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Tryg A/S
Klausdalsbrovej 601
2750 Ballerup
Denmark
+45 70 11 20 20
tryg.com
CVR-no. 26460212
Annual report 2010
Contents
Management’s report
About Tryg
Preface
Financial highlights and key ratios
Group overview
Highlights of 2010
Strategy and outlook
Strategy
KPI (Key performance Indictors)
The insurance industry
Customers and products
Outlook
Results
The Group’s financial performance
Private Nordic
Commercial Nordic
Corporate Nordic
Investment activities
Capital management and risk management
Capital management and profit distribution
Risk management
Corporate governance
Supervisory Board
Group Executive Management
Corporate governance
Shareholder information
Accounts
Statement by the Supervisory Board and the Executive Management
Independent auditor’s report
Income statement and statement of financial position – Tryg Group
Statement of changes in equity – Tryg Group
Cash flow statement – Tryg Group
Notes – Tryg Group
Income statement – Tryg A/S (Parent company)
Statement of financial position – (Parent company)
Statement of changes in equity (Parent company)
Notes (Parent company)
Geographical segments
Other key ratios
Glossary
Disclaimer
Group chart
Side
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14
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18
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22
24
26
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33
35
38
42
44
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58
66
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73
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81
130
131
132
133
138
140
141
143
144
Editors
Investor Relations
Design
Layout
e-types
amo design
Printers Centertryk A/S
Munken Polar
Paper
This is a translation of the Danish annual report 2010. In case of any discrepancy between the Danish and the English version of the annual report 2010,
the Danish version shall apply.
Our vision | is to be perceived as the leading peace-of-mind
provider in the Nordic region.
Our mission | is to secure a stable, high-quality supply
of products and services offering peace of mind to private
households and businesses.
In order to facilitate the realisation
of our vision we created a common
Nordic brand in 2010.
Read more about our new brand
on page 16.
Tryg A/S | Annual report 2010 | 1
Our values | We create peace of mind because
- we show people respect, openness and trust.
- we show initiative, share knowledge and take responsibility.
- we provide solutions characterised by quality and simplicity.
- we create sustainable results.
The peace-of-mind delivery | is anchored in our handshake
- Dynamic
- Compassionate
- Innovative
2 | Annual report 2010 | Tryg A/S
Annual report 2010 | Tryg wants to be perceived as the
leading peace-of-mind provider in the Nordic region and is
dedicated to providing peace of mind to our customers on
a daily basis. Our products include contents, house, motor,
building, workers’ compensation, transport, health and
personal accident insurances. In 2010, our 4,300 employees
ensured peace of mind for more than 2.7 million private
customers and more than 140,000 businesses.
Tryg is the second-largest insurance company in the Nordic
region. We are the largest player in Denmark and the third
largest in Norway. We have operated our rapidly growing
activities in Finland and Sweden since 2001 and 2006,
respectively.
We strive for high customer and employee satisfaction,
and several surveys indicate that Tryg is considered to
be second-to-none in terms of claims handling. We offer
insurances mainly through our own sales channels, and
our business partners include Nordea and AXA Corporate
Solutions.
Tryg A/S | Annual report 2010 | 3
Preface
Our 2010 performance was affected by winter
claims, a considerable number of large claims,
cloudbursts during the summer and a decision by
the Danish Supreme Court, all of which had an
adverse impact on the Group’s performance.
4 | Annual report 2010 | Tryg A/S
Mikael Olufsen: In a year with many large one-off claims
which we focused even more on cost reductions. In-house rota-
events and an increase in the claims level in Denmark, the
tion was a key priority, we optimised a number of processes,
technical result of DKK 375m was not satisfactory. However,
reduced the number of offices and improved sales efficiency,
a strong capital structure and tight management of operations
all of which is expected to provide for a lower expense ratio.
enabled us to generate a profit before tax of DKK 941m and a
The expense ratio in recent years has been almost steady in-
number of initiatives create a solid basis for future value crea-
cluding start-up costs in Sweden and Finland and affected by
tion for customers, shareholders and employees.
the refurbishment of our head offices to create The Living House
and by branding activities in 2010. Branding activities affected
Throughout the economic downturn, the Supervisory Board has
the combined ratio by around 0.4 percentage point.
been committed to maintaining the Group’s strong capitalisa-
tion. The Group has implemented initiatives to reduce claims
Furthermore, 2010 was impacted by claims that were DKK 1.4bn
as well as premium increases in 2009 and 2010, which are
higher than in a normal year due to the events described above.
expected to improve profitability significantly going forward.
The events affected the claims ratio by around 7 percentage
Backed by these initiatives and our focus on stable insurance
points. To this should be added higher-than-expected claims
earnings, Tryg still has a solid basis for strong earnings, com-
payments of around 2 percentage points of the combined ratio,
petitive equity returns and high dividends.
mainly attributable to changed behaviour and increased use of
insurances following the financial crisis in Denmark.
Just after the turn of the year, Group CEO Stine Bosse
announced that she wished to resign her position, and the
Supervisory Board appointed Morten Hübbe new Group CEO.
Stine, would you provide a brief review of the year’s
performance?
The technical result was DKK 375m and the
combined ratio 98.8, which was not satisfac-
tory, but still in line with the outlook reported
in the third quarter 2010 report.
Stine Bosse: Our 2010 performance was unsatisfactory and af-
fected by winter claims, a considerable number of large claims,
Finally, the investment result exceeded expectations due to rising
cloudbursts during the summer and a decision by the Danish
equity prices. In 2010, we divided our investment portfolio into
Supreme Court that changes the terms of workers’ compensa-
a match portfolio which creates the best possible match to our
tion claims, all of which had an adverse impact on the Group’s
technical provisions, and a free investment portfolio comprising
performance.
the active investments of the Group’s capital.
The total premium volume was DKK 19.5bn, distributed on high
For many years, it has been a key concern for me to align our
growth rates in Sweden and Finland, while Corporate Nordic
branding landscapes in the Nordic region as this provides the
reported falling premium volumes in Denmark and Norway.
basis for our Nordic strength. We achieved that in 2010 when we
changed our name from TrygVesta to Tryg and followed up with
2010 was a year in which we launched a number of initiatives
comprehensive branding activities in all four Nordic countries.
that will improve our performance in the years ahead, and in
We have for many years owned the peace-of-mind position in
DKKm
Earned premiums
Technical result
Profit after tax
Denmark, where the Tryg brand enjoys strong awareness. With
the new common Nordic branding strategy, Tryg is even better
equipped to support our pan-Nordic organisation.
19,475
375
593
The Supervisory Board focused strongly on the recommendations
on corporate governance, which were updated in 2010. What are
the Board’s perspectives after the developments of 2010?
Tryg A/S | Annual report 2010 | 5
Mikael Olufsen: The Supervisory Board is focused prima-
Morten Hübbe new Group CEO after having followed his compe-
rily on Tryg’s financial and market position, development and
tent work as Group CFO for more than seven years.
strategy as the key areas. We have monitored our performance
in Denmark, which deviated negatively from expectations, par-
Stine, let me take this opportunity to thank you for your efforts
ticularly close. The Supervisory Board believes that the Group’s
during the 23 years you have been with Tryg, and in particular
scheduled action will pave the way for improved profitability and
your last eight years as Group CEO. It has been a pleasure work-
continually ensure satisfied customers in the years ahead.
ing with you, and I wish you all the best in the future.
Looking ahead, the sale of the right to renew marine business will
Morten, you have been involved in all major decisions since 2003
help reduce volatility in our earnings from insurance operations,
and you will now have the ultimate responsibility for our day-to-
which the Supervisory Board approves. The changed structure of
day operations. What are the particular focus areas that you be-
our investment portfolio provides for a more stable performance
lieve the Supervisory Board should address in the years ahead?
and is a good basis for actively managing the Group’s capital.
Overall, we believe that the decisions and
actions taken in 2010 to improve profitability
support the Supervisory Board’s focus and are
balanced both short-term and longer-term.
Morten Hübbe: As the newly appointed Group CEO I first and
foremost represent continuity. I am in charge of a company
whose management has launched a number of initiatives in re-
cent years to strengthen the Group and maintain Tryg’s strong
customer satisfaction going forward. My focus will also be on
further enhancing efficiency and reducing selling and marketing
costs and administrative expenses. In recent years, our costs in
Denmark and Norway have fallen if we exclude activities such as
Corporate governance is also an important area for the Super-
The Living House and branding activities in 2010. Furthermore,
visory Board. The Supervisory Board has reviewed each item
we have introduced paperless processes, we mainly recruit new
of the updated corporate governance recommendations. The
staff by in-house rotation, and we have rationalised our distri-
conclusions can be seen on page 58 of this annual report and
bution by increasing the use of the Internet and call centres.
the full version can be downloaded on tryg.com.
Looking further ahead, Tryg’s ambition is to have an expense
The Supervisory Board finds it important that Tryg is a transpar-
things, through Tryg Transition, a multi-year process and IT ef-
ent company and that the skills necessary to facilitate corporate
ficiency enhancement project. We intend to invest around DKK
governance and essential for the Group’s value creation are
200m in this project each year, which is necessary for paving
represented on the Supervisory Board.
the way for achieving our 2020 ambition.
ratio of 10 in 2020. We intend to achieve this, among other
Moreover, a number of new rules have been introduced as from
On the management, we are very much aware of external
2011 which provide very detailed regulation of the governance
events that may impact customers’ purchasing power and claims
of insurance companies. The new rules have a decisive impact
inflation, and thus the Group’s profitability and growth. The
on the balance between the tasks of the Supervisory Board
general economic trends in the Nordic region improved in 2010,
and the Executive Management and thus on the distribution of
but were impacted by economic cycles in other regions in which
responsibilities between the governing bodies.
public debt burdens and the need for structural adjustments
In compliance with the recommendations, the Supervisory Board
Globally, the economic activity and prices of a number of raw ma-
has regularly considered the question of continuity and suc-
terials increased, which may push up inflation in the longer term.
of public spending dampened the economic progress at times.
cession in the supreme management of Tryg. We benefit from
that now that you, Stine, have decided to seek new challenges.
The historically low level of interest rates has in recent years re-
The day after your resignation the Supervisory Board appointed
sulted in lower returns on the bond portfolio, thereby affecting our
6 | Annual report 2010 | Tryg A/S
performance adversely. In 2010, we divided our investment activities
plans for improving profitability, and what are your expectations
into a free portfolio and a match portfolio. This means that the
for our 2011 performance?
immediate net effect of changes in interest rates on bonds and dis-
counted provisions for claims is close to zero, while current returns
Morten Hübbe: The initiatives implemented in 2010 and
will track changes in interest rates. Thus, an increase in interest
activities planned for 2011 should be seen in conjunction with
rates would have a positive impact on our results going forward.
our target of a combined ratio of around 90 including any run-
Going forward, the number of persons in
the working-age bracket is expected to be
reduced in large parts of the western world,
which may increase wage inflation. Tryg will
continue to monitor developments in order
to adjust premiums and claims procurement
with a view to improving profitability.
off results in the medium term, corresponding to a post-tax
return on equity of around 20%.
Based on the higher claims inflation seen, in particular, in 2009
and 2010, we will launch additional initiatives to improve profit-
ability, including claims prevention consultancy, portfolio enhancing
initiatives, changes in the scope of cover and premium increases.
In addition, we intend to ensure that each product area produces
a return that matches the cash outflow reflected by the risk.
In 2011, we expect an improvement of combined ratio based on
Since 2009 we have seen a distinct, marked increase in the
the substantial initiatives implemented in 2009 and 2010 as well
number of claims in Denmark compared with other countries.
as planned initiatives in 2011. As far as reserves are concerned,
Denmark is the country in the Nordic region which was the hard-
our review in late 2010 revealed that we have maintained our
est hit by the economic downturn, as reflected in a comparison
strong level of provisions.
of developments in private consumption and the number of
bankruptcies across the Nordic region. A common feature for all
In order to generate sustained, robust technical results, we must
countries is that irrespective of the economic situation, we con-
maintain high customer retention and satisfaction rates. The iden-
sider the claims put forward by our customers on a constructive
tity which a company presents to its customers is to a large extent
basis. Post-crisis developments in Denmark have revealed a need
based on the experience customers have when they contact the
to review internal processes, underwriting criteria, premium levels
company. Therefore, it is important to optimise all processes and
and claims procurement to enable us to bring profitability to the
be at the forefront of product developments while also developing
targeted levels.
the level of skills of the Group’s employees. These are areas that
will ensure Tryg’s ability to create value and be perceived as the
I look forward to meeting the target of improved profitability
leading peace-of-mind provider in the Nordic region.
and strengthening Tryg’s market position. From the Supervisory
Board’s perspective, what is your key priority going forward?
We hope you will enjoy reading our annual report.
Mikael Olufsen: The Supervisory Board is committed to maintain-
ing Tryg’s strong capital and reserve position in anticipation of the
changed Solvency II capital requirements. The changed capital re-
Mikael Olufsen
quirements, possible consolidations, and the new competition may
Chairman
affect the structure of the market, but on the Supervisory Board
we are confident that Tryg stands well prepared for the future.
So, Morten, after a 2010 performance strongly impacted by more
Morten Hübbe
one-off events than expected, improving performance is a key
Group CEO
Stine Bosse
Group CEO
priority for the Supervisory Board. What are the management’s
From 1 February 2011
Until 31 January 2011
Tryg A/S | Annual report 2010 | 7
Financial highlights and key ratios
See page 140 for a more
detailed list of key ratios.
DKKm
2006
2007
2008
2009
2010
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
Profit/loss for the year, continuing business
Profit/loss on discontinued
and divested business after tax a)
Profit/loss for the period
Run-off gains/losses, net of reinsurance
Balance sheet
Total provisions for insurance contracts
Total reinsurers’ share of provisions for insurance contracts
Total shareholders’ equity
Total assets
Key ratios
Gross claims ratio
Business ceded as a percentage of gross premiums
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
Gross expense ratio without adjustment
Operating ratio
Return on equity after tax (%)
Relative run-off gains/losses
Number of full-time employess, end of period
Solvency
Share performance
Earnings per share - continuing business of DKK 25
Net asset value per share (DKK)
Dividend per share (DKK)
Price Earnings
Number of shares, end of peiod (1,000)
15,715
-10,292
-2,662
2,761
-554
337
2,544
1,228
-31
3,741
-632
3,109
102
3,211
561
26,005
1,561
9,916
42,783
65.5
3.5
69.0
16.9
85.9
16.9
84.2
35.5
3.0
3,783
58
45.8
146.2
33.0
9.4
67,790
16,262
-10,448
-2,730
3,084
-553
494
3,025
340
-51
3,314
-893
2,421
-155
2,266
792
26,969
1,587
9,975
43,830
64.2
3.4
67.6
16.8
84.4
16.8
81.9
22.8
4.2
3,788
81
35.8
147.5
17.0
10.8
67,638
16,976
-11,473
-2,964
2,539
17,862
-12,882
-3,056
1,924
19,475
-15,617
-3,304
554
-598
491
2,432
-988
-49
1,395
-513
882
-36
846
800
25,228
1,036
8,209
38,445
67.6
3.5
71.1
17.1
88.2
17.5
86.1
9.3
4.1
4,065
100
13.3
127.5
6.5
24.7
64,378
-520
158
1,562
1,086
-38
2,610
-625
1,985
23
2,008
683
29,042
1,320
9,631
44,740
72.1
2.9
75.0
17.2
92.2
17.1
91.3
22.5
3.6
4,310
97
31.3
152.3
15.5
11.0
63,228
-313
134
375
570
-4
941
-265
676
-83
593
824
32,031
1,588
8,458
50,591
80.2
1.6
81.8
17.0
98.8
17.0
98.1
6.6
3.9
4,291
125
10.8
139.5
4.0
23.8
60,634
The gross expense ratio without adjustment is calculated as the ratio of actual gross insurance operating expenses to earned gross premiums. Other key ratios
are calculated in accordance with ’Recommendations & Financial Ratios 2010’ issued by the Danish Society of Financial Analysts.
The adjustment, which is made pursuant to the Danish Financial Supervisory Authority’s and the Danish Society of Financial Analysts’ definition of expense ratio
and combined ratio, involves the addition of a calculated expense (rent) concerning owner-occupied property based on a calculated market rent and the deduction
of actual depreciation and operating costs on owner-occupied property.
a) Profit/loss on discontinued and divested business after tax includes Marine Hull insurance. Comparative figures are restated to reflect Marine Hull insurance.
8 | Annual report 2010 | Tryg A/S
Group overview
Private Nordic
Privat & Erhverv
Commercial Nordic
Privat & Erhverv
Corporate Nordic
Denmark, Norway, Sweden
and Finland
Read more on page 30
Denmark, Norway, Sweden
and Finland
Read more on page 33
Denmark, Norway
og Sweden
Read more on page 35
% of total
business
Combined ratio
52
96.4
22
111.6
26
92.7
Insurances for corporate customers.
Corporate customers are custom-
ers who pay annual premiums of
more than DKK 900,000 or have
more than 50 employees or are
served by brokers.
Tryg Garanti, the leading provider
of guarantee insurances, is
included in Corporate.
• Own sales force
• Insurance brokers
Principal activities
Insurances for private individuals.
Insurances for businesses.
Enter Forsikring, which sells
insurances to private individuals,
is included in Private Nordic.
Distributions-
channels
• Call centres
• Own sales force
• Car dealers
• Call centres
• Own sales force
• Franchise offices
• Real estate agents
• Internet
• Nordea’s branches
• Affinity groups
• Internet
Strategic
partnership
Brands
Tryg A/S | Annual report 2010 | 9
Highlights of 2010
January
Danish Handicap Sports Federation
Claims handlers had an opportunity to participate in disabled
sports when the Danish Handicap Sports Federation visited Tryg’s
head office. The session was part of a collaboration initiated in
April 2009 to enhance the peace-of-mind delivery. The object
was to become even better at helping injured persons pursue a
full life through a closer dialogue with the federation. The Danish
Handicap Sports Federation has 18,000 members.
High customer satisfaction in Finland
Tryg scored high in a customer loyalty and satisfaction survey in
Finland. Tryg focuses primarily on the private market in Finland
and has 150,000 Finnish customers.
March
The renewal right for marine sold to Codan
The right to renew marine insurance was sold to Codan for DKK
50m. The business had annual revenue of around DKK 400m.
It was divested due to unsatisfactory profitability over a number
of years, producing a loss also in 2010.
May
Health insurances for people aged 60 and over
Tryg was the first insurer to launch health insurances to people
aged 60 and over. Under the motto ’at Tryg, health has no age’,
we now offer health insurance to all customers irrespective of age.
Read about a +60 customer on page 32
in the Stakeholder Magazine.
Tryg has the best image in the insurance industry
In the annual image analysis among Denmark’s 140 leading com-
panies performed by Berlingske Nyhedsmagasin, Tryg climbed from
23rd to a 14th place. Tryg was the best placed insurance company,
recording strong progress on all nine benchmarks.
February
Inauguration of The Living House
The Ballerup head office celebrated the opening of The Living Hou-
se. The Living House is a change project for the Group’s offices,
June
replacing cubicle offices with open-plan office environments, com-
Number one in health insurances
mon and quiet zones and café environments. The change project is
Tryg ranks first in the market for health insurances in Denmark.
the Group’s new basis for learning, innovation and collaboration.
This position is based on good products, high customer satisfac-
Career site
To focus even more on in-house recruitment, Tryg launched a
tion and stronger collaboration between operations and sales.
The profitability of health insurances improved in 2010.
career site on the Group’s intranet, which permits all employees
Online health check-up before you travel
to advertise their skills in-house. The data base supports Tryg’s
On tryg.dk, customers can take their own health check-up
wish to be a workplace in which openness and mobility across
before a trip. This service provides an overview of the travel
the Group are important elements of the corporate culture.
insurance’s coverage.
10 | Annual report 2010 | Tryg A/S
July
Moderna becomes a branch of Tryg
The Group’s Swedish subsidiary, Moderna Försäkringar AB,
which was acquired in March 2009, became a branch of Tryg
Forsikring A/S. Moderna had a total premium volume of DKK
1.8bn in 2010.
August
Trekking and management training
Tryg’s Group Executive Management members Lars Bonde and
Kjerstin Fyllingen went trekking with Danish and Norwegian
second-generation immigrants, respectively, for five days in
the Norwegian mountains under primitive conditions, focusing
on collaboration and introspection. The trek was part of Tryg’s
September
The World’s Best News
Volunteering Tryg employees participated in ’The World’s Best
News‘, a campaign launched by the UN, Danida and the Danish
development organisations to eradicate poverty in developing
countries.
Tryg in Finland rated third-best sales company
Tryg in Finland was rated the third-best sales company. The
jury emphasised Tryg’s sales processes and training.
Tryg Garanti introduces credit insurance
Tryg Garanti launched a credit insurance to protect trade and
industry against financial losses on debtors. The other players
in this specialised market are Euler Hermes and Atradius.
Standard & Poor’s and Moody’s affirm ’A-’ rating
Credit rating agencies Standard & Poor’s and Moody’s affirmed
management development concept the Trek and CSR efforts.
Tryg’s ’A-’ rating.
Read about the trek on page 26 in
the Stakeholder magazine.
From TrygVesta to Tryg
To strengthen the position as the leading peace-of-mind provider
in the Nordic region, the Group changed its name to Tryg in
Denmark, Norway and Finland, while the name was changed to
Moderna in Sweden. Tryg introduced the new common name
and a new logo in an extensive branding campaign throughout
the Nordic region.
Read about the name change on page 16.
Tryg on Facebook
Tryg launched a Danish and a Norwegian corporate site on
Facebook, where Tryg answers general questions and offers
good advice about prevention and insurance matters.
NemID on tryg.dk
November
Unique software insurance with Tryg Backup
Tryg launched a software insurance for commercial customers in
Denmark. Tryg Backup provides automatic backup of data on the
company’s computers and servers without limitation of the volume
of backup data. Tryg is the only company offering such a product.
December
Adjustment of the organisation
An adjustment of the organisation resulted in changed respon-
sibilities in Tryg’s senior management and a reduced number of
From 10 August, Tryg’s Danish customers were able to log on to
second-tier managers. The new organisation reflects Tryg’s focus
their owns pages on tryg.dk using the digital signature, NemID.
on efficiency and profitability.
Tryg A/S | Annual report 2010 | 11
Tryg focuses on a common
understanding of goals, strategy
and action plans.
Strategy and outlook
Strategy
Tryg’s vision is to be perceived as the leading peace-
•
generating profitability in all customer segments
of-mind provider in the Nordic region. The Group’s stra-
and countries and
tegy plan for 2007-2010 has taken us one step closer to
• offering customers value-creating insurance solutions.
achieving our vision and has helped generate satisfactory
returns on equity almost throughout the entire period,
Financial perspective
a strong market position in the Group’s principal markets
The Group’s productivity will be increased through process improve-
and growth opportunities in Sweden and Finland.
ments that also enhance the customer experience and result in
Strategy plan for 2011-2014
Recent years’ economic downturn has demonstrated the im-
portance of sustaining the focus on our core business. In the
increased customer retention. We intend to implement structural
changes to make the entire Group operate on the same platform by
2020. Our ambition is to achieve an expense ratio of 10 by 2020.
years ahead, our focus will be on tight cost management, a new
Increased productivity means a better relationship between earn-
platform for sales and claims handling, and the ability to quickly
ings, costs and the number of employees. For example, we have
adapt the Group to changes in the market.
to improve sales per employee and the portfolio per employee by
With a view to strengthening the Group’s position, the Super-
at least 2% annually.
visory Board adopted a new strategy plan at the end of 2010,
We must increase the Group’s revenue per customer by ensuring a
designed to strengthen the company towards 2014. Called ’Tryg
more correct price per risk. We will do this by offering more targeted
in transition’, the strategy plan is based on the four perspec-
products, services and claims handling. At the same time, we must
tives: financial, customer, process and learning. The strategy plan
be able to meet all of a customer’s peace-of-mind requirements by
defines ambitions of:
offering a range of solutions rather than individual products. Based
• achieving an expense ratio of 10 by 2020
on a high proportion of products and services per customer, we
• generating competitive returns on equity of more than 20%
expect high retention rates and increased profitability.
New name and branding landscape
In order to move closer to the Group’s vision of being perceived
as the leading peace-of-mind provider in the Nordic region,
Tryg launched a new brand in 2010 with a strong visual identity,
which in a modern and simple way brings out our handshake:
Dynamic, Compassionate and Innovative.
The Group changed its name from TrygVesta to Tryg. The new
logo was based on the familiar Tryg name from Denmark and the
Norwegian lifebuoy, which will be the Group’s future mark in
Denmark, Norway and Finland. Due to the coincidence of name
with Trygg-Hansa, Tryg’s products and solutions are marketed in
Sweden under the name Moderna.
Changing Tryg’s name and brand is a natural next step in our still
stronger common Nordic corporate culture and our close collabo-
ration across national borders. The Group’s business divisions are
pan-Nordic, and Tryg will increasingly be launching more Nordic
products to our customers.
14 | Annual report 2010 | Tryg A/S
We intend to reduce the Group’s claims expenses, the claims fre-
quency and the average claim. We will do that through improved
risk selection, partnership agreements with respect to claims
procurement, and not least claims prevention initiatives. Custom-
ers will be provided with more information about how to prevent
claims, and they must experience short response times when
reporting a claim. We also intend to reduce the size of claims by
taking swift action and limiting the scope of the loss.
Customer perspective
In August 2010, Tryg introduced a common Nordic branding platform
(see box to the left). A strong Nordic brand will strengthen our posi-
tion and competitive strength, and we expect that our customers
will experience a stronger presence and recognisability. We intend to
continue our pan-Nordic marketing of the Group’s new brand and to
enhance our communication with customers, thereby increasing the
Group’s top-of-mind position throughout the Nordic region.
We must appreciate that our customers require peace of mind
from the first contact, and if they experience major changes in
life and we must ensure that they remain loyal. By ’remain loyal’
We wish to generate profitability in all segments through cost re-
we mean customers who renew their commitment with us and
ductions, premium adjustments and by defining the right price per
act as ambassadors by speaking positively of and recommending
risk. We intend to reduce the Group’s selling costs by focusing on
Tryg to others. We want our customers to experience the peace-
partnership agreements, geographic representation, outsourcing
of-mind delivery through segmentation of customer profiles and
and online sales. Distribution costs will be reduced through the
claims behaviour. We will continue to expand our active claims
introduction of additional self-service solutions in Private Nordic
assistance and claims prevention consultancy rather than just
and Commercial Nordic including our partnership agreements.
providing financial solutions.
A strong branding platform is important with respect to customer
Tryg wants to increase the Group’s market positions and Nordic
loyalty and retention and it supports the potential for increasing
market share by balancing profitable growth through direct acti-
the Group’s market position and Nordic market share.
vities as well as partnerships. Our customers should be confirmed
in their choice of insurer on an ongoing basis. We intend to
Communication increasingly takes place over the Internet and on
maintain the Group’s high retention rate by being among the in-
mobile platforms. Accordingly, we intend to meet our customers on
surance companies with the highest customer satisfaction rates.
their own terms by increasingly communicating electronically and
Tryg intends to reduce claims by urging customers to prevent
providing services that customers can access irrespective of where
claims through guidance and attractive agreements, as preven-
they are and through their preferred means of communication.
tive measures can help reduce risk and thus premium levels.
Learning perspective
We wish to preserve our market-leading skills within niche
Tryg intends to use Corporate Social Responsibility (CSR) to
concepts as demonstrated by our activities in Enter Forsikring,
provide a competitive edge and incorporate CSR thinking in
Atlantica and Bilsport & MC.
everything we do. The Group’s CSR efforts cover four themes:
climate, inclusion, well-being and prevention.
Process perspective
In order to preserve our position in the Nordic market, we must
Read more about Tryg’s CSR efforts
continuously make our business more efficient and focus on cus-
in the Stakeholder magazine.
tomers’ purchase and use of insurance. In 2010, the Group took
the initial steps in Tryg Transition, a project designed to create pan-
We focus on our employees’ well-being and development, and
Nordic processes, systems and deliveries to customers as well as a
we strive to continuously develop as an attractive workplace. Our
common business platform in the Group. Tryg Transition is a busi-
ambition is to be perceived as the most attractive workplace in
ness project designed to secure Tryg’s long-term Nordic position
the Nordic financial sector.
by improving efficiency, reducing product complexity and address-
ing market trends, for example with respect to self-service.
The Group intends to ensure that the skills of managers and em-
By intensifying our focus on costs and
continuously increasing the portfolio per
employee, we intend to improve the
expense ratio and to gain a leading
position in the area. Our ambition is to
reduce the expense ratio to 10 by 2020.
ployees are developed in step with the competency requirements
of a developing organisation – an area that is closely linked to
the Tryg Transition project.
Furthermore, Tryg intends to maintain employee satisfaction,
which is above the financial sector average, and to have diversity
as a competitive advantage.
Tryg A/S | Annual report 2010 | 15
KPI (Key Performance Indicators)
Turning words into results – We use the balanced scorecard (BSC) to implement the Group’s strategy
and retain our strategic focus areas.
Financial perspective
Customer perspective
T
r
e
n
d
Retention rate
(index)
Expense ratio
Claims ratio
before run-off
Number of custo-
mers with concept
agreement (index)
Customer satis-
faction in claims
handling (index)
2006: 100
2007: 101.4
2008: 101.5
2009: 100.9
2006: 16.9
2007: 16.8
2008: 17.1
2009: 17.2
2006: 69.5
2007: 69.1
2008: 72.8
2009: 75.8
2007: 100
2008: 102
2009: 101
2009: 100
2010: 100.4
2010: 17.0
2010: 84.7
2010: 102
2010: 102
D
e
s
c
r
i
p
t
i
o
n
G
o
a
l
s
A
n
a
y
s
i
s
l
Number of customers
Administrative ex-
The ratio of claims
Index showing the
Index of customer
that renew their
penses and selling
incurred to gross
proportion of our
satisfaction for
insurances annually.
costs as a percentage
earned premiums
private customers
customers having
of earned premiums.
before run-off.
having made a multi-
experienced claims
ple product/concept
handling.
agreement.
Maintain the
current level.
Reduce of the
Gradual improvement.
Gradual increase
Maintain the leading
expense ratio to
10 by 2010.
of the proportion.
position in satisfaction
in claims handling.
The retention rate
Despite increased
The claims ratio was
The number of custo-
In 2010, Tryg had
remained at a high,
costs for branding
affected by extraordi-
mers with a concept
the highest customer
stable level in 2010.
activities, Tryg was
nary claims due to
agreement increased
satisfaction among
able to reduce the
hard winter weather,
in 2010 as a result of
the Danish companies
In Denmark, the high
expense ratio from
cloudbursts and a
an increase in the ave-
and among the best
retention rate was
17.2 to 17.0.
deterioration in some
rage number of pro-
placed of the Norwe-
maintained despite
substantial premium
increases.
product areas such as
ducts per customer.
gian companies pro-
house and contents
insurances.
gressing 2 percentage
points.
The positive develop-
ment was due to
shorter processing time
and higher telephone
availability.
16 | Annual report 2010 | Tryg A/S
Customer perspective
Process perspective
Learning perspective
Tryg Transition
Will figure as a KPI from
2011.
Portfolio per
full-time employee
(index)
Employee satisfaction
(index)
CO2 emission
(tonnes)
2006: 131
2007: 139
2008: 134
2009: 139
2006: 102
2007: 100
2008: 100
2009: 103
2007: 1,460
2008: 1,563
2009: 1,685
2010: 146
2010: 102
2010: 1,580
Tryg Transition is a change
Index of portfolio
Index of employee
project and the next natural
per employee.
satisfaction measured
Total CO2 emission
from air travel (tonnes).
step in making the Group’s
business model Nordic.
in an annual employee
survey.
T
r
e
n
d
D
e
s
c
r
i
p
t
i
o
n
Establish a unified Nordic
Increase in step with
Become the most
business with one set of
productivity, that is about
attractive financial
Reduce the Group’s CO2
emission from air travel by
G
o
a
l
Nordic products, processes
2% per year.
workplace in the Nordic
10% relative to 2008 level.
and IT platform.
region.
The Tryg Transition project
A decrease of employees
In 2010, Tryg expanded
After an increase in the
was launched in 2010.
in Denmark and Norway
the scope of questions
Group’s CO2 emissions
and an increased number
to obtain a more varied
from air transport in 2008
in Sweden and Finland
picture of employee
and 2009, the emissions
ensured a higher portfolio
satisfaction.
in 2010 fell due to a stricter
per employee.
travel policy and expansion
Tryg is 1 index point
of the Group’s video con-
above the financial sector
ference facilities.
average, where banks are
traditionally ranked higher
than insurance companies.
A
n
a
y
s
i
s
l
Tryg A/S | Annual report 2010 | 17
The insurance industry
The Nordic insurance industry is characterised by few companies
market and submitted bids in insurance programmes tendered by
holding relatively large market shares and having a presence in
brokers for several large companies. Tryg does not compromise
several markets in the Nordic region. The four largest companies
on profitability, and accordingly had to see several corporate cus-
have an aggregate Nordic market share of around 47%, and
tomers leave the company during the year. Historically, however,
the four largest companies in each of the four Nordic countries
many such customers return as it is difficult for the foreign insur-
cover an aggregate of between 63% and 81% of the respective
ers to match our service and quality in claims handling.
markets between them.
In 2010, the Nordic insurance industry generated aggregate
benefited from rising equity prices. Strong earnings growth and
earned premiums of around DKK 150bn, accounting for some
moderate equity valuations relative to the return on bonds gen-
2.1% of the region’s GDP.
erated good equity returns despite a negative sentiment and
In 2010, the investment activities of the insurance companies
In the past few years, insurance companies
across the Nordic region have generally
increased premiums to counter higher claims
costs and maintain profitability. However,
these initiatives are not yet deemed to be
sufficient.
economic challenges in several European countries.
Recent years’ challenges in the financial markets have resulted
in stronger focus on capitalisation and risk management. The
upcoming Solvency II rules are expected to affect the insurance
companies’ risk behaviour including capital requirements com-
pared to investment risk.
Tryg in the market
Fierce competition, high claims inflation, more weather claims
region, Tryg helps shape developments in the Nordic insurance
Being the second-largest insurance company in the Nordic
and the economic downturn continued to put pressure on Dan-
industry.
ish insurers’ earnings in particular in 2010. Premium and profit-
ability initiatives retained top priority in order to restore the
Financial market volatility and the focus on risk, the lower earn-
earnings levels of prior years. Most companies, particularly the
ings in 2010 and upcoming stricter solvency requirements are
Danish ones, implemented premium increases and profitability
likely to cause the insurance industry to change its behaviour.
initiatives in the private and commercial markets, while competi-
tion for large corporate customers was fierce due to bids from
Developments would indicate better pricing relative to the risk
several international players. Premium increases implemented in
which insurers assume from their customers. It is difficult to
2010 will feed through as gross earned premiums in 2011 and
predict how these developments will affect the distribution of
2012. Behaviour in the market would generally indicate more
market shares and the behaviour of individual competitors, but
measures to enhance profitability in the years ahead.
Tryg intends to exploit any opportunities that may contribute
to profitable growth. Tryg’s overall market share in the Nordic
The corporate market is characterised by medium-sized and large
region is expected to increase in the years ahead, primarily due
businesses served directly by an insurer or through an insurance
to growing market shares in Finland and Sweden. In addition
broker. Large customers in particular may see international insur-
to the partnership with Nordea, Tryg is continuously develop-
ance groups as an alternative to the Nordic insurance compa-
ing and streamlining the Group’s own sales channels and other
nies. In a historical perspective, however, international players
business partnerships, thereby covering more parts of the Finn-
have only to a small extent been able to build market positions
ish and Swedish insurance markets. For Denmark and Norway,
in the Nordic region. In 2010, several large international insur-
the main target is to improve profitability, which may cause a
ers once again showed an interest in setting up in the Nordic
loss of market shares in the short term.
18 | Annual report 2010 | Tryg A/S
Like the rest of the industry, Tryg increased premiums in 2010.
investments in process enhancements such as digitalisation, IT
The premium increase will continue to have an impact in the
systems and self-service are expected to improve the Group’s
years ahead. Likewise, initiatives have been implemented to
earnings and are important longer-term drivers for ensuring the
reduce claims. These initiatives are designed to improve overall
Group’s strong competitive power and low expense ratio.
earnings while also making for a better distribution in earnings
between the individual insurance products.
In 2011, Tryg will focus on further strengthening the balance
between price and risk, and on dynamic, compassionate and
However, improvements will not be created by higher insurance
innovative servicing of customers – in relation to regular
premiums alone, but through a sound balance with claims
consultancy as well as in a claims situation.
reducing initiatives and process enhancements. Targeted
Market shares in Denmark
Market shares in Norway
22.3
20.8
5.8
Percent
10.1
18.6
5.0
13.9
3.5
Tryg
Alm. Brand
IF
Alka
Codan
Topdanmark
Gjensidige
Other
Tryg
Gjensidige
Sparbank 1
IF
Other
18.6
17.0
Percent
26.2
28.1
10.1
Market shares in Sweden
Market shares in Finland
3.3
18.3
15.2
15.7
Percent
28.9
18.6
Moderna
Folksam
Länsforsäkringar
IF
Codan
Other
Source: The official market statistics from the countries concerned.
2.3
16.5
18.9
Percent
10.0
27.6
24.7
Tryg a)
Tapiola
Fennia
IF
Pohjola
Other
a) Estimated market share of the private market is above 5%.
Tryg A/S | Annual report 2010 | 19
Customers and products
Being one of the largest insurance companies in the Nordic
Customer segmentation
region, Tryg offers a broad range of insurance products to private
At Tryg, we treat the Group’s private customers in accordance
individuals and businesses. Tryg develops new products on a
with their current stage of life. We work with five life stages
regular basis and continuously adapts existing peace-of-mind
characterised by different levels of activity, cohabitation, work
solutions to customer requirements and developments in society.
life, financial situation and peace-of-mind requirements. Seg-
mentation enables us to the greatest extent possible to offer
Tryg sells insurances through own sales channels and through
advice and solutions tailored to the customers’ specific require-
partners such as Nordea. Tryg offers a broad range of insurances,
ments, while at the same time the targeted advice and individual
and continuously expands the Group’s peace-of-mind solutions.
service make our customers even more satisfied and improve our
potential for sales. Tryg segments private customers into five
Examples of new products
groups (life-stages) according to age and whether they have
Tryg focuses on product development and worked on several
children living at home or not. The segmentation means that
new product launches in 2010. As the only insurer in the Nordic
customers in each segment have several things in common. We
region, Tryg launched a new health product for customers aged
use our segmentation to provide optimum service to customers.
60 and over in May 2010. The health insurance reflects the
Knowing the segment a customer belongs to allows us to target
Group’s attitude that ’health has no age’. An increasing number
products, services, claims handling and sales campaigns in a
of people see life in their 60s as an extension of their 40s and
much better way. This enables us to advise and service custom-
50s, only with more time for the things they like to do best. We
ers based on their own requirements, giving us much more satis-
live longer, are active longer, and want to challenge ourselves
fied customers and improving our potential for sales.
and the world for a long time after we have left the labour
market. As an insurance company, we want to support that
Read about Tryg’s work with life stages
movement, and that is why we have removed the age limit for
in the Stakeholder magazine on page 34.
health insurances.
Customer commitments
Furthermore, Tryg worked on a modular treatment insurance
In 2010, Tryg focused on making the Group’s peace-of-mind
in Norway at the end of 2010, which was introduced 1 January
deliveries visible and clearly positioning us as a peace-of-mind
2011. The insurance is tailored to individual customer require-
provider. In 2011, Tryg will launch a number of specific com-
ments, ensuring an improved peace-of-mind delivery. The treat-
mitments to customers relating to our products and services.
ment insurance comprises four modules, with the base module
We began working on customer commitments in late 2009
being mandatory when the insurance is taken out. In addition,
where Tryg’s employees suggested more than 700 ideas for
the customer may add optional modules such as psychological
commitments. In the spring of 2010, we interviewed 1,200
assistance and physical treatment depending on individual re-
Danish and Norwegian private customers, narrowing down the
quirements. The launch of the modular treatment insurance was
number of commitments based on their responses. The internal
based on the very successful introduction of the modular health
implementation of commitments to private customers began in
insurance in Denmark in 2009. The modular solution is unique,
the autumn of 2010. The customer commitments were clearly
making the product extremely competitive in a market with only
anchored in Tryg and became an integral part of day-to-day
marginal differences between products.
work processes, allowing managers and employees to familiar-
Read more about the new health insurance
on page 32 in the Stakeholder magazine.
ise themselves with them. In 2011, we will launch the customer
commitments on the private markets in Denmark and Norway,
while Sweden and Finland will await the experience gained in
Denmark and Norway. We intend to launch customer commit-
ments to commercial customers at a later date.
20 | Annual report 2010 | Tryg A/S
Product overview
Motor insurances
Workers’ compensation insurances
Motor insurances account for 33% of the Group’s total premium
income and comprise a mandatory third party liability insurance
providing cover for injuries to a third party or damage to a third
party’s property and a voluntary own vehicle insurance providing
cover for damage to the customer’s own vehicle from collision,
fire or theft.
Workers’ compensation insurances account for 7% of the
Group’s premium income and cover employees against bodily
injury sustained at work (in Norway, also occupational diseases.
Workers’ compensation insurances are mandatory and cover a
business’ employees (except for public-sector employees and
persons working as sole traders).
In Denmark, motor insurance taken out by Tryg concept
customers include roadside assistance, such as towing and
battery jump-start.
Fire & contents – Private
Private fire & contents insurances account for 23% of the
Group’s total premium income and include for example house
and content insurances.
Tryg works with the concept of pro-active claims handling,
pursuing a close dialogue with the claimant to optimise claims
handling. Our pro-active claims handling team consists of claims
handlers, social counsellors, legal experts, occupational health
practitioners, orthopaedic surgeons and a network of psycholo-
gists. Pro-active claims handling has three winners: the business,
the injured person and Tryg in the form of a shorter period of
absence from work, enhanced self-esteem for the injured per-
son and reduced expenses.
House insurances cover damage to buildings due to fire, storm,
water and other damage, legal expenses and householder com-
prehensive liability while contents insurances cover the loss of,
or damage to, the contents of private dwellings with a range of
additional features, such as cover for valuables temporarily away
from home, legal expenses and liability arising from occupancy
of the dwelling.
Professional liability insurances
Professional liability insurances account for 4% of the Group’s
premium income and cover various types of liability, including
claims incurred by a company arising from the conduct of its
business or in connection with its products and professional lia-
bility incurred by professionals.
Personal accident insurances
Transport insurances
Personal accident insurances account for 9% of the Group’s
premium income and cover accidental bodily injury or death.
Compensation is in the form of a lump sum intended to help the
policyholder cope with the financial consequences of an acci-
dent, thereby easing the strain of a changed everyday life.
Fire & contents – Commercial
Commercial fire & content insurances account for 14% of the
Group’s premium income and comprise commercial building in-
surances that cover the loss of, or damage to, the buildings, in-
ventory or equipment of commercial customers. In addition, Tryg
provides cover for financial loss due to business interruption re-
sulting from covered claims.
Transport insurances account for 2% of the Group’s premium in-
come and cover damage to goods in transit due to collision,
capsizing or crash of the means of transport.
Health insurances
Health insurances account for 2% of the Group’s premium
income and is a relatively new product in the market attracting
great demand. Health insurances cover expenses involved in
examination, treatment, medicine, surgery and rehabilitation in
a private health care facility. Increasing health care costs and
waiting times in the public system, citizens’ higher requirements
have generated substantial demand for health insurances, and
this demand is expected to continue in the years ahead. The
greater number of insured persons and the increased use of
private health insurances will combine to generate significant
growth potential within health insurance.
Tryg A/S | Annual report 2010 | 21
Outlook
Outlook for the medium term
Despite a lower expense ratio in 2011, expenses involved in
Tryg maintains a medium-term target of generating a return on
the multi-year process and IT efficiency project Tryg Transition
equity exceeding 20%, corresponding to a combined ratio at the
will increase by around DKK 200m annually. Tryg Transition is
level of 90 including any run-off gains or losses, assuming an
a multi-year process and IT efficiency project. Expenses related
unchanged level of interest rates relative to 2010.
to Tryg Transition will support Tryg’s ambition of an expense
Technical result
ratio of 10 by 2020, achieved in particular through extensive
restructuring of processes and IT infrastructure and increased
The combined ratio for 2011 is expected to improve based on
use of self-service.
the major initiatives implemented in 2009 and 2010 and the
initiatives planned for 2011. However, Tryg still expects a high
Investment return
level of claims costs and follow the risk of a new claims inflation
Tryg divided the investment portfolio into two portfolios in 2010
closely. The initiatives are expected to have an impact of more
– a match portfolio exclusively intended to match the technical
than DKK 1.0bn in 2011 with an additional impact in 2012. The
provisions and a free investment portfolio for actively investing
initiatives mark the first major step on the road towards achieving
the Group’s capital.
the combined ratio targeted for the medium term, but additional
important improvements are scheduled for 2012 and 2013 in
Read more about the investment return
order to achieve our long-term targets.
in the section Investment activities.
Tryg expects premium growth at the level of 2010, composed
Price fluctuations on the match portfolio resulting from interest
of sustained organic growth in Sweden and Finland and growth
rate changes are offset by an opposite interest rate effect on the
in Denmark and Norway that will to a great extent relate to the
discounted provisions, thereby neutralising any immediate effect
above initiatives.
on the financial results. On the other hand, higher interest rates
produce higher, current earnings.
Based on the most recent experience, the level of both weather
claims and large claims is expected to increase in 2011 compared
Equities and real estate in the investment portfolio are expected
with previous forecast for a normal year. The increase in weather
to generate returns of 7% and 6%, respectively. The outlook for
claims is in particular attributable to the more frequent and more
bonds is based on the interest rates prevailing at 31 December.
violent cloudbursts. In addition, winter claims in 2010 triggered
At 31 December 2010, bonds in the investment portfolio yielded
an upgrade of forecasts. The level of large claims was higher
1.4%, while bonds in the match portfolio yielded 2.3%.
than expected in 2010, resulting in the higher expectations going
forward. It should be noted in this context that the divestment
Capitalisation
of the marine portfolio reduced the exposure to large claims
As in prior years, Tryg’s capitalisation in 2011 is expected to
significantly.
exceed the capital requirements to be imposed on the insur-
ance industry by the upcoming Solvency II rules by a substantial
The expense ratio is expected to fall in 2011. This will expectedly
margin. The Group’s own capital requirement target is currently
be achieved, among other things, because all divisions still have to
based on Standard & Poor’s ’A-’ rating, to which Tryg has added
reduce their direct costs by at least 2% each year. In 2011, addi-
a safety margin of 5%.
tional cost reductions have been implemented in the form of less
staffing due to efficiency improving initiatives and automation as
The Group’s capital requirement and structure
well as lower travel, meeting and consultant costs. Furthermore,
are described in greater detail in the section
branding costs which affected the expense ratio by 0.4 percentage
Capital management and profit distribution.
point in 2010 will be substantially reduced in 2011.
22 | Annual report 2010 | Tryg A/S
Tryg A/S | Annual report 2010 | 23
Good risk selection, low costs
and focus on efficient processes are
the basis for the results achieved.
Results
The Group’s financial performance
The pre-tax profit for 2010 was DKK 941m against DKK 2,610m
terms) to DKK 19.5bn in 2010. Premium increases in Denmark
in 2009, reflecting a sustained high underlying claims level and a
and Norway and high growth rates in Sweden and Finland lifted
number of one-off events. Winter claims, cloudburst and a workers’
premiums, while Corporate saw intensified competition. The com-
compensation verdict produced claims which were DKK 1.4bn higher
mercial and corporate markets especially in Denmark remained
than in a normal year. These events are referred to as extraordinary
affected by the lower level of activity in society in general, which
events in the annual report. Additionally, an adjustment of DKK
resulted in fewer assets to insure as well as challenges on the
0.1bn of unearned premium provisions for change of ownership
claims side.
insurance was made. With a view to improving profitability, Tryg
has implemented significant initiatives in the past few years, and
Tryg continued to expand in Sweden and Finland in 2010. To
we record a distinct improvement in the underlying development in
this should be added increased costs of branding activities due
Norway and Finland and an incipient improvement in the Danish pri-
to a new Nordic name and logo as well as costs related to the
vate market. Profitability remains unsatisfactory relative to the target
multi-year process and IT project named Tryg Transition. Despite
of a combined ratio at the level of 90, and additional initiatives are
increased branding costs, Tryg managed to reduce the expense
therefore underway to improve profitability in 2011 and 2012.
ratio from 17.2 to 17.0, which was better than expected.
The gross claims ratio was 80.2 in 2010 against 72.1 in 2009 and
Premium growth driven by premium initiatives and new markets
negatively impacted by 7 percentage points due to the above-
Gross earned premiums increased by 4.5% in 2010 to stand at
mentioned extraordinary one-off events.
DKK 19.5bn, attributable to high premium growth rates in Swe-
The combined ratio increased to 98.8 in 2010 from 92.2 in
mented in all four countries. Private Nordic generated premium
2009 including the events referred to above. The combined ratio
growth of 8.3% in local currency terms, to stand at DKK 10.2bn.
was impacted by a positive run-off result of DKK 824m in 2010
Most of Tryg’s customers are private households with a fairly
against DKK 683m in 2009. The relative run-off result relating
stable purchasing power and insurance requirements.
provisions was almost unchanged in 2010 compared with 2009.
den and Finland and the impact of the premium increases imple-
At the end of 2010, Commercial Nordic was characterised by in-
Tryg generated high growth in gross earned premiums in a
creasing average premiums, reduced insurance need and a slightly
challenging market, recording an increase of 4.5% (9% in DKK
higher customer outflow. Gross earned premiums increased by
Technical result by business area
One-off and extraordinary events
DKKm
1,200
900
600
300
0
-300
-600
4
1
9
2
3
7
6
4
4
9
6
3
7
3
1
,
1
8
7
8
4
9
3
4
-
5
6
4
-
Private Nordic
Commercial Nordic
Corporate Nordic
DKKm
2,500
2,000
1,500
1,000
500
0
One-off events
DKK 2.2bn
All figures are gross.
Extraordinary
events
DKK 1.4bn
2008
2009
2010
Extraordinary winter claims Q4
Large claims
Extraordinary winter claims Q1
Cloudburst in August
Workers’ compensation verdict
26 | Annual report 2010 | Tryg A/S
9.6% in local currency terms (12.9% in DKK terms) to stand at DKK
made with respect to loss-making insurance products for
4.3bn, affected by a portfolio transfer from Corporate to Commer-
the expected future loss until the product is profitable, which is
cial. Excluding this transfer, premium growth was 3.0%.
recognised as a reduction in earned premiums. This accounting
Gross earned premiums in Corporate Nordic were lower than ex-
corresponding to a reduction of 0.6 percentage point of pre-
policy reduced earned premiums for the full year by DKK 106m,
pected at the beginning of the year, falling by 5.9% in local cur-
mium growth for the year.
rency terms (a fall of 1.6% in DKK terms) to stand at DKK 5.0bn.
Several large insurance programmes were tendered in 2010. The
Claims strongly impacted by claims inflation
Group’s underwriting assumes profitability for such businesses,
and extraordinary claims
and accordingly Tryg did not participate in the tender rounds for
The gross claims ratio was 80.2 in 2010 compared with 72.1 in
reasons of profitability. Danish workers’ compensation insurance
2009. The development in the claims level was affected by rising
in particular recorded a declining number of customers. Corporate
claims costs, particularly in Denmark, and extraordinary claims,
Nordic transferred a portfolio to Commercial Nordic, which had a
which impacted the claims ratio by around 7 percentage points.
3% negative impact on the performance.
The rising claims costs related particularly to the Danish part of the
business, affecting the private, commercial and corporate markets
Geographically, growth rates remained high in Sweden and Finland
alike, and were mainly attributable to the economic downturn.
at 43.8% and 23.4%, respectively. Growth in Sweden was impacted
by the acquisition of Moderna, which was consolidated from the
For 2010, the Group had originally expected weather claims
second quarter of 2009. Adjusted growth in Sweden was 19.6%.
of DKK 200-300m and large claims of DKK 500-600m,
Gross earned premiums in Norway increased by 1.4% to DKK 7.5bn,
corresponding to a total assumption of around DKK 800m.
and premiums income in Denmark increased by 1.2% to DKK 9.6bn.
Extraordinary winter claims totalled a gross amount of DKK
Like Norway, the Danish market has generally been characterised by
0.9bn at 31 December 2010, cloudburst claims DKK 0.3bn,
premium increases since 2008, which is reflected in the growth.
large claims DKK 0.8bn, and a decision by the Danish Supreme
The Group’s premium growth was adversely affected by an in-
Corporate Nordic) entailed increased provisions of DKK 200m.
crease in unearned premium provisions for change of ownership
Total expenses for extraordinary claims amounted to DKK 2.2bn
insurances. According to accounting rules, provisions must be
or DKK 1.4bn more than in a normal year.
Court on workers’ compensation (read more in the section
Weather claims
Large claims
DKKm
1,200
1,000
800
600
400
200
0
DKKm
1,000
800
600
400
200
0
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
Storm and cloudburst, gross
Extraordinary winter claims
Large claims, gross
Large claims, net
Expected level for 2010 (DKK 200-300m)
Expected level 2010 (500-600 DKKm)
Tryg A/S | Annual report 2010 | 27
Example of lean at Tryg
Department
Before
After
Dealer service in Norway
Case processing time: 30 days
Case processing time: 2 days
Team Internet Norway
Sales budget achievement: 90%
Sales budget achievement: 165%
Motor claims
Case processing time: 22 days
Case processing time: 4 days
The winter in January 2010 was the coldest in Denmark in 14
costs in Denmark and Norway remained at a competitive level with
years, December the second coldest and August was the 10th
an expense ratio of 16.0. Sweden and Finland improved the expense
wettest month in weather history. January was the 8th coldest
ratio from 30.1 to 24.1 and are on track in enhancing profitability.
month in Norway in weather history. Based on the Group’s experi-
ence from cloudburst and snow load claims, a number of initiatives
The Group made sales distribution more efficient in 2009 and 2010.
have been launched, and more will be made to improve the risk
In Denmark, this resulted in 8 out of 22 sales offices being closed
balance going forward (read more in the section Private Nordic).
and the employees relocated to larger sales offices or call centres.
In Norway, the number of franchise offices was reduced from 85 to
While Denmark, Norway and Sweden were all affected by the
70, and the remuneration structure for franchisees was changed
winter weather, especially Denmark was also impacted by the
to focus more on sale to new customers and less to existing cus-
economic downturn and the severe effects this had in Denmark.
tomers. Tryg’s own sales force in the Norwegian private business
The adverse development impacted, among others, contents,
was relocated to customer service centres, leaving the franchise
house and change of ownership insurances which recorded steeply
part with direct physical sales.
increasing claims and required additional provisions (read more in
the section Private Nordic). In addition to the Supreme Court deci-
Paperless processes, digitalisation of a large number of internal
sion in Denmark, the performance of workers’ compensation was
processes, including in particular claims processes, will enhance
affected by low economic activity, which reduced the number of
efficiency by improving business processes and IT systems,
less complex industrial injuries but increased the number of claims
enabling staffing to be reduced. In the longer term, digitalisation
involving loss of ability to work. Overall, this impaired the perform-
and automation will be among the most important competition
ance since claims involving loss of ability to work account for only
and profitability drivers.
around 3% of the number of claims, but nearly 80% of claims paid.
At 31 December 2010, the Group employed 4,291 full-time em-
In Finland, claims in the private business developed satisfactorily
ployees, which was 19 employees fewer from the year-earlier date.
as reflected in an improvement of the claims ratio from 84.2 in
This development is a combination of natural wastage in Denmark
2009 to 80.9 in 2010. The claims ratio in Sweden was 84.6 in
and Norway with 80 employees leaving the Group since 2008, and
2010 against 80.6 in 2009 and, like in Denmark and Norway, it
an increase of employees in Sweden and Finland, where the Group
was adversely impacted by winter claims.
is expanding rapidly. In the past few years, Tryg has focused on
in-house rotation to fill vacant positions, particularly in the Danish
After settlement of reinsurance, the claims ratio, net of ceded
and Norwegian parts of the organisation.
business was 81.8 against 75.0 in 2009.
Efficiency enhancements reducing costs
principles contributed to reducing staff costs in 2010. This has
Costs were affected by branding activities, which amounted to DKK
been achieved with enhanced quality to customers and greater em-
70m with a 0.4 percentage point impact on the gross expense ratio.
ployee satisfaction. For example, the work load has been evened
The gross expense ratio was 17.0 against 17.2 in 2009. Overall,
out between the claims departments, and employee involvement
Greater efficiency in operations and processes based on the Lean
28 | Annual report 2010 | Tryg A/S
has been increased in the day-to-day planning of work flows.
The equity proportion was increased slightly in 2010, while the
See lean examples on the opporsite page.
proportion of bonds was reduced accordingly. The equity and
Tryg’s overall efforts to improve profitability include initiatives to
to the return. The total investment return (free investment and
optimise procurement of goods and services, more efficient claims
match portfolios) was DKK 570m against DKK 1,086m in 2009.
handling and distribution platforms, and a sustained requirement for
The gross investment return (before transfer to insurance and be-
all managers to reduce their direct costs by at least 2% annually.
fore other financial expenses) not related to investment activities
was DKK 722m against DKK 1,193m in the same period of 2009.
real estate investments in particular made positive contributions
In addition to cost reductions, Tryg invests in a multi-year
improvement of business processes and IT systems, which will
Tax
increase costs in the short term. This is the Group’s transition
Tax on continuing business was DKK 265m in 2010 against DKK
programme, designed to ensure common business processes and
625m in 2009, equalling a slight increase in the effective tax rate
systems and support the ambition of achieving an expense ratio
from 24 in 2009 to 28 in 2010. The effective rate in 2009 was
of 10 by 2020. Finally, increased expenses will be incurred in con-
low due to utilisation of accumulated tax losses in Sweden and
nection with the implementation of Solvency II. Focus on costs
tax-free gains on equities. The effective tax rate in 2010 was also
and investments in processes provide a strong foundation and
positively affected by tax-free gains on equities but adversely af-
help secure Tryg’s longer-term growth and value creation.
fected by the distribution of profits on individual countries as, for
Performance of discontinued business
In the spring of 2010, Tryg sold the right to renew the Group’s ma-
Shareholders’ equity
example, Norway has a higher tax rate.
rine portfolio, which at the time of divestment amounted to around
Shareholders’ equity stood at DKK 8,458m at 31 December 2010.
DKK 400m and had produced unsatisfactory results over a prolonged
The decrease was composed of dividends paid out of DKK 991m
period. The results of the run-off portfolio are included in ’discon-
and own shares bought back of DKK 816m which was, however,
tinued business’ in the financial statements. At 31 December 2010,
offset by the profit for the year of DKK 593m. The return on equity
less than 10% of the portfolio remained, and this is expected to be
was 6.6% in 2010 against 22% in 2009.
phased out around the summer of 2011. Run-off of the provisions
for claims is expected to last a number of years.
Events after the balance sheet date
Overall, divested business reported a loss of DKK 83m against DKK
resign her position as Group CEO. Stine Bosse has been with
On 11 January 2011 Stine Bosse announced that she wished to
23m in 2009.
Tryg since 1987 and has served as Group CEO since 2003. The
Supervisory Board agreed with Stine Bosse that she would remain
Investment return
as Group CEO until 31 January 2011 and subsequently make her
At the beginning of 2010, Tryg divided the investment assets into a
services available during the six-month notice period.
free and a match portfolio. The size of the match portfolio were DKK
30.9bn at the end of the year which corresponds to the discounted
In accordance with good corporate governance, the Supervisory
value of the technical provisions and hedging the related interest rate
Board had regularly considered the question of continuity and suc-
risk. The match portfolio is composed so as to best generate a return
cession in the company’s senior management and announced on
corresponding to the technical interest plus/less the value adjust-
12 January 2011 that Group CFO Morten Hübbe would assume the
ment resulting from changed discount rates. In 2010, the match
position as Group CEO of Tryg on 1 February 2011. Simultaneously
portfolio generated a return of DKK 974m as compared with the total
with the appointment of Morten Hübbe as Group CEO and upon
return to technical provisions of DKK 979m. The total negative devia-
consultation with Morten Hübbe, the Supervisory Board appointed
tion for the year was thus DKK 5m. The free investment portfolio
Group Executive Vice President Lars Bonde as member of the Execu-
comprising equities, real estate and bonds amounted to DKK 9.5bn
tive Management. Morten Hübbe and Lars Bonde will thus form the
at 31 December 2010 and yielded a return of DKK 772m or 7.4%.
senior management in charge of day-to-day operations in Tryg.
Tryg A/S | Annual report 2010 | 29
Private Nordic
Read about a new cooperation agreement
to prevent snow pressure claims
in the Stakeholder magazine page 16.
Private Nordic sells insurances to private individuals in
As in Denmark and Norway, the Swedish part of Private Nordic
Denmark, Norway, Sweden and Finland. Sales take place
was also greatly impacted by the winter. In 2010, the Swedish
through call centres, the Internet, own sales agents,
business focused on integrating the Group’s original Swedish
franchisees (Norway), affinity groups, car dealers, real
business in Malmø with the acquired company, Moderna, and on
estate agents and Nordea’s branches.
setting up a single Swedish organisation and business platform.
Performance affected by weather claims and economic
Combined ratio was 96.4 relative to 92.8 in 2009. The combined
recession, but underlying operations improved
ratio in Finland of 101.7 was only to a limited extent impacted by
Weather claims and the economic downturn reduced the overall
winter claims. The Finnish combined ratio reflects the achievement
performance, while the underlying operations improved, particu-
of the most important targets in relation to restoring profitability.
larly due to premium increases implemented in 2009 and 2010.
The effect of the economic downturn was particularly pro-
Development in gross premiums
nounced in the Danish part of Private Nordic, having a distinct
Gross earned premiums were up by 8.3% in local currency terms
impact on claims development related to house, contents and
to stand at DKK 10,181m. Growth was 5.8% when adjusted for
change of ownership insurances.
Moderna, which was included with one quarter more in 2010 than
in 2009. Premium initiatives in the Danish, Norwegian and Finnish
The lower profit was in particular attributable to weather
parts of the business made a major contribution to the positive
losses, which stood at an unusually high level in 2010. The
performance.
harsh winter impacted particularly the Danish and Norwegian
parts of the business, while the Finnish business was only
The Danish private business implemented in particular premium in-
to a limited extent affected by winter claims despite a longer
creases for contents, holiday home and change of ownership insur-
period of frost and snow. With a 5 percentage point fall in the
ances and, to a lesser extent, for house insurances. These initiatives
combined ratio, the Finnish business was a positive contribu-
had an impact of almost DKK 150m. The higher premiums increased
tor to the overall profit, illustrating the earnings advantage of
the premium volume. To this should be added higher sales through
geographic diversification.
partners, and several partnership agreements were renewed.
Profit/loss for Private Nordic
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
Run-off gains/losses, net of reinsurance
Key ratios
Gross claims ratio
Business ceded as percentage of gross premiums
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
30 | Annual report 2010 | Tryg A/S
2008
2009
2010
8,122
-5,735
-1,598
789
-85
210
914
190
70.6
1.0
71.6
19.7
91.3
8,962
-6,751
-1,477
734
-87
85
732
134
75.3
1.0
76.3
16.5
92.8
10,181
-8,223
-1,627
331
38
77
446
399
80.8
-0.4
80.4
16.0
96.4
Read about how diversity in Tryg creates added
value for the Group, employees and not least
customers in the Stakeholder magazine page 22.
The impact of the premium increases was clearly reflected in the
by premium initiatives. As already noted, Sweden focused
development of average premiums for house and motor insuranc-
particularly on the integration of Moderna with the Swedish
es in both the Danish and the Norwegian parts of the business.
business in Malmø, which Tryg founded in 2006. Growth in 2010
Developments in change of ownership insurances were unsat-
fact that Moderna was included with an extra quarter in 2010.
isfactory despite premium increases of 40% from the beginning
of 2010. Due to the negative performance, Private Nordic will
Claims affected by harsh winter and cloudbursts
implement further premium increases of 50% from 2011 and also
The development in claims deteriorated in 2010 in particular
adopt a more restrictive underwriting policy.
due to winter and cloudburst claims, which increased the claims
was nearly 20% in Finland and 20% in Sweden, adjusted for the
Unemployment insurances were considered an increased risk
already in 2008, and since 2009 Tryg has to a large extent with-
Severe winter claims had an impact of DKK 500m on the per-
drawn from this market. We introduced large premium increases
formance, corresponding to a 5 percentage point impact on the
in 2010, which resulted in an outflow of business and a major
combined ratio. Winter claims had major impacts in Denmark and
ratio from 75.3 in 2009 to 80.8 in 2010.
reduction of the business volume. As was expected, the general
premium increases resulted in a higher outflow of customers, and
the retention rate in Denmark decreased during 2010 from 91 to
Customer retention in Denmark and Norway
90, remaining, however, at a satisfactory, high level.
The Norwegian private business recorded premium growth of
3.4%, composed of premium increases for particularly motor,
house and contents insurances with an impact in 2010 of around
DKK 100m. Unlike in Denmark, the Norwegian private business
improved its retention rate from around 85 at the beginning of
the year to around 86 at the end of 2010.
Sweden and Finland recorded growth in accordance with the
plans for those areas. Finland sustained its strong growth,
however, at the same time focussing on improving profitability
%
94
92
90
88
86
84
82
2006
2007
2008
2009
2010
Denmark
Norway
Average premiums – House
Average premiums – Motor
Index
150
140
130
120
110
100
90
Index
120
110
100
90
80
2005
2006
2007
2008
2009
2010
2005
2006
2007
2008
2009
2010
Denmark
Norway
Denmark
Norway
Tryg A/S | Annual report 2010 | 31
Norway of DKK 163m and DKK 260m respectively. The Swedish busi-
2010 was affected by a sustained increase in claims within contents,
ness was impacted by winter claims of DKK 66m, while the Finnish
house and change of ownership insurances, particularly in the Dan-
business was almost unaffected by extraordinary winter claims.
ish part of the business. Tryg believes there is a clear connection
between this trend and the economic downturn and claims inflation.
In August, Denmark was hit by a cloudburst that produced claims
Tryg recorded, among other things, a steep increase in the number of
of around DKK 200m with a 2 percentage point impact on the
reported thefts of jewellery, and has introduced stricter documenta-
combined ratio. Tryg provides consultancy to customers on how
tion requirements for this type of claim. Tryg has previously expressed
to best protect their homes from cloudbursts, including on how
concern about police efforts in relation to theft, and we are pleased
to prevent basement flooding. In addition, the Group intends to
to note that the police have scaled up their efforts against burglaries
differentiate prices which will be higher in areas with the greatest
and similar crimes since the first quarter of 2010.
risk of flooding, and to combine these measures with require-
ments for preventive measures and higher deductibles.
In Norway, the underlying claims ratio improved when disregard-
ing weather claims, which was attributable to premium increases,
particularly for house, motor and holiday home insurances, and the
fact that Norway was not affected by the economic downturn to
Extraordinary winter effect in Private Nordic
any significant extent.
DKKm
0
-50
-100
-150
-200
-250
House and content
Motor
Accident
Denmark
Norway
The claims ratio in Finland improved by 3.4 percentage points, at-
tributable to minor premium increases for all products, emphasising
that the Finnish business now contributes to the Group’s overall
profitability and will continue to do so in future.
Focus on optimising costs
Costs remained a key issue in 2010. The distribution of tasks be-
tween insurance agents, service centres and web-based self-service
was optimised. The number of service centres in Denmark was
reduced from 22 to 14, while the franchise offices in Norway was
reduced from 85 to 70. This trend will continue in the years ahead
through the continuous development of digital processes.
Claims frequency – House
Claims frequency – Motor
Index
145
135
125
115
105
95
Index: Year 2005 = 100
Index
Index: Year 2005 = 100
140
130
120
110
100
90
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
Denmark
Norway
Exclusive extraordinary winter claims
Denmark
Norway
Exclusive extraordinary winter claims
Exclusive extraordinary winter claims
32 | Annual report 2010 | Tryg A/S
Commercial Nordic
Read more about workers’ compensation
insurances in Corporate Nordic.
Commercial Nordic sells insurances to small and medium-
recession also triggered a fall in the number of persons employed by
sized enterprises, mainly in Denmark and Norway. In Swe-
small and medium-sized enterprises. These trends are directly linked
den, most of the commercial business is written through
to a reduction in the number of workers’ compensation insurances
brokers and forms a part of Corporate Nordic. The com-
while at the same time a decision by the Danish Supreme Court on
mercial business in Finland remains in a start-up phase.
workers’ compensation had an adverse impact on profit.
Performance affected by claims, recession and costs
The performance in Norway was also negative compared with
The technical result was a loss of DKK 465m in 2010. The loss is
2009, although the Norwegian part of the commercial business
composed of winter claims, large claims and cloudburst claims,
was not nearly as much affected by weather claims and unaffected
which particularly affected the Danish part of Commercial Nordic,
by economic conditions. However, the level of large claims was
and continued challenges in the commercial business which are
high, and group life insurances saw an adverse development.
being addressed by profitability initiatives.
Interest rates were low as in 2009, adversely impacting profit.
The underlying development was unsatisfactory, necessitating
Development in gross premiums
premium increases and cost adjustments. With a view to improv-
Gross earned premiums increased by 9.6% in local currency terms
ing profitability, the Danish part of the commercial business
to DKK 4,263m in 2010. When adjusted for a transfer of business
implemented premium increases for agricultural insurances in an
from Corporate to Commercial Nordic, growth amounted to 3.0%.
average of 10%. In the autumn, premium increases were imple-
mented for contents insurances.
In 2009, we recorded profitability challenges in the commercial
The economic climate affected the Danish part of the commercial
tural insurances by an average of 10% effective from the begin-
market in particular, which has moved from boom to recession in the
ning of 2010, and in the autumn we increased premiums for con-
course of the past few years. This trend continued in 2010 and was
tents insurances. In addition to general premium measures, Tryg
among other things reflected in an increase of bankruptcies in Den-
made overhauls based on individual customer performances. In
mark by more than 13% from an already high level. The economic
the great majority of cases, premiums were adjusted or deducti-
market. Following up on this, we increased premiums for agricul-
Profit/loss for Commercial Nordic
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
Run-off gains/losses, net of reinsurance
Key ratios
Gross claims ratio
Business ceded as percentage of gross premiums
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
2008
2009
2010
3,694
-2,550
-819
325
-73
117
369
193
69.0
2.0
71.0
22.2
93.2
3,777
-2,797
-925
55
-98
39
-4
192
74.1
2.6
76.7
24.5
4,263
-3,768
-1,029
-534
39
30
-465
100
88.4
-0.9
87.5
24.1
101.2
111.6
Tryg A/S | Annual report 2010 | 33
bles increased. The premium increases from the autumn of 2010
Claims
will have a major positive impact on profitability in 2011, while
The claims ratio increased from 74.1 in 2009 to 88.4 in 2010, corre-
there was only a minor effect in 2010.
sponding to 14.3 percentage points. The development in claims was
affected by an above-average number of claims in an average year.
The Norwegian part of the commercial business did not require
premium initiatives to the same extent as the Danish part, and
Winter claims and cloudbursts affected the claims ratio by
only minor premium increases were implemented, covering in
8 percentage point. Commercial Nordic had the highest level
particular contents and building insurances in Norway.
of large claims in 2010 and impacted the claims level by almost
Earned premiums in the Finnish part of Commercial Nordic in-
10 percentage points.
creased by about 35% to about DKK 100m.
One of the year’s largest claims was a fire event in central Copen-
hagen, which is expected to total a gross amount of DKK 170m
and DKK 114m net of reinsurance.
The economic downturn had a positive impact on workers’ com-
pensation insurances in respect of the number of minor claims,
Customer retention in Denmark and Norway
whereas an increase in the number of claims involving loss of abil-
%
92
90
88
86
84
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Denmark
Norway
ity to work and thus significantly higher compensation resulted in
an overall negative performance for workers’ compensation.
Costs
Costs amounted to DKK 1,029m, and the expense ratio was
reduced from 24.5 to 24.1, which is still not satisfactory. The level
was explained by the continued large number of manual proc-
esses and significantly higher distribution costs than in the private
business. Reducing costs will be an important focus area for the
Group in 2011, and total costs are expected to be reduced in the
years ahead due to lower distribution costs and more internal
processes being automated.
Extraordinary winter effect in Commercial
Effect of claims costs in Commercial Nordic
DKKm
0
-50
-100
-150
-200
-250
DKKm
800
600
400
200
0
Property insurance
Motor insurance
2008
2009
2010
Denmark
Norway
Large claims
Workers’ comp. verdict
Winter claims
34 | Annual report 2010 | Tryg A/S
Corporate Nordic
Corporate Nordic sells insurances to corporate custom-
unusually low level of 83.5 in 2009. Run-off gains had a positive
ers under the brands ’Tryg’ in Denmark and Norway and
impact of 6.4 percentage points on the combined ratio compared
’Moderna’ in Sweden. Corporate Nordic’s products are
with 7.0 percentage points in 2009, while large claims had a
sold through its own sales force and through insurance
negative impact of 4.3 percentage points against 4.6 percent-
brokers. Corporate Nordic serves customers paying
age points in 2009.
annual premiums of more than DKK 900,000 or having
more than 50 employees, and around one fourth of our
The run-off result was DKK 325m in 2010 against DKK 357m in
customers pay annual premiums of more than DKK 10m.
2009, and expenses in respect of large claims amounted to DKK
All sales through brokers are written in Corporate Nordic
357m against DKK 344m in 2009.
irrespective of customer size. Tryg Garanti is included in
the financial results of Corporate Nordic.
In the spring of 2010, Tryg divested its renewal rights for the
Danish workers’ compensation insurance
business were previously recognised in Corporate, but are now
posed challenges in 2010
recognised in ’Profit/loss on discontinued business’, which is
The technical result amounted to DKK 394m in 2010 compared
described in the section The Group’s financial performance.
marine business to Codan Forsikring. The results of the marine
with DKK 878m in 2009. The performance was affected by
one-off events with an adverse impact of around DKK 250m.
Tryg Garanti is mainly involved in guarantee insurance, provid-
Competition intensified in 2010, particularly in the Danish part
ing guarantees to contractors, but also to contract manufactur-
of Corporate Nordic and particularly in relation to workers’ com-
ers and public authorities. Tryg Garanti had earned premiums
pensation insurances. Competition was less fierce in the Norwe-
of DKK 203m in 2010, an increase of 14% relative to 2009.
gian part of Corporate Nordic, and general premium increases of
A higher number of claims in the building and construction
5-7% were implemented.
industry triggered an increase in the claims ratio. The claims
Overall, gross earned premiums fell by 5.9% or DKK 83m in
a combined ratio for the year of 71.9 against 75.3 in 2009,
2010. Combined ratio was 92.7 in 2010 compared with the
supported by an improved cost level. In the second half of 2010,
ratio was 45.8 against 43.7 in 2009, and Tryg Garanti reported
Profit/loss for Corporate Nordic
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
Run-off gains/losses, net of reinsurance
Key ratios
Gross claims ratio
Business ceded as percentage of gross premiums
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
2008
2009
2010
5,165
-3,197
-549
1,419
-446
164
1,137
376
61.9
8.6
70.5
10.6
81.1
5,127
-3,348
-610
1,169
-325
34
878
357
65.3
6.3
71.6
11.9
83.5
5,044
-3,630
-648
766
-399
27
394
325
72.0
7.9
79.9
12.8
92.7
Tryg A/S | Annual report 2010 | 35
Read about new initiatives for corporate
customers to prevent claims in the Stakeholder
magazine page 6, 9 and 12.
Tryg Garanti introduced credit insurances, a product protecting
compensation is insured through public collective agreements
policyholders against losses on debtors.
and is therefore not offered as a product in Sweden. A significant
proportion of the Swedish corporate business comprises commer-
Competition putting premiums in Denmark under pressure
cial customers served by insurance agents. The Swedish business
Corporate Nordic reported gross earned premiums of DKK
sector is highly internationalised, and the partnership with AXA
5,044m, a fall of 5.9% in local currency terms. The business
Corporate Solutions has therefore supported Tryg’s expansion in
volume was reduced due to the economic downturn, which still
the Swedish market for corporate insurances. Given the current
persists particularly in the Danish market. A further cause of
action plans and distribution strategy, this part of the portfolio is
the lower earned premiums was an internal transfer of business
expected to see further growth in the years ahead.
between Commercial and Corporate.
Profitability before growth
In Denmark, lower demand for insurance and intensified compe-
Corporate Nordic generally provides a full insurance package to
tition put pressure on prices, and gross earned premiums fell by
customers within, for example, building, contents, transport,
12%. When adjusted for the transfer of business to Commercial,
workers’ compensation and liability insurances.
the fall was 6%. In particular the portfolio of workers’ com-
pensation insurances was affected by the reduction. Increased
Risk consultancy is the cornerstone of our customer efforts.
risk in relation to workers’ compensation and lower premiums
Consultancy is provided by dedicated customer teams, with Tryg’s
does not make for a sound combination, and Tryg has therefore
employees ensuring a high level of service with respect to risk
reduced the business volume since the autumn of 2009. The
consultancy as well as in a claims situation. We focus on develop-
adverse development was aggravated by intensified competi-
ing areas with sensible risk, in which pricing, product adjustment
tion and businesses’ increased focus on costs. Tryg does not
and development, and profitability are aligned with the Group’s
compromise on profitability, and accordingly lost several large
targets.
customers in 2010.
Claims affected by one-off events
Competition was less fierce in Norway, although premiums came
Gross claims incurred by Corporate Nordic increased by 8.4% or
under pressure early in the year, but the pressure subsided as
DKK 282m to DKK 3,630m. The claims ratio, net of ceded busi-
the year progressed. Overall, the Norwegian part of Corporate
ness was 79.9 in 2010 against 71.6 in 2009.
Nordic reported a 6.0% decrease in gross earned premiums.
This was particularly related to renewals at 1 January 2010
A number of one-off events had an adverse impact on claims
when several large customers left the Group, reducing the
in 2010. Workers’ compensation insurances in Denmark were
opening portfolio. In 2010, the Norwegian part of the corpo-
adversely affected by a decision by the Danish Supreme Court in
rate business implemented general premium increases of 5-7%.
August 2010, which made it possible for part-time employees
The competitive environment prevented a premium increase in
to increase their compensation retroactively. The decision trig-
Denmark.
gered a need to strengthen provisions for prior year claims and
increasing provisions for claims with respect to the current year
The Swedish part of the corporate business made a positive
of around DKK 200m, DKK 120m of which related to Corporate
contribution to growth. The portfolio amounted to around SEK
Nordic and had a 2.5 percentage point impact on the claims ratio.
435m at 31 December 2010, increasing by around 40% in 2010.
Going forward, the annual impact on claims will be limited,
In Sweden, insurances offered by Corporate Nordic include
and it is estimated at DKK 15-20m.
building, loss of profits, liability, transport and motor. Workers’
36 | Annual report 2010 | Tryg A/S
In addition to the Supreme Court decision, workers’ compensa-
When adjusted for the interest rate effect, run-off, large claims
tion insurances were also affected by the economic downturn.
and storms, the underlying claims ratio was higher compared
The number of minor claims fell, whereas the number of claims
with 2009.
involving loss of ability to work and thus significantly higher
compensation resulted in an overall negative performance for
Costs
workers’ compensation. The overall current claims ratio for
The cost level of Corporate Nordic was under pressure in 2010
workers’ compensation insurances is estimated to be close to
due to the adverse portfolio development. The expense ratio
100. Accordingly, additional claims-reducing and premium initia-
increased from 11.9 in 2009 to 12.8 in 2010. This level is not
tives will be introduced.
satisfactory, and initiatives have been implemented to restore the
low level seen in prior years. Targets for 2010 and 2011 include
Weather claims affected the performance in several respects.
reducing the number of employees in Denmark and Norway by
Winter losses and violent cloudbursts in August had an impact
around 10%, mainly by natural wastage. Conversely, the invest-
of 2.4 percentage points on the claims ratio.
ment in the Swedish part of the corporate business has triggered
an overall increase in the cost level.
Furthermore, the claims ratio was adversely impacted by the
lower discount rate which, seen in isolation, added 1 percent-
Additional self-service solutions were introduced in Norway in 2010.
age point to the claims ratio. Large claims amounted to DKK
One such solution was ’Min bedrift’, a portal providing businesses
357m, which was on level with 2009.
with an overview of all their insurance agreements, correspondence
The total net run-off result was DKK 325m in 2010, mainly
business maintains for its employees. These initiatives will succes-
attributable to the personal lines in the Norwegian part of the
sively be deployed to all corporate customers and are expected to
corporate business. In 2009, the run-off result was DKK 357m.
improve efficiency and restore costs to previous years’ lower level.
and claims processing, and a new portal showing the insurances a
Effect of claims costs in Corporate Nordic
Workers' compensation in Denmark
DKKm
800
600
400
200
0
%
100
80
60
40
20
0
2008
2009
2010
Claims costs
Number of claims
Large claims
Winter claims
Workers' comp. verdict
Loss of ability to work
Other
Tryg A/S | Annual report 2010 | 37
Investment activities
Tryg discounts technical provisions using the yield curve
The total investment return (free and match portfolios) before
published by the Danish Financial Supervisory Authority
other financial income and expenses not related to investment
and matches the disbursement profile of provisions
was DKK 722m compared with DKK 1,193m in the same period
with investment assets (bonds). This means that the im-
of last year. The net investment return at DKK 570m exceeded
pact of changing yields on the matching bond portfolio
expectations, mainly due to buoyant equity prices.
will more or less be offset by an almost corresponding
change in the discounted technical provisions. Invest-
Out of the total bond portfolio, 90% is placed in AAA rated
ment assets other than those included in the match
bonds, some 5% in AA rated bonds, and the remainder in A rated
portfolio are included in the free portfolio and are
bonds and unrated Norwegian money market certificates with
placed in equities, bonds and real estate.
good credit quality.
The total negative deviation between the match portfolio return
Restructuring of the investment portfolio
in 2010 and the return to technical provisions was DKK 5m.
In 2010, Tryg restructured the Group’s investment portfolio,
Out of a match portfolio of DKK 30.9bn, this is equivalent to a
dividing it into a match portfolio matching the technical,
deviation 0.02 percentage point. This is considered satisfactory
discounted provisions, and a free portfolio comprising active
and meets the target of a maximum deviation of plus/minus
investments and corresponding to the Group’s equity. The
DKK 50m in any quarter by a fair margin.
principles of this division are described in more detail on page
The free portfolio amounted to DKK 9.5bn at 31 December
extended to include return and other movements for the
2010 and yielded a total gross return of DKK 772m, corre-
Group’s two investment portfolios.
40. As a result of the division, the below table has been
sponding to a return of 7.4% on average invested capital.
The performance was favourably impacted by developments in
Match portfolio
the equity markets. The equity portfolio produced a return of
The match portfolio, which solely comprises fixed income products,
15.5% or DKK 261m.
yielded a return of DKK 974m. This should be seen in relation to the
negative amount of DKK 979m relating to technical provisions and
Income statement of match and free portfolio
DKKm
Bonds, cash deposits, etc.
Equities
Real estate
Total
Value adjustment, changed discount rate
Transferred to technical interest
Total return, investment activities
Other financial income and expenses, investment
Other financial income and expenses, non-investment
Return on investment activities
38 | Annual report 2010 | Tryg A/S
Match
Free
Total
974
974
-227
-752
-5
211
261
300
772
772
1,185
261
300
1,746
-227
-752
767
-45
-152
570
value adjustments due to a changed discount rate. As it is impos-
Other financial income and expenses
sible to perfectly match investments to the regulatory yield curve,
The item ’Other financial income and expenses’ comprises various
Tryg has defined an ambition of a maximum fluctuation of plus/mi-
elements included in the investment result. Some of these ele-
nus DKK 50m in any quarter, corresponding to around 0.15% of the
ments are fairly predictable, such as interest expenses on the loan
securities in the match portfolio. For the full year 2010, there was a
portfolio. Including rent from head office properties and interest
negative deviation of DKK 5m, but deviations have been close to the
received on operating assets, this is expected to amount to an
tolerance threshold in the individual quarters.
annual net expense of around DKK 250m. For 2010, this part of
the item was calculated at an expense of DKK 197m, including an
7.4% return on the free portfolio
expense of DKK 98m relating to ’Reversal of rent’ and an expense
The free portfolio is invested in equities, real estate and bonds
of DKK 86m relating to interest on loans. To this should be added
and generated a total gross return of DKK 772m in 2010, cor-
a number of less predictable items such as exchange rate adjust-
responding to 7.4% of average invested capital. The investment
ments, mismatch of inflation hedging of workers’ compensation
portfolio amounted to around DKK 9.5bn at 31 December 2010.
provisions, and other items. Tryg expects a deviation in these
The globally diversified equity portfolio produced a return of DKK
items in the range of plus/minus DKK 100m per year and plus/
261m or 15.5%, mainly due to increases in global equity markets.
minus DKK 50m per quarter. In 2010, the less predictable part
amounted to a net income of DKK 42m, including DKK 27m attrib-
The real estate portfolio, comprising Danish and Norwegian proper-
utable to inflation hedging of workers’ compensation provisions.
ties, produced a return of DKK 300m or 8.0%. The return on real
estate is calculated on the basis of the properties’ current net
Principles for the match portfolio and the free portfolio
rental income, sales gains and revaluation, if any. A return is calcu-
Denmark is one of the only countries in the world that requires
lated for the head office buildings based on market rents for similar
insurance companies to discount technical provisions. The Dan-
buildings, but this amount is deducted in the item ’Other financial
ish Financial Supervisory Authority publishes a discount rate
income and expenses’. The bond portfolio produced a return of DKK
which all companies must use. In countries which do not require
211m, corresponding to 3.8%. The duration of bonds in the invest-
discounting of technical provisions and where technical provisions
ment portfolio was around 1 year at 31 December 2010.
are therefore unaffected by changes in market rates, insurance
Income statement of investment activities
DKKm
Bonds, cash deposits, etc.
Equities a)
Real estate b)
Total
Value adjustment,
Transferred to technical interest
Total return, investment activities
Other financial income and expenses, investment c)
Other financial income and expenses, non-investment c)
Return on investment activities
2009
2010
31.12.09
31.12.10
Investment assets
34,248
1,589
3,893
34,317
2,179
3,897
39,730
40,393
1,850
405
258
2,513
-294
-845
1,374
-181
-107
1,086
1,185
261
300
1,746
-227
-752
767
-45
-152
570
a) DKK 246m bought on futures contracts has been added to the equity portfolio.
b) 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.
c)
The item comprises interest on operating assets, bank debt and reinsurance deposits, exchange rate adjustment of insurance items, costs of investment activities
and offsetting of return on owner-occupied property.
Tryg A/S | Annual report 2010 | 39
companies often structure their active portfolios differently and
volatile asset portfolios and thus greater earnings fluctuations.
independently of the liabilities side (the technical provisions).
Under the upcoming Solvency II rules, high earnings fluctua-
The new requirements for calculation under Solvency II, which
sions brings out deviations between the return on assets and
are expected to be implemented in 2013, will change the rules
liabilities. In order to reduce fluctuations and risk in the overall
and require all European companies to discount provisions.
results, insurance companies are expected to have to match
Under the current solvency rules and in countries that do not
assets and liabilities over time or to consider why they have
use discounting, an insurance company will typically have more
chosen different risk profiles for assets and liabilities.
tions will require a stronger capital base. Discounting of provi-
Division of the investment portfolio
Gross investment return
• Bonds
• Equities
• Real estate
Match – net return
• Bonds
• Derivatives
• Deducted return of provisions
Risk minimisation – create a return
close to technical interest rate
and discounting
+/- DKK 50m per quarter.
Investment return
• Bonds
• Real estate
• Equities etc.
Other financial income
and expenses
• Rent (domicile)
• Interest expenses, loan
• Interest income, operation
Absolute return – creates the best
return after risk, capital spending and
investment costs.
Items that is not directly related
to the return on investment approx.
DKK 250m p.a.
Unstable
• Others for instance workers’
compensation
Others +/- DKK 50m per quarter.
The free investment portfolio
The total investment portfolio
Bonds
Property
Equities
36
Percent
41
23
Bonds
Property
Equities
10
5
Percent
85
40 | Annual report 2010 | Tryg A/S
Scenario 1 | Unmatched
Scenario 2 | Duration match
DKKm
400
200
0
-200
-400
DKKm
400
200
0
-200
-400
Excepted acceptance level
Excepted acceptance level
Time
Time
Scenario 3 | Fully matched
Scenario 4 | Teoretically perfect match
DKKm
400
200
0
-200
-400
DKKm
400
200
0
-200
-400
Excepted acceptance level
Excepted acceptance level
Time
Time
In a perfect match, the return on the match portfolio (coupon and value adjustment) is identical to the return on provisions (value adjustment of provisions attributable to
interest rate changes plus technical interest). A perfect match is impossible in practice. The above figures illustrate differences in the fluctuation between the value of an in-
terest rate portfolio and the value of a discounted provisions portfolio in four scenarios (1) A scenario without any attempts to match interest rate sensitivity on the provisi-
ons; (2) A scenario matching the duration of assets and liabilities, hedging parallel yield curve changes; (3) A scenario matching the sensitivity of assets and liabilities to
changes in specific interest rate points; (4) A scenario perfectly matching all payments from the asset portfolio with payments from the provisions and ’invested’ in the re-
gulatory yield curve. The changes made by Tryg correspond to a movement from scenario 2 to scenario 3.
Tryg discounts insurance liabilities and regularly adjusts the
ment profile of the technical provisions as perfectly as possible.
bond portfolio in order to minimise net interest rate risk (price
The model portfolio is then used as the benchmark for external
changes caused by interest rate changes). Provisions are
portfolio managers who for practical reasons are permitted to de-
discounted using a yield curve defined by the Danish Finan-
viate within narrowly defined limits. This structure removes most
cial Supervisory Authority. The yield curve is hypothetical, and
of the market risks to which the match portfolio is exposed. The
it is not possible to invest and generate return and risk to
difference between the return to provisions and the return on
match this curve perfectly. Tryg has designed a model portfolio
the actual portfolio will continue to deviate, not least because an
which matches the return and risk of the regulatory yield curve
exact prediction of payments out of provisions is not possible.
as perfectly as possible. In the model portfolio, future interest
payments and repayment dates of principals match the disburse-
Tryg A/S | Annual report 2010 | 41
Tryg relies on its capital base
and financial strength for the Group
to assume risks from customers.
Capital management and
risk management
Capital management and profit distribution
Credit ratings
At 31 December 2010
Tryg Forsikring A/S
Tryg Garantiforsikring A/S
Standrd & Poor’s
Moody’s
‘A-’/stable
‘A-’/stable
A2
n.a.
Tryg relies on its capital base and financial strength for the
ments with respect to equities, bonds and real estate in its
Group to assume risks from customers. The platform is a capital
capital model. This increase was partly offset by the possibility
base adapted to the Group’s risk profile taking into account
of including discounting of provisions for unearned premiums.
natural growth. Tryg aims to have the necessary capital avail-
able, but no more than that. This approach thus determines our
In addition to requirements by the rating agencies, the Dan-
dividend policy.
ish authorities call for active capital management in that they
require an individual solvency need to be assessed. These
Risk based capital management
requirements are the precursor of the Solvency II rules which are
Tryg aims for its capital and risk management to optimise the
expected to apply as from 2013. Tryg assesses its individual sol-
company’s financial strength and ensure financial flexibility.
vency need on the basis of the Group’s internal capital model,
Capital management is based on
which estimates the necessary capital taking into account the
actual business composition, profitability, reserving profile,
• Tryg’s internal capital model
reinsurance protection and the investment mix chosen and also
•
a standard model currently being developed within the EU in
includes scenarios representing the additional risk that may
connection with the implementation of Solvency II in 2013 and
apply in particularly stressed situations. The assessment takes
• Standard & Poor’s standard model (’A-’ level)
into account the geographic diversification effect and the effect
of the defined investment policy, under which interest rate risk
All three models present the capital required to match Tryg’s cur-
on the bond portfolio matches the corresponding interest rate
rent risk profile. The capital requirement is estimated subject to a
risk on the discounted provisions, thereby ensuring that, for
99.5% confidence level, which means that statistically the defined
practical purposes, Tryg’s net interest rate risk is negligible. The
capital level would be insufficient once in a 200-year period.
individual solvency need is assessed on a quarterly basis and
Tryg currently determines its targeted
capital with a view to supporting the
company’s rating of A- from Standard &
Poor’s plus a buffer of 5%.
reported to the Danish Financial Supervisory Authority.
Implementation of Solvency II
In 2009, the European Parliament and the Commission adopted
the directive setting out future solvency rules for insurance
companies. The directive, which is expected to be implemented
in early 2013, defines quantitative as well as qualitative re-
quirements for insurance companies that will require extensive
Tryg has rating agencies Standard & Poor’s and Moody’s per-
adjustment of existing legislation.
form external credit ratings once a year. At 31 December 2010,
Tryg had a buffer of 5% relative to the capital required for an ‘A’
Tryg has taken part in the test calculations for a standard model
rating. In 2010, Standard & Poor’s increased the capital require-
under Solvency II since 2005. Under QIS5, the latest official
44 | Annual report 2010 | Tryg A/S
See a simplified updated capital model on
tryg.com under Investor > Key figures.
Composition of partial capital model
test calculation carried out in the autumn of 2010, Tryg had an
excess of DKK 1,800m over the capital requirement calculated
according to the standard model. If the QIS5 capital requirement
is maintained, it is expected that several companies will need to
strengthen their capital in order to comply with the new capital
requirements. Based on the internal capital model, the capital
requirement for Tryg would be somewhat lower than QIS5.
Solvency II permits companies to use internal models in full or
in part. Tryg’s approach is to use the existing internal model for
areas in which risk differs from that assessed in the standard
Standard model
Partial model
Internal model
model. With respect to insurance risk, we believe that Tryg could
Insurance risk
Operational risk
Credit risk
more correctly model own risk. For example, the standard model
TAC
Market risk
does not consider geographic diversification among Nordic coun-
tries, an important aspect of Tryg’s Nordic exposure. Conversely,
the treatment of investment risks in the existing internal model
is very similar to that of the standard model due to the homoge-
nous investment risk across national borders created by efficient
a capital base comprising mainly equity less intangible assets and
financial markets. The aim is that in future under Solvency II,
other statutory adjustments plus subordinated loan capital of up
Tryg will use a partially internal model for capital planning rather
to 25% of the Solvency I requirement. Standard & Poor’s applies
than the standard model referred to above. The partially internal
the term Total Available Capital (TAC), under which intangible
model will thus be based on the insurance module of Tryg’s
assets are also deducted from the capital base, and subordinated
existing model supplemented by the other modules (investment,
loan capital generally may not exceed 25% of the total capital.
operational risk, etc.) from the standard model.
In 2005, Tryg raised a 20-year EUR 150m subordinated bond
In addition to changes in the way of calculating capital, the
loan, which is listed on the London Stock Exchange. In connection
future Solvency II rules will also change regulatory capitalisation
with the acquisition of Moderna in 2009, Tryg raised a 20-year
requirements. Solvency II will classify capital under Tiers (1-3),
EUR 65m subordinated loan with TryghedsGruppen, which owns
reflecting the quality of the company’s capital. Tryg believes
60% of Tryg. This brought Tryg’s total subordinated debt to
that 72% of its capital will be approved as Tier 1 capital, while
approximately EUR 215m. The total ratio of debt to equity was
the remainder, being subordinated loan capital and parts of
around 19% at 31 December 2010, and the cost of debt in 2010
the Norwegian Pool, will be classified under Tier 2. Tryg follows
was DKK 83m. See table overleaf.
developments closely, taking account thereof when determining
dividends for the year.
The former credit facility which is included as part of Tryg’s cash
Capital structure
resources expired in 2010. To replace this facility, a new senior
credit facility in a total amount of DKK 2bn was raised. The new
Tryg’s capital structure comprises equity and subordinated
facility has a term to maturity of 12 months, and the utilisation
loan capital. The relationship between the two components is
ratio was 0 at 31 December 2010.
assessed on a regular basis in order to maintain the optimum
structure that takes into account return on equity, cost of capi-
Financial flexibility
tal and flexibility. Regulators and rating agencies assess the ac-
The financial flexibility must take into account strategic considera-
tual capital differently. Regulators require companies to calculate
tions and ensure the possibility of additional contributions of
Tryg A/S | Annual report 2010 | 45
Subordinated loans
Amount
EUR 150m
EUR 65m
For further details see note 20 on page 117.
Maturity
Repayment profile
Interest rate
2025
2032
Interest-only
4.50%
Interest-only
5.13% above EURIBOR 3 M
capital. The strategic considerations are processed each year in
a capital plan which tests the extent to which the capital sup-
Profit distribution
Dividend policy
ports Tryg’s strategy. The possibility of additional contributions
Dividend is determined on the basis of the Group’s profit
of capital is dealt with in Tryg’s capital contingency plan, which
distribution policy. Tryg intends to pursue a risk-based transpar-
describes measures that can be applied in the short term to im-
ent policy for capital management, and thus also for dividend
prove the Group’s solvency, if required. As a result of the strategy
distribution. At 31 December, a capital requirement is deter-
chosen for the future and distribution for 2010, restructuring of
mined based on the Standard & Poor’s model corresponding
investment assets and additional hedging of insurance liabilities
to the level of an A rating plus a buffer of 5%. Any capital in
could substitute for around DKK 1.4bn of capital in 2011.
excess thereof will be distributed as dividend. The relationship
between cash dividend and share buy back is determined by the
Furthermore, there would be room for increasing the capital
Supervisory Board, but out of the total distribution at least 50%
base by raising additional subordinated loan capital. In relation
of the profit for the year must be paid out in cash.
to the Danish solvency rules, the full potential of subordinated
loan capital has already been utilised (around DKK 800m). The
Dividend for the 2010 financial year
subordinated loan capital could be increased by around DKK
Based on Standard & Poor’s capital model, the capital require-
880m (after dividends) in relation to Standard & Poor’s capital
ment is DKK 9,857m and TAC before dividend DKK 10,607m. In
model, at 31 December 2010.
this light and based on a profit of DKK 593m, the Supervisory
Board proposes that DKK 256m be distributed by way of cash
dividend, equivalent to 4 DKK per share.
Capital and dividend
DKKm
Profit for the year
Cash dividends
Cash dividend per share (DKK)
Cash payout ratio
Total buy back
Buy back per share (DKK)
Total distribution per share (DKK)
Total distribution
Total payout ratio
Buffer to ’A-’ level (%)
2006
3,211
2,244
33
70%
33
2,244
70%
2.4%
2007
2,266
1,156
17
51%
1,405
21
38
2,561
113%
5.0%
2008
2009
2010
846
442
6.5
52%
6.5
442
52%
16.0%
2,008
991
15.50
49%
799a)
12.5
28
1,790
89%
7.7%
593
256
4
43%
0
0
4
256
43%
5.2%
a) The share buy back programme was based on the profit for 2009, amounted to DKK 799m and was initiated on 16 April 2010 with completion on 7 February 2011.
46 | Annual report 2010 | Tryg A/S
Risk management
Read about the Supervisory Board’s
Risk committee in the section
Corporate governance on page 62.
Risk management environment and risk identification
The introduction of Solvency II in 2013 will impose stricter
Underwriting risk and reinsurance
Underwriting
requirements with respect to the way in which insurance com-
Underwriting risk is the risk related to entering into insurance
panies work with and control risk, including the Supervisory
contracts and thus the risk that premiums charged do not
Board’s involvement in risk and capital management.
adequately cover the claims which Tryg has to pay when a claim
has been reported. The risk can be divided into random variation
See also the section Capital management.
in relation to estimated payments and the systematic trend of
the underlying claims level. Random variation is, for example, a
Tryg has for a number of years worked to align the company to
greater-than-expected number of large losses, while a system-
such requirements. This involves the Supervisory Board actively
atic trend could be attributable to an increased frequency of
defining risk appetite and risk management limits and regularly
cloudbursts during summer periods or a falling frequency of
assessing the overall risk in the company and the resulting
personal injuries in motor insurances due to safer cars.
capital requirement.
The risk of random fluctuations is assessed and managed
The Group Executive Management’s responsibility for the overall
based on statistical analyses of historical experience for the
risk and capital management is handled in a risk management
various lines of business. Systematic shifts in claims levels are
environment, in which separate committees handle the areas of
also identified by means of statistical methods combined with
underwriting and reinsurance, provisions, investment risk, and
information about changes in societal, climate-related and other
operational risk and security. Risk management is supported by
conditions. The insurance premium must be adequate to cover
Tryg’s internal capital model and has been developed on an on-
expected claims, but must also comprise a risk premium equal
going basis over the past ten years. In addition, we make an an-
to the return on the part of the Group’s capital used to protect
nual mapping of risk to identify new risks that cannot currently
against random fluctuations. All other things being equal, this
be assessed using statistical analyses. Such data is compiled in
means that insurance lines or areas which, from experience,
the Group’s risk data base, forming the basis for an annual risk
are subject to major fluctuations, must comprise a larger risk
report to the Executive Management and the Supervisory Board.
premium.
The assessment of selected risk scenarios based on this work is
incorporated directly in the Group’s calculation of the necessary
solvency need (individual solvency need).
Tryg’s risk mangement environment
Supervisory-
Board
• Risk appetite
• Capital
• Strategy
• Crisis
management
Executive
Manage-
ment
Instructions
Risk management environment
Organisation
Risk management committee
Policies
Risk reporting
recommen-
dations
Underwriting
Reinsurance
committee
Provisions
committee
Investment
risk
committee
Operational
risk
committee
Systematic risk
evaluation
• Risk managers
• Risk
identification
• Risk
management
Tryg A/S | Annual report 2010 | 47
The chart headed Insurance development in Norway shows
how, in practice, there may be significant variation in the
Insurance development in Norway over time
fluctuations observed in different lines, and thus in the
underwriting risk of those lines. Underwriting risk is continu-
ously assessed based on analyses in Tryg’s internal capital
model which provide target premium levels for the respective
parts of the insurance business. This applies to definition and
updating of tariffs and for individual pricing of major agree-
ments in the corporate area and with business partners. Risk
is furthermore managed on an ongoing basis by monitoring
profitability, business procedures, acceptance policies, au-
Claims ratio
175
150
125
100
75
50
25
0
Year
thorities and reinsurance.
Reinsurance
Reinsurance is used to reduce underwriting risk in areas
where this is particularly required. The need for reinsurance is
Property insurance
Motor liability insurance
assessed on the basis of Tryg’s internal capital model, which
a market claim of DKK 20bn would thus be around DKK 100m,
compares the price of buying reinsurance with the reduced
equal to Tryg’s market share of the pool’s DKK 0.5bn retention.
capital need achievable.
In addition, Tryg buys reinsurance for certain lines for which
With respect to property risks, major events in 2011 are
experience has shown that claims vary considerably. The largest
protected by catastrophe reinsurance of DKK 5.5bn with a
single risks in our corporate portfolio are property risks protected
maximum retention of DKK 100m. The primary risk of one-
by reinsurance cover of DKK 1.7bn with a retention of DKK 100m
off events is storm, and the level of cover has been defined
for the first claim and DKK 50m for each subsequent claim. Build-
using simulation models to the effect that protection would
ing and contents risks exceeding the upper level are protected
statistically be inadequate less than once every 250 years.
by facultative reinsurance. Other lines covered by reinsurance
The catastrophe reinsurance programme also covers other ca-
include liability, motor, fish farms and guarantee insurance.
tastrophe events, including terrorist events up to DKK 4.2bn.
We have bought catastrophe reinsurance up to DKK 1.5bn for
In case of a major insurance event comprised by the reinsurance
personal accident and workers’ compensation policies with a
programme, we may have major receivables from reinsurers and
retention of DKK 50m, covering the risk of multiple injuries
thus be exposed to credit risk. This risk is managed through
from the same cause, including terror.
requirements to reinsurers’ ratings and by spreading reinsurance
Denmark has established a guarantee scheme for terror that
came into force on 31 March 2010. Under the scheme, the
Reserving risk
on several reinsurers.
government provides a guarantee of up to DKK 15bn for the
After the period of the policy’s cover expires, insurance risk re-
total Danish market to cover total claims expenses in excess
lates to the provisions for claims made to cover future payments
of DKK 5bn. At 1 January 2011, the Danish Terrorism Insur-
on claims already incurred. Customers report claims at a certain
ance Pool for general insurance had protected the first DKK
delay. Depending on the complexity of the claim, a shorter or
5bn through reinsurance cover of DKK 4.5bn. Tryg’s share of
longer period of time may pass until the amount of the claim has
48 | Annual report 2010 | Tryg A/S
been finally calculated. This may be a prolonged process particu-
larly for personal injuries. Even when the claim has been settled
Major risk types
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 actuarial calculations. At 31 Decem-
ber 2010, the provisions for claims amounted to DKK 24,883m.
The duration of the provisions, that is, the average period until
such amounts are paid out to customers, was 3.2 years at 31
December 2010. Most of the provisions for claims related to
personal injury claims. These provisions are exposed to changes
in wage developments, the discount rate, disbursement pat-
terns, economic trends, legislation and court decisions.
Read more about the discount rate in the
section Investment and interest rate risk.
The calculation of provisions for claims will always be subject
to considerable uncertainty. Historically, many insurers have
experienced substantial positive as well as negative impacts on
profit (run-off) resulting from reserving risk, and that may also
be expected to happen in future. Tryg manages reserving risk
by pursuing a reserving policy to ensure a uniform process for
Underwriting risk
The risk related to entering into insurance contracts. The risk
that claims at the end of an insurance contract deviate signifi-
cantly from our assumptions when pricing at inception of the
contract.
Handled by the Underwriting reinsurance committee
Reserving risk
We make technical provisions at the end of a financial period to
cover expected future payments for claims already incurred. Re-
serving risk is the risk that future payments deviate significantly
from our assumptions when making the provisions.
Handled by the Claims reserving committee
Investment risk
The risk that volatility of financial markets impacts the Group’s
results. Investment risk includes elements such as interest rate
risk, equity risk, foreign exchange risk and liquidity risk.
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.
determining provisions across national borders and insurance
Handled by the Risk management committee
lines at all times. This implies that it is based on an underlying
model analysis, and that internal control calculations and evalu-
Operational risk
ations are made.
Provisions for claims relating to annuities in Danish work-
ers’ compensation insurance are discounted using the current
market rate and are also revalued by the wage inflation rate
each year. This exposes Tryg to explicit inflation risk in case of
changes in Danish wage inflation. Tryg hedges such risk using
an inflation swap.
The risk of errors, fraud or failures in internal procedures,
systems and processes.
Handled by the Operational risk committee
Tryg A/S | Annual report 2010 | 49
Provisions for claimsa) (gross)
Expected cash flow
0-1 year
1-2 year
2-3 year
> 3 year
Total
DKKm
8,044
3,866
2,439
9,906
24,255
expenses in the same currencies, and thus, only the profit
for the period is exposed to currency risk. Tryg uses currency
derivatives to hedge the risk of a loss of value of balance sheet
items due to exchange rate fluctuations Exchange rate adjust-
ments and hedging of foreign entities are taken directly to
equity.
Credit risk
a) The provisions for claims are excluding Finland and Tryg Garanti.
Credit risk is the risk of incurring a loss if counterparties fail to
meet their obligations. In connection with the investment activi-
Investment and interest rate risk
ties, the primary counterparties are bond issuers and counter-
Investment risk is the risk that volatility in the financial
parties in other financial instruments. Tryg uses limits and rating
markets will impact the results of operations and thus the
requirements to manage credit risk and concentration risk.
financial position of the company. Investment assets as well
as provisions for claims are exposed to interest rate changes.
See the section Investment activities for
Tryg aims to match the disbursement profile for discounted
an overview of the bond portfolio by rating.
provisions for claims with corresponding interest-bearing as-
sets as closely as possible. If interest rates fall, this structure
Liquidity risk
would cause a similar increase in the provisions for claims and
Many businesses, in particular financial businesses, have
the value of the bond portfolio, thereby reducing Tryg’s overall
had their access to liquidity significantly impaired during the
exposure to changes in interest rates considerably.
financial crisis. Tryg is not exposed to the same risk of a lack of
In 2010, Tryg divided the investment activities
to be paid out. Most of the payments received are placed in
into two investment portfolios. Read more in
cash accounts or liquid securities ensuring that Tryg will be able
the section Investment activities.
to procure the necessary liquidity at all times.
liquidity since premiums are due for payment before claims have
Equity and real estate risk
Operational risk
The equity and real estate portfolios are exposed to changes
Operational risk relates to errors or failures in internal proce-
in equity markets and real estate markets, respectively. At 31
dures, fraud, breakdown of infrastructure, IT security and similar
December 2010, the equity portfolio accounted for 5.4% of
factors. As operational risks are mainly internal, Tryg focuses
the total investment assets. In 2008, Tryg bought the head
on establishing an adequate controlling environment for the
office in Ballerup, thereby increasing the proportion of real
Group’s operations. In practice, this work is organised through
estate significantly. This proportion is expected to be reduced
a structure of procedures, controls and guidelines that cover
over time. In addition to the owner-occupied properties,
the various aspects of the Group’s operations, including the IT
Tryg’s real estate portfolio consists of office and rental proper-
security policy. Tryg has also set up a security and investigation
ties, which account for 9.6% of total investment assets.
unit to handle fraud, IT security, physical security and contin-
Currency risk
gency plans.
Currency risk is kept at a very low level. The Group’s premium
Tryg has prepared contingency plans to handle the most impor-
income in foreign currency is mostly matched by claims and
tant areas, such as the contingency plans in the individual parts
50 | Annual report 2010 | Tryg A/S
of the business to handle an event of a prolonged IT break-
down. The Group has also set up a crisis management structure
should Tryg be hit by a major crisis.
Sensitivity on selected changes in underwriting,
reserving and market conditions
Strategic risk
Strategic risk relates to Tryg’s choice of strategic position,
including IT strategy, flexibility relative to the market, business
partners and reputation as well as changed market conditions.
The management of strategic risk closely involves the Super-
visory Board.
Overall risk exposure
Tryg considers strategic risk and insurance risk (underwriting
and provisions) to be the most important types of risk expo-
sure. Both types of risk are closely related to Tryg’s operations
as a general insurer. Investment risk is at a satisfactory level due
to the current investment strategy. Operational risk is consid-
ered to be less important than the other risk types.
Insurance risk
Underwriting risk
Increase in claims expenses of 1%
Decrease in premium rates of 1%
Weather claims of DKK 5.5bn
(Retention plus reinstatement fee)
Reserving risk
Increase in social inflation of 1%
Estimation error of e.g. 10%
on workers’ compensation and motor
Market risk
Investment risk
Interest rate market – increase in interest rates of 1%:
Impact on fixed interest securities
Higher discounting of provisions for claims
Impact on Norwegian pension liability
Equity market
15% decline in equity markets
Effect arising from derivatives
Real estate market
15% decline in real estate markets
Currency market
Decline of 15% of exposed currency
relative to DKK
Impact derivatives
DKKm
-156
-195
-254
-614
-1,189
-795
706
225
-290
37
-584
-435
420
Tryg A/S | Annual report 2010 | 51
Tryg’s managers must create
strong results by communicating
clearly, sharing knowledge and
having a readiness to change.
Corporate governance
Supervisory Board
Mikael Olufsen
Bodil Nyboe Andersen
Jørn Wendel Andersen
Paul Bergqvist
Christian Brinch
Mikael Olufsen a)
Chairman
Born 1943. Joined the Supervisory Board in
2002. Nationality: Danish.
Number of shares held: 100.
Change in portfolio in 2010: 0.
Number of shares held: 100.
Change in portfolio in 2010: 0.
Ms Nyboe Andersen has special skills within
Mr Bergqvist has international management
the areas of management, governance, trea-
and board experience in M&A, strategic
Professional board member. Former CEO of
sury, financial business and risk management
development, marketing, branding and finan-
Toms Chokolade-fabrikker A/S.
from her former positions as Chairman of the
cial management. Being a Swedish citizen,
Educational background: MSc (Forestry),
PMD Harvard Business School.
Chairman: TryghedsGruppen smba, Tryg A/S,
Tryg Forsikring A/S, Egmont Fonden, Egmont
International Holding A/S, Ejendomsselskabet
Gothersgade 55 ApS, Ejendomsselskabet
Vognmagergade 11 ApS, Malaplast Co. Ltd.
Bangkok, Advisory Board of CareWorks Africa
Ltd and the Danish Rheumatism Association.
Board member: WWF in Denmark and
Danmark-Amerika Fondet.
Committee memberships: Remuneration
committee of Tryg A/S (chairman).
Number of shares held: 3,018.
Change in portfolio in 2010: 0.
Mr Olufsen has experience from managing
international companies, including strategic
development, and experience as a board mem-
ber of Danish and international companies.
Bodil Nyboe Andersen b)
Deputy Chairman
Born 1940. Joined the Supervisory Board in
2006. Nationality: Danish. Former Chairman
of the Board of Governors, Danmarks National-
Board of Governors of Danmarks Nationalbank
Mr Berggvist has special insight into Swedish
and Managing Director of Andelsbanken.
market conditions.
Jørn Wendel Andersen a)
Born 1951. Joined the Supervisory Board in
Christian Brinch b)
Born 1946. Joined the Supervisory Board in
2002. Nationality: Danish. Professional board
2007. Nationality: Norwegian. Senior Advisor
member and interim management projects.
of HitecVision and professional board member.
Former CFO, Arla Foods amba.
Former President and CEO of Helicopter Services
Educational background: MSc (Business
Economics), IMD Executive Development
Group ASA and Executive Vice President of
ABB Norge.
Programme and Strategy in Action Programme,
Educational background: Norway’s naval
Leadership Assessment – Heidrick & Struggles.
academy; PMD Harvard Business School.
Board member: TryghedsGruppen smba, Tryg
Chairman: Apply Group AS, Subsea Technology
A/S and Tryg Forsikring A/S, Nordea Liv & Pension.
Group AS, HV IV Invest Alfa AS, Helicopter
Committee memberships: Audit committee
of Tryg A/S and Risk committee of Tryg A/S.
Number of shares held: 1,078.
Change in portfolio in 2010: 0.
Mr Wendel Andersen has experience in
international management, insurance business,
finance, treasury and risk management.
Network AS, Fortissimo AS, Line Consult AS,
Gluteus AS and Røa Invest AS.
Deputy chairman: Norges Statsbaner AS
and Prosafe SE.
Board member: Tryg A/S, Tryg Forsikring A/S,
Kjell A. Østnes AS, Thor Dahl Management AS
and Thor Dahl Shipping AS.
Committee memberships: Election
committee of Prosafe SE.
Paul Bergqvist b)
Born 1946. Joined the Supervisory Board in
Number of shares held: 500.
Change in portfolio in 2010: 0.
bank (Danish Central Bank) and Managing
2006. Nationality: Swedish. Professional board
Director of Andelsbanken.
member. Former CEO of Carlsberg A/S.
Educational background: MSc (Economics)
Educational background: Economist, engineer.
Chairman: The Laurids Andersen Foundation.
Chairman: Sverige Bryggerier AB, East Capital
Explorer AB, HTC Group AB, Pieno Zvaigzdes AB,
Returpack Svenska AB, Norrköpings Segel-
sällskap and Östkinds Häradsallmänning.
Board member: Tryg A/S, Tryg Forsikring A/S,
Lantmännen and Björk Eklund Group AB.
Mr Brinch has experience in the areas of M&A,
treasury, communication and business de-
velopment. Being a Norwegian citizen,
Mr Brinch has special insight into Norwegian
market conditions.
John R. Frederiksen a)
Born 1948. Joined the Supervisory Board in
2002. Nationality: Danish. CEO, Fortunen A/S
Committee memberships: Remuneration
and Berco ApS. Former chief executive of Jacob
committee of Tryg A/S, Audit committee of
Holm & Sønner A/S and Bastionen A/S.
East Capital Explorer AB (spokesman) and
Nomination committee of East Capital Explorer AB
(chairman).
Educational background: Business training.
Chairman: Hellebo Park P/S, RenHold A/S,
Renoflex-Gruppen A/S, Renholdningsselskabet
Deputy chairman: Tryg A/S and Tryg
Forsikring A/S.
Board member: TV2, The Villum Kann
Rasmussen Foundation and The Energy
Technological Development and Demonstra-
tion Programme.
Committee memberships: Audit committee
of Tryg A/S (chairman), Risk committee of Tryg
A/S (chairman), Advisory Board of the Nordic
Investment Bank and the Committee of
Corporate Governance.
54 | Annual report 2010 | Tryg A/S
Tina Snejbjerg
Bill-Owe Johansen
John R. Frederiksen
Jesper Hjulmand
Rune Torgeir Joensen
Lene Skole
Berit Torm
af 1898, Rådgivningsselskabet af 1. september
Committee memberships: Chairman of
2009 A/S, SBS Byfornyelse smba, Sjælsø Gruppen
Dansk Energi Direktørudvalg and member of
A/S, Ejendomsforeningen Danmark, Komple-
Dansk Energi Fælles Forum.
mentarselskabet Uglen ApS and Grundejernes
Investeringsfond.
Board member: TryghedsGruppen smba,
Tryg A/S, Tryg Forsikring A/S, Fortunen A/S,
Freja Ejendomme A/S (Statens Ejendomssalg
A/S), Højgård Ejendomme A/S, C.W. Obel A/S,
C.W. Obel Ejendomme A/S, C.W. Obel Projekt
A/S, Obel-LFI Ejendomme A/S, Ejendoms-
aktieselskabet Knud Højgaards Hus, SSG A/S,
BERCO Deutschland GmbH, Invista Foundation
Holding Company Limited, 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.
Committee memberships: Remuneration
committee of Tryg A/S, Audit committee of
Invista Foundation Property Trust Ltd.,
Invista European Real Estate Trust Sicaf, Audit
committee of Sjælsø Gruppen A/S and European
Property Federation, Brussels (president).
Number of shares held: 280.
Change in portfolio in 2010: 0.
Mr Frederiksen has mangement and board
and treasury.
Jesper Hjulmand a)
Born 1963. Joined the Supervisory Board in
2010. Nationality: Danish. CEO of SEAS-NVE
A.m.b.a. Former CFO and CEO of i NVE A.m.b.a.
and head of budgets and chief accountant of
Rockwool A/S.
Educational background: MSc (Economic
and Business Administration) and Lieutenant
of the reserve, Danish Air Force.
Number of shares held: 0.
Change in portfolio in 2010: 0.
From his positions with SEAS-NVE and his
former work with the Danish Air Force,
Mr Hjulmand has experience within M&A,
strategy, organisational development,
Tina Snejbjerg
Elected by the employees
Born 1962. Joined the Supervisory Board in
2010. Nationality: Danish. Administrative officer,
Tryg’s staff association. Employed since 1987.
Educational background: Insurance training.
Board member: Tryg A/S and Tryg Forsikring A/S.
Committee memberships: DFL’s general
communication and business development.
council.
Number of shares held: 86.
Change in portfolio in 2010: 0.
Bill-Owe Johansson
Elected by the employees
Born 1959. Joined the Supervisory Board in
2010. Nationality: Swedish. Claims handler
with Atlantica/Moderna (Swedish subsidiary).
Employed in 2002.
Rune Torgeir Joensen
Elected by the employees
Born 1956. Joined the Supervisory Board in
2008. Nationality: Norwegian. Project worker
Educational background: Various insurance
with Tryg. Employed since 1984.
training courses.
Educational background: Printer, market
Board member: Tryg A/S and Tryg Forsikring A/S.
economist, HMS adviser.
Number of shares held: 140.
Change in portfolio in 2010: +140.
Lene Skole b)
Born 1959. Joined the Supervisory Board
President, Coloplast A/S 2005. Former CFO
of The Maersk Company Ltd., UK.
Educational background: The A.P. Møller
Group international shipping education, BSc
(Finance) and various international manage-
ment programmes.
Board member: Tryg A/S and Tryg Forsikring A/S.
Committee memberships: Audit committee
of Tryg A/S, Risk committee of Tryg A/S and
Advisory Board of Tryg Norge.
Number of shares held: 45.
Change in portfolio in 2010: 0.
Berit Torm
Elected by the employees
Born 1959. Joined the Supervisory Board in
2008. Nationality: Danish. Quality assurance
manager with Tryg. Employed since 1985.
Educational background: LL.M.
Board member: Tryg A/S, Tryg Forsikring A/S
and DFDS A/S.
Board member: Tryg A/S and Tryg Forsikring A/S.
Committee memberships: Audit committee
Committee memberships: Furesø local council.
of Tryg A/S and Risk committee of Tryg A/S.
Number of shares held: 86.
Change in portfolio in 2010: 0.
Chairman: Danske Energi- og Forsyningssel-
skabers Arbejdsgiverforening (DEA), Energi
Number of shares held: 410.
Change in portfolio in 2010: 0.
Danmark A/S, ChoosEV A/S and
CAT Invest I A/S.
Ms Skole has experience from international
a) Dependent board member; that is, affiliated with
corporations, including her work with Coloplast
the principal shareholder, TryghedsGruppen.
Board member: TryghedsGruppen smba, Tryg
A/S, Tryg Forsikring A/S, DI general council, DI
Energibranchen, Waoo! A/S and Forskerparken
and The Maersk Company Ltd., UK. Ms Skole
has skills within strategy, financing and
communication.
b) Independent board member; that is, without any
affiliation with Tryg or the principal shareholder,
TryghedsGruppen.
CAT A/S.
Tryg A/S | Annual report 2010 | 55
experience within M&A, strategy, finance
in 2010. Nationality: Danish. Executive Vice
Executive Management
Morten Hübbe
CFO/Group Executive Vice President until 31 January 2011
Christine (Stine) Bosse
CEO/Group CEO. Resigned effective 31 January 2011
Group CEO as of 1 February 2011
Born 1960. Joined Tryg in 1987. Joined the Executive Management
Born 1972. Joined Tryg in 2002. Joined the Group Executive
in 1999.
Management in 2003.
Member of the Executive Management of Tryg A/S.
Member of the Executive Management of Tryg A/S.
Member of the Executive Management of Tryg Forsikring A/S.
Member of the Executive Management of Tryg Forsikring A/S.
Educational background: LL.M., several management training
Educational background: BSc (International Business
programmes at INSEAD, Wharton and Harvard.
Administration and Modern Languages), MSc (Finance and
Accounting), management training at Wharton.
Board member: Høyteknologisentret AS.
Number of shares held: 4,801. Change in portfolio in 2010: 0
Chairman: BØRNEfonden.
Board member: Nordea, Amlin Plc., Forsikring og Pension, Geneva
Association, Rendex-vous de September and INSEAD Danish Council.
Committee memberships: Risk committee of Nordea,
Remuneration committee of Amlin Plc, UN Millinium Development
Goals Advocacy Group.
Number of shares held: 6,264. Change in portfolio in 2010: 0
Lars Bonde
Group Executive Vice President, Customer Service & Sales –
Martin Bøge Mikkelsen
Group Executive Vice President, Strategy & Human
Direct, and Country Manager Denmark. Joined the Executive
Competencies
Management of Tryg A/S as of 1 February 2011
Born 1962. Joined Tryg in 1989. Joined the Group Executive
Born 1965. Joined Tryg in 1998. Joined the Group Executive
Management in 2009.
Management in 2006.
Member of the Executive Management of Tryg Forsikring A/S.
Member of the Executive Management of Tryg Forsikring A/S.
Educational background: Graduate Diplomas in Organisation, Mar-
Educational background: Insurance training, LL.M.
keting Management and Accounting and management training pro-
Board member: Danish Employers’ Association for the Financial Sector
Number of shares held: 1,643. Change in portfolio in 2010: 0
grammes at Wharton, Ashridge and London Business School.
Number of shares held: 1,911. Change in portfolio in 2010: 0
56 | Annual report 2010 | Tryg A/S
Kjerstin Fyllingen
Group Executive Vice President, Customer Service & Sales
Truls Holm Olsen
Group Executive Vice President, Corporate
– Partners, and Country Manager Norway
Born 1964. Joined Tryg in 1998. Joined the Group Executive
Born 1958. Joined Tryg in 2006. Joined the Group Executive
Management in 2009.
Management in 2006.
Member of the Executive Management of Tryg Forsikring A/S.
Member of the Executive Management of Tryg Forsikring A/S.
Educational background: Bachelor of Business Administration
and Master of Management.
Board member: Finansnæringens Hovedorganisation and TSS
Marine ASA.
Committee memberships: Audit committee of TTS Marine ASA.
Number of shares held: 2,462. Change in portfolio in 2010: 0
Educational background: LL.M.
Board member: Energon AS.
Number of shares held: 17. Change in portfolio in 2010: 0
Birgitte Kartman
Group Executive Vice President, Claims
Born 1960. Joined Tryg in 1996. Joined the Group Executive
Jens Stener
Group Executive Vice President, Corporate Branding
& Business Centres
Management in 2009.
Born 1966. Joined Tryg in 2006. Joined the Group Executive
Member of the Executive Management of Tryg Forsikring A/S.
Management in 2009.
Educational background: LL.M.
Number of shares held: 619. Change in portfolio in 2010: 0
Member of the Executive Management of Tryg Forsikring A/S.
Educational background: BSc Business Economics and
management training programmes at INSEAD and IMD.
Board member: Leroy Design A/S and Forsikringsakademiet.
Number of shares held: 809. Change in portfolio in 2010: 0
Tryg A/S | Annual report 2010 | 57
Corporate governance
On 8 April 2010, the Corporate Governance Committee pub-
Shareholders may propose items to be included in the agenda
lished new corporate governance recommendations and recom-
of the general meeting, and may ask questions at the gen-
mended that they be incorporated as from the financial year
eral meeting. Shareholders may vote in person at the general
beginning on 1 January 2010. The Supervisory Board believes
meeting, vote by correspondence, or appoint the Supervisory
that Tryg complies with the recommendations apart from two
Board or a third party as their proxy. The proxy form and form
recommendations. See an explanation of these deviations last
for voting by correspondence will be available on tryg.com on or
in the chapter.
before 23 March 2011.
A complete review of the Statutory report on
The Supervisory Board has resolved that general meetings will
corporate governance with respect to each indi-
be held by physical attendance as the Supervisory Board em-
vidual recommendation can be downloaded on
phasises the oral dialogue with shareholders. The Supervisory
tryg.com > Download.
Board and the Executive Management will participate in general
meetings where possible, and this has a high priority.
Annual general meeting
Tryg holds its annual general meeting of shareholders each year
The dialogue between Tryg and its shareholders
before the end of April. The Supervisory Board convenes the an-
Tryg issues press releases and company announcements on a
nual general meeting in accordance with the Danish Companies
regular basis and publishes annual and interim reports, which
Act and the company’s articles of association, giving not less
are available on tryg.com. Furthermore, Tryg publishes regu-
than three weeks’ notice, by way of a company announcement,
lar IR newsletters on topical issues to shareholders and other
on tryg.com and in at least one national newspaper. Sharehold-
stakeholders. This material enables all stakeholders to get a
ers may elect to receive the notice by mail or as an electronic
reasonable impression of the Group’s position and performance.
notice of the general meeting, or they may download the no-
The financial statements are prepared in accordance with IFRS,
tice on tryg.com. The notice includes relevant information about
and all company announcements and financial statements are
the time and place of the meeting and sets out the agenda,
published in Danish and English. On tryg.com, stakeholders may
which as a minimum comprises the following items:
receive the latest news as e-mail and RSS feeds.
•
Report of the Supervisory Board on the activities of the com-
The Group has a number of in-house guidelines to ensure that
pany during the past financial year
disclosures of price-sensitive information are made in accord-
•
Presentation of the annual report for approval and discharge
ance with the stock exchange rules of ethics.
of the Supervisory Board and the Executive Management,
including determination of the Supervisory Board’s remu-
Investor Relations maintain regular contact to equity analysts
neration
and investors. Investor Relations also organise investor presen-
•
Adoption of a resolution as to the distribution of profit or
tations, teleconferences and webcasts with the Group Execu-
covering of loss, as the case may be, according to the annual
tive Management and participate in conferences in Denmark
report as approved, including proposed payment of dividend
and abroad. The Supervisory Board is regularly informed of the
for the past financial year
dialogue with investors and other stakeholders.
•
Any proposals from the Supervisory Board or from shareholders
• Election of members to the Supervisory Board
Capital and share structures
• Appointment of auditors
• Any other business
The Supervisory Board monitors that Tryg’s capital structure is
in line with the needs of the Group and its shareholders, and
that the capital structure is in compliance with the requirements
All shareholders are urged to attend the annual general meeting.
applicable to Tryg as a financial undertaking. Tryg has adopted
General meetings are also webcast, enabling stakeholders to view
a capital plan and a contingency capital plan that are reviewed
the general meeting on tryg.com during and after the meeting.
each year by the Supervisory Board.
58 | Annual report 2010 | Tryg A/S
See Tryg’s Statutory report on corporate
social responsibility on tryg.com > Download.
Furthermore, the Supervisory Board performs an annual review of
or adjust the Group’s strategy. The Supervisory Board cooperates
dividend distribution and share buy back. In 2010, the sharehold-
with the Executive Management to ensure follow-up on and develop-
ers at the annual general meeting authorised the Supervisory
ment of the Group’s strategies. The Supervisory Board ensures that
Board to let Tryg acquire own shares within 10% of the share
the required skills and financial resources are available for the Group
capital in the period up to 14 April 2015.
to achieve its strategic targets. The framework is discussed at the Su-
Takeover bids
pervisory Board’s annual strategy seminar and budget meeting. The
activities of the Supervisory Board are defined in the Group’s rules of
The Supervisory Board intends to consider any public takeover
procedure and annual cycle as approved by the Supervisory Board.
bid as prescribed by legislation and, depending on the nature of
such bid, to convene an extraordinary general meeting of share-
Rules of procedure
holders in accordance with applicable requirements and rules.
The Supervisory Board makes an annual review of and approves
Stakeholders and the Group’s corporate social responsibility
Management with guidelines and instructions describing report-
Identification of stakeholders is an integral part of the strategy
ing requirements and requirements for communication with the
rules of procedure for the Supervisory Board and the Executive
review at the Supervisory Board’s annual strategy seminar, which
Executive Management.
always focuses on investors, customers, society and employees.
Furthermore, the Supervisory Board receives regular reports
The financial legislation governing Tryg furthermore defines
about Tryg’s largest investors and employee and customer
requirements with respect to reporting by the Executive Man-
satisfaction reports.
agement to the Supervisory Board on developments in the most
The Group has a number of policies adopted by the Supervisory
Board and describing Tryg’s relationship with its shareholders.
The Chairman and Deputy Chairman
The Group is committed to corporate social responsibility, and
of the Supervisory Board
important areas of activity.
the Supervisory Board adopted the latest CSR policy on 5 October
The Supervisory Board is headed by its Chairman and Deputy
2010. In addition, Tryg has an Investor Relations policy and a
Chairman. The Deputy Chairman will act in the Chairman’s absence
Communication policy.
and has the role as a sparring partner for the Chairman.
See Tryg’s Investor Relations policy on tryg.com >
The tasks of the Chairman and the Deputy Chairman are defined in
Investor > Contact IR > IR policy.
the rules of procedure for the Supervisory Board. The tasks of the
See Tryg’s Communication policy on tryg.com >
Press > Communication policy.
Chairman of the Supervisory Board include chairing and assessing
the work of the Supervisory Board, organising, convening and chair-
ing Board meetings and being in charge of the collaboration with the
See Tryg’s CSR policy on tryg.com > CSR > CSR strat-
Group Executive Management. The Chairman also acts as spokesman
egy > CSR policy.
for the Supervisory Board for external purposes.
Tasks and responsibilities of the Supervisory Board
The Chairman and Deputy Chairman hold preparatory meetings with
The Supervisory Board is responsible for the overall management
the Executive Management before all Board meetings and before
and financial control of Tryg. In this work, the Supervisory Board
Board material is distributed. The Chairman and the Deputy Chairman
uses targets and framework management based on regular and
furthermore plan the future composition of the Supervisory Board.
systematic consideration of strategies and risks. The Executive
Management reports to the Supervisory Board on strategies and
According to the rules of procedure for the Supervisory Board, no
action plans, market developments and the Group’s performance,
Board member may perform work for Tryg without a prior decision
funding issues, capital resources and special risks. The Super-
to that effect by the Supervisory Board. Furthermore, such task
visory Board holds an annual strategy seminar to define and/
must be of a one-off nature.
Tryg A/S | Annual report 2010 | 59
Composition and organisation of the Supervisory Board
Independence of the Supervisory Board
The Supervisory Board makes an annual assessment of the skills
Eight members of the Supervisory Board are elected by the sharehold-
required for the Supervisory Board to perform its duties in the
ers atthe general meeting for a term of one year. Four of the eight
best possible way. The Group focuses on skills within financial
members elected by the shareholders are independent members.
business, IT, marketing and management.
The description of skills is available on
visory Board members are considered to be independent members.
tryg.com and in the notice convening
This is also described in the notice convening the annual general
the annual general meeting.
meeting, including in connection with election of new Supervisory
The section Supervisory Board and tryg.com describe which Super-
The Articles of Association provide that the Chairman of the
Supervisory Board of TryghedsGruppen smba should also act
New Supervisory Board members
Board members.
as Chairman of the Supervisory Board of Tryg A/S. In addition,
The process of selecting new Supervisory Board members is com-
the Supervisory Board of TryghedsGruppen smba elects three
prehensive and transparent for the Board members. The Chairman
members to the Supervisory Board of Tryg A/S from among the
and Deputy Chairman are in charge of selecting candidates for the
members of TryghedsGruppen smba’s Supervisory Board.
four independent seats on the Supervisory Board and submit the
recommendation for choice of candidate to the Supervisory Board.
The Supervisory Board includes members from Denmark,
Sweden and Norway and has four female members.
Prior to the election of new members, the Supervisory Board
prepares a description of the candidates’ background, professional
See the CVs and competency descriptions of the
qualifications and experience. A balanced distribution with respect
Supervisory Board on tryg.com > Governance >
to, among other things, age, gender and nationality is sought in the
Management > Supervisory Board
composition of the Supervisory Board, and the need for integrating
See the CVs of all Board members in the section
Supervisory Board.
new talent is considered. When taking up office, new Supervisory
Board members are given an introduction to the Group.
Supervisory Board members elected by the employees
Skills of the Supervisory Board members
Under the Danish Companies Act, employees are entitled to elect
The Supervisory Board performs an annual self-assessment
a number of representatives to the Supervisory Board, equal to
of the Supervisory Board’s work and its members’ skills to
half the number of other members at the time employee elections
assess whether the Supervisory Board has the required skills,
are held. Tryg has agreed with the Group’s staff organisations that
or whether the skills and expertise of its members need to be
two Supervisory Board members are elected among the employees
updated in any respects.
in Denmark, one member among the employees in Norway, and
one member among the employees in Sweden. The most recent
Number of Supervisory Board members
election of a Swedish employee representative was held in 2010.
The Supervisory Board comprises 12 members, and the Supervi-
The next ordinary election of the four employee representatives will
sory Board deems the number of members adequate to ensure
be held in 2012. Pursuant to the applicable legislation, employee
a constructive debate, sufficient diversification and an efficient
representatives have the same rights, duties and responsibilities as
decision-making process.
any other members of the Supervisory Board.
The Supervisory Board discusses the number of Supervisory Board
Meeting frequency
members each year when preparing the annual general meeting.
The Supervisory Board holds at least seven annual meetings and
an annual strategy seminar to discuss and define strategies and
60 | Annual report 2010 | Tryg A/S
goals for the years ahead. In 2010, the Supervisory Board held
Information about the Board committees includes descriptions
eight Board meetings and the annual strategy seminar. The
of members, meeting frequency, responsibilities and the activi-
Supervisory Board discusses the Supervisory Board’s tasks on a
ties of the committee during the year. Furthermore, the special
regular basis, and no later than at the last meeting of the year, it
qualifications of each Supervisory Board member are described
schedules the meetings of the coming year.
separately on the website.
Number of other directorships
Two out of four members of the Audit committee and the
The Supervisory Board and the individual Board members deem
Risk committee, including the chairman of the committees,
that each member has adequate time and resources to perform
are independent. In the Remuneration committee, one of four
their office as a Supervisory Board member of Tryg in a satisfac-
members is independent, while one of the Chairman and the
tory manner.
Deputy Chairman in their joint role as Nomination committee is
See the Supervisory Board members’ CVs,
independent.
including position, directorships and holding
Board committee members are primarily elected on the basis of
of Tryg shares and changes in portfolios in the
their special skills. It is also considered important to involve the
section Supervisory Board and on tryg.com >
employee representatives in the committees. The committees
Governance > Management > Supervisory Board.
solely prepare matters for decision by the entire Supervisory
Retirement age
Board.
To ensure replacement on the Supervisory Board, members
Evaluation of the work of the Supervisory Board and the
elected by the shareholders may hold office for a maximum of
Executive Management
nine years. Furthermore, members of the Supervisory Board must
The Supervisory Board has defined an evaluation procedure for
retire at the first general meeting following their 70th birthday.
assessing the composition of the Supervisory Board and the work
and results of the Supervisory Board and its individual members.
The age of each Supervisory Board member
is disclosed in the section Supervisory Board.
The Chairman is in charge of the evaluation and holds individual
Term of office
assessment interviews with each member of the Supervisory
Board at the beginning of the year, which are discussed at the
Board members elected by the shareholders at the annual gen-
first Board meeting of the year.
eral meeting are elected for terms of one year.
See when the Supervisory Board members joined the Board, were
the work and results of the Executive Management according
re-elected and when their term expires in the section Supervisory
to clearly defined criteria determined in advance and of the
The Supervisory Board carries out an annual evaluation of
Board.
Board committees
cooperation between the Supervisory Board and the Executive
Management. In addition, the Supervisory Board reviews and
approves the rules of procedure of the Supervisory Board and
Tryg’s Supervisory Board has set up an Audit committee, a Remu-
the Executive Management each year to ensure they are
neration committee and a Risk committeee. No formal Nomina-
aligned with Tryg’s requirements.
tion committee has been set up. The Chairman and the Deputy
Chairman of the Supervisory Board perform the duties generally
Remuneration of the Supervisory Board
handled by a Nomination committee.
and the Executive Management
The terms of reference of the Board committees
Board and the Executive Management, including guidelines for
are available on tryg.com.
incentive pay.
Tryg has adopted a policy for remuneration of the Supervisory
Tryg A/S | Annual report 2010 | 61
Board committees
Audit committee
Tryg set up an Audit committee in 2006 covering Tryg A/S and its sub-
sidiaries Tryg Forsikring A/S and Tryg Garantiforsikring A/S. The com-
mittee has four members and is chaired by an independent Supervi-
sory Board member who is also Deputy Chairman of the Supervisory
Board.
Members
• Mikael Olufsen, chairman
• John R. Frederiksen
• Paul Bergqvist (independent)
• Berit Torm
Responsibilities
The framework for the Audit committee’s work is defined in terms of
reference. The committee is solely a preparatory body, supporting the
Supervisory Board in its work. The Audit committee has knowledge of
and experience in financial matters as well as accounting and audit
matters in listed companies.
The Audit committee held four meetings in 2010, reporting to the Su-
pervisory Board on a regular basis. The Audit committee made an as-
sessment of the preceding year’s work in August 2010, evaluating the
need for changes to its terms of reference.
Members
• Bodil Nyboe Andersen, chairman (independent)
• Lene Skole (independent)
• Jørn Wendel Andersen
• Rune Joensen
Responsibilities
• Review the Group’s technical provisions.
• Review the methodology for and calculation of the Group’s Individ-
ual Solvency Need.
• Review the efficiency of the Group’s contingency plans.
• Assess the Group’s internal control procedures to prevent fraud.
• Supervise annual and interim financial statements.
• Supervise the audit work performed by the external auditors.
• Review and discuss the results of the work of the internal and ex-
ternal auditors and to supervise management’s follow-up on the
recommendations reported by the internal and external auditors.
• Ensure that the Group is being monitored by independent auditors
and by internal auditors.
Remuneration committee
The Remuneration committee has four members elected by the Super-
visory Board. The remuneration committee is chaired by the Chairman
of the Supervisory Board. In addition, the committee must include at
least one member of the Supervisory Board of TryghedsGruppen and
at least one independent member of the Supervisory Board. At pres-
ent, the committee has one independent member.
The Remuneration committee’s work is based on Tryg’s remuneration
policy and guidelines for incentive pay.
• Recommend the remuneration policy (including general guidelines
for incentive pay) to the Supervisory Board for approval prior to ap-
proval by the shareholders.
• Prepare recommendations to the Supervisory Board as to which
employees the company considers to be risk-takers.
• Prepare recommendations to the Supervisory Board about ele-
ments that should be included in the remuneration of the Super-
visory Board and the Executive Management as well as the amount
of the specific remuneration.
• Ensure compliance with the adopted remuneration policy
(including guidelines for incentive pay).
• Monitor that the information in the annual report on remuneration
of the Supervisory Board, the Executive Management and risk-
takers is correct, true and adequate.
• Ensure that the Supervisory Board is kept informed of the market
level of remuneration paid to the supervisory boards and executive
managements of the company’s peers, and, on behalf of the
Supervisory Board, to follow practice in the area to ensure that
any new forms of remuneration are discussed and considered
by the Supervisory Board.
Risk committee
In 2010, Tryg established a Risk committee. The purpose of the Risk
committee is to support the Supervisory Board in its work with and
supervision of capital management and risk management. The overall
responsibility rests with the Supervisory Board, while the Risk commit-
tee monitors the risk management environment and the related pro-
cesses. In 2011, the Supervisory Board will determine whether the
risk committee should be made permanent.
The committee held three meetings in 2010.
Members
• Bodil Nyboe Andersen, chairman (independent)
• Lene Skole (independent)
• Jørn Wendel Andersen
• Rune Joensen
Responsibilities
• Monitor the company’s risk management systems.
• Review the Group’s risk assessment.
• Assess and monitor the efficiency of the risk management
environment.
The committee held four meetings in 2010.
• Monitor the implementation of Solvency II in the Group.
62 | Annual report 2010 | Tryg A/S
The Chairman of the Supervisory Board reports on the Group’s re-
In 2010, the Executive Management, Group Executive Manage-
muneration policy each year in connection with the presentation
ment and senior executives were offered a performance-related
of the annual report at the annual general meeting. The Supervi-
bonus of up to three months’ salary including pension (four
sory Board’s proposal for remuneration to the Supervisory Board
months for the Group CEO). The bonus was linked to the achieve-
of Tryg for the current financial year is also submitted for approval
ment of pre-defined benchmarks and paid out in cash. The as-
by the shareholders at the annual general meeting of each year.
sessment of benchmark achievement included the Group’s overall
Tryg intends to present a new remuneration policy and new
tive areas of responsibility. Specific benchmarks for 2010 were
guidelines for incentive pay at the upcoming annual general
defined within all four perspectives of the balanced scorecard
meeting to be held on 14 April 2011 based, among other things,
(financial, customer, processes and learning), reflecting the strate-
on legislation changes.
gic focus areas of the Group and the individual business areas or
performance as well as individual performance within the respec-
Remuneration of the Supervisory Board
customer satisfaction, customer loyalty, image, processes, com-
Members of Tryg’s Supervisory Board receive a fixed fee and are
munication, employee satisfaction and development, and innova-
not part of any form of incentive programme. The Board mem-
tion. The variable pay components would constitute a maximum
bers’ remuneration (basic fee) is fixed on the basis of trends in
of 50% of the fixed annual salary including pension in 2010.
organisational units, including growth, profitability, cost reduction,
a peer group, taking into account Board members’ required skills
and efforts and the scope of the Board work, including number
Share option programme
of meetings. The Chairman of the Supervisory Board receives
In order to build loyalty and motivation, Tryg had a share option
a triple basic fee and the Deputy Chairman receives a double
programme in 2010 for the Executive Management, Group Execu-
basic fee.
tive Management, senior executives and employees to reward
outstanding performance. The options, which entitle the holders
Remuneration of the Executive Management
to buy one share per option, cannot be exercised earlier than
Members of the Executive Management are employed under
three years and not later than five years after grant. The strike
service contracts, and all terms of their remuneration are fixed by
price is the market price on grant plus 10%. The exercise price is
the Supervisory Board. The Supervisory Board reviews the remu-
the strike price less dividend payouts in the period. Options can
neration of the members of the Executive Management annually
only be exercised during the open trading windows in connection
based on the requirements for attracting and retaining the best
with profit announcements. Own shares are bought to cover the
qualified Executive Management members.
share option programme.
Total remuneration of the Supervisory Board in 2010
DKK
Mikael Olufsen
Bodil Nyboe Andersen
Jørn Wendel Andersen
Christian Brinch
John Rene Frederiksen
Paul Bergqvist
Jesper Hjulmand
Lene Skole
Tina Snejbjerg
Bill-Owe Johansson
Rune Torgeir Joensen
Berit Torm
Fee
Audit Remuneration
committee
committee
900,000
600,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
225,000
150,000
150,000
150,000
75,000
50,000
50,000
50,000
Total
975,000
825,000
450,000
300,000
350,000
350,000
300,000
450,000
300,000
300,000
450,000
350,000
Tryg A/S | Annual report 2010 | 63
In 2010, the share options entitled the holders to acquire shares
in risk policies that define detailed guidelines for the Group’s
at the average price of Tryg shares (all trades) as quoted on OMX
risk management. A Risk committee comprising the Group CEO,
Copenhagen on 23 February 2010 plus a 10% premium, equal to
Group CFO and Group CRO monitors the risk management envi-
a strike price of DKK 352.04.
ronment.
Retention and severance schemes
Tryg performs an annual risk identification process mapping
Each member of the Executive Management is entitled to 12
insurance risk and other risks related to the achievement of the
months’ notice of termination and to 12 months’ severance pay.
Group’s strategy or which may have a potential substantial im-
However, the Group CEO is entitled to 12 months’ notice and to
pact on the Group’s financial position. In this process, identified
18 months’ severance pay plus pension contributions during such
risks are recorded and quantified. The risk mapping is included
period.
in the annual risk reporting to the Supervisory Board, and the
quarterly quantification of identified risks is included in the
The going concern assumption
calculation of the individual solvency need.
When discussing and adopting the annual report for 2010, the
Supervisory Board considers whether the financial statements
The Executive Management reports to the Supervisory Board on
have been prepared on the assumption that the business is a go-
the Group’s risk management work. The overall responsibility
ing concern, including assumptions and uncertainties.
for the Group’s internal controls and risk management systems
in connection with the financial reporting process rests with
Risk management and internal control
the Supervisory Board and the Executive Management. The
Being an insurance business, Tryg is subject to the risk manage-
Supervisory Board and the Executive Management approve and
ment requirements of the Danish Financial Business Act. In its
monitor the Group’s general policies, procedures and controls in
capital and risk management instructions, the Supervisory Board
key areas in relation to the financial reporting process, including
defines the framework for risk management in Tryg with respect
compliance with relevant legislation and regulations, internal
to insurance risk/reinsurance, investment risk and operational
business procedures, limits and segregation of responsibilities,
risk, including IT security. This framework is then implemented
continuous monitoring of significant risks. A compliance status
Total remuneration of the Executive Management in 2010
DKK
Basic salary
Bonus
Pension
Car
I alt
Stine Bosse
Morten Hübbe
Peter Falkenham (resigned September 2010)
6,188,280
3,822,000
3,244,500
1,031,380
637,000
270,375
1,547,070
955,000
811,125
255,000
255,000
255,000
9,021,730
5,669,500
4,581,000
Share option programme
Options
2006
2007
2008
2009
2010
Total
Stine Bosse
Morten Hübbe
Peter Falkenham
Other option programme participants
20,960
7,860
0
53,710
13,527
7,101
5,072
112,990
24,597
15,916
11,575
183,003
18,066
11,690
8,502
137,576
22,690
14,682
10,678
178,849
99,840
57,249
35,827
666,128
Total no. of outstanding share options
82,530
138,690
235,091
175,834
226,899
859,044
64 | Annual report 2010 | Tryg A/S
is reported annually to the Supervisory Board in connection with
meetings for the purpose of assessing the auditors’ observations
approval of the Group’s risk management instructions. However,
and conclusions. The internal and external auditors’ long-form
any non-compliance with limits and guidelines that may occur is
reports are reviewed by the Supervisory Board.
reported immediately to the Supervisory Board.
The audit agreement with the external auditors, including the
In connection with major acquisitions, a general risk analysis is
auditors’ fees, is concluded between the Audit committee and
performed, and the significant business procedures and internal
the auditors. The Audit committee reviews the limits for the
controls are reviewed. The Executive Management has estab-
external auditors’ performance of non-audit services each year.
lished a formal Group reporting process which comprises monthly
reporting, including budget reporting and deviation reporting.
In at least one Audit committee meeting each year, the internal
The Group’s internal control systems are based, among other
and external auditors have a dialogue without the presence of
things, on clear organisational structures and guidelines, general
the Executive Management. The Audit committee will handle any
IT controls and segregation of duties, which are supervised by
matters that need to be reported to the Supervisory Board.
the internal auditors.
Internal audit
Whistleblowing scheme
Tryg has set up an internal audit department in compliance with
Tryg is in the process of setting up an Ethical Line through which
the Danish Financial Business Act. The internal audit depart-
employees, customers or business partners may report on serious
ment regularly reviews the quality of the Group’s internal control
matters related to breach of law or internal guidelines. The line
systems and business procedures. The department is responsible
will come into effect when it has been approved by the Danish
for planning, performing and reporting the audit work to the
data protection agency.
Supervisory Board.
Openness about risk management
Deviations and explanations
Risk management is an integral part of Tryg’s business opera-
The Supervisory Board believes that Tryg complies with the
tions. The Group continuously seeks to minimise the risk of
recommendations apart from:
unnecessary losses in order to optimise return relative to the
company’s capital.
Recommendation 5.10.2 in that a majority of the members of
the board committees cannot be considered to be independent
Read more about the Group’s risk management
members. Board committee members are primarily elected on
in the section Risk management.
the basis of their special skills. It is also considered important
to involve the employee representatives in the committees.
Audit
The Supervisory Board ensures that the Group is monitored by
Recommendation 6.1.8 in that the service contracts with the
competent and independent auditors. The Group’s internal audi-
Executive Management do not include a right to reclaim variable
tor participates in all Board meetings. The external auditors par-
components of remuneration in exceptional cases. The variable
ticipate in the annual Board meeting at which the annual report
component of the Executive Management’s remuneration is
is presented.
deemed to be modest, and the Supervisory Board has therefore
deemed that a claw-back provision would not be necessary.
Each year, the annual general meeting appoints external auditors
recommended by the Supervisory Board. In connection with the
Supervisory Board’s review of the annual report, it discusses the
accounting policies, among other issues. The results of the audit
are discussed with the Audit committee and in Supervisory Board
Tryg A/S | Annual report 2010 | 65
Shareholder information
Financial calendar 2011
14 April 2011 at 14:00
15 April 2011
20 April 2011
11 May 2011 after 17:00
17 August 2011 after 17:00
9 November 2011 after 17:00
Annual general meeting 2011
Tryg shares trade ex-dividend
Payment of dividend
Interim report for Q1 2011
Interim report for H1 2011
Interim report for Q1-Q3 2011
Tryg emphasises openness, transparency and accommodation
Share price performance in 2010
of stakeholder information requirements, thereby providing
Tryg shares opened 2010 at DKK 351.5 and ended the year at
investors, equity analysts and other stakeholders with a good
DKK 257.5. Including dividends of DKK 15.5, the share thus fell
basis for forming a correct picture of the Group’s financial posi-
22.3% in 2010. Tryg shares underperformed the market in gen-
tion, its performance and its opportunities and risks.
eral in 2010, with the OMX C20 increasing by 35.9% while the
DJ Euro Insurance Index was at the same level as in 2009.
The Group’s Investor Relations strive to maintain a high level of
information by
The performance of Tryg shares in 2010 was affected by a lower-
•
being available and proactive, and answering queries from
than-expected earnings level. This was to a large extent attribut-
investors and other stakeholders as promptly as possible
able to several extraordinary events as described earlier in the
•
having in-depth insight into and knowledge of the Group as
sections on performance, which reduced earnings by DKK 1.4bn.
well as relevant external trends
•
preparing plain and relevant written communication and
Turnover of Tryg shares and share buy back
presentation material
Tryg shares had an average daily turnover of DKK 43.1m in
•
having a website that is of relevance to professional and
2010 compared with DKK 27m in 2009. The total turnover
private investors alike
of Tryg shares for all of 2010 on Nasdaq OMX Copenhagen
Information that may influence the pricing of Tryg shares is pub-
lished in accordance with the rules applicable to the distribution
of news in the EU. The Group’s website is updated simultane-
Most active stockbrokers a)
ously with the release of new information. In addition, informa-
tion is distributed directly to the London Stock Exchange, the
press, equity analysts, investors and other stakeholders. All
financial information may be downloaded on tryg.com/investor,
where stakeholders may also order reports and subscribe for
news, reports and RSS feeds.
In accordance with the recommendations issued by Nasdaq
OMX Copenhagen, Tryg refrains from commenting on matters
1. Danske Bank
2. Carnegie
3. Nordea
5. SEB Enskilda
6. Credit Suisse Securities
7. Morgan Stanley
8. Deutsche Bank
11.5%
10.9%
10.5%
7.4%
6.9%
5.3%
5.2%
relating to financial performance or forecasts during a period of
a) In terms of percentage of turnover on Nasdaq OMX Copenhagen.
four weeks prior to the release of financial reports.
66 | Annual report 2010 | Tryg A/S
was DKK 12.1bn including OTC transactions (over the counter)
At 31 December 2010, the 40% free float was distributed among
compared with DKK 6.7bn in 2009. New trading platforms such
28,608 registered shareholders. The 200 largest shareholders
as Chi-X, Turqouise and Burgundy accounted for around 5% of
held 73.2% of the free float. At 31 December 2010, Tryg held own
all trades in Tryg shares in 2010. In addition MTF transactions
shares corresponding to 5.2% of the share capital.
accounted for DKK 4.4bn. MTF transactions account for 22% of all
Tryg share transactions.
Dialogue with investors
The Executive Management and Investor Relations meet with
On 16 April 2010, Tryg initiated a share buy back programme
institutional investors and equity analysts each quarter after the
running until 7 February 2011. During the period, Tryg bought
publication of financial statements. In 2010, Tryg held around 285
2,615,470 own shares at a total price of DKK 799m. Tryg holds a
investor meetings and participated in 12 investor conferences. Tryg
total of 3,495,322 shares as own shares, corresponding to 5.8%.
also participated in five events for private shareholders in Denmark.
The total number of shares is 63,931,573. The acquired shares
will be cancelled in June 2011.
The Group’s performance is followed by 21 equity analysts, six of
Share capital and ownership
tions with respect to Tryg shares are available on tryg.com. The
Tryg has a total share capital of DKK 1,598,289,325 comprised of
website, which is available in a Danish and an English version,
a single class of shares (63,931,573 shares of DKK 25 nominal
is being updated and developed on an ongoing basis, making it
value each), and all shares rank pari passu. The principal share-
an important source for providing information about the Group’s
holder, TryghedsGruppen smba, Kgs. Lyngby, Denmark, holds 60%
performance to interested investors.
whom are based in London. The equity analysts’ recommenda-
of the issued shares.
TryghedsGruppen is the only shareholder besides Tryg with an
letter about winter losses in the year. Newsletters are issued
ownership of more than 5%. TryghedsGruppen invests in Nordic
when deemed appropriate and deal with topical issues in order to
businesses that promote peace of mind and health, and supports
create a better understanding of factors of importance to Tryg’s
benevolent activities.
performance.
In 2010, Tryg’s Investor Relations department issued an IR news-
Read more about TryghedsGruppen
The newsletter can be downloaded
on tryghedsgruppen.dk.
on tryg.com > Investor.
Shareholders
At 31 December 2010
10
Percent
17
13
60
Equities by geography
At 31 December 2010
12
1
8
6
Percent
73
Denmark
UK
USA
Nordic
Other
TryghedsGruppen
Large Danish
shareholders a)
Large international
shareholders a)
Small shareholders
a) Shareholders with more than 10,000 shares.
Tryg A/S | Annual report 2010 | 67
Annual general meeting
Tryg’s annual general meeting will be held on 14 April 2011 at
Queries relating to the annual general meeting
Bjarne Lau Pedersen, Chief Legal Adviser
14:00 CET at Falkoner Centret, Falkoner Alle 9, 2000 Freder-
+45 21 71 30 28
iksberg, Denmark. The invitation to attend the meeting will be
bjarne.lau@tryg.dk
advertised in the daily press in March 2011 and will be sent to
shareholders who so request. Notice of the meeting will also be
Ole Søeberg, Investor Relations Director
posted on tryg.com. Shareholders unable to attend the annual
+45 40 30 00 04
general meeting may follow it live via webcast on tryg.com.
ole.soeberg@tryg.dk
Read about dividends for 2010 in the section
Capital management and profit distribution.
Company announcements published in 2010
Date
No. a)
Company announcement
25.02.2010
25.02.2010
25.02.2010
11.03.2010
15.03.2010
18.03.2010
25.03.2010
29.03.2010
1
2
3
4
5
6
7
8
Fourth quarter 2009 results
Annual report 2009
TrygVesta Forsikring AS Annual report 2009
TrygVesta sells marine hull business
TrygVesta changes name to Tryg
Notice of the annual general meeting of TrygVesta A/S
TryghedsGruppen’s candidates for TrygVesta’s Supervisory Board
Election of Swedish employee representative
09.04.2010
9
Effect of winter claims in Q1 2010
15.04.2010
16.04.2010
29.04.2010
21.05.2010
01.07.2010
10.08.2010
17.08.2010
23.08.2010
06.09.2010
15.10.2010
10.11.2010
15.11.2010
10
11
13
17
24
30
32
34
36
43
48
50
Resolutions from annual general meeting
TrygVesta initiates share buy back programme
Sale of marine hull business completed
First quarter 2010 report
Moderna becomes a branch of Tryg
Historical financial data in new reporting structure
Q2 and H1 2010 report
Financial calendar 2011a
Management change
Market update prior to Q3 2010 report
Revised financial calendar for 2010 and 2011
Interim report for Q1-Q3 2010
a) After implementing the share buy back programme on 16 April 2010, Tryg issued a company announcement on the weekly share buy backs each week in 2010 until
8 February 2011.
68 | Annual report 2010 | Tryg A/S
Tryg A/S | Annual report 2010 | 69
Tryg’s financial statements
are prepared in accordance
with IFRS and published
in Danish and English.
Contents – Accounts
Accounts 2010
Note Tryg Group
Statement by the Supervisory Board and the Executive Management
Independent auditors’ report
Income statement
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cashflows
Notes
Insurance operating expenses, net of reinsurance
1 Accounting policies
2 Earned premiums, net of reinsurance
3 Technical interest, net of reinsurance
4 Claims incurred, net of reinsurance
5
6 Operatingegments
6 Technical result, net of reinsurance, by line of business
7
8 Value adjustment
9 Tax
Interest and dividends
Intangible assets
Investment property
Investments in associates
10 Profit/loss on discontinued and divested business
11
12 Property, plant and equipment
13
14
15 Total other financial investment assets
16 Reinsurer’s share
17 Current tax
18 Shareholders’ equity
19 Capital adequacy
20 Subordinate loan capital
21 Provisions for claims
22 Pensions and similar obligations
23 Deferred tax
24 Other provisions
25 Debt to credit institutions
26 Other debt
27 Earnings per share
28 Contractual obligations, contingent liabilities and collateral
29 Acquisition of subsidiary
30 Related parties
31 Financial highlights
Tryg A/S (parent company)
Income statement (parent company)
Statement of financial position (parent company)
Statement of changes in equity (parent company)
Notes (parent company)
Geographical segments
Other key figures
Glossary
Disclaimer
Group chart
Page
72
73
74
75
76
78
80
81
92
92
92
92
98
100
102
102
103
103
104
106
108
109
110
115
115
115
116
117
118
122
124
125
125
125
125
126
127
128
129
130
131
133
133
138
140
141
143
144
Statement by the Supervisory Board
and the Executive Management
The Supervisory Board and the Executive Management have to-
and the parent company’s assets, liabilities and financial posi-
day considered and adopted the annual report for 2010 of Tryg
tion at 31 December 2010 and of the results of the Group’s
A/S and the Tryg Group.
and the parent company’s operations and the cash flows of the
Group for the financial year 1 January – 31 December 2010.
The consolidated financial statements have been prepared in
accordance with the International Financial Reporting Standards
Furthermore, in our opinion the Management’s report gives a
as adopted by the EU, and the financial statements of the par-
true and fair view of developments in the activities and financial
ent company have been prepared in accordance with the Danish
position of the Group and the parent company, the results for
Financial Business Act. In addition, the annual report has been
the year and of the Group’s and the parent company’s financial
presented in accordance with additional Danish disclosure re-
position in general and describes significant risk and uncertainty
quirements for the annual reports of listed financial enterprises.
factors that may affect the Group and the parent company.
In our opinion, the accounting policies applied are appropriate,
We recommend that the annual report be adopted by the share-
and the annual report gives a true and fair view of the Group’s
holders at the annual general meeting
Ballerup, 9 february 2011
Executive Management
Morten Hübbe
Group CEO
Bestyrelse
Lars Bonde
Group Executive Vice President
Mikael Olufsen
Chairman
Bodil Nyboe Andersen
Deputy Chairman
Jørn Wendel Andersen
John R. Frederiksen
Lene Skole-Sørensen
Jesper Hjulmand
Paul Bergqvist
Christian Brinch
Bill-Owe Johansson
Rune Torgeir Joensen
Tina Snejbjerg
Berit Torm
72 | Annual report 2010 | Tryg A/S
Independent auditor’s report
To the shareholders of Tryg A/S
cedures to obtain audit evidence about the amounts and disclosures
We have audited the consolidated and parent financial statements
in the consolidated and parent financial statements and the man-
of Tryg A/S for the financial year 1 January to 31 December 2010,
agement’s report. The procedures selected depend on the auditor’s
which comprise the income statement, balance sheet, statement of
judgment, including the assessment of the risks of material misstate-
changes in equity and notes, including the accounting policies as
ment of the consolidated and parent financial statements and the
well as the management’s report, for the Group and the Parent, and
management’s report, whether due to fraud or error. In making those
the statement of comprehensive income and cash flow statement
risk assessments, the auditor considers internal controls relevant to
for the Group. The consolidated financial statements have been
the entity’s preparation and fair presentation of consolidated and
prepared in accordance with International Financial Reporting Stand-
parent financial statements and to the fair review of a management’s
ards as adopted by the EU, and the parent financial statements have
report in order to design audit procedures that are appropriate in
been prepared in accordance with the Danish Financial Business Act.
the circumstances, but not for the purpose of expressing an opinion
In addition, the consolidated and parent financial statements have
on the effectiveness of the entity’s internal control. An audit also
been prepared in accordance with additional Danish disclosure re-
includes evaluating the appropriateness of accounting policies used
quirements for listed companies. The management’s report has been
and the reasonableness of the entity’s accounting estimates made
prepared in accordance with the Danish Financial Business Act.
by Management, as well as evaluating the overall presentation of the
consolidated and parent financial statements and the management’s
Management’s responsibility for the consolidated and
report. We believe that the audit evidence we have obtained is suf-
parent financial statements and the management’s report
ficient and appropriate to provide a basis for our audit opinion. Our
Management is responsible for the preparation and fair presenta-
audit has not resulted in any qualification.
tion of consolidated and parent financial statements in accordance
with International Financial Reporting Standards as adopted by the
Opinion
EU in respect of the consolidated financial statements, in accord-
In our opinion, the consolidated financial statements give a true and
ance with the Danish Financial Business Act in respect of the parent
fair view of the Group’s financial position at 31 December 2010, and
financial statements, as well as in accordance with additional Danish
of its financial performance and its cash flows for the financial year
disclosure requirements for listed companies, and for the preparation
1 January to 31 December 2010 in accordance with International
of a management’s report that contains a fair review in accordance
Financial Reporting Standards as adopted by the EU and additional
with the Danish Financial Business Act. This responsibility includes
Danish disclosure requirements for listed companies. Furthermore,
designing, implementing and maintaining internal control relevant
in our opinion, the parent financial statements give a true and fair
to the preparation and fair presentation of consolidated and parent
view of the Parent’s financial position at 31 December 2010, and of
financial statements and a management’s report that are free from
its financial performance for the financial year 1 January to 31 De-
material misstatement, whether due to fraud or error; selecting and
cember 2010 in accordance with the Danish Financial Business Act
applying appropriate accounting policies, and making accounting
and additional Danish disclosure requirements for listed companies.
estimates that are reasonable in the circumstances.
Moreover, in our opinion, the management’s report contains a fair
review in accordance with the Danish Financial Business Act.
Auditor’s responsibility and basis of opinion
Our responsibility is to express an opinion on these consolidated and
Ballerup, 9 February 2011
parent financial statements and this management’s report is based
on our audit. We conducted our audit in accordance with Danish
Deloitte
and International Standards on Auditing. Those standards require
Statsautoriseret Revisionsaktieselskab
that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance whether the consolidated
and parent financial statements and the management’s report are
Lars Kronow
Lone Møller Olsen
free from materiel misstatement. An audit involves performing pro-
State Authorised Public Accountant
State Authorised Public Accountant
Tryg A/S | Annual report 2010 | 73
Income statement
DKKm
Notes General insurance
Gross premiums written
Ceded insurance premiums
Change in provisions for unearned premiums
Change in reinsurers’ share of provisions for unearned premiums
2 Earned premiums, net of reinsurance
3 Technical interest, net of reinsurance
Claims paid
Reinsurance recoveries
Change in provisions for claims
Change in the reinsurers’ share of provisions for claims
4 Claims incurred, net of reinsurance
Bonus and premium rebates
Acquisition costs
Administrative expenses
Acquisition costs and administrative expenses
Commission and profit commission from the reinsurers
5
Insurance operating expenses, net of reinsurance
6 Technical result
14
Investment activities
Income from associates
Income from investment properties
Interest income and dividends
7
8 Value adjustment
Interest expenses
7
Investment management charges
2009
2010
17,883
-824
91
-62
19,939
-1,054
-382
47
17,088
18,550
158
134
-13,148
253
266
32
-14,809
391
-808
211
-12,597
-15,015
-112
-82
-2,214
-842
-3,056
81
-2,406
-898
-3,304
92
-2,975
-3,212
1,562
375
0
136
1,287
734
-116
-110
-5
128
1,133
238
-96
-76
Total return on investment activities
1,931
1,322
3
Interest on insurance provisions
Total return on investment activities after technical interest
Other income
Other expenses
Profit/loss before tax
9 Tax
Profit/loss on continuing business
10 Profit/loss on discontinued and divested business
Profit/loss for the year
27 Earnings per share - continuing business of DKK 25
Earnings per share of DKK 25
Diluted earnings per share of DKK 25
74 | Annual report 2010 | Tryg A/S
-845
1,086
123
-161
2,610
-625
1,985
23
2,008
31.3
31.7
31.7
-752
570
162
-166
941
-265
676
-83
593
10.8
9.5
9.5
Statement of comprehensive income
DKKm
2009
2010
Notes Adjustment beginning of year cf note 1
Change in equalisation provision
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
Deferred tax on provision for contingency funds
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 comprehensive income
-35
0
9
-2
505
-474
119
0
28
-7
143
2,008
2,151
0
1
19
-5
330
-328
82
68
-228
63
2
593
595
Tryg A/S | Annual report 2010 | 75
Statement of financial position
DKKm
Notes Assets
11
Intangible assets
Operating equipment
Owner-occupied property
Assets under construction
12 Total property, plant and equipment
13
Investment property
14
Investments in associates
Total investments in associates
Equity investments
Unit trust units
Bonds
Deposits in credit institutions
2009
2010
934
968
83
1,358
172
1,613
118
1,385
353
1,856
2,364
2,158
17
17
381
2,143
29,410
2,938
13
13
184
2,268
34,643
2,755
Total other financial investment assets
34,872
39,850
Deposits with ceding undertakings, receivable
15
15
15 Total investment assets
37,268
42,036
16 Reinsurers’ share of provisions for unearned premiums
21 Reinsurers’ share of provisions for claims
16 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
15 Total receivables
17 Current tax assets
23 Deferred tax assets
15 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
195
1,125
1,320
967
967
271
1,190
154
1,434
1,588
1,110
1,110
211
862
2,428
2,183
0
86
512
4
602
417
158
575
196
104
857
21
1,178
609
173
782
Total assets
44,740
50,591
76 | Annual report 2010 | Tryg A/S
Statement of financial position
DKKm
Notes Liabilities
18 Shareholders’ equity
20 Subordinate loan capital
21 Provisions for unearned premiums
21 Provisions for claims
Provisions for bonuses and premium rebates
Total provisions for insurance contracts
22 Pensions and similar obligations
23 Deferred tax liability
24 Other provisions
Total provisions
Debt related to direct insurance
Debt related to reinsurance
25 Debt to credit institutions
17 Current tax liabilities
26 Other debt
Total debt
Accruals and deferred income
Total liabilities and equity
1 Accounting policies
19 Capital adequacy
27 Earnings per share
28 Contractual obligations, contingent liabilities and collateral
29 Acquisition of subsidiary
30 Related parties
31 Financial highlights
2009
2010
9,631
8,458
1,586
1,591
6,208
22,470
364
6,819
24,883
329
29,042
32,031
496
1,330
6
1,832
383
168
611
303
989
671
1,387
1
2,059
419
187
30
106
5,353
2,454
6,095
195
357
44,740
50,591
Tryg A/S | Annual report 2010 | 77
Statement of changes in equity
DKKm
Share
capital
Revalua-
Reserve
for
tion- exchange
rate adj.
reserves
Equali-
sation-
reserve
Other Retained Proposed
reserves earnings dividents
Total
Shareholders’ equity at 31 Dec. 2008
1,700
7
-134
58
749
5,422
442
8,244
2009
Adjustment beginning of year cf note 1
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
Nullification of own shares
Dividend paid
Dividend own shares
Purchase of own shares
Exercise of share options
Issue of employee shares
Issue of share options
0
-102
Total equity entries in 2009
-102
Shareholders’ equity at 31 Dec. 2009
1,598
Shareholders’ equity at 31 Dec. 2009
1,598
2010
Profit for the period
Change in equalisation provision
Revaluation of owner-occupied properties
Exchange rate adjustment
of foreign entities
Hedge of foreign currency risk
in foreign entities
Actuarial gains and losses
on pension obligation
Tax on equity entries
Total comprehensive income
0
Dividend paid
Dividend own shares
Purchase of own shares
Exercise of share options
Issue of share options
9
-2
7
7
14
14
19
-5
14
201
0
201
487
-474
119
132
132
-2
0
58
201
950
-35
816
18
28
-7
820
102
32
-418
19
30
15
600
6,022
991
-35
2,008
9
505
-474
28
110
991
2,151
-442
0
-442
32
-418
19
30
15
549
991
1,387
9,631
-2
58
950
6,022
991
9,631
128
209
256
1
330
-328
82
84
1
128
256
-991
-228
131
112
14
-816
9
16
593
1
19
330
-328
-228
208
595
-991
14
-816
9
16
Total equity entries in 2010
0
Shareholders’ equity at 31 Dec. 2010
1,598
14
28
84
82
1
59
128
-665
-735
-1,173
1,078
5,357
256
8,458
78 | Annual report 2010 | Tryg A/S
Statement of changes in equity
Proposed dividend per share DKK 4.00 (in 2009 DKK 15.50)
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 (63,931,573). The dividend is not paid until approved by the shareholders at the annual general meeting of
the subsequent year.
Tryg Forsikring A/S’ Norwegian branch, has in its branch financial statements included provisions for contingency funds in the amount of
DKK 2,887m (in 2009 DKK 2,599m) Tryg Forsikring A/S’ Swedish branch, has in its branch financial statements included provisions for con-
tingency funds in the amount of DKK 194m (in 2009 DKK 369m). In Tryg Forsikring A/S, these provisions, due to their nature as additional
provisions, are included in shareholders’ equity (retained earnings), net of deferred tax. Tryg Forsikring A/S’ option to pay dividend to Tryg
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 Tryg Forsikring A/S. Tryg Garantiforsikring A/S has a similar contingency amounting to DKK 139m, which is also in-
cluded in the company’s shareholders’ equity.
Tryg A/S | Annual report 2010 | 79
Statement of cashflows
DKKm
Notes 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 and refurbishment 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/sale of operating equipment (net)
29 Acquisition of subsidiares
29 Acquisition of subsidiares, cash and cash equivalents
Foreign currency hedging
Investments, continuing business
Total investments
Funding
Purchase of own shares
Subordinated loan capital
Dividend paid
Change in debt to credit institutions
Funding, continuing business
Total funding
Change in cash and cash equivalents, net
Price adjustment of cash and cash equivalents, beginning of year
Change in cash and cash equivalents, gross
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
80 | Annual report 2010 | Tryg A/S
2009
2010
18,011
-13,170
-529
-2,946
-191
19,911
-14,801
-552
-3,172
-314
1,175
1,072
1,573
-173
14
-349
-42
2,198
-2
2,196
-203
1
14
1,411
-1,850
-166
-939
605
-474
-1,601
-1,601
-334
485
-442
-98
-389
-389
206
24
230
282
512
1,132
-96
10
-482
-5
1,631
-20
1,611
-210
339
441
593
265
-31
0
0
-328
1,069
1,069
-807
0
-991
-581
-2,379
-2,379
301
44
345
512
857
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 2010 and in accordance with
the Danish Statutory Order on Adoption of IFRS.
The annual report of the parent company is prepared in accord-
ance with the executive order on financial reports presented by in-
surance companies and lateral pension funds issued by the Danish
FSA. The deviations from the recognition and measurement re-
quirements of IFRS are:
• 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.
• Unlike IAS 19, the Danish FSA’s executive order does not allow
for actuarial gains and losses arising from experience adjust-
ments and changes in actuarial assumptions to be taken to
equity. Actuarial gains and losses will therefore be recognised
in the parent company’s income statement.
• The Danish FSA’s executive order does not allow provisions for
deferred tax of contingency reserves allocated from untaxed
funds. Deferred tax and the equity of the parent company have
been adjusted accordingly on the transition to IFRS.
• Amendments to IFRS 8 ’Operating Segments’
• Amendments to IAS 1 ’Presentation of Financial Statements’
• Amendments to IAS 7 ’Statement of Cashflow’
• Amendments to IAS 17 ’Leases’
• Amendments to IAS 31 ’Interests in Joint Ventures: consequential
amendments arising from amendments to IFRS 3’
• Amendments to IAS 32 ‘Financial Instruments:
Presentation –classification of right issues’
• Amendments to IAS 36 ’Impairment of Assets’
• Amendments to IAS 39 ‘Financial Instruments: recognition
and measurement – Embedded derivatives when reclassifying
financial instruments’ Amendments to IFRIC 16 ‘Hedges of
a net Investment in a foreign Operation’
• IFRIC 17 ‘Distributions of Non-cash Assets to Owners’,
IFRIC 18 ‘transfer of Assets from Customers’
The implementation of the new standards and interpretations
has not affected recognition and measurement in 2010, but solely
affected the disclosures to be included in the annual report.
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 In-
ternational Financial Reporting Interpretations Committee (IFRIC)
has issued a number of interpretations that have not yet come
into force. The interpretations are approved by EU but are not yet
been effective.
Corrections
The method to calculate holiday-pay obligations, etc., under IFRS has
been adjusted over the recent years and Tryg has decided to adopt
the latest and most generally accepted method. This has resulted in a
DKK 35m increase in holiday-pay obligations and recognised in equity.
• Amendments to IFRS 7 ’Financial Instruments: Disclosure’
• Amendments to IAS 1 ’Presentation of Financial Statements’
• Amendments to IAS 24 ‘Related Party Disclosures:
Revised definition of related parties’
• Amendments to IAS 27 ‘Consolidated and separate financial
Changes in accounting policies
From 1 January 2010, the operating business segments in Tryg are
Private Nordic, Commercial Nordic and Corporate Nordic.
• Amendments to IAS 34 ‘Interim Financial Reporting’
• Amendments to IFRIC 13 ‘Customer Loyalty Programmes’,
IFRIC 14 ‘The Limit on a Defined Benefit Asset’
statements’
The comparative figures are restated to reflect the disposal of the
renewal rights of the Marine Hull portfolio. The total result of the
Marine Hull portfolio is presented in Profit/loss on discontinued
and divested business.
Accounting policies are unchanged from the annual report 2009.
Implementation of accounting standards in 2010
In 2010, the Group implemented the following standards and
interpretations:
• IFRIC 19 ‘Extinguishing Financial Liabilities with Equity Instruments’
The changes will be implemented going forward from 2011.
Accounting estimates and judgements
The preparation of financial statements under IFRS requires the
use of certain critical accounting estimates and requires manage-
ment to exercise its judgment in the process of applying the
Group’s accounting policies. The areas involving a higher degree
of judgement or complexity, or areas where assumptions and esti-
mates are significant to the consolidated financial statements, are:
• Amendments to IFRS 2 ’Share-based Payments’
• Amendments to IFRS 3 ’Business Combinations’
• Amendments to IFRS 5 ‘Non-current Assets Held for Sale
and Discontinued Operations’
• Liabilities under insurance contracts
• Valuation of defined benefit plans
• Fair value of financial assets
• Measurement of goodwill
Tryg A/S | Annual report 2010 | 81
Notes
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 in-
volve 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 Tryg Group’s knowledge
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 Tryg Group establishes claims provisions covering both known
case reserves and estimated claims that have been incurred by its
policyholders but not yet reported to the company (known as
“IBNR” reserves) and future developments on claims which are
known to the Tryg Group but have not been finally settled. The
Group also includes in its claims reserves direct and indirect claims
settlement costs or loss adjustment expenses that arise from
events that have occurred up to the balance sheet date even if
they have not yet been reported to the Tryg Group.
The projection for claims provisions is therefore inherently uncer-
tain and, by necessity, relies upon the making of certain assump-
tions as to factors such as court decisions, changes in law, social
inflation and other economic trends, including inflation. The Tryg
Group’s actual liability for losses may therefore be subject to mate-
rial positive or negative deviations relative to the initially estimated
provisions for claims.
Provisions for claims are discounted. As a result, initial changes in
discount 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’ compensa-
tion and personal accident classes, in particular.
For discounting of provisions for claims, the Group generally applies a
risk-free market rate composed of a risk-free eurodenominated 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 ap-
plied a synthetic interest rate that includes a certain mortgage yield
spread, for liabilities denominated in Danish kroner. Liabilities in Nor-
wegian 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. This has the greatest
impact on assumptions with respect to interest rates and inflation.
Defined benefit pension schemes
The Group 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 net obligation with respect to the defined benefit plan is based
on actuarial calculations involving a number of assumptions. These
assumptions include discount rate, salary adjustment and mortality.’
In 2010, the rules relating to AFP (flexible pension scheme in Norway)
were changed to the effect that AFP will be treated as a defined con-
tribution plan in future. This change resulted in a total change of esti-
mates of DKK 40m, which amount has been recognised as income.
Fair value of financial assets
Measurements of financial assets for which prices are quoted in an
active market or which are based on generally accepted models
with observable 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 instrument or using a model calculation.
The valuation models include the discounting of the instrument
cash flow using an appropriate market interest rate with due con-
sideration to credit and liquidity premiums.
Measurement of goodwill
Goodwill was acquired in connection with acquisition of businesses.
Goodwill is allocated to the cash-generating units under which
management manages the investment. The carrying amount is
tested for impairment at least annually. Impairment testing involves
estimates of future cash flows and is affected by a number of fac-
tors, including discount rates and other circumstances dependent
on economic trends, such as customer behaviour and competition.
Basis of presentation
Recognition and measurement
The annual report has been prepared under the historical cost
convention, 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 finan-
cial assets and financial liabilities (including derivative instruments)
at fair value through the income statement.
Assets are recognised in the statement of financial position 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 statement of financial position 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.
82 | Annual report 2010 | Tryg A/S
Notes
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 de-
scribed 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 re-
corded in the income statement unless otherwise described below.
All amounts in the notes are shown in millions of DKK, unless
otherwise stated.
Consolidation
The consolidated financial statements comprise the financial state-
ments of Tryg A/S (the parent company) and subsidiaries controlled
by the parent company. Control is achieved where the parent com-
pany 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
subsidiaries 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 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
consolidation method. Using pro rata consolidation, the Group’s
share of joint venture assets and liabilities is recognised in the
statement of financial position. The share of income and expenses
and assets and liabilities are presented on a line by line basis in the
consolidated financial statements.
On consolidation, intra-group income and expenses, shareholdings,
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 con-
trol, respectively. 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 consolidated companies
(including 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.
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 Tryg Group
gains control of the company acquired. Identifiable assets, liabili-
ties and contingent liabilities in companies acquired are measured
at the fair value at the date of acquisition. The tax effect of revalu-
ations is taken into account.
The date of acquisition is the date on which control of the
acquired company actually passes to the Tryg 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 of the enterprise over the fair
value of the acquired identifiable assets, liabilities and contingent
liabilities is recognised as goodwill under intangible assets. Good-
will is tested for impairment at least once a year. If the carrying
amount of an asset exceeds its recoverable amount, the asset is
written down to the lower recoverable amount.
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. Transactions in currencies other than the functional
currency are transactions in foreign currencies.
On initial recognition, transactions in foreign currencies are trans-
lated into the functional currency at the exchange rate ruling at the
transaction date. Assets and liabilities denominated in foreign cur-
rency are translated at the exchange rates at the balance sheet
date. Translation differences are recognised in the income state-
ment 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
recognised in the income statement.
The presentation currency in the annual report is DKK.
Tryg A/S | Annual report 2010 | 83
Notes
Segment reporting
Segment information is based on the Group’s management and in-
ternal financial reporting system and is prepared in accordance
with the Group’s accounting policies.
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 accord-
ing to the expected run-off pattern of the provisions.
The operational business segments in the Tryg Group are Private
Nordic, Commercial Nordic and Corporate Nordic.
Technical interest is reduced by the portion of the increase in net
provisions that relates to unwinding.
Geographical information is presented on the basis of the eco-
nomic environment in which the Tryg Group operates. The geo-
graphical areas are Denmark, Norway, Finland and Sweden.
Segment income and segment costs as well as segment assets
and liabilities comprise those items that can be directly attributed
to each individual segment and those items that can be allocated
to the individual segments on a reliable basis. Unallocated items
primarily comprise assets and liabilities concerning investment ac-
tivity managed at Group level.
Ratios
Earnings per share (EPS) are calculated according to IAS 33. Other
key ratios are calculated in accordance with ”Recommendations and
Ratios 2010” issued by the Danish Society of Financial Analysts and
the executive order on financial reports presented by insurance
companies and lateral pension funds 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 ex-
posure of risk over the period of coverage, computed separately
for each insurance contract using the pro rata method, and ad-
justed if necessary 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 un-
expired risks at the balance sheet date is reported under provisions
for unearned premiums.
The portion of premiums paid to reinsurers that relates to unex-
pired 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 li-
ability provisions, net of reinsurance. The calculated interest return
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 pre-
vious 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 claims provisions due to changes in the yield curve and
exchange rates are recognised as a market value adjustment.
Tryg hedges the risk of changes in future wage and price figures
for provisions for workers’ compensation. Tryg uses zero coupon
inflation swaps 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.
Bonus and premium rebates
Bonus and premium rebates represent anticipated and reimbursed
premiums where the amount reimbursed depends on the claims
record, and for which the criteria for payment have been defined
prior to the financial year or when the business was written.
Insurance operating expenses
Insurance operating expenses represent acquisition costs and ad-
ministrative expenses less reinsurance commissions received. Ex-
penses relating to acquiring and renewing the insurance portfolio
are recognised at the time of writing the business. Underwriting
commission is recognised when a legal obligation occurs and is ac-
crued over the term of the policy. Administrative expenses are all other
expenses attributable to the administration of the insurance portfo-
lio. Administrative expenses are accrued to match the financial year.
Leasing
Leases are classified either as operating or finance leases. The as-
sessment of the lease is made on the basis of criteria such as
ownership, right of purchase when the lease term expires, consid-
erations as to whether the asset is custom-made, the lease term
and the present value of the lease payments.
84 | Annual report 2010 | Tryg A/S
Notes
Assets held under operating leases are not recognised in the
statement of financial position, but the lease payments are recog-
nised in the income statement over the term of the lease, corre-
sponding to the economic life of the asset, while assets held un-
der 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 Tryg Group’s incentive programmes comprise share option pro-
grammes 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.
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 di-
rectly in equity.
The options are issued at an exercise price that corresponds to the
market price of the Group’s shares at the time of allocation. No
other vesting conditions apply. Special provisions are in place con-
cerning sickness and death and in case of change to the Group’s
capital position, etc.
The share option agreement entitles the employee to the options un-
less the employee resigns his position or is dismissed due to breach
of the employment relationship. In case of termination due to restruc-
turing 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, half-year and quar-
terly reports and in accordance with Tryg’s in-house rules on trad-
ing in the Group’s shares. The options are settled in shares. A part
of the Group’s holding of treasury shares is reserved for settle-
ment of the options allocated.
uity. The discount is calculated at the grant date as the difference be-
tween 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 sharehold-
er’s death or disability.
Investment activities
Income from associates includes the Group’s share of the associ-
ates’ net profit.
Income from investment properties before fair value adjustment
represents the profit from property operations less property man-
agement expenses.
Interest and dividends represent interest earned and dividends
received during the financial year.
Realised and unrealised investment gains and losses, including
gains and losses on derivative financial instruments, value adjust-
ment of investment properties, exchange rate adjustments and the
effect of movements in the yield curve used for discounting, are
recognised as value adjustments.
Investment management charges represent expenses relating to
the management of investments.
Other income and expenses
Other income and expenses include income and expenses which
cannot be ascribed to Tryg’s insurance portfolio or investment as-
sets, including the sale of products for Nordea Liv og Pension.
Discontinued and divested business
Discontinued and divested business is consolidated in one line item in
the income statement and supplemented with disclosure of the dis-
continued and divested business in a note to the financial statements.
On initial recognition of the share options, the number of options ex-
pected to vest for employees and members of the Executive Manage-
ment 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.
Recognition of the balance sheet items in respect of the discontin-
ued business 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 divested business”, respectively.
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 ex-
pense in staff costs. The balancing item is recognised directly in eq-
The comparative figures, including five-year financial highlights and
key ratios, have been restated to reflect discontinued business.
Discontinued and divested business in the income statement in-
cludes the profit/loss after tax of the sale of the right to renew
the marine hull business in 2010. Discontinued business also com-
prises the Tryg Forsikring A/S run-off business and the
divestment of the subsidiary Chevanstell Ltd. UK (2006).
Tryg A/S | Annual report 2010 | 85
Notes
Statement of financial position
Intangible assets
Goodwill
Goodwill was acquired in connection with acquisition of business.
Goodwill is calculated as the difference between the cost of the
undertaking and the fair value of acquired identifiable assets, liabili-
ties and contingent liabilities at the time of acquisition. Goodwill is
allocated to the cash-generating units under which management
manages the investment and is recognised under intangible assets.
Trademarks and customer relations
Trademarks and customer relations have been identified as intangi-
ble assets on acquisition. The intangible assets are recognised at
fair value at the time of acquisition and amortised on a straight-
line basis over the expected useful lives of 5–12 years.
Software
Acquired computer software licences are capitalised on the basis
of the costs incurred to acquire and bring to use the specific soft-
ware. These costs are amortised on the basis of the expected use-
ful 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
recognised as intangible assets. Direct costs include the software
development 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 amortised on a
straight-line basis over the expected useful life, however with a
maximum period of four years. The basis of amortisation is re-
duced by any impairment writedowns.
Fixed assets
Operating equipment
Fixtures and operating equipment are measured at cost less
accumulated depreciation and any accumulated impairment losses.
Cost encompasses the purchase price and costs directly attributa-
ble to the acquisition of the relevant assets until the time when
the asset is ready to be brought into use.
Depreciation of 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.
Gains and losses on disposals and retirements are determined by
comparing proceeds with carrying amount. Gains and losses are
recognised in the income statement. When revalued assets are
sold, the amounts included in the revaluation reserves are trans-
ferred to retained earnings.
Land and buildings
Land and buildings are divided into owner-occupied property and
investment property. The Tryg 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 in-
vestment 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 revalua-
tion, less any subsequent accumulated depreciation and subse-
quent accumulated impairment writedowns. Revaluations are per-
formed regularly to avoid the carrying amount differing materially
from the owner-occupied 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 characteris-
tics, corresponding to the present value of a perpetual annuity.
Increases in the revalued carrying amount of owner-occupied
properties are credited to the properties’ revaluation reserve in eq-
uity. Decreases 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
recognised 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. Or-
dinary repair and maintenance costs are charged to the income
statement when incurred.
Depreciation on owner-occupied property is calculated using
straight-line method using the estimated useful lives up to 50
years. Land is not depreciated.
Assets under construction
In connection with the refurbishment of the owner-occupied prop-
erties, costs to be capitalised are 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.
86 | Annual report 2010 | Tryg A/S
Notes
Investment property
Properties held for renting yields that are not occupied by the
Group are classified as investment properties.
Net revaluation of investments in subsidiaries is taken to reserve
for net revaluation under the equity method if the carrying
amount exceeds cost.
Investment property is carried at fair value. Fair value is based on
market prices, adjusted for any difference in the nature, location or
condition of the specific asset. If this information is not available,
the Group uses alternative valuation methods such as discounted
cash flow projections and recent prices on less active markets.
The results of foreign subsidiaries are based on translation of the
items in the income statement at average exchange rates for the
period. Income and expenses in domestic enterprises denominated
in foreign currency are translated at the exchange rate ruling on
the date of the transaction.
The fair value is calculated on the basis of market-specific rental in-
come per property and typical operating expenses for the upcom-
ing year. The resulting operating income is divided by the percent-
age return requirement of the property, which has been adjusted to
reflect market interest rates and property characteristics, corre-
sponding to the present value of a perpetual annuity. The value is
subsequently adjusted with the value in use of the return on pre-
payments and deposits and adjustment for specific property issues
such as vacant premises or special tenant terms and conditions.
Changes in fair values are recorded in the income statement.
Impairment test for intangible assets and property, plant
and equipment
The carrying amounts of intangible assets and property, plant and
equipment are tested at least once a year for impairment for each
cash-generating unit to which the asset belongs. The asset is writ-
ten down to the recoverable amount if the carrying amount of the
asset is higher than the recoverable amount.
Balance sheet items of foreign subsidiaries are translated at the
exchange rate ruling at the balance sheet date.
Investments in associates
Associates are enterprises over which the Group has significant in-
fluence but not control, generally accompanying an ownership in-
terest of between 20% and 50% of the voting rights. Investments
in associates are measured according to the equity method of ac-
counting so that the carrying amount of the investment represents
the Group’s proportionate share of the enterprises’ net assets.
Income after taxes from investments in associates is included as a
separate line in the income statement. Income is made up after
elimination of unrealised intra-group profits and losses.
Associates with a negative net asset value are measured at zero
value. If the Group has a legal or constructive obligation to cover
the associate’s negative balance, such obligation is recognised un-
der liabilities.
The recoverable amount is generally calculated as the present
value of the future cash flows expected to be derived from the ac-
tivity 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 unre-
alised intra-group profits and losses is recognised in the income
statement. In the statement of financial position, 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 receivables are deemed irrecoverable. If the negative
net asset value exceeds the amount receivable, the remaining
amount is recognised under provisions if the parent company has
a legal or constructive obligation to cover the liabilities of the rele-
vant enterprise.
Investments
Investments include financial assets at fair value through the in-
come statement. The classification depends on the purpose for
which the investments were acquired. Management determines
the classification of its investments on initial recognition and re-
evaluates this at every reporting date.
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 income.
Financial assets at fair value through income
Financial assets are classified as financial assets available for trad-
ing at inception if acquired principally for the purpose of selling in
the short term, or if they form part of a portfolio of financial as-
sets in which there is evidence of short-term profit-taking. Deriva-
tives are also classified as financial assets available for trading un-
less they are designated as hedges.
Tryg A/S | Annual report 2010 | 87
Notes
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.
Realised and unrealised gains and losses arising from changes in
the fair value of the financial assets at fair value through income are
included in the income statement in the period in which they arise.
The fair values of quoted investments are based on stock ex-
change 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 trans-
actions, reference to other instruments 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 re-
lated to the portfolio of bonds and technical provisions. Share
derivates in the form of futures and options are used from time to
time to adjust share exposures.
Derivatives are recognised from the trade date and measured at
fair value in the statement of financial position. Positive fair values
of derivatives are recognised as bonds and shares or other receiv-
ables if they cannot unambiguously be attributed to the former.
Negative fair values of derivatives are recognised under other pay-
ables. Positive and negative values are only offset when the com-
pany is entitled or intends to make net settlement of more finan-
cial instruments.
The valuation is performed in securities systems with data usually
provided by Nordea, and the valuation is verified using own valua-
tion methods. Derivatives which include expected future cash
flows are discounted on the basis of market interest rates.
Recognition of the resulting gain or loss depends on whether the
derivative is designated as a hedging instrument and, if so, the na-
ture of the item being hedged. The Group designates certain deriv-
atives as hedges of investments in foreign operations. Changes in
the fair value of derivatives that are designated and qualify as net
investment hedges in foreign entities and which provide effective
currency hedging of the net investment are recognised directly in
equity. The net asset value of the foreign entities estimated at the
beginning of the financial year is hedged 90-100% by entering into
short-term forward exchange contracts according to the require-
ments 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 is-
sued by the Group and that meet the classification requirements
for insurance contracts are classified as reinsurers’ share of provi-
sions 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
contracts held are recognised as assets and reported as reinsurers’
share of provisions for insurance contracts.
Amounts recoverable from reinsurers are measured consistently
with the amounts associated with the reinsured insurance contracts
and in accordance with the terms of each reinsurance contract.
Changes due to unwinding are recognised in technical interest.
Changes due to changes in the yield curve or foreign currency ex-
change rates are recognised as value adjustments.
The Group assesses continuously its reinsurance assets for impair-
ment. If there is objective evidence that the reinsurance asset is
impaired, the Group reduces the carrying amount of the reinsur-
ance asset to its recoverable amount. 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 im-
pairment review of receivables.
On initial recognition, receivables are measured at fair value, and
they are subsequently measured at amortised cost. Appropriate al-
lowances 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 dif-
ference between the asset’s carrying amount and the present
value of estimated future cash flows.
88 | Annual report 2010 | Tryg A/S
Notes
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 in hand and at bank is recognised at nominal value at the
balance sheet date.
Prepayments and accrued income
Prepayments include expenses paid in respect of subsequent fi-
nancial years and interest receivable. Accrued underwriting com-
mission relating 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 attributa-
ble to the issue of equity instruments are shown in equity as a de-
duction 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 re-
lates primarily to owner-occupied properties.
Exchange adjustment reserve
Assets and liabilities of foreign entities are recognised at the ex-
change rate at the balance sheet date. Income and expense items
are recognised at the average exchange rates for the period. Any
resulting exchange 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 for-
eign 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 earn-
ings 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.
Dividends
Proposed dividend is recognised as a liability at the time of adop-
tion by the shareholders at the annual general meeting (the date
of declaration).
Treasury shares
The purchase and sale sums of treasury shares and dividends ther-
eon are taken directly to retained earnings under equity. Treasury
shares include shares acquired for employee shares and the share
option programmes and share buyback programme.
Proceeds from the sale of treasury shares in connection with the exer-
cise of share options or employee shares are taken directly to equity.
Subordinate loan capital
Subordinate loan capital is recognised initially at fair value, net of
transaction costs incurred. Subordinate loan capital is subse-
quently stated at amortised cost; any difference between the pro-
ceeds (net of transaction costs) and the redemption value is rec-
ognised in the income statement over the period of the
borrowings using the effective interest method.
Provisions for insurance contracts
Premiums are recognised in the income statement (earned premi-
ums) proportionally over the period of coverage and, where neces-
sary, adjusted to reflect any time variation of the risk. The portion
of premiums 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 pre-
mium 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 in-
curred 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 that 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 affected 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 pay-
ments from the provision. Discounting affects the motor liability,
professional liability, workers’ compensation and personal accident
classes, in particular.
Provisions for bonus and premium rebates represent amounts ex-
pected to be paid to policyholders in view of the claims experience
during the financial year.
Provisions for claims are determined for each line of business
based on actuarial methods. Where such business lines encompass
more than one business area, short-tail provisions for claims are
distributed based on number of claims reported while long-tail
provisions for claims are distributed based on premiums earned.
The models currently used are Chain-Ladder, Bornhuetter-Fergu-
Tryg A/S | Annual report 2010 | 89
Notes
son, the Loss Ratio method and De Vylder’s credibility method.
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 fu-
ture run-off performance. De Vylder’s credibility method is used
for areas that are somewhere in between the Chain-Ladder and
Bornhuetter-Ferguson/Loss Ratio methods, and may also be used
in situations that call for the use of exposure targets other than
premium volume, for example the number of insured.
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 expected future development of
claims. For example, this is the case with legislative changes where
an a priori estimate is used for premium increases related to the
expected increase in claims. For legislative changes this estimate is
used also in determining the level of claims. Subsequently, this es-
timate is maintained until new loss history materialises for re-esti-
mation.
Several assumptions and estimates underlying the calculation of
the provisions for claims are mutually dependent. Most impor-
tantly, this can be expected to be the case for interest rate and in-
flation assumptions.
Employee benefits
Pension obligations
The Group operates various pension schemes. The schemes are
funded through payments to insurance companies or trustee-ad-
ministered funds. In Norway, the Group operates a defined benefit
plan. A defined benefit plan is a pension plan that defines an
amount of pension benefit that an employee will receive on retire-
ment, dependent on age, years of service and compensation. In
Denmark, the Group operates a defined contribution plan. A de-
fined contribution plan is a pension plan under which the Group
pays fixed contributions into a separate entity (a fund) and will
have no legal or constructive obligation to pay further contribu-
tions. In Sweden, the Group complies with the industry pension
agreement, FTP-Planen. The FTP plan is primarily a defined benefit
plan in terms of the future pension benefits. Försäkringsbran-
schens Pensionskassa (FPK) is unable to provide sufficient informa-
tion for the Group to use defined benefit accounting. The plan is
therefore accounted for as a defined contribution plan.
The liability recognised in the statement of financial position in re-
spect 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
expectations of future returns are taken into consideration.
Workers’ compensation is an area in which explicit inflation as-
sumptions are used, with annuities for the insured being indexed
with the workers’ compensation index. An inflation curve that re-
flects the market’s inflation expectations plus a real wage spread is
used as an approximation to the workers’ compensation index.
The defined benefit obligation is calculated annually by actuaries
using the projected unit credit method. The present value of the
defined benefit obligation is determined by discounting the esti-
mated future cash outflows by a duration that matches the condi-
tions of the underlying pension obligation.
For other lines of business, the inflation assumptions, because
present only implicitly in the actuarial models, will cause a certain
lag in predicting the level of future losses when a shift in inflation
occurs. On the other hand, the effect of discounting will show im-
mediately as a consequence of inflation changes to the extent that
this change affects the interest rate.
Other correlations are not deemed to be significant.
Liability adequacy test
Tests are continuously performed to ensure the adequacy of the
technical provisions. In performing these tests, current best esti-
mates of future cash flows of claims, gains and direct and indirect
claims handling costs are used. Any deficiency is charged to the in-
come statement by raising the relevant provision and the adjust-
ment is recognised in the income statement.
The actuarial gains and losses arising from experience adjustments
and changes in actuarial estimates is recognised in equity.
The plan was closed for new business as at 1 January 2009.
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 reduced working hours. The Group recognises this liability
based on statistical models.
90 | Annual report 2010 | Tryg A/S
Notes
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 cur-
rent tax receivables are recognised in the statement of financial
position as estimated tax on the taxable income for the year, ad-
justed 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 us-
ing tax rules and tax rates that apply in the relevant countries by
the balance sheet date when the deferred tax asset is realised or
the deferred income tax liability is settled.
Deferred income tax assets, including the tax value of tax losses
carried forward, are recognised to the extent that it is probable
that future taxable profit will be available against which the tem-
porary differences can be utilised.
Deferred income tax is provided on temporary differences concern-
ing investments, except where Tryg controls when the temporary
difference will be realised, and it is probable that the temporary
difference will not be realised in the foreseeable future.
Provisions
Provisions are recognised when, as a consequence of an event
that has occurred before or on the balance sheet date, the Group
has a legal or constructive obligation, and it is likely that an out-
flow of resources will be required to settle the obligation. Provi-
sions are measured as the management’s best estimate of the
amount with which the liability is expected to be settled.
Financial liabilities
Bond loans, debt to credit institutions, etc. are recognised at the
raising of the loan as the proceeds received less transaction costs.
In the subsequent periods, financial liabilities are measured at am-
ortised cost, applying the ’effective interest rate method’, to the
effect that the difference between the proceeds and the nominal
value is recognised in the income statement under financial ex-
penses over the term of the loan. Transaction costs in connection
with floating-rate loans or floating-rate credit facilities are amor-
tised over the loan period using straight-line amortisation.
Other liabilities are measured at net realisable value.
Cash flow statement
The statement of cashflows 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 equiva-
lents at the beginning and the end of the financial year. No sepa-
rate statement of cashflows has been prepared for the parent
company because it is included in the consolidated statement of
cashflows.
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 statement of
cashflows 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 dis-
closed.
Cash flows from investing activities comprise payments in connec-
tion 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 Tryg’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.
Tryg A/S | Annual report 2010 | 91
Notes
DKKm
2 Earned premiums, net of reinsurance
Direct insurance
Indirect insurance
Unexpired risk provision
Ceded direct insurance
Ceded indirect insurance
2009
2010
17,925
31
17,956
18
17,974
-852
-34
19,627
36
19,663
-106
19,557
-941
-66
17,088
18,550
Direct insurance, by location of risk
2009
2010
Denmark
Other EU countries
Other countries
Gross
9,414
1,581
6,948
17,943
Ceded
-466
-52
-334
-852
Gross
9,610
2,918
6,993
19,521
Ceded
-501
-104
-336
-941
3 Technical interest, net of reinsurance
Interest on insurance provisions
Transferred from provisions for claims concerning discounting
4 Claims incurred, net of reinsurance
Claims incurred
Run-off previous years, gross
Reinsurance recoveries
Run-off previous years, reinsurers’ share
Under claims incurred, the value adjustment of inflation swaps to hedge the inflation risk
concerning annuities on workers’ compensation insurance totals DKK -83m (2009 DKK 62m).
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
92 | Annual report 2010 | Tryg A/S
2009
2010
845
-687
158
752
-618
134
-13,534
652
-12,882
254
31
-16,500
883
-15,617
661
-59
-12,597
-15,015
-439
-1,775
-2,214
-842
-3,056
81
-492
-1,914
-2,406
-898
-3,304
92
-2,975
-3,212
Notes
DKKm
2009
2010
5
Insurance operating expenses, net of reinsurance (continued)
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.
In the calculation of the expense ratio costs are stated exclusive of depreciation and operating
costs on the owner-occupied property but including a calculated rent concerning the owner-
occupied property based on a calculated market rent of DKK 11m. (in 2009 DKK 12m)
Insurance operating expenses, gross, classified by type
Commissions
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 expenses for leases amounts to DKK 37m (2009 DKK 35m)
Insurance operating expenses and claims include the following staff expenditure:
Salaries and wages
Commision
Allocated share options
Pensions
Other social security costs
Payroll tax
Remuneration for the Supervisory Board and Executive Management is disclosed
in note 30 ‘Related parties’.
-8
-8
-1
-1
-9
-9
-2
-2
-448
-1,750
-274
-453
-228
-140
237
-492
-1,827
-269
-682
-255
-163
384
-3,056
-3,304
-2,026
-32
-15
-318
-9
-273
-2,211
-19
-16
-288
-40
-258
-2,673
-2,832
Average number of full-time employees during the year
4,364
4,301
Share option programmes
In 2010, Tryg awarded share options to the Executive Management (3 persons), senior employees (96 persons) and other employees
(38 persons). At 31 December 2010, the share option plan comprised 859,044 share options (at 31 December 2009 681,861
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 1.4 % of the share capital in Tryg A/S if all share options are exercised.
In 2010, the fair value of share options recognised in the consolidated income statement amounted to DKK 16m (2009: DKK
15m). As at 31 December 2010, a total amount of DKK 56m was recognised for share option programmes issued in 2006-2010.
Fair values at the time of allocation are based on the Black & Scholes option pricing formula.
Tryg A/S | Annual report 2010 | 93
Notes
TOTAL NUMBERS
FAIR VALUE
Group
Executive
Other
senior
Other
Management employees employees
Total
fair value
Per Total fair
Per option per option option at value at
31 Dec.
DKKm
at grant
Total date DKK date DKKm
31 Dec.
DKK
at grant
5 Share option programmes
Spec. of outstanding options:
2010
Allocation 2006-2008
Allocated in 2006-2008,
beginning of year
Exercised
Cancelled
Expired
Outstanding options
from 2006-2008 allocation
106,608
0
0
0
353,882
-31,820
-4,646
0
39,427
-5,240
-1,900
0
499,917
-37,060
-6,546
0
64/99/69
64/99/69
64/99/69
0
39
-3
0
0
5/0/3
5/0/3
5/0/3
0
31 Dec 2010
106,608
317,416
32,287 456,311
-
36
-
Allocation 2009
Allocated in 2009,
beginning of year
Exercised
Cancelled
Expired
Outstanding options
from 2009 allocation
38,258
0
0
0
123,016
0
-5,580
0
20,670
0
-530
0
181,944
0
-6,110
0
94
0
94
0
17
0
-1
0
17
0
17
0
31 Dec 2010
38,258
117,436
20,140 175,834
-
16
-
Allocation 2010
Allocated in 2010
Exercised
Cancelled
Expired
Outstanding options
from 2010 allocation
48,050
0
0
0
154,838
0
-1,335
0
25,346
0
0
0
228,234
0
-1,335
0
75
0
75
0
31 Dec 2010
48,050
153,503
25,346 226,899
-
Number of options
exercisable end of 2010
54,520
166,700
0
221,220
64/99
17
0
0
0
17
19
17
0
17
0
-
5/0
1
0
0
0
1
3
0
0
0
3
4
0
0
0
4
0
94 | Annual report 2010 | Tryg A/S
Notes
TOTAL NUMBERS
FAIR VALUE
Group
Executive
Other
senior
Other
Management employees employees
Total
fair value
Per Total fair
Per option per option option at value at
31 Dec.
DKKm
at grant
Total date DKK date DKKm
31 Dec.
DKK
at grant
5 Share option programmes
Spec. of outstanding options:
2009
Allocation 2006-2007
Allocated in 2006-2007,
beginning of year
Exercised
Cancelled
Expired
Outstanding options
from 2006-2007 allocation
61,070
-6,550
0
0
247,306
-52,020
-4,287
0
16,000
-2,620
-1,953
0
324,376
-61,190
-6,240
0
64/99
64/99
64/99
0
26
-4
0
0
73/15
73/15
73/15
0
15
-4
0
0
31 Dec 2009
54,520
190,999
11,427 256,946
-
22
-
11
Allocation 2008
Allocated in 2008,
beginning of year
Exercised
Cancelled
Expired
Outstanding options
from 2008 allocation
52,088
0
0
0
167,203
0
-4,320
0
28,700
0
-700
0
247,991
0
-5,020
0
69
0
69
0
17
0
0
0
45
0
45
0
11
0
0
0
31 Dec 2009
52,088
162,883
28,000 242,971
-
17
-
11
Allocation 2009
Allocated in 2009
Exercised
Cancelled
Expired
Outstanding options
from 2009 allocation
38,258
0
0
0
124,076
0
-1,060
0
21,200
0
-530
0
183,534
0
-1,590
0
94
0
94
0
17
0
0
0
82
0
82
0
15
0
0
0
31 Dec 2009
38,258
123,016
20,670 181,944
-
17
-
15
Number of options
exercisable end of 2009
28,820
82,910
2,620
114,350
64
7
73
8
Tryg A/S | Annual report 2010 | 95
Notes
5 Share option programmes
Year of allocation
2006
2007
2008
2009
2010
Outstanding options
31 December 2010
Years
of exercise
2009-2011
2010-2012
2011-2013
2012-2014
2013-2015
1 Jan. 2010
Exercised
Cancelled
Expired 31 Dec. 2010
119,590
141,676
238,651
181,944
228,234
-37,060
0
0
0
0
0
-2,986
-3,560
-6,110
-1,335
910,095
-37,060
-13,991
0
0
0
0
0
0
82,530
138,690
235,091
175,834
226,899
859,044
The assumptions by calculating the marketvalue at time of allocation
Years
Year of allocation of exercise
Average share
price (DKK)
at time of
allocation
Expected
Volatility
Expected
maturity
Average
exercise
Share price
interest rate 31 dec. 2010 31 dec. 2010
Average
term to
maturity
Risk-free
2006
2007
2008
2009
2010
2009-2011
2010-2012
2011-2013
2012-2014
2013-2015
355.85
456.76
378.24
313.51
320.04
17.90%
24.10%
20.30%
37.70%
29.20%
4 år
4 år
4 år
4 år
4 år
3.30%
3.90%
3.60%
2.80%
2.70%
0.08
0.58
1.15
2.17
3.16
262.83
430.44
377.06
322.86
367.54
The following assumptions were applied in calculating the market value of outstanding share options at the time of allocation:
The expected volatility is based on the average volatility of Tryg shares. 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 term as the
expected term of 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 allocation. The dividend payout ratio is not included in the calculation as
the strike price is reduced by dividends paid in order to prevent option holders from being placed at a disadvantage in connection
with 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.
96 | Annual report 2010 | Tryg A/S
Notes
5 Employee shares
2010
Tryg did not grant employee shares at a discount to the market price to the employees in 2010.
2009
In 2009, Tryg 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 17 shares
at a discount to the market price equal to DKK 25 per share, equivalent to a total of 38,829 shares or around DKK 11.2m 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 2009, a total of 31,713 shares were granted at discount to the market price of DKK 25 per share or DKK 9.9m. The grant of
shares equalled 0.1% of the share capital. The amount was provided in 2008 and did not affect the profit for 2009.
Tryg A/S | Annual report 2010 | 97
Notes
DKKm
6 Operating segments
2010
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on business ceded
Technical interest, net of reinsurance
Technical result
Total return on investment activities
after technical interest
Other income and expenses
Profit before tax
Tax
Private
Nordic
Commercial
Nordic
Corporate
Nordic
Other
Group
10,181
-8,223
-1,627
38
77
446
4,263
-3,768
-1,029
39
30
-465
5,044
-3,630
-648
-399
27
394
-13
4
0
9
0
0
19,475
-15,617
-3,304
-313
134
375
570
-4
941
-265
676
-83
593
824
13
154
1,434
48,990
50,591
6,819
24,883
329
10,102
42,133
Profit on continuing business
Profit/loss on discontinued and divested business
Profit
Run-off gains/losses, net of reinsurance
399
100
325
Investments in associates
Reinsurers’ share of provision
for unearned premiums
Reinsurers’ share of provision for claims
Other assets
Total assets
14
232
0
312
140
890
Provisions for unearned premiums
Provisions for claims
Provisions for bonuses and premium rebates
3,883
6,824
196
1,480
6,280
20
1,456
11,779
113
Other liabilities
Total liabilities
0
13
0
0
48,990
0
0
0
10,102
98 | Annual report 2010 | Tryg A/S
Notes
DKKm
6 Operating segments
2009
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on business ceded
Technical interest, net of reinsurance
Technical result
Total return on investment activities
after technical interest
Other income and expenses
Profit before tax
Tax
Private
Nordic
Commercial
Nordic
Corporate
Nordic
Other
Group
8,962
-6,751
-1,477
-87
85
732
3,777
-2,797
-925
-98
39
-4
5,127
-3,348
-610
-325
34
878
-4
14
-44
-10
0
-44
17,862
-12,882
-3,056
-520
158
1,562
1,086
-38
2,610
-625
1,985
23
2,008
683
17
195
1,125
43,403
44,740
6,208
22,470
364
6,067
35,109
Profit on continuing business
Profit/loss on discontinued and divested business
Profit
Run-off gains/losses, net of reinsurance
134
192
357
Investments in associates
Reinsurers’ share of provision
for unearned premiums
Reinsurers’ share of provision for claims
Other assets
Total assets
48
93
0
118
147
914
Provisions for unearned premiums
Provisions for claims
Provisions for bonuses and premium rebates
3,430
6,265
206
1,404
5,444
21
1,374
10,752
137
Other liabilities
Total liabilities
Description of segments
0
17
0
0
43,403
0
9
0
6,067
Please refer to ‘Results’ for a description of our operating segments. Amounts relating to Tryg A/S, Tryg Ejendomme A/S and elimi-
nations are included in ‘Other’. Other assets and liabilities are managed at Group level and are therefore not allocated to the indi-
vidual 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. The distribution on segments in Moderna has been altered during
Q2 as to medium sized enterprise. Comparative figures have been restated accordingly. A presentation of segments broken down
by geography is provided in ‘Geographical segments.’
Tryg A/S | Annual report 2010 | 99
Notes
DKKm
6 Technical result, net of reinsurance, by line of business
Accident
and health
2009
2010
Gross premiums written
1,665
1,830
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on ceded business
Techn. interest net of reinsurance
Technical result
1,644
- 863
- 250
- 13
5
523
1,820
- 1,136
- 245
- 20
11
430
Health care
Worker’s
compensation
Motor TPL
Motor
comprehensive
Marine, aviation
and cargo
2009
258
263
- 220
- 26
0
3
20
2010
325
311
- 206
- 33
0
2
74
2009
1,402
1,432
- 702
- 169
- 47
23
537
2010
1,317
1,352
- 1,220
- 178
- 23
1
- 68
2009
2010
2009
2010
2,413
2,650
3,372
3,830
2,405
- 1,365
- 449
- 36
11
566
2,646
- 1,624
- 434
- 27
16
577
3,317
- 2,673
- 554
- 12
32
110
3,679
- 3,098
- 616
- 11
24
- 22
Claims Frequency a)
Average claims DKK b)
Total claims
3.7%
39,044
31,112
3.4%
43,342
31,833
80.1%
7,409
33,700
72.6%
7,567
32,987
19.6%
78,086
13,800
18.9%
83,801
14,395
6.1%
18,421
91,489
5.1%
25,374
80,073
19.7%
10,428
241,946
20.5%
11,554
264,675
28.6%
51,719
3,171
20.8%
83,551
3,122
Fire & contents
(Private)
Fire and contents
(Commercial)
Change of
ownership
Liability
Credit & guarantee
insurance
Tourist assistance
insurance
Gross premiums written
3,919
4,599
2,537
2,768
2009
2010
2009
2010
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on ceded business
Techn. interest net of reinsurance
Technical result
3,876
- 3,328
- 698
- 70
36
- 184
4,435
- 4,026
- 845
65
33
- 338
2,570
- 1,868
- 476
- 255
16
- 13
2,751
- 2,437
- 502
- 114
18
- 284
2009
90
86
- 234
- 8
0
4
- 152
2010
86
- 21
- 196
- 8
0
3
- 222
2009
757
745
- 518
- 153
31
5
110
2010
827
815
- 449
- 147
- 56
3
166
2009
187
181
- 38
- 54
- 39
2
52
2010
225
211
- 64
- 52
- 31
2
66
Claims Frequency a)
Average claims DKK b)
Total claims
7.6%
9,973
319,222
7.3%
13,150
310,832
22.2%
45,981
40,925
21.9%
62,951
40,462
9.8%
18,193
6,186
9.3%
22,919
6,141
10.3%
51,511
9,422
10.1%
55,335
9,252
1.4%
1.5%
843,571
1,567,033
45
58
13.3%
6,876
50,274
10.8%
8,059
49,862
2009
293
282
- 164
- 32
- 33
6
59
2009
431
455
- 400
- 70
- 1
4
- 12
2010
378
367
- 251
- 50
- 47
2
21
2010
488
480
- 407
- 72
- 1
4
4
Other
insurance
Total
Norwegian Group Life
One-year policies
2009
2010
2009
2010
Gross premiums written
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on ceded business
Techn. interest net of reinsurance
Technical result
65
74
- 59
- 48
- 43
7
- 69
68
17,389
19,391
69
- 19
- 69
- 44
5
- 58
17,330
- 12,432
- 2,987
- 518
154
18,915
- 15,133
- 3,251
- 309
124
1,547
346
2009
494
532
- 450
- 69
- 2
4
15
2010
548
560
- 484
- 53
- 4
10
29
Claims Frequency a)
Average claims DKK b)
Total claims
17,897
1,306
11,315
1,329
a) The claims frequency is calculated as the number of claims incurred in proportion to the average number of insurance contracts.
b) Average claims are total claims before run-off relative to the number of claims incurred.
100 | Annual report 2010 | Tryg A/S
Notes
Accident
and health
2009
2010
Gross premiums written
1,665
1,830
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on ceded business
Techn. interest net of reinsurance
Technical result
1,644
- 863
- 250
- 13
5
523
1,820
- 1,136
- 245
- 20
11
430
2009
258
263
- 220
- 26
0
3
20
2010
325
311
- 206
- 33
0
2
74
2009
1,402
1,432
- 702
- 169
- 47
23
537
2010
1,317
1,352
- 1,220
- 178
- 23
1
- 68
Health care
Worker’s
compensation
Motor TPL
Motor
comprehensive
Marine, aviation
and cargo
2009
2010
2009
2010
2,413
2,650
3,372
3,830
2,405
- 1,365
- 449
- 36
11
566
2,646
- 1,624
- 434
- 27
16
577
3,317
- 2,673
- 554
- 12
32
110
3,679
- 3,098
- 616
- 11
24
- 22
2009
293
282
- 164
- 32
- 33
6
59
2010
378
367
- 251
- 50
- 47
2
21
Claims Frequency a)
Average claims DKK b)
Total claims
3.7%
39,044
31,112
3.4%
43,342
31,833
80.1%
7,409
33,700
72.6%
7,567
32,987
19.6%
78,086
13,800
18.9%
83,801
14,395
6.1%
18,421
91,489
5.1%
25,374
80,073
19.7%
10,428
241,946
20.5%
11,554
264,675
28.6%
51,719
3,171
20.8%
83,551
3,122
Fire & contents
(Private)
Fire and contents
(Commercial)
Change of
ownership
2009
2010
2009
2010
Gross premiums written
3,919
4,599
2,537
2,768
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on ceded business
Techn. interest net of reinsurance
Technical result
3,876
- 3,328
- 698
- 70
36
- 184
4,435
- 4,026
- 845
65
33
- 338
2,570
- 1,868
- 476
- 255
16
- 13
2,751
- 2,437
- 502
- 114
18
- 284
- 152
- 222
Liability
Credit & guarantee
insurance
Tourist assistance
insurance
2009
757
745
- 518
- 153
31
5
110
2010
827
815
- 449
- 147
- 56
3
166
2009
187
181
- 38
- 54
- 39
2
52
2010
225
211
- 64
- 52
- 31
2
66
2009
431
455
- 400
- 70
- 1
4
- 12
2010
488
480
- 407
- 72
- 1
4
4
Claims Frequency a)
Average claims DKK b)
Total claims
7.6%
9,973
319,222
7.3%
13,150
310,832
22.2%
45,981
40,925
21.9%
62,951
40,462
9.8%
18,193
6,186
9.3%
22,919
6,141
10.3%
51,511
9,422
10.1%
55,335
9,252
1.4%
843,571
45
1.5%
1,567,033
58
13.3%
6,876
50,274
10.8%
8,059
49,862
2009
90
86
- 234
- 8
0
4
2009
494
532
- 450
- 69
- 2
4
15
2010
86
- 21
- 196
- 8
0
3
2010
548
560
- 484
- 53
- 4
10
29
Other
insurance
Total
Norwegian Group Life
One-year policies
2009
2010
2009
2010
Gross premiums written
68
17,389
19,391
Gross premiums earned
Gross claims
Gross operating expenses
Profit/loss on ceded business
Techn. interest net of reinsurance
Technical result
65
74
- 59
- 48
- 43
7
- 69
69
- 19
- 69
- 44
5
- 58
17,330
- 12,432
- 2,987
- 518
154
1,547
18,915
- 15,133
- 3,251
- 309
124
346
Claims Frequency a)
Average claims DKK b)
Total claims
17,897
1,306
11,315
1,329
a) The claims frequency is calculated as the number of claims incurred in proportion to the average number of insurance contracts.
b) Average claims are total claims before run-off relative to the number of claims incurred.
Tryg A/S | Annual report 2010 | 101
Notes
DKKm
2009
2010
7
Interest and dividends
Interest income 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 others
8 Value adjustment
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
Value adjustments concerning assets or liabilities that cannot be attributed to IAS39
Investment property
Owner-occupied property
Discounting
Other balance sheet items
Market value gains
Market value losses
Market value adjustment, net
Exchange rate adjustments concerning financial assets or liabilities which cannot
be valuated to market value is in total DKK 52m (2009 DKK 1.4m)
Under market value adjustment the adjustment of inflation swaps totals DKK 27m (in 2009 DKK 13m).
14
67
1,197
9
1,287
-90
-26
-116
10
43
1,054
26
1,133
-88
-8
-96
1,171
1,037
62
485
-38
532
-23
1,018
19
1
-294
-10
-284
734
1,606
-872
734
61
233
5
78
3
380
74
0
-227
11
-142
238
907
-669
238
102 | Annual report 2010 | Tryg A/S
Notes
DKKm
9 Tax
Tax on profit for the year
Difference between Danish and foreign tax rate
Prior-year tax adjustment
Adjustment non-taxable income and expenses
Change in valuation of tax assets
Change in valuation of tax loss carried forward
Other taxes
Effective tax rate
Tax on profit for the year
Difference between Danish and foreign tax rate
Prior-year tax adjustment
Adjustment non-taxable income and expenses
Change in valuation of tax assets
Change in valuation of tax loss carried forward
See ‘The Group’s financial performance in 2010’ in the Management report
for further information regarding the tax expense.
10 Profit/loss on discontinued and divested business
Earned premiums, net of reinsurance
Claims incurred, net of reinsurance
Insurance operating expenses, net of reinsurance
Technical result
Profit/loss before tax
Tax
Profit/loss on discontinued and divested business
Profit/loss on discontinued and divested business is excluded in ‘Marine, aviation
and cargo’ in the accounts broken down by line of business.
2009
2010
-653
-43
-4
58
55
-37
-1
-625
%
25
2
0
-2
-2
1
24
333
-265
-37
31
31
-8
23
-235
-28
9
18
-26
0
-3
-265
%
25
3
-1
-2
3
0
28
224
-291
-44
-111
-111
28
-83
Claims Frequency
Average claims DKK
Total claims
16.3%
331,288
978
27.8%
310,702
954
Tryg A/S | Annual report 2010 | 103
Notes
DKKm
11
Intangible assets
2010
Cost
Balance 1 January
Exchange rate adjustment
Additions during the year
Disposals during the year
Balance 31 December
Amortisation and writedowns
Balance 1 January
Exchange rate adjustment
Amortisation for the year
Impairment writedowns for the year
Reversed amortisation
Balance 31 December
Trademarks
and customer
relations
Goodwill
Software
Total
329
48
0
0
377
0
0
0
0
0
0
148
20
0
0
168
-12
-2
-18
0
0
-32
804
12
134
-49
901
-335
-8
-144
-3
44
-446
1,281
80
134
-49
1,446
-347
-10
-162
-3
44
-478
Carrying amount 31 December
377
136
455
968
2009
Cost
Balance 1 January
Exchange rate adjustment
Addition on acquisition of subsidiary a)
Additions during the year
Disposals during the year
Balance 31 December
Amortisation and writedowns
Balance 1 January
Exchange rate adjustment
Amortisation for the year
Impairment writedowns for the year
Reversed amortisation
Balance 31 December
0
19
310
0
0
329
0
0
0
0
0
0
0
9
139
0
0
148
0
0
-12
0
0
-12
645
18
17
143
-19
804
-195
-18
-121
-10
9
-335
645
46
466
143
-19
1,281
-195
-18
-133
-10
9
-347
Carrying amount 31 December
329
136
469
934
a) Addition on acquisition of subsidiary relates to the acquisition of Moderna Försäkringar, see note 29
Intangible assets under development amount to a total of DKK 115m in the total software (in 2009 DKK 114m). Additions for in-
ternally developed software expenses amount to DKK 30m (DKK 28m in 2009). Amortisation is recognised in the income state-
ment under insurance operating expenses and claims incurred.
104 | Annual report 2010 | Tryg A/S
Notes
DKKm
11
Intangible assets (continued)
Impairment test
Goodwill
As at 31 December 2010, management performed an impairment test of the carrying amount of goodwill based on the allocation
of the cost of goodwill to the cash-generating unit. Assumptions for impairment test:
The Value-in-use method is used.
2010
Moderna Försäkringar
MF Bilsport & MC Specialförsäkringar
2009
Moderna Försäkringar Sak AB
MF Bilsport & MC Specialförsäkringar AB
Assumed
annual growth
> 5 years
2.5%
2.5%
2.5%
2.5%
Return
require-
ment
before tax
14.9%
14.9%
15.4%
15.4%
Insurance activities in Sweden
In 2009, Tryg acquired Moderna Försäkringar Sak AB, Modern Re S.A., Netviq AB and MF Bilsport & MC specialfösäkringar. The in-
surance activities were incorporated into the Tryg Group’s business structure in 2009 and are reported under Sweden. In 2010 the
companies were merged into Tryg Forsikring A/S as Moderna Försäkringar, branch of Tryg Forsikring A/S.
The assumed growth during the terminal period has been estimated based on expectations for general economic growth. The re-
turn requirement is based on an assessment of the risk profile for the tested business activities. Higher return requirements or
lower growth would entail a lower value of the activities, whereas lower return requirements or higher growth expectations would
entail a higher value.
Software
The impairment charges are recognised in the income statement in total insurance operating expenses . In the impairment test, the
carrying amount is compared with the estimated present value of future cash flows.
Trademarks and customer relations
The impairment test performed for trademarks and customer relations did not indicate any impairment.
Tryg A/S | Annual report 2010 | 105
Notes
DKKm
12 Property, plant and equipment
2010
Cost
Balance 1 January
Exchange rate adjustment
Additions during the year
Disposals during the year
Balance 31 December
Accumulated value adjustments
Balance 1 January
Exchange rate adjustment
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
Reversed depreciation
Depreciation for the year
Balance 31 December
Operating Owner-occup- Assets under
construction
ied property
equipment
Total
225
7
62
-66
228
0
0
0
0
0
-142
-3
55
-20
-110
1,378
19
0
0
1,397
-2
0
0
19
17
-18
0
0
-11
-29
258
7
176
0
441
-86
-2
0
0
-88
0
0
0
0
0
1,861
33
238
-66
2,066
-88
-2
0
19
-71
-160
-3
55
-31
-139
Carrying amount 31 December
118
1,385
353
1,856
106 | Annual report 2010 | Tryg A/S
Notes
DKKm
12 Property, plant and equipment (continued)
Operating Owner-occup- Assets under
construction
ied property
equipment
Total
2009
Cost
Balance 1 January
Exchange rate adjustment
Addition on acquisition of subsidiary a)
Additions during the year
Disposals during the year
Balance 31 December
Accumulated value adjustments
Balance 1 January
Exchange rate adjustment
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
Reversed depreciation
Balance 31 December
185
6
11
45
-22
225
0
0
0
0
0
-139
-6
-18
21
-142
1,333
44
1
0
0
1,378
-9
-2
-2
11
-2
-9
-1
-8
0
-18
54
5
0
199
0
258
-54
-5
-27
0
-86
0
0
0
0
0
1,572
55
12
244
-22
1,861
-63
-7
-29
11
-88
-148
-7
-26
21
-160
Carrying amount 31 December
83
1,358
172
1,613
a) Addition on acquisition of subsidiary relates to the acquisition of Moderna Försäkringar, see note 29
Amortisation is recognised in the income statement under insurance operating expenses and claims incurred. External experts
were involved in valuing some of the owner-occupied properties.
Impairment test
Property, plant and equipment
The value of the owner-occupied properties was assessed in connection with The Living House and the improvements made to
those properties. The impairment charges on assets under construction are recognised in the income statement in total insurance
operating expenses. The impairment test performed for operating equipment and assets under construction did not indicate any
impairment. In establishing the market value of the owner-occupied properties, the following return percentages were used for
each property category.
Return percentages
2010
Office property
2009
Office property
Lowest
%
Average
%
Highest
%
6.0
%
6.0
6.4
%
6.8
7.8
%
7.8
Tryg A/S | Annual report 2010 | 107
Notes
DKKm
13
Investment property
Fair value at the end of the previous financial year
Exchange rate adjustment
Additions during the year
Disposals during the year
Value adjustment for the year
Reversed on sale
Fair value at 31 december
2009
2010
2,246
76
32
-2
17
-5
2,364
33
23
-261
68
-69
2,364
2,158
Total rental income for 2010 is DKK 166m (DKK 173m in 2009).
Total expenses for 2010 are DKK 37.8m (DKK 37.3m in 2009). Of this amount, not-hired property is DKK 0.9m.
(DKK 0.8m in 2009) why the total expenses at the income leading investment property are DKK 36.9m (DKK 36.5m in 2009).
External experts were involved in valuing the majority of the investment property.
In establishing the market value of the properties, the following return percentages were used for each property category:
Return percentages
2010
Business property
Office property
Residential property
2009
Business property
Office property
Residential property
Lowest
percentage
Average
percentage
Highest
percentage
7.0
5.8
3.8
7.0
6.0
3.8
7.3
6.7
5.2
7.3
6.8
5.3
7.5
7.8
6.0
7.5
7.8
6.0
108 | Annual report 2010 | Tryg A/S
Notes
DKKm
14
Investments in associates
Cost
Balance 1 January
Balance 31 December
Revaluations at net asset value
Balance 1 January
Exchange rate adjustment
Reversel of additions
Balance 31 December
Carrying amount 31 December
2009
2010
0
0
14
3
0
17
17
0
0
17
1
-5
13
13
Shares in associates according to the latest financial statements:
Name and registered office
Assets
Liabilities
Equity
Revenue
Profit/Loss
of the year
Ownership
share in %
2010
Komplementarselskabet af
1. marts 2006 ApS, DK
Bilskadeinstituttet AS, Norway
AS Eidsvåg Fabrikker, Norway
2009
Komplementarselskabet af
1. marts 2006 ApS, DK
Bilskadeinstituttet AS, Norway
AS Eidsvåg Fabrikker Norway
0
5
47
0
5
39
0
0
6
0
1
3
0
5
41
0
4
36
0
2
18
0
1
14
0
0
6
0
0
2
50
30
28
50
30
28
A individual estimate of the degree of influence referring to the agreed contracts are made.
Tryg A/S | Annual report 2010 | 109
Notes
DKKm
15 Total other financial investment assets
Fair value hierarchy for financial instruments
measured at fair value in the balance sheet
2010
Financial assets at fair value with value adjustment
in the income statement
Bonds
Shares
Unit trust units
Derivatives
Cash in hand and deposits in credit institutions
2009
Financial assets at fair value with value adjustment
in the income statement
Bonds
Shares
Unit trust units
Derivatives
Cash in hand and deposits in credit institutions
Quoted
market
prices
Observable Unobservable
input
input
Total
20,808
0
2,268
0
3,612
26,688
16,337
200
2,143
0
3,450
22,130
13,770
0
0
-49
0
13,721
12,947
0
0
6
0
12,953
43
184
0
-29
0
198
126
181
0
31
0
338
34,621
184
2,268
-78
3,612
40,607
29,410
381
2,143
37
3,450
35,421
2009
2010
121
10
90
117
0
0
338
338
4
-47
0
-100
3
198
96
-54
Financial instruments measured at fair value in the balance sheet
on the basis of non-observable input:
Carrying amount 1 January
Exchange rate adjustment
Gains/losses in the income statement
Purchases
Sales
Transfers to/from the group ‘non-observable input’
Carrying amount 31 December
Gains/losses in the income statement for assets held at the balance sheet
date recognised in value adjustments
Bonds measured on the basis of observable inputs mainly consist of Norwegian bonds issued by banks and to some extent
Danish semi liquid bonds, where no quoted prices within the last 5 days exist.
Non-observable input, total result DKK -47m (DKK 96m in 2009), mainly comprises inflation derivatives of DKK -60m hedging
(DKK 75m in 2009) inflation risk on technical provisions which recorded an accounting loss of DKK 83m (DKK -62m in 2009).
The risk of the non-observable input group is moderate since the inflation derivatives aim at hedging the by market conditions
such as inflation risk of the technical provisions 100 percent, while the unquoted shares and bonds, which are influenced
the development in interest rates and expected earnings, is a limited amount.
110 | Annual report 2010 | Tryg A/S
Notes
DKKm
Bonds
Shares
Property
Total
15
Financial assets at fair value with
value adjustment in the income statement
2010
Investment assets as per the section ‘Investment activities’
in the Management’s report
Consisting of:
Cash in hands allocated to portefolio management
Unsettled securities trading
Unit trust units
Futures
Deposits, derivatives etc.
Repo debt
Owner-occupied property
Equity investments
Investment assets according to balance sheet
Unit trust units
Deposits
Investment assets at fair value according to balance
sheet recognised through profit and loss
Associated shares
Deposits with ceding undertakings, receivable
Total investment assets according to balance sheet
2009
Investment assets as per the section ‘Investment activities’
in the Management’s report
Consisting of:
Cash in hands allocated to portefolio management
Unsettled securities trading
Unit trust units
Futures
Deposits, Derivatives etc.
Owner-occupied property
Equity investments
Investment assets according to balance sheet
Unit trust units
Deposits, Derivatives etc.
Investment assets at fair value according to balance sheet
recognised through profit and loss
Associated shares
Deposits with ceding undertakings, receivable
Total investment assets according to balance sheet
34,317
2,179
3,897
40,393
-80
1,795
-532
0
-2,753
1,896
0
0
34,643
0
0
-1,736
-246
0
0
0
-13
184
0
0
0
0
0
0
-1,739
0
2,158
-80
1,795
-2,268
-246
-2,753
1,896
-1,739
-13
36,985
2,268
2,755
42,008
13
15
42,036
34,248
1,589
3,893
39,730
-50
-1,022
-827
0
-2,939
0
0
29,410
0
0
-1,316
125
0
0
-17
381
0
0
0
0
0
-1,530
0
2,363
-50
-1,022
-2,143
125
-2,939
-1,530
-17
32,154
2,143
2,939
37,236
17
15
37,268
Tryg A/S | Annual report 2010 | 111
Notes
DKKm
2009
2010
15 Adjusted duration of Bond portfolio
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
19,198
11,875
2,869
306
15,143
16,645
1,904
625
34,248
34,317
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 mort-
gage institution at any point in time.
Maturity of the Group’s interest-bearing financial assets and debt
2010
Bonds
Cash in hand and at bank
Debt
Receivables
2009
Bonds
Cash in hand and at bank
Debt
Receivables
0-1 year
1-5 years
> 5 years
3,920
777
-30
2,183
22,947
0
0
0
6,850
22,947
10,084
462
-611
2,428
13,004
0
0
0
7,450
0
-1,591
0
5,859
11,160
0
-1,586
0
Total
34,317
777
-1,621
2,183
35,656
34,248
462
-2,197
2,428
12,363
13,004
9,574
34,941
Effective
interest rate
Adjusted
duration
2.2
0.8
5.2
-
3.3
0.9
4.1
-
1.9
0
0
-
2.0
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 21. Please refer to the section on ‘Investment and interest rate risk’ in
‘Capitalisation and risk mangement’ in the ‘Management’s report’.
Listed shares
Scandinavia
United Kingdom
Rest of Europe
United States
Asia etc.
Total
The portfolio of unlisted shares totals
Unlisted equity investments are measured at estimated fair value, see ‘Accounting policies’
2009
2010
348
134
336
354
219
1,391
198
350
83
579
647
336
1,995
184
112 | Annual report 2010 | Tryg A/S
Notes
DKKm
Properties
Bonds
Shares
Insurance
Hedge
Exposure
15 Exposure to exchange rate risk
2010
USD
EUR
GBP
NOK
SEK
Other
Total
2009
USD
EUR
GBP
NOK
SEK
Other
Total
0
0
0
823
1
0
0
0
0
852
1
0
0
50
1
11,773
2,056
0
0
128
0
11,952
1,673
361
799
513
74
0
113
229
479
418
126
359
72
231
-159
-1,551
0
-9,270
-944
-21
-162
-1,610
4
-10,457
-578
-18
-518
1,139
-76
-3,266
-1,197
-196
-261
1,210
-122
-2,678
-1,241
-565
122
151
1
60
29
16
379
56
146
8
28
-73
9
320
Please refer to the section on ‘currency risk’ in ‘Capitalisation and risk mangement’ in the ‘Management’s report’.
Sensitivity information
2009
2010
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%
26
-42
-191
-336
-12
-218
-75
13
-262
-334
-12
-315
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 ‘Capitalisation and risk mangement’ for an elaboration of risk management and risk exposure.
Tryg A/S | Annual report 2010 | 113
Notes
DKKm
2009
2010
Gross
Net
Gross
Net
15 Derivative financial instruments
Derivatives with value adjustment in the income statement
according to IAS 39 at fair value:
Interest derivatives
Share derivatives
Inflation derivatives
Exchange rate derivatives
Due within one year
Due within one to five years
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 during the year
Gains and losses on hedges charged to equity at 31 December
3,659
125
3,623
7,240
11,024
0
3,623
7
0
31
-4
34
0
0
25,373
246
3,248
11,972
30,751
3,709
6,379
Gains
Losses
850
133
983
-819
-461
-1,280
13
0
-29
-62
-19
-8
-51
Net
31
-328
-297
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
Balance at 31 December
Receivables
Receivables from insurance enterprises
Exchangerate and inflation derivatives
Unsettled transactions
Other receivables
Specification of writedowns on receivables from insurance contracts
Balance at 1 January
Exchange rate adjustment
Writedowns and reversed writedowns for the year
Balance at 31 December
Reversed impairment losses are estimated at around DKK 45m annually, but may vary
due to major cases/disputes. Please refer to the section on ‘Credit risk’ in ‘Capitalisation
and risk mangement’ in the ‘Management’s report’.
Receivables in connection with insurance contracts include overdue recievables totalling:
Falling due:
Within 90 days
After 90 days
Including writedowns of due amounts
114 | Annual report 2010 | Tryg A/S
2009
2010
-510
487
-23
1,238
27
1,051
112
-23
330
307
1,321
305
0
557
2,428
2,183
120
6
-2
124
271
110
381
124
124
3
8
135
197
161
358
135
Notes
DKKm
16 Reinsurer’s share
Reinsurers’ share
Writedowns after impairment test
Balance at 31 December
Impairment test
As at 31 December 2010, management performed a test of the carrying amount
of total reinsurers’ share of provisions for insurance contracts. The impairment test
resulted in impairment charges totalling DKK 17m (DKK 17m in 2009).
Writedowns during the year include reversed writedowns totalling DKK 1m (DKK 3m in 2009).
Please refer to the section on ‘Reinsurance’ in ‘Capitalisation and risk mangement’
in the ‘Management´s report’.
17 Current tax
Current tax, beginning of year
Exchange rate adjustment
Addition on acquisition of subsidiary a)
Current tax for the year
Current tax on equity entries
Adjustment of prior-year current tax
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
a) Addition on acquisition of subsidiary relates to the acquisition of Moderna Försäkringar, see note 29
2009
2010
1,337
-17
1,320
1,605
-17
1,588
-137
-25
-24
-576
118
-8
349
-303
0
-303
-303
-303
-15
0
-170
82
14
482
90
196
-106
90
18
Shareholders’ equity
Share capital
Numbers of shares
Balance at 1 January
Bought during the year
Sold during the year
2009
2010
No. of
shares
64,377,683
-1,286,817
136,784
Nominal
value
(DKK’000)
1,609,442
-32,170
3,420
No. of
shares
63,227,650
-2,625,786
31,837
Nominal
value
(DKK’000)
1,580,692
-65,645
796
Balance at 31 December
63,227,650
1,580,692 60,633,701
1,515,843
Tryg A/S | Annual report 2010 | 115
Notes
DKKm
18 Shareholders’ equity (continued)
Treasury shares
Balance at 1 January
Bought during the year
Cancellation in connection
with buyback programme.
Used in connection with issue
of employee shares
Used in connection with exercise
of stock options
2009
Nominal
value
(DKK’ 000)
90,558
32,170
No. of
shares
3,622,317
1,286,817
% of share
capital
No. of
shares
2010
Nominal
value
(DKK’ 000)
% of share
capital
5.32
2.01
703,923
2,625,786
17,598
65,645
-4,068,427
-101,711
-6.02
-70,354
-1,758
-0.11
0
-17
0
0
-66,430
-1,661
-0.1
-31,820
-796
1.10
4.11
0.00
0.00
-0.05
5.16
Balance at 31 December
703,923
17,598
1.10
3,297,872
82,447
Pursuant to the authorisation granted by the shareholders, Tryg may acquire up to 10.0% of the share capital until the next
annual general meeting in 2011. Treasury shares are acquired for use in the Group’s incentive programme and as part of the
share buy back programme.
19 Capital adequacy
Shareholders’ equity according to annual report
Subordinate loan capital
Proposed dividend
Solvency requirements to subsidiary undertakings
Capital base
Weighted assets
Solvency ratio
2009
9,631
732
-991
-4,579
4,793
2010
8,458
804
-256
-5,031
3,975
4,966
3,188
97
125
The capital base and the solvency ratio are calculated in accordance with the Danish Financial Business Act. Tryg manages
its capital requirement as described in ‘Capitalisation and risk management’ in the Management’s report’
116 | Annual report 2010 | Tryg A/S
Notes
DKKm
20 Subordinated loan capital
Loan terms:
Subordinated bond loan a)
Subordinated loan capital b)
Lender
Principal
Issue price
Issue date
Maturity year
Loan may be called by lender as from
Repayment profile
Interest structure
Listed bonds
EUR 150m
99.017
December 2005
2025
2015
Interest-only
4.5% (until 2015)
2.1% above EURIBOR 3M (from 2015)
TryghedsGruppen
EUR 65m
100
April 2009
2032
30 June 2012
Interest-only
5.13% above EURIBOR 3M (interest until 30 June 2012)
7.63%–6.63% (max. og min. until 30 June 2012)
5% above EURIBOR 3M (interest from 1 July 2012-30 June 2019)
6% above EURIBOR 3 M (interest from 1 July 2019)
a) In December 2005, Tryg Forsikring A/S raised a subordinated bond loan with no option for the creditor to call the loan before maturity or otherwise
terminate the loan agreement with Tryg Forsikring A/S. The loan is automatically accelerated upon the liquidation or bankruptcy of Tryg Forsikring A/S.
b) Tryg Forsikring A/S has subscribed the subordinated loan capital in connection with acquisitions made in April 2009, see note 29.
Prices used for determination of fair value in respect of both loans are based on an assessment of the credit spread of the loans
provided by Nordea.
The fair value of the loan at the balance sheet date
The fair value of the loan at the balance sheet date
is based on a price of
Total capital losses and costs the balance sheet date
Interest expenses of the year
Bond loan
2009
893
80
14
51
2010
950
85
12
50
Tryghedsgruppen smba
2010
2009
499
103
0
24
499
103
0
33
The share of subordinated capital included in the calculation of the capital base total DKK 804m (DKK 732m in 2009)
The loans are initially recognised at fair value on the date on which a loan is entered and subsequently measured
at amortised cost.
Tryg A/S | Annual report 2010 | 117
Notes
DKKm
21 Provisions for claims – Estimated accumulated claims
Gross
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Estimated accu-
mulated claims
End of year
1 year later
2 year later
3 year later
4 year later
5 year later
6 year later
7 year later
8 year later
9 year later
10 year later
Cumulative pay-
ments to date
Discounting
Reserves from
1999 and
prior years
Other reserves
Gross provisions
for claims,
end of year
8,611
8,938
9,148
9,354
9,441
9,573
9,325
9,443
9,429
9,508
9,746
9,746
9,252 11,335 10,757 11,092 11,828 11,627 12,571 13,249 14,691 17,030
9,490 11,696 10,863 11,096 11,727 11,883 13,196 14,629 15,362
9,689 11,696 10,524 10,952 11,554 11,390 13,768 14,519
9,801 11,752 10,522 10,838 11,158 11,614 13,773
9,730 11,742 10,548 10,570 11,294 11,546
9,720 11,651 10,520 10,645 11,162
9,934 11,638 10,442 10,440
9,908 11,504 10,310
9,960 11,493
9,889
9,889 11,493 10,310 10,440 11,162 11,546 13,773 14,519 15,362 17,030 135,271
-8,995
-137
-9,230 -10,745
-135
-117
-9,468
-161
-9,439 -10,010
-195
-177
-9,916 -11,429 -11,245 -11,112
-438
-386
-250
-311
-8,262 -109,851
-2,920
-614
1,659
724
24,883
Ceded business
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Estimated accu-
mulated claims
End of year
1 year later
2 year later
3 year later
4 year later
5 year later
6 year later
7 year later
8 year later
9 year later
10 year later
Cumulative pay-
ments to date
Discounting
Reserves from
1999 and
prior years
Other reserves
Provisions
for claims,
end of year
1,453
1,570
1,533
1,559
1,593
1,588
1,584
1,591
1,594
1,670
1,638
1,638
1,467
1,480
1,487
1,503
1,476
1,462
1,470
1,450
1,476
1,565
2,059
2,169
2,050
2,043
2,041
2,055
2,062
1,991
1,988
953
913
909
970
886
881
891
889
874
888
930
928
912
920
919
948
841
847
840
863
858
296
295
281
313
313
514
479
492
498
182
250
213
304
379
711
1,565
1,988
889
919
858
313
498
213
379
711
9,972
-1,588
-9
-1,435
-7
-1,859
-17
-844
-7
-842
-14
-806
-5
-296
0
-472
-3
-158
-2
-257
-4
-193
-13
-8,750
-80
191
101
1,434
118 | Annual report 2010 | Tryg A/S
Notes
DKKm
21 Provisions for claims – Estimated accumulated claims
Net of reinsurance 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Estimated accu-
mulated claims
End of year
1 year later
2 year later
3 year later
4 year later
5 year later
6 year later
7 year later
8 year later
9 year later
10 year later
Cumulative pay-
ments to date
Discounting
Reserves from
1999 and
prior years
Other reserves
Provisions for
claims, net of
reinsurance, end
of the year
7,158
7,368
7,615
7,795
7,849
7,985
7,742
7,852
7,835
7,838
8,108
8,108
7,785
8,010
8,201
8,298
8,254
8,258
8,464
8,458
8,484
8,325
9,276
9,527
9,646
9,709
9,702
9,596
9,575
9,514
9,505
9,805 10,218 10,881 11,331 12,057 13,067 14,387 16,318
9,950 10,208 10,887 11,588 12,717 14,379 14,983
9,615 10,022 10,707 11,110 13,276 14,307
9,909 10,318 11,302 13,274
9,552
9,658 10,431 11,233
9,662
9,725 10,304
9,638
9,521
9,551
9,422
8,325
9,505
9,422
9,521 10,304 11,233 13,274 14,307 14,983 16,318 125,299
-7,407
-128
-7,795
-109
-8,886
-119
-8,624
-154
-8,597
-163
-9,204
-189
-9,621 -10,956 -11,087 -10,855
-434
-384
-249
-308
-8,069 -101,101
-2,840
-601
1,468
622
23,449
Estimated accumulated claims regarding Moderna Försäkringar
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
I alt
45
44
99
97
117
117
133
131
243
241
348
343
426
409
520
591
646
849
760
1,102
0
1,444
3,336
5,367
The table consists of figures for Tryg Forsikring A/S, Tryg Forsikring, norwegian branch of Tryg Forsikring A/S, Enter Forsikring AS
and Moderna Försäkringar, branch of Tryg Forsikring A/S. Other group units are included in the item ’Other reserves’, which comprises
the provisions for claims for Tryg Garantiforsikring A/S and the Finnish branch.
The amounts in foreign currency in the table are translated to Danish kroner using the exchange rate at 31 December 2010
to prevent the impact of exchange rate fluctuation.
Tryg A/S | Annual report 2010 | 119
Notes
DKKm
21 Provisions for claims
2010
Total, beginning of year
Market value adjustment of provisions, beginning of year
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 and exchange rate adjustment
Provisions for claims, end of year a)
Other b)
2009
Total, beginning of year
Market value adjustment of provisions, beginning of year
Addition on acquisition of subsidiary c)
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 and exchange rate adjustment
Provisions for claims, end of year a)
Other b)
Gross
Ceded
Net
22,017
703
22,720
-8,273
-6,663
-14,936
16,502
-857
15,645
826
24,255
628
1,050
62
1,112
-195
-327
-522
757
-52
705
38
1,333
101
20,967
641
21,608
-8,078
-6,336
-14,414
15,745
-805
14,940
788
22,922
527
24,883
1,434
23,449
19,355
1,330
648
21,333
-7,175
-6,308
-13,483
13,742
-683
13,059
1,108
22,017
453
794
113
69
976
-152
-204
-356
355
35
390
40
1,050
75
18,561
1,217
579
20,357
-7,023
-6,104
-13,127
13,387
-718
12,669
1,068
20,967
378
22,470
1,125
21,345
a) The table consists of figures for Tryg Forsikring A/S, Tryg Forsikring, Norwegian branch of Tryg Forsikring A/S, Enter Forsikring AS
and Moderna Försäkringar, branch of Tryg Forsikring A/S. Other units in the Group are included in ’Other’
b) Comprises provisions for claims for Tryg Garantiforsikring A/S, the Finnish branch of Tryg Forsikring A/S.
c) Addition on acquisition of subsidiary relates to the acquisition of Moderna Försäkringar, see note 29
120 | Annual report 2010 | Tryg A/S
Notes
DKKm
0-1 year
1-2 years
2-3 years
> 3 years
Expected cashflow
Carrying
amount
Total
21 Provisions for claims
2010
Provisions for unearned premiums, gross
Provisions for unearned premiums, ceded
Provisions for claims, gross
Provisions for claims, ceded
2009
Provisions for unearned premiums, gross
Provisions for unearned premiums, ceded
Provisions for claims, gross
Provisions for claims, ceded
6,111
-138
8,044
-495
196
0
3,866
-201
177
0
2,439
-106
174
0
9,906
-531
6,658
-138
24,255
-1,333
13,522
3,861
2,510
9,549
29,442
5,615
-153
7,161
-292
158
-12
3,421
-134
152
-15
2,256
-99
156
-10
9,178
-525
6,081
-190
22,016
-1,050
12,331
3,433
2,294
8,799
26,857
The table consists of figures for Tryg Forsikring A/S, Tryg Forsikring, Norwegian branch of Tryg Forsikring A/S, Enter Forsikring AS
and Moderna Försäkringer, branch of Tryg 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 15.
Please refer to the section on ‘Capitalisation and risk mangement’ for an elaboration of risk management and risk exposure.
Tryg A/S | Annual report 2010 | 121
Notes
DKKm
2009
2010
22 Pensions and similar obligations
Jubilees, schemes for elderly employees etc.
Recognised obligation, end of year
Defined benefit persion 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
Acturial gains/losses
Paid during the period
Change in recognised employers’ nat. ins. contribution
48
48
144
1,160
1,304
856
448
1,123
206
55
47
-70
-57
0
50
50
108
1,464
1,572
951
621
1,304
81
52
58
181
-62
-42
Recognised pension obligation, end of year
1,304
1,572
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
Acturial gains/losses
Paid during the period
Carrying amount of plan assets, end of year
Total pensions and similar abligations, end of year
Total recognised obligation, end of year
Specification of pension cost for the year:
Present value of amounts accumulated during the year
Interest expense on accrued pensions obligation
Expected return on plan assets
Accrued employers’ nat.insurance contribution
Total year’s cost of defined benefit plans
The premium for the following financial years is estimated at:
Estimated distribution of plan assets:
Shares
Bonds
Property
Average return on plan assets
122 | Annual report 2010 | Tryg A/S
628
118
149
40
-42
-37
856
448
496
45
47
-40
8
60
55
%
10
70
20
5.1
856
57
73
53
-47
-41
951
621
671
44
58
-53
6
55
66
%
12
69
19
4.5
Notes
DKKm
22 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
Pension obligation
Plan assets
Surplus/deficit
Actuarial gains/losses associated
with the pension obligation
Actuarial gains/losses associated
with pension assets
2009
2010
%
4.6
5.8
4.0
4.0
4.0
7.0
14.1
20.0
Adj. K2005
%
3.8
4.5
4.0
3.8
3.8
6.0
14.1
0.0
Adj. K2005
2006
1,298
825
473
90
26
2007
1,292
932
360
104
-10
2008
1,123
628
495
-23
-173
2009
1,304
856
448
70
-42
2010
1,572
951
621
-181
-47
Moderna Försäkringar, branch of Tryg Forsikring A/S complies with the Swedish 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 c
ollaboration, 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 informa-
tion 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 2010 amounted to DKK 12m, which is about 2.6 % of the annual premium in FPK (2009). FPK writes in
its half-year report for 2010 that it had a collective consolidation ratio of 112 at 30 June 2010 (cosolidation ration 113 at 30 June
2009). The collective consolidation ratio is defined as the market value of the plan assets relative to the total collective pension
obligations.
Tryg A/S | Annual report 2010 | 123
Notes
DKKm
23 Deferred tax
Tax asset
Operating equipment
Debt and provisions
Capitalised tax loss
Tax liability
Intangible rights
Land and buildings
Bonds and loans secured by mortgages
Contingency funds
Deferred tax, end of year
Unaccrued timing differences of shares
Unaccrued timing differences of balance sheet items
Reconcillation of deferred tax
Deferred tax, beginning of year
Exchange rate adjustment
Addition on acquisition of subsidiary a)
Change in deferred tax previous years
Change in capitalised tax loss
Change in deferred tax taken to the income statement
Change in deferred tax taken to equity
Non-capitalised tax loss
Denmark
Sweden
Finland
Luxembourg
2009
2010
56
161
91
308
134
176
46
1,196
1,552
1,244
134
68
949
133
97
-3
-80
138
10
37
213
70
320
121
206
14
1,261
1,602
1,282
0
25
1,244
70
0
0
34
53
-119
1,244
1,282
72
0
313
142
72
16
343
103
a) Addition on acquisition of subsidiary relates to the acquisition of Moderna Försäkringar, see note 29
The loss in Tryg A/S cannot be utilised in the Danish joint taxation scheme. The loss can be carried forward indefinitely in Denmark
and Luxembourg.
Under Finnish rules, losses may be carried forward for ten years and according to the rules in Sweden, losses may be carried for-
ward indefinitely.
Losses are not recognised as tax assets until it is likely that there will be sufficient future taxable income for the loss to be utilised.
The total current and deferred tax relating to items recognised in equity is recognised in the balance sheet in the amount of DKK
-208m. (DKK 110m in 2009).
No deferred tax is associated with investments in subsidiaries (DKK 0m in 2009)
124 | Annual report 2010 | Tryg A/S
Notes
DKKm
2009
2010
24 Other provisions
Other provisions, beginning of year
Change in provisions
Other provisions, end of year
25 Debt to credit institutions
Bank loans
Bank overdrafts
Debt falling due within one year
Debt falling due after more than five years
From 2005 to july 2010 Tryg has had a loan facility with a consortium of banks for DKK 2,000m,
of which DKK 600m was utilised at 31 December 2009. In 2010, the loan carried interest at CIBOR
plus a margin, totalling approximately 2.5 % p.a. The unutilised part of the loan facility was
measured at amortised cost, and an amount of DKK 5m was deducted from the loan proceeds upon
signing the loan agreement. The cost was depreciated linear until the loan facility expired in
July 2010. The fair value of the loan is considered to be the utilised part of the facility of DKK 600m.
Tryg A/S has established committed credit facilities totalling DKK 1,000m with af number of Danish banks.
These credit facilities expire on 31 December 2011. In addition, Tryg Forsikring A/S has established
committed repo facilities DKK 1,000m with at number of Danish banks. These repo facilities expire on
31 December 2011. None of the facilities had been utilised at 31 December 2010.
26 Other debt
Unsettled transactions
Interest derivatives
Exchange and inflation rate derivatives
Repo debt
Other debt
Debt falling due within one year
Debt falling due after more than five years
27 Earnings per share
Profit/loss for the period from continuing business
Profit/loss on discontinued and divested business
Profit/loss for the period
Average number of shares (1,000 shares)
Diluted number of shares (1,000)
Diluted average number of shares (1,000)
Earnings per share - continuing business of DKK 25
Basic earnings per share of DKK 25
Diluted earnings per share (DKK)
1
5
6
600
11
611
611
0
27
3
0
0
959
989
989
0
1,985
23
2,008
63,334
114
63,448
31.3
31.7
31.7
6
-5
1
0
30
30
30
0
2,051
9
367
1,896
1,030
5,353
5,353
0
676
-83
593
62,362
82
62,444
10.8
9.5
9.5
The company has not issued warrants, convertible debt instruments or the like.
Tryg A/S | Annual report 2010 | 125
Notes
DKKm
<1 year
1-3 years
Payment due by period
3-5 years
> 5 years
28 Contractual obligations, contingent
liabilities and collateral
2010
Operating leases
Other contractual obligations
2009
Operating leases
Other contractual obligations
149
811
960
231
429
660
215
43
258
99
143
242
106
36
142
49
16
65
112
38
150
67
0
67
Total
582
928
1,510
446
588
1,034
The amounts include the following:
Tryg Forsikring A/S and Tryg Forsikring, norwegian branch of Tryg Forsikring A/S have signed an operating agreement with
CSC for an amount of DKK 374m for a period of 5 years which cannot be cancelled within a year. The contract expires in 2011.
Tryg Forsikring A/S has signed a portfolio management contract for DKK 143m. The contract expires in 2013.
Tryg Forsikring A/S has signed a telephony service contract with Telenor for DKK 145m. The contract expires in 2015.
Tryg Forsikring A/S has signed a car leasing contrakt with NF Fleet for DKK 30m. The contract expires in 2015.
Tryg Forsikring A/S has signed a it leasing contrakt with IBM for DKK 7.5m. The contract expires in 2011.
Tryg Forsikring A/S has signed a it leasing contrakt with a external company back up of the hard disk DKK 8.8m.
The contract expires in 2013.
Ejendomsselskaber af 8. Maj 2008 A/S has signed agreements for reburbishment of the property at Klausdalsbrovej 601, Ballerup.
The remaining contract sum amounts to DKK 21.3m. The work i s expected to be finalised in 2011.
Vesta Eiendom A/S has signed agreements for refurbishment of the property at Folke Bernadottesvei 50, Bergen.
The remaining contract sum amounts to DKK 5m. The work is expected to be finalised in 2011.
The Danish companies in Tryg group are jointly taxed with TryghedsGruppen smba.
Assets to cover the technical provisions in Tryg Forsikring A/S
have been registered in the total amount of
Assets to cover the technical provisions in Tryg Garantiforsikring A/S
have been registered in the total amount of
2009
2010
32,275
36,923
223
311
Most of the Danish companies in Tryg group are commonly registered for VAT and payroll tax and are jointly and severally liable for
payment of all such direct and indirect taxes.
In connection with the sale of Chevanstell Limited, Tryg Forsikring A/S issued few specific guarantees towards the buyer.
Management believes that it is unlikely that these guarantees will result in a financial loss for Tryg Forsikring A/S.
Companies of the Tryg Forsikring group are part of some disputes. Management believes that the outcome of these legal proceed-
ings will not affect the Group’s financial position beyond those receivables and obligations recognised in the statement of financial
position at 31 December 2010.
DKK 1,896m (DKK 0 in 2009) of the company’s bond portfolio was sold in repo transactions and must be repurchased. The value
of the bond portfolio remains recognised in the balance sheet and has been provided as security for financial liabilities concerning
repo transactions.
126 | Annual report 2010 | Tryg A/S
Notes
DKKm
29 Acquisition of subsidiary
2010
There have been no acquisitions of subsidiaries during 2010.
2009
In 2009 Tryg Forsikring A/S acquired Moderna Försäkringar Sak AB, Modern Re S.A., Netviq AB og MF Bilsport
& MC Specialförsäkring AB in Sweden.The acquisitionprice is final.
Acquired businesses
Moderna Försäkringar Sak AB
Modern Re S.A.
Netviq AB
MF Bilsport & MC Specialförsäkring AB
Acquired
interest
100%
100%
100%
100%
Principal
activity
Non life insurance
Intra group insurance
Agency for Moderna
Agency for Moderna
Aquisition
date
2 April 2009
2 April 2009
2 April 2009
2 April 2009
Acquired businesses
Intangible assets
Property, plant and equipment
Investment assets
Reinsurers´share of provisions for insurance contracts
Receivalbles, other assets and prepayments
Provisions for insurance contracts
Provisions
Debt, accruals and deferred income
Shareholders’ equity
Goodwill on acquisitions
Cost
Adjustment of cash and cash equivalents
Cash acquisition cost
Elements of cash acquisition cost
Cash
Direct acquisition costs
Cash acquisition cost
Carrying amount
before takeover a)
Market value
at takeover
16
12
955
140
1,082
-1,345
-75
-259
526
155
12
955
140
1,082
-1,345
-111
-259
629
310
939
-605
334
350
-16
334
a) The carrying amount prior to acquisition has been made up in accordance with the Tryg Group’s accounting policies.
Tryg A/S | Annual report 2010 | 127
Notes
Mio. DKK
30 Related parties
Supervisory Board and Group Executive Management
2009
2010
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
- Exercised, end of year
- Premium
Outstanding guarantees cover the policyholders’ financial obligations pursuant to the contract.
Following an individual assessment, all guarantees with the exception of Sjælsø Gruppen A/S, are
issued without additional security. The company has full recourse against the individual companies.
No provisions have been made for non-performing guarantees and no expenses were incurred
during the financial year.
Guarantee agreements are made on market terms.
Leases with related parties:
There are no leases with related parties.
Specification of remuneration
Supervisory Board
Executive Management
Remuneration includes pension contributions
Supervisory Board
Executive Management
0.3
0.6
115.8
0.7
0.2
6.2
1,470
538
7
-4
-19
-23
0
-3
-3
0.3
0.5
8.8
0.2
0.5
2.6
1,965
865
8
-5
-20
-25
0
-3
-3
Members of the Supervisory Board of Tryg A/S do not receive bonuses and are not participants in any severance plans. The Execu-
tive Management has a bonus scheme for up to 3 months’ salary (Group CEO up to 4 months’ salary) and participate ind the share
option programme in Tryg Forsikring as mentioned 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 Tryg Forsikring A/S 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 further claims in this respect, including claims for compensation pursuant to
sections 2a and/or 2b Salaried Employees Act, as such claims are included in the severance pay.
128 | Annual report 2010 | Tryg A/S
Notes
DKKm
30 Related parties
Parent company
Tryghedsgruppen smba
TryghedsGruppen smba controls 60% of the shares in Tryg A/S.
Intra-group trading involved
- Subordinated loan capital
- Interest expenses
Transactions between TryghedsGruppen smba and Tryg A/S are on market terms
2009
2010
499
-24
499
-33
Intra-group trading involved
Administration fee, etc. is fixed on a cost-recovery basis. Intra-group accounts are offset and carry interest on market terms. The
companies in Tryg Group 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.
31 Financial highlights
cf ‘Introduction to Tryg’ page 2
Tryg A/S | Annual report 2010 | 129
Income statement (parent company)
DKKm
2009
2010
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
Profit for the year
Proposed distribution for the year:
Dividend
Transferred to Net revaluation as per equity method
Transferred to Retained profits
2,079
2
-2
-14
-7
2,058
-46
2,012
17
2,029
2,029
991
1,470
-432
2,029
475
2
-1
-2
-8
466
-58
408
17
425
425
256
-1,965
2,134
425
130 | Annual report 2010 | Tryg A/S
Statement of financial position (parent company)
DKKm
Notes Assets
5
Investments in subsidiaries
Total investments in subsidiaries
Total investment assets
Receivables from subsidiaries
Other receivables
Total receivables
Current tax assets
6
7 Deferred tax assets
Total other assets
Total prepayments and accrued income
2009
2010
10,138
10,138
8,339
8,339
10,138
8,339
65
0
65
17
1
18
39
59
4
63
17
1
18
55
Total assets
10,260
8,475
Liabilities
Shareholders’ equity
8 Debt to credit institutions
Debt to subsidiaries
Total debt
Total liabilities and equity
1 Accounting policies
9 Capital adequacy
10 Contractual obligations, contingent liabilities and collateral
11 Related parties
12 Reconciliation of differences in the profit and the shareholders’ equity
9,652
8,475
600
8
608
0
0
0
10,260
8,475
Tryg A/S | Annual report 2010 | 131
Statement of changes in equity (parent company)
DKKm
Share
capital
Revalua-
tion
reserves
Retained
earnings
Proposed
dividends
Total
Shareholders’ equity at 31 December 2008
1,700
1,559
4,564
442
8,265
-35
2,029
9
505
-474
117
2,151
0
-442
32
-418
19
30
15
1,387
9,652
425
1
19
330
-328
144
591
-991
14
-816
9
16
2009
Adjustment beginning of year cf note 1
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
Nullification of own shares
Dividend paid
Dividend own shares
Purchase of own shares
Exercise of shareoptions
Issue of employee shares
Issue of share options
-35
1,470
9
505
-474
117
1,592
0
-102
Total equity entries in 2009
-102
1,592
-432
991
-432
102
32
-418
19
30
15
-652
991
-442
549
991
Shareholders’ equity at 31 December 2009
1,598
3,151
3,912
2010
Profit for the year
Change in equalisation provision
Revaluation of owner-occupied properties
Exchange rate adjustment of foreign entities
Hedge of foreign currency risk in foreign entities
Tax on equity entries
Total comprehensive income
0
Dividend paid
Dividend own shares
Purchase of own shares
Exercise of share options
Issue of share options
-1,965
1
19
330
-328
144
-1,799
2,134
256
256
-991
2,134
14
-816
9
16
Total equity entries in 2010
0
-1,799
1,357
-735
-1,177
Shareholders’ equity at 31 December 2010
1,598
1,352
5,269
256
8,475
Proposed dividend per share DKK 4.00 (DKK 15.50 in 2009) . 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 (63,931,573). The dividend is not paid un-
til approved by the shareholders at the annual general meeting of the subsequent year.
Tryg Forsikring A/S’ Norwegian branch, has in its branch financial statements included provisions for contingency funds in the amount
of DKK 2,887m (in 2009 DKK 2,599m) . In Tryg Forsikring A/S, these provisions, due to their nature as additional provisions, are included in
shareholders’ equity (retained earnings), net of deferred tax. Tryg Forsikring A/S’ option to pay dividend to Tryg 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
Tryg Forsikring A/S. Tryg Garantiforsikring A/S has a similar contingency amounting to DKK 139m, which is also included in the company’s
shareholders’ equity.
132 | Annual report 2010 | Tryg A/S
Notes (parent company)
DKKm
2009
2010
1 Accounting policies
Please refer to Tryg Group’s ‘Accounting policies.’
2
Income from subsidiaries
Tryg Forsikring A/S
3 Other expenses
Administrative expenses
2,079
2,079
-46
-46
475
475
-58
-58
Remuneration of the Executive Management is paid by Tryg Forsikring A/S and Tryg Forsikring,
norwegian branch of Tryg Forsikring A/S and is charged to Tryg A/S by the cost allocation.
Remuneration for Supervisory Board and Group Executive Management appears in
note 11 ‘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
Of which services other than audit:
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
-0.7
-0.7
0.0
0.0
17
17
%
25
25
-1.1
-1.1
-0.4
-0.4
17
17
%
25
25
Refer to the section ‘The Groups Financial performance 2010’ in the management report for further mention of the tax.’
Tryg A/S | Annual report 2010 | 133
Notes (parent company)
DKKm
5
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
2009
2010
6,987
6,987
1,524
2,238
-611
3,151
6,987
6,987
3,151
641
-2,440
1,352
Carrying amount 31 December
10,138
8,339
Name and registered office
2010
Tryg Forsikring A/S, Ballerup
2009
Tryg Forsikring A/S, Ballerup
6 Current tax assets
Current tax, beginning of year
Current tax for the year
Tax paid durring the year
7 Deferred tax assets
Capitalised tax loss
Tryg A/S
Non-capitalised tax loss
Tryg A/S
Ownership
shares in %
Equity
100
100
100
100
18
17
-18
17
1
72
17
17
-17
17
1
72
The loss in Tryg A/S can only be utilised in Tryg 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.
134 | Annual report 2010 | Tryg A/S
Notes (parent company)
DKKm
8 Debt to credit institutions
Bank loans
From 2005 to july 2010 Tryg A/S has had a loan facility with a consortium of banks for
DKK 2,000m, of which DKK 600m was utilised at 31 December 2009. In 2010, the loan
carried interest at CIBOR plus a margin, totalling approximately 2.5 % p.a.
Tryg has established committed credit facilities totalling DKK 1,000m with a number of Danish
banks. These credit facilities expire on 31 December 2011.
9 Capital adequacy, etc.
Shareholders’ equity according to annual report
Subordinate loan capital
Proposed dividend
Solvency requirements to subsidiary undertakings
Capital base
Weighted items
Solvency ptc.
10 Contractual obligations, contingent liabilities and collateral
The Danish companies in Tryg group are jointly taxed with TryghedsGruppen smba.
Most of the Danish companies in Tryg group are commonly registered for VAT and
payroll tax and are jointly and severally liable for payment of all such direct and indirect taxes.
Companies of the Tryg Group are part of some disputes. Management believes that the
outcome of these legal proceedings will not affect the Group’s financial position beyond
those receivables and obligations recognised in the balance sheet at 31 December 2010.
2009
2010
600
600
0
0
9,687
732
-991
-4,579
4,849
8,475
804
-256
-5,031
3,992
5,022
3,309
97
121
Tryg A/S | Annual report 2010 | 135
Notes (parent company)
DKKm
11 Related parties
Supervisory Board and Executive Management
Premium income
- Parent company (TryghedsGruppen smba)
- Key management
- Other related parties
Claims payments
- Parent company (TryghedsGruppen smba)
- Key management
- Other related parties
Guarantee agreements with related parties
- Account
- Exercised, end of year
- Premium
Outstanding guarantees cover the policyholders’ financial obligations pursuant to the contract.
Following an individual assessment, all guarantees are issued without additional security with
some exceptions. The company has full recourse against the individual companies.
No provisions have been made for non-performing guarantees and no expenses were
incurred during the financial year.
Guarantee agreements are made on market terms.
Leases with related parties
There are no leases with related parties.
Specification of remuneration
Supervisory Board
Executive Management
Remuneration includes pension contributions
Supervisory Board
Executive Management
Members of the Supervisory Board of Tryg 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.
136 | Annual report 2010 | Tryg A/S
2009
2010
0.3
0.6
115.8
0.7
0.2
6.2
1,470
538
7
0.3
0.5
8.8
0.2
0.5
2.6
1,965
865
8
-4
-19
-23
0
-3
-3
-5
-20
-25
0
-3
-3
Notes (parent company)
DKKm
11 Parent company
TryghedsGruppen smba
TryghedsGruppen smba controls 60% of the shares in Tryg A/S.
Intra-group trading involved
- Subordinated loan capital
- Interest expenses
Administration fee, etc. is fixed on a cost-recovery basis.
Intra-group accounts are offset and carry interest on market terms.
Subsidiaries and associates
Tryg A/S controls Tryg Forsikring A/S 100%.
Intra-group trading involved
- Providing and receiving services
- Intra-group account
- Interest
Administration fee, etc. is fixed on a cost-recovery basis.
Intra-group accounts are offset and carry interest on market terms.
12 Reconciliation of differences in the profit and the shareholders’ equity
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
standards and the rules issued by the Danish FSA. The following is a reconciliation of differences
in the profit and equity.
Profit reconciliation
Profit - IFRS
Current years effect of actuarial gains and losses on pension
obligation after tax
Change in the year in deferred tax provisions for contingency funds
Profit - Danish FSA executive order
Equity reconciliation
Shareholders’ equity - IFRS
Deferred tax provisions for contingency funds
Change in the year in deferred tax provisions for contingency funds
Equity - Danish FSA executive order
2009
2010
499
-24
499
-33
-49
65
-1
-61
76
2
2,008
21
0
2,029
9,631
21
0
9,652
593
-164
-4
425
8,458
21
-4
8,475
Tryg A/S | Annual report 2010 | 137
Geographical segments
DKKm
2006
2007
2008
2009
2010
Danish general insurance
Gross premiums earned
Technical result
Run-off gains/losses, net of reinsurance
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 employees, end of period
Norwegian general insurance
Gross premiums earned
Technical result
Run-off gains/losses, net of reinsurance
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 employees, end of period
Swedish general insurance a)
Gross premiums earned
Technical result
Run-off gains/losses, net of reinsurance
Key ratios
Gross claims ratio
Business ceded as % of gross premiums
Claims ratio, net of ceded business
Gross expense ratio
8,862
1,406
311
66.2
3.6
69.8
16.2
86.0
2,211
6,654
1,217
246
64.0
3.5
67.5
16.6
84.1
1,455
4
-41
0
144.9
0.4
145.3
1,003.8
9,105
1,805
579
64.6
2.4
67.0
15.4
82.4
2,221
6,816
1,374
213
63.0
4.9
67.9
15.9
83.8
1,379
90
-82
0
88.9
0.0
88.9
105.6
9,393
1,727
674
64.5
3.7
68.2
16.1
84.3
2,356
9,525
1,178
421
71.6
2.5
74.1
14.5
88.6
2,293
9,636
166
615
82.0
0.7
82.7
16.1
98.8
2,342
7,009
6,750
7,490
831
109
70.6
3.6
74.2
16.9
91.1
1,450
225
-93
0
95.1
0.9
96.0
48.4
618
277
70.8
3.7
74.5
17.0
91.5
1,398
389
177
76.7
3.1
79.8
15.7
95.5
1,338
1,111
1,769
-75
-8
80.6
1.8
82.4
25.1
-124
32
84.6
0.8
85.4
22.4
107.8
414
Combined ratio
1,149.1
194.5
144.4
107.5
Number of full-time employees, end of period
40
61
105
425
138 | Annual report 2010 | Tryg A/S
Geographical segments
DKKm
2006
2007
2008
2009
2010
Finnish general insurance
Gross premiums earned
Technical result
Run-off gains/losses, net of reinsurance
Key ratios
Gross claims ratio
Business ceded as % of gross premiums
Claims ratio, net of ceded business
Gross expense ratio
198
-34
0
78.1
0.2
78.3
41.7
251
-49
0
74.9
0.4
75.3
49.8
354
-44
17
72.9
0.3
73.2
44.1
480
-115
-7
84.2
0.6
84.8
41.7
Combined ratio
120.0
125.1
117.3
126.5
Number of full-time employees, end of period
77
127
154
194
593
-56
0
80.9
0.8
81.7
29.3
111.0
197
Other b)
Gross premiums earned
Technical result
Tryg
-3
-4
0
-23
-5
11
-4
-44
-13
0
Gross premiums earned
15,715
16,262
16,976
17,862
19,475
Technical result
Run-off gains/losses, net of reinsurance
Return on investment activities
Other income and expenses
Profit/loss before tax
Key ratios
Gross claims ratio
Business ceded as % of gross premiums
Claims ratio, net of ceded business
Gross expense ratio c)
Combined ratio
Number of full-time employees, end of period
2,544
561
1,228
-31
3,741
65.5
3.5
69.0
16.9
85.9
3,783
3,025
792
340
-51
3,314
64.2
3.4
67.6
16.8
84.4
3,788
2,432
800
-988
-49
1,395
67.6
3.5
71.1
17.1
88.2
4,065
1,562
683
1,086
-38
2,610
72.1
2.9
75.0
17.2
92.2
4,310
375
824
570
-4
941
80.2
1.6
81.8
17.0
98.8
4,291
a) Moderna Försäkringar is included in ‘Swedish general insurance’ from 2 april 2009.
b) Amounts relating to Tryg A/S, Tryg Ejendomme A/S and eliminations are included in ‘Other’.
c)
Adjustment to Gross expense ratio included only in the calculation of ‘Tryg’. Explanation of adjustment as a footnote to Financial Highlights
Tryg A/S | Annual report 2010 | 139
Other key figures
DKKm
2006
2007
2008
2009
2010
Claims ratio, net
Expense ratio, net
Combined ratio, net
Expense ratio, net without adjustment
Gross profit ratio
Profit ratio, net of reinsurance
Gross technical interest ratio
Technical interest ratio, net of reinsurance
Return on equity before tax on continuing business (%)
Return on equity after tax on continuing business (%)
Average provisions for unearned premiums
Average provisions for claims
Average reinsurers’ share of provisions for insurance contracts
Reserve ratio, provisions for unearned premiums (%)
Reserve ratio, provisions for claims (%)
Reserve ratio, total
Number of full-time employess, end of period,
discontinued and divested business
67.9
17.2
85.1
17.2
16.2
17.2
2.1
2.3
41.3
34.4
5,178
20,887
2,096
32.9
130.2
163.1
66.5
17.1
83.6
17.1
18.6
19.6
3.0
3.2
33.3
24.3
5,288
20,808
1,574
33.2
130.1
163.3
70.1
17.5
87.6
17.9
14.3
15.0
2.9
3.0
15.3
9.7
5,252
20,454
1,312
30.0
116.3
146.3
74.2
17.6
91.8
17.5
8.7
9.2
0.9
0.9
29.3
22.3
5,654
21,110
1,178
34.8
125.8
160.6
81.3
17.4
98.7
17.4
1.9
2.0
0.7
0.7
10.4
7.5
6,514
23,677
1,454
35.0
127.8
162.8
25
26
26
26
1
Share performance
Earnings per share (DKK)
Diluted earnings per share (DKK) a)
Average number of shares (1,000)
Diluted average number of shares (1,000) a)
Share price 31.12 (DKK)
Quoted price/net asset value
47.3
33.5
12.8
67,824
67,648
66,184
431.5
3.0
388.0
2.6
328.0
2.6
31.7
31.7
63,334
63,448
342.8
2.3
9.5
9.5
62,362
62,444
257.5
1.8
a) There has been no dilution of earnings or equity in the period 2006-2008
The expense ratio, net without adjustment is calculated as the ratio of actual insurance operating expenses, net of reinsurance to earned
premiums, net of reinsurance. Other key ratios are calculated in accordance with ‘’Recommendations & Financial Ratios 2010’’ issued by
the Danish Society of Financial Analysts.
The adjustment, which is made pursuant to the Danish Financial Supervisory Authority’s and the Danish Society of Financial Analysts’ defi-
nition of expense ratio and combined ratio, involves the addition of a calculated expense (rent) concerning owner-occupied property based
on a calculated market rent and the deduction of actual depreciation and operating costs on owner-occupied property.
140 | Annual report 2010 | Tryg A/S
Glossary
The financial highlights and key ratios of Tryg have been prepared in
accordance with the executive order issued by the Danish Financial
Supervisory Authority on the presentation of financial reports by in-
surance companies and profession-specific pension funds and also
comply with “Recommendations & Financial Ratios 2010” issued by
the Danish Society of Financial Analysts.
Business ceded as a percentage of gross premiums
Net result of business ceded x 100
Gross earned premiums
Capital base
Shareholders’ equity plus subordinated debt/subordinated loan capi-
tal less intangible assets/goodwill and tax asset.
Claims ratio, net of ceded business
Gross claims ratio + business ceded as % of gross premiums.
Combined ratio
Calculated as the sum of the gross claims ratio, the net result of
business ceded as a percentage of gross earned premiums and the
gross expense ratio.
Danish general insurance
Comprises the legal entities Tryg Forsikring A/S
(excluding the Norwegian, Finnish and Swedish branches)
and Tryg Garantiforsikring A/S.
Diluted earnings per share (continuing business)
Earnings per share
Equity margin
Profit for the year x 100
Average number of shares
Premiums earned, net of reinsurance x 100
Tier 1 capital
Finnish general insurance
Comprises Tryg Forsikring A/S, Finnish branch and the Finnish branch
of Tryg Garantiforsikring A/S.
Gross claims ratio
Gross claims incurred x 100
Gross earned premiums
Gross earned premiums
Calculated as gross premiums written adjusted for change in gross pro-
visions for unearned premiums, less bonuses and premium rebates.
Gross expense ratio
Calculated as the ratio of gross insurance operating expenses with
adjustment to gross earned premiums. The adjustment involves the
deduction of depreciation and operating costs on the owner-occu-
pied property and the addition of a calculated cost (rent) concerning
the owner-occupied property based on a calculated market rent.
Diluted earnings from continuing business after tax
Diluted average number of shares
Gross insurance operating expenses w. adjustment x 100
Gross earned premiums
Diluted number of shares
Average number of shares adjusted for number of share options
which may potentially dilute.
Discounting
Expresses recognition in the financial statements of expected future
payments at a value below the nominal amount, as the recognised
amount carries interest until payment. The size of the discount de-
pends on the market based discount rate applied and the expected
time to payment.
Dividends per share
Gross expense ratio without adjustment
Gross insurance operating expenses x 100
Gross earned premiums
Gross insurance interest ratio
Technical interest, net of reinsurance x 100
Gross premiums earned
Gross profit margin
Proposed dividend
Number of shares year end
Technical result x 100
Gross premiums earned
Tryg A/S | Annual report 2010 | 141
Glossary
Individual Solvency
New Danish solvency requirements for insurance companies. With ef-
fect from the 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 four times a year.
Return on equity
Profit for the year x 100
Average equity
Net asset value per share
Year-end equity
number of shares year end
Norwegian general insurance
Comprises Tryg Forsikring A/S, Norwegian branch, Enter Forsikring AS
and the Norwegian branch of Tryg Garantiforsikring A/S.
Operating ratio
Calculated like the combined ratio but adding technical interest in
the denominator.
Claims incurred + insurance
operating expenses + result of reinsurance x 100
Gross earned premiums + technical interest
Price earnings
Quoted price
Earnings per share
Quoted price/net asset value
Quoted price
Net asset value per share
Relative run-off gains/losses
Run-off result relative to provisions for claims,
beginning of year.
Reserve ratio, provisions for claims
Provisions for claims x 100
Gross premiums earned
Reserve ratio, provisions for unearned premiums
Provisions for unearned premiums x 100
Gross premiums earned
Run-off result
The difference between provisions for claims at the beginning of the
financial 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.
Solvency II
New solvency requirements for insurance companies issued by EU
Commission. The new rules are expected to come into effect in
2012.
Solvency margin
Premiums earned, net of reinsurance x 100
Capital base
Solvency ratio
Ratio of capital base to capital requirement
Swedish general insurance
Comprises Tryg Forsikring A/S, Swedish branch and the Swedish
branch of Tryg Garantiforsikring A/S.
Tier 1 capital
Shareholders’ equity less intangible assets/goodwill and tax asset
Total reserve ratio
Reserve ratio, provisions for claims + provisions for unearned
premiums
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 pro-
vision is not recognised under claims, but in technical interest in the
income statement.
142 | Annual report 2010 | Tryg A/S
Disclaimer
Certain statements in this annual report are based on the
Tryg urges readers to refer to the section on risk management
beliefs of our management as well as assumptions made by
for a description of some of the factors that could affect
and information currently available to management. Statements
the Group’s future performance or the insurance industri.
regarding Tryg’s future results of operations, financial condition,
cash flows, business strategy, plans and future objectives other
Should one or more of these risks or uncertainties materialise
than statements of historical fact can generally be identified
or should any underlying assumptions prove to be incorrect,
by terminology such as ”targets”, ”believes”, ”expects”, ”aims”,
Tryg’s actual financial condition or results of operations
”intends”, ”plans”, ”seeks”, ”will”, ”may”, ”anticipates”, ”would”,
could materially differ from that described herein as anticipart-
”could”, ”continues” or similar expressions.
ed, believed, estimated or expected.
A number of different factors may cause the actual performance
Tryg 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, devel-
opments in the financial markets, extra ordinary events such as
natural disasters or terrorist atttacks, changes in legislation or
case law and reinsurance.
Tryg A/S | Annual report 2010 | 143
Group chart
Tryg A/S
Tryg Forsikring A/S
Tryg Garanti-
forsikring A/S
(Dansk Kaution)
Moderna
Forsäkringar
(Swedish branch)
Tryg Forsikring
Inclusive Enter
(Norwegian branch)
Respons
Inkasso AS
(Norway)
Tryg
(Finnish branch)
Tryg Garanti
(Norwegian branch)
Modern Re S.A
(Luxembourg)
Moderna
Garanti
(Swedish branch)
Atlantica Yacht
Insurance S.à.r.l.
(Luxembourg)
Tryg Garanti
(Finnish branch)
Ejendoms-
selskabet
af 8. maj 2008
A/S
Tryg
Ejendomme A/S
Vesta
Eiendom AS
(Norway)
Komplementar-
selskabet
af 1. marts
2006 ApS (50%)
Other real
property
companies
(Norway)
Ejendoms-
selskabet af
1. marts
2006 P/S (50%)
Group chart at 1 January 2011. Companies and branches are wholly-owned
by Danish owners and placed in Denmark unless otherwise stated.
Company
Branch
144 | Annual report 2010 | Tryg A/S
Contents
Management’s report
About Tryg
Preface
Financial highlights and key ratios
Group overview
Highlights of 2010
Strategy and outlook
Strategy
KPI (Key performance Indictors)
The insurance industry
Customers and products
Outlook
Results
The Group’s financial performance
Private Nordic
Commercial Nordic
Corporate Nordic
Investment activities
Capital management and risk management
Capital management and profit distribution
Risk management
Corporate governance
Supervisory Board
Group Executive Management
Corporate governance
Shareholder information
Accounts
Statement by the Supervisory Board and the Executive Management
Independent auditor’s report
Income statement and statement of financial position – Tryg Group
Statement of changes in equity – Tryg Group
Cash flow statement – Tryg Group
Notes – Tryg Group
Income statement – Tryg A/S (Parent company)
Statement of financial position – (Parent company)
Statement of changes in equity (Parent company)
Notes (Parent company)
Geographical segments
Other key ratios
Glossary
Disclaimer
Group chart
Side
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4
8
9
10
12
14
16
18
20
22
24
26
30
33
35
38
42
44
47
52
54
56
58
66
70
72
73
74
78
80
81
130
131
132
133
138
140
141
143
144
Editors
Investor Relations
Design
Layout
e-types
amo design
Printers Centertryk A/S
Munken Polar
Paper
This is a translation of the Danish annual report 2010. In case of any discrepancy between the Danish and the English version of the annual report 2010,
the Danish version shall apply.
A
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Tryg A/S
Klausdalsbrovej 601
2750 Ballerup
Denmark
+45 70 11 20 20
tryg.com
CVR-no. 26460212
Annual report 2010