Annual report 2012
Contents
1
Income overview
16 Tryg’s results
2
Introduction by the Chairman
20 Private
3
Introduction by the Group CEO
24 Commercial
4 Highlights of the year
27 Corporate
29 Sweden
46 Corporate governance
54 Supervisory Board
57
Group Executive Management
58
Corporate Social Responsibility
8 Strategy and Key Performance Indicators
32
Investment activities
65 Financial statements
10 Customers
12
Insurance market
35 Financial targets and outlook
38
Capital and risk management
151 Group chart
41 Tryg share and dividend policy
152 Products
148 Glossary
Tryg is the second-largest insurance company in the Nordic region.
We are the largest player in Denmark and the third-largest in Norway.
In Sweden, we are the fifth-largest insurance company.
We offer a broad range of insurance products to both private
individuals and businesses.
Our 4,000 employees provide peace of mind for almost 3 million
customers.
Learn more
Reference to further information at tryg.com
Reference to further information in the annual report
Find more QR codes in the annual report. If you have
installed a QR reader on your smartphone, you can
access reports and websites containing further
information about Tryg by scanning the QR code.
Editors Investor Relations | Publication 7 February 2013 | Design e-types | Layout amo design | Print Centertryk A/S | Paper Munken Polar
Income overview
DKKm
Q4 2011
Q4 2012
2011
2012
Gross premium income
Technical result
Investment return after insurance technical interest
Profit/loss before tax
Profit/loss on continuing business
Profit/loss
Run-off gains/losses, net of reinsurance
Key figures
Total equity
Return on equity after tax (%)
Number of shares, year-end (1,000)
Earnings per share of 25 DKK
Net asset value per share (DKK)
Dividend per share (DKK)
Price/Earnings
Premium growth in local currencies
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
Combined ratio exclusive of run-off
Run-off, net of reinsurance (%)
Large claims, net of reinsurance (%)
Weather claims, net of reinsurance (%)
Combined ratio by business area
Private
Commercial
Corporate
Sweden
a) Proposed dividend.
4,950
310
144
467
338
344
331
-0.5
78.5
-0.9
77.6
16.9
94.5
101.2
-6.7
6.2
4.5
92.6
85.7
98.5
113.5
5,076
648
5
638
394
404
237
-0.5
70.2
0.9
71.1
16.3
87.4
92.1
-4.7
4.3
2.2
86.8
82.6
90.7
87.5
19,948
1,572
61
1,603
1,148
1,140
944
9,007
13.1
60,373
18.9
149.2
6.52
16.8
3.6
79.1
-2.5
76.6
16.6
93.2
97.9
-4.7
2.7
3.6
92.7
92.1
91.2
102.9
20,314
2,492
585
3,017
2,180
2,208
1,015
10,979
22.1
60,695
36.5
180.9
26.0a)
11.8
0.1
72.2
-0.4
71.8
16.4
88.2
93.2
-5.0
2.3
1.8
87.7
83.7
87.7
95.3
The results of Tryg’s Finnish branch are included under discontinuing business as the business is no longer part of the continuing business.
The comparative figures have been restated accordingly. The profit/loss on discontinued and divested business appears from the financial statements.
Income overview | Annual report 2012 | Tryg A/S |
1
Chairman of the Supervisory Board: A satisfactory year
approximately DKK 800m in the form of taxes and other duties,
while much of the dividend is distributed via TryghedsGruppen, Tryg’s
principal shareholder, for charitable purposes and activities aimed at
creating peace of mind.
Optimisation of the capital structure is an important focus area, which
is why it has been decided to arrange a new subordinate loan of DKK
800m, to repay the existing loan of EUR 65m and to initiate the extra-
ordinary buyback of treasury shares totalling DKK 800m. The purpose
is a capital reduction, and a corresponding reduction in equity.
2012 was a satisfactory year with good results. Important strategic
In 2012, the Supervisory Board focused, in particular, on risks, and Tryg
initiatives were implemented in the course of the year, including
established a process which ensures that all significant risks are reported
a new dividend policy, renewal of the partnership agreement with
and factored in when determining the Individual Solvency Requirement.
Nordea and the divestment of the Finnish business activities.
Profit for the year
Divestment of Finnish activities and new agreement with Nordea
In early 2012, Tryg announced that the Group’s Finnish business was
undergoing a strategic audit, as the business had not attained the size
At the beginning of 2012, the Supervisory Board and the Executive
and business volume required to operate profitably after 10 years on
Management set a return on equity target of 20%. With Morten Hübbe
the market. In November 2012, Tryg sold its Finnish business to If.
at the helm, we made a significant change of direction towards a stronger
focus on profitability, increased price differentiation and a clear division
At the same time, Tryg’s strategic partnership with Nordea in Denmark
of responsibility for results. The Supervisory Board is pleased to note
and Norway was strengthened following the renewal of its agreement
that in 2012 Tryg achieved a return on equity of 22.1% and satisfactory
with Nordea to better accommodate Tryg’s focus on profitability. In
growth in profit, borne by a strong profit for the insurance business and
Sweden and Finland, the agreement has been terminated by mutual
an unusually high investment return. The good results were created
agreement. As regards pensions, Tryg will continue to sell Nordea’s
concurrently with the satisfactory implementation of a number of
pension products in Denmark and Norway.
strategic measures. Further improvements in results are needed, but
the activities launched are beginning to bear fruit.
New Chairman
Dividend and capital
After 16 years on the Supervisory Board and seven years as Chairman of
Tryg, it is with sadness but also considerable pride that I will be handing
In 2012, a focus area for the Supervisory Board was creating a basis for
over to my successor in April, in the definite knowledge that a stable
stable results and stable dividends for shareholders, while at the same
foundation has been created for the future Tryg. My years as Chairman
time maintaining a solid capital base which is deemed key to customer
have been marked by many exciting challenges, the listing of Tryg in
confidence. According to the new dividend policy, adopted by the
2005 as one of the greatest. Moreover, the change of direction achieved
Super visory Board and announced in December 2012, the aim is to
in recent years has been tremendously positive for Tryg’s customers,
distribute 60-90% of the profit after tax, while at the same time aspiring
employees and shareholders. The many new initiatives have been neces-
for a steady increase in dividend in nominal terms. It is important that
sary and ensure that Tryg can maintain its strong market position. I would
the new dividend policy is competitive and on a par with the policies
like to express my sincere thanks to Tryg’s shareholders, management
of Tryg’s competitors in the Nordic region. For 2012, the Supervisory
and employees and wish you all a promising future.
Board proposes a dividend of DKK 26 per share or the distribution of
total dividend of DKK 1,594m, corresponding to 72% of the profit for
the year. In 2012, there was a lot of focus on the tax payments of Danish
Mikael Olufsen
companies and their corporate social responsibility. Tryg contributes
Chairman
2
| Tryg A/S | Annual report 2012 | Introduction by the Chairman
Group CEO: Tryg’s success depends on people
claims, we want to intensify our claims prevention efforts and improve
the procurement of claims services.
In 2011, Commercial was established as a separate business area
with a view to directing particular focus on profitability. Profitability is
improved through risk-based pricing, optimised sales channels and
improved processes. In Sweden, we are continuing our work to strike
a better balance between growth and profitability by optimising sales
and streamlining business processes.
Our success depends on people
Despite the enduringly uncertain macroeconomic situation in Europe,
Based on the commitment and dedicated efforts of our employees,
the considerable changes intro duced internally in Tryg contributed to
Tryg creates good results. Consequently, we must focus on creating
the return of markedly improved results for 2012 with a profit before
the best possible conditions for our employees to develop their
tax of DKK 3,017m.
Strategy and results
competences and potential and for ensuring a high level of employee
satisfaction. I am proud that – despite the many changes which have
been introduced in recent times – Tryg still ranks above average in
the employee satisfaction survey conducted by the financial sector.
Creating peace of mind and value must be at the core of everything
In 2012, we combined our staff functions Communication, HR,
we do, and Tryg aims to do just that. This means that we must be the
Marketing and Legal to create a new area – People & Reputation –
best in the industry when it comes to insurance, people and earnings.
which is represented on the Group Executive Management. The new
All three elements are fundamental to creating peace of mind and value
area will ensure a strong focus on employee activities by the Group
for our customers, employees and shareholders. In 2012, we further
Executive Management and strengthen the services provided by the
specified our financial targets, which must, among other things, be
staff functions, ensuring that Tryg can be best at insurance, people
achieved through increased price differentiation, increased segmen-
and earnings.
tation, claims prevention and improved procurement of claims services.
The phase which Tryg is now entering will focus on improvements
In 2012, CSR activities continued to focus on reducing the risk of
through hard internal work.
climate-related claims and reducing the company’s CO2 emissions. As
a large company, we are aware of our corporate social responsibilities,
The results for 2012 very clearly show that Tryg is on the right track.
and CSR plays a natural role in our daily activities.
The profit before tax was up at DKK 3,017m in 2012 from DKK 1,603m
in 2011, while the combined ratio totalled 88.2 against 93.2 in 2011.
The progress realised in 2012 can largely be ascribed to the initiatives
The improved results were strongly aided by a small number of weather
introduced in recent years. The result is a stronger Tryg resting on solid
claims and an unusually high investment return. Also, we achieved
foundations from which we can generate further growth, and create
the targets for 2012 set out in our cost-cutting programme, which
peace of mind and value for customers, employees and shareholders
must reduce costs and claims costs by DKK 1bn in the period leading
in the coming years.
up to 2015.
Ambitious financial targets
In 2012, Tryg specified its financial targets with a combined ratio
of 90 or less from Q3 2013 and an expense ratio of under 15 in
2015, while the target of a 20% return on equity was maintained.
The targets must be achieved by strengthening our competitiveness
Morten Hübbe
and striking a better balance between price and risk. With regard to
Group CEO
Introduction by the Group CEO | Annual report 2012 | Tryg A/S |
3
Highlights of the year
Tryg closed NASDAQ stock exchange
The Tryg share did well on the Danish
stock exchange in 2011, and in February
2012, Group CEO Morten Hübbe was
invited to close trading at the NASDAQ
stock exchange in New York.
Prestigious workplace
Tryg was the highest-ranked financial
business on the list of the most pres-
tigious Danish workplaces in a YouGov
survey conducted for the newspaper
Ugebrevet A4.
Improved Customer Service results
In Norway, Tryg improved results
markedly in 2012 compared with last
year’s customer service survey and still
ranks as one of the best companies.
January
February
March
April
May
June
July
August
September
October
November
December
Roadside assistance in Commercial
and Corporate
From mid-April, Commercial and Cor-
porate customers were offered peace of
mind for drivers of vans up to 3,500 kg
on the roads. Commercial and Corporate
customers using Tryg Roadside Assis-
tance will, among other things, be given
assistance on the spot, assistance in case
of a breakdown and free recovery. Like
Private customers, these customers may
now also choose Extended Tryg Roadside
Assistance, which includes a number of
additional services such as wheel change.
Strongest insurance brand in Denmark
Tryg is the strongest insurance brand in
Denmark according to the 2012 brand
index for the financial sector prepared
for FinansWatch. The survey looks into
brand perception based on the following
parameters: quality, impression, value for
money, willingness to recommend the
brand to others, reputation and customer
satisfaction. Tryg was also the second-
strongest financial brand, surpassed only
by ATP.
Tryg insured Danish Olympic delegation
Tryg insured the Danish delegation at the
London Olympics. About 300 people,
including athletes, coaches, TEAM
Danmark employees and invited guests,
were covered by Tryg’s travel insurance.
S&P confirms ‘A-’ rating
Standard & Poor’s confirmed Tryg’s and
Tryg Garanti’s ‘A-’ rating in their annual
assessment of both companies.
4
| Tryg A/S | Annual report 2012 | Highlights of the year
Capital Markets Day in London and specified targets
On Tryg’s Capital Markets Day in London, which was attended by international investors,
analysts and financial journalists, the management presented specified financial targets,
with a combined ratio of 90 or below from Q3 2013 and an expense ratio below 15 in 2015
by cutting expenses and reducing claims costs by a total of DKK 1bn.
Changes in Group Executive Management
Kjerstin Fyllingen left her position as Group Executive Vice President for Commercial and as
Country Manager Norway. Rikke Larsen was appointed Group Executive Vice President for
People & Reputation, which covers, among other things, HR, legal and a number of other
staff areas.
Lifebuoy’s 60th anniversary
The lifebuoy is a symbol of peace of mind in the Nordic countries, and in Norway 33,000 life-
buoys are dispersed along the coastline. Its 60th anniversary was celebrated with events all
over Norway, where lifebuoys were handed out to local communities, organisations and
private individuals.
Renewed agreement with Nordea
Tryg’s strategic partnership with Nordea
was strengthened with the renewal of
our agreement for another five-year term
for Denmark and Norway. The partner-
ship agreement was amended to better
accommodate Tryg’s profitability focus.
As regards pensions, Tryg will continue to
sell Nordea pension products in Denmark
and Norway. There was consensus that
the agreement would not be renewed
in Sweden.
January
February
March
April
May
June
July
August
September
October
November
December
Finnish business sold
In 2012, the Group’s Finnish business was subjected to a strategic audit, as the business
had not attained the expected size and business volume required to operate profitably after
10 years on the market. In November, Tryg sold the Finnish business to If for EUR 15m.
New contents insurance
A new contents insurance product, offering a tariff that better reflects the risk, was introduced
in Denmark. The new contents insurance product has no maximum sum insured, since it is
Tryg’s responsibility to ensure that the sum insured is correct. Thus, the customers are no
longer requested to state the total value of their belongings.
New dividend policy
Tryg changed its dividend policy with
the distribution of the profit for the year
2012. In future, the annual dividend will
consist of a 60-90% cash payment of the
profit after tax.
Highlights of the year | Annual report 2012 | Tryg A/S |
5
Peace of mind after accidents In the 2012 skiing season, Tryg
dispatched six air ambulances to pick up injured skiers. Every time
we fill an air ambulance instead of sending injured skiers home by
scheduled flights, we provide peace of mind and an enhanced sense
of security for our customers. At the same time, we save money and
improve our financial performance, thus serving the interests of
our customers and our business.
Carsten Kristoffersen was injured in a skiing accident in Canazei, Italy. He first contacted Tryg
on Monday, was informed which plane would take him home on Tuesday, and was flown back to
Denmark on Thursday.
‘I don’t think it could have been done any quicker,’ Carsten says, ‘but I wish I had known how my
insurance policy worked before I went on holiday. It would have saved me a lot of worry and hassle
if I had looked into how the social insurance card covers and where cover is provided under my
own insurance.’
Strategy and Key Performance Indicators
Creating peace of mind and value must be at the core of everything
Commercial back on track
we do, and Tryg aims to do just that. This means that we must be the
Commercial was set up as an independent business area in Tryg in
best in the industry when it comes to insurance, people and earnings.
2011, increasing focus on commercial customers as well as internal
All three elements are fundamental to creating peace of mind and
process optimisation. The purpose was to considerably improve the
value for our customers, employees and shareholders.
profitability of Commercial activities via targeted initiatives. Commer-
It’s all about creating peace of mind
We create peace of mind and value for customers,
employees and shareholders.
cial improved its profitability significantly in 2012. Focus areas in 2012
and in the years to come will be improved risk-based pricing, increased
segmentation, cost cuts, optimisation of distribution channels and
automated processes.
Solid foundation in Sweden
In Sweden, Tryg is focusing on striking a better balance between
In order to provide peace of mind and create value for customers,
growth and profitability. In order to achieve this, the coming years
employees and shareholders, Tryg must be a financially well-run
will see the implementation of three strategic phases: Establishing
business. In 2012, a set of clearly defined financial targets were
our position, producing results and creating profitable growth. Tryg
announced to the market. The financial targets include a return on
focuses on the optimisation of sales and claims, improved risk-based
equity of 20% after tax, a combined ratio of 90 or less, to be achieved
pricing and increasing business process efficiency.
from Q3 2013, and an expense ratio of under 15 in 2015. To ensure
continuous improvements in earnings, and to create the foundation
Competitive level of expenses and claims costs
for a strengthened market position and improved competitiveness,
In the past five years, Tryg has had a stable expense ratio during a
Tryg has defined a number of focus areas:
period of high premium income growth. During the same period,
• Increased price differentiation and ‘time to market’.
In response, Tryg has established an ambitious target of reducing
several of Tryg’s competitors have improved their expense ratios.
• Commercial back on track.
• Solid foundation in Sweden.
expenses and claims costs in the period leading up to 2015.
• Competitive level of expenses and claims costs.
Simplification of products and systems
• Simplification of products and systems.
Tryg continuously works to simplify its products. Companies acquired by
Tryg during the past decades are now an integrated part of the company,
Increased price differentiation and ‘time to market’
and some products originating from these acquisitions constitute part
Profitable insurance products depend on the right balance being struck
of Tryg’s portfolio and are different from the products that Tryg currently
between price and risk. Tryg’s tariffs and segmentation models are
sells to its customers. As part of the simplification process, measures
continuously being improved and updated. In 2012, Tryg focused in
have been launched to reduce the number of products and systems.
particular on risks and on our ability to respond quickly to changes in
risk scenarios. This focus will be maintained in the coming years. This
Key Performance Indicators (KPIs)
resulted in the launch in 2012 of a new contents insurance product
Tryg has determined a number of KPIs which are used to measure
with several additional tariff criteria, thus offering prices which more
and follow up on the objectives and targets laid down in the company
accurately reflect the risks involved. In terms of price differentiation,
strategy. Tryg has defined a number of ambitious financial targets to
the aim is to match or exceed the level of our competitors by 2015 for
be met by 2015, but to achieve this, KPIs have also been determined
most of our products. The correlation between price and risk is also
for customers and employees, as there is a clear link between cus-
impacted by claims prevention. Claims prevention serves the dual
tomer and employee satisfaction and the financial results.
purpose of shielding customers from the inconvenience caused by
damage or injury and at the same time reducing Tryg’s claims costs
Financial KPIs
by preventing damage or injury from happening as well as minimising
Tryg’s targets include a 20% return on equity and a similar target
the effects of such events.
for the insurance business of a combined ratio of 90 or less, to be
8
| Tryg A/S | Annual report 2012 | Strategy and Key Performance Indicators
It is our responsibility as a company to ensure that our employees possess or develop competences
which make them attractive in the labour market in times of mounting job insecurity. In return,
our employees must be ready to develop their competences in step with company needs.
achieved from Q3 2013. A necessary precondition for achieving this
provider. Tryg therefore wants to be better than its competitors
degree of profitability is a strong focus on the profitability of opera-
when it comes to customer satisfaction.
tions. Cost-efficiency is crucial to the company’s long-term com-
petitiveness, and Tryg wants to achieve an expense ratio below 15 in
Focus must be on customer experience, and customers must be
2015 and a DKK 1bn reduction in expenses and claims costs in 2015.
guaranteed a correct premium based on risk factors. Continued
This entails cost cuts of DKK 400m across business areas and staff
focus must be on claims handling, claims prevention and high
functions. Tryg has launched a programme aimed at reducing claims
product and service standards. Tryg meets customers on their terms
costs by DKK 600m, primarily through the improved procurement
by increasingly communicating digitally and by supplying services
of claims services and improved processes.
The financial KPIs,
which are available to customers wherever they are. The KPIs, which
return on equity, combined ratio and expense ratio are described
are used to assess how satisfied customers are with Tryg, include
under results on page 16.
customer satisfaction and customer retention.
Customer satisfaction and peace of mind
Competent employees
Tryg must provide peace of mind for customers from day one and in
Competent and highly committed employees are a precondition for
such a way that they continue to prefer Tryg as their peace-of-mind
achieving Tryg’s objectives. Tryg wants to be among the companies
Customer retention
Index
120
110
100
90
80
2008
2009
2010
2011
2012
with the highest level of employee satisfaction in the financial sector
in the Nordic region. An attractive workplace focusing on compe-
tence development and skilled managers is the key to achieving this.
We focus on developing our managers and employee competences
in accordance with Tryg’s strategy. At a time when there is a keen
focus on costs, we attach importance to not hampering investments
in competence development, but to strengthening such investments.
Employee satisfaction is measured both externally and internally
based on regular surveys. In 2012, Tryg maintained a high level of
employee satisfaction, and once again did better than the financial
sector as a whole, which was very positive. The high level of employee
satisfaction was maintained during a period marked by a number of
restructurings which involved job cuts.
Customer satisfaction
Employee satisfaction
Index
120
110
100
90
80
Index
120
110
100
90
80
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
Strategy and Key Performance Indicators | Annual report 2012 | Tryg A/S |
9
Customers
As a peace-of-mind provider, Tryg wants to supply comprehensive
channels. Tryg makes it possible and easy for customers to take out
solutions characterised by simplicity. Being available to customers as
insurance online, report a claim electronically, request quotes and
and when required is an important part of Tryg’s distribution strategy, as
calculate prices. So far, experience from the Nordic region shows that
is a desire for most of the distribution to take place via the company’s
the Internet is a valuable tool for informing and advising customers
own sales channels. Tryg’s business areas are divided into Private,
and for servicing customers, for example in connection with a claim.
Commercial, Corporate and Sweden.
Sales are primarily effected through personal contact between the
customer and the company, for example by phone.
Sales to and the servicing of private customers in Denmark are
handled via call centres and the Internet, via Tryg’s own agents,
Products and differentiation
group agreements, car dealers, estate agents and Nordea’s branches.
With a view to improving profitability and increasing transparency for
In Norway, sales and services are handled in the same way as in
customers, focus is on the sharper pricing of risk based on the inclusion
Denmark, but with the addition of franchisees who are independent
of a number of relevant pricing parameters. Consequently, price diffe r -
sellers of Tryg’s products. The Private customer segment is Tryg’s
entiation is a continuous focus area for Tryg. In 2012, Tryg launched
largest business area with revenue in 2012 of DKK 9,733m being
a new contents insurance product with tariffs which more accurately
generated in Denmark and Norway.
reflect the risks involved. The result is improved competitiveness in
relation to customers. The new contents insurance product has no
The Commercial segment encompasses the sale of insurance
maximum sum insured. The customer therefore no longer has to as-
products to small and medium-sized businesses, which means
sess the total value of household contents, which very few customers
businesses with 0-4 employees (small) and up to 50 employees
are able to do reliably. To obtain cover, customers only have to indicate
(medium-sized). In Denmark, sales and services are handled by Tryg’s
items worth more than DKK 50,000. Everything else is gene rally cov-
own agents and sector agree ments. In Norway, the segment is serviced
ered. This provides peace of mind, and in future the customer only has
by franchisees and Tryg’s own agents. In Norway, group agreements
to actively and specifically consider items of special value.
have also been made with various associations. The Commercial
customer segment generated revenue of DKK 3,687m in 2012.
The many initiatives within pricing and product development and the
streamlining of operations are helping Tryg to maintain its strong position
Corporate customers are mainly large enterprises, and in Denmark
in the Nordic market. People’s insurance needs change in the course
and Norway Tryg sells insurance via its own sales team and through
of their lives. Consequently, private customers are treated differently
insurance brokers. For customers requiring an international insurance
depending on which stage of life they are at. Life stages are characterised
programme, Tryg’s partnership with the AXA Group enables the
by differences in activity levels, form of cohabitation, working life,
offering of complete insurance solutions. In addition, the Corporate
financial position and required level of peace of mind. Focus on this
business area handles all activities involving brokers. Consequently,
means that Tryg can offer advice and solutions which are tailored to the
medium-sized businesses using brokers are also included in the
customers’ specific requirements, and to suit the different stages of life
Corporate segment. Corporate is Tryg’s second-largest business area
and situations. At the same time, the company’s targeted advice and
and generated revenue of DKK 5,258m in 2012.
individual service increase customer satisfaction and improve the scope
In Sweden, insurance products for private customers are sold via
policies with Tryg. Customers who bundle their insurance agreements
of sales. Customers need to know that it pays to have all your insurance
the Moderna brand, through own agents, customer centres and
with Tryg enjoy special benefits.
the Internet. An important distribution channel is also dealers who
sell insurance products as part of their sales of consumer products.
These include:
These include both boat and motorcycle dealers and shops selling
• Discounts when several policies are taken out with Tryg.
electronics. In 2012, the business area posted revenue of DKK 1,654m.
•
Benefits such as Tryg Roadside Assistance, psychological crisis
assistance and under-insurance guarantee.
Important elements in Tryg’s distribution strategy are being available
to customers and for primary distribution to take place via own sales
•
•
Product benefits such as free travel insurance for companions.
Discounts on various peace-of-mind products, including burglar
alarms.
10 | Tryg A/S | Annual report 2012 | Customers
Claims prevention
pack consists, for example, of fire retardant and smoke alarms and can
In recent years, Tryg has focused on claims prevention as a way of
be purchased via the Tryg website. An offer has been sent out by email
creating peace of mind for customers, to draw attention to risks
to Danish customers, and this is yet another step aimed at minimising
and to make customers address the risks and to mitigate damage
claims. Moreover, Tryg runs the two sites tryghedsraadgiveren.dk and
and injury. Tryg offers preventive solutions for customers based on
trygghetsraadgiveren.no, where customers and others can find advice
knowledge, data and expertise which are translated into preventive
on how to protect their homes against burglary, water damage and
solutions that focus on preventing undesired situations from arising.
fire. The sites also provide guidance on travel insurance, family insu-
In 2012, Tryg gave customers who had previously suffered water
rance and checklists which can help prevent or limit damage or injury.
damage in connection with cloudbursts the offer of a free inspec-
tion of their homes with a view to preventing and mitigating future
In cooperation with the Federation of Danish Motorists (FDM), Tryg
claims. The inspections were carried out by experts who offered
also offers technical driving courses; against a small fee, customers
advice on specific, practical solutions. For agricultural businesses,
are offered advice on driving economically and on how to improve
Tryg has established initiatives whereby buildings are inspected and
their driving technique. The initiative has been introduced to provide
thermography is performed of electrical panels which are often the
increased peace of mind for customers in icy or slippery road
seat of fire in farm buildings.
conditions.
See an overview of Tryg’s insurance products on
page 152 and at the customer sites
tryg.dk,
tryg.no and
Tryg has also introduced a safety pack aimed at reducing fire damage
modernaforsakringar.se.
in the home, which often occurs in December and January. The safety
Customers | Annual report 2012 | Tryg A/S |
11
Insurance market
The Nordic insurance market is characterised by a number of large
Finally, a reform of the law on early retirement and subsidised flexible
companies being present in several of the Nordic countries. The
employment schemes will tighten the rules and lead to higher workers’
four largest companies have a combined market share of 47% in the
compensation payments. This is due to the fact that pay under
Nordic market. In the individual countries, the four largest companies
subsi dised flexible employment schemes is offset against workers’
have a combined market share of 60-77%. For the Nordic market as a
compensation payments. Also, case handling is expected to become
whole, total premium income amounts to approximately DKK 160bn.
more protracted, resulting in more people being granted temporary
2012 was characterised by continued economic uncertainty. Despite
also be affected by a gradual increase in payroll tax in the period up
workers’ compensation payments. The insurance companies will
a large number of initiatives on the part of the EU and the European
until 2012.
Central Bank aimed at ensuring economic stability in the EU, uncertainty
is still hampering the budding signs of recovery seen in the healthier
Norway and Sweden have not seen major changes in legislation in
European markets. This translates into low growth rates which impact
these areas, and the market was affected by no major structural
the insurance companies’ premium income, especially within the
changes in 2012. In Norway, the small insurance companies have won
commercial and corporate segments.
market shares from the larger firms, but are struggling to combine
growth and profitability. Sweden has seen a number of mergers and
The atmosphere of economic uncertainty is expected to continue
acquisitions among the smaller market players, but this does not
in 2013 and will thus dominate the markets for some time to come.
change the general picture of a strongly consolidated market with
In the insurance market, 2012 was a good year as most insurance
a small number of large players. In Finland, market consolidation
companies in the Nordic region saw a relatively low level of claims.
became even more pronounced in 2012 following the merger of the
This is true, in particular, as regards weather claims due to favourable
second-largest company, Tapiola, with the fifth-largest player in the
weather conditions throughout the year. Moreover, several companies
market, making it the largest insurance company in Finland. Follow-
are beginning to see the effects of the price adjustments introduced in
ing the merger, the four largest insurance companies in Finland will
recent years, and many companies are reporting general profitability
account for almost 90% of premium income.
improvements. In recent years, continued focus has been directed at
the correlation between price and risk, and this focus on profitability is
Tryg in the market
expected to continue. This also applies to costs, as efficiency increases
As the second-largest general insurance company in the Nordic
and cost reductions have been on the agenda of many companies for
region, Tryg is affected by developments in the Nordic insurance
a long time.
market, but at the same time it is helping to shape developments.
Like many of the other Nordic companies, Tryg has introduced price
At the beginning of 2012, the Danish government decided to abolish
adjustments in recent years in order to counter a negative develop-
the tax exemption for company-paid health insurance. This is expected
ment in the price/risk correlation. But whereas many of these price
to impact the insurance companies’ premium income from these
adjustments have been introduced in response to specific market
products, but derived negative effects on, especially, the private
trends, Tryg will continue to work on developing products which bet-
health care sector are also expected to follow in the wake of this step.
ter take account of a large number of risk factors. A better balance
Furthermore, legislative changes were also introduced in Denmark in
must be struck between risk and premium, and Tryg’s products must
2012 which have an impact on workers’ compensation. The change in
be more differentiated, while also improving the company’s competi-
the statutory retirement age from 65 to 67 years meant that provisions
tiveness in the Nordic market.
for workers’ compensation insurance were increased in 2012. A bill on
a new workers’ compensation tax was introduced, which would mean
Steps aimed at process optimisation internally and in connection with
that the insurance companies would have to increase their premiums
the procurement of claims services are also central to improving Tryg’s
for this product by 14%. However, the tax on workers’ compensation
competitiveness. In the long term, an efficient and more cost-effective
payments was changed so that, from 1 January 2013, it will be levied
insurance business will make Tryg better geared to manoeuvring in
via the Labour Market Occupational Diseases Fund and not via the
more uncertain and changeable markets. In the long term, this will
insurance companies.
also contribute to the foundation for profitable growth.
12 | Tryg A/S | Annual report 2012 | Insurance market
Market shares in Denmark
Market shares in Norway
28.8
5.8
5.5
20.2
Per cent
17.5
9.7
12.5
Tryg
Topdanmark
Codan
Alm. Brand
Gjensidige
If
Others
22.4
15.6
Per cent
11.3
25.1
25.6
Tryg
If
Gjensidige
Sparbank 1
Others
Market shares in Sweden
Market shares in Nordic region
3.9
15.6
1.3
15.3
Per cent
29.4
16.0
18.5
Moderna (Tryg)
Länsforsäkringar
If
Codan
Folksam
Gjensidige
Others
11.1
39.8
Per cent
17.8
9.0
5.0
8.7
8.6
Tryg
If
Codan
Gjensidige
Länsforsäkringar
Topdanmark
Others
Source: Official market statistics from the various countries.
In line with the strategic work aimed at improving Tryg’s profitability
employees, who will now be part of a larger Finnish organisation. The
and competitiveness, a decision was made in November 2012 to
divestment also means that Tryg can now focus on running a profitable
divest the company’s Finnish business activities to its competitor,
insurance business in those markets where Tryg has a solid position
If. In the strongly consolidated and also very competitive Finnish
and a good foundation for developing its business in Denmark,
market, Tryg has not been able to achieve the size necessary for pro f-
Norway and Sweden.
itable insurance operations. The transaction was therefore the right
solution for all parties, but especially for customers and the Finnish
Insurance market | Annual report 2012 | Tryg A/S |
13
Prevention in agriculture In March 2012, Tryg published a study
which confirmed the importance of informing our customers of
claims prevention. The study showed that there is a significant risk
of fire at 10% of all agricultural establishments. For this reason,
thermography of electrical panels is provided under Tryg policies
to uncover any potentially serious defects that might cause
severe and very costly damage.
Every year, fires in electrical panels cause devastating fires at agricultural establishments. This results in
declining revenues and a lot of extra work until normal operations can be resumed. With thermography,
the systems are measured when active to identify the peak loads. Thermography shows differences in
temperature and thus pinpoints major fire hazards. It typically costs DKK 2-3,000 to repair the defects
identified by means of thermography.
We also ask our agricultural customers to install firetrace in their harvesters. This technology can be used
to prevent fire in, for example, the engine compartment of combine or forage harvesters. Installation and
equipment cost DKK 10-15,000, and it is a requirement for new large harvesters and is recommended for
existing harvesters. We are sure that this is a worthwhile investment for our customers, as it will enable
them to repair their harvesters quickly and bring in the harvest.
Tryg’s results
Highlights
•
The profit after tax for the year was DKK 2,208m (DKK 1,140m )
with a high return on equity after tax of 22.1% (13.1%).
• Technical result of DKK 2,492m (DKK 1,572m).
the combined ratio by 1.2 per centage points. Thanks to the improved
result and several initiatives in the pipeline, Tryg is well on its way to
achieving its targets of a return on equity of 20% and a combined
ratio of 90 or below from Q3 2013.
The high investment return was influenced, in particular, by rising
share prices, the credit crisis in southern Europe and a low interest rate
• Combined ratio of 88.2 (93.2).
level, which meant that the authorities carried out a technical adjust-
• Claims ratio, net of ceded business, of 71.8 (76.6).
•
Lower level of large claims, net DKK 471m (DKK 546m),
and weather claims, gross of DKK 356 (DKK 721m).
• Expense ratio improved from 16.6 to 16.4.
•
High investment return, after transfer to insurance, of DKK 585m
(DKK 61m).
• Write-down of owner-occupied property of DKK 350m.
•
Proposed dividend of DKK 26 per share and proposed share
buyback of DKK 800m.
ment of the discount rate which is used when discounting claims
provisions in the insurance business. These factors led to significant
price increases for especially bonds in the Nordic markets, and a
one-off gain of DKK 150m as a result of the change in the discounting
curve. In addition, the investment return benefited from solid gains
on high-yield and emerging market bonds as well as write-down of
owner-occupied property. The primary purpose of the investment
business is to support the insurance business and to have a low risk
profile. In this respect, the investment return in 2012 was extra ordi n-
arily high and must, given the low interest rate levels, be expected
to be lower in the coming years.
In 2012, the macroeconomic situation was generally characterised
After a couple of challenging years in 2010 and 2011, when weather-
by low growth in the Danish economy accompanied by reticence
related claims in particular impacted results, 2012 was in many ways
on the part of consumers, which impacted small and medium-sized
a good year for Tryg. The most important profitability measures which
businesses. Large corporate customers benefited from growth in the
have been implemented in recent years had a positive impact on
export markets, especially the German market. The Norwegian market
results, while the main strategic challenges – the business in Finland
was basically unaffected by the economic crisis in southern Europe,
and renewing the Nordea partnership agreement – were resolved.
which otherwise impacted the rest of Europe. Norway continued to
It was also positive that all business areas contributed to the overall
see solid growth in its gross domestic product, increasing pay levels
profit, in particular Commercial and Sweden, which saw marked
and employment rates, but still relatively low inflation. The Swedish
improvements in results. At the same time, many initiatives saw good
economy was, like the Danish economy, influenced by general reti-
progress and will improve results in the coming years. These include,
cence among consumers.
for example, a DKK 1bn cost-savings programme, and price differenti-
ation which, in 2012, was manifested through the launch of a new
Premiums
contents insurance product on the Danish market.
Premium income totalled DKK 20,314m (DKK 19,948m), which in
local currencies corresponds to basically unchanged premium income.
Tryg’s profit after tax totalled DKK 2,208m (DKK 1,140m), which
Premium income was impacted by Tryg’s focus on profitability which,
corresponds to a return on equity of 22.1% (13.1%). The improvement
among other things, was improved through price increases and prun-
in profit stems from an increase in the technical result of DKK 920m
ing unprofitable customers. Premium income for Private increased
and a higher investment return of DKK 524m. The technical result
by 1.5% (6.1%) and was influenced by the high renewal rate in both the
was improved from DKK 1,572m to DKK 2,492m and is attributable
Danish and Norwegian business. The lower growth is due to lower
to profitability measures, a significantly lower level of weather claims
sales, especially in Denmark. Moreover, the development in motor in-
and the positive effect of a reinsurance agreement based on the
surance premiums was affected by the fact that car sales in Denmark,
frequency of weather claims. The combined ratio totalled 88.2
in particular, were comprised mainly of smaller vehicles with higher
(93.2) despite a low interest rate level, which negatively impacted
safety levels and thereby lower average premiums. Premiums in both
16
| Tryg A/S | Annual report 2012 | Tryg’s results
the Commercial and Corporate segments fell by 2% when measured
which was slightly higher than the savings target for 2012 of DKK
in local currencies. This development was also influenced by the re-
100m. The greatest effect of the initiatives can be seen within motor
action of customers to price increases, pruning and a weak economy,
insurance. In the coming years, a bigger effect will be seen within the
especially in the Danish market.
building area. An important initiative has been the signing of an agree-
ment on using Scalepoint, a purchasing system which is more flexible
Tryg implemented significant price increases in 2010 to improve
for customers while ensuring more accurate pricing of an item’s value.
profitability, focusing in particular on the private sectors in Denmark.
A significant effect will also be achieved through improved processes.
The price increases were introduced as a result of an increasing num-
ber of burglaries, increasing prices from tradesmen and a higher level
Weather claims, gross, totalled DKK 323m (DKK 1,756m). This signifi-
of weather claims. Subsequently, Tryg has introduced price increases
cantly lower level can be attributed to the cloudburst in the Copenhagen
in the Commercial area. In future, there will be less need for price
area in July 2011 which triggered claims expenses of DKK 1.5bn.
increases beyond normal adjustment for inflation.
In addition, weather claims in 2012 were at a lower level than ex-
Claims
pected for an average year. In 2012, Tryg introduced a new contents
insurance product, where the risk of weather claims is a significant
The claims ratio, net of ceded business, which covers both claims
element in the pricing.
and net reinsurance ratio, was 71.8 (76.6). The improvement covers,
in particular, the effect of the profitability measures, the low level
At DKK 713m (DKK 858m), the level of large claims was slightly
of weather claims and a satisfactory result from a lateral reinsur-
lower than in 2011, but somewhat higher than the expected level of
ance agreement. The level of large claims was lower than in 2011,
DKK 550m for the year as a whole.
whereas the lower interest rate level had a negative impact on the
claims ratio, net of ceded business.
In July 2011, Tryg bought a reinsurance programme which limits
Tryg’s expenses in the case of a high frequency of weather claims
On the Capital Markets Day in 2012, Tryg announced its target of
events. While traditional reinsurance provides cover per event, this
reducing claims costs by a total of DKK 700m (including DKK 100m
cover takes effect if Tryg incurs more than DKK 400m in claims for
transferred from expenses) up to 2015. These reductions will be
weather damage originating from several events. As a result of the
achieved, in particular, by exploiting Tryg’s size in connection with
many storms and cloudbursts in H2 2011 and developments in H1
sourcing and through improved processes. In 2012, Tryg continually
2012, Tryg saw reinsurance cover of DKK 136m. The agreement was
followed up on these initiatives, the total effect being DKK 120m,
renewed from 1 July 2012 at a slightly higher price. Tryg does not
Weather claims
Large claims
DKKm
2,000
1,600
1,200
800
400
0
Expected level, gross for 2012: DKK 600m
2008
2009
2010
2011
2012
DKKm
1,000
800
600
400
200
0
Expected level, gross for 2012: DKK 550m
2008
2009
2010
2011
2012
Storm and cloudburst, gross
Storm and cloudburst, net
Large claims, gross
Large claims, net
Tryg’s results | Annual report 2012 | Tryg A/S |
17
expect any proceeds from this agreement, as it is primarily intended
Investment return
to provide cover in the event of a high frequency of weather-related
In 2012, Tryg’s total investment portfolio of DKK 45.5bn (DKK 41.3bn)
events which do not follow the normal weather patterns.
realised a high gross return of DKK 2,243m, corresponding to a return
Expenses
of 5.1% (4.8%) on the average invested capital during the period.
Tryg’s investment portfolio is divided into a match portfolio and a
The expense ratio was 16.4 (16.6) in 2012. The improvement must
free portfolio. The match portfolio totalled DKK 34.9bn (DKK 32.6bn)
be seen in the context of a target of an expense ratio below 15 in
and was made up of bonds which match the insurance provisions so
2015, which must be achieved through initiatives that will reduce
that fluctuations resulting from interest rate changes are offset to the
the cost level by DKK 300m between now and 2015.
greatest possible extent. The remaining part of the assets, the free
portfolio, is a diversified portfolio of real estate, equities and bonds
It is positive that the expense ratio in 2012 was reduced
which reflect the company’s total equity. At 31 December 2012, the
considerably despite a growth in premiums below the rate of
value of the free portfolio totalled DKK 10.8bn. In general, the division
inflation and despite non-recurring restructuring costs of
of the investment portfolio entails a low financial risk and reflects
approximately DKK 100m in connection with the restructurings
Tryg’s focus on the insurance business.
which have been implemented in Tryg.
In 2012, the return on the match portfolio was, after transfer to
The initiatives for reducing costs by DKK 300m by 2015 are divided
insurance technical interest, DKK 109m (DKK 95m), and was
into annual effects. For 2013, the goal is to implement initiatives
impacted by changes in the Danish Supervisory Authority’s interest
corresponding to DKK 125m. For 2012, the effect was DKK 55m,
curve which had a positive effect on the return on the match portfolio.
and covers in particular a reduction in the number of employees
in staff functions. Tryg is simplifying its processes through having
The return on the free investment portfolio was DKK 1,129m.
a flatter organisation and assessing value creation in relation to
(DKK 184m). The return was impacted by significant price increases
customers. The process will continue in 2013 to ensure the goal
for equities and bonds and by negative developments in the financial
is achieved.
markets, including the debt crisis in southern Europe. The equity
portfolio, which is a globally diversified portfolio, generated a posi-
The number of employees, exclusive of the Finnish business, was
tive return of 13% (4.2%). Bond investments were impacted by the
reduced from 4,076 to 3,912, which reflects the implemented
development in interest rates in Europe and produced a return of
streamlining measures.
4.5% and, for high-yield and emerging-market bonds in particular,
there was a high return in 2012. The composition of the free portfolio
In recent years, the cost level has been impacted by increases in
was basically unchanged in 2012, and the portfolio is still made up of
payroll taxes in Denmark, and it will increase further in 2013 from
a diversified mix of real estate, equities and bonds.
10.5% to 10.9%. Also, from 2013, the payroll tax will gradually
increase, so that by 2021 it will total 12.3%, corresponding to a
Other financial income and expenses were negative by an amount
increase of approximately DKK 30m.
of DKK 551m, particularly in relation to the write-down of owner-
Profit on discontinued business
DKK 200m, respectively, were based on a re-evaluation of rent levels
The profit on discontinued business was DKK 28m and primarily
and a higher return requirement to ensure a higher degree of flexi bility
concerns the Finnish business, which was sold in Q4 and therefore
in connection with possible future restructurings. Including other finan -
falls under discontinued business. The Finnish business was sold
cial income and expenses as well as investment return from discon tin ued
for EUR 15m. At the same time, intangible assets concerning a
and divested activities, the investment return totalled DKK 585m.
occupied property. In Q2 and Q4, write-down charges of DKK 150m and
large IT project were impaired by approximately DKK 100m so
that the total impact on the profit was slightly negative. In addition,
Tax
run-off on claims provisions from Marine Hull insurance, which Tryg
Tax on profit for the year totalled DKK 837m, or 28%. In 2012, Tryg
stopped writing in 2010, is included, with a slightly positive result.
paid corporate income tax of DKK 425m and in addition various payroll
18 | Tryg A/S | Annual report 2012 | Tryg’s results
taxes which totalled DKK 374m. Thus, the combined income tax and
aim being a steadily increasing dividend. On the basis of this new
paid payroll taxes for 2012 totalled approximately DKK 800m. In 2011,
dividend policy, the Supervisory Board proposes that DKK 1,594m
taxes and duties totalled approximately DKK 600m.
be disbursed as a cash dividend. In addition, an extraordinary share
buyback of DKK 800m is proposed.
Capital position
Tryg’s equity totalled DKK 10,979m (DKK 9,007m) at the end of
Events after the statement of financial position date
2012. Tryg determines an individual solvency need according to the
As previously mentioned, in connection with the repayment of the
Danish Financial Supervisory Authority’s guidelines. This totalled
subordinated loan with TryghedsGruppen, Tryg has decided to
DKK 6,410m at the end of 2012, and should be seen in relation to
arrange a loan of DKK 800m, which is irredeemable by the creditor.
a capital base of DKK 8,832m after the proposed dividend. Relative
Read more in the chapter Capital and risk management on page
to this, Tryg thus has surplus cover of DKK 2,422m, or 38%.
38 in the annual report.
Tryg has arranged subordinate loans of DKK 1,597m. In 2009,
in connection with the acquisition of Moderna, Tryg took out a
sub ordinate loan of EUR 65m with TryghedsGruppen, which is
Highlights for Q4 2012
expected to be repaid in Q1 2013. In this connection, it has been
decided to make the most of the favourable capital markets and
optimise the capital structure by arranging a subordinate loan of
•
Profit after tax of DKK 404m (DKK 344m).
DKK 800m which is irredeemable by the creditor. The current
capital requirement rules limit the amount of fixed-term subordin-
ated loan capital which can be included in the capital base, which
has meant that the existing subordinated loan from TryghedsGrup-
pen of EUR 65m does not qualify for inclusion in Tryg’s capital base.
The new subordinated loan will be for a perpetual term, and the full
amount of DKK 800m can therefore be included in the capital base,
• Technical result of DKK 648m (DKK 310m).
• Combined ratio of 87.4 (94.5).
•
•
The quarter was characterised by a lower level of weather claims
than in Q4 2011.
Large claims impacted the combined ratio by 4.3 percentage
points (6.2).
which thus increases by DKK 800m, all else being equal. Against
•
Expense ratio of 16.3 (16.9).
this background, Tryg will acquire treasury shares worth DKK 800m
as part of an extraordinary distribution, which all in all will result in
an unchanged capital base, but with a lower proportion of equity,
leading to a higher future return on equity for the benefit of Tryg’s
• High bond yields and write-down of owner-occupied property.
shareholders. Moreover, the new subordinated loan is expected
Results for Q4 2012
to qualify for inclusion as Tier 2 capital under the new Solvency II
The profit after tax totalled DKK 404m for Q4 2012 (DKK 344m).
capital adequacy rules.
The result was made up of a technical result of DKK 648m and an
investment return of DKK 5m (DKK 144m) based on an exceptionally
In connection with a change to the dividend policy, capital manage-
high return on bonds and the write-down of owner-occupied property
ment will be based on the calculation of Individual Solvency. This
by DKK 200m. The technical result was impacted by weather claims
decision has been made to strengthen the balance between Tryg’s
below the expected level, a high level of large claims totalling DKK 317m
risk profile and capital base, and does not change Tryg’s objective
(DKK 398m) and a run-off level totalling DKK 237m (DKK 331m). As a
of a Standard & Poor’s ‘A-’ rating or its focus on a strong capital
result of the lower interest rate level, the effect of discounting on the
structure.
Dividend policy
combined ratio was 0.8 percentage points less than in Q4 2011.
Premiums in local currencies fell in Q4 by 0.5%, resulting from
Tryg presented a new dividend policy in December 2012. The policy
positive growth in the Private market and negative growth in the
is based on the distribution of 60-90% of the profit for the year, the
Commercial and Corporate markets.
Tryg’s results | Annual report 2012 | Tryg A/S |
19
Private
Highlights
•
Technical result improved by DKK 466m to DKK 1,233m
(DKK 767m).
•
Combined ratio improved by 5.0 percentage points to 87.7 (92.7).
Results
Private was the business area where Tryg first implemented significant
profitability measures. Thus, Private is the area which is farthest ahead
in relation to the financial targets. To ensure continued satisfactory
financial results, considerable focus is devoted to price differentiation,
segmentation and optimising sales channels.
Gross premiums increased by 1.5% (6.1%) following price
increases.
The technical result for 2012 was DKK 1,233m (DKK 767m), with a
combined ratio of 87.7 (92.7).
•
•
Still highest customer satisfaction among the largest companies
in Denmark and Norway.
• Launch of new contents insurance product.
• Significant reduction in the expense ratio from 16.4 to 15.7.
The improvement is due to both the effect of profitability measures
and significantly better weather conditions in 2012. Due to previous
price increases, the need for extraordinary increases, apart from
general inflation adjustments, was less pronounced in 2012.
In 2012, the Danish economy was impacted by the economic crisis,
Private encompasses the sale of insurance products to private
especially in southern Europe. This particularly affected consumer
individuals in Denmark and Norway. Sales are effected via call
spending and thereby the level of economic activity. For the insurance
centres, the Internet, Tryg’s own agents, franchisees (Norway),
market, this meant a low turnover of homes and increased sales of
interest organisations, car dealers, estate agents and Nordea’s
smaller cars. In Norway, private consumption was still at a high level,
branches. The business area accounts for 48% of the Group’s
with car sales slightly up on 2011. Inflation is low in both Denmark and
total premium income.
Norway, but due to increasing pay levels in Norway, Tryg is particularly
Key figures – Private
DKKm
Gross premium income
Gross claims
Gross expenses
Profit/loss on gross business
Profit/loss on ceded business
Insurance technical interest, net of reinsurance
Technical result
Run-off gains/losses, net of reinsurance
Key ratios
Premium growth in local currencies
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
Combined ratio exclusive of run-off
Run-off, net of reinsurance (%)
Large claims, net of reinsurance (%)
Weather claims, net of reinsurance (%)
20 | Tryg A/S | Annual report 2012 | Private
Q4 2011
Q4 2012
2,373
-1,803
-387
2,449
-1,717
-383
183
-6
15
192
43
2.1
76.0
0.3
76.3
16.3
92.6
94.4
-1.8
1.6
5.0
349
-27
4
326
40
0.6
70.1
1.1
71.2
15.6
86.8
88.4
-1.6
0.6
2.5
2011
9,425
-7,469
-1,542
414
273
80
767
185
6.1
79.2
-2.9
76.3
16.4
92.7
94.7
-2.0
0.4
4.2
2012
9,733
-7,084
-1,524
1,125
81
27
1,233
326
1.5
72.8
-0.8
72.0
15.7
87.7
91.0
-3.3
0.1
2.4
A new contents insurance product
was an important milestone in
2012, and price differentiation will
also be essential in future
Group Executive Vice President, Private
Lars Bonde
aware of developments in the inflation rate in Norway and the possible
Premiums
need to adjust pricing. In 2012, Tryg’s customer retention rate
All in all, gross premiums increased by 1.5% (6.1%) in local currencies.
remained high, which is supported by customer surveys from EPSI
The growth was made up of a slightly negative growth in Denmark of
for 2012 which show that Tryg, in both Denmark and Norway, still has
0.3% and growth in Norway of 3.5%.
the highest level of customer satisfaction among the larger insurance
companies.
The low growth in Denmark resulted from an enduringly high retention
rate and a decline in sales relative to last year. In addition, the premium
As mentioned, in Private there was considerable focus in 2012 on
income is impacted by a higher level of premium discounts based
price differentiation. In November 2012, Tryg launched a new con-
on developments for a number of group agreements which reduced
tents insurance product in the Danish market which better reflects
growth in the Danish business by 0.5 percentage points. The retention
variations in risk. The new product makes it easier for the customer
rate was approximately 90, which was positive given the price in-
to be adequately covered. With the new contents insurance, the
creases intro duced in recent years. The lower sales can be attributed
customer does not have to calculate the total sum insured, but simply
to a declining average price for motor insurance, among other things
list any assets in the home worth more than DKK 50,000. Initially, the
because of high sales of cars with a higher level of safety and thereby
insurance is being sold to new customers, but in 2013 existing cus-
a lower insurance risk. The higher pricing of many insurance products
tomers will also be covered by the new insurance. Within the Private
and the economic situation in Denmark characterised by, among
segment, Tryg will continue to work with price differentiation, and in
other things, low consumer spending and a low turnover of owner-
the coming years gradually implement several new products with a
occupied homes, also contributed to the lower growth in the Private
higher degree of price differentiation.
customer segment.
One of Private’s most important distribution channels is the bank
The growth in Norway of 3.5% is explained by price increases, a
insurance partnership with Nordea. In 2012, the agreement with
Norwegian economy with solid growth and a retention rate which
Nordea was renewed for Denmark and Norway for a term of five
has improved by almost one percentage point. The growth is seen,
years. The agreement has been changed in relation to previous years
in particular, within house and motor insurance, and generally reflects
and is now more in line with Tryg’s focus on profitability and portfolio
the level of inflation in the Norwegian economy. The effect of price
development. Among other things, the partnership agreement makes
increases was evident in the average premium for Norwegian Private
it possible in future for Tryg to sell new products to existing Nordea
customers, which increased by 4.3% in 2012, while the correspond-
customers through its own call centres.
ing increase for Danish Private customers was 3.3%.
Average premium – house
Average premium – motor
Index
140
130
120
110
100
90
2008
2009
2010
2011
2012
Index
140
130
120
110
100
90
2008
2009
2010
2011
2012
Denmark
Norway
Denmark
Norway
Private | Annual report 2012 | Tryg A/S |
21
Customer retention – Private
%
94
92
90
88
86
84
82
the rate of inflation, the effect is also countered by claims prevention
measures where Tryg, through using its purchasing power and
improved processes, achieves benefits that reduce the claims costs.
Expenses
The expense ratio was 15.7 (16.4) in 2012, which was a significant
reduction, and achieved through the continued optimisation of
distribution costs, in particular. The number of employees was reduced
from an average of 955 in 2011 to 918 in 2012, primarily through
natural wastage. The Private area has centralised functions that were
2008
2009
2010
2011
2012
previously scattered, which has positively impacted the expense ratio.
Denmark
Norway
Claims
The gross claims ratio amounted to 72.8 (79.2), and the claims ratio,
net of ceded business, which includes net reinsurance ratio, was
72.0 (76.3). The improved claims ratio, net of ceded business, is
attributable to a significantly lower level of weather claims and the
effect of profitability measures. Moreover, the claims ratio, net of
ceded business, was also impacted by the lateral reinsurance
In addition, Private is, like other business areas, affected by reductions
in the various staff functions, which will also have a positive effect on
costs in the coming years.
Highlights for Q4 2012
•
Technical result of DKK 326m (DKK 192m).
• Combined ratio of 86.8 (92.6).
•
The quarter was characterised by a considerably lower level of
weather claims than in Q4 2011.
agreement, which had a positive effect of DKK 93m, reducing the
• Expense ratio of 15.6 (16.3).
claims ratio by 1.0 percentage point. Claims prevention activities
were also a high-priority area for Tryg in 2012. Tryg implemented
various measures, especially vis-à-vis house-owners in Denmark to
Results for Q4 2012
reduce claims following storms and cloudbursts. In 2012, the offer of
For Q4 2012, the technical result totalled DKK 326m (DKK 192m)
a Tryg House Check was extended to customers who have previously
and was impacted by the continual improvements resulting from
made cloudburst claims. The offer involves inspecting the customer’s
profitability measures and favourable weather conditions. The
property to identify the risk of damage from cloudbursts, with the
combined ratio showed a solid improvement and totalled 86.8 (92.6)
option of a quote for repairs which may prevent claims. In addition,
in Q4 2012.
several activities aimed at preventing claims have been implemented,
for example the use of ‘burn block’ to counter the risk of fire in
Gross premiums increased by 0.6% in Q4 which, as expected, was
Christmas decorations.
slightly lower than for the year as a whole. The retention rate in
Denmark was 90.2 (90.5), which was still high, while the retention
In 2012, Tryg renewed its agreement with garages on car repairs,
rate in Norway was 86.8 (86.1).
and repair costs remain significantly lower than for the market as a
whole.
The gross claims ratio was 70.1 (76.0), and the claims ratio, net of
ceded business, was 71.2% (76.3%).
In the Norwegian part of Private, particular focus is on claims inflation
as wage inflation is at a considerably higher level than in Denmark.
The expense ratio was 15.6 (16.3). The considerable fall is due, in
This, of course, impacts the claims, especially where labour is involved
particular, to the reduced employee numbers and a streamlining of
in repairing damage. In addition to the possibility of raising prices by
the staff functions.
22 | Tryg A/S | Annual report 2012 | Private
Commercial
Highlights
•
Technical result improved from DKK 310m to DKK 604m.
business area. Creating results which are in line with Tryg’s overall
objectives is particularly challenging for the Commercial business
area. This focus is reflected in the measures which have been intro-
duced, and which have resulted in clear improvements in the level
of claims. Moreover, structural initiatives were implemented in 2012
•
Combined ratio improved from 92.1 to 83.7.
which will further improve cost levels in the coming years.
•
The gross premiums were reduced by 2.0% (0.2%) as a result of
profitability measures and the economic situation for businesses
in Denmark.
Commercial posted a technical result for 2012 of DKK 604m
(DKK 310m), with a combined ratio of 83.7 (92.1). The improved result
is due to both the effect of profitability measures and significantly
better weather conditions than in 2011. Moreover, medium-sized claims
Commercial encompasses the sale of insurance products to small
were considerably lower than in 2011, while run-off was unusually high.
and medium-sized businesses in Denmark and Norway. Sales are
effected by Tryg’s own sales force, franchisees (Norway), customer
The results were positively impacted by price increases and segmen t -
centres and group agreements. The business area accounts for 18%
a tion and product development activities. In addition, the first
of the Group’s total premium income.
structural adjustments of the organisation were made to increase
Results
efficiency and cut costs. The Danish and Norwegian markets deve-
loped differently. In Denmark, private consumption was marked by
In 2011, the desire for special focus to be devoted to the business
continued reticence, which both had an impact on the insurance
segment led to the establishment of Commercial as an independent
requirements of businesses and the continued high level of
Key figures – Commercial
DKKm
Gross premium income
Gross claims
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
Premium growth in local currencies
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
Combined ratio exclusive of run-off
Run-off, net of reinsurance (%)
Large claims, net of reinsurance (%)
Weather claims, net of reinsurance (%)
24 | Tryg A/S | Annual report 2012 | Commercial
Q4 2011
Q4 2012
916
-588
-178
150
-19
2
133
93
-3.1
64.2
2.1
66.3
19.4
85.7
95.9
-10.2
4.4
5.0
906
-542
-181
183
-25
-2
156
29
-3.3
59.8
2.8
62.6
20.0
82.6
85.8
-3.2
5.0
4.0
2011
3,715
-2,801
-755
159
132
19
310
147
0.2
75.4
-3.6
71.8
20.3
92.1
96.1
-4.0
2.4
3.9
2012
3,687
-2,372
-748
567
32
5
604
212
-2.0
64.3
-0.9
63.4
20.3
83.7
89.4
-5.7
1.5
1.9
Structural changes must ensure
continued improvements in the
coming years
Acting Group Executive Vice President,
Nicklas Larsen
Commercial
bankruptcies. In Norway, sustained macro-economic growth
contents insurance. The measures include price increases and
supported growth for small and medium-sized businesses.
changed terms, especially for valuables in basements. Commercial
Premiums
also focused on claims prevention, for example in the agricultural
sector, with a view to reducing fire damage as a result of short-
A combined fall in premium income of 2.0% (0.2%) was realised,
circuiting. Product differentiation is also important within the
when measured in local currencies. The fall was based on negative
Commercial business area, and the first product area to see product
growth in Denmark of 2.7% and in Norway of 0.4%. The negative
differentiation in 2013 is workers’ compensation insurance, in the
growth in Denmark resulted both from a fall in the retention rate
form of a new tariff.
and from lower sales. The retention rate was negatively affected
by profitability measures, which in addition to price increases also
Expenses
comprised a demand for protective measures in basements, and by
In 2012, the expense ratio was 20.3 (20.3), which is explained by
a large number of business failures due to the economic situation.
a reduction in nominal expenses of approximately 1%, achieved
The fall in sales was attributable both to price increases and to the
primarily through organisational adjustments. To improve cost levels,
difficulties facing businesses. With a view to improving premium
Tryg restructured the area significantly in Q4, mainly back-office
income, Tryg decided to change its sales organisation towards the
functions, which cut staff by approximately 30. As mentioned above,
end of 2012, the aim being to ensure greater activity in the Danish
with a view to increasing sales efficiency, Commercial set up a new
market through the use of more cost-effective channels.
sales channel at the end of 2012 which will focus on small busi-
The zero growth in Norway can also be ascribed to price increases
important focus area, calling for further automation and simplifica-
nesses in the Commercial segment. Reducing costs will remain an
and a competitive market, which led to a fall in renewals relative to
tion of processes.
last year. This development also calls for a stronger focus on sales.
With a view to strengthening the focus on sales and the quality of its
Another cost-cutting measure will be a transfer to digital commu-
customer service, in 2012 Commercial introduced a specialisation
nication. Therefore, in 2013, customers will be able to access their
of the sales and service functions in its own sales channels. Similarly,
insurance details and documents via the Internet before Tryg stops
franchisees have been offered training in commercial insurance with
sending physical documents and makes a complete transfer to
the aim of boosting sales.
digital communication.
At the end of 2012, both the Danish and the Norwegian part of
Commercial set up new sales channels focusing on new sales to
small businesses in the Commercial segment.
Customer retention – Commercial
Claims
The gross claims ratio amounted to 64.3 (75.4), and the claims
ratio, net of ceded business, which includes net reinsurance ratio,
was 63.4 (71.8). The improved claims ratio is attributable to a
significantly lower level of both weather claims and large claims
as well as the effect of profitability measures and a reinsurance
agreement concerning the frequency of weather claims which had
a positive impact of DKK 20m, corresponding to 0.5 percentage
points in relation to the claims ratio, net of ceded business.
%
94
92
90
88
86
84
82
As mentioned above, Tryg has introduced profitability measures in
relation to Commercial customers, primarily within building and
2008
2009
2010
2011
2012
Denmark
Norway
Commercial | Annual report 2012 | Tryg A/S |
25
Highlights for Q4 2012
• Technical result of DKK 156m (DKK 133m).
• Combined ratio of 82.6 (85.7).
•
The quarter was characterised by a lower level of weather
claims than in Q4 2011.
• Expense ratio of 20.0 (19.4).
The combined ratio totalled 82.6 (85.7), which is very low and
which reflects the measures introduced, but also the fact that in
Q4 Commercial was affected by favourable weather conditions
and an unusually low level of medium-sized claims.
Gross premiums fell by 3.3% in Q4, which was in line with expect-
ations and the developments which generally characterised the
year. The retention rate for Denmark was 84.6 (85.5), a level which
was still affected by the profitability measures introduced, while
the retention rate in Norway was 87.4 (88.4).
Results for Q4 2012
The gross claims ratio was 59.8 (64.2), and the claims ratio,
A technical result of DKK 156m (DKK 133m) was posted, based on
net of ceded business, was 62.6 (66.3).
continuous improvements as a result of the measures introduced. In
Q4 2012, weather claims were lower than for the prior-year period
The expense ratio was 20.0 (19.4), which was lower than for the
and also lower than for an average year.
full year.
26
| Tryg A/S | Annual report 2012 | Commercial
Corporate
Focus on profitability –
even if it leads to fluctuations
in premium income
Truls Holm Olsen
Group Executive Vice President,
Corporate
Highlights
•
Technical result improved by DKK 141m to DKK 650m (DKK 509m).
•
Combined ratio improved by 3.5 percentage points to 87.7 (91.2).
•
Gross premiums reduced by 2.0% (0.8%) after intro duction of
profitability measures, including the pruning of customers.
These are often keen to compete on price, and Corporate’s focus on
profitability means that premium income will fluctuate more than for
Private and Commercial. For Corporate, it is therefore important to
ensure profitable business, while at the same time being able to adjust
cost levels to major fluctuations in premium income.
The technical result for 2012 was DKK 650m (DKK 509m), with a
combined ratio of 87.7 (91.2). The improved result is primarily attri b-
utable to the effect of profitability measures, including pruning of
unprofitable segments and considerably more favourable weather
Corporate sells insurance products to corporate customers under the
conditions than in 2011. The level of large claims declined compared
‘Tryg’ and ‘Tryg Garanti’ brands in Denmark and Norway and under the
with last year, corresponding to a 0.3 percentage point reduction.
‘Moderna’ brand in Sweden. Sales are effected both via Tryg’s own sales
However, the lower interest rate level reduced the combined ratio by
force and via insurance brokers. Moreover, customers with international
2.4 percentage points relative to 2011. Run-off gains were high, pri-
insurance needs are served by Corporate through its cooperation with
mary due to the significant size of long-tailed workers’ compensation
the AXA Group. Tryg Garanti is also included in Corporate results. The
business, which – seen from a historical perspective – has had high
business area accounts for 26% of the Group’s total premium income.
run-off gains. Despite the high run-off gains, no changes have been
made in the principles used for claims provisions.
Profit/loss
Corporate is focused on improving profitability and satisfactory generating
Tryg has a solid market position in Denmark and Norway, while the
results relative to the capital attributable to the area. The Corporate market
Corporate business in Sweden is still in a start-up phase character-
is the most competitive area, and new players enter the field regularly.
ised by consciously limited growth, the focus being on the profit-
Key figures – Corporate
DKKm
Gross premium income
Gross claims
Gross expenses
Profit/loss on gross business
Profit/loss on ceded business
Insurance technical interest, net of reinsurance
Technical result
Run-off gains/losses, net of reinsurance
Key ratios
Premium growth in local currencies
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
Combined ratio, exclusive of run-off
Run-off, net of reinsurance (%)
Large claims, net of reinsurance (%)
Weather claims, net of reinsurance (%)
Q4 2011
Q4 2012
1,308
-1,177
-172
-41
60
10
29
189
-3.4
90.0
-4.6
85.4
13.1
98.5
112.9
-14.4
17.3
4.3
1,330
-1,035
-162
133
-9
-3
121
169
-1.4
77.8
0.7
78.5
12.2
90.7
103.4
-12.7
11.8
0.8
2011
5,259
-4,227
-671
361
107
41
509
630
0.8
80.4
-2.0
78.4
12.8
91.2
103.2
-12.0
7.9
3.2
2012
5,258
-3,929
-648
681
-37
6
650
506
-2.0
74.7
0.7
75.4
12.3
87.7
97.3
-9.6
7.6
0.6
Corporate | Annual report 2012 | Tryg A/S |
27
ability of selected segments. Tryg distinguishes itself, in particular, on
weather claims which had a positive impact of DKK 23m, correspond-
its significant knowledge of the segments and its high service levels.
ing to 0.4 percentage points in relation to the claims ratio.
Considering Tryg’s small market share in Sweden, it was therefore very
positive that a survey among 143 insurance brokers ranked Tryg most
The profitability measures in relation to Corporate customers have
highly among the insurance companies in the Swedish market.
included higher prices, changes to the insurance cover for weather
In 2012, the market situation in the Corporate market was generally
unsatisfactory profitability. In Norway, these included power stations,
not impacted significantly by the economic situation in southern
and in Denmark local authorities.
claims and pruning of customers and segments characterised by
Europe. Danish businesses benefited from the positive economic
development in Germany, Denmark’s largest export market. However,
Expenses
towards the end of the year, the German economy fared less well, which
The expense ratio was 12.3 (12.8 ) in 2012, which represented a satis-
is expected to have a negative impact on Danish industry in 2013.
factory reduction concurrently with a reduction in premium levels. The
reduction is due to the tailoring of the business to a lower level of activity
In Norway, macro-economic growth also benefited the industrial
and general measures aimed at ensuring a reduction in cost levels.
companies. On account of Tryg’s smaller market share and focused
approach to new business, Tryg’s Swedish business is only affected
by macro-economic developments to a smaller extent.
Premiums
All in all, gross premiums fell by 2.0% (0.8%) in local currencies. The
negative growth was a combination of negative growth of 1.1% in
the Danish Corporate segment, a negative growth in Norway of 5.2%
and a positive growth in Sweden of 10%. The negative growth in both
Denmark and Norway can be ascribed to price increases, pruning of
Highlights for Q4 2012
• Technical result of DKK 121m (DKK 29m).
• Combined ratio of 90.7 (98.5).
•
The quarter was characterised by a considerably lower level of
both weather claims and large claims than in Q4 2011.
customers and lower sales. As mentioned above, the Corporate market is
• Expense ratio of 12.2 (13.1).
characterised by changes in the competitive situation when new players
try to gain market shares – a development which in 2011 was particularly
pronounced in the Danish market, and which affected the Norwegian
Results for Q4 2012
market in 2012. Tryg focuses on profitability, which during periods of
The technical result totalled DKK 121m (DKK 29m) and reflected the
fierce price competition will lead to fluctuations in premium income.
continued improvement based on profitability measures, but was also at-
tributable to a considerably lower level of weather claims and large claims.
Corporate customer loyalty is determined by the distribution channels.
For its direct sales, Tryg has, over the years, developed concepts for the
The combined ratio was 90.7 (98.5), the considerable fall being
various customer groups which entice customers to stay with Tryg. This
attributable to developments in claims.
is deemed to be an important explanation for the higher level of loyalty
compared with customers served by brokers.
Gross premiums fell by 1.4% in Q4, representing a slightly lower
reduction than for the full year.
Claims
The gross claims ratio amounted to 74.7 (80.4), and the claims ratio,
The claims ratio was 77.8 (90.0), and the claims ratio, net of ceded
net of ceded business, which includes the profit/loss from reinsurance,
business, was 78.5 (85.4), reflecting in particular a lower level of
was 75.4 (78.4). The improved claims ratio is attributable to a signifi-
weather claims and large claims.
cantly lower level of both weather claims and large claims as well as
the effect of profitability measures. Moreover, the claims ratio was
The expense ratio was 12.2 (13.1), corresponding to the level
affected by a reinsurance agreement concerning the frequency of
for the full year.
28 | Tryg A/S | Annual report 2012 | Corporate
Sweden
Highlights
•
Technical result improved by DKK 116m to DKK 102m (DKK -14m).
•
•
Combined ratio improved by 7.6 percentage points to 95.3
(102.9).
Gross premiums were up 0.7% (9.2%) as a result of profitability
measures and a conscious reduction in sales.
Profitability measures
have improved results and
will continue to do so in
the coming years
Group Executive Vice President, Sweden
Per Fornander
business and the acquired Moderna. Moreover, important structural
measures have been implemented in relation to distribution. With
these initiatives, a solid foundation has been created for further
developing the business and improving profitability.
Profit/loss
A profit of DKK 102m (DKK -14m) was posted. The positive
develop ment is based on a continued high level of profitability
within the niche areas, which comprise the insurance of leisure
boats, motorcycles and product insurance in connection with elec-
tronics purchases. Moreover, the profitability measures introduced
in the business which was originally started up in Malmö based on
Sweden comprises the sale of insurance products to private
Nordea customers have contributed positively to the results.
customers under the ‘Moderna’ brand. Sales are effected via Tryg’s
own sales team, call centres and the Internet. The business area
Profitability measures have also been introduced for the rest of the
accounts for 8% of the Group’s total premium income.
Private business area, and a conscious reduction has been made
in the rest of the acquired Moderna’s non-niche Private portfolio.
For the Sweden business area, which at the beginning of the year
The market situation in Sweden is generally impacted by the global
also included Finland, focus has been on improving profitability.
economic situation which put a dampener on private consump-
Important steps included divesting the Finnish business and im-
tion. For Moderna, this has been particularly true of the market for
proving pricing, while further integrating the original bank insurance
leisure boats and motorcycles where sales have been low.
Key figures – Sweden
DKKm
Gross premium income
Gross claims
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
Premium growth in local currencies
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
Combined ratio, exclusive of run-off
Run-off, net of reinsurance (%)
Weather claims, net of reinsurance (%)
Q4 2011
Q4 2012
370
-326
-92
-48
-2
6
-44
6
4.7
88.1
0.5
88.6
24.9
113.5
115.1
-1.6
1.4
399
-268
-84
47
3
4
54
-1
0.9
67.2
-0.8
66.4
21.1
87.5
87.2
0.3
1.3
2011
1,586
-1,319
-303
-36
-9
31
-14
-18
9.2
83.2
0.6
83.8
19.1
102.9
101.8
0.0
1.3
2012
1,654
-1,267
-306
81
-3
24
102
-29
0.7
76.6
0.2
76.8
18.5
95.3
93.5
1.8
1.2
Sweden | Annual report 2012 | Tryg A/S |
29
Premiums
Claims
All in all, premium income was up 0.7% against growth of 9.2% in
The gross claims ratio amounted to 76.6 (83.2), and the claims ratio,
2011. The low growth is due to Tryg’s focus on profitability, which
net of ceded business, which includes the profit/loss from reinsurance,
has resulted in considerable price increases within the Private seg-
was 76.8 (83.8). The improved claims ratio, net of ceded business, can
ment, which was originally established on the basis of bank distribu-
be ascribed to price increases and reduced growth within un pro fitable
tion. Price increases have been introduced for all main products. The
customer groups. Moreover, considerably improved tariffs have
motor insurance portfolio has been pruned as it comprised too many
been developed within both motor and house insurance, ensuring
expensive cars at too low a price, and new tariffs with a markedly
signifi cantly better price differentiation. The claims ratio is positively
better correlation between risk and price have been implemented.
affected by major efficiency increases in claims handling. This is il-
The number of partnership agreements has been reduced signifi-
lustrated for example by the fact that approximately 50% of claims in
cantly to ensure profitability and a volume which reflects the costs
Stockholm were registered and processed on the same day. A conver-
associated with administering the agreements.
sion from two IT systems to one in 2013 will further increase claims
The profitability measures have had the intended effect, which can,
among other things, be seen from the official statistics for the Swedish
Expenses
handling efficiency.
market. They show that Moderna’s market share for contents, house
An improved expense ratio of 18.5 (19.1) was achieved in 2012,
and motor insurance has been reduced in terms of the number of
concurrently with considerably lower premium growth compared
policies, whereas it is virtually unchanged within both boat insurance
with prior years. To ensure further growth, Moderna implemented a
and other motor insurance. Measured in terms of premium income,
number of structural initiatives at the end of 2012 which will result
market share is slightly up, which illustrates the improved profitability.
in additional cost level improvements in the coming years. The initia-
tives include a centralisation of functions within distribution, claims
Nordea was an important distribution channel in particular in connec-
handling and staff services. The most important step was gathering
tion with the original establishment of the business in Sweden. In
all customer service and telemarketing functions in Malmö and the
2012, Tryg and Nordea decided not to renew the distribution agree-
closing-down of a similar function in Luleå in northern Sweden.
ment. On the other hand, Moderna’s agreement with ICA Bank was
The restructure results in approximately 50 jobs being cut, or ap-
renewed and expanded. Moreover, Moderna will launch a number
proximately 11%. Moreover, Moderna will, in 2013, convert to using
of initiatives both to retain the profitable customers in the Nordea
only one IT system, which will contribute to further cost reductions.
portfolio, to develop direct sales and to enter into more partnership
agreements.
Average premium – house
Average premium – motor
Index
140
130
120
110
100
90
2008
2009
2010
2011
2012
Index
140
130
120
110
100
90
2008
2009
2010
2011
2012
30 | Tryg A/S | Annual report 2012 | Sweden
Highlights for Q4 2012
The combined ratio was 87.5 (113.5), which highlights the marked
improvements achieved by this business area.
•
Technical result of DKK 54m (DKK -44m).
• Combined ratio of 87.5 (113.5).
• Expense ratio of 21.1 (24.9).
Gross premiums were up 0.9% in Q4, which was in line with expect-
ations and the developments which generally characterised the year.
The claims ratio was 67.2 (88.1), and the claims ratio, net of ceded
business, was 66.4 (88.6). The lower level of claims is attributable to
the positive development in claims costs recognised in the financial
statements for Q2 and Q3, which improved the claims ratio in Q4.
Results for Q4 2012
A technical result of DKK 54m (DKK -44m) was posted, based on
The expense ratio was 21.1 (24.9). The slightly higher level is attri b -
continuous improvements as a result of the profitability measures
utable, in particular, to the accrual of Moderna’s premium income
introduced and a lower level of weather claims.
according to the risk, and to the fact that the premium income is
therefore lower in Q4 than in the year as a whole.
Sweden | Annual report 2012 | Tryg A/S |
31
Investment activities
Highlights
investment portfolio. Consequently, the investment portfolio is divided
into two portfolios – a match portfolio and a free portfolio.
• Gross return of DKK 2,243m (DKK 1,890m).
Investment return in 2012
In 2012, the Group’s total investment portfolio of DKK 45.5bn
• Return on match portfolio of DKK 109m (DKK 95m).
(DKK 41.3bn) generated a gross return of DKK 2,243m (DKK 1,890m),
•
Very high return on free portfolio of DKK 1,129m
(DKK 184m).
• Write-down of owner-occupied property of DKK 350m.
corresponding to a return of 5.1% (4.8%) on the average invested
capital. The result was positively impacted by gains on equities and
credit bonds like, for example, global high-yield bonds, government
and corporate bonds from emerging markets and primarily financial
senior credit bonds. Bonds generally benefited from strongly falling
interest rates, especially in the first half year. The return on investment
Tryg’s investment activities include investing in investment assets
property also made a positive contribution, thanks to a slight upturn
such as bonds, equities and property and managing Tryg’s liquidity.
in the Norwegian property market.
The investment activities are regulated by legislation and by the
policies and guidelines adopted and issued by the Supervisory Board.
The investment return after transfer of insurance technical interest and
Investment portfolio
value adjustment of discounting of provisions totalled DKK 1,238m in
2012. After adjustment of other financial income and expenses, the net
Tryg’s primary focus is on operating a profitable insurance business,
investment return totalled DKK 617m (DKK 54m), and after discon -
and the investment activities must support this focus in the best
ti nued and divested activities the result was DKK 585m (DKK 61m).
possible way. The investment strategy is based on a relatively low
investment risk, and most of the assets are secure investment assets,
Match portfolio
primarily bonds. The purpose of the investments is both to match
The purpose of the match portfolio is to hedge fluctuations in the
the insurance-related obligations in the best possible way, and to
discounting of insurance provisions by means of interest rate swaps in
obtain a satisfactory absolute return on the remaining part of the
local currencies. By entering into Danish, Norwegian and Swedish
Key figures for the year – Investments
DKKm
Bonds, cash deposits etc.
Equities
Real estate
Total
Value adjustments, changed discount rate
Transferred to insurance technical interest
Total investment return before other financial items
Other financial income and expenses, investments a)
Total investment return
Other financial income and expenses, non-investment a)
Investment return
Of which investment return on discontinued and divested business
Investment return on continuing business
Return
2011
1,858
-87
119
1,890
-760
-851
279
-59
220
-166
54
-7
61
Total
1,770
269
204
2,243
-477
-528
1.238
-70
1,168
-551
617
32
585
Free
656
269
204
Investment assets
31.12.12
31.12.11
37,232
1,860
2,199
41,019
2,444
2,082
1,129
41,291
45,544
Return 2012
Match
1,114
1,114
-477
-528
109
1,129
a) The item comprises interest on operating assets, bank debt and reinsurance deposits, foreign currency translation adjustment of insurance items,
costs of investment activities.
32 | Tryg A/S | Annual report 2012 | Investment activities
fixed-rate swaps, Tryg avoids fluctuations in the fair value of its
The free portfolio yielded a gross return of DKK 1,129m (DKK 184m),
long-term liabilities in the respective countries, and this eliminates
corresponding to 11.4% (3.4%) of the average invested capital. The
most of the interest rate risk of Tryg’s claims provisions. As fluctua-
portfolio grew from approximately DKK 8.1bn at the end of 2011 to
tions in swap rates are sometimes greater or smaller than the Danish
DKK 10.8bn at the end of 2012. The increase is attributable to satisfac-
Financial Supervisory Authority’s interest rates, a mismatch will arise
tory insurance operations as well as an increase in value due to devel-
in addition to a mismatch from the other risks which are not interest
opments in the financial markets. The equity portfolio, which is globally
rate risks and which cannot be hedged accurately.
diversified, yielded a return of DKK 269m (DKK -87m), or 13.0%. This
In practice, Tryg seeks to put together bond portfolios which are
report for 2011. The property portfolio, which consists of Danish and
most likely to achieve the discounting curve yield given by the Danish
Norwegian properties, yielded a return of DKK 204m (DKK 119m), cor-
significantly exceeded the outlook announced by Tryg in the annual
Financial Supervisory Authority over time. These portfolios are provided
responding to 9.7% (6.1%).
as benchmarks for our managers who must ensure performance.
Hedging of the interest rate risk and developments in the FSA rate and
In 2012, the free bond portfolio yielded a total return of DKK 656m
the swap rate has resulted in a mismatch of DKK 109m. The mismatch
(DKK 152m), due to an overweight of bonds with credit exposure.
is primarily attributable to the implementation of the Solvency II curve
The bond portfolio was impacted in 2012 by decreasing interest rates,
in June, on the initiative of the Danish Ministry of Business and Growth.
narrowing credit spreads, low risk appetite and a demand for alterna-
This meant an immediate write-down of Tryg’s discounted provisions by
tive investments with high risk premiums. Moreover, the portfolio was
DKK 150m. Without this write-down, Tryg would have had a negative
supported by good absolute returns on both global high-yield bonds
mismatch of approximately DKK 40m.
and emerging-market bonds which are primarily issued in USD or EUR.
Free portfolio
Improved public finances in many high-interest countries, relative to
the western economies, supported these asset classes. Moreover,
The free investment portfolio consists of the other investment assets
financial senior credit bonds contributed to a good return. Based on
which reflect Tryg’s equity. The portfolio is invested broadly in bonds,
the above-mentioned positive performance and a sensible portfolio
equities and investment property to ensure diversification and the best
allocation, Tryg’s bond portfolio made a substantial contribution to the
possible return based on a limited risk.
total investment return.
Key figures for investments Q4
DKKm
Bonds, cash deposits etc.
Equities
Real estate
Total
Value adjustments, changed discount rate
Transferred to insurance technical interest
Total investment return before other financial items
Other financial income and expenses, investment a)
Total investment return
Other financial income and expenses, non-investment a)
Investment return
Of which investment return on discontinued and divested business
Investment return on continuing business
Investment
assets
31.12.12
41,019
2,444
2,081
45,544
Return
Q4
2011
Return Q4 2012
Total
Match
Free
235
235
-103
-105
27
146
67
43
256
256
432
103
25
560
-196
-176
188
-16
172
-29
143
-1
144
381
67
43
491
-103
-105
283
-20
263
-251
12
7
5
a) The item comprises interest on operating assets, bank debt and reinsurance deposits, foreign currency translation adjustment of insurance items,
costs of investment activities.
Investment activities | Annual report 2012 | Tryg A/S |
33
Other financial income and expenses
Other financial income and expenses totalled DKK -621m
(DKK -225m), due, among other things, to the write-down of Tryg’s
owner-occupied properties by DKK 350m. The write-down resulted
partly from the effect of a reassessment of the rent level in Q2 2012
Highlights for Q4 2012
• Return on match portfolio of DKK 27m (DKK -7m).
by an amount of DKK 150m, and partly from a higher return
• High return on free portfolio of DKK 256m (DKK 194m).
requirement, the effect being DKK 200m. Other major elements
included Tryg’s interest expenses in respect of subordinate loans and
the costs of hedging Tryg’s equity in Norway and Sweden. The costs
of hedging currency exposure totalled approximately DKK 110m
• Write-down of owner-occupied property of DKK 200m.
(DKK 87m) in 2012, primarily from the hedging of foreign branches
Investment activities in Q4 2012
due to the higher interest rate level in Norwegian kroner. Interest on
Investment activities before other financial income and expenses
subordinate loans amounted to approximately DKK 79m in 2012.
generated a profit of DKK 283m in Q4 2012 against DKK 188m for
Total investment portfolio
10
Per cent
5
5
3
2
75
Mortgage bonds
High-yield bonds
Government bonds
Real estate
Equities
Bank deposits
the prior-year period. The match portfolio had a mismatch of DKK 27m
(DKK -7m) and thus fulfilled the targets for this part of the portfolio.
The free portfolio generated a profit of DKK 256m (DKK 194m) in Q4,
with equities accounting for DKK 67m (DKK 103m). Bonds etc. in the
free portfolio generated a profit of DKK 146m (DKK 66m) and were
affected by a high direct interest rate on credit bonds and high-yield
bonds.
Moreover, the return was impacted by the above-mentioned write-
down of owner-occupied property of DKK 200m due to a higher
return requirement with the aim to ensure a higher degree of flex-
ibility in connection with possible future restructurings.
Match portfolio
Free investment portfolio
3 9
Per cent
88
Mortgage bonds
Government bonds
Bank deposits
14
24
Per cent
20
30
10
2
Mortgage bonds
High-yield bonds
Government bonds
Real estate
Equities
Bank deposits
34 | Tryg A/S | Annual report 2012 | Investment activities
Financial targets and outlook
Efficiency increases and
simplification will be
essential to reducing costs
in the coming years.
Tor Magne Lønnum
Group CFO
Tryg’s financial targets
An extraordinarily high investment return was realised in 2012, and
• Combined ratio of 90 or below from Q3 2013.
a lower return is expected for the coming years as interest rates are
• Expense ratio under 15 in 2015.
• Return on equity of 20% after tax.
low and are expected to remain so. As the investment risk is generally
kept low, half of the investment portfolio is in bonds and will only
make a modest contribution to the investment return as current
In order to ensure the realisation of Tryg’s financial targets, Tryg is
interest rate levels are used to calculate the expected bond yields.
implementing an ambitious cost-cutting programme, the aim being
For equities and real estate, the same expectations are applied as
to reduce costs and claims by a total of DKK 1bn in the period up until
for earlier years of 7% and 6%, respectively.
2015. Costs must be reduced by DKK 400m, including DKK 100m
from claims handling costs to be realised via claims. Claims must
Investment activities include other types of investment income and
be reduced by DKK 600m. Claims-related cost reductions must be
expenses, especially the costs of managing the investments, gains
achieved through outsourcing and better procurement, for example
and losses on foreign currency hedges and interest paid on loans.
via the use of online auctions for repairs. Costs must be reduced, in
particular, through job cuts in the staff functions, where the number
of employees has increased by 25% in recent years.
Claims expenses related to weather and large claims have been
increasing in recent years. However, 2012 was an exception as both
weather and large claims were lower than expected. In 2013, weather
claims net of reinsurance are expected to total DKK 500m, and large
claims DKK 450m.
Price increases have lifted the top line in recent years. Given Tryg’s
focus on profitability, it will be necessary to say goodbye to unprofit-
able customers, and Tryg therefore expects only a modest increase
in premium income in the coming years.
Targets – expenses
DKKm
300
250
200
150
100
50
0
300
55
125
125
50
Total savings
and expenses
2012
2013
2014
2015
Target
Achieved
Savings programme up until 2015
Targets – claims
DKKm
1,000
800
600
400
200
0
Total reduction
in expenses
DKK 400m
Claims
DKK 600m
300
100
600
Transfer to claims/
indirect claims
Claims
DKKm
800
700
600
500
400
300
200
100
0
700
100
120
250
250
100
Total savings
and clims
2012
2012
2013
2014
2015
Target
Achieved
Financial targets and outlook | Annual report 2012 | Tryg A/S |
35
Tryg House Check In 2012, we gave many private customers
in the Greater Copenhagen area who suffered water damage in
connection with the cloudburst in 2011 the offer of a free inspection
of their homes. With the Tryg House Check, customers are given
advice and instructions on what they can do to prevent damage in
future, and, if requested, a specific quote for the work required.
Leif and Tove Rasmussen from Dyssegård accepted the offer of the Tryg House Check. The family was
hit twice by cloudbursts in 2011 and had to undergo extensive renovation work, which was expensive for
Tryg and difficult for Leif and Tove.
An anti-flooding valve at the floor drain and a water tank connected to the gutter are some of the measures
implemented by the family to prevent future damage. ‘We really want to avoid any more damage. We are
the ones who suffer, and it is such a hassle sorting everything out, especially with water damage,’ Tove
and Leif say. The specialist who performed the House Check inspection was satisfied with the family’s
preventive measures.
Capital and risk management
Credit ratings
As at 31 December 2012
Tryg Forsikring A/S
Tryg Garantiforsikring A/S
Standard & Poor’s
‘A-’/stable
‘A-’/stable
Tryg’s capital base and financial strength are preconditions for the
model, Tryg calculates the necessary capital each quarter based on
Group being able to take over risks from customers. For this to be
the future Solvency II standard model. Under the standard model, the
possible, capital planning must be tailored to the Group’s risk and
capital need is DKK 8,161m which – compared to the actual capital of
growth profile. Tryg wants to have the necessary capital, while at
DKK 10,400m, calculated according to the Solvency II rules – equates
the same time being able to distribute stable dividend correspond-
to a surplus cover of DKK 2,239m. The introduction of the Solvency II
ing to 60-90% of the earnings for the year.
Read more about
rules will make stricter demands on the way in which insurance com-
dividend policy in the chapter on the Tryg share and dividend
panies work with and control risks, including the Supervisory Board’s
policy on page 41.
involvement in risk and capital management. Tryg has for a number of
years been working to tailor the company to meeting these require-
Risk-based capital management
ments. This means that the Supervisory Board actively determines the
Through capital and risk management, Tryg aims to secure financial
company’s risk appetite and the risk management framework, while
strength and flexibility. Capital management is based on Tryg’s
regularly assessing the aggregate risk and the derived capital need.
internal capital model, and the capital requirement is determined on
Once a year, a so-called ORSA (Own Risk and Solvency Assessment)
the basis of Tryg’s current risk profile with a 99.5% level of certainty.
is carried out, which is a systematic and comprehensive assessment
This corresponds to the chosen capital level being insufficient once in
of the Group’s risk and solvency. ORSA also comprises a capital plan
a 200-year period on a statistical basis. The model calculates the
and a capital contingency plan illustrating the implications of the com-
capital requirement while taking account of the actual business mix,
pany’s business plan and documenting the adequacy of the capital
profitability, provisions profile, reinsurance protection, investment mix
base, even in a selection of stressed situations. Such an assessment
and scenarios for the additional risk which you may experience in
will be a statutory requirement under Solvency II.
particularly stressed situations. The calculation takes account of the
geographical spread and the effect of the chosen investment policy;
The Executive Management’s responsibility for all risk and capital man -
the interest rate risk attaching to the bond portfolio corresponds to
a gement is exercised on a daily basis through a risk management environ-
the interest rate risk for the discounted provisions, which means that
ment in which underwriting and reinsurance, provisions, investment
Tryg’s net interest rate risk is insignificant.
risk and operational risk are managed by separate subcommittees.
An external credit rating is obtained from Standard & Poor’s, and
Capital structure
Tryg is given an ‘A-’ rating.
Tryg’s capital base consists of equity and subordinate loans. The relative
sizes of these two categories are subject to ongoing assessment with a
The Danish authorities demand active capital management based
view to maintaining an optimum structure which takes account of the
on quarterly calculations of an individual solvency need. These
return on equity, capital costs and flexibility. Different models are used
requirements are precursors of the future Solvency II rules. Tryg’s
to calculate the actual capital under the various regimes, but regardless
calculation of its individual solvency need is based on the Group’s
of the model applied, Tryg has a high level of internal financing (low
internal capital model. The individual solvency need was DKK
gearing). In 2005, Tryg took out a 20-year subordinated bond loan of
6,410m at the end of 2012 against DKK 6,320m at the end of 2011.
EUR 150m listed on the London Stock Exchange. In connection with the
With a capital base of DKK 8,832m less proposed dividend, Tryg has
acquisition of Moderna in Sweden in 2009, Tryg took out a sub ordinated
a surplus cover of DKK 2,422m. In addition to the internal capital
loan with expiry in 2032 of EUR 65m from TryghedsGruppen. Tryg’s
38 | Tryg A/S | Annual report 2012 | Capital and risk management
total subordinated debt subsequently amounted to EUR 215m. All in
believes that the likely start date of Solvency II will be 1 January 2016
all, debt amounted to 15% of equity at the end of 2012, correspond-
or later. It is unknown at present to which extent the individual parts of
ing to 10% of the capital base. Interest expenses on the subordinated
the Solvency II regime will be implemented earlier in Danish legislation.
loan capital totalled DKK 80m in 2012.
For further details on loan
Solvency II allows for the use of full or partial internal models. Tryg’s
terms and capital mangement in Tryg, see note 2, pages 88-89.
plan is to use the existing internal model in areas where the risk
deviates from the risk assessed using the standard model. Within the
As part of the assessment of the capital structure, Tryg has decided
area of insurance risk, Tryg is of the opinion that it will be able to
to repay the existing subordinated loan from TryghedsGruppen of
model its own risk more correctly. For example, the standard model
EUR 65m in 2013 and to replace it with a new subordinated loan of
does not take account of geographical diversification between the
DKK 800m. The current capital requirement rules limit the amount
Nordic countries, which is an aspect of Tryg’s exposure. On the other
of fixed-term subordinated loan capital which can be included in the
hand, the existing internal model’s treatment of investment risks is
capital base, which has meant that the existing subordinated loan
very like the standard model, which must be seen in light of the
from TryghedsGruppen of EUR 65m cannot be included in Tryg’s
homogeneous investment risk which is generally hedged across
capital base. The new subordinated loan will be of a perpetual term,
national borders based on efficient financial markets. The aim is that,
which means that the loan can be included in the capital base in full,
under Solvency II, Tryg will in future use a partial internal model in its
which thus increases by DKK 800m. Against the background of the
capital planning consisting of the insurance module in Tryg’s existing
above, treasury shares worth DKK 800m will be acquired as part of an
model, supplemented with the other modules (investment, opera-
extraordinary distribution. Together with the new subordinated loan,
tional risk etc.) from the standard model.
the distribution will result in an unchanged capital base, but with a
lower proportion of equity, which in isolation will contribute positively
Tryg engages in ongoing dialogue with the Danish Financial Super-
to the future return on equity for the benefit of Tryg’s share holders.
visory Authority on requirements for the development of a partial
Moreover, the new subordinated loan is expected to be included as
internal model. The plan is for Tryg to submit an application which
Tier 2 capital under the new Solvency II capital adequacy rules.
the Financial Supervisory Authority will then consider for approval.
Reinsurance
At the end of 2012, Tryg had a capital buffer of 27% (after expected
dividend) based on the standard model under Solvency II, and the
Reinsurance is an important tool when it comes to protecting Tryg’s
approval of the internal model is expected to further increase the
capital base. The need for reinsurance is assessed on an ongoing
capital buffer.
basis using Tryg’s internal capital model, in which the reinsurance
premium is compared with the reduction in the capital requirement
that can be achieved. Tryg’s reinsurance programme comprises single
claims (large claims), and events which may impact several policies at
the same time (catastrophe cover). The most important programmes
Capital
covering large claims include buildings, contents, motor, goods
transport, liability and fish farming. catastrophe cover has been taken
out for buildings, contents and risks in respect of which frequency
protection has been arranged which limits the aggregate annual
deductible in the event of, for example, hurricanes and cloudbursts.
The reinsurance programme also comprises catastrophe cover for
accidents and workers’ compensation.
For a detailed description
of Tryg’s reinsurance programme, see Note 1 on page 77.
Implementation of Solvency II
The Omnibus II Directive, which was to introduce the Solvency II
regime on 1 January 2014, was not adopted in 2012 as planned. Tryg
DKKm
12,000
10,000
8,000
6,000
4,000
2,000
0
Individual Solvency
Solvency II
Capital requirement
Buffer
Capital and risk management | Annual report 2012 | Tryg A/S |
39
Tryg share and dividend policy
It is important for Tryg that investors, shareholders and other stake-
of DKK 6.52, the share rose by 33.7% during 2012 (31.7% excluding
holders are able to form a true and fair view of Tryg’s development.
dividend). By comparison, the OMXC20 index rose by 27.2% in 2012.
For this reason, we emphasise openness, transparency and the
The index of insurance shares in Europe, the STOXX Euro Insurance
accommodation of stakeholder information requirements. The
Index, rose by 33.4% in 2012. The positive development in perfor-
Executive Management and Investor Relations go on a roadshow
mance and increased stability contributed to increasing the value of
every quarter following publication of the financial statements to
the Tryg share throughout 2012. The development was also supported
meet with investors and equity analysts.
by a generally higher demand for insurance shares, which are regarded
In 2012, Tryg held 220 investor meetings and participated in ten
that the demand for insurance is largely constant, which benefits the
as safe investments in turbulent times. The financial crisis has shown
conferences for both institutional investors and private shareholders.
insurance industry in times of crisis.
The Tryg share is covered by 21 investment analysts.
See a list of
analysts and their recommendations of Tryg at tryg.com > Investor.
Nasdaq OMX Copenhagen continues to be the primary exchange for
The Tryg share
trading in the Tryg share. This is the venue of approximately 80% of
the trading that generates liquidity in the share and determines the
The Tryg share is listed on the Nordic exchange Nasdaq OMX Copen-
price of the Tryg share. However, the share continues to be increasingly
hagen and is covered by the OMX Copenhagen C20 index (OMXC20),
traded on alternative exchanges (MTF trades through, among others,
comprising the 20 most traded shares on the exchange. In accordance
Chi-X and Turquoise), as other trading platforms are gaining ground in
with the recommendations issued by Nasdaq OMX Copenhagen, Tryg
step with the increased focus of the major investment funds on trading
does not comment on financial results or outlook four weeks before
costs. OTC (over-the-counter) and dark pools (non-transparent tradings)
the publication of financial statements. All financial information is
represent a large share of this trade which takes place outside of the
published on tryg.com in Danish and English. It is possible to order an-
established exchanges and, thus, does not have a direct impact on
nual reports and subscribe for news and RSS feeds on the website.
the price of and the liquidity in the Tryg share.
In 2011, the Tryg share ended at a price of 319, and during 2012 it
From 2011 to 2012, the total annual turnover (including OTC trades)
increased, reaching 426.50 at the end of the year. Including a dividend
fell from 50 million shares in 2011 to 34 million shares in 2012.
Shareholders
At 31 December 2012
11
Per cent
60
17
12
TryghedsGruppen
Large Danish
shareholders a)
Large international
shareholders a)
Small shareholders
Free float – geographical distribution
At 31 December 2012
8
4
Per cent
51
15
22
Denmark
UK
United States
Nordic region
Others
a) Shareholders holding more than 10,000 shares.
Free float is exclusive TryghedsGruppen.
Tryg share and dividend policy | Annual report 2012 | Tryg A/S |
41
Capital and dividend distribution
DKKm
Dividend
Dividend per share (DKK)
Payout ratio
Share buyback
2008
442
6.5
52%
0
2009
991
15.5
49%
799
2010
256
4
43%
0
2011
2012a)
400
6.52
35%
0
1,594
26
72%
800
a) Proposed by the Supervisory Board for adoption by the annual general meeting.
Share capital and ownership
•
A general objective of creating long-term value for the company’s
Tryg has a total share capital of DKK 1,532,902,575, comprising a sin-
shareholders.
gle share class (61,316,103 shares with a nominal value of DKK 25),
•
A competitive dividend policy in comparison with those of our
and all shares rank pari passu. The principal shareholder, Trygheds-
Nordic competitors.
Gruppen smba, Denmark, owns 60% of the issued shares and is the
only shareholder owning more than 5% registered in the company’s
register of shareholders. TryghedsGruppen invests in peace-of-mind
and healthcare providers in the Nordic region, and supports charit-
able activities.
•
•
•
•
Distribution of 60-90% of the profit after tax.
Aspiration to distribute a dividend which is steadily increasing in
nominal terms.
An unchanged return on equity of 20% after tax.
The capital level must at all times reflect the objective of a 20%
return on equity as well as the Group’s strategic plans.
As of 31 December 2012, there was a free float of 40% of the shares,
•
The capital level may extraordinarily be adjusted through a share
divided among 25,213 registered shareholders. The 200 largest
buyback.
shareholders owned 88% of the shares. At the end of 2012, Tryg held
621,292 treasury shares, corresponding to 1.0% of the share capital.
At the 2013 annual general meeting, the Supervisory Board will pro-
pose the payment of a cash dividend of DKK 1,594m, corresponding
Dividend policy
to DKK 26 per share.
From the year 2012, Tryg has changed its dividend policy to achieve a
higher degree of stability in the annual distribution. The new dividend
Tryg has decided to take out an irredeemable subordinate loan, and
policy reflects our expectations of high earnings in the insurance
for that purpose purchase treasury shares of DKK 800m in order to
business and a low risk profile within the investment activities, as well
reduce equity by a corresponding amount.
Read more in the
as the requirement to have a solid capital position based on Tryg’s
chapter Capital and risk management on page 38.
internal capital model (Individual Solvency). In future, Tryg’s internal
capital model will provide the framework for the company’s capital
Annual general meeting
requirement. Tryg’s future dividend policy will be based on the
Tryg’s annual general meeting will be held on 18 April 2013 at 14:00
following assumptions:
at Falkoner Centret, Falkoner Allé 9, 2000 Frederiksberg, Denmark.
The notice will be advertised in the daily press in March 2013 and will
be sent to shareholders, if requested. The annual general meeting
will also be announced on tryg.com, where shareholders not able to
attend can follow the proceedings live via webcast.
42 | Tryg A/S | Annual report 2012 | Tryg share and dividend policy
Financial calendar 2013
18 April 2013
19 April 2013
24 April 2013
30 April 2013
10 July 2013
Annual general meeting
Tryg shares trade ex-dividend
Payment of dividend
Interim report for Q1
Interim report for H1 2013
10 October 2013
Interim report for Q1-Q3 2013
Company announcements published in 2012
Date
No.
Company announcement
8 February 2012
8 February 2012
13 February 2012
22 March 2012
29 March 2012
17 April 2012
19 April 2012
19 April 2012
2 May 2012
18 June 2012
19 June 2012
2 August 2012
14 August 2012
12 October 2012
6 November 2012
8 November 2012
13 December 2012
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
Annual report 2011
Tryg reconsiders strategy for Finland
Annual general meeting
Notice of annual general meeting
Election of employee representatives for Supervisory Board
Tryg changes reporting structure from Q1 2012
New Investor Relations Director in Tryg
Resolutions from annual general meeting
Interim report for Q1 2012
Changes in Group Executive Management
Announcement of new financial targets and Capital Markets Day in London
Interim reports for Q2 2012 and H1 2012
Revised financial calendar 2012
Financial calendar 2013
Tryg sells Finnish business and concludes new partnership agreement with Nordea
Interim report for Q1-Q3 2012
New dividend policy and repayment of subordinate loan
Tryg share and dividend policy | Annual report 2012 | Tryg A/S |
43
Innovative claims prevention Many corporate customers in
the Copenhagen area remember the cloudburst on 2 July 2011.
The cloudburst flooded many basements and destroyed millions
of kroner’s worth of electronics. Thanks to an innovative idea,
our customers can now install a sensor which makes the lift in
a building stop before it reaches the water in the basement.
The 2011 cloudburst led us to start reflecting on how we could prevent and minimise damage to, for example,
electronics. Together with one of our small subsuppliers, we have developed a solution: a sensor which
stops lifts if there is water in the basement and switches electrical panels off automatically if water is
leaking into the basement. A modest investment of DKK 7,500 which will save our customers a lot of
trouble if a new cloudburst strikes.
One of Tryg’s corporate customers, AP Pension, suffered several million kroner’s worth of damage as
a result of the cloudburst. The cost of repairing its lifts alone was significant. Although the damage is
covered by insurance, it causes great inconvenience to a business of this size to have to go through a
claims procedure. AP Pension has now been one of the first to install sensors in its basements.
Corporate governance
Tryg focuses on managing the Group in accordance with the principles
Each year, the Supervisory Board proposes the distribution of dividend
for good corporate governance. Tryg complies to the widest possible
and possibly a share buyback. In 2010, the annual general meeting au-
extent with the Recommendations on Corporate Governance prepared
thorised the Supervisory Board to allow Tryg to acquire treasury shares
by the Danish Committee on Corporate Governance, which were
up to 10% of the share capital until 14 April 2015.
most recently updated in 2011. The recommendations are available
at www.corporategovernance.dk. Tryg has published the statutory
Annual general meeting
report according to the ‘comply-or-explain’ principle for each
Tryg holds its annual general meeting each year before the end of April.
recommendation at tryg.com. A summary of the report is provided
As required by the Danish Companies Act and the Articles of Association,
below.
Download Tryg’s statutory corporate governance report
the annual general meeting is convened via a company announcement
at tryg.com > Investor > Download.
and at tryg.com subject to at least three weeks’ notice. Shareholders
may also opt to receive the notice by post or email. The notice contains
Dialogue between Tryg and its shareholders
information about time and venue as well as an agenda for the
Tryg issues press releases and company announcements, and pub-
meeting, which as a minimum includes the following items:
lishes annual and interim reports, which are available at tryg.com.
Tryg provides quarterly updates of the Group’s outlook. This material
•
Report by the Supervisory Board on the company’s activities during
provides all stakeholders with a comprehensive picture of Tryg’s
the past financial year.
position and performance. The consolidated financial statements are
•
Presentation of the annual report for adoption, including remunera-
prepared in accordance with IFRS, and all company announcements
tion for the Supervisory Board and discharge from liability of the
and financial statements are published in Danish and English. Stake-
Supervisory Board and Executive Management.
holders may order printed annual reports and subscribe to news at
•
Resolution concerning the appropriation of profits or the cover of
tryg.com. A number of internal guidelines ensure that the disclosure
losses in accordance with the annual report.
of price-sensitive information complies with the stock exchanges’
• Proposals from the Supervisory Board or from shareholders.
code of conduct.
• Election of members to the Supervisory Board.
• Appointment of auditors.
Investor Relations maintains regular contact with analysts and
• Any other business.
investors. The Executive Management and Investor Relations also
organise investor meetings, teleconferences and webcasts and
All shareholders are encouraged to attend the annual general meeting.
attend conferences in Denmark and abroad. The Supervisory Board
The annual general meeting is webcast, allowing stakeholders to
is informed of the dialogue with investors and other stakeholders on
watch the annual general meeting at tryg.com both during and after
a regular basis.
the meeting.
Share and capital structure
Shareholders may propose items to be included on the agenda for the
Tryg’s share capital comprises a single share class, and all shares
annual general meeting and may ask questions at the annual general
rank pari passu. The principal shareholder, TryghedsGruppen smba,
meeting. Shareholders may vote in person at the annual general meet-
Kgs. Lyngby, Denmark, owns 60% of the issued shares and is the only
ing, by post or appoint the Supervisory Board or a third party as their
shareholder owning more than 5% to be registered in the company’s
proxy. Shareholders may consider each item on the agenda. The proxy
register of shareholders.
form and form for voting by post are available at tryg.com prior to the
The Supervisory Board ensures that Tryg’s capital structure is in line
annual general meeting.
with the needs of the Group and the interests of its shareholders and
The annual general meeting is held by personal attendance as the
complies with the requirements applicable to Tryg as a financial un-
Supervisory Board values personal contact with the Group’s share-
dertaking. Tryg has adopted a capital plan and a contingency capital
holders. The Supervisory Board and the Group Executive Management
plan, which are reviewed annually by the Supervisory Board.
attend the annual general meeting whenever possible, and this has
high priority.
46 | Tryg A/S | Annual report 2012 | Corporate governance
Download
statutory corporate
governance report
Takeover bids
Each year, the Supervisory Board discusses Tryg’s activities to
The Supervisory Board will consider any public takeover bid as
guaran tee diversity at management levels. Tryg places great emphasis
prescribed by legislation and, depending on the nature of such bid,
on diversity at all levels of management, and in January 2012 the
convene an extraordinary general meeting.
company signed the ‘Charter for More Women in Management’. Tryg
supports the charter which aims to guarantee equal career opportuni-
Stakeholders and corporate social responsibility
ties for women and men. Tryg has prepared an action plan which sets
Identification of stakeholders is an integral part of the strategy review
out specific targets to ensure diversity and equal opportunities and
at the Supervisory Board’s annual strategy seminar, which always
access to management positions for qualified men and women. In
focuses on investors, customers, society and employees. The Super-
2012, the number of women at management level was 34.0%, and
visory Board also receives regular reports about Tryg’s investor mix
Tryg aims to increase the total number of women in management by
and employee and customer satisfaction.
2% by 2014.
See the action plan at tryg.com > CSR.
Tryg has adopted a number of policies describing Tryg’s relationship
Rules of procedure
with various stakeholders, including a CSR policy which describes
Each year, the Supervisory Board reviews the rules of procedures for
Tryg’s CSR strategy and policy on corporate social responsibility.
the Supervisory Board and the Executive Management with relevant
See the Investor Relations policy at tryg.com > Investor
guidelines and instructions describing reporting requirements and
> IR contacts > IR policy and the CSR policy at tryg.com > CSR
requirements for communication with the Executive Management.
> CSR strategy > CSR policy.
Financial legislation also requires the Executive Management to
disclose all relevant information to the Supervisory Board and report
Openness and transparency
on compliance with limits defined by the Supervisory Board and
Tryg has adopted an Investor Relations policy which states, among
in legislation.
other things, that all company announcements and financial state-
ments are published in Danish and English and that Tryg publishes
Chairman and Deputy Chairman of the Supervisory Board
interim financial statements each quarter.
The Supervisory Board is headed by a Chairman and a Deputy Chair-
man. The Deputy Chairman will act in the Chairman’s absence and
Duties and responsibilities of the Supervisory Board
serves as a discussion partner for the Chairman.
The Supervisory Board is responsible for the central strategic manage-
ment and financial control of Tryg and for ensuring that the business
The tasks of the Chairman and Deputy Chairman are defined in the
is organised in a sound way. This is achieved by monitoring targets
Supervisory Board’s rules of procedure. The tasks of the Chairman
and framework on the basis of regular and systematic review of
include chairing and assessing the work of the Supervisory Board,
the strategy and risks. The Executive Management reports to the
organising, convening and chairing board meetings and being in
Supervisory Board on strategies and action plans, market develop-
charge of the cooperation with the Executive Management. The
ments and Group performance, funding issues, capital resources
Chairman also acts as spokesman for the Supervisory Board.
and special risks. The Supervisory Board holds an annual strategy
seminar to define and/or adjust the Group’s strategy. The Executive
The Chairman and Deputy Chairman hold preparatory meetings with
Management works with the Supervisory Board to ensure that the
the Executive Management before all board meetings. According
Group’s strategy is developed and monitored. The Supervisory Board
to the Supervisory Board’s rules of procedure, no board member
ensures that the necessary competencies and financial resources are
may perform work for Tryg without a prior decision to that effect by
available for Tryg to achieve its strategic targets. The framework is
the Supervisory Board. Furthermore, such work must be of a non-
discussed at the strategy seminar and at an annual budget meeting.
recurring nature.
The Supervisory Board specifies its activities in the company’s rules
of procedure and annual cycle.
Composition and organisation of Supervisory Board
The Supervisory Board has 12 members, and the Supervisory Board
deems the number of members adequate to ensure a constructive
Corporate governance | Annual report 2012 | Tryg A/S |
47
debate, sufficient diversification and an efficient decision-making
sory Board in terms of, among other things, age, gender and nationality
process. The Supervisory Board considers the number of board
is sought, and the need for integrating new talent is considered.
members each year when preparing the annual general meeting.
Furthermore, the Supervisory Board performs an annual evaluation
New board members are given an introduction to Tryg when taking
of the performance and achievements of the Supervisory Board and
up office.
See CVs and descriptions of the competencies of the
its members’ competencies to assess whether the Supervisory Board
Supervisory Board in the section Supervisory Board on pages 54-55
has the competencies required to perform its duties in the best
and at
tryg.com > Governance > Management > Supervisory Board.
possible way. In 2012, new requirements from the Danish Financial
Supervisory Authority came into effect, prompting the Supervisory
Independence of the Supervisory Board
Board to carry out a further self-evaluation in October. The Super-
Eight members of the Supervisory Board are elected by the annual
visory Board focuses, in particular, on competencies in the fields of
general meeting for one year at a time. Of the eight members elected
insurance, economics, accounting, financial knowledge and experi-
at the annual general meeting, four are independent persons as
ence, manage ment experience, M&A experience, market insight and
stated in recommendation 5.4.1 in Recommendations on Corporate
international experience.
See the description of competencies at
Governance, while the other four members are not independent
tryg.com and in the notice convening the annual general meeting.
persons as they are appointed by the principal shareholder Trygheds-
The Supervisory Board has carried out a self-evaluation as required
in the section Supervisory Board on pages 54-55 and at
tryg.com
by the Danish Financial Supervisory Authority’s guidelines on
> Governance > Management > Supervisory Board.
This is also
evaluation of board members’ knowledge and experience in general
described in the notice convening the general meeting.
Gruppen.
See details about the independent board members
insurance companies. The evaluation concludes that the Supervisory
Board as a whole has the knowledge and experience necessary to
Board members elected by employees
perform its tasks.
Under the Danish Companies Act, employees are entitled to elect a
number of representatives to the Supervisory Board, equal to half
The Articles of Association stipulate that the Chairman of Trygheds-
the number of other members at the time employee elections are
Gruppen’s Supervisory Board must also be Chairman of Tryg’s
held. Tryg has agreed with Tryg’s staff organisations that two board
Supervisory Board. Furthermore, TryghedsGruppen’s Supervisory
members are elected among employees in Denmark, one member
Board recommends three members to Tryg’s Supervisory Board from
among employees in Norway and one member among employees in
among the members of TryghedsGruppen’s Supervisory Board.
Sweden. Employee representative elections were held in 2012. The
next election will be held in 2016. Danish law states that employee
The Supervisory Board includes members from Denmark, Sweden
representatives have the same rights, obligations and responsibilities
and Norway and has five female members, including three female
as the other board members.
employee representatives.
Meeting frequency
New board members
The Supervisory Board holds at least seven meetings a year and an
The process of selecting new board members is thorough and trans-
annual strategy seminar to discuss and define strategies and targets
parent for the board members. The Nomination Committee selects
for the years ahead. In 2012, the Supervisory Board held seven board
new candidates for the four board positions, which are not selected
meetings and the annual strategy seminar. The Supervisory Board
from among the members of TryghedsGruppen’s Supervisory Board,
discusses the Supervisory Board’s tasks on a regular basis, and at the
and presents its recommendation for the selection of candidates to
last meeting of the year at the latest, it determines its meeting and
the Supervisory Board.
work schedule for the coming year.
Prior to the election of new members, the Supervisory Board prepares a
Number of other directorships
description of the candidates’ background, directorships, professional
The Supervisory Board and the individual board members deem that
qualifications and experience. A balanced composition of the Supervi-
each member has adequate time and resources to perform their
48 | Tryg A/S | Annual report 2012 | Corporate governance
office as board members of Tryg in a satisfactory manner. Information
as well as accounting and auditing in publicly listed companies. The
about the board members’ position, directorships and shareholding
Audit Committee held four meetings in 2012 and reported regularly
and changes in portfolios can be found under their CVs.
to the Supervisory Board. In August 2012, the Audit Committee
See the CVs in the section Supervisory Board on pages 54-55 and
carried out an evaluation of the preceding year’s work.
See the
at
tryg.com > Governance > Management > Supervisory Board.
tasks of the Audit Committee in 2012 at tryg.com > Governance
> Management > Supervisory Board > Board committees.
Retirement age and election period
Board members elected by the annual general meeting are up for
Risk Committee
election each year at the annual general meeting. See pages 54-55 for
Tryg has had a Risk Committee since 2010. The Risk Committee is
information on when the individual members joined the Supervisory
responsible for supervising asset and risk management. The Risk
Board, were re-elected and when their current election period expires.
Committee monitors the risk management environment as well as
To ensure the integration of new talent on the Supervisory Board,
associated processes. The Committee has four members, and in
members elected by the annual general meeting may hold office for a
2012 the Risk Committee held four meetings.
maximum of nine years. Furthermore, members of the Supervisory
See the tasks of the Risk Committee at tryg.com > Governance
Board must retire at the first annual general meeting following their
> Management > Supervisory Board > Board committees.
70th birthday.
See the ages of the individual board members
on pages 54-55 and at
tryg.com > Governance > Management
Nomination Committee
> Supervisory Board.
Board committees
Tryg has set up a Nomination Committee which is primarily tasked
with ensuring the correct composition and size of the Executive
Management and the Supervisory Board. The committee consists of
Tryg’s Supervisory Board has set up an Audit Committee, a Risk
the Chairman and Deputy Chairman and meets as needed, although
Committee, a Nomination Committee and a Remuneration Com-
at least twice a year.
See the tasks of the Nomination Committee
mittee. The board committees’ terms of reference are available at
at tryg.com > Governance > Management > Supervisory Board >
tryg.com and include descriptions of members, meeting frequency,
Board committees.
responsibilities and the activities of the committees during the year.
The special competencies of each member are also described
Remuneration Committee
separately at tryg.com.
The Remuneration Committee carries out preparatory work on behalf
of the Supervisory Board relating to remuneration for the Supervisory
Two out of four members of the Audit Committee and the Risk Com-
Board, the Group Executive Management and significant risk-takers.
mittee, including the chairman of the committees, are independent
The Remuneration Committee has four members, and the Chairman
persons. One out of four members of the Remuneration Committee
of the Supervisory Board is Chairman of the Remuneration Commit-
is an independent person, while one out of two members of the
tee. Moreover, the committee must consist of at least one member of
Nomination Committee is independent.
TryghedsGruppen and at least one independent board member.
The committee has one independent member at the present time.
Board committee members are elected primarily on the basis of their
special competencies that are considered important by the Supervi-
The Remuneration Committee held four meetings in 2012. The work
sory Board. It is also considered important to involve the employee
of the Remuneration Committee is based on Tryg’s remuneration
representatives in the committees. The committees exclusively
policy.
See the tasks of the Remuneration Committee at tryg.com
prepare matters for decision by the entire Supervisory Board.
> Governance > Management > Supervisory Board > Board committees.
Audit Committee
Evaluation of the work of the Supervisory Board and
In 2006, Tryg set up an Audit Committee. The framework of the Audit
the Executive Management
Committee’s work is defined in its terms of reference. The committee
The Supervisory Board has defined an evaluation procedure for
has four members with knowledge and experience of financial matters
assessing the composition of the Supervisory Board and the
Corporate governance | Annual report 2012 | Tryg A/S |
49
achievements and performance of the Supervisory Board and its
Remuneration of the Executive Management
individual members.
Members of the Executive Management are employed on a con-
tractual basis, and all terms of their remuneration are fixed by the
The Chairman is in charge of the evaluation and holds evaluation
Super visory Board. The Supervisory Board fixes the remuneration of
interviews with each member at the beginning of the year, according
the Executive Management for one year at a time. There is an annual
to an agenda agreed in advance. The outcome is discussed at the
review based on the requirements for attracting and retaining the
first board meeting of the year. The Supervisory Board carries out
best-qualified Executive Management members. The fixed salary must
an annual evaluation of the achievements and performance of the
be competitive and appropriate for the market in order to provide
Executive Management in accordance with clearly pre-defined criteria
sufficient motivation for each director to do his or her best in order
and of the cooperation between the Supervisory Board and the
to achieve the company’s defined targets.
Executive Management. In addition, the Supervisory Board reviews
and approves the rules of procedure of the Supervisory Board and
The Executive Management’s remuneration consists of a fixed salary,
the Executive Management each year to ensure they are aligned with
pension and a variable salary. The variable salary constitutes only a
Tryg’s requirements.
limited part of the overall remuneration. The Supervisory Board can
decide that the fixed salary be supplemented with a variable salary
Remuneration of the management
of up to 10% of the fixed basic salary including pension at the time
Tryg has adopted a policy for remuneration of the Supervisory Board
of allocation. The Supervisory Board has decided that the variable
and the Executive Management, including general guidelines for
salary consists of a matching shares programme. Four years after the
incentive pay. The remuneration policy was adopted by the Super-
purchase by a member of the Executive Management of a specified
visory Board in February 2011 and approved by the annual general
number of shares, such member is allocated a corresponding number
meeting on 14 April 2011.
of free shares in Tryg. The allocation of matching shares at the time
of allocation is not dependent on Tryg’s financial performance.
The Chairman of the Supervisory Board reports on Tryg’s remunera-
The purpose of the matching shares programme is both to retain
tion policy each year in connection with the consideration of the an-
the member of the Executive Management, and to create a joint
nual report at the annual general meeting. The Supervisory Board’s
financial interest between the Executive Management and the
proposal for remuneration to the Supervisory Board for the current
company’s shareholders.
Read more about the matching
financial year is also submitted for approval by the shareholders at
shares programme in the remuneration policy at tryg.com
the annual general meeting of each year.
> Governance > Remuneration.
The remuneration policy also covers Tryg employees whose activities
Some members of the Executive Management still have unexercised
have a significant influence on the Group’s risk profile, known as risk-
share options, which were allocated under a previously adopted
takers, as well as employees in control functions such as compliance
share-option programme.
Please refer to Note 7 on page 98 for
and internal audit.
See the remuneration policy at tryg.com
further details.
> Governance > Remuneration.
Retention and severance schemes
Remuneration of the Supervisory Board
Each member of the Executive Management is entitled to 12 months’
Members of Tryg’s Supervisory Board receive a fixed fee and are not
notice of termination and 12 months’ severance pay. However, the
comprised by any form of incentive or severance programme. The board
Group CEO is entitled to 12 months’ notice and 18 months’ severance
members’ remuneration is fixed on the basis of trends in peer companies,
pay plus pension contributions during the same period.
taking into account board members’ required competencies, efforts
and the scope of the board’s work, including the number of meetings.
Each member of the Executive Management has 25% of the basic
The Chairman of the Supervisory Board receives a triple remunera-
salary paid into a pension scheme. One of the members of the
tion, while the Deputy Chairman receives a double remuneration.
Execu tive Management, however, receives a defined-benefit pension.
The Supervisory Board is not comprised by any pension scheme.
This is paid on an ongoing basis upon retirement. The benefit depends
50 | Tryg A/S | Annual report 2012 | Corporate governance
on years of service and constitutes part of the salary earned immedi-
ORSA is to link strategy, risk management and solvency as the aim
ately prior to retirement.
of the ORSA is to ensure a sensible correlation between the strategy
for assuming risks and the available capital over a period of three to
Risk management and internal control
five years.
Being an insurance business, Tryg is subject to the risk manage-
ment requirements set out in the Danish Financial Business Act.
The Supervisory Board and the Executive Management monitor the
The Supervisory Board uses policies to define the framework for risk
Group’s general policies and guidelines, procedures and controls in
management in Tryg in the areas of insurance risk, investment risk
significant risk areas, and receive reports on trends in these areas as
and operational risk, as well as IT security. With reference to these
well as the application of the defined frameworks. The Supervisory
frameworks, guidelines are issued from the Supervisory Board to the
Board checks that the company’s risk management and internal
Executive Management. A Risk Management Committee comprising
controls are effective. Any non-compliance with frameworks and
the Group CFO, Head of Group Risk and Head of Investments monitors
guidelines is reported to the Supervisory Board.
the risk management environment.
The Supervisory Board’s Risk Committee monitors the company’s
Tryg conducts an annual risk identification process, mapping insurance
risk management and control on an ongoing basis and reports on
risks and other risks related to the realisation of the Group’s strategy
this quarterly to the Supervisory Board.
or which may have a potentially substantial impact on the Group’s
financial position. The process involves registering and quantifying the
The Group’s internal control systems are based on clear organisa-
risks identified. Quantification of the risks identified is included in the
tional structures and guidelines, general IT controls and segregation
state ment of the individual solvency requirement that the Supervisory
of functions, which are supervised by the internal auditors. In 2012,
Board considers every quarter. In 2012, Tryg performed an assessment
Tryg introduced decentralised risk management whereby risk manag-
of the company’s risk and solvency (Own Risk and Solvency Assess-
ers in the individual business areas carry out controlling tasks for the
ment, also known as ‘ORSA’) in preparation for future requirements for
risk management environment and Tryg’s compliance function.
insurance companies under EU law (Solvency II). The purpose of the
Total remuneration of the Supervisory Board in 2012
DKK
Mikael Olufsen
Torben Nielsen
Jens Bjerg Sørensen
Paul Bergqvist
Jesper Hjulmand
Lene Skole
Tina Snejbjerg
Bill-Owe Johansson
Mari Thjømøe
Jørgen Huno Rasmussen
Vigdis Fossehagen
Lone Hansen
Jørn Wendel Andersen a)
Christian Brinch a)
Rune Torgeir Joensen a)
Berit Torm a)
a) Resigned board members.
Fee
Audit
Committee
Risk Remuneration
Committee
Committee
900,000
600,000
300,000
300,000
300,000
300,000
300,000
300,000
209,167
209,167
209,167
209,167
90,833
90,833
90,833
90,833
225,000
104,583
150,000
69,722
150,000
104,583
100,000
69,722
45,417
30,278
45,417
30,278
112,500
75,000
75,000
52,292
22,708
Total
1,012,500
975,000
474,306
375,000
375,000
550,000
474,306
300,000
209,167
209,167
261,458
209,167
166,528
90,833
166,528
113,542
Corporate governance | Annual report 2012 | Tryg A/S |
51
Total remuneration of the Executive Management in 2012
Basic salary
Pension
Car/
car allowance
Total
fixed salary
Value of
matching
shares a)
Total fee
8,215,144
4,638,741
4,121,583
2,053,786
1,007,173
1,030,396
255,000
154,564
255,000
10,523,930
5,800,478
5,406,979
850,000
550,000
400,000
11,373,930
6,350,478
5,806,979
DKK
Morten Hübbe
Tor Magne Lønnum
Lars Bonde
a) At the time of allocation.
The Executive Management has established a formal group reporting
Each year, the annual general meeting appoints an independent
process comprising monthly reporting, including budget reporting and
auditor recommended by the Supervisory Board. In connection with
deviation reporting, among other things.
the Supervisory Board’s review of the annual report, it discusses
Going concern assumption
accounting policies and other issues. The results of the audit are
discussed in the Audit Committee and at board meetings for the
When discussing and adopting the annual report, the Supervisory
purpose of assessing the auditor’s observations and conclusions.
Board considers whether the financial statements have been prepared
The internal and independent auditors’ long-form audit reports are
on a going-concern basis, including the underlying assumptions and
reviewed by the Supervisory Board. The audit agreement and asso-
uncertainties.
Whistleblowing scheme
ciated audit fee are agreed between the Supervisory Board and the
auditor on the basis of a recommendation from the Audit Commit-
tee. Each year, the Audit Committee reviews the framework for the
Tryg has set up an Ethical Hotline which is managed by an external
independent auditors’ performance of non-audit services.
partner, which allows employees, customers or business partners
to report any serious wrongdoing or suspicions of such. Reporting
At least once a year, the internal and external auditors meet with
takes place in confidence to the Chairman of the Audit Committee
the Audit Committee without the presence of the Executive
and Tryg’s internal Audit Manager.
See more about Tryg’s Ethical
Management. The Chairman of the Audit Committee will deal with
Hotline at tryg.com > Governance > Ethical Hotline.
any matters that need to be reported to the Supervisory Board.
Openness about risk management
Internal audit
Risk management is an integral part of Tryg’s business operations. The
Tryg has set up an internal audit department which regularly
Group seeks at all times to minimise the risk of unnecessary losses in
reviews the quality of the Group’s internal control systems and
order to optimise returns on the company’s capital.
Read more
business procedures. The department is responsible for planning,
about Tryg’s risk management in the section Capital and risk manage-
performing and reporting the audit work to the Supervisory Board.
ment on page 38 and in note 1 page 77.
Deviations and explanations
Audit
The Supervisory Board follows the Recommendations on Corporate
The Supervisory Board ensures that the Group is monitored by compe-
Governance with the exception of the recommendation for the
tent and independent auditors. The Group’s internal auditor attends all
number of independent members of the board committees as stated
meetings of the Supervisory Board. The independent auditor attends
in item 5.10.2 of the Recommendations on Corporate Governance.
the annual board meeting at which the annual report is presented.
The deviation is explained in Tryg’s statutory corporate
governance report, which is available at tryg.com > Downloads.
52 | Tryg A/S | Annual report 2012 | Corporate governance
Supervisory Board
Mikael Olufsen a)
Chairman
Born 1943. Joined: 1997. Nationality: Danish.
Professional board member. Former CEO of
Toms Chokoladefabrikker A/S.
Education: MSc in Forestry, PMD Harvard
Business School.
Chairman: TryghedsGruppen smba, Tryg A/S,
Tryg Forsikring A/S, Egmont Fonden (Egmont
Foundation), Egmont International Holding
A/S, Ejendomsselskabet Gothersgade 55 ApS,
Ejendomsselskabet Vognmagergade 11 ApS,
Malaplast Co. Ltd and Gigtforeningen (Danish
Rheumatism Association).
Board member: WWF Verdensnaturfonden
(WWF in Denmark) and Danmark-Amerika
Fondet (Denmark-America Foundation).
Committee memberships: Chairman of Remu-
neration and Nomination Committee in Tryg A/S.
Number of shares held: 3,018
Change in portfolio in 2012: 0
Experience from managing international
companies, including strategic development,
and experience as a board member of Danish
and international companies.
Torben Nielsen b)
Deputy Chairman
Born 1947. Joined: 2011. Nationality: Danish.
Professional board member. Adjunct Professor,
CBS. Former Governor, Danmarks Nationalbank.
Education: Savings bank training, Graduate Diplo-
mas in Organisation and Work Sociology as well as
Credit and Financing.
Chairman: Investeringsforeningen Sparinvest,
Eik banki p/f, Plass Data A/S, VP Lux S.à.r.l.,
Investeringsforeningen Sparinvest SICAV,
Luxembourg and Museum Sydøstdanmark.
Deputy Chairman: Tryg A/S, Tryg Forsikring A/S,
VP Securities A/S and Bankernes Kontantservice A/S.
Board member: Nets Holding A/S and member
of the Executive Board of Bombebøssen and
DLR Kredit A/S.
Committee memberships: Audit and Risk
Committee (Chairman) and Nomination
Committee in Tryg A/S.
Number of shares held: 3,500
Change in portfolio in 2012: +2,000
Special skills in management, governance, finance,
financial services and risk management from his
role as Governor of Danmarks Nationalbank and
board positions.
Paul Bergqvist b)
Born 1946. Joined: 2006. Nationality: Swedish.
Professional board member. Former CEO of
Carlsberg A/S.
Education: Economist and engineer.
Chairman: Sverige Bryggerier AB, East Capital
Explorer AB, HTC Group AB, Pieno Zvaigzdes
AB, Svenska Returpack AB, Norrköpings Segel
Sällskap and Östkinds Häradsallmänning.
Board member: Tryg A/S, Tryg Forsikring A/S
and Björk Eklund Group AB.
Committee memberships: Remuneration
Committee in Tryg A/S.
Number of shares held: 100
Change in portfolio in 2012: 0
International management and board
experience within M&A, strategic development,
marketing, branding and financial management.
Being a Swedish citizen, Paul Bergqvist has
special insights into Swedish market conditions.
Bill-Owe Johansson
Employee representative
Born 1959. Joined: 2010. Nationality: Swedish.
Claims Handler (Moderna). Employed in 2002.
Education: Insurance training courses.
Board member: Tryg A/S and Tryg Forsikring A/S.
Number of shares held: 200
Change in portfolio in 2012: 0
Vigdis Fossehagen
Employee representative
Born 1955. Joined: 2012. Nationality: Norwegian.
Chairman of Finansforbundet (Finance Sector
Union of Norway) in Tryg, Norway.
Employed in 1996.
Education: Educated in the area of agricultural
mechanics.
Board member: Tryg A/S and Tryg Forsikring A/S.
Committee memberships: Remuneration
Committee in Tryg A/S.
Number of shares held: 0
Jens Bjerg Sørensen a)
Born 1957. Joined: 2011. Nationality: Danish.
CEO of the public limited company Schouw & Co
and Dutch Consul. Former CEO of BioMar A/S.
Education: Academy Economist, Graduate
Diploma in Marketing Management and IEP
– Executive Programme from Insead.
Chairman: Dovista A/S. Chairman or Deputy
Chairman in Schouw & Co companies.
Board member: Tryg A/S, Tryg Forsikring A/S,
TryghedsGruppen smba and Aida A/S.
Committee memberships: Audit and Risk
Committee in Tryg A/S.
Number of shares held: 118
Change in portfolio in 2012: 0
Experience from international management, stra-
tegic development, finance, M&A and branding.
54 | Tryg A/S | Annual report 2012 | Supervisory Board
a) Dependent board member.
b) Independent board member,
see definition in Corporate
Governance Recommendations.
Jesper Hjulmand a)
Born 1963. Joined: 2010. Nationality: Danish.
CEO of SEAS-NVE amba. Former CFO and
CEO of NVE and Budget Manager and Chief
Accountant of Rockwool A/S.
Education: MSc in Economics and Business
Administration and Lieutenant-Colonel in the
Royal Danish Air Force Reserve.
Chairman: Dansk Energi- og Forsyningsselskabers
Arbejdsgiverforening, Energi Danmark A/S,
CLEVER A/S.
Board member: TryghedsGruppen smba, Tryg
A/S, Tryg Forsikring A/S, DI General Council and
Forskerparken CAT A/S.
Committee memberships: Remuneration
Committee in Tryg A/S.
Number of shares held: 1,750
Change in portfolio in 2012: 0
Experience from positions with SEAS-NVE and
the Royal Danish Air Force, within the fields of
M&A, strategy, organisational and management
development, communication and business
development.
Mari Thjømøe b)
Born 1962. Joined: 2012. Nationality: Norwegian.
Professional board member and independent
advisor. Former CFO of KLP.
Education: Master of Economics and Business
Administration, Financial Analyst (CFA) and
management programme at the London Business
School.
Chairman: Bank2 ASA, Norgani Hotels AS and
Seilsport Maritimt Forlag AS.
Board member: Tryg A/S, Tryg Forsikring A/S,
Petoro AS, SinOceanic Shipping ASA, Argentum
Fondsinvesteringer AS and Sevan Marine ASA.
Number of shares held: 200
Change in portfolio in 2012: +200
Management experience from a number of
major enterprises such as Norsk Hydro and
Statoil. She has special knowledge of strategic
and financial planning, restructuring, investment
and investor relations. As a Norwegian citizen,
she has special insights into Norwegian market
conditions.
Jørgen Huno Rasmussen a)
Born 1952. Joined: 2012. Nationality:
Danish. CEO of FLSmidth & Co. A/S.
Education: Graduate Diploma in Organisation,
Graduate Engineer and Ph.d.
Chairman: Subsidiaries in the FLSmidth Group,
LundbeckFond Invest A/S and the Lundbeck
Foundation.
Deputy Chairman: Cembrit Holding A/S and
TryghedsGruppen smba.
Board member: Tryg A/S, Tryg Forsikring A/S,
Vestas Wind Systems A/S and Bladt
Industries A/S.
Number of shares held: 366
Change in portfolio in 2012: 0
As the CEO of FLSmidth, Jørgen Huno
Rasmussen has experience in international
management and special competencies
within strategy, business development,
communication, risk management and finance.
Lene Skole b)
Born 1959. Joined: 2010. Nationality: Danish.
Executive Vice President of Coloplast A/S.
Former CFO of The Maersk Company Ltd., UK.
Education: A.P. Møller Group international
shipping education, Graduate Diploma in
Financing and various international management
programmes.
Board member: Tryg A/S, Tryg Forsikring A/S and
DFDS A/S.
Committee memberships: Audit and Risk
Committee in Tryg A/S.
Number of shares held: 745
Change in portfolio in 2012: +335
Experience from international corporations via
her work in Coloplast and Mærsk UK and skills in
strategy, economics, financing and communication.
Tina Snejbjerg
Employee representative
Born 1962. Joined: 2010. Nationality: Danish.
Senior clerk in Tryg’s personnel department.
Employed since 1987.
Education: Insurance training.
Board member: Tryg A/S and Tryg Forsikring A/S.
Committee memberships: Audit and Risk
Committee in Tryg A/S.
Number of shares held: 86
Change in portfolio in 2012: 0
Lone Hansen
Employee representative
Born 1966. Employed in 1990. Joined: 2012.
Nationality: Danish. Chairman of the Association
for Tied Agents and Key Account Managers in Tryg.
Education: Certified commercial insurance
agent. Various insurance and sales courses and
negotiation training.
Board member: Tryg A/S and Tryg Forsikring A/S.
Number of shares held: 86
Change in portfolio in 2012: 0
Supervisory Board | Annual report 2012 | Tryg A/S |
55
Back row, from left Truls Holm Olsen, Lars Bonde, Rikke Larsen, Nicklas Larsen, Tor Magne Lønnum.
Front row, from left Morten Hübbe, Per Fornander, Birgitte Kartman.
Group Executive Management
Morten Hübbe
Group CEO
Tor Magne Lønnum
Group CFO
Born 1972. Employed in 2002. Joined
the Group Executive Management in 2003.
Appointed Group CEO in 2011.
Member of the Executive Management
and the Group Executive Management.
Education: BSc in International Business
Administration and Modern Languages, MSc
in Finance and Accounting and management
programme at Wharton.
Board member: Forsikring & Pension
(Danish Insurance Association) and
Tjenestemændenes Forsikring.
Number of shares held: 9,910
Change in portfolio in 2012: +2,820
Born 1967. Employed in 2011. Joined the
Group Executive Management in 2011.
Member of the Executive Management and
the Group Executive Management.
Education: State-authorised public ac-
countant, Executive Master of Business and
Administration, University of Bristol and École
Nationale des Ponts et Chaussées.
Board member: Tryg Garantiforsikring A/S
(Chairman), Thermopylae AS (Chairman) and
Finansnæringens Fellesorganisasjon.
Number of shares held: 3,510
Change in portfolio in 2012: +1,810
Lars Bonde
Group Executive Vice President, Private,
Country Manager in Denmark and COO
Born 1965. Employed in 1998. Joined the
Group Executive Management in 2006.
Member of the Executive Management and
the Group Executive Management.
Education: Insurance training and LL.M.
Board member: Finanssektorens
Arbejdsgiverforening (Danish Employers’
Association for the Financial Sector) and
Tjenestemændenes Forsikring.
Number of shares held: 3,687
Change in portfolio in 2012: +733
Truls Holm Olsen
Group Executive Vice President, Corporate
and Country Manager in Norway
Rikke Larsen
Group Executive Vice President,
People & Reputation
Born 1964. Employed in 1998. Joined the
Group Executive Management in 2009.
Born 1971. Employed in 2000. Joined the
Group Executive Management in 2012.
Education: LL.M.
Board member: Tryg Garantiforsikring
A/S, Energon AS, Norsk Naturskadepool
(Norwegian Natural Perils Pool) and
Tryg Almennyttige Stiftelse.
Number of shares held: 2,017
Change in portfolio in 2012: +1,000
Education: LL.M. and lawyer.
Number of shares held: 35
Change in portfolio in 2012: 0
Birgitte Kartman
Group Executive Vice President, Claims
Born 1960. Employed in 1996. Joined the
Group Executive Management in 2009.
Education: LL.M.
Board member: The Danish Insurance
Academy
Number of shares held: 2,617
Change in portfolio in 2012: +1,010
Per Fornander
Group Executive Vice President and
Country Manager in Sweden
Nicklas Larsen
Acting Group Executive Vice President,
Commercial
Born 1963. Employed in 2011. Joined the
Group Executive Management in 2011.
Born 1973. Employed in 2011. Joined the
Group Executive Management in 2012.
Education: Marketing DIHM, IHM Business
School in Stockholm.
Education: Graduate engineer and MSc in
Business Administration and Financing.
Board member: Tryg Garantiforsikring A/S,
Svensk Försäkring, Försäkringsbranschens
Arbetsgivarorganisation and Försäkrings-
branschens Pensionskassa.
Number of shares held: 2,110
Change in portfolio in 2012: +1,010
Number of shares held: 0
Change in portfolio in 2012: 0
Group Executive Management | Annual report 2012 | Tryg A/S |
57
Back row, from left Truls Holm Olsen, Lars Bonde, Rikke Larsen, Nicklas Larsen, Tor Magne Lønnum.
Front row, from left Morten Hübbe, Per Fornander, Birgitte Kartman.
Corporate Social Responsibility
In Tryg, corporate social responsibility is an integrated part of running
Such initiatives benefit society significantly in that they minimise dam-
a healthy business. Thus, responsibility and sustainability are key
to developing our business and to our branding. More specifically,
age to infrastructure and buildings as well as reducing CO2 emissions.
See the climate targets at tryg.com > CSR > Thematic areas >
Tryg focuses on reducing the climate impact of its activities and on
Climate.
protecting and promo ting human rights in the Nordic countries.
Tryg’s CSR commitment concentrates on four thematic areas:
Another focus area is Tryg’s Mobility Management programme
Climate, Prevention, Inclusion and Well-being.
which unites our interest in reducing CO2, improving the health of
our employees and cutting costs with society’s interest in reducing
Moreover, anti-corruption and responsible sourcing and investments
road congestion and promoting sustainable transport. Key to the
guide all Tryg’s processes and planning activities.
See Tryg’s CSR
programme is changing the transport habits of Tryg’s employees,
policy at tryg.com > CSR > CSR strategy > CSR policy.
both those who drive to and from work and those who take a taxi
Climate
when going to meetings. The programme has been developed
in collaboration with the Municipality of Ballerup, Formel M and
In handling claims, we come face to face with the consequences of climate
neighbouring businesses in Ballerup.
change every year. Damage caused by cloudbursts, landslides and hur-
ricanes impacts Tryg’s customers considerably. The prevention of climate-
Specific initiatives aimed at making it easier for employees to choose
related claims is therefore a key priority, and together with customers,
to go by bike or public transport as alternatives to private motor
researchers and the authorities, Tryg is focusing on finding new ways of
vehicles include access to commuter bicycles to and from the
minimising and handling the consequences of such perils. The climate
nearest bus and train station, more bicycle parking spaces, more
perspective is also used to identify new ways of cutting operating costs.
changing and showering facilities and the offer of bicycle repairs
at the main office. Two electric cars are available when attending
In 2012, Tryg made its expertise available to the Danish Ministry of
meetings and supple ment a new taxi arrangement with a company
the Environment and participated in the recording of the ministry’s
offering environmentally friendly solutions. Moreover, air travel has
climate campaign movie. The campaign focuses on how citizens
been reduced considerably since 2009 through the use of video
can prevent water damage caused by climate change. In 2013, we
conference facilities.
expect to launch a climate check programme for our customers
which will help them identify preventive measures and give benefits
to customers who implement such measures.
The main sources of CO2 emissions from Tryg’s buildings and trans-
port activities come from heating, electricity and waste as well as air
CO2 emissions
Tonnes
3,000
2,500
2,000
1,500
1,000
500
0
Electricity
Heating oil
Air travel
Motor
Waste
Kg
300,000
250,000
200,000
150,000
100,000
50,000
0
Paper waste
Corrugated
cardboard
Biowaste
Residual waste
2011
2012
2011
2012
58 | Tryg A/S | Annual report 2012 | Corporate Social Responsibility
travel. Tryg has introduced a number of initiatives aimed at reducing
At Tryg, we are devoted to creating an attractive workplace character-
emissions. These include the use of low-energy bulbs and LED lighting,
ised by equal opportunities for men and women. We have signed
electricity savings achieved by having cleaning done in daylight hours
the ‘Charter for Women in Management’ and submitted our first
rather than at night and increased focus on reducing waste. For paper
report in 2012. In spring 2012, Tryg’s action plan was turned into an
waste alone, Tryg in Norway achieved a 53% reduction in 2012 com-
activity plan for the year, comprising specific initiatives such as a
pared to 2011. An internal campaign planned for 2013 will encourage
course for employees who are planning a management career, a
employees to act more sustainably in terms of their paper consump-
new programme for ‘successor planning’ to promote equal access to
tion, waste handling and transport and travel.
management positions for men and women, a new internal mentor
CO2 emissions were reduced by a total of 27.5% from 2007 to 2012.
The CO2 reduction target for 2013 is 23% compared to 2007. Since
2007, Tryg has produced climate accounts on its consumption of
scheme for managers and employees and introductory courses on
diversity and inclusion for new managers and new employees.
Moreover, we have examined whether higher levels of sickness
absence among young women hamper their access to management
electricity, energy, air travel and vehicular transport.
See the
positions. In order to prevent sickness absence, the office in Bergen
climate accounts at tryg.com > CSR > Thematic areas > Climate.
has taken on a health visitor who advises mothers on the work/
Human rights
life balance.
Today, Tryg is finding that social responsibility is a significant competi-
With a view to ensuring equal pay for women and men performing
tion parameter in the insurance market. In particular, inclusion and
the same work, or work of the same value, Tryg carried out a number
diversity are central issues in our partnerships with customers, NGOs
of job assessments in 2012 and ensured an equalisation of pay
and public institutions.
Read more about the targets for our
where inequalities were identified.
human rights efforts at tryg.com > CSR > Thematic areas > Inclusion.
Read more about labour rights at tryg.com > CSR > Thematic
In 2012, the proportion of women in management fell from 37.5% to
areas > Well-being > Labour rights.
34.0%. The aim is to increase the share by 2% by 2014.
See the
Inclusion
action plan for women in management at tryg.com > CSR strategy
> Plans of action.
See the report for the Charter for More Women
Today, non-discrimination is an important human rights issue in
in Management (in Danish only) at tryg.com/dk > CSR > Inclusion.
the Nordic countries. Tryg is therefore taking active steps to ensure
equal treatment and to create an inclusive culture in Tryg. By
Translating diversity into improved well-being and better customer
reflecting the society of which we are part and exploring diversity
service requires knowledge about legislation prohibiting discrimin-
as a quality and a resource, we want to contribute to creating an
ation, but also insights into the stereotypes and prejudices which we
inclusive society.
all carry with us and which are inherent in our daily routines. Tryg has
therefore developed a workshop on diversity, aimed at disseminating
The purpose of Tryg’s efforts within the fields of diversity and inclusion
information about diversity and at removing structural barriers to
is to make the most of the potential which arises when employees from
diversity in connection with recruitment, employment, promotion
different backgrounds work together for the benefit of customers and
and dismissal, and at using diversity actively in the consultancy
colleagues. For this reason, we work actively with diversity emanating
offered to customers and in the development of the business.
from gender, age, ethnicity, disability, sexual orientation, faith and
religion. Priority is given to efforts aimed at women in management, the
In 2012, the Private sales function held a total of ten workshops,
active recruitment of employees of different ethnicities, accessibility
and the aim is to hold 30 workshops in 2013. In 2012, as a supple-
for employees with disabilities, marking of religious festivals and
ment to these workshops, Tryg took part in the City of Copenhagen’s
access to rooms for reflection as well as tolerance of different sexual
Innovækst project, the purpose of which is to measure the results of
orientations.
Read more about the activities at tryg.com > CSR
diversity efforts. Tryg also signed the City of Copenhagen’s Diversity
> Thematic areas > Inclusion.
Charter.
Watch the film on diversity in Tryg (in Danish) at
tryg.com > CSR > Thematic areas > Inclusion.
Corporate Social Responsibility | Annual report 2012 | Tryg A/S |
59
In August 2012, Tryg commissioned a study on access for people
peace-of-mind provider in the Nordic region and its ability to
with disabilities at our main office in Ballerup. Access to Tryg and the
increase customer satisfaction and loyalty.
canteen facilities were assessed, and the study showed that all mini-
mum requirements were met, and Tryg was given seven out of seven
A total of fourteen new refugee guides were recruited in 2012. The
points. This means, among other things, that access for wheelchair
plan for 2013 is to strengthen and disseminate knowledge about the
users and people with visual, hearing and developmental disabilities
project, to extend it to the Oslo area and to develop a set of guide-
was satisfactory, which is in line with Tryg’s efforts to ensure non-
lines for children, young people and unaccompanied asylum seekers
discrimination and socially responsible conduct.
on life i Norway.
In 2012, Tryg held a career day for people with disabilities, which
Personal data
was attended by 60 people. The career day was intended to provide
As an insurance company, we handle a variety of personal data every
inspiration for people with physical or mental disabilities on how
day. The correct processing of personal data and the promotion of
to improve their chances in the job market. The day was part of a
correct data protection are therefore Tryg’s contribution to protecting
national campaign for job seekers launched by the Danish Ministry of
and promoting the right to privacy. Ensuring the correct use of personal
Employment and Disabled Peoples Organisations Denmark.
data in our daily customer contact and claims handling activities is
crucial to our customer services. In order to increase Tryg employees’
One of the central partnership agreements made in 2012 was with
knowledge about the significance and importance of the consent to
the Union of Education Norway (UDF) and resulted in a joint project
use and disclose information on insurance matters and claims history,
with the Norwegian Red Cross on training refugee guides. The guides
40 seminars on personal data protection were held in 2012 by Tryg
are volunteers who help refugees to become integrated into their local
departments and units in business areas and staff functions.
communities. Guides for the project are recruited among Tryg and
UDF employees and as part of a regional partnership with local Red
Tryg also advises its employees on good behaviour in the social
Cross offices. The partnership agreement runs for three years and
media when topics on which they communicate relate to Tryg.
aims to create dialogue and common values for Tryg, customers and
See Tryg’s guidelines on social media communication at
society. The efforts strengthen Tryg’s ambition of being the leading
tryg.com > CSR > CSR strategy > Plans of action.
Employee survey
Employee mix
Score
100
80
60
40
20
0
Environmenta)
Sociallyb)
Genderc)
Backgroundd)
No.
2,000
1,600
1,200
800
400
0
Men
Women
Age
<30 yrs
Age
30-49 yrs
Age
>50 yrs
Flexi job
Non-
western
background a)
a) Tryg is environmentally responsible
b) Tryg is socially responsible
c) Tryg offers equal opportunities for women and men
d) Tryg’s employees are accepted regardless of their background and lifestyle
a) Non-western background is calculated by Statistics Denmark.
60 | Tryg A/S | Annual report 2012 | Corporate Social Responsibility
CSR in sourcing
CSR in investments
In 2012, responsible sourcing was introduced as a new provision in
A small proportion of Tryg’s investment portfolio is invested in shares
Tryg’s general procurement terms and conditions, requiring suppliers
and corporate bonds which are managed by external partners. They
to comply with human rights and reduce the climate impact of their
are all obliged to integrate environmental considerations and social
activities. All new contracts include a similar requirement and a right
and governance (ESG) issues into their investment decision-making,
to rescind contracts with suppliers who aid and abet human rights
for example through membership of UN PRI.
violations. Moreover, 2012 also saw suppliers of motor services
being introduced to an extended CSR programme, whereby they
Tryg contributes to the DI Frontier Market Energy and Carbon Fund,
are required to report annually on their CO2 emissions, measures
introduced to protect human rights and labour rights as well as
the purpose of which is to establish, run and sell plants for the
generation of renewable energy in sub-Saharan Africa based on
anti-corruption measures.
Watch the film on CSR for caravan
hydropower, wind power, solar power and biomass.
See more
workshops (in Danish) at tryg.com > CSR > CSR in sourcing.
about CSR in investments at tryg.com. > CSR > CSR in investments.
Corporate Social Responsibility | Annual report 2012 | Tryg A/S |
61
Claims prevention in Norway In 2012, Tryg focused on claims
prevention and implemented a range of different measures
to prevent and limit the claims that may occur. This benefits
customers and provides peace of mind, while also serving the
interests of the company and our investors.
In 2012, Tryg organised Security Days in cooperation with the University of Trondheim (NTMU), Norway.
The seminar in Trondheim was a pilot project which will inform the development of tailored claims
prevention seminars, which may in future be extended to Tryg’s departments in Bergen and Oslo.
The objective was to strengthen our customers’ competencies and inspire them to implement health,
environmental and safety concerns in their day-to-day operations.
Providing our customers with knowledge within areas of specific importance to them will both help to
reduce claims and increase customer value. However, it also strengthens our role as a peace-of-mind
provider and should be viewed in the context of Tryg’s strong focus on corporate social responsibility.
Tryg’s Group consolidated
financial statements are prepared
in accordance with IFRS and
published in Danish and English.
Contents – Financial statements
Financial statements 2012
Note Tryg Group
Statement by the Supervisory Board and the Executive Management
Independent auditor’s reports
Financial highlights
Income statement
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Cash flow statement
1 Risk management
2 Capital management
3 Operating segments
3 Geographical segments
3 Technical result, net of reinsurance, by line of business
4 Premium income, net of reinsurance
5
6 Claims, net of reinsurance
7
8 Interest income and dividends etc.
9 Price adjustments
Insurance technical interest, net of reinsurance
Insurance operating costs, net of reinsurance
Intangible assets
Investment property
10 Tax
11 Profit/loss on discontinued and divested business
12
13 Property, plant and equipment
14
15 Equity investments in associates
16 Financial assets
17 Reinsurers’ share
18 Current tax
19 Assets held for sale and associated liabilities
20 Equity
21 Premium provisions
21 Claims provisions
22 Pensions and similar liabilities
23 Deferred tax
24 Other provisions
25 Amounts owed to credit institutions
26 Debt relating to unsettled funds transactions and repos
27 Earnings per share
28 Contractual obligations, collateral and contingent liabilities
29 Related parties
30 Financial highlights
31 Accounting policies
Tryg A/S (parent company)
Income statement – Tryg A/S (parent company)
Statement of financial position – Tryg (parent company)
Statement of changes in equity (parent company)
Notes (parent company)
Q4 2012
Q4 2012 | Quarterly outline
Q4 2012 | Geographical segments
Other key ratios
Glossary
Disclaimer
Group chart
Product overview
Page
66
67
69
70
71
72
74
76
77
88
90
92
94
96
96
96
96
101
101
102
102
104
106
108
109
110
114
115
115
116
116
117
118
120
121
121
121
121
122
123
124
125
136
137
138
139
142
144
146
148
150
151
152
Statement by the Supervisory Board
and the Executive Management
The Supervisory Board and the Executive Management have today
parent company’s assets, liabilities and financial position at 31 Decem-
considered and adopted the annual report for 2012 of Tryg A/S and
ber 2012 and of the results of the Group’s and the parent company’s
the Tryg Group.
operations and the cash flows of the Group for the financial year
1 January-31 December 2012.
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 true and
as adopted by the EU, and the financial statements of the parent
fair view of developments in the activities and financial position of
company have been prepared in accordance with the Danish Finan-
the Group and the parent company, the results for the year and of the
cial Business Act. In addition, the annual report has been presented
Group’s and the parent company’s financial position in general and
in accordance with additional Danish disclosure requirements for
describes significant risk and uncertainty factors that may affect the
the annual reports of listed financial enterprises.
Group and the parent company.
In our opinion, the accounting policies applied are appropriate, and
We recommend that the annual report be adopted by the shareholders
the annual report gives a true and fair view of the Group’s and the
at the annual general meeting.
Ballerup, 7 February 2013
Executive Management
Morten Hübbe
Group CEO
Supervisory Board
Mikael Olufsen
Chairman
Tor Magne Lønnum
Group CFO
Lars Bonde
Group Executive Vice President
Torben Nielsen
Deputy Chairman
Paul Bergqvist
Vigdis Fossehagen
Lone Hansen
Jesper Hjulmand
Bill-Owe Johansson
Jørgen Huno Rasmussen
Jens Bjerg Sørensen
Lene Skole
Tina Snejbjerg
Mari Thjømøe
66
| Tryg A/S | Annual report 2012 | Notes
Independent auditor’s reports
To the shareholders of Tryg A/S
statements, whether due to fraud or error. In making those risk assess-
Report on the consolidated financial statements
ments, the auditor considers internal control relevant to the entity’s
and parent financial statements
preparation of consolidated and parent financial statements that give a
We have audited the consolidated and parent financial statements of
true and fair view in order to design audit procedures that are appropri-
Tryg A/S for the financial year 1 January to 31 December 2012, page
ate in the circumstances, but not for the purpose of expressing an opin-
69-141, which comprise the income statement, statement of compre-
ion on the effectiveness of the entity’s internal control. An audit also
hensive income, statement of financial position, statement of changes
includes evaluating the appropriateness of accounting policies used
in equity and notes, including the accounting policies, for the Group as
and the reasonableness of accounting estimates made by manage-
well as for the parent company, and the consolidated cash flow state-
ment, as well as the overall presentation of the consolidated and parent
ment. The consolidated financial statements are prepared in accord-
financial statements. We believe that the audit evidence is sufficient and
ance with International Financial Reporting Standards as adopted by
appropriate to provide a basis for our audit opinion. Our audit has not
the EU and the parent financial statements are prepared in accordance
resulted in any qualification.
with the Danish Financial Business Act. In addition, the consolidated
and parent financial statements are prepared in accordance with Danish
Opinion
disclosure requirements for listed financial services companies.
In our opinion, the consolidated financial statements give a true and
fair view of the Group’s financial position at 31 December 2012, and
Management’s responsibility for the consolidated
of the results of its operations and cash flows for the financial year
financial statements and parent financial statements
1 January to 31 December 2012 in accordance with International
Management is responsible for the preparation of consolidated
Financial Reporting Standards as adopted by the EU and Danish disclo-
financial statements that give a true and fair view in accordance with
sure requirements for listed financial services companies. Moreover, in
International Financial Reporting Standards as adopted by the EU and
our opinion, the parent financial statements give a true and fair view of
Danish disclosure requirements for listed financial services companies
the parent company’s financial position at 31 December 2012, and of the
as well as for the preparation of parent financial statements that give
results of its operations for the financial year 1 January to 31 December
a true and fair view in accordance with the Danish Financial Business
2012 in accordance with the Danish Financial Business Act and Danish
Act and Danish disclosure requirements for listed financial services
disclosure requirements for listed financial services companies.
companies, and for such internal control as management determines
is necessary to enable the preparation and fair presentation of con-
Statement on the management commentary
solidated and parent financial statements that are free from material
Pursuant to the Danish Financial Business Act, we have read the man-
misstatement, whether due to fraud or error.
agement commentary. We have not performed any further procedures
Auditor’s responsibility
in addition to the audit of the consolidated and parent financial state-
ments. On this basis, it is our opinion that the information provided in
Our responsibility is to express an opinion on the consolidated and
the management commentary is consistent with the consolidated and
parent financial statements based on our audit. We conducted our
parent financial statements.
audit in accordance with International Standards on Auditing and
additional requirements under Danish audit regulation. This requires
that we comply with ethical requirements and plan and perform
Ballerup, 7 February 2013
Deloitte
the audit to obtain reasonable assurance about whether the con-
Statsautoriseret Revisionspartnerselskab
solidated and parent financial statements are free from material
misstatement. An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures in the consolidated
and parent financial statements. The procedures selected depend
Lars Kronow
on the auditor’s judgement, including the assessment of the risks of
State Authorised
material misstatements of the consolidated and parent financial
Public Accountant
Lone Møller Olsen
State Authorised
Public Accountant
67
Notes | Annual report 2012 | Tryg A/S | 68
| Tryg A/S | Annual report 2012 | Notes Financial highlights
DKKm
2008
2009
2010
2011
2012
Gross premium income
Gross claims
Total insurance operating costs
Profit/loss on gross business
Profit/loss on ceded business
Insurance technical interest, net of reinsurance
Technical result
Investment return after insurance technical interest
Other income and costs
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 year
Run-off gains/losses, net of reinsurance
Statement of financial position
Total provisions for insurance contracts
Total reinsurers’ share of provisions for insurance contracts
Total equity
Total assets
Key ratios
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
Gross expense ratio without adjustment
Operating ratio
Relative run-off gains/losses
Return on equity after tax (%)
Solvency ratio (Solvency I)
16,622
-11,262
-2,810
17,390
-12,467
-2,861
18,894
-15,111
-3,136
19,948
-15,783
-3,271
20,314
-14,675
-3,295
2,550
-597
474
2,427
-937
-49
1,441
-513
928
-82
846
783
25,228
1,036
8,209
38,445
67.8
3.6
71.4
16.5
87.9
16.9
85.8
4.1
9.3
100
2,062
-518
145
1,689
1,083
-38
2,734
-625
2,109
-101
2,008
692
29,042
1,320
9,631
44,740
71.7
3.0
74.7
16.6
91.3
16.5
90.4
3.6
22.5
97
647
-311
124
460
550
-4
1,006
-265
741
-148
593
824
32,031
1,588
8,458
50,591
80.0
1.6
81.6
16.7
98.3
16.6
97.6
3.9
6.6
125
894
507
171
1,572
61
-30
1,603
-455
1,148
-8
1,140
944
34,220
2,067
9,007
53,184
79.1
-2.5
76.6
16.6
93.2
16.4
92.2
4.0
13.1
112
2,344
86
62
2,492
585
-60
3,017
-837
2,180
28
2,208
1,015
34,355
2,317
10,979
54,313
72.2
-0.4
71.8
16.4
88.2
16.2
87.8
4.1
22.1
90
The gross expense ratio without adjustment is calculated as the ratio of actual gross insurance operating costs to gross premium income. 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’ definitions of expense ratio and combined ratio, involves
the addition of a calculated expense (rent) in respect of 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, which was divested in 2010, and the Finnish branch of Tryg
Forsikring, which was sold in 2012, but is awaiting authority approval. Comparative figures are restated accordingly.
Financial highlights | Annual report 2012 | Tryg A/S |
69
Income statement
DKKm
Note General insurance
Gross premiums written
Ceded insurance premiums
Change in premium provisions
Change in reinsurers’ share of premium provisions
4 Premium income, net of reinsurance
5
Insurance technical interest, net of reinsurance
Claims paid
Reinsurance cover received
Change in claims provisions
Change in the reinsurers’ share of claims provisions
6 Claims, net of reinsurance
Bonuses and premium discounts
Acquisition costs
Administration expenses
Acquisition costs and administration expenses
Reinsurance commissions and profit participation from reinsurers
7
Insurance operating costs, net of reinsurance
2011
2012
20,192
-1,123
-96
45
19,018
171
-15,250
1,142
-533
354
-14,287
-148
-2,368
-903
-3,271
89
-3,182
20,128
-1,147
354
35
19,370
62
-15,480
964
805
131
-13,580
-168
-2,490
-805
-3,295
103
-3,192
3 Technical result
1,572
2,492
15
Investment activities
Income from associates
Income from investment property
Interest income and dividends
8
9 Price adjustments
Interest expenses
8
Administration expenses in connection with investment activities
Total investment return
5 Return on insurance provisions
Total investment return after insurance technical interest
Other income
Other costs
Profit/loss before tax
10 Tax
Profit/loss on continuing business
11 Profit/loss on discontinued and divested business
Profit/loss for the year
27 Earnings per share of DKK 25 – continuing business
Earnings per share of DKK 25
Diluted earnings per share of DKK 25
Earnings per share of DKK 25 – discontinued and divested business
Diluted earnings per share of DKK 25 – discontinued and divested business
70 | Tryg A/S | Annual report 2012 | Income statement
1
118
1,252
-264
-113
-92
902
-841
61
136
-166
1,603
-455
1,148
-8
6
123
1,196
-16
-100
-99
1,110
-525
585
106
-166
3,017
-837
2,180
28
1,140
2,208
19.0
18.9
18.9
-0.1
-0.1
36.0
36.5
36.4
0.5
0.5
Statement of comprehensive income
DKKm
Profit/loss for the year
Other comprehensive income
Other comprehensive income which cannot subsequently be reclassified as profit or loss
Revaluation of owner-occupied property for the year
Tax on revaluation of owner-occupied property for the year
Actuarial gains/losses on defined-benefit pension plans
Tax on actuarial gains/losses on defined-benefit pension plans
Deferred tax on contingency fund provision
Other comprehensive income which can subsequently be reclassified as profit or loss
Foreign currency translation adjustment of foreign entities for the year
Hedging of currency risk in foreign entities for the year
Tax on hedging of currency risk in foreign entities for the year
Total other comprehensive income
Comprehensive income
2011
1,140
20
-6
-399
111
-22
-296
29
-27
7
9
-287
853
2012
2,208
42
-12
-62
16
0
-16
193
-184
46
55
39
2,247
Statement of comprehensive income | Annual report 2012 | Tryg A/S |
71
Statement of financial position
DKKm
Note Assets
12
Intangible assets
Operating equipment
Owner-occupied property
Assets under construction
13 Total property, plant and equipment
14
Investment property
15 Equity investments in associates
Total investments in associates
Equity investments
Unit trust units
Bonds
Deposits with credit institutions
Derivative financial instruments
Total other financial investment assets
2011
2012
952
759
102
1,745
10
1,857
138
1,443
11
1,592
2,199
2,081
14
14
187
2,378
38,400
1,635
614
43,214
21
21
199
3,261
38,862
949
547
43,818
16 Total investment assets
45,427
45,920
17 Reinsurers’ share of premium provisions
21 Reinsurers’ share of claims provisions
17 Total reinsurers’ share of provisions for insurance contracts
Receivables from policyholders
Total receivables in connection with direct insurance contracts
Receivables from insurance enterprises
Receivables from Group undertakings
Other receivables
16 Total receivables
18 Current tax assets
16 Cash at bank and in hand
19 Assets held for sale
Total other assets
Interest and rent receivable
Other prepayments and accrued income
Total prepayments and accrued income
192
1,875
2,067
1,158
1,158
317
1
189
1,665
93
402
0
495
497
224
721
237
2,080
2,317
1,149
1,149
227
1
612
1,989
0
504
742
1,246
369
121
490
Total assets
53,184
54,313
72 | Tryg A/S | Annual report 2012 | Statement of financial position
Statement of financial position
DKKm
Equity and liabilities
Note
20 Equity
2 Subordinate loan capital
21 Premium provisions
21 Claims provisions
Provisions for bonuses and premium discounts
Total provisions for insurance contracts
22 Pensions and similar liabilities
23 Deferred tax liability
24 Other provisions
Total provisions
Debt relating to direct insurance
Debt relating to reinsurance
25 Amounts owed to credit institutions
26 Debt relating to unsettled funds transactions and repos
16 Derivative financial instruments
18 Current tax liabilities
19
Liabilities associated with assets held for sale
Other debt
Total debt
Accruals and deferred income
Total equity and liabilities
1 Risk management
2 Capital management
28 Contractual obligations, collateral and contingent liabilities
29 Related parties
30 Financial highlights
31 Accounting policies
2011
2012
9,007
10,979
1,589
1,597
6,932
26,904
384
34,220
1,026
1,191
11
2,228
410
191
11
4,161
35
260
0
740
5,808
6,688
27,242
425
34,355
1,102
1,143
98
2,343
415
256
14
1,470
66
652
742
1,030
4,645
332
394
53,184
54,313
Statement of financial position | Annual report 2012 | Tryg A/S |
73
Statement of changes in equity
DKKm
Revalua-
Reserve
for foreign
currency
tion translation
reserves adjustment
Equalisa-
tion
reserves
Share
capital
Other
reserves
Retained Proposed
dividend
earnings
Total
Equity at 31 December 2010
1,598
28
82
59
1,078
5,357
256
8,458
2011
Profit/loss for the year
Revaluation of owner-occupied
property for the year
Foreign currency translation adjustment
of foreign entities for the year
Hedging of currency risk in foreign
entities for the year
Actuarial gains and losses on
pension obligation
Tax on changes in equity
Total comprehensive income
Nullification of treasury shares
Dividend paid
Dividend, treasury shares
Purchase of treasury shares
Exercise of share options
Issue of share options and matching shares
20
-6
14
30
-27
7
10
0
-65
0
76
76
664
400
1,140
-1
-399
89
353
65
14
-91
15
14
370
20
29
-27
-399
90
853
0
-256
14
-91
15
14
549
9,007
400
-256
144
400
76
1,154
5,727
Total changes in equity in 2011
Equity at 31 December 2011
-65
1,533
14
42
10
92
0
59
74 | Tryg A/S | Annual report 2012 | Statement of changes in equity
Statement of changes in equity
DKKm
Revalua-
Reserve
for foreign
currency
tion translation
reserves adjustment
Equalisa-
tion
reserves
Share
capital
Other
reserves
Retained Proposed
dividend
earnings
Total
Equity at 31 December 2011
1,533
42
92
59
1,154
5,727
400
9,007
2012
Profit/loss for the year
Change in equalisation reserve for the year
Revaluation of owner-occupied property
Foreign currency translation adjustment
of foreign entities for the year
Hedging of currency risk in
foreign entities for the year
Actuarial gains and losses on
pension obligation
Tax on changes in equity
Total comprehensive income
0
Dividend paid
Dividend, treasury shares
Purchase and sale of treasury shares
Exercise of share options
Issue of share options and matching shares
42
-12
30
192
-184
46
54
2,208
0
42
193
-184
-62
50
2
-40
654
-2
1,594
-1
2
2
-41
-62
16
608
6
66
44
9
1,594
2,247
-400
-400
6
66
44
9
Total changes in equity in 2012
Equity at 31 December 2012
0
1,533
30
72
54
146
2
61
-41
733
1,194
1,972
1,113
6,460
1,594
10,979
Proposed dividend per share DKK 26 (DKK 6.52 in 2011).
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 at
the end of the year (61,316,103 shares). The dividend is not paid until approved by the shareholders at the annual general meeting. In the financial statements
of Tryg Forsikring A/S’s Norwegian branch, it has included contingency fund provisions in the amount of DKK 2,394m (DKK 2,430m in 2011). In the financial
statements of Tryg Forsikring A/S’s Swedish branch, it has included contingency fund provisions in the amount of DKK 160m (DKK 144m in 2011). In Tryg
Forsikring A/S, these provisions, due to their nature as additional provisions, are included in equity (retained earnings), net of deferred tax. Tryg Forsikring A/S’s
possible payment of 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 equity in Tryg Forsikring A/S. Tryg Garantiforsikring A/S has a similar contingency fund provision amounting to DKK 139m, which is also
included in the company’s equity. The contingency fund provisions can be used to cover losses in connection with the settlement of insurance provisions or
otherwise for the benefit of the insured.
Statement of changes in equity | Annual report 2012 | Tryg A/S |
75
Cash flow statement
DKKm
2011
2012
Cash from operating activities
Premiums
Claims
Ceded business
Costs
Changes in other debt and other amounts receivable
Cash flow from insurance activities
Interest income
Interest expenses
Dividend received
Taxes
Other income and costs
Cash flow from operating activities, continuing business
Cash flow from operating activities, discontinued and divested business
Total cash flow from operating activities
Investments
Acquisition and refurbishment of real property
Sale of real property
Acquisition and sale of equity investments and unit trust units (net)
Purchase/sale of bonds (net)
Deposits with credit institutions
Purchase/sale of operating equipment (net)
Hedging of currency risk
Investments, continuing business
Investments, discontinued and divested business
Total investments
Financing
Exercise of share options/purchase of treasury shares (net)
Dividend paid
Change in amounts owed to credit institutions
Financing, continuing business
Financing, discontinued and divested business
Total financing
Change in cash and cash equivalents, net
Cash and cash equivalents – discontinued and divested business at 1 January 2012
Foreign currency exchange rate 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
19,991
-15,121
-25
-3,252
112
1,705
1,379
-109
10
-210
-30
2,745
-168
2,577
-50
2
-191
-3,523
1,124
-18
-27
-2,683
1
-2,682
-76
-256
-19
-351
0
-351
-456
0
1
-455
857
402
20,200
-15,105
42
-3,094
-137
1,906
1,340
-100
15
-425
-61
2,675
37
2,712
-53
278
-563
-1,897
163
-54
-184
-2,310
-74
-2,384
110
-400
3
-287
58
-229
99
-11
14
102
402
504
76 | Tryg A/S | Annual report 2012 | Cash flow statement
Notes
1 Risk management
Risk management principles
Risk management is an integral part of Tryg’s business model. Tryg
seeks at all times to minimise the risk of unnecessary losses in order to
optimise returns on the company’s capital.
Risk management at Tryg is organised on the basis of three lines of defence:
The first line of defence is the business managers, who manage and
control all significant risks associated with their own activities. This
takes place on an operational level and involves establishing business
procedures, contingency plans and control descriptions and ensuring
that risks are hedged as appropriate.
The second line of defence is the risk management function, which en-
sures a consistent risk management approach across business areas.
This function carries out measurements and assessments at Group
level, and recommendations for capital management and general risk
hedging (reinsurance, inflation swaps, currency hedging etc.) are made.
The third line of defence is the internal audit, which most important
task is to carry out an independent assessment of the control environ-
ment etc. for the Supervisory Board.
Risk management
The Supervisory Board has overall responsibility for the company’s risk
management and proactively defines risk appetite and the risk manage-
ment framework, assessing the total risk and capital requirements
within Tryg on an ongoing basis. This is achieved by means of policies
and guidelines drawn up in accordance with Section 71 of the Danish
Financial Business Act and by continuously taking a view on the calcu-
lation of the company’s capital requirements.
In order to be able to monitor the organisation’s risk management work
closely, the Supervisory Board has appointed a special Risk Committee
consisting of representatives from the Supervisory Board, which
reviews Tryg’s capital and risk status on a quarterly basis.
Tryg’s risk management is administered through a risk management
environment, in which the Risk Management Committee, with repre-
sentatives from the Group Executive Management, monitors the overall
risk and asset management process. The areas of underwriting and
reinsurance, provisions, investment risk as well as operational risk and
security are administered by similar sub-committees. To support risk
management in the organisation, Tryg has established a structure
where each business area is supported by a risk manager responsible
for risk identification, risk control, event registration, contingency plans
and compliance.
Effective risk management involves identifying, assessing and quantifying
risk in all significant areas. As an insurance company, Tryg is able to utilise
statistical experience as a basis for identifying and quantifying most risks.
This takes place within the framework of Tryg’s internal model, which is
used for calculating the capital requirement, determining the investment
profile, selecting a reinsurance programme and defining earnings require-
ments for product and business areas. In addition, there will be several
risks, often associated with the company’s strategy, operational matters
or similar, which cannot be readily assessed based on historical expe-
rience. In order to reflect these risks as well, an identification process has
been established where all business managers and the Group Executive
Management assess significant risks relating to business plans and the
most important activities.
Further to this, Tryg has established an ORSA (Own Risk and Solvency
Assessment) process, which is to demonstrate the correlation between risk
assessments and profiles relative to the assumptions used in the internal
model. In addition to the ORSA, a capital plan is prepared to demonstrate
that the company’s capital base can support the selected business plan
over a three to five-year period taking into account the dividend policy,
also when the business plan is subjected to a number of negative stress
scenarios. The ORSA process is part of the future Solvency II regime.
Line of defence
Supervisory Board
1. Line of defence
2. Line of defence
3. Line of defence
External audit
• Operational control
• Business controls
• Risk management
• Internal audit
Executive Management
77
Notes | Annual report 2012 | Tryg A/S |
Notes
Under the internal capital model, the capital requirement (individual
solvency requirement) is determined using a 99.5% safety level, equal
to the safety level applied in the future Solvency II requirements.
The actual capital contains a buffer in relation to the individual solvency
requirement, which helps to ensure that the company with a high degree
of certainty will be able to comply with the dividend policy, which aims for
a steadily rising nominal dividend per share corresponding to a payout
ratio of 60-90% of net profit/loss for the year. This also supports Tryg’s
A rating with a stable outlook from the credit rating agency Standard &
Poor’s.
Risk types
Underwriting risk
The underwriting risk is the risk relating to the conclusion of insurance
contracts and thus the risk that premium income does not adequately
cover the claims that Tryg is obliged to pay when damage has occurred.
This risk can be assessed and managed based on statistical analyses of
historical experience within various business sectors.
The insurance premium must be adequate to cover expected claims,
but must also comprise a risk premium equal to the return on the part
of Tryg’s capital that is used to protect against random fluctuations.
All things being equal, this means that insurance sectors or areas which,
from experience, are subject to major fluctuations, must comprise a
larger risk premium as these areas require a larger capital base.
The ongoing assessment of the underwriting risk is based on Tryg’s
internal capital model, which defines the target premium levels for each
area of the insurance business. This applies both when determining and
updating tariffs, and when individually pricing major agreements for the
corporate and partner segments. The underwriting risk is managed by
means of ongoing profitability monitoring, business processes, accep-
tance policy, proxies and reinsurance. The overall management frame-
work is defined by the Supervisory Board in Tryg’s insurance policy.
Reinsurance is used to reduce the risk in areas where a special need for
this exists. The need for reinsurance is assessed on an ongoing basis using
Tryg’s internal capital model, in which the price of reinsurance is com-
pared with the reduction in the capital requirement that can be achieved.
In light of the considerable cloudburst claims in Denmark in 2010
and 2011 and similar cloudburst claims in the rest of Europe, Tryg has
adjusted its risk assessment associated with weather-related events
upwards. As a consequence of this, in 2012/2013 Tryg took out what
is known as an aggregate cover for small or medium-sized events
resulting in nature-related claims. The aggregate cover amounts to
DKK 500m, with an annual retention of DKK 400m.
In the field of buildings and contents insurance, major events in 2013
were covered by catastrophe reinsurance cover of DKK 5.5bn with re-
tention of DKK 150m. The primary risk for individual events is storms,
and the scope of the cover is defined using simulation models such that
this cover will prove insufficient in statistical terms less than once every
250 years. The reinsurance programme for catastrophes also covers
other disastrous events, including terrorist attacks, up to a maximum
of DKK 4.0bn.
For accident and workers’ compensation policies, Tryg has bought
catastrophe reinsurance with retention of DKK 50m and with coverage of
up to DKK 1.5bn for claims originating from the same event, including
terrorism.
Tryg's risk management environment
Supervisory
Board
Executive
Management
Risk management environment
Policies
Risk Management Committee
Policies
Risk reporting
Recommen-
dations
Underwriting
Reinsurance
Committee
Provisions
Committee
Investment
Risk
Committee
Operational
Risk
Committee
Systematic risk
assessment
reporting
• Contingency
• Control
• Risk
identification
• Risk
management
• Risk appetite
• Capital
• Strategy
• Crisis
management
78
| Tryg A/S | Annual report 2012 | Notes
Notes
Major risk types
Underwriting risk
The risk relating to the conclusion of insurance contracts. The risk
that claims at the end of an insurance contract deviate significantly
from our pricing assumptions when concluding the contract.
Handled by the Underwriting Reinsurance Committee
Provisioning risk
We make technical provisions at the end of a financial period to cover
expected future payments in respect of claims already incurred.
The provisioning risk is the risk that future payments deviate
significantly from our assumptions when making the provisions.
Handled by the Provisions Committee
Investment risk
The risk of volatility in the financial markets impacting the Group’s
results. Investment risk includes elements such as interest rate risk,
equity risk, currency risk, credit risk and liquidity risk.
Handled by the Investment Risk Committee
Operational risk
The risk of errors, fraud or failures in internal procedures, systems
and processes.
Handled by the Operational Risk Committee
Strategic risk
The risk of changes to the conditions under which Tryg operates,
including changed legislation, competition, partnerships or market
conditions.
Handled by the Risk Management Committee
Sensitivity analysis
Insurance risk
DKKm
Underwriting risk
Effect of 1% change in:
Combined ratio (1 percentage point)
Claim frequency (1 percentage point)
Average claim
Premium rates
Provisioning risk
1% change in social inflation
10% error in the assessment of
long-tailed lines of business
(workers’ compensation, motor
liability, liability, accident)
Investment risk
Interest rate market
Effect of 1% increase in interest curve:
Impact of interest-bearing securities
Higher discounting of
claims provisions
Net effect of interest rate rise
Impact of Norwegian
pension obligation a)
Equity market
15% decline in equity market
Effect of derivatives
Real estate market
15% decline in real estate markets
Currency market
Equity:
15% decline in exposed currency
(exclusive of EUR) relative to DKK
Impact of derivatives
Technical result per year:
Effect of 15% change in exchange
rates of NOK and SEK relative to DKK
2011
2012
+/- 196
+/- 1,608
+/- 153
+/- 194
+/- 200
+/- 1,599
+/- 141
+/- 197
+/- 738
+/- 779
+/- 1,725
+/- 1,826
-850
-851
889
39
296
-279
7
864
13
291
-367
18
-593
-530
-659
629
-851
868
+/- 83
+/- 175
a) Additional sensitivity information about pay increase rate and mortality
in Note 22 ‘Pensions and similar obligations’
79
Notes | Annual report 2012 | Tryg A/S |
Notes
Denmark has established a national guarantee scheme to cover NBCR
(Nuclear Biological Chemical Radioactive) terrorist attacks. Insurance
companies in the Danish market pay claims of up to DKK 500m for these
types of events, and joint reinsurance then covers up to DKK 5bn. Claims
above DKK 5bn will be covered by a government guarantee of DKK 15bn.
Tryg’s share of the total retention will be approximately DKK 100m,
which will be the maximum claim as a consequence of NBCR events.
Natural disasters in Norway are covered by the Norwegian Natural
Perils Pool (NNP). Insurance companies in the Norwegian market
pay claims of up to DKK 600m for these types of events, and joint re-
insurance then covers up to NOK 12.5bn. Tryg pays a market share of
this retention, which is again covered by Tryg’s catastrophe programme.
Tryg also utilises the option of member companies to act as reinsurers
for NNP correspon ding to its own share of the pool. The risk assumed is
subsequently hedged through Tryg’s catastrophe programme, thereby
reducing costs.
In addition, reinsurance is bought for a number of sectors which, from
experience, are exposed to major claims. The largest single risks in
Tryg’s corporate portfolio are in the area of buildings and contents
insurance, protected by reinsurance cover of DKK 1.7bn and with reten-
tion of DKK 50m, but with additional annual retention. This means that,
in practice, retention is DKK 100m for the first claim, DKK 75m for the
second claim and DKK 50m for subsequent claims. If there are more
than four major claims in the same year, additional frequency cover
has been purchased, reducing retention to DKK 25m for subsequent
claims. Tryg buys individual reinsurance cover for buildings and contents
risks above this limit. Other sectors covered by reinsurance include
liability, motor, fish farming and guarantee insurance.
In the event of a major insurance event covered by the reinsurance
programme, receivables from reinsurers may increase, entailing a
credit risk. This risk is managed through requirements to assess the
reinsurers’ credit ratings and to spread reinsurance across several
reinsurers.
Provisioning risk
At the end of the term of insurance, the insurance risk relates to
the claims provisions made to cover future payments in respect of
damage which has already occurred. When damage occurs, there is a
certain delay before the customer submits a claim. Depending on the
complexity of the claim, a longer or shorter period of time may pass
before the size of the claim is finally agreed. This may be a prolonged
process, particularly for personal injuries. Even once the claim has been
settled, there is a risk that it will be reopened at a later date, triggering
further payments.
In determining the claims provisions, both individual assessments and
statistical calculations are used. At the end of 2012, claims provisions
totalled DKK 27,242m. The duration of these provisions, that is, the
average time until these amounts were disbursed to customers, was
3.6 years. Most of the claims provisions relate to personal injury claims.
These provisions are exposed to changes in inflation, the discount rate,
disbursement patterns, economic trends, legislation and court decisions.
The calculation of claims provisions will always be subject to uncertainty.
Historically, many insurers have experienced substantial positive as well
as negative impacts on profit (run-off) resulting from provisioning risk,
and this is also expected to be the case in future. The Supervisory Board
defines the overall framework for managing provision risk in Tryg’s
insurance policy. This entails, among other things, that assessments of
provisions are based on an underlying model analysis, and that internal
control calculations and evaluations are performed.
Claims provisions relating to annuities under Danish workers’ compen-
sation insurance are discounted using the current market rate and
simul taneously increased based on the wage inflation rate each year.
This exposes Tryg to an explicit inflation risk. To hedge this, Tryg uses a
number of zero coupon inflation swaps in Danish kroner, in which Tryg
receives a fixed amount in return for payment of an amount based on
the trend in Danish consumer prices.
80
| Tryg A/S | Annual report 2012 | Notes Notes
DKKm
Claims provisions – estimated accumulated claims
Gross
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Estimated acc.
claims, end of year 11,683
12,074
1 year later
12,068
2 years later
12,123
3 years later
12,111
4 years later
12,022
5 years later
12,011
6 years later
11,743
7 years later
11,857
8 years later
11,746
9 years later
11,676
10 years later
11,676
11,084
11,189
10,834
10,836
10,855
10,824
10,609
10,617
10,535
10,549
11,408
11,401
11,252
11,136
10,866
10,659
10,729
10,617
10,576
12,147
12,050
11,864
11,458
11,187
11,543
11,441
11,454
11,954
12,208
11,703
11,462
11,876
11,863
11,841
12,908
13,552
13,572
14,134
14,120
14,017
13,637
14,340
14,934
14,940
14,888
14,284
15,838
15,872
15,624
17,551
17,652
17,591
17,854
18,296
15,287
10,549
10,576
11,454
11,841
14,017
14,888
15,624
17,591
18,296
15,287 151,801
Cumulative
payments to date
Provisions before
discounting,
end of year
Discounting
Reserves from 2001
and prior years
Other
Gross claims pro-
visions, end of year
-11,242
-9,909
-9,925
-10,604
-10,621
-12,406
-12,566
-12,997
-14,012
-13,449
-7,442 -125,172
434
-55
640
-69
651
-89
850
-115
1,221
-160
1,611
-174
2,323
-219
2,627
-226
3,579
-244
4,847
-261
7,845
-290
26,629
-1,900
2,114
400
27,242
Ceded
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Estimated acc.
claims, end of year
1 year later
2 years later
3 years later
4 years later
5 years later
6 years later
7 years later
8 years later
9 years later
10 years later
Cumulative
payments to date
Provisions before
discounting,
end of year
Discounting
Reserves from 2001
and prior years
Other
Reinsurers’ share
of claims provi-
sions, end of year
2,141
2,261
2,135
2,127
2,125
2,141
2,149
2,070
2,071
2,029
2,017
2,017
1,005
961
957
1,023
934
929
937
934
999
1,042
923
935
979
977
961
933
967
955
953
959
852
857
850
816
869
851
851
305
303
288
286
321
316
314
520
483
467
503
525
494
192
219
221
209
209
255
393
370
317
734
815
812
1,512
2,280
290
1,042
953
851
314
494
209
317
812
2,280
290
9,578
-1,958
-909
-880
-817
-303
-488
-180
-283
-550
-1,415
-93
-7,876
59
-2
133
-5
72
-5
33
-1
11
0
6
0
29
-1
34
-1
263
-4
865
-17
198
-7
1,702
-44
235
187
2,080
81
Notes | Annual report 2012 | Tryg A/S |
Notes
DKKm
Claims provisions – estimated accumulated claims
Net of reinsurance
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Estimated accu-
mulated claims
End of year
1 year later
2 years later
3 years later
4 years later
5 years later
6 years later
7 years later
8 years later
9 years later
10 years later
Cumulative
payments to date
Provisions before
discounting,
end of year
Discounting
Reserves from
2001 and
prior years
Other
Claims provisions,
net of reinsurance,
end of year
9,542
9,812
9,933
9,996
9,986
9,881
9,862
9,673
9,785
9,718
9,659
9,659
10,079
10,228
9,877
9,813
9,921
9,896
9,672
9,683
9,536
9,507
10,485
10,466
10,273
10,159
9,906
9,726
9,762
9,661
9,623
11,188
11,198
11,007
10,609
10,371
10,675
10,590
10,603
11,649
11,905
11,415
11,176
11,555
11,547
11,527
12,387
13,069
13,104
13,631
13,595
13,523
13,445
14,121
14,713
14,731
14,680
14,029
15,446
15,502
15,307
16,817
16,837
16,779
16,341
16,017
14,997
9,507
9,623
10,603
11,527
13,523
14,680
15,307
16,779
16,017
14,997 142,223
-9,283
-9,000
-9,044
-9,787
-10,317
-11,918
-12,386
-12,715
-13,463
-12,035
-7,349 -117,297
376
-52
508
-64
579
-84
816
-113
1,210
-160
1,605
-174
2,294
-218
2,593
-226
3,317
-240
3,982
-244
7,648
-283
24,927
-1,856
1,879
213
25,162
Estimated accumulated claims regarding Moderna:
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
End of year
1 year later
2 years later
3 years later
4 years later
5 years later
6 years later
7 years later
8 years later
9 years later
10 years later
366
361
363
364
256
254
256
256
140
138
139
139
124
123
124
123
800
1,161
1,166
1,182
1,521
1,526
1,566
1,862
1,842
1,654
681
894
898
893
547
623
637
637
449
431
433
433
The acquisition of Moderna in April 2009 affects the diagonals with its share of the claims, net of reinsurance. As a consequence of the merger of Moderna
and Tryg’s Swedish branch in Malmö in 2010, the diagonal is changed corresponding to its share of the claims, net of reinsurance.
Other provisions comprise the claims provisions for Tryg Garantiforsikring A/S and in 2011 the Finnish branch of Tryg Forsikring A/S.
In 2012, the Finnish branch is included under liabilities associated with assets held for sale. The amounts in foreign currency in the table are translated to
Danish kroner using the exchange rate at 31 December 2012 to prevent the impact of exchange rate fluctuations.
82
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
0-1 year
1-2 years
2-3 years
> 3 years
Other
Expected cash flow
Claims provisions (continued)
2012
Premium provisions, gross
Premium provisions, ceded
Claims provisions, gross
Claims provisions, ceded
2011
Premium provisions, gross
Premium provisions, ceded
Claims provisions, gross
Claims provisions, ceded
6,107
-222
9,914
-941
14,858
6,175
-180
10,135
-995
15,135
180
0
4,562
-387
4,355
204
0
4,452
-258
4,398
182
0
2,956
-190
2,948
199
0
2,796
-176
2,819
189
0
9,410
-375
9,224
192
0
8,776
-326
8,642
30
-15
400
-187
228
162
-12
745
-120
775
Carrying
amount
Total
6,688
-237
27,242
-2,080
31,613
6,932
-192
26,904
-1,875
31,769
Other comprises Tryg Garantiforsikring A/S and in 2011 the Finnish branch of Tryg Forsikring A/S. In 2012, the Finnish branch is included under liabilities
associated with assets held for sale.
Operational risk
Operational risk relates to errors or failures in internal procedures,
fraud, breakdown of infrastructure, IT security and similar factors. As
operational risks are mainly internal, Tryg focuses on establishing an
adequate control environment for its operations. In practice, this work
is organised by means of procedures, controls and guidelines that cover
the various aspects of Tryg’s operations, including the IT security policy.
Tryg has also set up a security and investigation unit to handle internal
fraud, IT security, physical security and contingency plans.
Tryg has prepared contingency plans to handle the most important
areas, such as contingency plans for handling prolonged IT breakdowns
in the individual areas of the business. A crisis management structure
has also been established to deal with the eventuality that Tryg is hit by
a major crisis. The Supervisory Board defines the overall framework for
managing operational risk in Tryg’s IT security policy and operational
risk policy.
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 Supervisory
Board is closely involved in the management of strategic risk.
Investment risk
The overall framework for managing investment risk is defined by the
Supervisory Board in Tryg’s investment policy.
Interest rate risk
Interest rate risk is the risk of losses resulting from changes in market
interest rates. Tryg’s investment portfolio is divided into a match
portfolio and a free portfolio.
The match portfolio corresponds to the value of the discounted claims
provisions and is designed to replicate the interest rate sensitivity of the
discounted provisions to the widest possible extent. Tryg carries out daily
monitoring, follow-up and risk management of the Group’s interest rate
risk. The bond portfolio is thus adjusted continuously to minimise the
net interest rate risk.
In practice, it is not possible or expedient to aim for a complete match.
The administration costs alone associated with a complete match
mean that, in practice, a certain degree of mismatch is acceptable
within an appropriate limit defined in the investment policy. Add to this
that the provisions are discounted using a mathematical interest rate
curve specified by the Danish Financial Supervisory Authority, meaning
that it cannot be perfectly replicated in the market and that a certain
degree of mismatch is therefore to be accepted.
83
Notes | Annual report 2012 | Tryg A/S |
Notes
Interest rate basis risk
The positive or negative additional return stemming from the bond spread
risk reflects changes in the price of the bond investment resulting from
changes in the market’s assessment of the expected credit quality of
the specific security and the level of the general credit demand in the
market. Tryg covers risk from five years and onwards, primarily using
local interest rate swaps, which is a different curve than the Danish
Financial Supervisory Authority’s discount curve. For example, illiquidity
of Norwegian government bonds included in the Danish Financial
Supervisory Authority’s curve may occasionally result in sharp declines
or increases in the value of the Norwegian provisions whereas Tryg’s
hedging of Norwegian interest rate swaps shows a more moderate
response. The net interest rate risk of the match portfolio versus the
insurance obligations can thus generate relatively large short-term
fluctuations of up to DKK 200-300m, while long-term hedging turns out
to have ideal properties.
price its financial interest rate assets. In the interest rate curve between
one to five years, the interest rate risk is hedged by means of invest-
ments in AAA-rated Nordic and European mortgage bonds, government
bonds and possibly highly rated corporate bonds with relevant regulatory
interest curve properties. Even though the interest rate risk of these cor-
responds to the interest rate risk of the provisions, there is still a differ-
ence and thereby risk as the investments also carry a bond spread risk.
They will thus generate a positive or negative additional return relative to
the interest rate curve, to which should be added refinancing and invest-
ment costs which are not included in the regulatory interest curve.
Tryg manages its bond spread risk by means of ratings and credit rat-
ings, among other things, and uses these to set nominal limitations on
purchases from the different bond issuers. Furthermore, Tryg regularly
calculates the price sensitivity of its bond portfolio in the event of a
change in the bond spread.
Bond spread risk
Interest rate basis risk is the risk of various changes in the discount
curve and the market interest rate curve, respectively, used by Tryg to
Norwegian pension scheme
Tryg is also exposed to interest rate changes as a result of its liabilities
under the Norwegian pension scheme, which is a defined-benefit plan
Investment risk
Bond portfolio
Duration 1 year or less
Duration 1-5 years
Duration 5-10 years
Duration more than 10 years
Total
Duration
2011
2012
19,132
10,187
4,213
3,700
37,232
2.1
20,427
15,735
2,641
2,216
41,019
2.1
The option-adjusted duration is used to measure duration. The option adjustment relates primarily to Danish mortgage bonds and reflects the expected
duration-shortening effect of the borrower’s option to cause the bond to be redeemed through the mortgage institution at any point in time.
Listed shares
Nordic countries
United Kingdom
Rest of Europe
United States
Asia etc.
Total
The portfolio of unlisted shares totals
The share portfolio includes exposure of DKK -120m sold on futures contracts (DKK -44m in 2011).
Unlisted equity investments are measured based on an estimated market price.
2011
2012
395
82
331
565
242
1,615
187
458
102
483
632
429
2,104
199
84
| Tryg A/S | Annual report 2012 | Notes
Notes
covering approximately 1,428 employees. This scheme was closed to
new employees in 2008, and the total provision was DKK 1,042m at the
end of 2012. Changes in the pension provision are not recognised in the
income statement, but are charged directly to changes in equity.
Equity and real estate risk
The equity and real estate portfolios are exposed to risks as a consequence
of changes in equity markets and real estate markets, respectively. At the
end of 2012, the equity portfolio accounted for 4.5% of the total invest-
ment assets. This proportion is expected to be in the range 2.3-6.0% in
2013. In 2008, Tryg bought the head office in Ballerup, significantly in-
creasing the proportion of real estate. This proportion is expected to be
reduced over time. In addition to owner-occupied property, Tryg’s real
estate portfolio consists of office and rental property, which account for
17.8% and 22.3%, respectively, of total investment assets.
Currency risk
Currency risk is the risk of incurring a loss on foreign positions as a
result of changes in exchange rates. Tryg keeps the currency risk low.
Tryg’s premium income in foreign currencies is matched by claims
and costs in the same currencies, and only the profit for the period
is therefore exposed to currency risk. The risk of a loss of value of
statement of financial position items as a consequence of exchange
rate fluctuations is hedged by means of currency derivatives in
accordance with a general hedging rate of 90-100% per currency. The
aim is for the net carrying amount of the Norwegian entity to be hedged
98-100% over time. Foreign currency translation adjustments and
hedging of foreign entities are charged directly to equity.
To manage currency risk, Tryg uses currency spots as well as forward
exchanges and currency swaps with a typical duration of one to three
months. Furthermore, Tryg uses so-called NDF contracts (non-deliver-
able forward contracts), which are short-term forward contracts on a
currency with limited revenue. The contracts are needed to hedge the
currency risk relating to Tryg’s equity portfolio and Tryg’s insurance
exposure to these currencies.
Exposure to exchange rate risk
Property
Bonds
incl. derivatives
Shares incl.
derivatives
Insurance
Hedge
Exposure
2012
USD
EUR
GBP
NOK
SEK
Other
Total
2011
USD
EUR
GBP
NOK
SEK
Other
Total
0
0
0
941
1
0
0
0
0
873
1
0
0
1,819
0
14,785
2,702
731
-7
1,845
-3
14,112
3,107
0
728
412
94
577
589
508
640
222
78
391
88
305
-15
-1,547
10
-12,950
-1,741
-87
-74
-2,174
5
-12,470
-1,683
-16
-700
-338
-104
-3,481
-1,546
-1,003
-566
1,450
-83
-3,013
-1,208
-186
13
346
0
-128
5
149
641
-7
1,343
-3
-107
305
103
1,866
85
Notes | Annual report 2012 | Tryg A/S |
Notes
Impact of exchange rate fluctuations in SEK and NOK
on technical result
Gross premium income
Gross claims
Total insurance operating costs
Profit/loss on gross business
Profit/loss on ceded business
Insurance technical interest, net of reinsurance
Technical result
Impact of exchange rate fluctuations in SEK and NOK
on technical result
Gross premium income
Gross claims
Total insurance operating costs
Profit/loss on gross business
Profit/loss on ceded business
Insurance technical interest, net of reinsurance
Technical result
Impact of exchange rate fluctuations in SEK and NOK
on statement of financial position
Assets
Intangible assets
Total property, plant and equipment
Investment property
Investments in associates
Other financial investment assets
Reinsurers’ share of provisions for insurance contracts
Receivables
Other assets
Prepayments and accrued income
Total assets
Equity and liabilities
Equity
Subordinate loan capital
Provisions for insurance contracts
Total provisions
Other debt
Accruals and deferred income
Total equity and liabilities
86
2011
19,948
-15,783
-3,271
894
507
171
1,572
2010
18,894
-15,111
-3,136
647
-311
124
460
2012
Change
Currency
Change excl.
effect currency effect
20,314
-14,675
-3,295
2,344
86
62
2,492
366
1,108
-24
1,450
-421
-109
920
376
-274
-65
37
2
3
42
-10
1,382
41
1,413
-423
-112
878
2011
Change
Currency
Change excl.
effect Currency effect
19,948
-15,783
-3,271
894
507
171
1,572
1,054
-672
-135
247
818
47
1,112
383
-291
-69
23
-11
5
17
671
-381
-66
224
829
42
1,095
2011
2012
Change
Currency
Change excl.
effect Currency effect
952
1,857
2,199
14
43,214
2,067
1,665
495
721
53,184
9,007
1,589
34,220
2,228
5,808
332
53,184
759
1,592
2,081
21
43,818
2,317
1,989
1,246
490
54,313
10,979
1,597
34,355
2,343
4,645
394
54,313
-193
-265
-118
7
604
250
324
751
-231
1,129
1,972
8
135
115
-1,163
62
1,129
24
33
23
1
1,153
74
46
23
4
1,381
7
0
929
138
300
7
1,381
-217
-298
-141
6
-549
176
278
728
-235
-252
1,965
8
-794
-23
-1,463
55
-252
| Tryg A/S | Annual report 2012 | Notes
Notes
Impact of exchange rate fluctuations in SEK and NOK
on statement of financial position
Assets
Intangible assets
Total property, plant and equipment
Investment property
Investments in associates
Other financial investment assets
Reinsurers’ share of provisions for insurance contracts
Receivables
Other assets
Prepayments and accrued income
Total assets
Equity and liabilities
Equity
Subordinate loan capital
Provisions for insurance contracts
Total provisions
Other debt
Accruals and deferred income
Total equity and liabilities
2010
2011
Change
Currency
Change excl.
effect Currency effect
968
1,856
2,158
13
40,126
1,588
1,922
1,157
803
50,591
8,458
1,591
32,031
2,059
6,095
357
50,591
952
1,857
2,199
14
43,214
2,067
1,665
495
721
53,184
9,007
1,589
34,220
2,228
5,808
332
53,184
-16
1
41
1
3,088
479
-257
-662
-82
2,593
549
-2
2,189
169
-287
-25
2,593
5
3
2
0
116
6
6
2
1
141
2
0
98
11
29
1
141
-21
-2
39
1
2,972
473
-263
-664
-83
2,452
547
-2
2,091
158
-316
-26
2,452
Credit and counterparty risk
Credit risk and counterparty risk is the risk of incurring a loss if counter-
parties fail to meet their obligations. In connection with investment ac-
tivities, the primary counterparties are bond issuers and counterparties
in other financial instruments. Tryg uses limits and rating requirements
to manage credit risk.
As already mentioned, Tryg matches the interest rate sensitivity of the
provisions with interest rate swaps, leading to counterparty risk on the
derivative contracts. However, a framework agreement concerning
cash collateral has been concluded for most of them if the value of the
interest rate swap exceeds a certain threshold level (CSA agreement),
which reduces the counterparty risk. Moreover, Tryg is exposed to a
natural credit risk as a result of its considerable exposure to different
mortgage forms (covered bonds), including mortgage bonds in the
Nordic region. The risk is primarily AAA-rated, with an AA-rated risk
in exceptional circumstances, and is diversified with a broad range of
issuers.
Credit risks from reinsurance counterparties are managed according
to framework conditions, such as minimum rating requirements and
through the Credit Committee, which monitors the quality of reinsu-
rance counterparties on an ongoing basis. The minimum requirements
include a BBB rating from Standard & Poor’s for short-tailed business
and an A rating from Standard & Poor’s for long-tailed business.
Credit risk
Bond portfolio by ratings
AAA to A
Other
Not rated
Bond portfolio by ratings
Included in assets held for sale
Bonds according to statement of financial position
Reinsurance balances
AAA to A
Other
Not rated
Total
2011
DKKm
37,940
372
88
38,400
0
38,400
1,901
0
50
1,951
2011
%
98.8
1.0
0.2
100.0
97.4
-
2.6
100.0
2012
DKKm
38,387
716
246
39,349
487
38,862
1,578
9
136
1,723
2012
%
97.6
1.8
0.6
100.0
91.6
0.5
7.9
100.0
87
Notes | Annual report 2012 | Tryg A/S |
Notes
Concentration risk
Concentration risk is the risk that arises as a result of either single large
commitments or exposure to relatively few sectors/portfolios. Tryg
identifies any risk concentrations by continuously monitoring the credit
portfolio, and risk is managed via exposure limits and rating require-
ments for the exposure.
Liquidity risk
Liquidity risk is the risk that Tryg fails to meet its financial liabilities
or cannot meet such liabilities without sustaining a loss. A general
insurance company such as Tryg naturally has good liquidity, as
premium payments fall due before claims are paid. Payments received
are largely invested in securities that can easily be realised and/or
mortgaged (repos). Tryg also has access to funding and liquidity from
the money and bond markets. Tryg continuously monitors the liquidity
requirement and adapts its contingency plans so that it can obtain the
necessary liquidity at all times.
Liquidity risk
Maturity of the Group’s financial obligations
2012
Subordinate loan capital
Amounts owed to credit institutions
Debt relating to unsettled funds transactions and repos
Derivative financial instruments
Other debt
2011
Subordinate loan capital
Amounts owed to credit institutions
Debt relating to unsettled funds transactions and repos
Derivative financial instruments
Other debt
0-1 year
1-5 years
> 5 years
485
14
1,470
66
3,095
5,130
0
11
4,161
35
1,601
5,808
0
0
0
0
0
0
0
0
0
0
0
0
1,112
0
0
0
0
1,112
1,589
0
0
0
0
1,589
Total
1,597
14
1,470
66
3,095
6,242
1,589
11
4,161
35
1,601
7,397
The subordinate loan to TryghedsGruppen smba, which represented DKK 485m at the end of 2012, is scheduled for refinancing in Q1 2013.
2 Capital management
Tryg’s capital base consists of equity and additional subordinate loan
capital. The relationship between these is evaluated on an ongoing
basis in order to maintain an optimum structure which takes into
account the return on equity, the capital cost and flexibility. The actual
capital is assessed differently by authorities and Standard & Poor’s.
The authorities require companies to determine the capital base
consisting of equity minus intangible assets, discount effect and other
statutory corrections plus additional capital. The additional capital can
be included by up to 50% of the Solvency I requirement, although
additional capital with a definite maturity may not exceed 25% of the
Solvency I requirement.
Standard & Poor’s uses the term ‘Total Adjusted Capital’ (TAC), where the
subordinate loan capital may generally not exceed 25% of the total capital.
In 2005, Tryg took out a 20-year subordinate bond loan of EUR 150m
listed on the London Stock Exchange. In 2009, in connection with the
acquisition of Moderna, Tryg took out a subordinate loan with expiry in
2032 of EUR 65m from TryghedsGruppen, which owns 60% of Tryg.
Tryg’s total holding of subordinate debt subsequently amounted to
approximately EUR 215m. In total, debt amounted to 18% of equity at
the end of 2012, and interest expenses in 2012 amounted to DKK 80m.
Given Tryg’s desire to optimise its capital structure in light of the currently
favourable market conditions for core capital, Tryg has decided to refi-
nance the subordinate loan from TryghedsGruppen. Due to the most
recent reports about the postponement of the commencement of
Solvency II, Tryg has decided that the new subordinate loan should be
such that it can be fully recognised according to the current capital
adequacy rules. This includes the option of including subordinate loan
capital with an indefinite maturity in the capital base by up to 50% of
the company’s capital requirement. Moreover, it is expected that the
subordinate loan can be included as Tier 2 capital under Solvency II.
Viewed separately, the new loan combined with early repayment of the
existing subordinate loan will strengthen Tryg’s capital base by DKK 800m.
Tryg has therefore decided to purchase treasury shares worth DKK 800m
as part of an extraordinary distribution.
88
| Tryg A/S | Annual report 2012 | Notes
Notes
Capital adequacy
Equity according to annual report
Proposed dividend
Solvency requirements for subsidiaries – 50%
Tier 1 capital
Subordinate loan capital
Solvency requirements for subsidiaries – 50%
Capital base
Weighted assets
Solvency ratio
2011
2012
9,007
-400
-2,508
6,099
848
-2,507
4,440
10,979
-1,594
-2,406
6,979
873
-2,405
5,447
3,953
6,048
112
90
The capital base and the solvency ratio are calculated in accordance with the Danish Financial Business Act.
Subordinate loan capital
The fair value of the loan at the statement of financial position date
The fair value of the loan at the statement of financial position date
is based on a price of
Total capital losses and costs at the statement of financial position date
Interest expenses for the year
Bond loan
2011
962
86
10
50
2012
1,119
100
7
50
TryghedsGruppen smba
2012
2011
464
96
0
33
490
101
0
30
The share of capital included in the calculation of the capital base totals DKK 873m (DKK 848m in 2011).
The loans are initially recognised at fair value on the date on which a loan is entered and subsequently measured at amortised cost.
Loan terms:
Subordinate bond loan a)
Subordinate 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)
Effective interest rate
4.4%
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. and min. until 30 June 2012)
5% above EURIBOR 3M (interest 1 July 2012-30 June 2019)
6% above EURIBOR 3M (interest from 1 July 2019)
0.4 %
a) In December 2005, Tryg Forsikring A/S took out a subordinate 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 subordinate loan capital in connection with acquisitions made in April 2009. The loan is scheduled for refinancing
in Q1 2013.
The prices used for determining fair value in respect of both loans are based on an assessment of the credit spread of the loans conducted by Nordea.
89
Notes | Annual report 2012 | Tryg A/S |
Notes
DKKm
Private
Commercial
Corporate
Sweden
Other
Group
3 Operating segments
2012
Gross premium income
Gross claims
Gross operating expenses
Profit/loss on ceded business
Insurance technical interest,
net of reinsurance
Technical result
Total investment return after
insurance technical interest
Other income and costs
Profit/loss before tax
Tax
Profit/loss on continuing business
Profit/loss on discontinued and
divested business after tax
Profit/loss
Run-off gains/losses,
net of reinsurance
Intangible assets
Equity investments in associates
Reinsurers’ share of
premium provisions
Reinsurers’ share of claims provisions
Assets held for sale
Other assets
Total assets
Premium provisions
Claims provisions
Provisions for bonuses and
premium discounts
Liabilities associated with
assets held for sale
Other liabilities
Total liabilities
9,733
-7,084
-1,524
81
27
1,233
3,687
-2,372
-748
32
5
604
5,258
-3,929
-648
-37
6
650
1,654
-1,267
-306
-3
24
102
-18
-23
-69
13
0
-97
326
212
506
1
249
0
319
236
1,448
2,899
6,479
291
1,397
6,203
1,414
13,011
32
101
-29
502
0
64
978
1,549
0
0
257
21
0
0
742
50,474
0
0
1
742
8,237
20,314
-14,675
-3,295
86
62
2,492
585
-60
3,017
-837
2,180
28
2,208
1,015
759
21
237
2,080
742
50,474
54,313
6,688
27,242
425
742
8,237
43,334
90
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
Private
Commercial
Corporate
Sweden
Other
Group
3 Operating segments
2011
Gross premium income
Gross claims
Gross operating expenses
Profit/loss on ceded business
Insurance technical interest,
net of reinsurance
Technical result
Total investment return after
insurance technical interest
Other income and costs
Profit/loss before tax
Tax
Profit/loss on continuing business
Profit/loss on discontinued and
divested business after tax
Profit/loss
Run-off gains/losses,
net of reinsurance
Intangible assets
Equity investments in associates
Reinsurers’ share of
premium provisions
Reinsurers’ share of claims provisions
Other assets
Total assets
Premium provisions
Claims provisions
Provisions for bonuses and
premium discounts
Other liabilities
Total liabilities
Description of segments
9,425
-7,469
-1,542
273
80
767
3,715
-2,801
-755
132
19
310
5,259
-4,227
-671
107
41
509
1,586
-1,319
-303
-9
31
-14
-37
33
0
4
0
0
185
147
630
1
256
2
374
189
1,182
2,877
5,688
238
1,461
6,644
1,474
12,794
23
123
-18
499
0
62
982
1,300
0
0
453
14
0
1
50,151
138
478
0
9,957
19,948
-15,783
-3,271
507
171
1,572
61
-30
1,603
-455
1,148
-8
1,140
944
952
14
192
1,875
50,151
53,184
6,932
26,904
384
9,957
44,177
Please refer to the accounting policies for a description of operating segments. Amounts relating to eliminations, restructuring expenses and
discontinued and divested business are included under ‘Other’. Other assets and liabilities are managed at Group level and are therefore not
allocated to the individual segments but are included under ‘Other’.
Costs are allocated according to specific keys, which are believed to provide the best estimate of assessed resource consumption. The operating
business segments consist of Private, Commercial, Corporate and Sweden (Private and Commercial). Finland is included under ‘Discontinued and
divested business’/‘Other’. The comparative figures have been restated accordingly.
91
Notes | Annual report 2012 | Tryg A/S |
Notes
DKKm
2008
2009
2010
2011
2012
3 Geographical segments
Danish general insurance
Gross premium income
Technical result
Run-off gains/losses, net of reinsurance
Key ratios
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
9,393
1,678
674
65.0
3.7
68.7
16.2
84.9
9,533
1,190
423
71.4
2.5
73.9
14.6
88.5
9,648
195
615
81.6
0.7
82.3
16.2
98.5
10,019
1,033
770
83.3
-8.1
75.2
15.1
90.3
9,910
1,441
571
71.1
-0.2
70.9
14.5
85.4
Number of full-time employees, end of period
2,356
2,296
2,349
2,315
2,187
Norwegian general insurance
Gross premium income
Technical result
Run-off gains/losses, net of reinsurance
Key ratios
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
7,009
831
109
70.6
3.6
74.2
16.9
91.1
6,750
618
277
70.8
3.7
74.5
17.0
91.5
7,490
389
177
76.7
3.1
79.8
15.7
95.5
7,916
598
181
73.2
3.2
76.4
17.0
93.4
8,239
1,017
464
72.4
-1.0
71.4
16.8
88.2
Number of full-time employees, end of period
1,450
1,398
1,338
1,338
1,282
Swedish general insurance a)
Gross premium income
Technical result
Run-off gains/losses, net of reinsurance
Key ratios
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
Number of full-time employees, end of period
225
-93
0
95.1
0.9
96.0
48.4
144.4
105
1,111
-75
-8
80.6
1.8
82.4
25.1
107.5
425
1,769
-124
32
84.6
0.8
85.4
22.4
107.8
414
2,050
-59
-7
82.0
2.6
84.6
20.3
104.9
423
2,183
131
-21
75.3
1.5
76.8
18.6
95.4
444
92
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
2008
2009
2010
2011
2012
3 Geographical segments
Other b)
Gross premium income
Technical result
Tryg
Gross premium income
Technical result
Run-off gains/losses, net of reinsurance
Key ratios
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio c)
Combined ratio
-5
11
-4
-44
-13
0
-37
0
-18
-97
16,622
2,427
783
17,390
1,689
692
18,894
460
824
19,948
1,572
944
67.8
3.6
71.4
16.5
87.9
71.7
3.0
74.7
16.6
91.3
80.0
1.6
81.6
16.7
98.3
79.1
-2.5
76.6
16.6
93.2
20,314
2,492
1,015
72.2
-0.4
71.8
16.4
88.2
Number of full-time employees, end of period,
continuing business
3,911
4,119
4,101
4,076
3,913
Number of full-time employees, end of period,
discontinued and divested business
180
217
191
242
189
a) Moderna Försäkringar is included in ‘Swedish general insurance’ from 2 April 2009.
b) Amounts relating to eliminations, restructuring expenses and discontinued and divested business are included under ‘Other’.
c) Adjustment of gross expense ratio included only in ‘Tryg’. Explanation of adjustment as a footnote to Financial highlights.
93
Notes | Annual report 2012 | Tryg A/S |
NotesNotes
DKKm
3 Technical result, net of reinsurance, by line of business
2011
2,435
2,461
-1,543
-431
-35
30
482
62.7
81.6
5.2%
23,977
75,681
2011
915
853
-641
-148
-4
6
66
75.1
93.0
2012
2,400
2,456
-1,742
-430
-12
14
286
70.9
88.9
5.1%
25,090
72,300
2012
945
918
-718
-139
10
0
71
78.2
92.3
19.9%
10,960
264,163
18.1%
11,244
240,070
23.2%
60,838
3,320
20.1%
84,256
2,659
2011
4,039
3,903
-2,866
-629
-7
31
432
73.4
89.7
2011
258
260
-169
-65
-21
2
7
65.0
98.1
1.1%
50
2012
4,013
4,011
-2,617
-641
-4
16
765
65.2
81.3
2012
309
307
-201
-61
-28
3
20
65.5
94.5
1.2%
57
2011
408
403
-205
-44
-75
3
82
50.9
80.4
2011
498
488
-501
-74
-1
5
-83
102.7
118.0
12.4%
8,502
53,321
2012
392
386
-158
-39
-25
0
164
40.9
57.5
2012
564
569
-413
-79
-1
3
79
72.6
86.6
6.8%
55,012
10,436
10.0%
76,535
8,927
3,387,982
3,700,928
12.3%
8,889
53,491
Accident and health
Health care
Workers’ compensation
Motor TPL insurance
Motor comprehensive insurance
Marine, aviation and cargo insurance
2011
1,803
1,790
-1,176
-250
-15
11
360
65.7
80.5
4.2%
37,586
35,293
2012
1,838
1,831
-1,456
-241
-12
4
126
79.5
93.3
4.2%
39,432
36,243
2011
361
360
-279
-32
0
4
53
77.5
86.4
2012
327
350
-224
-29
0
1
98
64.0
72.3
109.0%
5,765
51,597
106.3%
5,837
47,547
2011
1,192
1,225
-418
-162
-89
-2
554
35.1
55.6
18.6%
88,842
11,507
2012
1,076
1,089
-687
-135
-14
-21
232
63.1
76.8
16.5%
97,258
9,582
Fire and contents (Private)
Fire and contents (Commercial)
Change of ownership
Liability insurance
Credit and guarantee insurance
Tourist assistance insurance
2011
4,758
4,665
-4,193
-829
308
37
-12
89.9
101.1
2012
4,803
4,831
-3,664
-863
97
20
421
75.8
91.7
8.6%
12,303
345,104
7.8%
11,856
306,088
Other
insurance c)
2011
80
79
-6
-45
-58
1
-29
7.6
138.0
12,399
1,129
2012
114
100
-127
-159
30
0
-156
127.0
256.0
34,658
512
2011
2,850
2,793
-3,103
-490
506
28
-266
111.1
110.5
24.6%
70,676
44,803
2012
2,758
2,793
-2,051
-436
46
14
366
73.4
87.4
18.6%
58,678
32,471
2011
50
112
-178
-8
0
4
-70
158.9
166.1
9.5%
26,050
6,236
2012
35
89
-81
-7
0
0
1
91.0
98.9
7.2%
25,631
4,280
Total
Norwegian Group Life
1-year policies
2011
2012
2011
19,647
19,392
-15,278
-3,207
509
160
1,576
78.8
92.7
19,574
19,730
-14,139
-3,259
87
54
2,473
71.7
87.7
545
556
-505
-64
-2
11
-4
90.8
102.7
2012
554
584
-536
-36
-1
8
19
91.8
98.1
Gross premiums written
Gross premium income
Gross claims
Gross operating expenses
Profit/loss on ceded business
Insurance technical interest,
net of reinsurance
Technical result
Gross claims ratio
Combined ratio
Claims frequency a)
Average claims DKK b)
Total claims
Gross premiums written
Gross premium income
Gross claims
Gross operating expenses
Profit/loss on ceded business
Insurance technical interest,
net of reinsurance
Technical result
Gross claims ratio
Combined ratio
Claims frequency a)
Average claims DKK b)
Total claims
Gross premiums written
Gross premium income
Gross claims
Gross operating expenses
Profit/loss on ceded business
Insurance technical interest,
net of reinsurance
Technical result
Gross claims ratio
Combined ratio
Average claims DKK b)
Total claims
94
| Tryg A/S | Annual report 2012 | Notes
Notes
Accident and health
Health care
Workers’ compensation
Motor TPL insurance
Motor comprehensive insurance
Marine, aviation and cargo insurance
2011
2,435
2,461
-1,543
-431
-35
30
482
62.7
81.6
5.2%
23,977
75,681
2012
2,400
2,456
-1,742
-430
-12
14
286
70.9
88.9
5.1%
25,090
72,300
2011
4,039
3,903
-2,866
-629
-7
31
432
73.4
89.7
2012
4,013
4,011
-2,617
-641
-4
16
765
65.2
81.3
2011
408
403
-205
-44
-75
3
82
50.9
80.4
2012
392
386
-158
-39
-25
0
164
40.9
57.5
19.9%
10,960
264,163
18.1%
11,244
240,070
23.2%
60,838
3,320
20.1%
84,256
2,659
Fire and contents (Private)
Fire and contents (Commercial)
Change of ownership
Liability insurance
Credit and guarantee insurance
Tourist assistance insurance
2011
915
853
-641
-148
-4
6
66
75.1
93.0
2012
945
918
-718
-139
10
0
71
78.2
92.3
2011
258
260
-169
-65
-21
2
7
65.0
98.1
2012
309
307
-201
-61
-28
3
20
65.5
94.5
6.8%
55,012
10,436
10.0%
76,535
8,927
1.1%
3,387,982
50
1.2%
3,700,928
57
2011
498
488
-501
-74
-1
5
-83
102.7
118.0
12.4%
8,502
53,321
2012
564
569
-413
-79
-1
3
79
72.6
86.6
12.3%
8,889
53,491
a) The claims frequency is calculated as the number of claims incurred in the year in proportion to the average number of insurance contracts in the year.
b) Average claims are total claims before run-off in the year relative to the number of claims incurred in the year.
c) Other insurance, gross claims and gross operating expenses include restructuring costs of DKK 28m and DKK 69m, respectively, in 2012.
95
Gross premiums written
Gross premium income
Gross claims
Gross operating expenses
Profit/loss on ceded business
Insurance technical interest,
net of reinsurance
Technical result
Gross claims ratio
Combined ratio
Claims frequency a)
Average claims DKK b)
Total claims
Gross premiums written
Gross premium income
Gross claims
Gross operating expenses
Profit/loss on ceded business
Insurance technical interest,
net of reinsurance
Technical result
Gross claims ratio
Combined ratio
Claims frequency a)
Average claims DKK b)
Total claims
Gross premiums written
Gross premium income
Gross claims
Gross operating expenses
Profit/loss on ceded business
Insurance technical interest,
net of reinsurance
Technical result
Gross claims ratio
Combined ratio
Average claims DKK b)
Total claims
2011
1,803
1,790
-1,176
-250
-15
11
360
65.7
80.5
4.2%
37,586
35,293
2011
4,758
4,665
-4,193
-829
308
37
-12
89.9
101.1
8.6%
80
79
-6
-45
-58
1
-29
7.6
138.0
12,399
1,129
2012
1,838
1,831
-1,456
-241
-12
4
126
79.5
93.3
4.2%
39,432
36,243
2012
4,803
4,831
-3,664
-863
97
20
421
75.8
91.7
2012
114
100
-127
-159
30
0
-156
127.0
256.0
34,658
512
2011
361
360
-279
-32
0
4
53
77.5
86.4
109.0%
5,765
51,597
2011
2,850
2,793
-3,103
-490
506
28
-266
111.1
110.5
24.6%
70,676
44,803
19,647
19,392
-15,278
-3,207
509
160
1,576
78.8
92.7
2012
327
350
-224
-29
0
1
98
64.0
72.3
106.3%
5,837
47,547
2012
2,758
2,793
-2,051
-436
46
14
366
73.4
87.4
18.6%
58,678
32,471
19,574
19,730
-14,139
-3,259
87
54
2,473
71.7
87.7
2011
1,192
1,225
-418
-162
-89
-2
554
35.1
55.6
18.6%
88,842
11,507
2011
50
112
-178
-8
0
4
-70
158.9
166.1
9.5%
26,050
6,236
545
556
-505
-64
-2
11
-4
90.8
102.7
2012
1,076
1,089
-687
-135
-14
-21
232
63.1
76.8
16.5%
97,258
9,582
2012
35
89
-81
-7
0
0
1
91.0
98.9
7.2%
25,631
4,280
2012
554
584
-536
-36
-1
8
19
91.8
98.1
12,303
345,104
7.8%
11,856
306,088
Other
insurance c)
2011
Total
Norwegian Group Life
1-year policies
2011
2012
2011
Notes | Annual report 2012 | Tryg A/S |
Notes
DKKm
2011
2012
4 Premium income, net of reinsurance
Direct insurance
Indirect insurance
Unexpired risk provision
Ceded direct insurance
Ceded indirect insurance
20,022
36
20,058
38
20,096
-1,008
-70
19,018
Direct insurance, by location of risk
2011
2012
20,395
60
20,455
27
20,482
-1,051
-61
19,370
Ceded
-541
-61
-449
Ceded
-573
-100
-335
Gross
9,947
2,176
8,299
-1,008
20,422
-1,051
Gross
10,022
2,040
7,998
20,060
Denmark
Other EU countries
Other countries
5
Insurance technical interest, net of reinsurance
Interest on insurance provisions
Discounting transferred from claims provisions
6 Claims, net of reinsurance
Claims
Run-off previous years, gross
Reinsurance cover received
Run-off previous years, reinsurers’ share
Run-off previous years, gross, was DKK 756m lower in 2012 than in 2011, primarily due to a negative
run-off of DKK 554m relating to the cloudburst on 2 July 2011 and the Norwegian Natural Perils Pool.
These run-offs are covered to a wide extent by reinsurance of DKK 518m. The run-off gain from the
reinsurance agreement concerning the weather claims frequency is included by DKK 136m.
7
Insurance operating costs, net of reinsurance
Commission regarding direct insurance contracts
Other acquisition costs
Total acquisition costs
Administration expenses
Insurance operating costs, gross
Commission from reinsurers
96
2011
841
-670
171
-16,822
1,039
-15,783
1,591
-95
-14,287
-432
-1,936
-2,368
-903
-3,271
89
-3,182
2012
525
-463
62
-14,958
283
-14,675
363
732
-13,580
-477
-2,013
-2,490
-805
-3,295
103
-3,192
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
2011
2012
7
Insurance operating costs, net of reinsurance (continued)
Administration expenses include fee to the auditors appointed by the annual general meeting:
Deloitte
The fee is divided into:
Statutory audit
Tax advice
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 46m (DKK 33m in 2011).
Insurance operating costs, gross, classified by type
Commissions
Staff expenses
Other staff expenses
Office expenses and fees, headquarter expenses
IT operating and maintenance costs, software expenses
Depreciation, amortisation, impairment losses and write-downs
Other income
Total lease expenses amount to DKK 36m (DKK 39m in 2011).
Insurance operating costs and claims include the following staff expenses:
Salaries and wages
Commission
Allocated share options and matching shares
Pension
Other social security costs
Payroll tax
-7
-7
-6
-1
-7
-432
-1,901
-210
-528
-230
-149
179
-3,271
-2,277
-11
-14
-323
-4
-351
-2,980
-6
-6
-6
0
-6
-477
-1,977
-206
-473
-218
-129
185
-3,295
-2,379
-10
-9
-393
-5
-369
-3,165
Remuneration for the Supervisory Board and Executive Management is disclosed in Note 29
‘Related parties’.
Average number of full-time employees during the year (continuing business)
4,095
4,016
Restructuring costs
To achieve the anticipated cost-efficiency and profitability in the new efficiency improvement project,
Tryg plans to reduce its staff by approximately 400 employees in 2012-2014.
Restructuring costs relating to the streamlining project are included with DKK 97m in 2012,
consisting primarily of staff expenses.
97
Notes | Annual report 2012 | Tryg A/S |
Notes
7
Share option programmes
Spec. of outstanding options:
2012
Allocation 2007-2010
Allocated in 2007-2010,
beginning of year
Category changes
Exercised
Cancelled
Expired
Outstanding options from
2007-2010 allocation at
31 Dec. 2012
Allocation 2011
Allocated in 2011,
beginning of year
Category changes
Exercised
Cancelled
Expired
Outstanding options from 2011
allocation at 31 Dec. 2012
Number of options exercisable
at 31 Dec. 2012
2011
Allocation 2006-2010
Allocated in 2006-2010,
beginning of year
Category changes
Exercised
Cancelled
Expired
Outstanding options from
2006-2010 allocation at
31 Dec. 2011
Allocation 2011
Allocated in 2011
Category changes
Exercised
Cancelled
Expired
Outstanding options from 2011
allocation at 31 Dec. 2011
Number of options exercisable
at 31 Dec. 2011
98
TOTAL NUMBERS
MARKET VALUE
Executive
Manage-
Other
Other
senior
ment employees employees
Total
Per option Total value
at time of
at time of
allocation
allocation
(DKKm)
(DKK)
at 31
Per option Total value
at 31
December December
(DKKm)
(DKK)
113,353
-11,575
0
-17,245
479,921
19,895
-103,177
-3,502
-100,012
71,886
-19,895
-6,780
-1,197
-4,000
665,160
-121,532
-4,699
-121,257
99/69/94/75
99/69/94/75
99/69/94/75
99/69/94/75
99/69/94/75
54 60/118/115
-10 60/118/115
0 60/118/115
-12
52
-10
-1
84,533
293,125
40,014
417,672
-
32
-
41
8,285
0
0
0
101,169
-1,036
0
-1,381
0
26,220
1,036
0
-690
0
135,674
0
0
-2,071
0
8,285
98,752
26,566
133,603
51,165
153,305
18,670
223,140
72
0
72
0
10
0
0
0
10
137
19
137
0
192,916
30,757
-10,480
-78,880
-20,960
588,355
-30,757
-45,850
-26,587
-5,240
77,773
0
0
-5,887
0
859,044 64/99/69/94/75
0 64/99/69/94/75
-56,330 64/99/69/94/75
-111,354 64/99/69/94/75
-26,200 64/99/69/94/75
69 0/12/43/53
0 0/12/43/53
-3 0/12/43/53
-9 0/12/43/53
-2 0/12/43/53
113,353
479,921
71,886
665,160
8,285
104,967
27,600
0
0
0
0
-3,798
0
0
-1,380
0
140,852
0
0
-5,178
0
8,285
101,169
26,220
135,674
53,417
236,068
28,666
318,151
-
72
0
72
0
55
10
0
0
0
10
-
70
0
70
0
19
22
0
0
-4
0
18
10
0
0
0
10
| Tryg A/S | Annual report 2012 | Notes
Notes
7
Share option programmes
Specification of outstanding options:
Year of allocation
Years of exercise
1 Jan. 2012
Additions
Exercised
Cancelled
Expired
31 Dec. 2012
2007
2008
2009
2010
2011
2010-2012
2011-2013
2012-2014
2013-2015
2014-2016
Outstanding options
at 31 Dec. 2012
121,257
196,894
149,808
197,201
135,674
800,834
0
0
0
0
0
0
0
-71,216
-50,316
0
0
0
-700
-1,330
-2,669
-2,071
-121,257
0
0
0
0
0
124,978
98,162
194,532
133,603
-121,532
-6,770
-121,257
551,275
Assumptions for calculation of market value at time of allocation
Year of
allocation
2007
2008
2009
2010
2011
Average share
price at time
of allocation
(DKK)
Years of
exercise
Expected
volatility
Expected
maturity
Risk-free
interest rate
Average
time to expiry,
31 Dec. 2012
Average
exercise
price,
31 Dec. 2012
2010-2012
2011-2013
2012-2014
2013-2015
2014-2016
456.76
378.24
313.51
320.04
295.83
24.10%
20.30%
37.70%
29.20%
30.00%
4 years
4 years
4 years
4 years
4 years
3.90%
3.60%
2.80%
2.70%
3.00%
0.00
0.08
0.58
1.15
2.11
0.00
366.54
312.34
326.02
314.90
Tryg did not allocate share options in 2012. At 31 December 2012, the share option plan comprised 551,275 share options (800,834 share
options at 31 December 2011). Each share option entitles the holder to acquire one existing share with a nominal value of DKK 25 in Tryg
A/S. The share option plan entitles the holders to buy 0.9% of the share capital in Tryg A/S if all share options are exercised.
In 2012, the fair value of share options recognised in the consolidated income statement amounted to DKK 7m (DKK 13m in 2011).
At 31 December 2012, a total amount of DKK 76m was recognised for share option programmes issued in 2006-2011. Fair values at the
time of allocation are based on the Black & Scholes option pricing formula.
The Group Executive Management includes retired managers with a total of 27,465 units with a value of DKK 2.2m at the time of allocation.
Risk-takers are included under ‘Other senior employees’.
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 term is 4 years, corresponding to the average 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 term are based on the same principles as for the market value at the time of allocation.
99
Notes | Annual report 2012 | Tryg A/S |
Notes
7 Matching shares
TOTAL NUMBERS
MARKET VALUE
Executive
Manage-
ment
Risk-
takers
Total
Average per
matching
Average per
Total
share at Total value matching
share at
at time of
time of
value
31 Dec. at 31 Dec.
allocation
allocation
(DKKm)
(DKKm)
(DKK)
(DKK)
2012
Allocated in 2012
Matching shares allocated at 31 Dec. 2012
Allocated in 2011
Matching shares allocated at 31 Dec. 2012
5,948
5,948
4,979
4,979
3,846
3,846
5,996
5,996
9,794
9,794
10,975
10,975
2011
Allocated in 2011
Matching shares allocated at 31 Dec. 2011
4,979
4,979
5,996
5,996
10,975
10,975
301
301
302
302
302
302
3
3
4
4
4
4
427
427
427
427
319
319
4
4
5
5
4
4
In 2011 and 2012, Tryg entered into an agreement on matching shares for the Executive Management and selected risk-takers as a
consequence of the Group’s remuneration policy. The Executive Management and selected risk-takers are allocated one share in Tryg A/S
for each share that the Executive Management member or risk-taker acquires in Tryg A/S at market rate for liquid cash at a contractually
agreed sum. The shares are reported at market value and are accrued over the 4-year maturation period. In 2012, the reported fair value of
matching shares for the Group amounted to DKK 2m.
100
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
2011
2012
8
Interest and dividends etc.
Interest income and dividends
Dividends
Interest income cash at bank and in hand
Interest income bonds
Interest income other
Interest expenses
Interest expenses subordinate loan capital and credit institutions
Interest expenses other
9 Price adjustments
Price 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
Other loans
Price adjustments concerning assets or liabilities that cannot be attributed to IAS 39:
Investment property
Owner-occupied property
Discounting
Other statement of financial position items
10
51
1,173
18
1,252
-83
-30
-113
1,139
13
-100
16
160
465
1
555
15
-10
-757
-67
-819
-264
15
26
1,133
22
1,196
-80
-20
-100
1,096
2
378
-2
202
263
0
843
82
-350
-475
-116
-859
-16
Value gains
Value losses
Price adjustments, net
743
-1,007
-264
1,001
-1,017
-16
Foreign currency translation adjustments concerning financial assets or liabilities which cannot be stated
at fair value total DKK 37m (DKK 31m in 2011).
101
Notes | Annual report 2012 | Tryg A/S |
Notes
DKKm
10 Tax
Tax on accounting profit/loss
Difference between Danish and foreign tax rates
Tax adjustment, previous years
Adjustment of non-taxable income and costs
Change in valuation of tax assets
Change in tax rate
Other taxes
Effective tax rate
Tax on accounting profit/loss
Difference between Danish and foreign tax rates
Tax adjustment, previous years
Adjustment of non-taxable income and costs
Change in valuation of tax assets
11 Profit/loss on discontinued and divested business
Gross premium income
Gross claims
Total insurance operating costs
Profit/loss on gross business
Profit/loss on ceded business
Insurance technical interest, net of reinsurance
Technical result
Total investment return after insurance technical interest
Other income and costs
Profit/loss before tax
Tax
Profit/loss on discontinued and divested business
102
2011
2012
-401
-13
32
-64
-7
0
-2
-455
%
25
1
-2
4
1
29
633
-471
-159
3
-8
13
8
-7
-1
0
-8
-8
-754
-57
2
49
-89
12
0
-837
%
25
2
0
-2
3
28
611
-484
-244
-117
-4
4
-117
32
113
28
0
28
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
11 Profit/loss on discontinued and divested business (continued)
Technical result, net of reinsurance, by line of business
Motor TPL
insurance
Motor comprehensive Fire and contents
insurance
(Private)
Other line of business
Total
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
174
177
-138
-27
0
168
170
-144
-41
0
157
157
-122
-24
0
151
152
-126
-37
0
147
143
-122
-53
0
150
149
-126
-85
3
153
156
-89
-55
-8
129
140
-88
-81
-7
631
633
-471
-159
-8
598
611
-484
-244
-4
5
2
0
0
2
1
6
1
13
4
Gross premiums written
Gross premium income
Gross claims
Gross operating expenses
Profit/loss on ceded business
Insurance technical interest,
net of reinsurance
Technical result
17
-13
11
-11
-30
-58
10
-35
8
-117
Gross claims ratio
Combined ratio
78.0
93.2
84.7
108.8
77.7
93.0
82.9
107.2
85.3
122.4
84.6
139.6
57.1
97.4
62.9
125.7
74.4
100.8
79.2
119.8
Claims frequency a)
Average claims DKK b)
Total claims
2.3%
48,875
2,818
2.5%
49,614
2,906
14.8%
9,509
12,872
16.0%
9,493
13,324
2.9%
16,503
7,375
3.3%
15,435
8,132
a)
The claims frequency is calculated as the number of claims incurred in the year in proportion to the average number of insurance contracts in
the year.
b) Average claims are total claims before run-off in the year relative to the number of claims incurred in the year.
Other line of business include accident and health, workers’ compensation, marine insurance, fire and contents (commercial), liability insurance and
tourist assistance insurance, which are the line of business in which premium income does not exceed DKK 70m.
Tryg Forsikring A/S and If P&C Insurance Company Ltd (Finland) entered into agreement on 6 November 2012 on If’s acquisition of Tryg’s Finnish
branch at a total price of DKK 112m. The sale is expected to be finalised in spring 2013, pending authority approval. The comparative figures have
been restated to reflect the sale.
103
Notes | Annual report 2012 | Tryg A/S |
Notes
DKKm
12
Intangible assets
2012
Cost
Balance at 1 January
Foreign currency translation adjustments
Transferred to assets held for sale
Transferred from assets under construction
Additions for the year
Disposals for the year
Balance at 31 December
Amortisation and write-downs
Balance at 1 January
Foreign currency translation adjustments
Transferred to assets held for sale
Amortisation for the year
Impairment losses and write-downs for the year
Reversed amortisation
Balance at 31 December
Trademarks
and customer
relations
Goodwill
Assets
under
construction
Software
380
17
0
0
0
0
397
0
0
0
0
0
0
0
170
8
0
0
0
0
178
-51
-2
0
-20
0
0
-73
882
12
-4
14
13
-48
869
-632
-9
3
-143
-2
36
-747
257
0
0
-14
82
-98
227
-54
0
0
0
-38
0
-92
Total
1,689
37
-4
0
95
-146
1,671
-737
-11
3
-163
-40
36
-912
Carrying amount at 31 December
397
105
122
135
759
2011
Cost
Balance at 1 January
Foreign currency translation adjustments
Transferred from assets under construction
Additions for the year
Disposals for the year
Balance at 31 December
Amortisation and write-downs
Balance at 1 January
Foreign currency translation adjustments
Amortisation for the year
Impairment losses and write-downs for the year
Balance at 31 December
377
3
0
0
0
380
0
0
0
0
0
168
2
0
0
0
170
-32
0
-19
0
-51
786
1
74
22
-1
882
-446
-1
-172
-13
-632
115
0
-74
216
0
257
0
0
0
-54
-54
1,446
6
0
238
-1
1,689
-478
-1
-191
-67
-737
Carrying amount at 31 December
380
119
250
203
952
Software developed in-house is included in ‘Software and assets under construction’ by DKK 110m at 31 December 2012
(DKK 210m at 31 December 2011)
104
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
12
Intangible assets (continued)
Impairment test
Goodwill
At 31 December 2012, 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, which consists of the total Swedish insurance activities.
In 2009, Tryg acquired Moderna Försäkringar Sak AB, Modern Re S.A., Netviq AB and MF Bilsport & MC Specialförsäkringar. The insurance
activities were incorporated into the Tryg Group’s business structure in 2009 and are reported under Sweden. In 2010, the companies,
excluding Modern Re S.A., were merged into Tryg Forsikring A/S as Moderna Forsäkringar, a branch of Tryg Forsikring A/S. Modern Re S.A.
was discontinued in 2011.
Assumptions for impairment test: The value-in-use method is used.
The cash flows appearing from the latest budgets approved by management for the next 5 financial years are used when calculating the
value in use of the total Swedish activities acquired. The cash flows in the latest budget period have been extrapolated for financial years
after the budget periods (terminal period) and adjusted for expected growth rates determined on the basis of expectations for the general
economic growth. The required return is based on an assessment of the risk profile of the tested business activities. Higher return require-
ments or lower growth would entail a lower value of the activities, whereas lower return requirements or higher growth expectations
would entail a higher value. The impairment test shows a calculated equity of approximately DKK 1.8bn relative to a recognised equity of
DKK 0.8bn and did not indicate any impairment.
2012
Moderna
2011
Moderna
Assumed
annual growth
> 5 years
Required
return
before tax
2.0%
12.4%
2.0%
12.7%
Trademarks and customer relations
The impairment test performed for trademarks and customer relations did not indicate any impairment.
Software and assets under construction
In 2010, Tryg launched an IT project ‘Tryg Transition’, the aim of which was to design new IT processes and achieve efficiency improvements
at Tryg. In 2012, management chose to change the direction of the project and instead focus on improving the efficiency of the existing
processes. Based on this, Tryg Transition is impaired, including the related pilot project in Finland. A total impairment of DKK 123m has been
made for Tryg Transition. The part relating to the pilot project in Finland is recognised under discontinued business. All other impairment is
recognised under insurance operating costs.
The impairment test compares the carrying amount with the estimated present value of future cash flows.
105
Notes | Annual report 2012 | Tryg A/S |
Notes
DKKm
13 Property, plant and equipment
2012
Cost
Balance at 1 January
Foreign currency translation adjustments
Transferred to assets held for sale
Transferred from assets under construction
Additions for the year
Disposals for the year
Balance at 31 December
Accumulated value adjustments
Balance at 1 January
Foreign currency translation adjustments
Value adjustments for the year at revalued amount in income statement
Value adjustments for the year at revalued amount in other
comprehensive income
Balance at 31 December
Accumulated depreciation
Balance at 1 January
Foreign currency translation adjustments
Transferred to assets held for sale
Reversed depreciation
Depreciation for the year
Balance at 31 December
Operating Owner-occupied
property
equipment
Assets under
construction
Total
187
3
-8
0
55
-9
228
0
0
0
0
0
-85
-1
4
8
-16
-90
1,760
27
0
10
8
-19
1,786
27
0
-350
42
-281
-42
-1
0
0
-19
-62
98
2
0
-10
11
0
101
-88
-2
0
0
-90
0
0
0
0
0
0
2,045
32
-8
0
74
-28
2,115
-61
-2
-350
42
-371
-127
-2
4
8
-35
-152
Carrying amount at 31 December
138
1,443
11
1,592
106
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
13 Property, plant and equipment (continued)
2011
Cost
Balance at 1 January
Foreign currency translation adjustments
Transferred from assets under construction
Additions for the year
Disposals for the year
Balance at 31 December
Accumulated value adjustments
Balance at 1 January
Value adjustments for the year at revalued amount in income statement
Value adjustments for the year at revalued amount in other
comprehensive income
Balance at 31 December
Accumulated depreciation
Balance at 1 January
Reversed depreciation
Depreciation for the year
Balance at 31 December
Operating Owner-occupied
property
equipment
Assets under
construction
Total
228
0
0
18
-59
187
0
0
0
0
-110
48
-23
-85
1,397
2
340
21
0
1,760
17
-10
20
27
-29
0
-13
-42
441
0
-340
-3
0
98
-88
0
0
-88
0
0
0
0
2,066
2
0
36
-59
2,045
-71
-10
20
-61
-139
48
-36
-127
Carrying amount at 31 December
102
1,745
10
1,857
External experts were involved in valuing the owner-occupied property.
Impairment test
Property, plant and equipment
A valuation of the owner-occupied property has been carried out, including the improvements made, and a revaluation of DKK 42m
(DKK 20m in 2011) was subsequently included in other comprehensive income and impairment of DKK 350m (DKK 10m in 2011) in the
income statement. The impairment test performed for operating equipment did not indicate any impairment. In establishing the market
value of the owner-occupied property, the following return percentages were used:
Return percentages weighted average
Office property
2011
6.3
2012
6.9
107
Notes | Annual report 2012 | Tryg A/S |
Notes
DKKm
14
Investment property
Fair value at 1 January
Foreign currency translation adjustments
Additions for the year
Disposals for the year
Value adjustments for the year
Reversed on sale
Fair value at 31 December
2011
2012
2,158
2
29
-1
12
-1
2,199
2,199
24
35
-259
47
35
2,081
Total rental income for 2012 is DKK 152m (DKK 156m in 2011).
Total expenses for 2012 are DKK 29m (DKK 39m in 2011). Of this amount, expenses for non-let property total DKK 2m
(DKK 2m in 2011); total expenses for the income-generating investment property are DKK 27m (DKK 37m in 2011).
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 weighted average
Business property
Office property
Residential property
Total
2011
2012
7.3
6.3
4.8
6.3
7.0
6.4
5.9
6.5
108
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
15 Equity investments in associates
Cost
Balance at 1 January
Balance at 31 December
Revaluations at net asset value
Balance at 1 January
Foreign currency translation adjustments
Value adjustments for the year
Balance at 31 December
Carrying amount at 31 December
2011
2012
0
0
13
0
1
14
14
0
0
14
1
6
21
21
Shares in associates according to the latest annual report:
Name and registered office
Assets
Equity and
liabilities
Equity
Revenue
Profit/loss
for the year
Ownership
share in %
2012
Komplementarselskabet af
1. marts 2006 ApS, Denmark
Bilskadeinstituttet AS, Norway
AS Eidsvag Fabrikker, Norway
2011
Komplementarselskabet af
1. marts 2006 ApS, Denmark
Bilskadeinstituttet AS, Norway
AS Eidsvag Fabrikker, Norway
0
9
60
0
5
49
0
3
19
0
0
5
0
5
42
0
5
44
0
15
22
0
1
19
0
0
9
0
0
4
50
30
28
50
30
28
Individual estimates are made of the degree of influence under the contracts made.
109
Notes | Annual report 2012 | Tryg A/S |
Notes
DKKm
16 Financial assets
Financial assets at fair value with value adjustment in the income statement
Equity investments
Unit trust units
Bonds
Deposits with credit institutions
Derivative financial instruments
Assets held for sale
Financial assets at fair value with value adjustment in the income statement
Loans and receivables measured at amortised cost
Total receivables in relation to direct insurance contracts
Receivables from insurance enterprises
Receivables from Group undertakings
Other receivables
Current tax assets
Cash at bank and in hand
Assets held for sale
Total loans and receivables measured at amortised cost
Total financial assets
Financial assets at amortised cost only deviate to a minor extent from fair value.
Financial liabilities
Financial liabilities at fair value with value adjustment in the income statement
Derivative financial instruments
Total financial liabilities at fair value with value adjustment in the income statement
Financial liabilities measured at amortised cost
Subordinate loan capital
Debt relating to direct insurance
Debt relating to reinsurance
Amounts owed to credit institutions
Debt relating to unsettled funds transactions and repos
Current tax liabilities
Liabilities associated with assets held for sale
Other debt
Total financial liabilities measured at amortised cost
Total financial liabilities
Information on valuation of subordinate loan capital at fair value is stated in Note 2.
Other financial liabilities measured at amortised cost only deviate to a minor extent from fair value.
2011
2012
187
2,378
38,400
1,635
614
0
43,214
1,158
317
1
189
93
402
0
2,160
199
3,261
38,862
949
547
487
44,305
1,149
227
1
612
0
504
141
2,634
45,374
46,939
35
35
1,589
410
191
11
4,161
260
0
740
7,362
7,397
66
66
1,597
415
256
14
1,470
652
742
1,030
6,176
6,242
110
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
16 Financial assets (continued)
Other financial investment assets
Fair value hierarchy for financial instruments measured
at fair value in the statement of financial position
2012
Equity investments
Unit trust units
Bonds
Deposits with credit institutions
Derivative financial instruments
Assets held for sale
2011
Equity investments
Unit trust units
Bonds
Deposits with credit institutions
Derivative financial instruments
Quoted
market prices
Observable
input
Non-
observable
input
Total
0
3,261
24,794
949
0
487
29,491
0
2,378
26,713
1,635
0
30,726
0
0
14,058
0
481
0
14,539
0
0
11,657
0
579
12,236
199
0
10
0
0
0
209
187
0
30
0
0
217
199
3,261
38,862
949
481
487
44,239
187
2,378
38,400
1,635
579
43,179
2011
2012
Financial instruments measured at fair value in the statement of financial position based on
non-observable input:
Carrying amount at 1 January
Foreign currency translation adjustments
Gains/losses in the income statement
Purchases
Sales
Transfers to/from the group ‘non-observable input’
Carrying amount at 31 December
Gains/losses in the income statement for assets held at the statement
of financial position date recognised in price adjustments
227
0
11
8
-29
0
217
11
Bonds measured on the basis of observable input mainly consist of Norwegian bonds issued by banks and to some extent
Danish semi-liquid bonds, where no quoted prices based on actual trades are available.
Non-observable input, total result DKK -13m (DKK 11m in 2011), mainly comprises unlisted shares and bonds.
Inflation derivatives are measured at fair value on the basis of non-observable input and are included under claims
provisions at a fair value of DKK 3m (DKK 37m in 2011).
217
5
-13
15
-10
-5
209
-13
111
Notes | Annual report 2012 | Tryg A/S |
Notes
DKKm
Bonds
Shares
Property
Total
16 Financial assets (continued)
Reconciliation between investment assets as per ‘Investment activities’
in the management’s review and the statement of financial position
2012
Investment assets as per the section ‘Investment activities’
in the management’s review
Consisting of:
Cash and cash equivalents allocated to portfolio management
Debt and receivables relating to unsettled funds and property transactions
Unit trust units
Deposits with credit institutions
Derivative financial instruments
Repo debt and reverse receivables
Assets held for sale
Associated shares
Investment assets according to statement of financial position
Unit trust units
Deposits with credit institutions
Derivative financial instruments
Associated shares
Total investment assets according to statement of financial position
2011
Investment assets as per the section ‘Investment activities’
in the management’s review
Consisting of:
Cash and cash equivalents allocated to portfolio management
Debt and receivables relating to unsettled funds and property transactions
Unit trust units
Deposits and derivatives
Repo debt and reverse receivables
Associated shares
Investment assets according to statement of financial position
Unit trust units
Deposits with credit institutions
Derivative financial instruments
Associated shares
Total investment assets according to statement of financial position
41,019
2,444
2,081
45,544
-61
905
-1,037
-949
-511
94
-598
0
38,862
0
0
-2,224
0
0
0
0
-21
199
0
0
0
0
0
0
0
0
2,081
-61
905
-3,261
-949
-511
94
-598
-21
41,142
3,261
949
547
21
45,920
37,232
1,860
2,199
41,291
-33
779
-719
-2,241
3,382
0
38,400
0
0
-1,659
0
0
-14
187
0
0
0
0
0
0
2,199
-33
779
-2,378
-2,241
3,382
-14
40,786
2,378
1,635
614
14
45,427
112
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
16 Financial assets (continued)
Sensitivity information
Impact on equity from the following changes:
Interest rate increase of 0.7-1.0 percentage point
Interest rate fall of 0.7-1.0 percentage point
Equity price fall of 12%
Fall in property prices of 8%
Exchange rate risk (VaR 99)
Loss on counterparties of 8%
2011
2012
-24
87
-223
-330
-23
-500
112
-182
-279
-283
-19
-320
The impact on the income statement is similar to the impact on equity.
The statement complies with the disclosure requirements set out in the Executive Order on Financial Reports
for Insurance Companies and Multi-Employer Occupational Pension Funds issued by the Danish FSA.
Derivative financial instruments
Derivatives with value adjustment in the income statement at market value:
2011
2012
Market value
in statement
of financial
position
Nominal
Market value
in statement
of financial
position
Nominal
Interest derivatives
Share derivatives
Exchange rate derivatives
Derivatives according to statement of financial position
Inflation derivatives included in claims provisions
Total derivative financial instruments
Due after less than 1 year
Due within 1-5 years
Due after more than 5 years
16,971
44
8,131
25,146
2,931
28,077
10,288
3,656
14,133
606
0
-27
579
37
616
-57
-21
694
Derivatives, repos and reverses are used continuously as part of the cash and
risk management carried out by Tryg and its portfolio managers.
Derivative financial instruments used in connection with hedging of foreign entities for accounting purposes
Gains and losses on hedges charged
to other comprehensive income:
Balance at 1 January
Price adjustments for the year
Balance at 31 December
Gains
983
273
1,256
2011
Losses
-1,280
-300
-1,580
Net
Gains
-297
-27
-324
1,256
191
1,447
27,078
-120
2,411
29,369
2,590
31,959
2,301
10,955
18,703
2012
Losses
-1,580
-375
-1,955
511
0
-30
481
3
484
-30
42
472
Net
-324
-184
-508
113
Notes | Annual report 2012 | Tryg A/S |
Notes
DKKm
16 Financial assets (continued)
2011
2012
Price adjustments
Price adjustments of foreign entities recognised in other comprehensive income in the amount of:
Balance at 1 January
Price adjustments for the year
Balance at 31 December
Receivables
Receivables from insurance enterprises
Receivables from Group undertakings
Other receivables
Specification of write-downs on receivables from insurance contracts:
Balance at 1 January
Foreign currency translation adjustments
Transferred to assets held for sale and
write-downs and reversed write-downs for the year
Balance at 31 December
Reversed write-downs are estimated at DKK 48m (DKK 52m in 2011) in one year, but may vary due to
major cases/disputes. Written-down receivables are collected by an external collection agency.
Receivables in connection with insurance contracts include overdue receivables totalling:
Falling due:
Within 90 days
After 90 days
Including write-downs of due amounts
Other receivables do not include overdue receivables
17 Reinsurers’ share
Reinsurers’ share
Write-downs after impairment test
Balance at 31 December
307
30
337
1,475
1
189
1,665
135
0
8
143
170
151
321
143
337
192
529
1,376
1
612
1,989
143
2
-32
113
160
108
268
113
2,086
-19
2,067
2,354
-37
2,317
Impairment test
At 31 December 2012, 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 37m (DKK 19m in 2011). Write-downs for the year include reversed
write-downs totalling DKK 16m (DKK 1m in 2011). There is no overdue reinsurers’ share over and above the share already provided for.
114
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
18 Current tax
Current tax, beginning of year
Foreign currency translation adjustments
Current tax for the year
Current tax on equity entries
Adjustment of current tax in respect of previous years
Tax paid for the year
Net current tax, end of year
Current tax is recognised in the statement of financial position as follows:
Under assets, current tax
Under liabilities, current tax
Net current tax, end of year
19 Assets held for sale and associated liabilities
Intangible assets
Property, plant and equipment
Investment assets and cash equivalents
Reinsurers’ share of claims provisions
Receivables
Assets held for sale
Premium provisions
Claims provisions
Other debt
Liabilities associated with assets held for sale
Net assets held for sale
2011
2012
90
0
-500
7
26
210
-167
93
-260
-167
0
0
0
0
0
0
0
0
0
0
0
-167
-16
-949
46
9
425
-652
0
-652
-652
112
2
603
7
18
742
125
540
77
742
0
In the statement of financial position at 31 December 2012, assets and liabilities relating to the Finnish branch are classified as ‘Assets
held for sale’ and ‘Liabilities associated with assets held for sale’. The proceeds from the sale of the activity are expected to correspond to
or exceed the carrying amounts of the associated assets and liabilities. The activity did not fulfil the conditions for classification as assets
held for sale and associated liabilities at 31 December 2011. The Group had no other assets held for sale and associated liabilities at
31 December 2011.
115
Notes | Annual report 2012 | Tryg A/S |
Notes
DKKm
20
Equity
Share capital
Number of shares, exclusive of treasury shares
Balance at 1 January
Bought during the year
Sold during the year
Used in connection with exercise of share options
2011
2012
Number of Nominal value
(DKK ’000)
shares
Number of Nominal value
(DKK ’000)
shares
60,633,701
-316,792
56,360
0
1,515,843
-7,920
1,409
0
60,373,269
0
200,000
121,532
1,509,332
0
5,000
3,038
Balance at 31 December
60,373,269
1,509,332
60,694,811
1,517,370
2011
2012
Number of Nominal value
(DKK ’000)
shares
% of
share capital
Number of Nominal value
(DKK ’000)
shares
% of
share capital
Treasury shares
Balance at 1 January
Bought during the year
Sold during the year
3,297,872
316,792
0
82,447
7,920
0
Cancellation in connection with
buyback programme
-2,615,470
-65,387
Used in connection with issue of
employee shares
Used in connection with exercise
of share options
Balance at 31 December
0
0
-56,360
942,834
-1,409
23,571
5.16
0.50
0.00
-4.03
0.00
-0.09
1.54
942,834
0
-200,000
0
-10
23,571
0
-5,000
0
0
-121,532
621,292
-3,039
15,532
1.54
0.00
-0.33
0.00
0.00
-0.20
1.01
Pursuant to the authorisation granted by the shareholders, Tryg may acquire up to 10.0% of the share capital in the period up until
14 April 2015. Treasury shares are acquired for use in the Group’s incentive programme and as part of the share buyback programme.
21 Premium provisions
Premium provisions, beginning of year
Price adjustment of provisions, beginning of year
Paid in the financial year
Change in premiums in the financial year
Foreign currency translation adjustments
Premium provisions, end of year
Other a)
2011
6,659
22
20,016
-19,924
-3
6,770
162
6,932
2012
6,770
185
20,139
-20,434
-2
6,658
30
6,688
116
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
21 Claims provisions
2012
Claims provisions, beginning of year
Price 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
Gross
Ceded
Net of
reinsurance
26,159
720
26,879
-7,442
-8,233
-15,675
14,978
-300
14,678
1,755
44
1,799
-92
-867
-959
268
740
1,008
24,404
676
25,080
-7,350
-7,366
-14,716
14,710
-1,040
13,670
Discounting and foreign currency translation adjustments
960
45
915
Claims provisions, end of year
Other a)
2011
Claims provisions, beginning of year
Price 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 foreign currency translation adjustments
Claims provisions, end of year
Other a)
26,842
400
27,242
24,255
69
24,324
-8,413
-6,921
1,893
187
2,080
1,333
5
1,338
-750
-341
24,949
213
25,162
22,922
64
22,986
-7,663
-6,580
-15,334
-1,091
-14,243
16,623
-1,005
15,618
1,551
26,159
745
26,904
1,483
-34
1,449
15,140
-971
14,169
59
1,492
1,755
120
1,875
24,404
625
25,029
a)
Comprises premiums and claims provisions for Tryg Garantiforsikring A/S and, in 2011, the Finnish branch of Tryg Forsikring A/S.
In 2012, the Finnish branch is included under ‘Liabilities associated with assets held for sale’.
117
Notes | Annual report 2012 | Tryg A/S |
Notes
DKKm
2011
2012
22 Pensions and similar liabilities
Jubilees, schemes for elderly employees etc.
Recognised liability, end of year
Defined-benefit pension plans:
Present value of pension obligations funded through operations
Present value of pension obligations funded through establishment of funds
Pension obligation, gross
Fair value of plan assets
Pension obligation, net
Specification of change in recognised pension obligations:
Recognised pension obligation, beginning of year
Adjustment beginning of year regarding plan changes not recognised in the income statement
and expected estimate deviation
Foreign currency translation adjustments
Present value of pensions earned during the year
Capital cost of previously earned pensions
Actuarial gains/losses
Paid during the period
Recognised pension obligation, end of year
Change in carrying amount of plan assets:
Carrying amount of plan assets, beginning of year
Adjustment beginning of year regarding plan changes not recognised in the income statement
and expected estimate deviation
Foreign currency translation adjustments
Investments in the year
Estimated return on pension funds
Actuarial gains/losses
Paid during the period
Carrying amount of plan assets, end of year
Total pensions and similar obligations, end of year
Total recognised obligation, end of year
Specification of pension cost for the year:
Present value of pensions earned during the year
Interest expense on accrued pension obligation
Expected return on plan assets
Accrued employer contributions
Total year’s cost of defined-benefit plans
The premium for the following financial years is estimated at:
Number of active persons and number of pensioners
Estimated distribution of plan assets:
Shares
Bonds
Property
Average return on plan assets
118
49
49
122
1,868
1,990
1,013
977
60
60
106
2,045
2,151
1,109
1,042
1,572
1,990
57
13
49
58
310
-69
0
120
81
52
-22
-70
1,990
2,151
951
1,013
-17
9
88
41
-15
-44
1,013
977
1,026
40
57
-41
10
66
0
58
130
41
-84
-49
1,109
1,042
1,102
69
51
-40
11
91
80
1,472
114
1,428
%
5
77
18
4.0
%
9
74
17
2.5
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
22 Pensions and similar obligations (continued)
Assumptions used:
Discount rate
Estimated return on pension funds
Salary adjustments
Pension adjustments
G adjustments
Turnover
Employer contributions
Mortality table
Sensitivity information
Impact on equity shareholders from the following changes:
Interest rate increase of 0.3 percentage points
Interest rate decrease of 0.3 percentage points
Increase in expected return of 1.5 percentage points
Pay increase rate, increase of 1 percentage point
Pay increase rate, decrease of 1 percentage point
Mortality +1 year’s life
2011
2012
%
%
2.7
4.0
4.0
3.8
3.8
6.0
14.1
Adj. K2005
2.4
2.5
3.5
3.3
3.3
7.0
14.1
Adj. K2005
96
-89
18
-109
92
73
84
-90
18
-105
86
70
Pension obligation
Plan assets
Surplus/deficit
Actuarial gains/losses associated with the
pension obligation
Actuarial gains/losses associated with pension assets
Actuarial gains/losses in other comprehensive
income, end of year
2008
2009
2010
2011
2012
1,123
628
495
-23
-173
-196
1,304
856
448
70
-42
28
1,572
951
621
-181
-47
-228
1,990
1,013
977
-367
-32
-399
2,151
1,109
1,042
22
-84
-62
Moderna Försäkringar, a 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 collaboration, to pay the pensions of the individual employees in accordance with the applicable rules.
The FTP plan is primarily a defined-benefit plan in terms of the future pension benefits. FPK is unable to provide sufficient information for
the Group to use defined-benefit accounting. For this reason, the Group has accounted for the plan as if it were a defined-contribution plan
in accordance with IAS 19.30.
This year’s premium paid to FPK amounted to DKK 15m, which is about 3% of the annual premium in FPK (2011). FPK writes in its interim
report for 2012 that it had a collective consolidation ratio of 104 at 30 June 2012 (consolidation ratio 134 at 30 June 2011). The collective
consolidation ratio is defined as the market value of the plan assets relative to the total collective pension obligations.
119
Notes | Annual report 2012 | Tryg A/S |
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 statement of financial position items
Reconcillation of deferred tax
Deferred tax, beginning of year
Foreign currency translation adjustments
Change in deferred tax relating to change in tax rate
Change in deferred tax previous years
Change in capitalised tax loss
Change in deferred tax taken to the income statement
Change in valuation of tax assets
Change in deferred tax taken to equity
Tax value of non-capitalised tax loss
Denmark
Sweden
2011
2012
31
284
81
396
136
228
49
1,174
1,587
1,191
30
1,282
9
-10
0
0
-6
0
-84
1,191
18
4
22
422
13
457
76
253
78
1,193
1,600
1,143
118
1,191
56
-12
7
65
-247
89
-6
1,143
18
4
The loss in Tryg A/S cannot be utilised in the Danish joint taxation scheme. The loss can be carried forward indefinitely. Loss determined
according to Swedish rules 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 offset the tax loss.
The total current and deferred tax relating to items recognised in equity is recognised in the statement of financial position in the amount
of DKK 50m (DKK 90m in 2011).
120
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
24 Other provisions
Other provisions, beginning of year
Change in provisions
Other provisions, end of year
Other provisions relate to provisions for the Group’s own insurance claims and restructuring costs.
A provision of DKK 97m has been made for restructuring in connection with management’s plans
for efficiency improvements and aims to reduce the Group’s cost level.
25 Amounts owed to credit institutions
Overdraft facilities
26 Debt relating to unsettled funds transactions and repos
Unsettled funds transactions
Repo debt
Unsettled funds transactions include debt for bonds purchased in 2011 and 2012; however,
with settlement in 2012 and 2013, respectively.
27 Earnings per share
Profit/loss on continuing business
Profit/loss on discontinued and divested business
Profit/loss for the year
Average number of shares (1,000)
Diluted number of shares (1,000)
Diluted average number of shares (1,000)
Earnings per share, continuing business
Earnings per share, discontinued and divested business
Diluted earnings per share, discontinued and divested business
Earnings per share
Diluted earnings per share
2011
2012
1
10
11
11
11
11
87
98
14
14
779
3,382
4,161
1,050
420
1,470
1,148
-8
1,140
60,401
0
60,401
19.0
-0.1
-0.1
18.9
18.9
2,180
28
2,208
60,491
223
60,714
36.0
0.5
0.5
36.5
36.4
121
Notes | Annual report 2012 | Tryg A/S |
Notes
DKKm
28
Contractual obligations, collateral and
contingent liabilities
Contractual obligations
2012
Operating leases
Other contractual obligations
2011
Operating leases
Other contractual obligations
<1 year
136
397
533
130
479
609
1-3 years
Obligations due by period
3-5 years
> 5 years
215
86
301
230
183
413
65
0
65
106
0
106
57
0
57
84
0
84
Total
473
483
956
550
662
1,212
The amounts include the following:
Tryg Forsikring A/S and Tryg Forsikring, a Norwegian branch of Tryg Forsikring A/S, have signed a 5-year outsourcing agreement
with CSC for an amount of DKK 365m. The contract expires in 2015.
Tryg Forsikring A/S has signed the following contracts with amounts above DKK 50m:
Telephony services contract with Telenor for DKK 105m, which expires after 2015.
Lease contracts on premises for DKK 313m. The contracts expire after 5 years.
Collateral
The Danish companies in the Tryg Group are jointly taxed with TryghedsGruppen smba. As of 1 July 2012, the companies and the other
jointly taxed companies are thus jointly and severally liable for any obligation to withhold tax deducted at source on interest, royalties and
dividends in respect of the jointly taxed companies.
Tryg Forsikring A/S and Tryg Garantiforsikring A/S have registered the following assets as
having been furnished as security for the insurance provisions:
Equity investments in associates
Equity investments
Unit trust units
Bonds
Deposits with credit institutions
Receivables relating to reinsurance
Bonds and cash and cash equivalents included in the item ‘Assets held for sale’
Interest and rent receivable
Equity investments in and receivables from Group undertakings which have been
eliminated in the consolidated financial statements
Total
2011
2012
0
0
2,378
33,942
1,637
1,563
0
522
1,672
41,714
21
199
3,261
37,458
949
1,614
587
365
2,128
46,582
The Group has received DKK 315m as cash and cash equivalents (DKK 66m in 2011) as security for current derivative contracts.
DKK 420m (DKK 3,382m in 2011) of the Group’s bond portfolio was sold in repo transactions and must be repurchased. The value of the
bond portfolio is still recognised in the statement of financial position and has been furnished as security for financial liabilities concerning
repo transactions.
Contingent liabilities
Companies in the Tryg Group are party to a number of disputes. Management believes that the outcome of these legal proceedings will
not affect the Group’s financial position over and above the receivables and liabilities recognised in the statement of financial position at
31 December 2012.
122
| Tryg A/S | Annual report 2012 | Notes
Notes
DKKm
29 Related parties
The Group has no related parties with a decisive influence other than the parent company,
TryghedsGruppen smba. Related parties with a significant influence include the Supervisory
Board, the Executive Management and their members’ family.
2011
2012
0.3
0.6
2.9
0.1
0.0
1.4
0.3
0.4
3.0
0.0
0.1
0.2
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
Specification of remuneration
2012
Supervisory Board
Executive Management
Risk-takers
Of which retired:
Supervisory Board
Executive Management
Risk-takers
Number of persons Basic salary Variable salary
Pension
Total a)
0
2
1
3
0
4
5
9
6
24
28
58
12
3
11
26
6
18
22
46
Number
of persons
Severance
pay
4
0
1
5
0
0
20
20
The maximum amount paid in severance pay to an individual is DKK 20m.
2011
Supervisory Board
Executive Management
Risk-takers
Of which retired:
Supervisory Board
Executive Management
Risk-takers
Number of persons Basic salary Variable salary
Pension
Total a)
0
0
1
1
0
4
7
11
5
29
39
73
14
5
14
33
5
25
31
61
Number
of persons
Severance
pay
2
2
4
8
0
8
0
8
The maximum amount paid in severance pay to an individual is DKK 4m.
a) Exclusive of severance pay.
123
Notes | Annual report 2012 | Tryg A/S |
Notes
DKKm
29 Related parties (continued)
Fees are charges incurred during the financial year. Variable salary includes the charges for matching shares, which are recognised over
4 years, and share options, which are recognised over 3 years. The Executive Management and risk-takers are included in incentive
programmes. Please refer to Note 7 for information concerning this.
The members of the Supervisory Board in Tryg A/S are paid a fixed remuneration and are not covered by the incentive schemes.
The Executive Management is paid a fixed remuneration and pension. The variable salary is awarded in the form of a matching share
programme, see ‘Corporate governance’.
Each member of the Executive Management is entitled to 12 months’ notice and severance pay equal to 12 months’ salary plus pension
contributions (the Group CEO is entitled to severance pay equal to 18 months’ salary). Members of the Executive Management can assert no
further claims in this respect, for example claims for compensation pursuant to Sections 2a and/or 2b of the Danish Salaried Employees Act,
as such claims are regarded as being included in the severance pay.
Risk-takers are defined as employees whose activities have a significant influence on the company’s risk profile. The Supervisory Board
decides which employees should be considered to be risk-takers.
Parent company
TryghedsGruppen smba
TryghedsGruppen smba controls 60% of the shares in Tryg A/S.
Intra-group trading involved:
- Subordinate loan capital
- Interest expenses
2011
464
33
2012
490
30
Transactions between TryghedsGruppen smba and Tryg A/S are conducted on an arm’s length basis.
Intra-group transactions:
Administration fee etc. is fixed on a cost-recovery basis. Intra-group accounts are offset and carry interest on market terms. The companies
in the Tryg Group have entered into reinsurance contracts on market terms. Transactions with Group undertakings have been eliminated in
the consolidated financial statements in accordance with the accounting policies.
30 Financial highlights
See page 69.
31 Accounting policies
This table concerns a change in accounting policies for 2012 – page 125 (opposite page).
Reconciliation of profit/loss
DKKm
Profit/loss – IFRS
Current year’s effect of
actuarial gains and losses on
pension obligation after tax
Profit/loss – Danish FSA
executive order
124
2011
1,140
-288
852
Change
2011
1,140
2012
2,208
Change
288
288
0
-46
1,140
2,162
46
46
2012
2,208
0
2,208
| Tryg A/S | Annual report 2012 | Notes
Notes
31 Accounting policies (continued)
The consolidated financial statements are prepared in accordance with
the International Financial Reporting Standards (IFRS) as adopted by
the EU on 31 December 2012 and in accordance with the Danish
Statutory Order on Adoption of IFRS.
• Amendments to IFRS 7 ‘Disclosures – Transfers of Financial Assets’
• Amendments to IAS 12 ‘Deferred Tax – Recovery of Underlying Assets’
• Amendments to IAS 1 ‘Presentation of Items of Other Comprehen-
sive Income’
The annual report of the parent company is prepared in accordance
with the Executive Order on Financial Reports for Insurance Companies
and Multi-Employer Occupational Pension Funds issued by the Danish
Financial Supervisory Authority. The deviations from the recognition
and measurement requirements 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 disclos-
ure are less comprehensive than under IFRS.
• The Danish Financial Supervisory Authority’s executive order does
not allow provisions for deferred tax of contingency reserves allo-
cated from untaxed funds. Deferred tax and the other comprehensive
income of the parent company have been adjusted accordingly on
the transition to IFRS.
Change in accounting policies
Following an amendment to the Executive Order on Financial Reports
for Insurance Companies and Multi-Employer Occupational Pension
Funds issued by the Danish Financial Supervisory Authority and applicable
from 1 January 2013, but which Tryg has decided to implement early,
actuarial gains and losses are recognised directly in other comprehen-
sive income in the parent company. These were previously recognised
in the income statement – see the table at the bottom of page 124
(opposite page). In 2011, there was a minor reclassification between
derivative financial instruments and claims provisions of DKK 37m.
The comparative figures have been restated to reflect the above changes.
Except as noted above, the accounting policies have been applied con-
sistently with last year.
New and revised executive orders, standards and interpretations
which the Group has not yet applied and that have been issued but
which are not yet effective:
• Amendments to IFRS 7 related to the offsetting of assets and liabilities a)
• IFRS 9 ‘Financial Instruments’ c)
• Reissue of IFRS 9 to include requirements for the classification
and measurement of financial liabilities and incorporate existing
derecognition requirementsc)
• IFRS 10 ‘Consolidated Financial Statements’ a)
• IFRS 11 ‘Joint Arrangements’ a)
• IFRS 12 ‘Disclosure of Interests in Other Entities’ a)
• Amendments to IFRS 10, 11 and 12 ‘Transition Guidance’ a)
• IFRS 13 ‘Fair Value Measurement’ a)
• Amendments to IAS 1 ‘Presentation of Items of Other Comprehen-
sive Income’ b)
• Amendments to IAS 1 ‘Annual Improvements 2009-2011 Cycle
(comparative information)’ a)
• Amendments to IAS 16 ‘Annual Improvements 2009-2011 Cycle
(servicing equipment)’ a)
• IAS 19 (as revised in 2011) ‘Employee Benefits’ a)
• IAS 27 (as revised in 2011) ‘Separate Financial Statements’ a)
• IAS 28 (as revised in 2011) ‘Investments in Associates and Joint
Ventures’ a)
• Amendments to IAS 32 ‘Offsetting Financial Assets and Financial
Liabilities’ d)
• Amendments to IAS 32 ‘Annual Improvements 2009-2011 Cycle
(tax effect of equity distribution)’ a)
a) Effective for annual periods beginning on or after 1 January 2013.
b) Effective for annual periods beginning on or after 1 July 2012.
c) Effective for annual periods beginning on or after 1 January 2015.
d) Effective for annual periods beginning on or after 1 January 2014.
Accounting regulation
The changes will be implemented going forward from 2013.
Implementation of changes to financial reporting standards and
interpretations in 2012
The International Accounting Standards Board (IASB) has issued a num-
ber of amendments to the International Financial Reporting Standards,
and the International Financial Reporting Interpretations Committee
(IFRIC) has also issued a number of interpretations.
No standards or interpretations have been implemented for the first time for
the financial year beginning on 1 January 2012 that have had a significant
impact on the Group. New or amended standards and interpretations that
have been implemented but have not significantly affected the Group:
Changes to accounting estimates
In June 2012, the Danish Financial Supervisory Authority adjusted the
discount curve used for discounting claims provisions. The effect of the
transition to a new curve on 30 June 2012 is:
DKKm
Total investment return after insurance technical interest
Profit/loss before tax
Claims provisions
Equity and capital base are affected by the same amounts.
Effect
150
150
-150
125
Notes | Annual report 2012 | Tryg A/S |
Notes
Significant accounting estimates and assessments
The preparation of financial statements under IFRS requires the use
of certain critical accounting estimates and requires management to
exercise its judgement in the process of applying the Group’s account-
ing policies. The areas involving a higher degree of judgement or com-
plexity, or areas where assumptions and estimates are significant to the
consolidated financial statements are:
• Liabilities relating to insurance contracts
• Valuation of defined-benefit plans
• Fair value of financial assets and liabilities
• Valuation of property
• Valuation of goodwill
Liabilities relating to insurance contracts
Estimates of provisions for insurance contracts represent the Group’s
most critical accounting estimates, as these provisions involve a num-
ber of uncertainty factors.
Claims provisions are estimated based on actuarial and statistical pro-
jections of claims and the administration of claims. The projections are
based on Tryg’s knowledge of historical developments, payment patterns,
reporting delays, duration of the claims settlement process and other
factors that might influence future developments in the liabilities.
The Group makes claims provisions, in addition to provisions for known
claims, which cover estimated compensation for losses that have been
incurred, but not yet reported to the Group (known as IBNR reserves)
and future developments in claims which are known to the Group but
have not been finally settled. Claims provisions also include direct and
indirect claims settlement costs or loss adjustment expenses that arise
from events that have occurred up to the statement of financial position
date even if they have not yet been reported to Tryg.
The calculation of the claims provisions is therefore inherently uncertain
and, by necessity, relies upon the making of certain assumptions as re-
gards factors such as court decisions, amendments to legislation, social
inflation and other economic trends, including inflation. The Group’s
actual liability for losses may therefore be subject to material positive or
negative deviations relative to the initially estimated claims provisions.
Claims provisions are discounted. As a result, initial changes in discount
rates or changes in the duration of the claims provisions could have
positive or negative effects on earnings. Discounting affects the motor
third-party liability, general third-party liability, workers’ compensation
classes, including sickness and personal accident, in particular.
The Financial Supervisory Authority’s adjusted discount curve, which is
based on euro swap rates, national spreads and Danish swap rates, and
also an option-adjusted mortgage interest rate spread, is used to discount
Danish claims provisions.
The Norwegian and Swedish provisions are discounted based on euro
swap rates, to which a country-specific interest rate spread is added that
reflects the difference between Norwegian and Swedish government
bonds and the interest rate on German government bonds. Finnish
provisions are discounted using the Danish discount curve.
Several assumptions and estimates underlying the calculation of the
claims provisions are mutually dependent. This has the greatest impact
on assumptions regarding 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 salary.
The net obligation with respect to the defined- benefit plan is based on
actuarial calculations involving a number of assumptions. The assump-
tions include discount interest rate, expected future salary and pension
adjustments, turnover, mortality and expected future return on pension
assets.
Fair value of financial assets and liabilities
Measurements of financial assets and liabilities 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 esti-
mates. 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 valua-
tion models include the discounting of the instrument cash flow using
an appropriate market interest rate with due consideration for credit
and liquidity premiums.
Valuation of property
Property is divided into owner-occupied property and investment pro-
perty. Owner-occupied property is assessed at the reassessed value
that is equivalent to the fair value at the time of reassessment, with a
deduction for depreciation and write-downs. The fair value is calculated
based on a market-determined rental income, as well as operating
expenses in proportion to the property’s required rate of return in per cent.
Investment property is recognised at fair value. The calculation of fair
value is based on market prices, taking into consideration the type of
property, location and maintenance standard, and based on a market-
determined rental income as well as operating expenses in proportion
to the property’s required rate of return.
Measurement of goodwill
Goodwill is acquired in connection with the acquisition of businesses.
Goodwill is allocated to the cash-generating units under which manage-
ment manages the investment. The carrying amount is tested for im-
pairment at least once annually. Impairment testing involves estimating
future cash flows and is affected by a number of factors, including dis-
count rates and other circumstances dependent on economic trends,
such as customer behaviour and competition.
126
| Tryg A/S | Annual report 2012 | Notes Notes
Description of accounting policies
Recognition and measurement
The annual report has been prepared under the historical cost conven-
tion, as modified by the revaluation of owner-occupied property, where
increases are recognised in other comprehensive income, and revalua-
tion of investment property, financial assets held for trading and finan-
cial assets and financial liabilities (including derivative instruments) at
fair value in 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 such assets can be measured reliably. 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 such liabilities can be measured reliably.
On initial recognition, assets and liabilities are measured at cost, with
the exception of financial assets, which are recognised at fair value.
Measurement subsequent to initial recognition is effected as described
below for each 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 statement of financial position
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 recognised 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 company
directly or indirectly holds more than 50% of the voting rights or is
otherwise able to exercise or actually exercises a controlling influence.
The consolidated financial statements are prepared on the basis of the
financial statements of the parent company and its subsidiaries by com-
bining items of a uniform nature. The financial statements of subsidiar-
ies that present financial statements under other legislative rules are
restated with reference to the accounting policies applied by the Group.
Undertakings 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 control of more than
20% but less than 50% of the votes.
Investments in joint ventures are recognised using the pro rata consoli-
dation method. Using pro rata consolidation, the Group’s share of joint
venture assets and liabilities is recognised in the statement of financial
position. The share of income and costs and assets and liabilities are pre-
sented on a line-by-line basis in the consolidated financial statements.
On consolidation, intra-group income and costs, 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 with the
results for the period subsequent to taking over or before surrendering
control, respectively. Profit and loss in divested subsidiaries and profit
and loss from 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 undertakings are recognised in the consolidated finan-
cial statements from the date of acquisition. Comparative figures are
not restated to reflect new acquisitions.
The purchase method is applied for new acquisitions if the Tryg Group
gains control of the company acquired. Identifiable assets, liabilities
and contingent liabilities in undertakings acquired are measured at fair
value at the date of acquisition. The tax effect of revaluations is taken
into account.
The date of acquisition is the date on which control of the acquired
company actually passes to Tryg.
The cost of a company is the fair value of the agreed consideration paid
plus, for acquisitions before 1 January 2010, 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 measured reliably.
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. Goodwill 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.
Foreign currency translation
A functional currency is determined for each of the reporting entities in
the Group. The functional currency is the currency used in the primary
economic environment in which the reporting entity operates. Transac-
tions in currencies other than the functional currency are transactions
in foreign currencies.
127
Notes | Annual report 2012 | Tryg A/S |
Notes
On initial recognition, transactions in foreign currencies are translated
into the functional currency using the exchange rate applicable at the
transaction date. Assets and liabilities denominated in foreign curren-
cies are translated using the exchange rates applicable at the statement
of financial position date. Translation differences are recognised in the
income statement under price adjustments.
On consolidation, the assets and liabilities of the Group’s foreign
operations are translated using the exchange rates applicable at the
statement of financial position date. Income and expense items are
translated using the average exchange rates for the period. Exhange rate
differences arising on translation are classified as other comprehensive
income and transferred to the Group’s translation reserve.
Such translation differences are recognised as income or as expenses in
the period in which the activities are divested. All other foreign currency
translation gains and losses are recognised in the income statement.
The presentation currency in the annual report is DKK.
Segment information
Segment information is based on the Group’s management and internal
financial reporting system and supports management decisions con-
cerning the allocation of resources and the assessment of the Group’s
results divided into segments.
The operational business segments in Tryg are Private, Commercial,
Corporate and Sweden. Private encompasses the sale of insurance
products to private individuals in Denmark and Norway. Commercial
encompasses the sale of insurance products to small and medium-sized
businesses in Denmark and Norway. Corporate sells insurance products
to industrial clients in Denmark and Norway. In addition, Corporate
handles all activities involving brokers. Sweden encompasses the sale
of insurance products to private individuals and corporate customers
in Sweden.
Geographical information is presented for the economic areas in which
the Tryg Group operates. The geographical areas are Denmark, Norway
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 relating to investment activities managed
at Group level.
Key ratios
Earnings per share (EPS) are calculated according to IAS 33. This and
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 for Insurance Companies and
Multi-Employer Occupational Pension Funds issued by the Danish
Financial Supervisory Authority.
Income statement
Premiums
Premium income represents gross premiums written during the year,
net of reinsurance premiums and adjusted for changes in premium pro-
visions, corresponding to an accrual of premiums to the risk period of
the policies, and in the reinsurers’ share of the premium provisions.
Premiums are calculated as premium income in accordance with the
risk exposure over the cover period, calculated separately for each indi-
vidual insurance contract. The calculation is generally based on the pro
rata method, although this is adjusted for an unevenly divided risk be-
tween lines of business with strong seasonal variations or for policies
lasting many years.
The portion of premiums received on contracts that relate to unexpired
risks at the statement of financial position date is reported under pre-
mium provisions.
The portion of premiums paid to reinsurers that relate to unexpired
risks at the statement of financial position date is reported as the
reinsurers’ share of premium provisions.
Insurance technical interest
According to the Danish Financial Supervisory Authority’s executive order,
insurance technical interest is presented as a calculated return on the
year’s average insurance liability provisions, net of reinsurance. The cal-
culated interest return for grouped classes of risks is calculated as the
monthly average provision plus a co-weighted interest from the present
yield curve for each individual group of risks. The interest is weighted
according to the expected run-off pattern of the provisions.
Insurance technical interest is reduced by the portion of the increase in
net provisions that relates to unwinding.
Claims
Claims are claims paid during the year and adjusted for changes in claims
provisions less the reinsurers’ share. In addition, the item includes run-off
gains/losses in respect of previous years. The portion of the increase in
provisions which can be ascribed to unwinding is transferred to insurance
technical interest. Claims are shown inclusive of direct and indirect claims
handling costs, including costs of inspecting and assessing claims, costs
to combat and mitigate damage and other direct and indirect costs
associated with the handling of claims incurred.
Changes in claims provisions due to changes in yield curve and
exchange rates are recognised as a price adjustment.
Tryg hedges the risk of changes in future pay and price figures for provi-
sions for workers’ compensation. Tryg uses zero coupon inflation swaps
acquired with a view to hedging the inflation risk. Value adjustments of
these swaps are included in claims, thereby reducing the effect of
changes to inflation expectations under claims.
128
| Tryg A/S | Annual report 2012 | Notes Notes
Bonuses and premium discounts
Bonuses and premium discounts represent anticipated and refunded
premiums to policyholders, where the amount refunded depends on
the claims record, and for which the criteria for payment have been
defined prior to the financial year or when the insurance was taken out.
Insurance operating costs
Insurance operating costs represent acquisition costs and adminis-
tration expenses less reinsurance commissions received. Expenses re-
lating to acquiring and renewing the insurance portfolio are recognised
at the time of writing the business. Underwriting commission is recog-
nised when a legal obligation occurs and is accrued over the term of the
policy. Administration expenses are all other expenses attributable to
the administration of the insurance portfolio. Administration expenses
are accrued to match the financial year.
Leases
Leases are classified either as operating or finance leases. The assessment
of the lease is based on criteria such as ownership, right of purchase when
the lease term expires, considerations as to whether the asset is custom-
made, the lease term and the present value of the lease payments.
Assets held under operating leases are not recognised in the statement
of financial position, but the lease payments are recognised in the income
statement over the term of the lease, corresponding to the economic
lifetime of the asset. The Group has no assets held under finance leases.
Share-based payment
The Tryg Group’s incentive programmes comprise share option pro-
grammes and matching 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 fair value at the time of
allocation and recognised under staff expenses over the period from
the time of allocation until vesting. The balancing item is recognised
directly 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 plus 10%. No other
vesting conditions apply. Special provisions are in place concerning sick-
ness and death and in case of change to the Group’s capital position etc.
The share option agreement entitles the employee to the options unless
the employee resigns his position or is dismissed due to breach of the
contract of employment. In case of termination due to restructuring or
retirement, the employee is still entitled to the options.
The share options are exercisable exclusively during a 15-day period
following the publication of full-year, interim and quarterly reports and
in accordance with Tryg’s internal rules on trading in the Group’s shares.
The options are settled in shares. A part of the Group’s holding of treasury
shares is reserved for settlement of the options allocated.
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. The value
for retired employees who retain their right to options is reported for
the remaining period of the financial year in which the employee retires.
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.
Matching shares
Members of Executive Management and risk-takers have been allocated
shares in accordance with the matching shares programme. Under this
programme, the individual management member is allocated one share
in Tryg A/S for each share the Executive Management member or risk-
taker acquires in Tryg A/S at the market rate for own liquid cash at a
contractually agreed sum in connection with the matching share
programme.
The shares are provided free of charge, four years after the time of
purchase. The holder must acquire the shares in the open window
following publication of the annual report for the previous year. In 2011,
however, the shares were traded in the first open window after the Tryg
A/S annual general meeting. The holder may not sell the shares until six
months after the matching time.
The shares are recognised at market value and are accrued over the
four-year maturation period, based on the market price at the time of
acquisition. Recognition is from the end of the month of acquisition
under staff expenses with a balancing entry directly in equity. If an
Executive Management member or risk-taker retires during the matura-
tion period but remains entitled to shares, the remaining expense is
recognised in the current accounting year.
Investment activities
Income from associates includes the Group’s share of the associates’
net profit/loss.
Income from investment property before fair value adjustment repre-
sents the profit from property operations less property management
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 adjustment of investment property, foreign currency translation
adjustments and the effect of movements in the yield curve used for
discounting, are recognised as price adjustments.
Investment management charges represent expenses relating to the
management of investments.
129
Notes | Annual report 2012 | Tryg A/S |
Notes
Other income and costs
Other income and costs include income and expenses which cannot
be ascribed to the Group’s insurance portfolio or investment assets,
including the sale of products for Nordea Liv og Pension.
Discontinued and divested business
Discontinued and divested business is consolidated in one item in the
income statement and supplemented with disclosure of the discontinued
and divested business in a note to the financial statements. Discontinued
and divested business includes gross premiums, gross claims, gross
costs, profit/loss on ceded business, insurance technical interest net of
reinsurance, investment return after insurance technical interest, other
income and costs and tax in respect of the discontinued business. Any
reversal of earlier impairment is recognised under other income and
costs.
The statement of financial position items concerning discontinued
activities are reported unchanged under the respective entries whereas
assets and liabilities concerning divested activities are consolidated
under one item as assets held for sale and liabilities associated with
assets held for sale.
The comparative figures in the income statement, including result
figures in the five-year financial highlights and key figures, have been
restated to reflect discontinued business. Discontinued and divested
business in the income statement includes the profit/loss after tax of
the sale of the right to renew the marine hull business in 2010 and the
divested activities in the Finnish branch. Discontinued business also
comprises the Tryg Forsikring A/S run-off business.
Costs for Group-developed software that are directly connected with the
production of identifiable and unique software products, where there is
sufficient certainty that future earnings will exceed the costs in more than
one year, are reported as intangible assets. Direct costs include staff
costs for software development and directly attributable relevant fixed
costs. All other costs connected with the development or maintenance
of software are expensed on an ongoing basis.
After completion of the development work, the asset is amortised
according to the straight-line method over the assessed economic
lifetime, though over a maximum of 4 years. The amortisation basis is
reduced by any impairment and write-downs.
Assets under construction
Group-developed intangible assets are recognised under assets under
construction until they are put into use, after which they are reclassified
as software and amortised in accordance with the amortisation periods
stated above.
Property, plant and equipment
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 attributable to the acquisition of
the relevant assets until the time when such assets are ready to be
brought into use.
Depreciation of operating equipment is calculated using the straight-line
method over its estimated economic lifetime as follows:
Statement of financial position
Intangible assets
Goodwill
Goodwill is acquired in connection with the acquisition of undertakings.
Goodwill is calculated as the difference between the cost of the under-
taking and the fair value of acquired identifiable assets, liabilities and
contingent liabilities at the time of acquisition. Goodwill is allocated
to the cash-generating units under which management manages the
investment and is recognised under intangible assets. Goodwill is not
amortised but is tested for impairment at least once per year.
• IT, 4 years
• Vehicles, 5 years
• Furniture, fittings and equipment, 5-10 years
Leasehold improvements are depreciated over the expected economic
lifetime, however maximally the term of the lease.
Gains and losses on disposals and retired assets are determined by
comparing proceeds with carrying amounts. Gains and losses are
recognised in the income statement. When revalued assets are sold,
the amounts included in the revaluation reserves are transferred to
retained earnings.
Trademarks and customer relations
Trademarks and customer relations are identified as intangible 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 economic lifetime of 5-12 years.
Land and buildings
Land and buildings are divided into owner-occupied property and invest-
ment property. The Group’s owner-occupied properties consist of the head
office buildings in Ballerup and Bergen and a small number of holiday
homes. The remaining properties are classified as investment property.
Software
Acquired computer software licences are capitalised on the basis of the
costs incidental to acquiring and bringing to use the specific software.
The costs are amortised based on an estimated economic lifetime of up
to 4 years.
Owner-occupied property
Owner-occupied property is property that is used in the Group’s opera-
tions. Owner-occupied properties are measured in the statement of
financial position at their revalued amounts, being the fair value at the
date of revaluation, less any subsequent accumulated depreciation
130
| Tryg A/S | Annual report 2012 | Notes Notes
and impairment losses. Revaluations are performed regularly to avoid
material differences between the carrying amounts and fair values
of owner-occupied property at the statement of financial position
date. The fair value is calculated on the basis of market-specific rental
income per property and typical operating expenses for the coming
year. The resulting operating income is divided by the required return
on the property in per cent, which is adjusted to reflect market interest
rates and property characteristics, corresponding to the present value
of a perpetual annuity.
Increases in the revalued carrying amounts of owner-occupied property
are recognised in the revaluation reserve in equity. Decreases that offset
previous revaluations of the same asset are charged against the revalua-
tion reserves directly in equity; all other decreases are charged to the
income statement.
Subsequent costs are included in the asset’s carrying amount or recog-
nised 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 measured reliably. Ordinary repair and main-
tenance costs are expensed in the income statement when incurred.
Depreciation on owner-occupied property is calculated based on the
straight-line method and using an estimated economic lifetime of up to
50 years. Land is not depreciated.
Assets under construction
In connection with the refurbishment of owner-occupied property, costs
to be capitalised are recognised at cost under owner-occupied property.
On completion of the project, it is reclassified as owner-occupied pro-
perty, and depreciation is made on a straight-line basis over the expected
economic lifetime, up to the number of years stated under the individual
categories.
Investment property
Rental properties that are not occupied by the Group are classified as
investment property.
Investment property is recognised at fair value. Fair value is based on
market prices, adjusted for any differences in the nature, location or
maintenance condition of specific assets. If this information is not
available, the Group uses alternative valuation methods such as
discounted cash flow projections and recent prices in less active markets.
The fair value is calculated on the basis of market-specific rental income
per property and typical operating expenses for the coming year. The re-
sulting operating income is divided by the required return on the property
in per cent, which is adjusted to reflect market interest rates and property
characteristics, corresponding to the present value of a perpetual annuity.
The value is subsequently adjusted with the value in use of the return on
prepayments and deposits and adjustments 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 of intangible assets and property, plant and equipment
Operating equipment and intangible assets are assessed at least once a
year to ensure that the depreciation and amortisation methods and the
depreciation and amortisation periods that are used are in line with the
expected economic lifetimes. This also applies to the residual value.
Impairment is performed if a decrease in value has been demonstrated.
A continuous assessment of owner-occupied property is performed
using the same method as for investment property.
Goodwill is tested annually for impairment, or more often if there are
indications of impairment, and impairment testing is performed for
each cash-generating unit to which the asset belongs. The present
value is normally established using budgeted cash flows based on
business plans. The business plans are based on past experience and
expected market developments.
Equity investments in Group undertakings
The parent company’s equity investments in subsidiaries are recognised
and measured using the equity method. The parent company’s share of
the enterprises’ profits or losses after elimination of unrealised intra-group
profits and losses is recognised in the income statement. In the statement
of financial position, equity investments are measured at the pro rata
share of the enterprises’ equity.
Subsidiaries with a negative net asset value are recognised 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 relevant enterprise.
Net revaluation of equity investments in subsidiaries is taken to reserve
for net revaluation under equity if the carrying amount exceeds cost.
The results of foreign subsidiaries are based on translation of the items
in the income statement using average exchange rates for the period.
Income and costs in domestic enterprises denominated in foreign
currencies are translated using the exchange rates applicable on the
transaction date.
Statement of financial position items of foreign subsidiaries are trans-
lated using the exchange rates applicable at the statement of financial
position date.
Equity investments in associates
Associates are enterprises in which the Group has significant influence
but not control, generally in the form of an ownership interest of between
20% and 50% of the voting rights. Equity investments in associates are
measured using the equity method so that the carrying amount of the
investment represents the Group’s proportionate share of the enter-
prises’ net assets.
131
Notes | Annual report 2012 | Tryg A/S | Notes
Profit after tax from equity investments in associates is included as a
separate line in the income statement. Income is made up after elimi-
nation 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 under liabilities.
Investments
Investments include financial assets at fair value which are recognised
in the income 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 adjust-
ments in the income statement comprise assets that form part of a
trading portfolio and financial assets designated at fair value with value
adjustment via the income statement.
Financial assets at fair value recognised in income statement
Financial assets are recognised at fair value on initial recognition if they
are entered in a portfolio that is managed in accordance with fair value.
Derivative financial instruments are similarly classified as financial assets
held for sale, unless they are classified as security.
Realised and unrealised profits and losses that may arise as a result of
changes in the fair value for the category financial assets at fair value
are recognised in the income statement in the period in which they arise.
Financial assets are derecognised when the rights to receive cash flows
from the financial assets 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.
The fair values of quoted securities are based on stock exchange prices
at the statement of financial position date. For securities that are not
listed on a stock exchange, or for which no stock exchange price is
quoted that reflects the fair value of the instrument, the fair value is
determined using valuation techniques or using OTC prices. These
include the use of similar recent arm’s length transactions, reference
to other 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 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
statement of financial position items. Interest rate derivatives in the
form of futures, forward contracts, repos, swaps and FRAs are used to
manage cash flows and interest rate risks related to the portfolio of
bonds and insurance provisions. Share derivatives in the form of futures
and options are used from time to time to adjust share exposures.
Derivative financial instruments are reported from the trading date and
are measured in the statement of financial position at fair value. Positive
fair values of derivatives are recognised as bonds and shares or derivatives
if they cannot unambiguously be attributed to the former. Negative fair
values of derivatives are recognised under derivative financial instruments.
Positive and negative values are only offset when the company is entitled
or intends to make net settlement of more financial instruments.
Calculation of value is generally performed on the basis of rates sup-
plied by Nordea with relevant information providers and is checked by
the Group’s valuation technicians. Discounting on the basis of market
interest rates is applied in the case of derivative financial instruments
involving an expected future cash flow.
Recognition of the resulting gain or loss depends on whether the
derivative is designated as a hedging instrument and, if so, the nature
of the item being hedged. The Group designates certain derivatives as
hedges of investments in foreign entities. 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 requirements of hedge accounting. Changes
in the fair value relating to the ineffective portion are recognised in the
income statement. Gains and losses accumulated in equity are included
in the income statement on disposal of the foreign entity.
Reinsurers’ share of provisions for insurance contracts
Contracts entered into by the Group with reinsurers under which the
Group is compensated for losses on one or more contracts issued by
the Group and that meet the classification requirements for insurance
contracts are classified as reinsurers’ share of provisions for insurance
contracts. Contracts that do not meet these classification requirements
are classified as financial assets.
The benefits to which the Group is entitled under its reinsurance con-
tracts held are recognised as assets and reported as reinsurers’ share of
provisions for insurance contracts.
Amounts receivable 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 insurance technical interest.
Changes due to changes in the yield curve or foreign exchange rates are
recognised as price adjustments. The Group continuously assesses its
reinsurance assets for impairment. If there is objective evidence that the
reinsurance asset is impaired, the Group reduces the carrying amount
of the reinsurance asset to its recoverable amount. Impairment losses
are recognised in the income statement.
132
| Tryg A/S | Annual report 2012 | Notes Notes
Receivables
Total receivables comprise accounts receivable from policyholders
and insurance companies as well as other accounts receivable. Other
receivables primarily contain accounts receivable in connection with
property.
Derivative financial instruments are reported from the trading date
and are measured in the statement of financial position at fair value.
Receivables that arise as a result of insurance contracts are classified
in this category and are reviewed for impairment as a part of the
impairment test of accounts receivable.
Receivables that are not derivative financial instruments are recognised
initially at fair value and are subsequently assessed at amortised cost.
The income statement includes an estimated reservation for expected
unobtainable sums when there is a clear indication of asset impairment.
The reservation entered is assessed as the difference between the
carrying amount of an asset and the present value of expected future
cash flows.
Assets held for sale and associated liabilities
Assets held for sale comprise non-current assets and disposal groups
held for sale. A disposal group is a group of assets which an entity intends
to dispose of in a single transaction. Liabilities associated with assets
held for sale are liabilities which are directly associated with these assets,
which will be transferred as part of the transaction. Assets are classified
as ‘held for sale’ when their carrying amount will be recovered primarily
via a formally planned sale within a period of 12 months rather than
through continued use.
Impairment or reversal of earlier impairment arising in connection with
the first classification as held for sale and gains or losses in connection
with subsequent measurements at the lower of carrying amount and
fair value less costs to sell are recognised in the income statement
under the relevant items. Gains and losses are specified in the notes.
Assets and disposal groups held for sale are measured at the lower of
carrying amount at the time of classification as held for sale and fair
value less costs to sell. Assets are not depreciated or amortised from
the time of classification as held for sale.
Assets and associated liabilities are specified separately in the state-
ment of financial position, and the main items are specified in the
notes. Comparative figures in the statement of financial position are
not restated.
Other assets
Other assets include current tax assets and cash at bank and in hand.
Current tax assets are receivables concerning tax for the year adjusted
for on-account payments and any prior-year adjustments. Cash at bank
and in hand is recognised at nominal value at the statement of financial
position date.
Prepayments and accrued income
Prepayments include expenses paid in respect of subsequent financial
years and interest receivable. Accrued underwriting commission relat-
ing to the sale of insurance products is also included.
Equity
Share capital
Shares are classified as equity when there is no obligation to transfer cash
or other assets. Incremental costs directly attributable to the issue of
equity instruments are shown in equity as a deduction from the proceeds,
net of tax.
Revaluation reserves
Revaluation of owner-occupied property is recognised in other compre-
hensive income unless the revaluation offsets a previous impairment
loss, and relates primarily to owner-occupied property.
Foreign currency translation reserve
Assets and liabilities of foreign entities are recognised using the exchange
rate applicable at the statement of financial position date. Income and
expense items are recognised using the average monthly exchange
rates for the period. Any resulting differences are recognised in equity.
When an entity is wound up, the balance is transferred to the income
statement. The hedging of the currency risk in respect of foreign entities
is also offset in other comprehensive income in respect of the part that
concerns the hedge.
Contingency fund reserves
Contingency fund reserves are recognised as part of retained earnings
under equity. The reserves may only be used when so permitted by the
Danish Financial Supervisory Authority and when it is for the benefit of
the policyholders. The Norwegian contingency fund reserves include
provisions for the Norwegian Natural Perils Pool, security reserve,
administration reserve and guarantee reserve. The Danish and Swedish
provisions comprise contingency fund provisions. Deferred tax on the
Norwegian and Swedish contingency fund reserves is allocated.
Dividend
Proposed dividend is recognised as a liability at the time of adoption by
the shareholders at the annual general meeting (date of declaration).
Treasury shares
The purchase and sale sums of treasury shares and dividends thereon
are taken directly to retained earnings under equity. Treasury shares
include shares acquired for incentive programmes and for a 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 trans-
action costs incurred. Subordinate loan capital is subsequently stated at
amortised cost; any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the income statement
over the borrowing period using the effective interest method.
133
Notes | Annual report 2012 | Tryg A/S | Notes
Provisions for insurance contracts
Premiums written are recognised in the income statement (premium
income) proportionally over the period of coverage and, where necessary,
adjusted to reflect any time variation of the risk. The portion of premiums
received on in-force contracts that relates to unexpired risks at the
statement of financial position date is reported as premium provisions.
Premium provisions are generally calculated according to a best estimate
of expected payments throughout the agreed risk period; however, as a
minimum as the part of the premium calculated using the pro rata tem-
poris principle until the next payment date. Adjustments are made to
reflect any risk variations. This applies to gross as well as ceded business.
Claims and claims handling costs are expensed in the income statement
as incurred based on the estimated liability for compensation owed to
policyholders or third parties sustaining losses at the hands of the policy-
holders. They include direct and indirect claims handling costs that arise
from events that have occurred up to the statement of financial position
date even if they have not yet been reported to the Group. Claims provi-
sions 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.
Claims provisions are discounted. Discounting is based on a yield curve
reflecting duration applied to the expected future payments from the
provision. Discounting affects the motor liability, professional liability,
workers’ compensation and personal accident and health insurance
classes, in particular.
Provisions for bonuses and premium discounts etc. represent amounts
expected to be paid to policyholders in view of the claims experience
during the financial year.
Claims provisions are determined for each line of business based on
actuarial methods. Where such business lines encompass more than
one business area, short-tailed claims provisions are distributed based
on number of claims reported while long-tailed claims provisions are
distributed based on premiums earned. The models currently used are
Chain-Ladder, Bornhuetter-Ferguson, the Loss Ratio method and De
Vylder’s credibility method. Chain-Ladder techniques are used for lines
of business with a stable run-off pattern. The Bornhuetter-Ferguson
method, and sometimes the Loss Ratio method, are used for claims
years in which the previous run-off provides insufficient information
about the future run-off performance. De Vylder’s credibility method is
used for areas that are somewhere in between the Chain-Ladder and
Bornhuetter-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 under workers’ compensation insurance is
calculated on the basis of a mortality corresponding to the G82 calcula-
tion basis (official mortality table).
In some instances, the historic data used in the actuarial models is not
necessarily predictive of the 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. In connection with legislative changes, the same estimate is
used for determining the change in the level of claims. Subsequently,
this estimate is maintained until new loss history materialises which
can be used for re-estimation.
Several assumptions and estimates underlying the calculation of the
claims provisions are mutually dependent. Most importantly, this can
be expected to be the case for assumptions relating to interest rates
and inflation.
Workers’ compensation is an area in which explicit inflation assump-
tions are used, with annuities for the insured being indexed based on
the workers’ compensation index. An inflation curve that reflects the
market’s inflation expectations plus a real wage spread is used as an
approximation to the workers’ compensation index.
For other lines of business, the inflation assumptions, because present
only implicitly in the actuarial models, will cause a certain lag in predict-
ing the level of future losses when a change in inflation occurs. On the
other hand, the effect of discounting will show immediately as a conse-
quence of inflation changes to the extent that such changes affect the
interest rate.
Other correlations are not deemed to be significant.
Reserve adequacy test
Tests are continuously performed to ensure the adequacy of the
insurance provisions. In performing these tests, current best estimates
of future cash flows of claims, gains and direct and indirect claims
handling costs are used. Any deficiency results in an increase in the
relevant provision, and the adjustment is recognised in the income
statement.
Employee benefits
Pension obligations
The Group operates various pension schemes. The schemes are funded
through contributions to insurance companies or trustee-administered
funds. In Norway, the Group operates a defined-benefit plan. A defined-
benefit plan is a pension plan that defines an amount of pension benefit
that an employee will receive on retirement, dependent on age, years of
service and salary. In Denmark, the Group operates a defined-contribution
plan. A defined-contribution plan is a pension plan under which the
Group pays fixed contributions into a separate entity (a fund) and will
have no legal or constructive obligation to pay further contributions.
In Sweden, the Group complies with the industry pension agreement,
FTP-Planen. FTP-Planen is primarily a defined-benefit plan as regards
the future pension benefits. Försäkringsbranschens Pensionskassa
(FPK) is unable to provide sufficient information for the Group to use
defined-benefit accounting. The plan is therefore accounted for as a
defined-contribution plan.
134
| Tryg A/S | Annual report 2012 | Notes Notes
The liability recognised in the statement of financial position in respect
of defined-benefit pension plans is the present value of the defined-
benefit obligation at the statement of financial position date less the
fair value of plan assets, together with adjustments for unrecognised
actuarial gains or losses and past service costs.
Expectations as regards returns on plan assets are based on the returns
for each asset class and the current allocation thereof. Market expecta-
tions of future returns are taken into consideration.
The defined-benefit obligation is calculated annually by independent
actuaries using the projected unit credit method. The present value of
the defined-benefit obligation is determined by discounting the estimated
future cash outflows by a duration that matches the conditions of the
underlying pension obligation.
The actuarial gains and losses arising from experience-based adjustments
and changes in actuarial estimates is recognised in other comprehen-
sive income.
Deferred income tax is provided on temporary differences concerning
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.
Other provisions
Provisions are recognised when the Group has a legal or constructive
obligation as a result of an event prior to or at the statement of financial
position date, and it is probable that future economic benefits will
flow out of the Group. Provisions are measured at the best estimate
by management of the expenditure required to settle the present
obligation. The measurement of provisions is based on a discounting of
the costs necessary to settle the obligation if this has a significant effect
on the measurement of the obligation.
Provisions for restructurings are recognised as obligations when a
detailed formal restructuring plan has been announced prior to or at the
statement of financial position date at the latest to the persons affected
by the plan.
The plan is closed for new business.
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 at the time of sign-
ing the contract of employment.
In special instances, the employee can enter into a contract with the
Group to receive compensation for loss of pension benefits caused by
reduced working hours. The Group recognises this liability based on
statistical models.
Own insurance is included under other provisions. The provisions
apply to the Group’s own insurance claims and are reported when the
damage occurs according to the same principle as the Group’s other
claims provisions.
Debt
Debt comprises debt in connection with direct insurance and rein-
surance, amounts owed to credit institutions, current tax obligations
and other debt. Derivative financial instruments are assessed at fair
value according to the same practice that applies to financial assets.
Other liabilities are assessed at amortised cost based on the effective
interest method.
Income tax and deferred tax
The Group expenses current tax according to the tax laws of the
jurisdictions in which it operates. Current tax liabilities and current tax
receivables are recognised in the statement of financial position as
estimated tax on the taxable income for the year, adjusted for change
in tax on prior years’ taxable income and for tax paid under the
on-account tax scheme.
Cash flow statement
The consolidated cash flow statement is presented using the direct
method and shows cash flows from operating, investing and financing
activities as well as the Group’s cash and cash equivalents at the
beginning and end of the financial year. No separate cash flow
statement has been prepared for the parent company because it is
included in the consolidated cash flow statement.
Deferred tax is measured according to the statement of financial position
liability method on all timing differences between the tax and accounting
value of assets and liabilities. Deferred income tax is measured using
the tax rules and tax rates that apply in the relevant countries on the
statement of financial position date when the deferred tax asset is realised
or the deferred income tax liability is settled.
Cash flows from operating activities are calculated whereby major
classes of gross cash receipts and gross cash payments are disclosed.
Cash flows from investing activities comprise payments in connection
with the purchase and sale of intangible assets, property, plant and
equipment as well as financial assets and deposits with credit institutions.
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 realised against which the temporary differences
can be offset.
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, repayments of interest-bearing debt and the payment
of dividends.
Cash and cash equivalents comprise cash and demand deposits.
135
Notes | Annual report 2012 | Tryg A/S | Income statement (parent company)
DKKm
Note
1
Investment activities
Income from Group undertakings
Price adjustments
Administration expenses in connection with investment activities
Total investment return
2 Other expenses
Profit/loss before tax
3 Tax
Profit/loss on continuing business
Profit/loss for the year
Proposed distribution for the year:
Dividend
Transferred to reserve for net revaluation according to the equity method
Transferred to retained profit
Statement of comprehensive income
Profit/loss for the year
Other comprehensive income
Other comprehensive income which cannot subsequently be reclassified as profit or loss
Revaluation of owner-occupied property for the year
Tax on revaluation of owner-occupied property for the year
Actuarial gains/losses on defined-benefit pension plans
Tax on actuarial gains/losses on defined-benefit pension plans
Deferred tax on contingency fund provision
Other comprehensive income which can subsequently be reclassified as profit or loss
Foreign currency translation adjustment of foreign entities for the year
Hedging of currency risk in foreign entities for the year
Tax on hedging of currency risk in foreign entities for the year
Total other comprehensive income
Total comprehensive income
136 | Tryg A/S | Annual report 2012 | Income statement (parent company)
2011
2012
1,189
1
-8
2,265
0
-8
1,182
2,257
-57
-67
1,125
2,190
15
18
1,140
2,208
1,140
2,208
400
911
-171
1,140
1,594
1,865
-1,251
2,208
1,140
2,208
20
-6
-399
111
-22
-296
29
-27
7
9
-287
853
42
-12
-62
16
0
-16
193
-184
46
55
39
2,247
Statement of financial position (parent company)
DKKm
Note Assets
4
Equity investments in Group undertakings
Total investments in Group undertakings
Total investment assets
Receivables from Group undertakings
Total receivables
5 Current tax assets
Cash at bank and in hand
Total other assets
Total assets
Equity and liabilities
Equity
Debt to Group undertakings
Other debt
Total debt
Total equity and liabilities
6 Deferred tax assets
7 Capital adequacy
8 Contractual obligations, contingent liabilities and collateral
9
10
11 Accounting policies
Related parties
Reconciliation of profit/loss and equity
2011
2012
8,985
8,985
10,889
10,889
8,985
10,889
23
23
17
0
17
85
85
24
1
25
9,025
10,999
9,024
10,996
1
0
1
0
3
3
9,025
10,999
Statement of financial position (parent company) | Annual report 2012 | Tryg A/S |
137
Statement of changes in equity (parent company)
DKKm
Share
capital
Revaluation
reserves
Retained
earnings
Proposed
dividend
Equity at 31 December 2010
1,598
1,352
5,269
2011
Profit/loss for the year
Revaluation of owner-occupied property for the year
Foreign currency translation adjustment of foreign entities for the year
Hedging of currency risk in foreign entities for the year
Actuarial gains and losses on pension obligation
Tax on changes in equity
Total comprehensive income
Nullification of treasury shares
Dividend paid
Dividend, treasury shares
Purchase of treasury shares
Exercise of share options
Issue of share options
Total changes in equity in 2011
Equity at 31 December 2011
2012
Profit/loss for the year
Revaluation of owner-occupied property for the year
Foreign currency translation adjustment of foreign entities for the year
Hedging of currency risk in foreign entities for the year
Actuarial gains and losses on pension obligation
Tax on changes in equity
Total comprehensive income
Dividend paid
Dividend, treasury shares
Purchase and sale of treasury shares
Exercise of share options
Issue of share options
Total changes in equity in 2012
Equity at 31 December 2012
911
20
29
-27
-399
112
646
646
1,998
1,865
42
193
-184
-62
50
1,904
0
-65
-65
1,533
0
0
1,533
1,904
3,902
256
400
400
-256
144
400
-171
-22
-193
65
14
-91
15
14
-176
5,093
-1,251
1,594
-1,251
6
66
44
9
-1,126
3,967
1,594
-400
1,194
1,594
Total
8,475
1,140
20
29
-27
-399
90
853
0
-256
14
-91
15
14
549
9,024
2,208
42
193
-184
-62
50
2,247
-400
6
66
44
9
1,972
10,996
Proposed dividend per share DKK 26 (DKK 6.52 in 2011). 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 at the end of the year (61,316,103 shares). The dividend is not paid until approved by the
shareholders at the annual general meeting. Tryg Forsikring A/S’s Norwegian branch has in its branch financial statements included contingency fund
provisions in the amount of DKK 2,394m (DKK 2,430m in 2011). Tryg Forsikring A/S’s Swedish branch has in its branch financial statements included
contingency fund provisions in the amount of DKK 160m (DKK 144m in 2011). In Tryg Forsikring A/S, these provisions, due to their nature as additional
provisions, are included in equity (retained earnings), net of deferred tax. Tryg Forsikring A/S’s possible payment of dividend to Tryg A/S is influenced by
this amount and by a contingency fund provision of DKK 670m, which is included in equity in Tryg Forsikring A/S. Tryg Garantiforsikring A/S has a similar
contingency fund provision amounting to DKK 139m, which is also included in the company’s equity. The contingency fund provisions can be used to cover
losses in connection with the settlement of insurance provisions or otherwise for the benefit of the insured.
138 | Tryg A/S | Annual report 2012 | Statement of changes in equity (parent company)
Notes (parent company)
DKKm
1
Income from Group undertakings
Tryg Forsikring A/S
2 Other expenses
Administration expenses
2011
2012
1,189
1,189
2,265
2,265
-57
-57
-67
-67
Remuneration for the Executive Management is paid partly by Tryg A/S and partly by Tryg Forsikring A/S
and Tryg Forsikring, a Norwegian branch of Tryg Forsikring A/S, and is charged to Tryg A/S via the cost
allocation. Remuneration for the Supervisory Board, the Executive Management and risk-takers can be
seen from Note 29 concerning related parties of the Tryg Group. Refer to Note 7 of the consolidated
financial statements for a specification of the audit fee.
Average number of full-time employees during the year
0
11
3 Tax
Reconciliation of tax costs
Tax on accounting loss before profit/loss in subsidiaries and tax
Tax adjustment, previous years
Effective tax rate
Tax on accounting profit
Change in respect of previous years
4
Equity investments in Group undertakings
Cost
Balance at 1 January
Balance at 31 December
Revaluation and impairment to net asset value
Balance at 1 January
Revaluations for the year
Dividend paid
Balance at 31 December
Carrying amount at 31 December
Name and registered office
2012
Tryg Forsikring A/S, Ballerup
2011
Tryg Forsikring A/S, Ballerup
15
0
15
%
25
-2
23
6,987
6,987
1,352
902
-256
1,998
8,985
Ownership
share in %
19
-1
18
%
25
-1
24
6,987
6,987
1,998
2,304
-400
3,902
10,889
Equity
100
100
100
100
Notes (parent company) | Annual report 2012 | Tryg A/S |
139
Notes (parent company)
DKKm
5 Current tax assets
Tax payable, beginning of year
Current tax for the year
Adjustment of current tax in respect of previous years
Tax paid for the year
6 Deferred tax assets
Capitalised tax losses
Tryg A/S
Non-capitalised tax losses
Tryg A/S
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 offset the tax losses.
7 Capital adequacy
Equity according to annual report
Proposed dividend
Solvency requirements for subsidiaries – 50%
Tier 1 capital
Subordinate loan capital
Solvency requirements for subsidiaries – 50%
Capital base
Weighted items
Solvency ratio
2011
2012
17
16
0
-16
17
0
18
17
24
-7
-10
24
0
18
9,024
-400
-2,508
6,116
848
-2,507
4,457
10,996
-1,594
-2,406
6,996
873
-2,405
5,464
3,970
6,078
112
90
8 Contractual obligations, contingent liabilities and collateral
The Danish companies in the Tryg Group are taxed jointly with TryghedsGruppen smba. As of 1 July 2012, the companies and the other
jointly taxed companies are thus jointly and severally liable for any obligation to withhold tax deducted at source on interest, royalties and
dividends in respect of the jointly taxed companies.
Companies in the Tryg Group are party to a number of disputes. Management believes that the outcome of these legal proceedings will not
affect the Group’s financial position over and above the receivables and liabilities recognised in the statement of financial position at 31
December 2012.
140 | Tryg A/S | Annual report 2012 | Notes (parent company)
Notes (parent company)
DKKm
9
Related parties
Tryg A/S has no related parties with a controlling influence other than the parent company, Trygheds-
Gruppen smba. Related parties with a significant influence include the Supervisory Board, the Execu-
tive Management and their members’ related family. Related parties are the same as for the Tryg
Group; please see Note 29 in the consolidated financial statements.
2011
2012
Parent company
TryghedsGruppen smba
TryghedsGruppen smba controls 60% of the shares in Tryg A/S.
Transactions with Group undertakings and associates
Tryg A/S exercises full control over Tryg Forsikring A/S.
Intra-group trading involved:
- Providing and receiving services
- Intra-group account
Administration fee etc. is settled on a cost-recovery basis.
Intra-group accounts are offset and carry interest on market terms.
10
Reconciliation of profit/loss and 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 profit/loss and equity.
Reconciliation of profit/loss
Profit/loss – IFRS
Profit/loss – Danish FSA executive order
Reconciliation of equity
Equity – IFRS
Deferred tax provisions for contingency funds
Equity – Danish FSA executive order
11 Accounting policies
Please refer to the Tryg Group’s accounting policies.
-61
23
-40
84
1,140
1,140
9,007
17
9,024
2,208
2,208
10,979
17
10,996
Notes (parent company) | Annual report 2012 | Tryg A/S |
141
Q4 2012 | Quarterly outline
DKKm
Private
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Gross premium income
2,283
2,329
2,338
2,385
2,373
2,401
2,405
2,478
2,449
Technical result
124
123
221
231
192
152
351
404
326
Key ratios
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
77.3
1.1
78.4
16.9
95.3
Combined ratio exclusive of run-off
101.5
Commercial
Gross premium income
Technical result
Key ratios
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
Combined ratio exclusive of run-off
Corporate
938
56
73.2
-0.1
73.1
21.3
94.4
99.1
78.4
1.3
79.7
16.1
95.8
97.3
924
4
78.9
2.2
81.1
19.6
100.7
99.1
73.3
1.3
74.6
16.9
91.5
92.7
929
104
61.6
7.0
68.6
21.0
89.6
87.6
89.2
-14.3
74.9
16.1
91.0
94.3
946
69
96.4
-24.9
71.5
21.2
92.7
102.0
76.0
0.3
76.3
16.3
92.6
94.4
916
133
64.2
2.1
66.3
19.4
85.7
95.9
80.4
-2.3
78.1
16.0
94.1
98.4
920
87
78.2
-7.1
71.1
20.0
91.1
95.7
71.8
-2.1
69.7
16.0
85.7
90.1
930
168
62.6
-1.4
61.2
21.1
82.3
90.4
69.0
-0.1
68.9
15.0
83.9
87.0
931
193
56.8
2.3
59.1
20.1
79.2
86.3
70.1
1.1
71.2
15.6
86.8
88.4
906
156
59.8
2.8
62.6
20.0
82.6
85.8
Gross premium income
1,330
1,282
1,313
1,356
1,308
1,305
1,312
1,311
1,330
Technical result
98
141
176
163
29
150
284
95
121
Key ratios
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
Combined ratio exclusive of run-off
78.3
2.3
80.6
12.8
93.4
99.9
68.2
9.4
77.6
12.6
90.2
102.8
77.2
-2.9
74.3
13.0
87.3
98.4
85.8
-9.5
76.3
12.3
88.6
98.5
90.0
-4.6
85.4
13.1
98.5
112.9
78.9
-2.2
76.7
12.6
89.3
96.7
64.0
1.8
65.8
12.7
78.5
92.1
78.2
2.5
80.7
11.9
92.6
97.3
77.8
0.7
78.5
12.2
90.7
103.4
142 | Tryg A/S | Annual report 2012 | Q4 2012 | Quarterly outline
DKKm
Sweden
Gross premium income
Technical result
Key ratios
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
Combined ratio exclusive of run-off
Other a)
Gross premium income
Technical result
Tryg
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
351
-1
353
-1
80.1
0.3
80.4
21.4
101.8
105.8
76.5
4.0
80.5
22.4
102.9
103.5
412
14
81.1
1.5
82.6
16.7
99.3
93.7
451
17
86.3
-2.9
83.4
14.0
97.4
96.7
370
-44
361
-28
88.1
0.5
88.6
24.9
113.5
115.1
87.5
0.6
88.1
21.9
110.0
107.8
417
28
77.7
-0.2
77.5
17.7
95.2
92.8
477
48
75.3
1.0
76.3
14.5
90.8
88.7
399
54
67.2
-0.8
66.4
21.1
87.5
87.2
-3
0
-9
0
-6
0
-5
0
-17
0
-2
0
-7
0
-1
-88
-8
-9
Gross premium income
4,899
4,879
4,986
5,133
4,950
4,985
5,057
5,196
5,076
Technical result
Investment return
Profit/loss before tax
Profit/loss
Key ratios
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
277
262
524
369
77.0
1.1
78.1
16.9
95.0
Combined ratio exclusive of run-off
100.8
267
111
359
271
75.7
3.7
79.4
16.5
95.9
99.6
515
-5
498
362
72.4
1.7
74.1
16.7
90.8
93.5
480
-189
279
163
89.5
-14.1
75.4
16.1
91.5
97.3
310
144
467
344
78.5
-0.9
77.6
16.9
94.5
101.2
361
353
702
556
79.9
-2.7
77.2
16.6
93.8
98.5
831
-111
701
515
68.7
-1.0
67.7
16.5
84.2
91.1
652
338
976
733
70.3
1.0
71.3
16.4
87.7
91.5
648
5
638
404
70.2
0.9
71.1
16.3
87.4
92.1
a) Amounts relating to eliminations, restructuring expenses and discontinued and divested business are included under ‘Other’.
A more detailed version of the table can be found at tryg.com > investor > Downloads
Q4 2012 | Quarterly outline | Annual report 2012 | Tryg A/S |
143
Q4 2012 | Geographical segments
DKKm
Danish general insurance
Gross premium income
Technical result
Run-off gains/losses, net of reinsurance
Key ratios
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
Q4
2011
Q4
2012
2011
2012
2,488
273
266
82.0
-6.0
76.0
13.1
89.1
2,456
536
159
62.6
2.4
65.0
12.7
77.7
10,019
1,033
770
83.3
-8.1
75.2
15.1
90.3
9,910
1,441
571
71.1
-0.2
70.9
14.5
85.4
Number of full-time employees, end of period
2,315
2,187
Norwegian general insurance
Gross premium income
Technical result
Run-off gains/losses, net of reinsurance
Key ratios
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
Number of full-time employees, end of period
Swedish general insurance a)
Gross premium income
Technical result
Run-off gains/losses, net of reinsurance
Key ratios
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio
Combined ratio
Number of full-time employees, end of period
1,991
2,091
84
49
72.6
5.2
77.8
18.9
96.7
488
-47
16
83.4
2.9
86.3
25.8
112.1
54
79
79.9
-0.6
79.3
18.5
97.8
537
67
-2
65.7
1.9
67.6
20.7
88.3
7,916
598
181
73.2
3.2
76.4
17.0
93.4
8,239
1,017
464
72.4
-1.0
71.4
16.8
88.2
1,338
1,282
2,050
-59
-7
82.0
2.6
84.6
20.3
104.9
423
2,183
131
-21
75.3
1.5
76.8
18.6
95.4
444
144 | Tryg A/S | Annual report 2012 | Q4 2012 | Geographical segments
DKKm
Other b)
Gross premium income
Technical result
Tryg
Gross premium income
Technical result
Investment return
Other income and costs
Profit/loss before tax
Run-off gains/losses, net of reinsurance
Key ratios
Gross claims ratio
Net reinsurance ratio
Claims ratio, net of ceded business
Gross expense ratio c)
Combined ratio
Number of full-time employees, end of period, continuing business
Number of full-time employees, end of period, discontinued and divested business
Q4
2011
Q4
2012
2011
2012
-17
0
-8
-9
-37
0
-18
-97
4,950
5,076
19,948
20,314
310
144
13
467
331
78.5
-0.9
77.6
16.9
94.5
648
5
-15
638
237
70.2
0.9
71.1
16.3
87.4
1,572
61
-30
1,603
944
79.1
-2.5
76.6
16.6
93.2
4,076
242
2,492
585
-60
3,017
1,015
72.2
-0.4
71.8
16.4
88.2
3,913
189
a) Moderna Försäkringar is included in ‘Swedish general insurance’ from 2 April 2009.
b) Amounts relating to eliminations, restructuring expenses and discontinued and divested business are included under ‘Other’.
c) Adjustment of gross expense ratio included only in ‘Tryg’.
The adjustment is explained in a footnote to Financial highlights.
Q4 2012 | Geographical segments | Annual report 2012 | Tryg A/S |
145
Other key figures
Claims ratio, net
Expense ratio, net with adjustment
Combined ratio, net with adjustment
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 premium provisions
Average claims provisions
Average reinsurers’ share of provisions for insurance contracts
Reserve ratio, premium provisions (%)
Reserve ratio, claims provisions (%)
Total reserve ratio
Number of full-time employees, end of period,
continuing business
Number of full-time employees, end of period,
discontinued and divested business
Share performance
Earnings per share (DKK)
Diluted earnings per share (DKK) a)
Earnings per share (DKK) of continuing business
Number of shares, end of period (1,000)
Average number of shares (1,000)
Diluted average number of shares (1,000) a)
Share price at 31 December (DKK)
Net asset value per share (DKK)
Market price/net asset value
Dividend per share (DKK)
Price/earnings
a) There has been no dilution of earnings or equity in 2008.
2008
2009
2010
2011
2012
70.3
16.9
87.2
17.3
14.6
15.3
2.9
3.0
15.8
10.2
5,252
20,454
1,312
30.7
118.8
149.5
73.8
16.9
90.7
16.8
9.7
10.2
0.8
0.9
30.7
23.6
5,654
21,110
1,178
35.7
129.2
164.9
81.4
17.1
98.5
17.0
2.4
2.6
0.7
0.7
11.1
8.2
6,514
23,677
1,454
36.1
131.7
167.8
75.7
17.0
92.7
16.9
7.9
8.3
0.9
0.9
18.4
13.1
6,876
25,894
1,828
34.8
134.9
169.7
70.7
16.9
87.6
16.6
12.3
13.0
0.3
0.3
30.2
21.8
6,810
27,073
2,192
32.9
134.1
167.0
3,911
4,119
4,101
4,076
3,912
180
217
191
242
189
12.8
14.0
64,378
66,184
328.0
127.5
2.6
6.5
23.4
31.7
31.7
33.3
63,228
63,334
63,448
342.8
152.3
2.3
15.5
10.3
9.5
9.5
11.9
60,634
62,362
62,444
257.5
139.5
1.8
4.0
21.7
18.9
18.9
19.0
60,373
60,401
60,401
319.0
149.2
2.1
6.52
16.8
36.5
36.4
36.0
60,695
60,491
60,714
426.5
180.9
2.4
26.00
11.8
The expense ratio, net without adjustment, is calculated as the ratio of actual insurance operating costs, net of reinsurance, to premium income,
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’ definitions
of expense ratio and combined ratio, involves the addition of a calculated cost (rent) in respect of owner-occupied property based on a calculated
market rent and the deduction of actual depreciation and operating costs on owner-occupied property.
146 | Tryg A/S | Annual report 2012 | Other key figures
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 Financial Reports for Insurance Companies
and Multi-Employer Occupational Pension Funds and also comply with
‘Recommendations & Financial Ratios 2010’ issued by the Danish Society
of Financial Analysts.
Run-off gains/losses
The difference between the claims provisions at the beginning of the fi-
nancial year (adjusted for foreign currency translation adjustments and
discounting effects) and the sum of the claims paid during the financial
year and that part of the claims provisions at the end of the financial year
pertaining to injuries and damage occurring in earlier financial years.
Capital base
Equity plus share of subordinate loan capital and less intangible assets,
tax asset, discounting, equalisation reserve and proposed dividend.
Gross claims ratio
Gross claims x 100
Gross premium income
Gross premium income
Calculated as gross premium income adjusted for change in gross premium
provisions, less bonuses and premium discounts.
Market price/net asset value
Share price
Net asset value per share
Combined ratio
The sum of the gross claims ratio, the net reinsurance ratio and the gross
expense ratio.
Danish general insurance
Comprises the legal entities Tryg Forsikring A/S (excluding the Norwegian
and Swedish branches) and Tryg Garantiforsikring A/S (including Finnish
branch).
Discounting
Expresses recognition in the financial statements of expected future pay-
ments at a value below the nominal amount, as the recognised amount
carries interest until payment. The size of the discount depends on the
market-based discount rate applied and the expected time to payment.
Gross insurance technical interest ratio
Percentage return on equity
Insurance technical interest net of reinsurance x 100
Gross premium income
Profit for the year x 100
Average equity
Gross expense ratio
Calculated as the ratio of gross insurance operating costs, including
adjustment and gross premium income. The adjustment involves the
deduction of depreciation and operating costs on the owner-occupied
property and the addition of a calculated cost (rent) concerning the
owner-occupied property based on a calculated market rent.
Gross insurance operating costs with adjustment x 100
Gross premium income
Gross expense ratio without adjustment
Gross insurance operating costs x 100
Gross premium income
Gross profit margin
Equity margin
Premium income, net of reinsurance x 100
Tier 1 capital
Individual solvency
New Danish solvency requirements for insurance companies comprising
the companies’ own determination of their capital requirements calculated
using their own methods.
The rules entered into force on 1 January 2008, and the figures must be
reported to the Danish Financial Supervisory Authority four times a year.
Net asset value per share
Year-end equity
Number of shares at year-end
Technical result x 100
Gross premium income
Tier 1 capital
Equity less proposed dividend and share of capital claims in subsidiaries.
148 | Tryg A/S | Annual report 2012 | Glossary
Solvency II
New solvency requirements for insurance companies issued by the
EU Commission. The new rules are expected to come into force in
2014/2015, at the earliest.
Solvency ratio
Ratio between capital base and weighted assets.
Swedish general insurance
Comprises Tryg Forsikring A/S, Swedish branch, and the Swedish branch
of Tryg Garantiforsikring A/S.
Dividend per share
Proposed dividend
Number of shares at year-end
Diluted number of shares
Average number of shares adjusted for number of share options which
may potentially dilute.
Diluted earnings per share (continuing business)
Diluted earnings from continuing business after tax
Diluted average number of shares
Unwinding
Unwinding of discounting takes place with the passage of time as the
expected time to payment is reduced. The closer the time of payment,
the smaller the discount. This gradual increase of the provision is not
recognised under claims, but under technical interest in the income
statement.
Net reinsurance ratio
Profit or loss from reinsurance x 100
Gross premium income
Norwegian general insurance
Comprises Tryg Forsikring A/S, Norwegian branch, and the Norwegian
branch of Tryg Garantiforsikring A/S.
Operating ratio
Calculated as the combined ratio plus insurance technical interest in the
denominator.
Claims + insurance operating costs +
profit or loss from reinsurance x 100
Gross premium income + insurance technical interest
Price/earnings ratio
Share price
Earnings per share
Relative run-off gains/losses
Run-off gains/losses net of reinsurance relative to claims provisions net
of reinsurance, beginning of year.
Reserve ratio, claims provisions
Claims provisions x 100
Gross premium income
Reserve ratio, premium provisions
Premium provisions x 100
Gross premium income
Total reserve ratio
Reserve ratio, claims provisions + premium provisions
Earnings per share
Profit or loss for the year x 100
Average number of shares
Claims ratio, net of ceded business
Gross claims ratio + net reinsurance ratio
Glossary | Annual report 2012 | Tryg A/S |
149
Disclaimer
Certain statements in this annual report are based on the beliefs of
developments in the financial markets, extraordinary events
our management as well as assumptions made by and information
such as natural disasters or terrorist attacks, changes in
currently available to management. Statements regarding Tryg’s
legislation or case law and reinsurance. Should one or more
future operating results, financial position, cash flows, business
of these risks or uncertainties materialise, or should any
strategy, plans and future objectives other than statements of
underlying assumptions prove to be incorrect, Tryg’s actual
historical fact can generally be identified by the use of words such
financial condition or results of operations could materially differ
as ‘targets’, ‘believes’, ‘expects’, ‘aims’, ‘intends’, ‘plans’, ‘seeks’,
from that described herein as anticipated, believed, estimated
‘will’, ‘may’, ‘anticipates’, ‘would’, ‘could’, ‘continues’ or similar
or expected. Tryg is not under any duty to update any of the
expressions.
forward-looking statements or to conform such statements to
actual results, except as may be required by law.
Read more
A number of different factors may cause the actual performance
in the chapter Capital and risk management in the annual report
to deviate significantly from the forward-looking statements in
on page 38, and in Note 1 on page 77, for a description of some
this annual report, including but not limited to general economic
of the factors which may affect the Group’s performance or the
developments, changes in the competitive environment,
insurance industry.
150 | Tryg A/S | Annual report 2012 | Disclaimer
Group chart
Tryg A/S
Tryg Forsikring A/S
Tryg Garanti-
forsikring A/S
(Dansk Kaution)
Moderna
Försäkringar
(Swedish branch)
Tryg Forsikring,
(Norwegian branch)
Respons
Inkasso AS
(Norway)
Tryg
(Finnish branch)
Tryg Garanti
(Norwegian branch)
Moderna
Garanti
(Swedish branch)
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%)
Thunesvei 2 AS
946 919 845
(Norway)
Ejendoms-
selskabet af
1. marts
2006 P/S (50%)
ANS Grensen 3
848 383 082
(99%)
(Norway)
Group chart at 1 January 2013. Companies and branches are wholly owned by Danish owners and domiciled in Denmark, unless otherwise stated.
Company
Branch
The branch has been sold. Final authority approval expected in Q1 2013.
Group chart | Annual report 2012 | Tryg A/S |
151
Product overview
Being one of the largest insurance companies in the Nordic region,
Tryg sells its products primarily via its own sales channels such as
Tryg offers a broad range of insurance products to both private
call centres, the Internet, tied agents, franchisees (Norway), interest
individuals and businesses. Tryg continuously develops new
organisations, car dealers, real estate agents, insurance brokers and
products and adapts existing peace-of-mind solutions to customer
Nordea branches. Moreover, Tryg engages in international cooperation
requirements and developments in society. Also, Tryg focuses
with the AXA Group. It is an important element of Tryg’s distribution
strongly at all times on striking a better balance between price
strategy to be available in places where customers want it and that
and risk.
most distribution takes place via the company’s own sales channels.
Motor insurance
Workers’ compensation insurance
Motor insurance accounts for 32% of total premium income and
comprises mandatory third-party liability insurance providing cover
for injuries to a third party or damage to a third party’s property, and
a voluntary comprehensive insurance policy that provides cover for
damage to the customer’s own vehicle from collision, fire or theft.
Workers’ compensation insurance accounts for 5% of total premium
income and covers employees against bodily injury sustained at work
(in Norway, also occupational diseases). Workers’ compensation
insurance is mandatory and covers a company’s employees (except for
public sector employees and persons working for sole proprietors).
In Denmark, motor insurance taken out by concept customers includes
Tryg’s roadside assistance, such as towing and battery jump-start.
Fire and contents – Private
Fire and contents insurance for private customers represents 24% of
total premium income and includes, for example, house and contents
insurance.
House insurance covers damage to properties caused by, for example,
fire, storm or water, legal assistance and the customer’s liability as
owner of the property. The contents insurance covers loss of or damage
to private household contents and covers in and outside of the home.
Moreover, the insurance includes liability and legal assistance, to which
can be added a number of supplementary covers, for example cover of
sudden damage and damage to electronic equipment.
Tryg works with the concept of proactive claims handling, pursuing a
close dialogue with the claimant to optimise the process. Our proactive
claims handling team consists of claims handlers, social counsellors,
legal experts, occupational health practitioners, orthopaedic surgeons
and a network of psychologists. Proactive claims handling has three
winners: the company, the claimant and Tryg in the form of shorter
periods of sick leave, enhanced self-esteem for the injured person
and reduced expenses.
General third-party liability insurance
General third-party liability insurance represents 5% of total premium
income and covers various types of liability, including claims incurred
by a company arising from the conduct of its business or in connection
with its products, and third-party liability for professionals.
Personal accident insurance
Personal accident insurance accounts for 9% of total premium income
and covers accidental bodily injury and death resulting from accidents.
Transport insurance represents 2% of total premium income and
covers damage to goods in transit due to the collision, overturning or
crashing of the means of transport.
Transport insurance
Compensation takes the form of a lump sum intended to help the customer
cope with the financial consequences of an accident, thereby making
their daily lives easier. The insurance can include a number of supple-
mentary covers, including treatment by a physiotherapist or chiropractor.
Fire and contents – Commercial
Commercial fire and contents insurance, which includes building
insurance, represents 14% of total premium income and covers the
loss of or damage to the buildings, stock or equipment of commercial
customers. Moreover, Tryg provides cover for operating losses in
connection with covered claims.
Health insurance
Health insurance represents 2% of total premium income. The insurance
covers the costs of examinations, treatment, medicine, surgery and
rehabilitation at a private health facility. In recent years, increasing
health costs and waiting times in the public system have led to a
significant demand for private health insurance. The growth in health
insurance is, however, expected to decline, as the new government
has removed the tax deduction from schemes funded by employers.
152
| Tryg A/S | Annual report 2012 | Products
Products | Annual report 2012 | Tryg A/S |
153
Tryg A/S
Klausdalsbrovej 601
2750 Ballerup
Denmark
+45 70 11 20 20
tryg.com
CVR no. 26460212