year end
(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.
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
148 of 152 l Glossary l TrygVesta Annual Report 2008
Price/earnings
Calculated as the ratio of the price per share to earnings per share.
Quoted price
Earnings per share
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 branch, the Norwegian sub-
sidiaries and the Norwegian branch of TrygVesta Garantiforsikring A/S.
finnish general insurance
Comprises TrygVesta Forsikring A/S, Finnish branch and the Finnish
branch of TrygVesta Garantiforsikring A/S.
Swedish general insurance
Comprises TrygVesta Forsikring A/S, Swedish branch and the Swedish
branch of TrygVesta Garantiforsikring A/S.
Individual Solvency
New Danish solvency requirements for insurance companies. With
effect from 1 January 2008, companies are required to make
their own determination of their capital requirements applied with
own methods. The Individual Solvency shall be reported to the Danish
FSA four times a year.
Solvency II
New solvency requirements for insurance companies issued by the EU
Commisison. The new rules are expected to com into effect in 2012 at
the earliest.
TrygVesta Annual Report 2008 l Glossary l
149 of 152
Organisation Chart
Organisation chart 2009
CEO
Stine Bosse
COMMUNICATIONS
INVESTOR
RELATIONS
LEGAL DEPARTMENT
& QUALITY
Customer Service
& Sales
Direct
Lars Bonde
Customer Service
& Sales
Partners
Kjerstin Fyllingen
Corporate
Claims
Corporate Branding
& Business Centres
Process & IT
Group finance
Strategy & human
Competency
Truls Holm Olsen
Birgitte Kartman
Jens Stener
Peter Falkenham
Morten Hübbe
Martin Bøge Mikkelsen
Customer Service
Sweden
Sales DK
Personal Claims
Marketing
IT strategy, Arkitecture
& Planning
Controlling
& Reporting
Strategy
& Planning
Sales
Outbound
Sales
Private
Finland
Sales NO
Car Claims
Segmentation /
Concepts
Sales- and
Customer Processes
Group Risk
M&A
Civil Servants
UW
Building / Property
Claims
BusinessLab
Product-, Police- and
UW Processes
Business Intelligence
Organisational
& Leadership
Development
Sales
Commercial
Partner Contracts
Private
International
Solutions
Claims
Liability / Lawyers
BC Health Care
& Person
Claims and
Support Processes
Finance & Salary
Lean
Advisory Services
& Sales Support
Partner Contracts
Commercial
Travel Claims and
Alarm
Bankassurance
Claims Purchase
BC
Private
BC
Car
E-business
Investments
Recruitment
& Benefits
IT Operations
Corporate Finance
Car Channel & Enter
Claims Secretariat
& Fact-finding
BC
Commercial /
Corporate
Nordea + partners
Corporate Learning
The Living House
TrygVesta
Garantiforsikring
Excecutive Management of TrygVesta A/S
Excecutive Management of TrygVesta Forsikring A/S
150 af 152 l Organisation chart 2009 l TrygVesta Annual Report 2008
Disclaimer
Certain statements in this annual report are based on the beliefs
TrygVesta urges readers to refer to the section on risk manage-
of our management as well as assumptions made by and informa-
ment for a description of some of the factors that could affect
tion currently available to management. Statements regarding
the Group’s future performance or the insurance industri.
TrygVesta’s future results of operations, financial condition, cash
flows, business strategy, plans and future objectives other than
Should one or more of these risks or uncertainties materialise
statements of historical fact can generally be identified by termino-
or should any underlying assumptions prove to be incorrect,
logy such as ”targets”, ”believes”, ”expects”, ”aims”, ”intends”,
TrygVesta’s actual financial condition or results of operations
”plans”, ”seeks”, ”will”, ”may”, ”anticipates”, ”would”, ”could”,
could materially differ from that described herein as anticiparted,
”continues” or similar expressions.
believed, estimated or expected.
A number of different factors may cause the actual performance
TrygVesta is not under any duty to update any of the forward-
to deviate significantly from the forward-looking statements in
looking statements or to conform such statements to actual
this annual report, including but not limited to general economic
results, except as may be required by law.
developments, changes in the competitive envrironment, develop-
ments in the financial markets, extra ordinary events such as
natural disasters or terrorist atttacks, changes in legislation or
case law and reinsurance.
This is a translation of the Danish Annual Report 2008. In case of any discrepency between the Danish and the English version of the Annual
Report 2008, the Danish version shall apply.
TrygVesta Annual Report 2008 l Discaimer l
151 of 152
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Annual Report 2008
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 66 00