Tryg
Annual Report 2022

Plain-text annual report

Annual report 2022 As the world changes, we make it easier to be tryg Tryg A/S · Klausdalsbrovej 601, 2750 Ballerup, Denmark · CVR no. 26460212 Contents Management’s review 03 Highlights 05 Tryg at a glance 06 Business areas 07 Income overview Introduction by Chairman and Group CEO 09 11 Events in 2022 13 Financial outlook 15 Targets and strategy Strategic initiatives 17 18 Business initiatives 20 Tryg’s results 25 Private 27 Commercial 29 Corporate 31 Investment activities 33 Capital and risk management 37 ESG & Sustainability 43 Investor information 45 Corporate governance 49 Supervisory Board 53 Executive Board Financial statements Financial statements Group chart Glossary Product overview 54 128 129 131 Management’s review - Contents 05 Tryg at a glance Tryg aims to pay a nominal, stable and increasing ordinary dividend, while maintaining stable results and a high level of return on capital employed Shareholder remuneration (DKK per share) 1.65 6.6 6.8 7.0 6.29 4.28 5,000 1.786 3.214 i g n n a m e R d e t e p m o C l 2018 2019 2020 2021* 2022 Ordinary dividend Extraordinary dividend in millions (DKK) Buyback * Calculated on the new 654m number of shares following the DKK 37bn rights issue to fund the RSA Scandinavia acquisition 43 Investor information 09 Introduction by Chairman and Group CEO 13 Financial outlook Annual report 2022 | Tryg A/S | 2 Highlights 2022 Management’s review - Contents Financial 2022 Financial Q4 2022* 5.9% Premium growth in local currencies, based on to pro-forma figures 14.1 Expense ratio 82.2 Combined ratio 6.7% Premium growth in local currencies 0.8 Group underly- ing claims ratio improvements percentage points 14.3 Expense ratio 2021: 14.1 2021: 84.5 Q4 2021: 0.8 Q4 2021: 14.6 6,177m Technical result (DKK) -1,193m Total investment return (DKK) 3,051m Profit before tax (DKK) 82.1 Combined ratio 1,689m Technical result (DKK) 317m Total investment return (DKK) 2021: 3,709m 2021: 870m 2021: 3,956m Q4 2021: 84.1 Q4 2021: 1,380m Q4 2021: 803m 6.29 Dividend per share (DKK) 201 Solvency ratio 1,377m Profit before tax (DKK) 1.60 Dividend per share (DKK) 201 Solvency ratio 2021: 4.28 2021: 188 Q4 2021: 1,458m Q4 2021: 1.07 Q4 2021: 188 * The comparison figures for Q4 2021 related to technical result are pro-forma disclosed in June. Annual report 2022 | Tryg A/S | 3 Highlights 2022 (continued) New reporting structure In Q2 2022, Tryg started to fully consolidate Codan Norway and Trygg-Hansa. These businesses have been merged into the overall Private and Commercial organisations and reporting structure. Tryg is reporting its results through three divisions: Private, Commer- cial and Corporate, this is unchanged from previous practice. The old Sweden segment where Moderna Private was reported has been merged into the Private segment. Tryg has been producing pro-forma* numbers for the enlarged Group from Q2 2021 to Q1 2022 to help comparability, these have been published on tryg.com. Tryg will also continue to publish the results by geographies in the notes of each quarterly report, with Denmark, Norway and Sweden primarily shown here. Codan Norway and Trygg-Hansa will also flow into the respec- tive geographical results. Private Q4 2022 Q4 pro-forma 2021 Q4 reported 2021 Gross premium income Technical result Claims ratio Expense ratio Combined ratio 5,847 1,073 69.2 13.1 82.4 5,622 997 69.3 12.9 82.2 3,840 681 70.1 12.1 82.2 Commercial Q4 2022 Q4 pro-forma 2021 Q4 reported 2021 Gross premium income Technical result Claims ratio Expense ratio Combined ratio 2,292 452 64.4 16.7 81.1 2,264 347 65.2 19.4 84.6 1,352 109 72.2 19.7 91.9 Corporate Q4 2022 Q4 pro-forma 2021 Q4 reported 2021 Gross premium income Technical result Claims ratio Expense ratio Combined ratio 903 164 67.1 15.5 82.7 850 36 82.0 13.7 95.7 850 36 82.0 13.7 95.7 * Pro-forma figures from Q2 2021 to Q1 2022 have been published on tryg.com to improve comparability. Pro-forma figures are shown including full consolidation of Codan Norway and Trygg-Hansa Management’s review - Contents 4 Annual report 2022 | Tryg A/S | Tryg at a glance As the world changes, we make it easier to be tryg* Strong market position 5.3 million customers Tryg is the largest non-life insurer in Scandina- via. We are the largest player in Denmark and the third largest in Sweden. In Norway, we are the fourth-largest company in the market. Our 7,000 employees provide peace of mind for 5.3 million customers and handle approxi- mately 1.5 million claims on a yearly basis. Low risk portfolio Attractive dividend policy Tryg aims to distribute a stable, nominal increase in dividends and to pay out 60-90% of operating earnings. Private Commercial Corporate Retail Trygheds- Gruppen TryghedsGruppen owns 46.5%** of Tryg and contribu tes to projects that create peace of mind via TrygFonden. In 2022, Tryg- Fonden has contributed up to DKK 650m and paid a member bonus of 1.2bn to Danish customers in Tryg. Read more about our history at tryg.com * ‘Tryg’ means feeling protected and cared for. ** Calculated excluding Tryg's own shares Management’s review - Contents Sweden Norway Denmark 4 1 3 Market position Market position Market position 14.7% Market share 22.4% Market share 17.3% Market share 5 Annual report 2022 | Tryg A/S | Business areas Management’s review - Contents Private Commercial Corporate Private provides insurance products to private customers in Denmark, Sweden and Norway. Private offers a range of insurance products including motor, content, house, accident, travel, motorcycles, pet and health. Commercial provides insurance products includ- ing motor, property, liability, workers’ compensa- tion, travel and health to small and medium-sized business in Denmark, Sweden and Norway. 65% of premiums 25% of premiums Distribution channels* Distribution channels Own sales agents • Call centres • Real estate agents • Online • Bancassurance • Car dealers • Franchises • Partner Call centres • Online • Bancassurance • Own sales agents • Franchises• Partner Corporate provides insurance products includ- ing property, liability, workers’ compensation, transport, group life etc. to corporate customers under the brand Tryg in Denmark and Norway, and Trygg-Hansa in Sweden. Tryg has a cooper- ative agreement with the global RSA network for international customers. 10% of premiums Distribution channels Own sales agents • Insurance brokers Brands Brands Brands * Not exhaustive 6 Annual report 2022 | Tryg A/S | Income overview DKKm 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 Income from RSA Scandinavia a) Currency hedge related to RSA Scandinavia Tryg stand-alone Investment return Investment return after insurance technical interest Other income and costs Profit/loss before tax Tax Profit/loss on continuing business Profit/loss onsiscontinued and divested business after tax Profit/loss Run-off gains/losses, net of reinsurance Key figures Total equity Return on equity after tax (%) b) Return on own funds (%) Return on tangible equity (%) Number of shares 31 December (1,000) Earnings per share (DKK) Operating earnings per share (DKK) c) Net asset value per share (DKK Ordinary dividend per share (DKK) Extraordinary dividend per share (DKK) Premium growth in local currencies Gross claims ratio Net reinsurance ratio Claims ratio, net of ceded business Gross expense ratio Combined ratio Run-off, net of reinsurance (%) Large claims, net of reinsurance (%) Weather claims, net of reinsurance (%) Discounting (%) COVID-19 claims, net of reinsurance (%) Combined ratio on business areas Private Commercial Corporate Q4 2022 Q4 pro-forma 2021 Q4 reported 2021 2022 2021 2020 2019 2018 9,042 -5,975 -1,292 1,775 -155 69 1,689 -19 0 336 317 -629 1,377 -296 1,081 0 1,081 362 42,504 9.5 27.0 30.8 633,710 1.69 2.00 1.60 6.7d) 66.1 1.7 67.8 14.3 82.1 -4.0 3.2 2.3 3.0 0.0 82.4 81.1 82.7 8,735 -5,837 -1,280 1,619 -233 -5 1,380 66.8 2.7 69.5 14.6 84.1 -2.5 2.2 1.0 0.9 -0.3 82.2 84.6 95.7 6,041 -4,229 -847 966 -135 -5 826 568 0 235 803 -171 1,458 -85 1,373 -3 1,370 232 49,008 18.0 40.0 37.5 653,447 2.10 2.14 1.07 2.6 70.0 2.2 72.2 14.0 86.2 -3.8 2.7 2.0 0.7 0.0 82.2 91.9 95.7 33,938 -22,407 -4,783 6,748 -723 152 6,177 34 0 -1,227 -1,193 -1,933 3,051 -804 2,247 0 2,247 1,380 42,504 4.9 13.0 7.8 633,710 3.47 4.43 67.07 6.29 0.00 5.9d) 66.0 2.1 68.2 14.1 82.2 -4.1 3.4 1.7 2.2 0.0 83.0 80.5 81.4 24,137 -16,275 -3,394 4,468 -731 -29 3,709 1,206 -1,035 699 870 -624 3,956 -795 3,161 -3 3,158 963 49,008 7.8 23.0 16.1 653,447 5.51 5.70 75.00 4.28 0.00 4.9 67.4 3.0 70.5 14.1 84.5 -4.0 1.8 1.9 0.5 -0.5 83.7 83.8 89.4 22,653 -15,437 -3,202 4,014 -499 -20 3,495 0 0 311 311 -265 3,541 -768 2,773 0 2,773 1,145 12,264 22.5 32.6 55.4 301,750 9.19 9.54 40.64 7.00 0.00 7.0 68.1 2.2 70.3 14.1 84.5 -5.1 2.2 1.6 0.2 -0.8 83.8 83.7 89.4 21,741 -14,857 -3,081 3,803 -566 1 3,237 0 0 579 579 -188 3,628 -783 2,845 -2 2,843 1,194 12,085 24.6 35.1 62.5 301,750 9.42 9.82 40.05 6.80 1.65 17.1 68.3 2.6 70.9 14.2 85.1 -5.5 2.1 1.9 0.7 0.0 83.9 83.8 87.6 18,740 -12,636 -2,704 3,400 -624 -10 2,766 0 0 -332 -332 -172 2,262 -529 1,733 -2 1,731 1,221 11,334 14.9 16.3 21.2 301,743 5.73 5.84 37.56 6.60 0.00 6.3 67.4 3.3 70.7 14.4 85.1 -6.5 2.6 2.0 1.0 0.0 82.2 78.2 95.6 a) Tryg's acquisition of RSA Scandinavia includes also the net effect from demerger and sale of Codan Denmark and impacts the Financial Statements from 1 June 2021 b) ROE is calculated as Profit for the year after tax divided by the weighted average equity (as prescribed by the Danish FSA). From 1 April 2022 this included Trygg-Hansa and Codan Norway c) Adjusted for depreciation on intangible assets related to Brands and Customer relations after tax d) Based on pro-forma figures Management’s review - Contents How to read this annual report Tryg started to fully consolidate Codan Nor- way and Trygg-Hansa from Q2 2022, there- fore the FY technical result only includes nine months of the acquired businesses. In June 2022, Tryg published pro-forma figures for the period Q2 2021 to Q1 2022 with the new businesses fully consolidated, the Q4 2021 pro-forma column is shown to provide comparability. The third column shows the reported Q4 2021 results. At that time, the new businesses were equity accounted, which means the net profit for the quarter for the new businesses was included in the overall investment result. Throughout the annual report, Q4 com- parison figures related to the insurance business are pro-forma. Additionally, FY comparison figures for premiums growth are also pro-forma. Tryg reported a FY 2022 technical result of DKK 6,177m, which includes the new busi- nesses for nine months (Q2 to Q4 2022). The overall investment result of DKK -1,193m was primarily driven by a very difficult year for capital markets with extremely volatile equity markets as well as increasing interest rates. Tryg is paying a FY DPS of 6.29, a 46% increase compared to 2021, driven by the full inclusion of the new businesses for nine months and an initial delivery of synergies. The solvency ratio was 201 at the end of the year, a robust level for the start of a new journey. 7 Annual report 2022 | Tryg A/S | RSA Scandinavia’s impact on Tryg’s income statement Management’s review - Contents 2021 Q3 Q2 2022 Q4 Q1 Q2 Q3 Q4 RSA Scandinavia equity account Fully consolidated figures Full year report 2022 Codan Norway and Trygg-Hansa were equity accounted and therefore the net profit for the quarter was included in the overall investment result. The group technical result rom 1 June 2021 to Q1 2022 includes only Tryg stand-alone Codan Norway and Trygg-Hansa were fully consolidated thus included in the group’s technical result. The figures were consolidated for 9 months (Q2 to Q4 2022). In June 2022, Tryg published pro-forma figures for the quarters in 2021. Tryg reported a FY 2022 technical result of DKK 6,177m. The result includes Codan Norway and Trygg-Hansa from Q2 to Q4 2022 whilst Q1 2022 was Tryg stand-alone. FY 2022 is therefore not comparable to FY 2021 8 Annual report 2022 | Tryg A/S | Management’s review - Contents Strong results in our first year as the largest fully integrated non- life insurer in Scandinavia Introduction by Chairman & Group CEO Annual report 2022 | Tryg A/S | 9 Management’s review - Contents A resilient business despite the most difficult macroeconomic conditions in recent memory Geopolitical and macroeconomic tensions have been at their highest level for many years in 2022, following the COVID-19 pandemic in the winter and Russia's invasion of Ukraine in February. 2022 will also be remembered as the year marking the return of inflation to levels not seen in the last 40 years. The Russian invasion of Ukraine exacerbated an already complicated situation with the global economy reeling from COVID-19 lockdowns and related supply chain issues. Inflation increased sharply through- out the year, ending at close to 10% in many advanced economies. Yet, Tryg managed to produce a robust financial performance against this highly challenging backdrop, proving the resilience of its business model. Acquired Swedish and Norwegian businesses of RSA Scandinavia fully integrated After obtaining all regulatory approvals and following the demerger on 1 April, Tryg started to consolidate Codan Norway and Trygg-Hansa from Q2 2022 and fully integrate these busi- nesses into the Private, Commercial and Corpo- rate operating segments. In connection with the RSA Scandinavia trans- action, we welcomed the swift sale of Codan Denmark to Alm. Brand, which was approved in late April 2022, thereby finalising the entire RSA Scandinavia transaction. Tryg has subse- quently initiated a share buyback programme of DKK 5bn, which is expected to last until summer 2023. As per year-end 2022, some 19.8m shares had been bought for a total value of DKK 3.2bn. Overall, we can look back on a very successful process that created the largest non-life insurance group in Scandinavia, thereby creating value for our shareholders, customers and employees. Strong results for the new group Tryg reported a technical result of DKK 6,177m with full consolidation of Codan Norway and Trygg-Hansa from Q2; in other word, only con- solidated for nine months when looking at the full-year technical result. Tryg is very satisfied with the result in a year of extremely challenging geopolitical circumstances and the highest level of inflation for many decades. The result was positively impacted by solid growth in the Pri- vate and Commercial businesses and improved underlying profitability for the group. Profitabil- ity initiatives related primarily to the Corporate ” Tryg has a strong focus on shareholders and expe- cts to pay a total of DKK 17-19bn to its owners between 2022 and 2024, with the amount split between DKK 12-14bn in ordinary dividends and a DKK 5bn extraordinary buyback share programme. and Commercial segments (large Commercial customers). The result was also supported by RSA Scandinavia related synergies of DKK 406m against a total target of DKK 350m in 2022 and DKK 900m for 2024. ongoing share buyback programme of DKK 5bn. The high shareholder return is supported by the targeted technical result of between DKK 7.0 bn and 7.4 bn, driven by a combined ratio target of at or below 82 in 2024. Tryg’s most profitable segment, the Private segment (accounting for 65% of total premi- ums), continued to deliver strong growth and high profitability in all countries. In the Com- mercial segment, Tryg saw an inflow of small commercial customers in line with the strategy of targeting an increased presence in this part of the market. We are very satisfied with the level of growth in the acquired Swedish busi- ness, which developed positively compared to previous years. The Corporate segment reported a slight drop in the business volume in line with expectations, as Tryg is strongly focused on improving profitability. Hence, Tryg is decreas- ing the number of the high-end international property and US liability segments to rebalance the portfolio and improve profitability. Strong and profitable growth supported by high customer satisfaction In both Private and Commercial, we are very sat- isfied with the level of profitable growth. Tryg has a very strong focus on customers and realised a customer satisfaction score of 85. Tryg generally saw a strong retention rate in both the Private and Commercial business areas, although Q4 2022 was impacted by slightly higher churn, es- pecially in the single product customer segment in Private (in partner agreements). Sustainability and ESG Tryg believes that working systematically to ad- vance sustainability and ESG aspects unleashes better business results and customer relation- ships while also fostering greater innovative power and a more attractive workplace. In 2022, Tryg continued to focus on delivering sustain- able solutions to its customers. Through close collaboration with suppliers, Tryg was able to reduce CO2 emissions from claims handling by 15,449 tons, putting Tryg well on track to reach its target of cutting CO2 emissions by 20,000- 25,000 tons CO2 by 2024. Thanks to all employees 2022 was a challenging year for all Tryg employ- ees impacted by the acquisition of RSA’s Scan- dinavian activities. We are very proud that we managed to strongly develop the existing busi- ness and significantly improve Tryg’s strategic position by closing a very important acquisition. The Supervisory Board and the Executive Board would like to thank all employees for their great efforts in Denmark, Sweden and Norway. JUKKA PERTOLA Chairman Focus on shareholder remuneration Tryg expects to return a total DKK 17-19bn to its owners between 2022 and 2024, split between DKK 12-14bn in ordinary dividends and the MORTEN HÜBBE Group CEO 10 Annual report 2022 | Tryg A/S | Events in 2022 Management’s review - Contents Group Tryg is united On 1 April, the demerger of Trygg-Hansa and Codan Norway from Codan Denmark became a reality. From Sale of Codan Denmark and launch of share buyback programme In April, Tryg announced that the Supervisory Board had international standards for environmental management systems. This will be an important element in Tryg’s continued work to integrate sustainability initiatives that day, Trygg-Hansa and Codan Norway were legally decided to initiate a share buyback programme of DKK across the organisation. part of the Tryg group – which also means that the Tryg 5.0bn following approval by the Danish Competition group has become Scandinavia’s largest non-life insurer. and Consumer Authority for the sale of Codan Denmark Following the demerger, the group has full access to to Alm. Brand. The launch of the share buyback pro- data and customers, and the integration of the new gramme was an important milestone in the acquisition Swedish and Norwegian businesses is still progressing. of RSA Scandinavia. New maternity/paternity leave rules in Tryg Den- mark ensure equal rights for all parents Tryg aims to be an inclusive workplace with equal op- portunities for all employees. From autumn 2022, Tryg Denmark has introduced equal rights maternity/paterni- The group continues to focus on collaboration, knowl- edge sharing and creating a new, united culture – with all these endeavours made possible thanks to the great ESG certifications Many important steps were taken in 2022 with regards ty leave for all parents. Mothers, fathers and co-parents have equal status and the right to leave with full pay for Denmark commitment of employees across the Tryg group. to continuously promoting strong ESG practices across up to 25 weeks, regardless gender or family constella- the organisation. Tryg received both an ISO 14001 certi- tion. Thanks to legislation, equal parental conditions fication and an EU Eco Management and Audit Scheme already exist in Tryg’s Norwegian and Swedish branches, (EMAS) - the first insurance company in the Nordics so the focus has been on introducing the same condi- to do so. The certificates are the two most recognised tions in Tryg Denmark. Launch of pregnancy insurance In December, Tryg Denmark launched its new preg- Hence, pregnancy insurance is also one of many good examples of how the acquisition strengthens Tryg's nancy insurance, which covers from week 21 of the overall business. pregnancy up to six months after birth. The insurance provides help, guidance and compensation in a number of different and difficult situations as well as additional Fire in Vanløse On 25 March, a devastating fire started in an apartment comfort during the pregnancy. The insurance offers building in Vanløse, one of 10 districts in Copenhagen. access to online consultations with midwifes in collab- It was described as the largest fire in recent times and oration with gravid.dk, an online forum for pregnant women, and psychological crisis counselling if needed. Tryg’s pregnancy insurance is the first of its kind in Den- mark, whereas in Sweden more than 85% of all parents have already chosen to have pregnancy insurance - Trygg-Hansa is the market leader with a similar product. around 90 families lost their homes. Approximately, half of the 90 families were insured at Tryg. Immediately after Tryg received the news that multiple customers were affected by the fire, several employees went to the location and assisted with help and guidance about emergency housing, etc. TryghedsGruppen’s member bonus For the seventh consecutive year, TryghedsGruppen, Tryg’s largest shareholder, paid out a member bonus in 2022 - of DKK 1.2bn, equivalent to 8% of premiums paid for 2021. The bonus was paid to Tryg customers in Denmark, amounting to every fourth Dane. 11 Annual report 2022 | Tryg A/S | Events in 2022 Management’s review - Contents Norway Anniversary of the lifebuoy This year, the lifebuoy had its 70th anniversary in Nor- Integrating the acquired Norwegian business At the end of 2022, Codan's Norwegian organisation Increased use of used car parts Tryg has become the largest operator in used car parts way. The red and white buoy is inextricably linked to was fully integrated into Tryg Norway and the merged within a short space of time, with more than one in ten Tryg and has become a symbolic representation of the organisation now has almost 1,600 employees. The fo- car repairs now made with reused parts. Tryg has en- company's social responsibility since 1952. In Norway, cus of the integration has been on creating a new organ- tered framework agreements with the industry's leading more than a thousand human lives have been saved isation and migrating Codan's customers and products car dismantling companies to ensure consistent and with the help of the buoy over the years. over to Tryg's systems. extensive access to parts. Customer centre award Tryg Norway's Contact Centre won the Customer Centre Award for 2022 - the result of systematic and focused work. Tryg believes the key to this award is tar- geted and dedicated effort with respect to the customer experience. Sweden A historical merger In Sweden, the year has been marked by the merger of market. Online sales are growing very comfortably, focus continues, as employees are gathered together in thanks to the leading position in online marketing and Malmö as well as at other locations where Trygg-Hansa Trygg-Hansa and Moderna Försäkringar. The process data driven sales. In addition, Trygg-Hansa continues has a presence in offices in Sweden. of merging the two branches under the brand Trygg- to invest in digital solutions to support interactions Hansa kicked off on 1 April. Since then, the intense with customers, underpinning the ambition to reduce work has focused on creating a new organisation and ordinary mail correspondence and thus the ambition Strong new partnerships in the motor segment In the beginning of 2022, Trygg-Hansa launched a new migrating products, IT systems and customers. In to reduce the total carbon footprint of the group. partnership with BMW. Despite being in a declining September, an important milestone was reached by launching pet insurance under the Trygg-Hansa brand for the first time - a direct result of the merger. Growing business thanks to digitalisation The intense work with merging the branches has already produced concrete results, and Trygg-Hansa continues to gain market share. By the end of Q3, Trygg-Hansa was the fastest growing insurance com- Looking ahead to 2023 During the first quarter of 2023, one of the main high- lights of the year will occur when Trygg-Hansa receives the keys to the new office in Hyllie, just outside Malmö. 1,200 employees will be moving into the brand-new office in spring 2023. Being able to gather all employ- ees in Malmö under one roof is of the highest priority in the endeavour to be an attractive employer. The market due to the global supply issues, Trygg-Hansa saw some solid trends in the motor segment and new partner BMW contributed significantly to growth. Trygg- Hansa also saw strong sales from the existing partner- ship with Tesla cars, which were up more than 70% in 2022 compared to 2021. Trygg-Hansa has a strong focus on this area and expects to enter more partner agreements with car dealers going forward to support the the position in the market for electric cars. pany in Sweden, maintaining its strong position in the work to create an inclusive culture with employees in 12 Annual report 2022 | Tryg A/S | Financial outlook Global geopolitical tensions have been very high in 2022 due the Russian invasion of Ukraine and ongoing uncertainty in various parts of the world. The macroeconomic picture has deteriorated rapidly, with inflationary pressures at all-time high in the last 40 years and rapidly rising interest rates increasing the likelihood of a difficult 2023. The Scandinavian economies continue to do relatively well against this highly challenging backdrop. Global geopolitical tensions have been at their highest levels for many years in 2022 following a number of events: the COVID-19 pandemic during the winter, Russia's invasion of Ukraine in February, US/China tensions on the future of Taiwan and various other pockets of crisis in many parts of the world. 2022 will also be remembered as the year marking the return of inflation to levels not seen in the last forty years. The Russian invasion of Ukraine exacerbated an already complicated situation where the global economy was reeling from COVID-19 lockdowns and related supply chain issues. Inflation levels started moving upwards already in the first part of 2022 and ended the year at close to 10% in many developed countries. The financial markets have followed the developments closely and experienced a degree of turmoil and volatil- ity. Most asset classes developed negatively (es- pecially equities and corporate bonds) as infla- tionary pressures began to materialise in various parts of the economy. Equity markets dropped substantially in the first nine months of the year, only to partly recover in the last three months of 2022. Equity valuations were primarily hit by higher risk-free rates, with cyclical stocks and business models that discounted a long period before profitability, being the worst hit. The Scandinavian countries continue to perform relatively well compared to most European countries. A high level of trust in public author- ities, solid overall public finances and relatively low unemployment rates are strong competitive advantages, especially in troubled times. Government indebtedness across Scandinavia remain low compared to larger European coun- tries, and this has allowed for various schemes to support consumers and businesses against the sudden spike in inflation. Scandinavian non-life insurance markets remain relatively stable. The region is characterised by relatively high product penetration, and ratios of non-life insurance premiums as a percentage of GDP are some of the highest in the world. Prod- uct offerings are broader and also significantly Management’s review - Contents more diverse compared to larger European countries. Motor and property insurance make up around two thirds of total premium income, but accident and health and other products are also very well developed. Households usually cover their insurance needs comparatively well and there is generally a high level of trust in in- surance companies and high brand recognition. Retention levels are very high in Scandinavia compared to nearly everywhere else in the world. This is a key profitability driver, as it helps insurers keep their overall expenses low. Reten- tion rates hover around 90% in the Private and Commercial (SMEs) segments, which together represent close to 90% of Tryg’s total business. A direct distribution model also contributes significantly to the very efficient setup. At the end of 2022, Tryg reported an expense ratio of 14.1 (same as in 2021). Tryg’s reserves position remains strong. Run-off gains are expected to be between 3% and 5% in 2024. Tryg’s systematic claims reserving approach still includes a margin of approximately 3% at best estimate. In 2023, weather claims net of reinsurance and large claims are expected to total DKK 800m and DKK 800m, respectively, for the enlarged group including Codan Norway and Trygg- Hansa, i.e. unchanged from 2022. 13 Annual report 2022 | Tryg A/S | The investment portfolio is divided into a match portfolio, which corresponds to the technical provisions, and a free portfolio. The objective is for the return on the match portfolio to be approximately zero, as capital gains and losses on the asset side should be mirrored by corresponding developments on the liability side. The free portfolio consists of a diversified asset allocation with a view to obtaining the best risk-adjusted return. The return on bonds in the free portfolio (approximately 55% of the free portfolio) will vary, and be higher for the corporate bonds' portfolio versus the covered bonds portfolio considering the different dura- tions and credit risk. For equities, the estimated return is around 6%, with the MSCI World Index as a benchmark, while the normalised expected return on properties is expected to be around 5%. Investment return in the P&L also includes the cost of managing investments, the cost of currency hedges, interest expenses on subordi- nated loans and other minor items. Tryg hosted a Capital Markets Day in London in November 2021 to launch the 2024 strategy and updated financial targets for the new combined group that includes Codan Norway and Trygg- Hansa. Tryg is targeting a technical result in 2024 of between DKK 7.0 and 7.4bn driven by a com- bined ratio at or below 82 and an expense ratio of around 14. The overall technical result target is underpinned by DKK 900m in synergies from the Codan Norway and Trygg-Hansa acquisition. Tryg also introduced a new profitability measure, return on own funds (ROOF), which is targeted at or above 25%, also in 2024. Financial targets 2024 7.0-7.4bn Technical result (DKK) ≤82% Combined ratio 14% Expense ratio (reaffirmed) ≥25% Return on own funds Customer targets ≥40% Digitalisation (% growth in value -creating actions upon login) 88 Customer satisfaction 20-25,000 Sustainability & ESG (tonnes CO2e reduction) Management’s review - Contents IFRS 17 comment In April 2022, Tryg published a newsletter on the introduction of IFRS 17, a new accounting stand- ard for the insurance sector that will go live from 1 January 2023 with the first interim report to be released shortly after the end of Q1 2023. The goals of IFRS 17 are to ensure accounting con- sistency across all insurance contracts, increase comparability between insurance companies and drive more detailed disclosure. Due to Tryg’s business being relatively short-tailed along with the current accounting policy practices already in force in Denmark (e.g. mark-to-market account- ing for all assets and liabilities). The introduc- tion of IFRS 17 will primarily mean a change in terminology and only have a minor impact on financial statements overall. Key items such as the net profit and shareholder equity will remain virtually unchanged, while the technical result will see only a modest positive impact. Tryg aims to publish 12 quarters (Q1 2020 to Q4 2022) of re-stated numbers under IFRS 17 towards the end of March 2023 to ensure comparability. It is very important to remember that the acquisition of RSA Scandinavia has impacted Tryg's accounts heavily from Q2 2021, therefore comparability will be affected. The IFRS 17 newsletter is public- ly available on Tryg.com and can be found here. Tryg has targeted synergies from the acquisition of Codan Norway and Trygg-Hansa of DKK 350m in 2022 growing to DKK 650m in 2023 and DKK 900m in 2024. Interest rates are approximately 200 basis points higher compared to the CMD date, this has a clear positive effect on Tryg earnings, at the same time currencies (SEK and NOK) have moved unfavorably and reinsurance prices have also increased. Tryg is maintaining all financial targets for 2024 including the technical result target between DKK 7.0-7.4bn and the combined ratio target at or below 82. During 2023 Tryg continues to expect a positive top line growth primarily driven by the Private and Commercial segment, although some neg- ative impact is expected from the conversion of customers from Codan Norway to Tryg Norway and to a less extent from Moderna to Trygg- Hansa, this will have no financial impact. At the time of writing this annual report it is expected that the remaining DKK 300m (approxi- mately) of integration costs related to the Codan Norway and Trygg-Hansa acquisition will be booked in H1 2023 against the other income and costs line (as in 2022). The overall tax rate for the FY is expected to be approximately 23%, as the full consolidation of Trygg-Hansa's Swedish earnings will reduce the tax rate considering the lower corporate tax rate in Sweden, whereas a new financial tax (so called “Arne skat”) in Denmark will tend to increase the corporate tax rate. 14 Annual report 2022 | Tryg A/S | Targets and strategy 2024 Tryg hosted a Capital Markets Day on 16 November 2021 unveiling 2024 financial and strategic targets. Financial targets Tryg hosted a Capital Markets Day in Novem- ber 2021 where the 2024 financial targets were published. Tryg targets a technical result of between DKK 7.0 and 7.4bn driven by a combined ratio at or below 82. The expense ratio is expected to remain stable at around 14 as in the previous strategy period. In addition to the three financial targets, Tryg also introduced a new profitability target, return on own funds (ROOF), which is set at or above 25% by 2024. All financial targets are underpinned by the DKK 900m in synergies related to the acquisition of Codan Norway and Trygg-Hansa. Customer targets Tryg believes that high customer satisfaction and retention rates lead to lower distribution costs. Customer satisfaction targets are therefore of high importance for realising the financial targets. Tryg has disclosed two ambitious targets relating to the customer experience. The first target builds on the customer journey, from onboarding the customer to the claims handling and relation processes. In 2022, Tryg reported a customer journey satisfaction score of 85 (on a scale from 0-100) and the target is to reach 88 by 2024. * Calculated excluding Tryg's own shares Processes Combination of in- house and sourcing Employe e s * ’Tryg’ means feeling protected and cared for Management’s review - Contents Our purpose As the world changes, we make it easier to be tryg* Grasping opportunities to develop rather than just defending our business • Digitalisation • New products • Analytics Adjusting to customer preferences and needs • Self-service • Straight-through processing • Packaging of products Increasing customer relevance and share of wallet • Product innovation • Prevention • Add-on services s E m ployees Distribution Own sales force and partners e e y o p m l E g n i c i r P i g n d r o c c a g n c i r P i l e fi o r p k s i r o t Insurance Prevention Claims handling p r o d u c t r a n g e F u l l n o n - l i f e P r o d u c t s Tryg’s business model Tryg makes it easier to be ‘tryg’ for its customers by offering them insurance against risk, efficient claims handling, and advice and services to prevent claims from arising in the first place. By making it easier for our customers to feel protected and cared for, we all benefit of Tryg’s stakeholders. Via TryghedsGruppen’s 46.5%* ownership of Tryg, part of the company’s profit is returned to customers, who are also members of TryghedsGrup- pen. Tryg’s purpose is valid for all stakeholders – our cus- tomers, our employees and our shareholders. E l m p o y e e s 15 Annual report 2022 | Tryg A/S | Secondly, Tryg has set a target to grow ‘val- ue-creating actions’ upon logging in online. To illustrate this, if a customer logs in to Tryg.dk to report a claim, buy insurance, self-service or similar, the customer creates value in a very low- cost frictionless manner. Tryg aims to increase these low-cost value-creating actions by 40% by 2024 (vs ~DKK 14m in 2020). In 2022, Tryg increased the level of value creating actions by 35% by, for example, using “My page” for all communication instead of emails and also due to customers preferring to use self-service to a greater degree. Tryg is also introducing a new target related to sustainability. By 2024, Tryg aims to reduce carbon emissions by 20,000-25,000 tonnes in claims handling, equivalent to approximately 1,000 annual household emissions. Sustain- able claims handling with initiatives within motor, property and content claims, etc. are expected to be the main driver for reaching the sustainability target. In 2022, Tryg reduced its carbon emissions by 15,449 tonnes through the above-mentioned initiatives. Read more about Tryg’s latest sustainability initiatives on page 37. Management’s review - Contents Tryg 2024 1 2 3 4 Full speed ahead in a successful core Change the way to win in B2B Shape the future DKK ~1,050m increase in TR DKK ~600m increase in TR DKK ~1.5bn premi- ums in 2024+ across product types Trygg-Hansa and Codan NO synergies DKK ~900m in synergies Advanced approach to claims Grow among smaller SMEs in Commercial Expand the market of today Leverage scale to realise cost synergies Sales and customer excellence Improve profitability in Corporate Build the market of tomorrow Share best practices to realise commercial synergies Customer experience Sustainability & ESG Key enablers Data and analytics IT capabilities HR - people, organisation and culture 16 Annual report 2022 | Tryg A/S | Strategic initiatives Tryg has defined four key strategic pillars to support both its financial and customer targets for 2024. Full speed ahead in a successful core This strategic pillar aims to increase the techni- cal result by DKK 1,050m by 2024 through the continued improvement of Tryg’s core business. DKK 650m will relate to a more advanced approach to claims, such as the claims handling process, procurement savings and a focus on reducing the level of fraud. In 2022, this initiative had a very large impact on mitigating the high level of claims inflation. DKK 400m will be reached through sales and customer excellence, including partnerships as lead generators, cross and upselling as well as pricing and analytics. An example of this was in 2022, where Private Denmark introducing new car packages that meet customers’ individual needs better and Tryg’s claims departments increasing their focus on car repair to reduce plastic waste, for exam- ple by repairing headlights instead of replacing them. These initiatives and others helped sup- port the strong growth in Tryg's Private business. Change the way to win in B2B* This strategic pillar aims to increase the techni- cal result by DKK ~600m in 2024. Small custom- ers make up the most profitable segment, and a segment where Tryg can offer good advice. Tryg therefore aims to grow its Commercial business while making Corporate more profitable. This involves a 30% portfolio increase in the SME segment (0-9 employees) and aiming for a ~90% combined ratio with run-off levels around 5-7% in the Corporate segment. An increased focus on more accurate underwriting, better segmen- tation to reduce risk exposure, improved sales and distribution, and new products and services will support the target of reaching DKK ~600m by 2024. These initiatives strongly supported continued growth in the groups underlying claims ratio both via profitability in the Corpo- rate business and a higher share of customers in the SME segment. In 2022, a new partnership with Valified was announced. Valified helps Tryg’s commercial customers meet increasing demands for sus- tainability and provides them with insights into their performance across selected ESG areas. In Norway, a new partnership between Tryg and ABAX (a large tracking and telematics company) was launched, allowing Tryg to create data-driv- en insurance solutions based on the customers’ driving behaviour. Shape the future This strategic pillar aims to grow premiums by DKK 1,500m via new products and services by 2024+. This initiative builds on Tryg’s continued focus on launching new and profitable products. Expanding the market of today and building the market of tomorrow will support realising the target. Both the Private and Commercial busi- nesses have developed strongly in this area. Tryg generally has seen strong development in the * Commercial customers are defined as enterprises with less than 100 FTEs and/or DKK 100m in turnover. Corporate customers are defined as enterprises with more than 100 FTEs and/or DKK 100m in turnover health area for both Private and Commercial. In 2022, Tryg launched a new cyber insurance product that includes cyber prevention tools which the customer can install on their devices to reduce risks, while in Norway a new innova- tive partnership with DyreID provides access to 600,000 customers. Tryg does not see any value in defining a specific growth target, as profitability remains the key focus. Trygg-Hansa and Codan Norway synergies This strategic pillar aims to strengthen the technical result by DKK 900m through synergies from the acquisition of Trygg-Hansa and Codan Norway. In 2022, DKK 406m was reached against a target of DKK 350m, driven by accel- erated synergies delivery in the initial phase. Synergies have mainly been achieved through a reduced marketing spend and administration initiatives, though lower claims costs through capitalising on Tryg’s strong procurement power as well as reduced RSA group charges have helped. Synergies of DKK 250m relating to ad- ministration and distribution were achieved for 2022, driven primarily by FTE reductions. DKK 61m was linked to commercial initiatives, DKK 55m from procurement and, finally, DKK 40m was related to claims costs. Management’s review - Contents 17 Annual report 2022 | Tryg A/S | Business initiatives 2022 marked the beginning of Tryg’s new strategy period, which included the acquisition of Trygg-Hansa and Codan Norway. Tryg has set new and ambitious targets for 2024 under the headline “Growing a successful core while shap- ing the future”. Tryg will continue growing its successful Private and SME segment by building on the foundations for customer and sales ex- cellence while initiating structural changes in the Corporate segment. Specifically, in 2022, Tryg had an enhanced focus on the B2B segment, and initiatives were implemented to continue growth in the SME segment while increasing profitability in the Corporate business. Private In Private, Tryg continues to build on its strong foundation of innovative capabilities to deliver excellent customer experiences and new propo- sitions to meet customer expectations as well as support profitability. In Denmark, Private established a new part- ner-ship agreement with Velliv, the third largest pension company in Denmark. The partnership entails Velliv continuing to distribute Tryg’s pension product, Tryg Pension. Private Den- mark also launched a new car insurance to further meet customer needs and trends. The product aims to be even more intuitive, easier to understand and tailored to the individual customer and the demands deriving from new technologies within mobility. Subsequently, Private Denmark added a new pregnancy prod- uct, aiming to assist the women throughout the pregnancy period. The product was inspired by Trygg-Hansa, leveraging knowledge sharing and synergy. Additionally, as part of the ESG agenda, Tryg will plant a tree for every new electric car insured, thus helping give back to the environ- ment. In Norway, Private established a new partner- ship with DyreID (‘Pet ID’). More than 90% of all cats and dogs in the country are earmarked via DyreID, but less than a 25% of the pets are insured. With the new partnership, Tryg will start offering insurance to pets earmarked via DyreID. Additionally, Private Norway renewed its part- nership with OBOS, one of the largest housing construction companies in Scandinavia. The renewed partnership is focused on providing insurance to OBOS as well as adding on the new dimension regarding improved safety along the Norwegian coastline, which is a great addition to Tryg’s 70-year history of providing lifebuoys. In Sweden, Trygg-Hansa added a new product, pet insurance. The product is similar to ones already offered by Tryg, thus a good example of leveraging knowledge sharing and synergy. Also, early this year Trygg-Hansa added a new service to its already existing product Family Help. The new service is “Familjehjäljpen Gravid”, which is offered to pregnant women, their partners and new parents. Additionally, Trygg-Hansa renewed several of its partnerships, including Akader- mikerförsäkring, an organisation for lawyers and economists; Finansförbundet, the largest organisation for employees in the insurance and banking industries; and its partnership with BMW. Business-to-business (B2B) At Tryg, a key priority has been to grow the attractive and profitable SME segment while Management’s review - Contents 18 Annual report 2022 | Tryg A/S | finding the right balance between risk and price among large Corporate customers. One way of supporting growth in the small business seg- ment is through tailoring products to accurately cover the needs of the smaller companies in the Commercial segment. An example of this is the new packaged product tailored towards craftsmen called ‘Håndværkerpakken’. This was launched in Denmark during the autumn of 2022 and seeks to reduce complexity by bundling the most relevant insurance products for the business. The product is an important initiative to increase the portfolio of SMEs (0-9 FTEs) by 30% in 2024. So far, the product has been very well received. In Trygg-Hansa, a service called ‘Din Företags- jurist’ ('Your Commercial Lawyer') was launched in collaboration with HELP Försäkring. It is a legal advice service tailored to SMEs with a turnover below SEK 50m. In Corporate, the focus has been on profitability. To strengthen the work around profitability, the tools and capabilities used when matching price with risk have been enhanced. In practice, this means that more data are included and utilised in the decision process. An example of this is a new initiative in Commer- cial Norway where Tryg's partner ABAX instals a device in customers’ vehicles and can therefore generate data based on their actual driving be- haviour and thus estimate risks more accurately than would be possible based on of their claims history. The upside for the customer is attractive pricing if their driving behaviour is considered safe or sustainable, as this leads to lower fuel consumption, fewer claims and fewer repairs. Claims In the Danish and Norwegian claims organisa- tions, the implementation of a new and more effective claims handling system (Guidewire) continued in 2022. The new claims handling system boosts the quality of the claims handling process by ensuring that all the correct informa- tion is collected and that the claim is handled as soon as possible, either physically or by ways of payment to the customer. Simple claims types, such as travel claims, are handled as “Straight Through Processing”, which is a fully automated claim handling. Other, more complex claims types are automated to the extent that is pos- sible. By the end of 2022, approximately 52% of all claims in Denmark were being handled in the new claim system, with Tryg incorporating major products such as health, content leisure house and pets during the year. In Norway, 68% of all claims are handled through Guidewire with the following products included in 2022; health, liability, content, road assistance and boat insurance. Sustainability & ESG In 2021, Tryg launched its Corporate Respon- sibility strategy: “Driving sustainable impact” and the work on the strategy continued in 2022. In addition to strengthening the anchoring of strong ESG practices across the organisation, the strategy also aims to support customers in the green transition by increasingly offering sustainable insurance products and sustainable claims handling. Tryg has included the activities of Trygg-Hansa and Codan Norway in its sus- tainability targets, and hence increased its level of ambition with regard to sustainable claims handling. Tryg has raised its target for increasing the claims spend classified as sustainable by 80% in 2024 compared to 2020. The target is an important lever for achieving its target of a total reduction in CO2 emissions of 20,000- 25,000 tonnes through more sustainable claims handling in 2024. Tryg wants to offer products and services that can help move society in a more climate-friendly and socially responsible direction. During this process, Tryg wants to ensure that solutions are aligned with the business model and strategy, resonate with the customers, and are aligned with the EU Taxonomy for sustainable activities. One example of a sustainable service that Tryg has started to offer its Danish customers is Valified. This can provide Tryg’s business partners with insights into their performance across selected ESG (Environmental, Social and Governance) areas. Such insights are becoming key for SMEs because their customers demand ESG transparency. For smaller enterprises, ESG reporting can be a resource-intensive and com- plex task. With Valified, Tryg is able to support its customers in their ambitions and help them better understand and work with their carbon footprint. In 2022, Tryg launched a ‘smart repair’ initiative whereby Tryg cooperates with car repair shops to reduce plastic waste by repairing headlights instead of replacing them. Every year, Tryg and Alka pay for having approximately 10,000 head- lights replaced. An increased focus on repairing headlights when they are damaged instead of replacing them results in both savings as well as reduced waste and CO2 emissions. To ensure the repair is attractive to suppliers, Tryg offers an incentive payment to suppliers for repairs instead of replacement and also helps train Management’s review - Contents personnel. Tryg’s target is to repair at least 2,000 headlights a year by 2024. Employee satisfaction In its annual employee survey, Tryg once again saw that the employee satisfaction was much higher than among peer groups. There was a slight drop in employee satisfaction at Tryg to 79 for 2022 compared to 80 in 2021. This was expected in a year with structural changes relat- ed to the integration of Trygg-Hansa and Codan Norway in Sweden and Norway. Employee satisfaction (Index) 80 79 73 73 75 75 Tryg Nordic Nordic financial market 2021 2022 Tryg has an employee satisfaction level above the average of the Nordic sector. Source: Global Employee and Leadership Index 19 Annual report 2022 | Tryg A/S | Tryg’s results Tryg reported a technical result of DKK 6,177m (DKK 3,709m) in 2022 (Codan Norway and Trygg-Hansa fully consolidated for nine months starting in Q2) impacted by a solid premium growth of 5.9%, the inclusion of RSA Scandinavia and related synergies and significantly higher interest rates. The combined ratio was 82.2 (84.5), driven by a generally improved underlying performance and tight cost controls. Investment result of DKK -1,193m (DKK 870m) primarily impacted by very challenging capital markets conditions with equities producing negative returns and increasing interest rates hitting also fixed- income returns. The overall pre-tax profit was DKK 3,051m (DKK 3,956m), with the fall entirely driven by the negative investment result and planned integration costs related to the Codan Norway and Trygg- Hansa acquisition. Tryg is paying a dividend for the full year of 6.29 per share, a 46% increase compared to 2021, driven by the consolidation of the new businesses and an initial delivery of the synergies. The solvency ratio was 201 at year-end, hence showing resilience in challenging times and supportive of the dividend outlook. Results 2022 Tryg reported a pro-forma group premium growth of 5.9% when measured on a comparable basis that includes Codan Norway and Trygg- Hansa in 2021. The top-line development was predominantly driven by a good growth in the Private and Commercial segments. The Private segment reported a robust growth of 6.3% (4.9% excluding bonuses and premium rebates), whilst the Commercial segment also reported positive top-line growth of 5.1%. Corporate reported a growth of 5.4%, positively impacted by a transfer from the Commercial business area (adjusted for this, growth was approximately -1%). Tryg reported a technical result of DKK 6,177m (DKK 3,709m) that was predominantly impacted by the consolidation (for nine months) of Codan Norway and Trygg-Hansa, but also positively impacted by the underlying claims development, the ongoing delivery of RSA Scandinavia synergies and the increasing interest rates used to discount liabilities, hence leading to a lower level of claims paid, all else being equal. The high technical result was achieved despite a significant drop in the Swedish and Norwegian currencies. Tryg reported a combined ratio of 82.2 (84.5), driven by a claims ratio of 68.2 (70.5) and an expense ratio of 14.1 (14.1). The reported technical result improved significantly for Private and Commercial predomi- nantly due to the acquisition of RSA Scandinavia. The improvement in the technical result was also supported by organic growth in both Private and Commercial, whilst Corporate improved primarily driven by pricing initiatives and Tryg’s rebalanc- ing strategy with lower levels of international high-risk exposure. The group’s underlying claims ratio (adjusted from the reported claims ratio for all volatile items such as weather claims, large claims, run-offs, discount rate and COVID-19 claims) continued to improve, primarily driven by profitability initiatives in Corporate and Commer- cial offsetting a small deterioration in the Private segment against pro-forma figures. Synergies from the RSA Scandinavia transaction amounted to DKK 406m in 2022 and therefore exceeded the targeted DKK 350m. The DKK 406m of synergies can be split into DKK 250m Management’s review - Contents Financial highlights 2022 6,177m Technical result (DKK) 2021: 3,709m 3,051m Profit before tax 2021: 3,956m 68.2 Claims ratio, net of reinsurance 2021: 70.5 14.1 Gross expense ratio 2021: 14.1 82.2 Combined ratio 2021: 84.5 20 Annual report 2022 | Tryg A/S | Full-year technical result comparison Split by business (DKKm) +15% 627 6,804 2,182 5,891 6,177 3,709 Technical Result 2021 RSA Scandinavia 2021 Pro-forma 2021 Technical Result 2022 RSA Scandinavia 2022 Pro-forma 2022 Pro-forma figures New business (cid:22) 9 months Equity accounting +83% from administration and distribution, DKK 61m from Commercial synergies, DKK 55m from procurement synergies and DKK 40m from claims synergies. The investment result was DKK -1,193m (DKK 870m) including income from RSA Scandinavia of DKK 34m (primarily driven by the equity accounting for Q1 2022 and net effect from demerger and sale of Codan DK in Q2 2022). Financial markets developed negatively in 2022 driven primarily by falling equity markets during the first nine months of the year and higher interest rates during the same period following sharply increased inflation levels. Some of these trends reversed partly in the last quarter of 2022. Tryg continues to pursue a relatively low-risk investment strategy with limited equity expo- sure and a conservative fixed-income profile (more than 90% of fixed-income securities are Nordic covered bonds). Furthermore, it is worth remembering that Tryg marks to market both assets and liabilities (in accordance with Danish Financial Supervisory Authority rules), resulting in P&L volatility in turbulent times, while other Nordic and European insurers hold large parts of their fixed-income portfolios to maturity, or book most of their asset moves to shareholders’ equity. Tryg’s asset allocation remained broadly unchanged during the period. Other income and costs totalled DKK -1,933m (DKK -624m), with the large increase driven by the booking of integration costs related to the RSA Scandinavia acquisition totalling DKK 949m as well as intangibles amortisation related to the acquistion totalling DKK 651m for the nine months between Q2 and Q4. Other income and costs also include the annual depreciation of customer relations and brands related to the Management’s review - Contents Alka acquisition of DKK 127m, holding company costs and number of smaller items. The pre-tax result was DKK 3,051m (DKK 3,956m), while the net profit was DKK 2,247m (DKK 3,161m). The fall in the pre-tax result is en- tirely attributable to the poorer investment result in 2022 and the planned booking of integration costs related to the RSA Scandinavia acquisition. In 2022, Tryg customers in Denmark received their seventh member bonus from Trygheds- Gruppen (Tryg’s largest shareholder). The 8% bonus is appreciated by customers and seen as an important competitive advantage, boosting cus- tomer loyalty and supporting customer targets. Premiums Tryg reported a premium income of DKK 33,938m, equivalent to pro-forma 5.9% growth in local currencies. Premium growth was 5.3% after adjusting for bonuses and premium re- bates. The Private segment reported pro-forma growth of 6.3% (4.9% when adjusted for bo- nuses and premium rebates). Private Denmark maintains a high level of organic growth and was positively impacted by a lower level of bonuses and premium rebates compared to 2021. Addi- tionally, the development was positively impact- ed by strong growth driven by partner agree- ments, cross-selling to existing customers and price adjustments to mitigate inflation. Private Norway reported an increased growth due to strong sales to partner agreements and further price adjusting initiatives to mitigate inflation. Private Sweden experienced improved growth compared to recent years, driven by higher sales across all channels and improvements in partner agreements. Growth was more pronounced in the motor segment even in a year when sales of new cars were challenged. Retention in all 21 Annual report 2022 | Tryg A/S | markets remains high but deteriorated slightly towards year-end due to a modestly higher churn for single product customers in some partner agreements. The Commercial segment reported a growth of 5.1%. Commercial Denmark had a high level of growth and was impacted by both organic growth and price adjustments to mitigate infla- tion and improve profitability. Growth was also supported by a net inflow of customers. Reten- tion in all markets remains high but deteriorated slightly at year-end as a result of customers re- acting to price adjustments. Commercial Norway reported a decrease of 13.1% and was affected by a transfer of business from Codan Norway to Corporate Norway. Adjusted for the transfer, Commercial Norway grew by approximately 3%. The growth was predominantly affected by price adjustment to improve profitability and mitigate inflation. Trygg-Hansa’s Commercial segment delivered a strong growth compared to previous years, supported by a net inflow of customers, strong retention and pricing adjustments to miti- gate inflation and improve profitability. The Corporate segment, reported a growth of 5.4% including the transfer of the Codan Norway portfolio to the Corporate segment. Ad- justed for the transfer, the segment experienced negative top-line development of approximately 1%, which is in line with Tryg’s key priority to improve profitability in the Corporate segment. The Corporate segment continues to work on sustainable profitability initiatives, and rebalancing the portfolio by, for example, lowering the level of international high-risk exposure. Claims The claims ratio, net of ceded business, was 68.2. In general, the group underlying profitability improved, supported by profitability initiatives in Commercial and Corporate. At the same time, travel insurance claims in the Private segment increased throughout the year as travel activity picked up and many households displayed a changed travel pattern, with fewer but more expensive trips as opposed to more activity during the year. In 2022, inflation headlines were all over, this was particularly evident in building materials and motor spare parts. Tryg is relatively shielded by robust procurement agreements and continuous- ly monitors inflation and adjusts prices accord- ingly to mitigate increased claims costs. The development in inflation was primarily evident in the Private segment and affected the underlying profitability. Price adjustments in all segments and claims containment measures will offset the current pressure on the Private segment and continue to help improve the underlying claims ratio for the group. For FY 2022, large claims totalled DKK 1,142m (3.4%), weather claims totalled DKK 591m (1.7%) while the run-off result was DKK 1,380m (-4.1%). Tryg had a high level of large claims in both the Commercial and Corporate businesses. Tryg was also impacted by weather claims, especially in Private, particularly in Denmark and Norway. Nor- way experienced very bad weather in December which resulted in a high number of claims. The higher level of interest rates had a positive impact on the result, as Tryg discounted its liabilities (claims reserves) with a higher interest rate there- fore reducing claims costs (all else being equal). Expenses The expense ratio was 14.1 (14.1). At the latest CMD in November 2021, Tryg reiterated an expense ratio target of around 14, also in 2024. Management’s review - Contents Tryg has been working to generally reduce dis- tribution costs whilst some of the savings from these initiatives are being invested in new digital solutions. The expense ratio is also positively impacted by the strong growth, especially in the Private segment in recent years. The strong top-line development helps the expense ratio as there are significant economies of scale considering that the backend staff and shared service units are not particularly significantly impacted by the higher revenue level therefore supporting the low expense ratio level. The RSA Scandinavia related synergies also support the expense focus. As communicated, Tryg invests cost synergies to develop the business across the group. Investment activities The investment return for the full year totalled DKK -1,193m (DKK 870m). The investment return includes the income from RSA Scandina- via of DKK 34m (primarily driven by the equity accounting for Q1 2022 and the net effect of the demerger and sale of Codan DK in Q2 2022). Tryg's investment return was DKK -1,227m following a highly challenging year for financial markets. Leading equity indexes experienced a steep falls as valuations adjusted to the higher level of interest rates. Fixed-income returns were also very poor, with higher interest rates hitting bond portfolios. Tryg’s property portfolio pro- duced good returns in the first part of the year while being under pressure in the second half. In general, high geopolitical tensions, the return of 22 Annual report 2022 | Tryg A/S | virtually double digit inflation in most advanced economies and a challenging macroeconomic outlook were the backdrop to very difficult market conditions. Other income and costs Other income and costs totalled DKK -1,933m (DKK -624m). This line includes the integration costs related to RSA of DKK 949m for the full- year. Additionally, depreciation of customer rela- tions and brands related to the RSA Scandinavia and Alka acquisitions of DKK 778m is included together with holding company costs and other minor items. Profit before and after tax Profit before tax was DKK 3,051m (DKK 3,956m), while profit after tax and discontinued activi- ties was DKK 2,247m (DKK 3,158m). The drop in earnings (both pre and after tax) is entirely attributable to highly challenging capital markets developments and planned integration costs related to the acquisition of RSA Scandinavia. The total tax bill was DKK 804m (DKK 795m), equat- ing to a tax rate of approximately 26,5%, driven primarily by losses on the equity portfolio, higher interest expenses on the subordinated loans and the booking of a deferred tax of DKK 40m in Q3 due to a new financial tax being introduced in Denmark (so called “Arne skat”). Dividend and solvency Tryg will pay a Q4 dividend of 1.60 per share bringing the full-year dividend per share to 6.29, a 46% increase compared to the previous year and driven primarily by the nine months' consolida- tion of Codan Norway and Trygg-Hansa earnings and the synergies related to the acquisition. Following the sale of Codan Denmark, Tryg has initiated a DKK 5bn buyback programme (the amount has already been fully deducted from own funds). As per year-end 2022, approximately DKK 3.2bn has been bought back. The solvency ratio (based on Tryg’s partial inter- nal model) was 201 at year-end 2022 compared to 188 at year-end 2021. Own funds were DKK 16,012m and the solvency capital require- ment was DKK 7,966m. Tryg’s own funds are predominantly made up of shareholders' equity, subordinated loans and future profits, while all intangibles are duly deducted from the own funds calculation. Tryg calculates its individual solvency capital requirement based on a partial internal model in accordance with the Danish FSA’s Executive Order on Solvency and Operating Plans for In- surance Companies. The model is based on the structure of the standard model. Tryg uses an internal model to evaluate insurance risks, while other risks are calculated using standard model components. The solvency capital requirement, calculated using the partial internal model, was DKK 7,966m (DKK 9,866m at year-end 2021). The fall in the solvency capital requirement as previously explained was impacted by the sale of Codan Denmark and additionally by the steep fall in equity markets, which reduces the market risk capital charge. Tryg’s solvency ratio displays low sensitivity to capital market movements. The area with the highest level of sensitivity is spread risk, where a widening/tightening of 100 basis points would impact the solvency ratio by approximately 15 percentage points. Sensitivity to the falling equi- ty markets and interest rate movements is low. Tryg refined its dividend policy at its Capital Markets Day. The company continues to target a stable, nominal increase in dividend payments on a full-year basis, and the targeted payout ratio remains between 60% and 90% based on operating earnings (and not reported earnings). This is driven by the fact that reported earnings will be burdened by the close to DKK 700m (after tax) annual amortisation of intangible assets deriving from the Codan Norway and Trygg-Hansa acquisition. The targeted payout ratio is secondary to the aim of increasing the annual dividend. Tryg aims to pay DKK 12-14bn in ordinary dividends between 2022 and 2024 and, as previously mentioned, launched a DKK 5bn share buyback programme in May following the closing of the sale of Codan Denmark to Alm. Brand. Results Q4 2022 Tryg reported a premium growth of 6.7% (4.0% excluding the bonuses and premium rebates). The company reported a technical result of DKK 1,689m (DKK 1,380m for Q4 2021 based on pro-forma figures) driven by a good growth, improved underlying profitability (including RSA Scandinavia related synergies) and a higher discount rate of the liabilities. Weather claims were higher than Q4 2021, which reported an unusually low amount for weather claims, while Q4 2022 was closer to a normal end of the year and also characterised by some harsh weather in Scandinavia. The combined ratio was 82.1 (84.1), driven by a claims ratio of 67.8 (69.5) and an expense ratio of 14.3 (14.6). The group's un- derlying claims ratio improved by 0.8 percentage points, driven by profitability initiatives in Com- mercial and Corporate, which more than offset a modest deterioration in the Private segment driven by adverse developments in the travel insurance segment. The investment result was DKK 317m in Q4 2022, driven by a positive eq- uity market and falling interest rates significantly reversing the trend of the first nine months of Management’s review - Contents Q4 Financial highlights 2022 1,689m Technical result (DKK) Q4 2021: 1,380m 1,377m Profit before tax Q4 2021: 1,458m 67.8 Claims ratio, net of reinsurance Q4 2021: 69.5 14.3 Gross expense ratio Q4 2021: 14.6 82.1 Combined ratio Q4 2021: 84.1 23 Annual report 2022 | Tryg A/S | the year. It is important to note that the DKK 803m investment result in Q4 2021 included income of DKK 568m from RSA Scandinavia, as the new businesses were equity accounted at the time and therefore the net profit was includ- ed in Tryg’s overall investment result. The overall pre-tax result was DKK 1,377m (DKK 1,458m), while the result after tax was DKK 1,081m (DKK 1,370m). The fall is primarily driven by the difference in the reported investment result and also the planned booking of integration costs related to the RSA Scandinavia acquisition. The technical result developed positively. Premiums Tryg reported a premium growth of 6.7% in Q4 2022 (4.0% excluding bonuses and premium rebates). Growth in the Private segment was 7.4% (3.4% excluding bonuses and premium rebates) and was predominantly driven by Pri- vate Denmark. Commercial reported a premium growth of 4.1%, whilst Corporate reported a premium growth of 9.2%. Due to the transfer of the portfolio between Commercial Norway and Corporate Norway, the adjusted growth was 7.4% for Commercial and flat for the Corporate business. Claims The claims ratio, net of reinsurance was 67.8 (69.5). Weather claims were significantly higher than the corresponding period and characterised by a very low winter experience. At the same time, the run-off result was somewhat higher than the corresponding period. The underlying claims ratio improved by 0.8 percentage points for the group, driven by profitability initiatives in the Commercial and Corporate segments offsetting a modestly negative development (0.3%) in the Private segment driven primarily by higher travel insurance claims. Management’s review - Contents Expenses The reported expense ratio was 14.3 (14.6). Various initiatives aimed at lowering distribution costs are being implemented, and some of the savings from these initiatives are being invested in new digital solutions and partnerships. RSA Scandinavia related synergies have had an addi- tional positive impact and this is being used for investments especially in the Swedish business. At the Capital Markets Day in November 2021, Tryg reiterated its expense ratio target of around 14%, also for 2024. Investment activities The investment return totalled DKK 317m reversing the trend experienced in the first nine months of the year. Equities posted good returns in the last three months of 2022 and interest rates dropped, helping fixed-income returns. Properties reported a negative return, primarily driven by the higher level of interest rates in the first part of the year. Both the match and the free portfolio produced good returns in Q4. Other income and costs Other income and costs totalled DKK -629m (DKK -171m) including integration costs of Trygg-Hansa and Codan Norway of DKK 331m. The amortisation of customer relations from RSA Scandinavia of DKK 210m and Alka of DKK 32m is booked against this line together with other minor items. Taxes The total tax expense was DKK 296m (DKK 85m), resulting in a tax rate of 21.5%. The slightly lower than normal tax rate is primarily attributable to positive developments in the equity market during the quarter. 24 Annual report 2022 | Tryg A/S | Private Results 2022 Private reported a technical result of DKK 3,813m (DKK 2,496m in 2021) and a com- bined ratio of 83.0 (83.7). The higher result was pre-dominantly impacted by the inclusion of the RSA Scandinavia businesses for nine months, but was also supported by high premium growth, particularly in Denmark. The result was characterised by a modest deterioration in the underlying claims ratio primarily driven by high- er claims costs in the travel insurance segment. Premiums Gross premium income was 6.3% (4.9% ex- cluding bonuses and premium rebates) based on pro-forma figures for 2021. Private is the most profitable area and has the lowest capital requirement. Strong growth in this area is a structurally positive development for the group. In Denmark, Private maintained a high level of premium growth and was positively impacted by a lower level of bonuses and premium rebates. Additionally, the development was positively impacted by further growth driven by partner agreements, cross-selling to existing customers and price adjustments to mitigate inflation. In Norway, Private reported an increased premium growth due to strong sales via partner agree- ments and further price adjusting initiatives to mitigate inflation and despite a higher churn for transferred Codan Norway customers. In Sweden, Trygg-Hansa saw improved premium growth compared to recent years, driven by higher sales across all channels and an improve- ment in partner agreements. The lower level of new cars sales continued to have a negative impact on premium growth, particularly in Denmark and Norway, while Sweden reported positive developments as a result of new partner agreements. The retention rate for Denmark was 90.3 (90.5), slightly deteriorated at the end of the year impacted primarily by single product customers (in partner agreements) reaction to price adjustments. Retention rate for Norway was 88.7 (88.5) and thus positive in a period with significant price adjustments to mitigate inflation. Retention rate in Sweden was 87.6. Claims The claims ratio, net of ceded business, was 69.5 (70.1). Financial performance was broadly stable but characterised by higher large claims, unchanged weather claims and a slightly lower run-off result. Large claims of 0.7% were booked in the Danish business driven by a significant fire in a Copenhagen suburb. Large claims are rather unusual in the Private segment. The underlying claims ratio deteriorated slightly due to increased claims costs in travel insurance and further robust top-line growth, which initially dampens profitabil- ity. Travel insurance claims increased throughout the year as travel activity picked up significantly following two years of COVID-19. Many house- holds displayed a changed travel pattern with fewer but more expensive trips as opposed to more activity during the year. Inflation continued to increase throughout the year and Tryg is con- tinuously monitoring developments and adjusting prices accordingly. It is important to emphasise that the full impact of the price adjustments will only be visible in the P&L after 12-24 months. In the long term, the price adjustments will match claims inflation, but there may be some slightly more volatile developments in the short-term. 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 (%) a) Based on pro-forma figures. Management’s review - Contents Q4 2022 Q4 pro- forma 2021 Q4 reported 2021 5,847 -3,937 -768 1,142 -111 42 1,073 58 7.4a) 67.3 1.9 69.2 13.1 82.4 83.4 -1.0 0.3 2.1 5,622 -3,829 -724 1,069 -69 3,840 -2,628 -464 748 -64 -4 997 0 68.1 1.2 69.3 12.9 82.2 82.2 0.0 0.0 1.3 -4 681 95 9.0 68.4 1.7 70.1 12.1 82.2 84.6 -2.5 0.0 2.5 2022 2021 21,960 -14,915 -2,961 4,084 -358 15,386 -10,518 -2,087 2,781 -267 86 3,813 -18 2,496 338 372 6.3a) 67.9 1.6 69.5 13.5 83.0 84.6 -1.5 0.7 1.9 9.0 68.4 1.7 70.1 13.6 83.7 86.1 -2.4 0.1 2.2 65% The business area accounts for 65% of the group’s total premium income. Financial highlights 2022 6.3% 3,813m 13.5 Technical result (DKK) Expense ratio Premium growth (local currencies) Based on pro-forma figures 83.0 Combined ratio 2021: 2,496m 2021: 13.6 2021: 83.7 25 Annual report 2022 | Tryg A/S | Management’s review - Contents Claims The claims ratio, net of reinsurance was 69.2 (69.3). It was positively impacted by a higher level of run-off gains by 1.0 (0.0) due to a strong reserving position in the Swedish motor business, offset by higher weather claims 2.1 (1.3) due to severe rain and snowfall in both Denmark and Norway. The underlying claims ratio slightly deteriorated by 0.3, driven by increased claims costs for travel insurance. In addition, a robust top-line development also weighed negatively, as new business displays lower profitability compared to the back book. Inflation levels continued to increase during the quarter, and claims costs in private proper- ty and motor, in particular, have increased due to higher building costs and higher prices on spare parts for cars. Expenses The expense ratio was 13.1 (12.9) deteriorated slightly but the comparison figures for 2021 included a lower expenses ratio from Trygg- Hansa due to the lack of a periodisation effect. Expenses The expense ratio was more or less unchanged with 13.5 (13.6), reflecting tight cost control relative to a rather high premium growth but also re-investments in commercial develop- ment, particularly in Sweden. Results Q4 2022 In Q4, Private reported a technical result of DKK 1,073m (DKK 997m) with a combined ratio of 82.4 (82.2). The higher premium level had a positive impact on the result together with the higher level of interest rates. The underlying claims ratio deteriorated slightly due to continued growth, while a spike in travel insurance claims was reported for the quarter. Additionally, the quarter also witnessed harsh- er weather conditions, primarily in Denmark and Norway, compared to an unusually low level in Q4 2021. Premiums Gross premium income increased by 7.4% (3.4% excluding bonuses and premium rebates). In Q4, Tryg reported continuing high levels of premium growth with drivers being similar to the ones described for the full-year development. Q4 Financial highlights 2022 7.4% 1,073m 13.1 Technical result (DKK) Expense ratio Premium growth (local currencies) Based on pro-forma figures 82.4 Combined ratio Q4 2021: 997m Q4 2021: 12.9 Q4 2021: 82.2 26 Annual report 2022 | Tryg A/S | Commercial Results 2022 Commercial posted a technical result of DKK 1,670m (DKK 850m in 2021) and a combined ratio of 80.5 (83.8). The higher technical result was mainly driven by the inclusion of Codan Norway and Trygg-Hansa creating a larger Com- mercial business segment. The result was also supported by a growth in the Commercial area, particularly in Denmark and Sweden, for the new enlarged group and a strong improvement in the underlying claims ratio. Premiums Gross premium income totalled DKK 8,350m (DKK 5,294m), representing a 5.1% increase when measured in local currencies and compa- rable figures. Commercial Denmark reported growth of 9.1%, driven by both organic growth and price adjustments to mitigate inflation. In Sweden, Trygg–Hansa reported a growth of more than 13%, driven by strong sales and price adjustments. In Norway, premiums decreased by 8.1% due to transfer of business from the Codan Norway portfolio to Corporate Norway. Adjusted for this transfer, Tryg saw a growth in Commercial Norway of 3.1%, driven by price hikes for larger commercial customers. In general, Tryg reported strong development in Denmark, with a net inflow of customers supported by many initiatives, such as high level of sales of tailored packages. In Norway, growth was primarily based on high acceptance of price adjustments and sale of packages. The retention rate for Denmark was 88.0 (88.6) and relatively stable during the year, but slightly impacted from customer reaction to price adjustments to mitigate inflation. In Norway, the retention rate was relatively stable at 89.0 (89.4), which was positive in a period with significant initiative to improve profitability and mitigate inflation. In Sweden retention remained stable at 88.5 (89.0). Claims The claims ratio, net of ceded business, was 64.3 (66.6). Tryg registered a higher level of large and weather claims overall compared to 2021 and what is expected in an average year. The run-off level was somewhat higher at 6.7% (5.8%), reflecting a strong reserving position. The underlying claims level improved and was particularly helped by price initiatives in Norway targeting Commercial customers and also a gen- eral focus in all countries on smaller commercial customers. Inflation increased significantly during 2022 to levels not experienced in more than four decades, but this has been mitigated through procurement agreements and price adjustments. The claims ratio was also impacted by much higher discounting that was driven by the significantly higher level of interest rates in 2022. Expenses The expense ratio was 16.3 (17.2). The lower expense ratio level was impacted by the strong growth in recent years supporting economies of scale. Tryg’s initiative is aimed at improving expense levels in Commercial Denmark through the independent sales agents and high sales of product packages positively affecting the Key figures – Commercial 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 (%) a) Based on pro-forma figures. Management’s review - Contents Q4 2022 Q4 pro- forma 2021 Q4 reported 2021 2022 2021 2,292 -1,506 -384 402 30 2,264 -1,317 -440 507 -159 20 452 203 4.1a) 65.7 -1.3 64.4 16.7 81.1 90.0 -8.9 8.8 2.6 -1 347 161 58.2 7.0 65.2 19.4 84.6 91.7 -7.1 4.6 0.2 1,352 -910 -267 175 -66 -1 109 77 5.1 67.3 4.9 72.2 19.7 91.9 97.6 -5.7 5.6 1.1 8,350 -5,239 -1,360 1,752 -126 44 1,670 560 5.1a) 62.7 1.5 64.3 16.3 80.5 87.2 -6.7 7.2 1.7 5,294 -3,334 -913 1,048 -191 -7 850 309 6.1 63.0 3.6 66.6 17.2 83.8 89.6 -5.8 3.4 1.5 25% The business area accounts for 25% of the group’s total premium income. Financial highlights 2022 5.1% 1,670m 16.3 Technical result (DKK) Expense ratio Premium growth (local currencies) Based on pro-forma figures 80.5 Combined ratio 2021: 850m 2021: 17.2 2021: 83.8 27 Annual report 2022 | Tryg A/S | expense ratio level. In Sweden, there was a strong focus on investing in digital solutions to support customer interactions. In Norway, as mentioned, pricing initiatives for large Commercial customers were widely accept- ed, which also had a positive impact on the expense ratio level. The integration of Codan Norway into the Norwegian business had an additional positive impact on the level of expenses. Results Q4 2022 The technical result was DKK 452m (DKK 347m) with a combined ratio of 81.1 (84.6). The result was positively impacted by an underlying improvement, especially in Norway, and negatively impacted by a higher level of weather claims at 2.6% (0.2%) and an increased level of run-offs at 8.9% (7.1%). Pre- miums increased by 4.1% but were impacted by the transfer of business from Commercial Norway to Corporate Norway. Adjusting for this transfer the growth rate was at 7.4% Management’s review - Contents Premiums Gross premiums increased by 4.1% in local currencies, primarily due to increased cus- tomer numbers in Denmark, organic growth in Norway and price adjustments in Norway. As mentioned, growth was negatively impacted by the transfer of Customers from Commercial Norway to Corporate Norway. Excluding this, growth in Commercial Norway was 7.4%. Claims The gross claims ratio was 65.7 (58.2) with a claims ratio, net of ceded business, of 64.4 (65.2). The claims ratio was impacted by a higher level of weather claims and a more or less unchanged level of run-offs compared to the prior-year period. Expenses The expense ratio was 16.7 and hence much lower than the comparison figure of 19.4. It was positively impacted by economies of scale and synergy initiatives connected to the RSA Scandinavia transaction particularly those related to the integration of Codan Norway. Q4 Financial highlights 2022 4.1% 452m 16.7 Technical result (DKK) Expense ratio Premium growth (local currencies) Based on pro-forma figures 81.1 Combined ratio Q4 2021: 347m Q4 2021: 19.4 Q4 2021: 84.6 28 Annual report 2022 | Tryg A/S | Corporate Results 2022 The technical result amounted to DKK 694m (DKK 361m in 2021) with a combined ratio of 81.4 (89.4). The much higher technical result is primarily due to positive developments in the underlying claims ratio, primarily due to significant profitability initiatives in all countries combined with a rebalancing of the portfolio with lower level of international high-risk expo- sure. Furthermore the result was impacted by a much higher level of run-off at 13.3% (8.2%) partly offsetting a higher level of large claims at 10.8% (6.6%). Premium growth was 5.4% (0.3%), impacted by the transfer from Commer- cial Norway to Corporate Norway. Excluding this transfer, premium growth was negative at approximately 1%. Premiums Gross premium income totalled DKK 3,628m (DKK 3,457m), representing an increase of 5.4% when measured in local currencies. Adjusted for the transfer from Commercial Norway, growth was negative at approximately 1%, as men- tioned. Tryg has a strong focus on rebalancing its portfolio to reduce large claim exposure by reducing international exposure to property and liability. Claims The claims ratio, net of ceded business, was 68.7 (78.0). The level of large claims was 10.8% (6.6%), weather claims were 1.0% (1.1%) and the run-off level was higher at 13.3% (8.2%). Tryg continued to see an improved underlying claims level driven by profitability initiatives in current and previous years in all countries. In 2022, there has been a strong focus on reducing volatility by reducing international exposure to international property and US liability. Going for- ward, these initiatives will going forward improve profitability and reduce the capital requirement. Expenses The expense ratio of 12.7 (11.4) was slightly higher than the prior-year period, but still at a satisfactory level. Management’s review - Contents 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 2022 Q4 pro- forma 2021 Q4 reported 2021 2022 2021 903 -531 -140 231 -75 8 164 96 9.2 58.8 8.3 67.1 15.5 82.7 93.3 -10.6 7.4 2.8 850 -691 -116 42 -5 -1 36 60 81.4 0.6 82.0 13.7 95.7 102.8 -7.1 10.3 1.3 850 -691 -116 42 -5 -1 36 60 -2.5 81.4 0.6 82.0 13.7 95.7 102.8 -7.1 10.3 1.3 3,628 -2,253 -462 912 -239 21 694 482 5.4 62.1 6.6 68.7 12.7 81.4 94.7 -13.3 10.8 1.0 3,457 -2,423 -396 638 -273 -4 361 282 0.3 70.1 7.9 78.0 11.4 89.4 97.6 -8.2 6.6 1.1 10% The business area accounts for 10% of the group’s total premium income. Financial highlights 2022 5.4% 694m 12.7 Technical result (DKK) Expense ratio Premium growth (local currencies) Based on pro-forma figures 81.4 Combined ratio 2021: 361m 2021: 11.4 2021: 89.4 29 Annual report 2022 | Tryg A/S |       Management’s review - Contents Results Q4 2022 The technical result was DKK 164m (DKK 36m) with a combined ratio of 82.7 (95.7). The results were positively impacted by an im- proved underlying claims ratio and a reduced level of large claims as well as a higher run-off level. Premium growth, adjusted for the trans- fer in Norway, was negative and impacted by the mentioned de-risking initiatives and price increases to improve profitability and mitigate inflation. Premiums Gross premiums were flat after adjusting for the transfer of business from Commercial Nor- way that was related to former Codan Norway customers. This was due to a continued focus on reducing exposure to property and liability related to international customers as well as price initiatives in all countries to improve profitability and mitigate inflation. Corporate Denmark saw a growth but only due to a adjustment in premiums for Q4 2021 resulting in lower comparable figures. Adjusting for this, the growth for the Corporate segment would be flat. Claims The gross claims ratio was 58.8 (81.4) and the claims ratio, net of ceded business, was 67.1 (82.0). The lower claims ratio was impacted by profitability initiatives, reduced international exposure, the lower level of large claims and a much higher level of run-off. The underlying claims ratio improved as a result of the above initiatives in Norway, Denmark and Sweden. Expenses The expense ratio was 15.5 (13.7) and some- what higher than in Q4 2021, which did not, however, represent a trend, but rather some volatility in expenses for this quarter. Q4 Financial highlights 2022 9.2% 164m 15.5 Technical result (DKK) Expense ratio Premium growth (local currencies) Based on pro-forma figures 82.7 Combined ratio Q4 2021: 36m Q4 2021: 13.7 Q4 2021: 95.7 30 Annual report 2022 | Tryg A/S | Investment activities Capital markets experienced highly challenging developments in 2022. Geopolitical tensions were and remain very high following Russia's in- vasion of Ukraine. The year also saw the return of inflation to levels not seen for forty years, while central banks have been rapidly increasing inter- est rates trying to tame this development. This all points to a difficult start for 2023, with a majority of analysts expect some form of economic con- traction in the most advanced economies. The total market value of Tryg’s investment portfolio was DKK 63bn at year-end 2022. The investment portfolio consists of a match portfolio (which matches the insurance liabilities and is constructed to minimise capital consumption) of DKK 45bn and a free portfolio (the net asset value of the company) of DKK 18bn. The full-year figures for investment return are partly blurred by RSA Scandinavia operations not being consolidated in Q1 and the net result for the quarter therefore being included in the investment result (equity accounting). In addition, some one-offs related to the net effect of the demerger and sale of Codan Denmark impacted the investment figures in the second quarter. These two items almost offset each other, with a total positive impact of DKK 34m. The investment return for the full year was DKK -1,193m (DKK 870m), which represents the sum of the company’s investment return of DKK -1,227m and the aforementioned income from RSA Scandinavia of DKK 34m. The free portfolio showed a result of DKK -945m (DKK 869m) after a year of high volatility and challenging capital markets conditions across nearly all asset classes while the match portfolio reported a result of DKK 58m (DKK 134m), primarily driven by nar- rowing Nordic covered bond credit spreads and a decreasing DK-EU yield spread. H1 was primarily characterised by widening credit spreads and an increasing DK-EU yield spread, while H2 and especially Q4 were characterised by more posi- tive markets and narrowing credit spreads, with the DK-EU yield spread contributing to a positive Match portfolio result for the full-year. Other financial income and expenses totalled DKK -340m (DKK -304m), the higher level (compared to full year 2021) primarily driven by somewhat higher interest expenses on subordinated loans and the Q3 negative value adjustment on the Trygg-Hansa inflation swap. Free portfolio Financial markets have experienced a highly challenging year. Geopolitical tensions were at the highest level in recent memory, with Russia'a invasion of Ukraine bringing war back to the doorstep of Europe following two years characterised by the COVID-19 pandemic. Supply chain issues prompted by the pandemic led to bottlenecks in the most advanced econo- mies, while energy costs increased sharply fol- lowing the Russian invasion of Ukraine. All this contributed to a huge spike in inflation to levels not seen in the last forty years. Central banks have rapidly and repeatedly increased interest rates to try to tame the inflation development. Against this challenging backdrop, equity valu- ations have fallen, interest rates have increased Key figures - investments Return - match portfolio Management’s review - Contents Financial highlights 2022 -945m Free portfolio (DKK) 58m Match portfolio (DKK) -1,193m Total investment return (DKK) DKKm Q4 2022 Q4 2021 Free portfolio, gross return Match portfolio, regulatory deviation and performance Other financial income and expenses Income from RSA Scandinavia Currency hedge related to RSA Scandinavia Total investment return 205 168 -37 -19 0 317 275 30 -70 568 0 803 2022 -945 58 -340 34 0 -1,193 2021 DKKm Q4 2022 Q4 2021 2022 2021 869 134 -304 1,206 -1,035 870 Return, match portfolio Value adjustments, changed discount rate Transferred to insurance technical interest Match, regulatory deviation and performance Hereof: Match, regulatory deviation Match, performance 438 90 -360 168 77 91 -47 104 -27 30 16 14 -2,433 3,419 -928 58 218 -160 -332 528 -62 134 78 56 31 Annual report 2022 | Tryg A/S | and property markets have started to weaken. Tryg’s free portfolio produced a total result of DKK -945m (DKK 869m), all main asset classes but properties produced negative returns. Tryg’s equity portfolio reported a return of -15.7% (18.9%), corporate bonds (a small asset class for Tryg) reported a –15.4% (0.3%) return, while properties reported a 10.4% (12.5%) return. The free portfolio totalled DKK 18bn at the end of 2022. Match portfolio The match portfolio of DKK 45bn is primarily made up primarily by Nordic covered bonds for the purpose of matching insurance liabilities while keeping capital consumption low. The result of the match portfolio is the difference between the match portfolio and the amount transferred to the technical result. The result can be split into a “regulatory deviation” and a “performance result”. The “regulatory deviation” reported a positive contribution of DKK 218m (DKK 78m) due to a smaller difference between Danish and European yields. For example, the 10-year swap yield spread between DK and EU has decreased from 22 basis points to 11 basis points. The Return - free portfolio DKKm Bonds Corporate and Emerging Market Bonds Investment grade credit Emerging market bonds High-yield bonds Diversifying Alternatives a) Equity Real Estate Total a) Diversifying Alternatives consist of CAT Bonds and hedging instruments. “performance” result was DKK -160m (DKK 56m) despite a positive contribution in Q4. This was be- cause of widening Nordic covered bond spread, earlier in the year, which hit the performance negatively. Other financial income and expenses Other financial income and expenses mainly include interest expenses related to outstanding subordinated debt, the cost of currency hedges to protect shareholders’ equity, the cost of run- ning the investment operations and other general costs. Other financial income and expenses totalled DKK -340m (DKK -304m). The higher level compared to 2021 is primarily driven by the value adjustment on the Swedish inflation swap booked in Q3 and a generally higher level of interest rates that increase the interest expenses on the subordinated loans (DKK 151m vs DKK 107m). Investment result in Q4 2022 The final quarter of the year was characterised by positive developments in the financial mar- kets, equity markets performed well and interest rates dropped after a steep increase in the first nine months of the year. The free portfolio posted a total income of DKK 205m (DKK 275m), primarily driven by equities and fixed income securities while properties pro- duced a negative return. Tryg’s equity portfolio returned 6.6% (5.9%) for the quarter, helped by a more stable picture of inflation developments and a more dovish message from central banks when it comes to interest rates development in 2023. Interest rates fell in Q4 2022, driving a positive performance by covered and corporate bonds. Properties posted a negative return after a long period of contributing positively. The match portfolio returned a positive DKK 168m (DKK 30m) with contributions from both the regulatory deviation and the performance result. Danish provisions are discounted by euro swap rates but hedged by a combination of euro and Danish assets. A decreasing yield spread means a positive contribution to the regula- tory deviation. Nordic covered bond spreads narrowed in the final quarter of the year, thus producing a positive performance. Other financial income and expenses were DKK -37m (DKK -70m), broadly in line with expecta- tions. Management’s review - Contents Q4 Financial highlights 2022 205m Free portfolio (DKK) 168m Match portfolio (DKK) 317m Total investment return (DKK) Q4 2022 Q4 2022 (%) Q4 2021 Q4 2021 (%) 2022 2022 (%) 2021 2021 (%) 31.12.2022 31.12.2021 Investment assets 82 96 34 34 28 -64 216 -125 205 1.4 3.3 3.1 3.5 3.4 -5.2 6.6 -2.8 1.2 -7 -11 -7 -5 1 -16 157 152 275 -0.2 -0.5 -0.9 -0.7 0.1 -1.6 5.9 5.0 2.2 -427 -420 -155 -120 -144 -40 -525 467 -945 -7.5 -15.4 -15.4 -15.2 -15.4 -3.3 -15.7 10.4 -5.8 -35 5 2 -1 4 -10 506 403 869 -0.9 0.3 0.3 0.0 0.7 -1.0 18.9 12.5 7.0 6,034 3,896 2,979 1,199 1,039 742 1,239 3,182 4,222 17,656 2,154 784 709 661 1,021 2,710 3,233 13,014 32 Annual report 2022 | Tryg A/S | Capital and risk management Management’s review - Contents Risk management is a key function at Tryg. The assessment and management of Tryg’s aggre- gated risk and associated capital requirement constitute a core element in the management of the company. Tryg’s risk management is based on the targets and strategy and the risk exposure limits decided by the Supervisory Board. Tryg’s Supervisory Board defines the framework for the company’s target risk appetite and there- by the capital which must be available to cover any losses. The company’s risk management is based on four risk categories: Strategic and business risk, Insurance risk, Investment risk and Operational risk. A detailed description of these can be found in the tables below. Strategic and business risk Definition Strategy Risk Management Objectives and methods Financial losses or lost opportu- nities due to a lack of ability to carry out business plans and strategies. This includes the risk of not being able to adjust to changing market conditions in a timely fashion. Tryg is one of the most successful non-life insurance com- panies in Scandinavia. The risk management policy adopted by the Supervisory Board sets out guidelines for risk management. The current strategy (as presented at the Capital Markets Day in November 2021) is to a large degree to continue down this path. The strategy process sets out overall strategic objectives. This is done as a bottom-up process where the individual business units contribute with concrete business plans. Risk management carries out ongoing risk identification and assessment to ensure that all existing and emerging strategic and business risks are reported to the Supervisory Board on a semi-annual basis. Close monitoring of each business unit with regard to their performance towards the overall strategic objectives. Tryg has chosen to implement a highly decentralised orga- nisation with a large degree of autonomy for each business unit. This ensures a timely reaction to changing market conditions in the separate business units. 33 Annual report 2022 | Tryg A/S | Insurance risk Definition Strategy Risk Management Objectives and methods Management’s review - Contents The risk that insurance premi- ums are insufficient to cover the compensation and other costs associated with the insurance business. The risk of the insurance provisi- ons being inadequate. Taking on insurance risk is the cornerstone of Tryg's busi- ness model. It is therefore naturally the area where Tryg has the largest risk appetite. Tryg's main focus is to write primarily non-life insurance business in Scandinavia. The Private and Commercial busi- nesses (SMEs) are considered the most attractive seg- ments. The insurance portfolio should be well-diversified and pro- fitable with an overweight on the retail segment. Increased focus on the retail segment in the coming years will help to mitigate insurance risk, as this segment is typically less complex and also drives value creation. Tryg has a conservative approach to claims provisioning. The insurance risk policy adopted by the Supervisory Bo- ard sets out general guidelines for permitted insurance risk. This includes guidelines for provisioning, general underwri- ting principles, new products, profitability measuring, reinsurance, etc. Capital Markets Day targets for ROOF and UW results set the overall ambition for profitability versus capital con- sumption (measure of unexpected risk). Day-to-day monitoring of developments in the insurance business (premium growth, underlying profitability, capital consumption, etc.) is key to ensuring development in line with desired risk appetite. Reinsurance is used to reduce the underwriting risk in situ- ations where this cannot be achieved to a sufficient degree via ordinary diversification. The retention limit specifies the maximum loss that Tryg is willing to take on a specific event. The capacity of the reinsurance programme is set so that it is very unlikely that a breach will occur. Both the re- tention limit and the capacity are approved by the Supervi- sory Board. The internal model used to calculate the solvency capital requirements in Solvency II are used to allocate capital consumption to the business and thereby ensure sufficient profitability in the insurance business. The actuary function calculates the technical provision ba- sed on the guidelines set out in the insurance risk policy. These are regularly presented to the Supervisory Board. Investment risk Definition Strategy Risk Management Objectives and methods Financial losses due to changes in the value of financial assets or liabilities. Tryg has decided to divide its investment assets into the free portfolio and the match portfolio. The strategy for the match portfolio is to mitigate interest rate risk from provisions. The strategy for the free portfolio is to achieve the optimal market return on a medium-term basis taking risk, liquidity, etc. into account. The investment risk policy adopted by the Supervisory Bo- ard sets out general guidelines for permitted investment risk. This includes specific maximum limits for • asset classes • interest rate risk • currency risk • credit risk • counterparty exposure • SCR market risk Daily reporting on investment return on all asset classes. Independent daily control ensures compliance with per- mitted risk-taking. 34 Annual report 2022 | Tryg A/S | Operational risk Definition Strategy Risk Management Objectives and methods Risk here relates to errors or failures in internal procedures, fraud, breakdown of infrastruc- ture, IT security and similar fac- tors. The Supervisory Board sets out the overall strategy regar- ding operational risk. The operational risk policy adopted by the Supervisory Bo- ard sets out general guidelines for operational risk. This in- cludes general guidelines for IT security, physical security, compliance, fraud, money laundering, contingency plan- ning, and model risk. Ongoing identification, assessment and reporting on risks and any incident that has imposed a loss or a near loss on Tryg. Management’s review - Contents Capital management Capital management and capital modelling are central and key functions of the Finance team at Tryg. Capital management broadly covers the company’s current and future capital require- ments, capital allocation to the different lines of business and required returns. In addition, capital management analyses the dividend outlook and the ability of the company to meet its return on own funds target (previously return on equity). Tryg’s solvency ratio is a function of developments in own funds and the solvency capital requirement (based on the approved partial internal model). As mentioned previously, Tryg has modelled the insurance risk internal- ly, while all other modules are based on the standard formula. The capital model is based on Tryg’s risk profile and takes into consideration the composition of Tryg’s insurance portfolio, geographical diversification, its claims reserves profile, reinsurance programme, investment mix and overall level of profitability. The solvency ratio was 201 at year-end 2022 compared to 188 at year-end 2021. profit, while all intangibles are deducted in the calculation. Own funds totalled DKK 16,012m at the end of 2022 vs DKK 18,559m at the end of 2021. The downward movement was primarily driven by the difference between net result for the year minus dividends paid and additionally from the sale of Codan Denmark (as 50% of Codan Denmark’s own funds were included in Tryg’s own funds). The net result for the year has been burdened by challenging capital markets conditions and also by the planned booking of integration costs. The solvency capital requirement (SCR) is calculated in such a way that Tryg should be able to honour its obligations in 199 out of 200 years and is regularly stress-tested. At the end of 2022, Tryg’s SCR was DKK 7,966m, down from DKK 9,866m at the end of 2021. The lower level is explained by the sale of Codan DK (whose 50% capital requirement corresponding to the ownership was included in Tryg's SCR) and by a sharp correction in equity markets during the year, which resulted in a lower market risk capital charge. The key components of Tryg’s own funds are shareholders’ equity, qualifying debt instru- ments (both Tier 1 and Tier 2 debt) and future Tryg’s solvency ratio continues to display low sensitivity towards movements in the capital 35 Annual report 2022 | Tryg A/S | markets. Fixed-income securities represent some 90% of Tryg’s invested assets, so the highest solvency sensitivity is therefore towards spread risk, where a widening/tightening of 100 basis points would impact the solvency ratio by approximately 20 percentage points. Lower sensitivity is displayed towards equity market losses and interest rate fluctuations. Shareholders’ remuneration The Supervisory Board regularly assesses the capital structure in light of future internal earnings forecasts and balance sheet needs. The projections include initiatives set out in the company’s strategy for the coming years and are also based on the most significant risks identified by the company. Capital adequacy is measured in relation to Tryg’s strategic targets, including the new return on own funds target (ROOF) and the dividend policy. Tryg will pay a Q4 dividend per share of 1.60 on 31 January 2023 after having paid a dividend for the first nine months of 4.69 per share bringing the total for the full year to 6.29 per share. The quarterly dividend in 2022 has been tailored to cater for the ongoing reduction in the number of shares due to the DKK 5bn buyback programme started at the beginning of May. As per end of 2022 approximately DKK 3.2bn out of the total DKK 5bn has been bought back. The buyback was announced following the sale of Codan Denmark to Alm.Brand and related proceeds. TryghedsGruppen, Tryg’s largest shareholder, is not participating in the buyback in order to facilitate an overall increased ownership of Tryg following the acquisition of RSA Scandi- Management’s review - Contents navia. TryghedsGruppen owns 46.5%* of the shares with the on-going buyback facilitating an increased ownership level towards the stated 50% plus target. At the Capital Markets Day in London in November 2021, Tryg refined its dividend policy going forward. Tryg continues to aim to offer a nominally stable and increas- ing ordinary dividend on an annual basis. The targeted payout ratio of 60- 90% (based on operating earnings) is secondary to the aim of increasing the annual dividend. leverage. Moody’s also assigned an “A3” rating to Tryg’s subordinated debt and a “Baa3” rating to Tryg’s Tier 1 debt. The ratings were reaffirmed following the completion of the acquisition by Tryg and Intact Financial Corporation (Intact) to acquire RSA Insurance Group Pls (RSA), whereby Tryg would acquire RSA’s Swedish and Norwe- gian operations. Moody’s expects the acquisition to further increase and broaden Tryg’s earnings base in the long term. Furthermore, Tryg’s lever- age will reduce materially in the short term. Moody’s rating Tryg has an “A1” (stable outlook) insurance fi- nancial strength (IFSR) rating from Moody’s. The rating agency highlights Tryg’s strong position in the Nordic P&C market, robust profitability, very good asset quality and relatively low financial Own funds (DKKm) Solvency Capital Requirement (DKKm) Shareholder remuneration (DKK per share) Solvency ratio development (%) 18,559 9,866 16,012 7,966 1.65 Q4 2021 Q4 2022 Q4 2021 Q4 2022 2018 2019 2020 2021* 2022 2021 2022 2021 2022 Ordinary dividend Extraordinary dividend 6.6 6.8 7.0 6.29 4.28 5,000 1.786 3.214 i g n n a m e R d e t e p m o C l in millions (DKK) Buyback * Calculated excluding Tryg's own shares * Calculated on the new 654m number of shares following the DKK 37bn rights issue to fund the RSA Scandinavia acquisition 188 184 195 198 201 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 36 Annual report 2022 | Tryg A/S | ESG & Sustainability This section introduces Tryg’s approach and work with sustainability & ESG. The statutory independent and comprehensive sustainability report is available at tryg.com Tryg’s Sustainability report composes Tryg’s Communication on Progress (COP) report and includes an ESG data overview of Tryg’s key performance indicators, Tryg’s climate reporting in line with Insurance & Pension Denmark’s industry recommendations, Tryg’s reporting on EU Taxonomy-eligible and non-eligible econom- ic activities as well as Tryg’s climate-related disclosure in line with the TCFD (Task Force on Climate-related Financial Disclosures) recom- mendations. Download Sustainability report at www. tryg.com/en/sustainability/reporting Strategy, materiality and governance Tryg’s 2024 Sustainability strategy, ‘Driving sus- tainable impact’, guides its priorities and targets. Under three focus areas – Sustainable insurance, Responsible company, and Green workplace – the purpose of the strategy is to ensure that sustainability is integrated across all of Tryg. The sustainability and KPIs are an integrated part of Tryg’s corporate strategy. Due to a strong market position and the nature of the value chain, Tryg can enable and support its customers and part- ners on their respective sustainability journeys. The upstream/downstream value chain is where most of the impact is, and where Tryg can make the biggest positive difference by working togeth- er with the customers and suppliers. Tryg can have a significant impact in reducing its indi- rect climate impact by preventing claims from happening in the first place, and when claims do happen, together with the suppliers, Tryg is able to handle them in the most climate-friendly manner. Download Sustainability policy at www. tryg.com/en/dokumenter/trygcom/corpo- rate-reponsibility-policy Tryg’s Sustainability & ESG Board drives Tryg’s strategic direction in the Sustainability and ESG area. The Board is chaired by the Group CFO and is composed of Vice Presidents from key functions to ensure that Sustainability and ESG are effectively anchored across the organisation. Management’s review - Contents Sustainability & ESG Tryg has changed the name of its Corporate Responsibil- ity de partment to Sustainability & ESG. This is in line with the focus on creating a sustainable business that delivers on financial as well as environmental, social and govern- ance parameters, and is intended to signal more clearly to stakeholders that this is an integrated part of how we operate and conduct the business. Download Terms of reference for Sustain- ability & ESG Board at www.tryg.com/en/ CR/cr-governance 37 Annual report 2022 | Tryg A/S | Overview of 2022 The table illustrates targets and performance of Tryg's Sustainability & ESG strategy and efforts. For specific data, please see extensive ESG data on pages 42-46 in the Sustainability report. Management’s review - Contents The table outlines Tryg's Sustainability targets and 2022 performance. a e r a s u c o f c i g e t a r t S s t l u s e r d n a s t e g r a T Sustainable insurance Responsible company Green workplace Sustainable claims handling page 12 Responsible procurement page 18 Responsible investment page 19 Diverse workplace page 26 page 31 2024 targets 2022 2024 targets 2022 2024 targets 2022 2024 targets • 80% increase in sustai- nable spend1 59% Sustainability screening of suppliers • 20,000 – 25,000 tonnes CO2e reduction from more sustainable claims handling 15,449 • Up to 90% of contract 43% suppliers 50% N/A3 • Up to 100% of contract suppliers within claims High supplier performance for screened suppliers • Up to 50% of contract suppliers • 70% of contract suppliers within claims 2030 targets • 50% CO2 intensity reduc- tion from equity portfolio • Exclusion of fossil fuel production companies with no strategy for green transition 2022 -16.9% N/A 1 Compared to 2020 2 Market-based 3 Tryg is in the process of developing the critera for supplier performance screening 2022 58%2 86%2 • 41% women in management 40.5% • 35% CO2 reduction positions • 33% women at top management 25% level • 58% CO2 reduction from energy consumption • 41% women at director level 31% waste • 12% CO2 reduction from 31% • 23% CO2 reduction from 34% air travel • 23% CO2 reduction from -2% car fleet 2030 • 55% CO2 reduction 2022 58% 2 38 Annual report 2022 | Tryg A/S | SUSTAINABILITY STRATEGY 2024 Climate and environment – a step change from within In 2022, Tryg took an important step towards making sure that sustainability, climate and the environment are integrated across the organ- isation and in all decision-makings, as Tryg in Denmark was certified according to the ISO 14001 standard and the Eco-Management and Audit Scheme (EMAS). The certification implies a highly systematic approach to working with climate and environment, and will support Tryg in delivering on the strategy and realising its ambitions. Sustainable insurance Tryg aims to be a proactive peace-of-mind creator by integrating sustainability elements into its products and services and enable its cus- tomers to make more sustainable choices and push for change. Within sustainable insurance, Tryg's focus is to further integrate and advance sustainability in its claims handling process and ensure that sustainability and prevention aspects are integrated aspect of its products and services. Sustainable products and services Tryg wants to offer products and services that can help move society in a climate-friendly and socially responsible direction. In Denmark, Tryg has started to introduce Valified to its Danish commercial customers. Valified is a platform that, based on usage data, can provide customers with insights into their performance across selected ESG (Environ- mental, Social and Governance) areas. Valified enables Tryg to support customers in better understanding and working with their footprint, and live up to the transparency requirements of their customers. In 2022, Trygg-Hansa launched an improved car insurance product for electrical and hybrid cars to help customers make sustainable choices when buying a car. The insurance offers better machine damage coverage, a deductible dis- count as well as roadside assistance if their car runs out of battery. Another element in building a more sustainable product portfolio is to further integrate sustain- ability measures into the underwriting strategy. During 2022, Tryg has started to assess the implications of this for specific sectors, while continuing its focus on impact pricing, preven- Management’s review - Contents tion, proactive counselling and risk selection. Further work is required, especially in light of the EU Taxonomy standards, which will be intensi- fied during 2023. Claims prevention Integrating claims prevention measures into products and services may prevent claims from arising in the first place or minimise any damage or loss that might occur. In addition to the comfort this provides to customers, it also has an environmental upside. Claims handling pro- cesses are often associated with the use of con- siderable resources and energy. Tryg is working strategically to prevent claims from arising and has set a target that a quarter of Tryg’s top-line growth from new products and services should be attributed to claims prevention measures by 2024. Read more on page 16 in Tryg’s Sustainability report Sustainable claims handling With more than 1.5 million claims annually, integrating sustainability into Tryg’s claims handling processes is an essential part of the positive change and contribution to a more climate-friendly business that Tryg wants to contribute to. It is also the area where Tryg can have a significant impact both on customers and suppliers. Tryg seeks to repair or reuse to the greatest possible extent in the claims handling processes. It is not a simple task; it involves a change of mindset not only in the way Tryg handles claims, but also in the way suppliers operate and when it comes to what customers perceive as valuable. Tryg focus on repairs and on reducing material usage, while researching possible ways of reusing or repurposing materi- als that are reaching the end of their life cycle. 39 Annual report 2022 | Tryg A/S | Carbon emission reductions from claims handling Tryg’s claims handling activities are the most carbon-intensive processes across the business. Replacing broken windshields or car bumpers might not seem like a carbon-intensive process, yet, with approximately 97,000 motor-related claims a year, a significant impact can be made by thinking in terms of reusing resources. In 2022, Tryg was able to reduce CO2 emissions by repairing instead of replacing within motor, by more than 14,700 tons CO2. In 2022, Tryg assessed the CO2 emission re- duction effect of new initiatives such as phone screen repairs and SWAP options instead of replacing with new phones, as well as an initia- tive related to the conservation of foundations in connection with major building claims instead of demolition and rebuilding. Across all initia- tives, Tryg has helped reduce 15,449 tons CO2 emissions during 2022 by establishing more sustainable claims handling processes. Tryg continues to expand the list of initiatives to be able to offer a more sustainable solution to a claim, while maintaining focus on existing initia- tives. Already identified initiatives include using spare parts for cars, repairing windshields and plastic car bumpers instead of replacing them, phone fix, online support for road assistance, digital medical or veterinary consultations as well as remote reviewing of building claims. Tryg will continue to investigate and implement more climate-friendly initiatives to support the target to reduce CO2e from claims handling by 20,000–25,000 tonnes in 2024. Critical to achieving this is collaboration with suppliers to identify new sustainable initiatives, and to de- velop new and more climate-friendly solutions enabling us to expand sustainable business practices across supply chain. proposals, engaging with external fund man- agers, and screening for potential violations of international conventions. Classifying claims spend as sustainable Tryg's supplier spend totals more than DKK 22bn a year. Through specific sustainability measures, Tryg monitors the supplier-related spend. For Tryg, it is important to understand how the spend is used, in order to be able to act on it and direct it towards more sustainable practices. Tryg’s ambition is to increase claims spend classified as sustainable by 80% in 2024 compared to 2020. By monitoring the suppliers, introducing new and advancing the existing sustainable initia- tives, more claims spend will be used towards sustainable practices. In 2022, Tryg increased its share of sustainable spend by 59% compared to base year 2020. Tryg consistently seeks dialogue and collabora- tion with the industry to further align reporting methodologies related to more sustainable claims handling. Read more on page 15 in Tryg’s Sustainability report Responsible investment Following the integration of Trygg-Hansa, Tryg’s investment portfolio is now approximately DKK 63bn, up from approximately DKK 43bn. Tryg aims to ensure that the portfolio is invested in a responsible manner and in accordance with Tryg’s values and ambitions. Tryg works with responsible investment through active ownership by voting on shareholder Download Responsible Investment Policy at www.tryg.com/en/dokumenter/ trygcom/responsible-investment-policy Active ownership Most of Tryg’s investment assets are man- aged externally and typically held through commingled fund structures. A key aspect in ensuring responsible conduct, is therefore via Tryg’s selection of external funds managers. In addition to the evaluation performed on external managers, Tryg emphasize active ownership as a means to promote shareholder value and sustainable development whenever possible. External funds managers are expected to par- ticipate in and vote at annual general meetings, and enter into dialogue around ESG topics. Tryg considers this as key in moving forward on the agenda. Divestment and exclusion of companies from the investment portfolio is therefore con- sidered as a last resort since this will not result in any positive change. Tryg’s target is for the external fund managers to attend and vote at least 90% of the possible shareholder meetings for the actively managed equity holdings. In 2022, they actively partici- pated in 98% of the shareholder meetings. Tryg continues to monitor and engage in dialogue with relevant external asset managers on how to ensure effective practices. Download Active Ownership Policy at www.tryg.com/en/dokumenter/trygcom/ active-ownership-policy Management’s review - Contents Ethical screening process When investing, Tryg always complies with all applicable national and international legislation, international standards and tax code. The com- pany also seeks to minimise reputational risk, while maintaining a competitive risk-adjusted return. Tryg conducts ethical screenings each year based on controversial behaviour and controver- sial weapons. Additionally, an external screening agency performs regular screenings to make sure that none of investments have ultimate parents that are considered unacceptable. If a violation is identified, there is a formal escalation process to guide any further steps. In 2022, the Russian invasion of Ukraine led Tryg to exclude Russian assets from its investment universe. The investment managers (equites and bonds) have divested in line with the Sanction Regulation. Download Process for Ethical Screening at www.tryg.com/en/ dokumenter/trygcom/process- ethical- screening The transition to a low-carbon economy Tryg wants to contribute to the transition to a low-carbon economy by directing parts of the portfolio towards investment managers that focus on reducing carbon emissions by investing in companies that provide climate change solutions or that have high potential and clear commitment to reduce their emissions. The long-term ambition is to achieve a low-carbon and fossil-free world by allocating capital where it makes the biggest impact on current and future CO2 emissions. Hence, the strategy is not 40 Annual report 2022 | Tryg A/S | to minimize the current level of CO2 emissions in the portfolio, but rather to focus on current and future reduction-potential over time. Tryg perceives the combination of active ownership and capital allocation as the most efficient way to support ambition. Tryg's target is to reduce the carbon intensity of the equity portfolio by at least 50% in 2030 com- pared to prime 2020. While active ownership is preferred option, Tryg will begin to divest man- agers with investments in fossil fuel production companies that have not presented a strategy for a green transition. This process will begin in 2023 and conclude no later than 2030. Read more on pages 19 in Tryg’s Corporate Responsibility report Climate-related risk and opportunities The impact of climate change is significant and a cause of concern for Tryg’s customers and the society. It is anticipated that physical and tran- sitional climate-related risks and opportunities may impact Tryg as a business in both the medi- um and long terms. Inherent to Tryg’s business is a strong focus on managing and preventing claims related to natural events such as flooding and storms, and there is a continuous focus on data, methods and practices for managing this. Extreme weather events such as flooding, cloud- bursts, storms, rising sea levels and heatwaves represent physical risks, not only for Tryg, but also for Private, Commercial and Corporate customers, and the number of weather-related claims is increasing within all Tryg’s business Employee satisfaction (Index) Employee mix % 80 79 73 73 75 75 54% 52% 46% 31% 17% Tryg Nordic Nordic financial market 2021 2022 Men Women Age <30 years Age 30-49 years Age >50 years areas. Tryg monitors data available on adverse climate-related risks and seeks to mitigate such risks to the greatest possible extent. Read Tryg’s climate-related disclosure in line with TCFD (Task Force on Climate-related Finan- cial Disclosures) reccomendations on page 22 in Tryg’s Sustainability report Diverse and inclusive workplace Tryg is committed to increase the level of diversi- ty, equality and inclusion across the organisation and industry. The ambition is to have a diverse pool of employees and managers with different backgrounds, skills, age and experience. This is not only to reflect the society that Tryg is part of, but also to better understand and match the changing needs of the diverse customers and society in general. Ensuring gender balance in leadership Tryg has had a strong focus on diversity for sev- eral years with the aim of increasing the share of women in management positions to 41%. The target includes all management levels i.e., from team manager to top management4. The share of women in management positions has increased slightly from 40.1% in 2021 to 40.5% in 2022, leaving Tryg very close to the target of 41%. Progress has been driven by a continuous focus in the recruitment and HR processes, and in 2022, Tryg has achieved gender balance in internal and external managerial recruitments, with 51% female and 49% male. The financial sector is generally characterised by low female representation in management positions, which is a challenge when it comes to gender diversity. One of the levers to increase this is through internal talent development and promotions from the leadership pipeline where Management’s review - Contents the share of women is higher. Breaking through the glass ceiling is an important focus area for Tryg, who is dedicated to creating a better gen- der balance at the top levels of the organisa tion. Download Policy for competency and diversity at www.tryg.com/en/dokument- er/trygcom/competency-and-diversi- ty-policy Engaging employees Providing a healthy, safe and engaging working environment and securing the well-being of employees is critical to creating an attractive workplace where everyone thrives and can perform to their full potential. With the acquisition of Trygg-Hansa in Sweden and Codan in Norway, the number of employees in Tryg increased to approximately 7,500. In- formed, engaged and enabled employees is the guiding principle for Tryg. To ensure a smooth transition to new teams, tools and processes, thorough onboarding processes were put in place for the new colleagues, and all leaders were trained in how to support their employees in the process. Throughout all of these initia- tives, commitment and engagement from imme- diate managers have been crucial in keeping employees engaged and continuously informed about progress. In 2022, the overall employee satisfaction score decreased one point to 79, which is still well above the average of 75 points for the Nordic financial sector. In light of the integration, Tryg is proud to have maintained a high level of satis- faction across the three countries. 41 Annual report 2022 | Tryg A/S |  Read more on page 30 in Tryg’s Sustaina- bility report Green workplace Tryg’s direct carbon footprint is relatively limited. However, there is an ambition to actively do what it takes to reduce the climate impact stemming from offices, waste, company cars and business travels. To direct efforts, clear CO2e reduction targets for all areas have been defined across the relevant parts of the organi- sation. Governance and responsibility have been established to ensure progress on initiatives. Tryg has furthermore focused on creating aware- ness across employees, to ensure that everyone understands how they can contribute. The ISO 14001 and EMAS certifications in Denmark and the Eco-Lighthouse certification in Nor- way ensure that Tryg works systematically and thoroughly with environmental matters across the organisation. Download Climate and environmental policy at www.tryg.com/en/dokumenter/ trygcom/climate-and-environmental- policy Carbon footprint The CO2 emissions from the direct activities stem from offices and transportation, i.e. Tryg is therefor focusing on making its offices more environmentally friendly through energy efficiency, waste reduction and segregation, and on changing transportation habits. Tryg has set reduction targets of 35% and 55% in 2024 and 2030, respectively, compared to the 2019 base year. To achieve carbon neutrality in 2023, Tryg will compensate for the rest of its emissions – with a clear focus to reduce more and compen- sate less over time. In 2022, Tryg's total carbon emissions were reduced by 58%*. Needless to * market-based say that the previous two years' performance on the CO2 target have been highly impacted by COVID-19. In the first quarter of 2022, there is still an impact of COVID-19 as employees worked from home and were not able to travel. However, Tryg's long-time focus on improving energy efficiency through shifts to LED lighten- ing and better management of lightning, heating, cooling and ventilation across our buildings, is reflected in the performance across the year. Read more on pages 31-32 in Tryg’s Sustainability report Ethics and compliance It is fundamental that Tryg maintains and ensures a high level of business and data ethics, security and good corporate governance at all times. This is the foundation of the business and a precondition for succeeding with the strategy. Tryg promotes responsible business conduct throughout the value chain and expect its employees, suppliers, business partners and external investment managers to comply with these principles. This is an ongoing process that involves continuously building knowledge and capacity throughout the value chain and inter- nally across the employee base. Tryg’s Code of Conduct defines the rules that all employees are required to adhere to. It is mandatory for employees to complete a recur- ring e-learning programme on Tryg’s Code of Conduct. Download Code of Conduct at www. tryg.com/en/dokumenter/trygcom/code- conduct-uk The use of data is essential for the business model, as the primary resource in the develop- ment of products that meet customer needs. Data privacy Ensuring that the customers’ personal data are stored and handled in a lawful, secure and com- pliant manner is a high priority for Tryg. Through the Privacy and Cookies Notice, available at tryg. com, Tryg seeks to be transparent about how personal data is collected, processed and used. The notice describes which data is collected, from which sources, about whom and how it is shared and for how long it is stored. Download Privacy and cookie notice at www.tryg.com/en/trygs- privacy-and- cookie-notice Data ethics and security The data ethical principles are based on industry standards stemming from the Danish trade association Insurance & Pension Denmark’s Data Ethical Codex, relevant legal requirements as well as internationally agreed standards, and outline three main principles: transparency, free choice, and data security. Tryg's data ethical principles are anchored within and approved by Tryg’s GDPR and IT Security Board. Tryg’s employees must be well-informed about data ethics, data security as well as the proper and confidential handling of personal data. All employees must sign a confidentiality undertaking. Tryg creates awareness and teach employees about privacy through e-learning and training programmes, which all employees must complete. Data Tryg deals with personal data daily, including sensitive data about customers and employees. Read more on page 33 in Tryg’s Sustaina- bility report Management’s review - Contents 42 Annual report 2022 | Tryg A/S | Investor information Investor Relations (IR) is responsible for Tryg’s communication with the capital markets. It is important that investors, analysts and other stakeholders can form a true and fair view of company developments, including Tryg’s finan- cial results. For this reason, Tryg’s IR team strives to be as open and transparent as possible to ensure that stakeholders’ information require- ments are met at the highest possible level. IR is in charge of communication with equity inves- tors, fixed income investors and rating agencies. After the publication of quarterly and annual reports, Tryg’s management and IR team ordi- narily travel extensively to meet with sharehold- ers and potential investors. Quarterly analyst presentations are typically held in Copenhagen and London. Tryg also attends investor meetings and various financial conferences at a local and global level. Because of COVID-19, many analyst and investor meetings were held virtually at the beginning of 2022 (as in 2021 and 2020). From Q2 onwards, the majority of analyst and investor meetings and conferences were held in-person across Europe, the USA and Canada. The Tryg share is currently covered by 19 an- alysts, who continuously update their recom- mendations and earnings forecasts. Tryg hosts an annual Analyst Day focusing on selected aspects of the business, while a more in-depth Capital Markets Day, where new financial targets is hosted every three years. At the latest Capital Markets Day in November 2021, the 2024 finan- cial targets were disclosed for the new enlarged *Calculated excluding Tryg's own shares group. Hence, Tryg targets a technical result of between DKK 7.0 and DKK 7.4bn, a combined ratio at or below 82, an expense ratio around 14 and a return on own funds at or above 25% in 2024. The Tryg share The Tryg share is listed on the NASDAQ Copen- hagen exchange. Company announcements and trading announcements are published in English - and in Danish on an optional basis. Interim reports and annual reports are published in English only. The Tryg share started the year at a price of DKK 161.8 and ended 2022 at DKK 161.5. Total return (price and dividends) on the share was a positive 6%. The Tryg share performed relatively well in 2022 against a very challenging macroe- conomic backdrop. Russia's invasion of Ukraine increased geopolitical tensions dramatically. In addition, inflation has accelerated rapidly and is currently at levels not seen in the past forty years. Central banks have been increasing inter- est rates at a swift pace to try and tame this de- velopment, and the economic outlook for 2023 looks challenging. Tryg is a relatively defensive stock, as the company’s top-line performance is not particularly sensitive to macroeconomic developments, while investment operations are relatively low risk and the business is considered stable and produces a strong cash flow. Tryg’s total shareholder return was 6% compared to the European Insurers' sector at 3% and the OMX C 25 in Denmark at -11%. Equity markets generally performed very poorly during the first nine months of the year before partly recovering in the last three months. More cyclical sectors have been sold off while defensive stocks have performed better. Share capital and ownership Tryg’s share capital totalled DKK 3,273,269,900 on 31 December 2022. There is one share class (654,653,980 shares with a nominal value of DKK 5), and all shares rank pari passu. The larg- est shareholder, TryghedsGruppen smba, owns 46.5%* of the shares and is the only shareholder holding more than 5% of the share capital. TryghedsGruppen supports peace of mind and healthcare activities in the Nordic region. Quarterly dividends Tryg started paying quarterly dividends in 2017. The Tryg share has a distinct income profile due to the business generally growing in line with GDP, thus producing high margins that are mostly returned to shareholders. Due to the prolonged period of very low interest rates in the wake of the financial crisis, investors attach even greater importance to dividends than in a more normal environment, all else being equal. This is particularly true for insurance investors, as insurance is one of the sectors offering the highest dividend yield. From an investment per- spective, a quarterly dividend is a clear reminder of the high profitability of Tryg’s business and the company’s focus on returning capital to shareholders. Tryg’s dividend policy is based on the following premises: Management’s review - Contents TryghedsGruppen In 2022, and for the seventh year running, Tryg’s largest shareholder, TryghedsGruppen, paid out DKK 1.2bn in member bonuses to Tryg in Denmark, corresponding to 8% of the annual premiums paid in 2021. TryghedsGruppen owns 46.5%* of the shares in Tryg. TrygFonden TrygFonden is the leading and best-known peace-of-mind promoter in Denmark, sup- porting around 800 activities that contribute to creating peace of mind, such as coastal lifeguards, cuddle bears for children in hospital and defibril- lators. TrygFonden contributes around DKK 650m annually to projects that create peace of mind in all parts of Denmark. 43 Annual report 2022 | Tryg A/S | Annual general meeting Tryg’s annual general meeting will be held on 30 March 2023 at 15:00 CET. The notice will be advertised in the daily press in February 2023 and will be sent to shareholders upon request. • An aspiration to distribute a steadily increasing dividend in nominal terms on a full-year basis. • A general objective of creating long-term value for the company’s shareholders. • A competitive dividend policy in comparison with the policies of Tryg's Nordic competitors. • Annual distribution of 60-90% of operating earnings. • The capital level must at all times reflect Tryg's targets for return on own funds and statutory capital requirements. • The capital level may be adjusted via extraor- dinary dividends. Management’s review - Contents Financial calendar 2023* 27 Jan. 2023 Tryg shares are traded ex-dividend 31 Jan. 2023 Payment of Q4 dividend 30 Mar. 2023 Annual general meeting 20 Apr. 2023 Interim report Q1 21 Apr. 2023 Tryg shares are traded ex-dividend 25 Apr. 2023 Payment of Q1 dividend 11 July 2023 Interim report Q2 and H1 12 July 2023 Tryg shares are traded ex-dividend 14 July 2023 Payment of Q2 dividend 13 Oct. 2023 Interim report Q1-Q3 16 Oct. 2023 Tryg shares are traded ex-dividend 18 Oct. 2023 Payment of Q3 dividend Shareholders at 31 December 2022 Free float - geographical distribution at 31 December 2022 * Depending of the approval of the Supervisory Board 5% 33,5% 46,5% TryghedsGruppen Large Danish shareholders* Large international shareholders* Small shareholders 21% 18% 36% Denmark UK USA Others 15% 18% *Shareholders holding more than 10.000 shares. Source: CMi2i Free float is exclusive of TryghedsGruppen. Source: CMi2i Shareholder distribution DKKm 2022 2021 2020 2019 2018 Dividend Dividend per share (DKK) Payout ratio Extraordinary share buy back Extraordinary dividend Extraordinary dividend per share (DKK) 4,118 6.29 183% 5,000 2,802 4.28 89% 2,115 7.0 76% 2,056 6.8 72% 500 1.65 1,994 6.6 115% 44 Annual report 2022 | Tryg A/S | Corporate governance Management’s review - Contents Tryg focuses on managing the company in accordance with the principles of good corpo- rate governance and generally complies with the Danish recommendations prepared by the Committee on Corporate Governance. The Recommendations on Corporate Governance are available at corporategovernance.dk. At tryg. com, Tryg has published its statutory corporate governance report based on the ‘comply-or-ex- plain’ principle for each individual recommenda- tion. This section on corporate governance is an excerpt of the corporate governance report. Download Tryg’s Statutory Corporate Govern ance Report at www.tryg.com/en/ downloads-2022 Dialogue between Tryg, its shareholders and other stakeholders Tryg’s Investor Relations (IR) department main- tains regular contact with analysts and investors. Together with the Executive Board, the Investor Relations team organises investor meetings, conference calls and participates in conferences in Denmark and abroad. The Supervisory Board is regularly informed about the dialogue with investors and other stakeholders. Tryg has an IR policy which states that all company announcements may be published in English only. Tryg publishes quar- terly interim reports in English. Furthermore, Tryg publishes an annual profile in Danish and Norwegian. The profile is addressed to Tryg’s * Calculated excluding Tryg's own shares private shareholders, customers, employees and other stakeholders and will be published on 26 January 2023. Tryg also prepares quarterly investor presenta- tions which are used in the dialogue with inves- tors and analysts. Additionally, Tryg also regularly publishes IR newsletters on relevant topics. All announcements, financial reports, presenta- tions and newsletters are available at tryg.com. This material provides all stakeholders with a comprehensive picture of Tryg’s position and performance. Finally, IR also communicates with stakeholders on social media via Twitter@TrygIR. The consolidated financial statements are presented in accordance with IFRS. At tryg.com, stakeholders are invited to subscribe to press releases, company announcements as well as insider trading announcements. A number of internal guidelines ensure that the disclo- sure of price-sensitive information complies with legislation and stock exchange codes of conduct. Tryg has adopted a number of policies describing the relationship between different stakeholders. See the IR Policy at www.tryg.com/en/ governance/policies Annual General Meeting Tryg holds an Annual General Meeting (AGM) every year. As required by the Danish Compa- nies Act and Tryg’s Articles of Association, the AGM is convened via a company announcement 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 in- formation about the time and venue, or tech- nical requirements for attending the meeting virtually, as well as an agenda for the meeting. All shareholders are encouraged to attend the general meeting. The AGM is held by physical attendance as the Supervisory Board values personal contact with the Group’s sharehold- ers. Tryg has decided to livestream the general meeting and encouraged all shareholders to participate in the general meeting by physical attendance or via livestream. shareholder, TryghedsGruppen smba, owns 46.5%* of the shares and is the only shareholder owning more than 5% of the company’s shares. The Supervisory Board ensures that Tryg’s capital structure is aligned with the needs of the Group and the interests of its shareholders and that it complies with the requirements applicable to Tryg as a financial undertaking. Tryg has adopted a capital plan and a contingency capital plan, which are reviewed annually by the Supervisory Board. Depending on the financial results, each year the Supervisory Board proposes the distribution of quarterly dividends, and possibly an extraordinary annual dividend if a further adjustment of the capital structure is required. Shareholders may propose items to be included on the agenda for the AGM and may ask ques- tions before and at the meeting. Shareholders may vote at the AGM, by post, or appoint the Supervisory Board or a third party as their proxy. Shareholders may consider each item on the agenda. The proxy form and form for voting by post are available at tryg.com before the AGM. Duties, responsibilities and composition of the Supervisory Board The Supervisory Board is responsible for the central strategic management and financial con- trol of Tryg and for ensuring that Tryg’s business setup is robust. This is achieved by monitoring targets and frameworks based on regular and systematic reviews of strategy and risks. Furthermore, prior to the general meeting, Tryg invites shareholders to submit written questions to be considered at the general meeting. Infor- mation on how to exercise shareholders’ rights at the general meeting is clearly communicated to shareholders and published at tryg.com. Share and capital structure Tryg’s share capital comprises a single share class, and all shares rank pari passu. The largest The Executive Board reports to the Supervisory Board on strategies and action plans, market developments and Group performance, funding issues, capital resources and special risks. The Supervisory Board holds one annual strategy seminar to decide on and/or adjust the Group’s strategy to sustain value creation in the company. The Executive Board works with the Supervisory Board to ensure that the Group’s strategy is developed and monitored. The Super- 45 Annual report 2022 | Tryg A/S | visory Board ensures that the necessary skills and financial resources are available for Tryg to achieve its strategic targets. The Supervisory Board specifies its activities in a set of rules of procedure and an annual cycle for its work. The current nine external members of the Su- pervisory Board were elected by the annual gen- eral meeting for a term of one year. Of the nine members elected at the annual general meeting, six, and thus the majority, are independent persons, thus complying with recommendation 3.2.1. in the Recommendations on Corporate Governance. The other three members are dependent persons as they are appointed by Tryg’s largest shareholder, TryghedsGruppen. See pages 45-48 for information on when the in- dividual members joined the Supervisory Board, were re-elected, and when their current election period ends. To ensure the integration of new talent onto the Supervisory Board, members elected by the annual general meeting may hold office for a maximum of twelve years. The Supervisory Board has 14 members in total, with an equal gender representation, as the board currently comprises seven women and seven men (including one male and four female employee representatives). This complies with legislation as well as Tryg’s policy. The Super- visory Board has members from Denmark, Sweden and Norway. See details about the independent board mem bers in the section Supervisory Board on pages 49-52 and at www.tryg.com/en/governance/ management/supervisory-board The Supervisory Board performs an annual evaluation of its work and skills to ensure that it possesses the expertise required to perform its duties in the best possible way. In addition to the annual self-evaluation, an assessment is facilitated with external assistance at least every three years to ensure objectivity in the evalua- tion process. The Supervisory Board focuses pri- marily on the following qualifications and skills: business judgement, problem solving, network- ing, risk management, succession management, general management, CFO/audit, people and organisation, business development, financial services, risk and regulatory compliance, insur- ance – commercial and product insurance – technical/financial modelling, IT & digitalisation, value chain optimisation and customer journey. As part of the evaluation, the Supervisory Board also focuses on other executive positions and board memberships held by the members of the Supervisory Board, including the level of commitment and workload associated with each position to prevent potential overboarding. The evaluation is based on the individual board member’s ability to devote the necessary time for preparation, their performance, attendance and participation at committee and board meet- ings in Tryg. In 2022, the Chair, Jukka Pertola, held four board seats in publicly listed compa- nies. As a professional board member with more than 25 years of relevant international experi- ence combined with a unique set of competen- cies, the Chair, with his role as an independent chair at Tryg, is a very valuable presence at board and committee meetings. He has had a 100% attendance record at all board and committee meetings since he was elected as Chair of the Supervisory Board in 2018. In line with good corporate governance, the Chair has reduced his obligations in listed and non-listed companies in 2022 and is continuously assessing his capabili- ty to allocate the required time and energy to his current Board positions. In early 2022, an externally assisted evalua- tion was conducted of all board members and members of the executive management based on a questionnaire focusing on board compe- tencies and performance. The overall conclusion was that Tryg has a very good, value-adding and professional Supervisory Board that works efficiently and in accordance with sound governance principles. The evaluation resulted in a continued strong focus on Trygg-Hansa integration, long-term strategy, digitalisation, ESG and succession. Further, the Supervisory Board decided to arrange a board training day on relevant matters. See CVs and descriptions of skills in the section Supervisory Board on pages 49- 52 and at www.tryg.com/en/governance/ management/supervisory-board Duties and composition of the Executive Board Each year, the Supervisory Board reviews and adopts the rules of procedure of the Superviso- ry Board and the Executive Board, comprising relevant policies, guidelines and instructions describing reporting requirements and require- ments for communication with the Executive Board. Financial legislation also requires the Executive Board to disclose all relevant infor- mation to the Supervisory Board and report on compliance with limits defined by the Superviso- ry Board and in legislation. The Supervisory Board considers the composi- tion, development, risk and succession plans of the Executive Board in connection with the an- nual evaluation of the Executive Board, and reg- Management’s review - Contents ularly in connection with board meetings. Each year, the Supervisory Board discusses Tryg’s activities to guarantee diversity at management levels. Tryg attaches great importance to diver- sity at all management levels. Tryg has prepared an action plan that sets out specific targets to ensure diversity and equal opportunities and access to management positions for qualified men and women. For several years, Tryg has had a strong focus on diversity and has been aiming to increase the number of women in manage- ment positions to 41%. The number of women in management positions increased from 38% in 2020 to 40% in 2021, just short of the target. Progress has been driven through continuous focus in the recruitment and HR processes. See the General action plan for diversity including women in management at www.tryg.com/en/governance/policies Board committees Tryg has an Audit Committee, a Risk Commit- tee, a Nomination Committee, a Remuneration Committee and an IT-Data Committee. The frameworks for the committees’ work are de- fined in their terms of reference. The board committees’ terms of refer- ence can be found at www.tryg.com/en/ governance/management/ supervisory- board/board-committees including descriptions of members, meeting frequency, responsibilities and activities during the year. 46 Annual report 2022 | Tryg A/S |  See the tasks of the Board Committees in 2022 at www.tryg.com/en/govern- ance/management/supervisory-board/ board-committees All members of the Audit Committee and three out of four members of the Risk Committee, including the committee chair, are independent persons. Three out of the five members of the Remuneration Committee are independent persons, including the committee chair. Two out of three members of the Nomination Committee are independent, including the committee chair. Three out of five members of the IT-Data Com- mittee are independent persons, including the committee chair. Board committee members are elected primarily on the basis of their specialist skills considered important by the Supervisory Board. The involvement of the employee repre- sentatives in the committees is also considered important. The committees exclusively prepare matters for decision by the entire Supervisory Board. The specialist skills of all members are also described at www.tryg.com/en/ governance/management/superviso- ry-board/about-board Remuneration of management Tryg has adopted a remuneration policy for Tryg in general that includes specific schemes for the Supervisory Board, the Executive Board and other employees in Tryg whose activities have a material impact on the risk profile of the company - risk-takers. The remuneration policy for 2022 was adopted by the Supervisory Board in January 2022 and approved by the annual general meeting on 31 March 2022. The Chair of the Supervisory Board reports on Tryg’s remuneration policy each year in connec- tion with the review of the annual report at the annual general meeting. The Board’s proposal for the remuneration of Supervisory Board for the current financial year is also submitted for approval by the shareholders at the annual general meeting. Remuneration of the Supervisory Board Members of Tryg’s Supervisory Board receive a fixed fee and are not covered by any form of incentive or severance programme or pension scheme. Their remuneration is based on trends in peer companies and benchmarked against C25, taking into account the required skills and efforts and the scope of the Supervisory Board’s work, including the number of meetings held. The remuneration received by the Chair of the Supervisory Board is three times that received by ordinary members, while the Deputy Chair’s remuneration is twice that received by ordinary members of the Supervisory Board. Remuneration of the Executive Board Members of the Executive Board are employed on a contractual basis, and all terms of their remuneration are established by the Supervisory Board within the framework of the approved remuneration policy. Tryg wants to strike an appropriate balance between management remuneration, predict- able risk and value creation for the company’s shareholders in the short and long term. Management’s review - Contents The Executive Board’s remuneration consists of a fixed basic salary, a pension contribution of 25% of the base salary and other benefits. The base salary must be competitive and appro- priate for the market and provide sufficient motivation for all members of the Executive Board to do their best to realise the company’s defined targets. end of the deferral period, the participant will receive free shares in Tryg A/S corresponding to the numbers of conditional shares allotted. The granting of free shares is conditional upon the fulfilment of additional conditions such as continued employment and back-testing (testing prior to granting to ensure that the criteria on which the variable salary is based are still met at the time of the granting of free shares). The Supervisory Board can decide that the basic salary should be supplemented with a variable pay element of up to 50% of the fixed salary including pension. Read more about remuneration at Tryg in the Remuneration policy and in the Remunera tion Report at www.tryg.com/ en/governance/remuneration The variable pay is set out in an incentive pro- gramme for the Executive Board. The allocation of the variable salary components under the incentive programme is based on a result and performance assessment for the performance year (financial year) in accordance with specific weighted financial and non-financial targets de- cided at the beginning of the performance year. The principal purpose of the incentive pro- gramme is to ensure the congruence of the finan- cial interest of the participants and the company’s shareholders and to create a correlation between remuneration and performance results. Secondly, the programme should contribute to retaining the participants in the programme at Tryg. For the performance year 2022, the variable pay element was in January 2023 allotted as a combination of cash and conditional shares. The allotted conditional shares are deferred for four years from the time of allotment. After the Independent and internal audit The Supervisory Board ensures monitoring by competent and independent auditors. The group’s internal auditor attends all board meet- ings as well as meetings in the audit committee and risk committee. The independent auditor attends the annual board meeting where the annual report is presented as well as meetings in the audit committee and risk committee. The annual general meeting appoints an inde- pendent auditor recommended by the Super- visory Board. At least once a year, the auditors meet with the Audit Committee without the presence of the Executive Board. The Audit Committee chair deals with any mat- ters that need to be reported to the Supervisory Board. The deviations are explained in Tryg’s Statutory Corporate Governance report, which is available at www.tryg.com/en/ downloads-2022 47 Annual report 2022 | Tryg A/S | Tryg’s internal audit department regularly re- views the quality of the Group’s internal control systems and business procedures. It is respon- sible for planning, performing and reporting on the audit work to the Supervisory Board. Deviations and explanations Tryg complies with the Recommendations on Corporate Governance except with regards to the number of independent members of board committees, with which Tryg complies partially; see recommendation 3.4.2. of the Recommen- dations on Corporate Governance. Management’s review - Contents 48 Annual report 2022 | Tryg A/S | Supervisory Board Management’s review - Contents Jukka Pertolaa) Born in 1960. Joined the Supervisory Board in 2017. Finnish citizen. Torben Nielsena) Born in 1947. Joined the Supervisory Board in 2011. Danish citizen. Mari Thjømøea) Born in 1962. Joined the Supervisory Board in 2012. Norwegian citizen. Carl-Viggo Östlunda) Born in 1955. Joined the Supervisory Board in 2015. Swedish citizen. Career Professional board member. Former CEO of Sie- mens Denmark Education MSc in Electrical Engineering Board seats, Chair Tryg A/S and Tryg Forsikring A/S, Siemens Gamesa Renewable Energy A/S, Asetek A/S and COWI Holding A/S Board seats, Deputy Chair Gomspace Group AB incl. Gomspace A/S, GN Store Nord A/S incl. GN Audio A/S and GN Hearing A/S Committee memberships Remuneration Committee (Chair), Nomination Committee (Chair) and IT-Data Com- mittee in Tryg A/S, Nomination Committee in COWI Hold- ing A/S (Chair), Remuneration Committee (Chair) Asetek A/S, Nomination Committee Asetek A/S, Remuneration Committee, Nomination Committee and Strategy in GN Store Nord A/S Experience More than 25 years of top management ex- perience in the IT and telecommunication industry and electrical engineering. The latest position being CEO of Siemens Denmark from 2002 to 2017. Broad international experience with global and regional business responsibili- ties in both BtC and BtB Competencies Solid technological background in tel- ecommunication, IT, digitalisation, business models, strategy and business development. Understanding of risk management, M&A, business know-how and judgement as well as insurance Number of shares held 13,000 Change in portfolio since 2021 0 Career Professional board member, former Adjunct Pro- fessor at Copenhagen Business School. Former Governor of Danmark’s Nationalbank (Danish Central Bank) Education Savings bank training, Graduate Diplomas in Organisation, Work Sociology, Credit and Financing Board seats, Chair Ny Holmegaard Værk Fund, Invester- ingsforeningen Sparinvest, Vordingborg Borg Fund, Muse- um of Southeast Denmark, Borgring Fonden, Tryg Invest A/S and KTIF (Kapitalforeningen Tryg Invest Funds) Board seats, Deputy Chair Tryg A/S and Tryg Forsikring A/S Board member Sampension KP Livsforsikring A/S and a member of the Executive Management of Bombebøssen Committee memberships Audit Committee (Chair) and Risk Committee (Chair), Nomination Committee and Remuneration Committee in Tryg A/S, Audit Committee (Chair) and Risk Committee (Chair) in Sampension KP Livsforsikring Experience General experience at executive level in bank- ing. Micro and macro knowledge from membership of the board of governors in the Danish Central Bank. Knowledge of chairmanship from non-executive boards Competencies General top management experience from the financial sector as well as experience of risk manage- ment and regulatory requirements, business know-how and judgement Number of shares 53,000 Change in portfolio since 2021 1,000 Career Professional board member and independent ad- visor. Former CFO of KLP Education MSc in Economics and Business Administra- tion, Chartered Financial Analyst (CFA), the Senior Execu- tive Programme from London Business School and Effec- tive Board Management from Harvard Business School Board seats, Chair Seilsport Maritimt Forlag A/S and ThjømøeKranen A/S Board member Tryg A/S and Tryg Forsikring A/S, TF Bank AB, FCG Fonder AB, Hafslund ASA, Deezer SA, Norconsult A/S and Norconsult Holding, Varme og Bad AS Committee memberships Audit Committee and Risk Committee in Tryg A/S, Audit Committee (Chair) in Norconsult A/S, Audit Committee (Chair) in Deezer SA, Risk Committee in TF Bank AB and Audit Committee in Hafslund AS Experience Senior management experience from large- cap companies, insurance and real estate. Extensive experience from board of directors within finance, energy and renewables and is engaged in developing sustainable businesses and good governance. Headed the Norwegian IR associations for a number of years and received the Women’s Board Award for Norway Competencies Business know-how from experience with the financial sector and energy as well as risk manage- ment, strategy, restructuring, business development, M&A, IR and financial communication and working with regula- tory authorities Number of shares 16,817 Change in portfolio since 2021 2,500 Career Former CEO of Swedish banks SBAB and Nordnet and the insurance company SalusAnsvar. At present entre- preneur, professional board member and investor Education BSc in International Business and Finance & Accounting, Stockholm School of Economics Board seats, Chair Fondo Solutions AB, Gladsheim Fas- tigheter AB, Hemdel AB, Juvinum Food&Beverage AB, Picsmart AB, Ponture AB, Ywonn Media Group Sweden AB and Nedvi Fastigheter AB Board member Tryg A/S and Tryg Forsikring A/S, Allert Östlund AB, Delimport Ltd, Goobit Group AB, Havsgaard AB Committee memberships IT-Data Committee (Chair) and Remuneration Committee in Tryg A/S Experience More than 30 years as CEO and Managing Director in local and international environments in both listed and privately held companies as well as banks. Experience from the following industries: manufacturing, logistics, insurance, finance and banking Competencies Solid background from the insurance industry, non-life as well as life. Business know-how and judgement, banking and finance know-how, understand- ing of digitalisation and risk management Number of shares 7,788 Change in portfolio since 2021 0 49 Annual report 2022 | Tryg A/S | Supervisory Board Management’s review - Contents Thomas Hofman-Banga) Born in 1964. Joined the Supervisory Board in 2022. Danish citizen. Mengmeng Dua) Born in 1980. Joined the Supervisory Board in 2022. Swedish citizen. Ida Sofie Jensenb) Born in 1958. Joined the Supervisory Board in 2013. Danish citizen. Claus Wistoftb) Born in 1959. Joined the Supervisory Board in 2019. Danish citizen. Career CEO of the Danish Industry Foundation Education Certified Public Accountant Board seats, Chair CBS Academic Housing, K Alternativ Private Equity 2019 K/S, K Alternativ Private Equity 2020 K/S, K Alternativ Private Equity 2021 K/S, K Alternativ Pri- vate Equity 2022 K/S, K Alternativ Private Equity 2023 K/S and Half Double Institute fmba Board seats, Deputy Chair Bikubenfonden Board member Tryg A/S and Tryg Forsikring A/S and Tranes Fond Experience Extensive global experience in the B2B envi- ronment and within the professional services industry in various roles as CEO, CFO, COB, non-executive director and advisor for world class and market leading compa- nies, including positions as CEO KPMG Denmark (5 years), President and Group CEO NKT (8 years) and Group CFO NKT (6 years) Competencies Key competencies include leadership, de- velopment and execution of ambitious growth strategies focused on value creation, performance culture, trans- parency, integrity, strong team performance and great communication skills Number of shares 4,830 Career Independent advisor to tech startups and profes- sional board member. Former leading positions at Spotify and Acast Education MSc in Economics and Business Administra- tion from Stockholm School of Economics, MSc in Com- puter Science from Royal Institute of Technology (KTH) Board member Tryg A/S and Tryg Forsikring A/S, Dometic Group AB, Swappie Oy and Clas Ohlson AB Committee memberships People and Renumeration Committee in Swappie Oy Experience 10+ years of top management experience and as board member. Thorough knowledge of the Tech start- up space as well as international experience from leading positions within Marketing and Operations at Spotify and COO at Acast. Extensive board experience from Retail, Life Insurance and Aviation. Member of Sweden’s National Innovation Council Competencies BGeneral top management experience from the Tech industry. Extensive experience in the areas of IT & digitalisation, transformation, marketing, organisa- tion, strategy and business development Number of shares 0 Career CEO of Lif (Medicine and Healthcare Industry), CEO of the subsidiary DLI A/S (Danish Medicine Informa- tion) and the subsidiary ENLI ApS (Ethical Board for the Pharmaceutical Industry) Education MSc in Political Science (cand.scient.pol.), Eu- ropean Health Leadership Programme INSEAD, Executive Management Programme INSEAD, Executive Program Columbia Business School, Executive Program Singularity University Board seats, Chair TryghedsGruppen smba, Dansk Medicin Verifikation Organisation Aps Board member Tryg A/S and Tryg Forsikring A/S Committee memberships Remuneration Committee, Nomination Committee and IT-Data Committee in Tryg A/S Experience General top management experience as CEO of Lif since 2004 and former CEO of Herlev University Hospital. Representative in TryghedsGruppen since 2010. Deputy Chair 2014-2019 and Chair since 2019 Competencies Solid business know-how and judgement, analytical approach to problem-solving and strategy, net- working, ability and skills to evaluate succession scenarios as well as understanding of digitalisation Number of shares 5,616 Change in portfolio since 2021 0 Career 1st Deputy Mayor, Municipality of Syddjurs and member of the finance committee. Agriculturalist, wind energy production, tenanted properties and project devel- opment of building sites. CEO in Demex Holding A/S and C.W. Holding A/S Education Agricultural education at Bygholm Agricultural College and various business courses Board member Tryg A/S and Tryg Forsikring A/S, TryghedsGruppen smba, Seidelmann Holding ApS, Houmarken A/S, Lyngfeldt A/S, Lyngfeldt Finansiering A/S, Lyngfeldt Maskinudlejning ApS, K/S Prinz Carl Anlage and Ejendomsfonden - Maltfabrikken Experience Top management experience from operating his own business for 35 years Competencies Analytical approach to problem-solving, solid business know-how and business development, understanding of risk management and succession Number of shares 8,716 Change in portfolio since 2021 0 50 Annual report 2022 | Tryg A/S | Supervisory Board Management’s review - Contents Jørn Rise Andersenb) Born in 1956. Joined the Supervisory Board in 2022. Danish citizen. Charlotte Dietzerb) Born in 1974. Joined the Supervisory Board in 2020. Danish citizen. Tina Snejbjergb) Born in 1962. Joined the Supervisory Board in 2010. Danish citizen. Elias Bakkb) Born in 1975. Joined the Supervisory Board in 2017. Swedish citizen. Career Union Chairman of Dansk Told og Skatteforbund (the Danish Customs and Tax Union) Education 3-year education in the Danish Customs Au- thorities. Various accounting courses (business diploma level), such as internal and external accountancy, organi- sation and tax law Board seats, Chair Tjenestemændenes Laaneforening, Dansk Told- og Skatteforbunds Fælleslegat and TJM Bolig A/S Board seats, Deputy Chair TryghedsGruppen SMBA Board member Tryg A/S and Tryg Forsikring A/S, TJM Forsikring, Interesseforeningen, Lån og Spar Bank A/S, Fondet af 1844, Fagbevægelsens Hovedorganisation (the Trade Union Central Organisation), CO10 (The Central Organisation of 2010), Administrationsaktieselskabet Forenede Gruppeliv and Stats- og Kommunalansattes Forhandlingsfællesskab Committee memberships Risk Committee in Trygheds- Gruppen (Chair), Audit Committee in Lån og Spar Bank A/S (Chair), Risk Committee and Remuneration Commit- tee in Lån og Spar Bank A/S Experience Many years of experience from top manage- ment positions in Danish trade unions as well as board seats in financial companies Competencies Understanding of the financial sector, finance and risk management, member loyalty and care, investments and capital management, political flair Number of shares 0 Employed since 1998 Career Manager advisor in Claims Denmark, Tryg A/S Education Insurance education at Forsikringsakademiet (level 5) as well as various management and communica- tion courses. Supervisory Board education at Forsikring- sakademiet Board member Tryg A/S and Tryg Forsikring A/S Experience Division partner in Tryg A/S and examiner at Forsikringsakademiet Competencies Solid knowledge and experience of the insurance industry. Excellent interpersonal and verbal communication skills Number of shares 706 Change in portfolio since 2021 156 Employed since 1987 Career Officer of Tryg’s Personnel Department Education Insurance training Board member The Central Board of Forsikringsforbundet, Tryg A/S and Tryg Forsikring A/S Committee memberships Risk and Remuneration Com- mittees in Tryg A/S Experience From 1987 to 2001, Tina Snejbjerg worked with insurance sales to both private and commercial customers as well as providing insurance advice to cus- tomers. From 2001-2009, Tina Snejbjerg was the deputy chair of the local branch of Forsikringsforbundet and since 2009 she has been the chair, working with operations, strategy, negotiating agreements and engaged in recruit- ing and retaining members Competencies Many years of experience mean Tina Snejbjerg has acquired solid business know-how and judgement, problem-solving abilities, and has worked with management and HR-related issues in the financial sector, specifically the insurance industry Number of shares 2,657 Change in portfolio since 2021 156 Employed since 2006 Career Product & Strategic Engagement Manager in Tryg A/S Education Norra Real Gymnasium, financial services & insurance at Företagsekonomiska Institut Stockholm. Pro- gramme at Forsikringsakademiet for new board members Board member Tryg A/S and Tryg Forsikring A/S Committee memberships IT-Data Committee in Tryg A/S Experience Team Manager in Moderna Affinity for 12 years, Business development in Moderna and Affinity for 4.5 years Competencies Solid insurance knowledge from his years in the industry, business know-how and judgement, expe- rience with organisation development, business develop- ment, customer handling and interaction Number of shares 3,000 Change in portfolio since 2021 250 51 Annual report 2022 | Tryg A/S | Management’s review - Contents Commitee meeting overview 2022 Supervisory Board Audit Committee Risk Committee Nomination Committee Remuneration Committee IT-Data Committee 6/6 6/6 6/6 8/8 8/8 7/8 6/8 7/8 5/8 8/8 7/7 7/7 7/7 7/7 7/7 4/4 4/4 4/4 4/4 4/4 11/11 11/11 11/11 11/11 11/11 11/11 7/11 6/11 6/11 10/11 11/11 11/11 4/11 4/11 Name Jukka Pertola Torben Nielsen Ida Sofie Jensen Carl-Viggo Östlund Claus Wistoft Mari Thjømøe Thomas Hofman-Banga) Mengmeng Dua) Jørn Rise Andersena) Tina Snejbjerg Charlotte Dietzer Elias Bakk Lena Darinb) Mette Osvoldb) a) Joined the Board in March 2022 b) Joined the Board in July 2022 Supervisory Board Mette Osvoldb) Born in 1978. Joined the Supervisory Board in 2022. Norwegian citizen. Lena Darinb) Born in 1961. Joined the Supervisory Board in 2022. Swedish citizen. Employed since 2003 Career Chair in Finansforbundet in Tryg Education BA in Business and Finance for Managers from Oxford Brookes University, Executive programme from Norwegian School of Economics, Executive management programme from Norwegian Business School, Executive programme from Høyskolen Kristiania Board seats, Chair Finansforbundet in Tryg Board member Tryg A/S and Tryg Forsikring A/S Experience Since 2003, Mette Osvold has held various positions in Tryg, including as process and business devel- oper, project manager, competence manager and most recently as Chair of Finansforbundet in Tryg Competencies Solid knowledge and experience of the insurance industry Number of shares 853 Employed since 1989 Career Claims handler Education Cand.jur/LLM Board seats, Chair Chair of Akademikerföreningen of Trygg-Hansa since 2012 Board member Tryg A/S and Tryg Forsikring Experience Since 1989, Lena Darin has worked as a claims handler in the insurance industry. Former Board Employee representative at Trygg-Hansa (2012-2015) Competencies Solid knowledge and experience of the insurance industry Number of shares 0 Members of the Supervisory Board are elected for a term of one year. Employee representatives are, however, elected for a term of four years. a) Independent member of the Supervisory Board, as per the definition in Recommendations on Corporate Governance b) Dependent member of the Supervisory Board. 52 Annual report 2022 | Tryg A/S | Executive Board Management’s review - Contents Morten Hübbe Group CEO* Born in 1972. Joined Tryg in 2002. Joined the Executive Board in 2003. Barbara Plucnar Jensen Group CFO Born in 1971. Joined Tryg in 2019. Joined the Executive Board in 2019. Lars Bonde Group COO Born in 1965. Joined Tryg in 1998. Joined the Executive Board in 2006. Johan Kirstein Brammer Group CCO Born in 1976. Joined Tryg in 2016. Joined the Executive Board in 2018. Education: BSc in International Business and Modern Lan- guages and MSc in Finance and Accounting, Copenhagen Business School as well as management programme, The Wharton School Board seats, Chair: Siteimprove (including two holding companies) and Conscia A/S (including four holding com- panies) Board seats, Deputy Chair: Simcorp A/S Experience: Morten Hübbe is an experienced senior exec- utive with a holistic and approach to strategic leadership. Morten has 25+ years of insurance experience, of which nearly 20 years have been at top executive level - 8 years as Group CFO and 10 years as Group CEO. In addition, Morten has Supervisory Board experience in banking, software and real estate development Competencies: Morten Hübbe has specific strengths within strategy, finance, communication and leadership. He also has solid know-how within the fields of investor relations, M&A and financial regulation Number of shares held: 321,061 Number of shares held at the start of 2022: 289,921 Change in portfolio: +31,140 * Other Directorships in the following non-financial holding companies CGH Invest ApS, Gusta Invest ApS and Moccau Holding ApS (including one subsidiary). The investment companies are established for the bene- fit of Morten Hübbe and his related family. Education: MSc in Economics, University of Copenhagen Board seats, Deputy Chair: KTIF (Kapitalforeningen Tryg Invest Funds) Board member: Nordsøenheden and Scandi JV Co 2 A/S Experience: Barbara Plucnar Jensen has extensive senior management experience in the financial and service sec- tor. Before joining Tryg, she held the position of CFO with- in ISS' largest market, the UK & Ireland, and several senior positions within group treasury and risk management with ISS. Furthermore, she has comprehensive experience of the banking industry, as she has held several senior posi- tions within the largest financial institution in Denmark, Danske Bank Competencies: Barbara Plucnar Jensen is an execu- tion-oriented executive with an international and strategic mindset focused on making an impact. She has a passion for understanding the day-to-day business and the ability to grasp complex issues quickly and generate results through strong leadership capabilities. She has a strong financial profile and extensive experience within finance and investments, risk management and governance, financial regulation & compliance, group treasury, M&A, IT & outsourcing, use of technology and data as well as sustainability Number of shares held: 29,319 Number of shares held at the start of 2022: 29,319 Change in portfolio: 0 Education: Insurance training, LL.M., University of Copenhagen Board seats, Chair: P/F Betri Trygging, Tryg Livsforsikring A/S and Forsikringsakademiet A/S Board member: Danish Employers’ Association for the Financial Sector and Scandi JV Co 2 A/S Experience: With more than 35 years' experience in the insurance industry, of which more than 15 years have been as a top executive, Lars Bonde has extensive industry knowledge. Throughout his tenure, he has held consec- utive positions as leader and business-responsible for claims and all Tryg's business units, some of which were alongside his role as a member of the Executive Board. Lars Bonde has over 10 years of international experience from board positions. Competencies: Comprehensive experience from the insurance industry. Experienced in strategy, business development, digitalisation, innovation, legal and M&A. Management and leadership experience, including inter- national experience. Extensive board experience across several countries Number of shares held: 122,692 Number of shares held at the start of 2022: 105,885 Change in portfolio: +16,807 Education: LL.M., University of Copenhagen, MBA Aus- tralian Graduate School of Management, and Graduate Diploma (HD-Finance) Copenhagen Business School Board member: Insurance & Pension Denmark (IPD) Experience: Johan Kirstein Brammer has extensive top management experience from a range of industries. Prior to joining Tryg’s Executive Board, Johan headed Tryg’s Private Lines business in Denmark. Before joining Tryg, Jo- han held numerous executive roles with TDC before join- ing the company’s Board as Head of Consumer and Group Chief Marketing Officer. Prior to this, Johan was with McKinsey & Co as a strategy consultant based in Australia and the UK. Before joining McKinsey & Co, Johan was an attorney with Kromann Reumert in Denmark. This range of experience has provided Johan with a broad, diverse toolbox, having held strategic and P&L responsibilities across multiple industries in an international setting Competencies: Johan Kirstein Brammer has an interna- tional and strategic mindset developed from his time as a management consultant as well as a number of strategic roles across several industries. He couples this with a strong commercial sense and a desire to grow the busi- ness and improve the customer experience through inno- vation and digitalisation. Johan has extensive experience within transformative M&A across borders and sectors Number of shares held: 55,287 Number of shares held at the start of 2022: 49,663 Change in portfolio: +5,624 53 Annual report 2022 | Tryg A/S |  Contents – Financial statements 2022 Tryg’s Group consolidated financial statements are prepared in accordance with IFRS Financial statements - Contents Financial statements - Contents 55 56 60 61 62 63 64 65 66 78 80 84 Tryg Group Note Statement by the Supervisory Board and the Executive Board 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 and capital management 2 Operating segments 2 Geographical segments 3 4 Premium income, net of reinsurance Insurance technical interest, net of reinsurance 84 84 5 Claims, net of reinsurance Insurance operating costs, net of reinsurance 84 6 86 Share-based payment - Matching shares 6 87 Share-based payment - Conditional shares 6 88 Interest and dividends 7 88 8 Value adjustments 88 9 Other income and costs 88 10 Tax Intangible assets Property, plant and equipment Investment property Equity investments in associates Financial assets Reinsurer’s share Note 89 11 92 12 93 13 93 14 94 15 98 16 98 17 Current tax 99 Equity 18 100 19 Premium provisions 100 19 Claims provisions 101 20 102 21 Deferred tax 22 Other provisions 103 23 Other debt and debt to group undertakings 103 104 24 25 Contractual obligations, collateral Pensions and similar obligations Earnings per share 26 27 28 29 30 and contingent liabilities Equity investments in associates Related parties Financial highlights Accounting policies Transition to IFRS 9 & IFRS 17 at 1 January 2023 105 106 107 108 109 117 Tryg A/S (parent company) Income statement for Tryg A/S Statement of financial position for Tryg A/S Statement of changes in equity Notes Reporting for Q4 Q4 2022 Quarterly outline Q4 2022 Geographical segments Information Other key figures Group chart Glossary, key ratios and alternative performance measures Product overview Disclaimer 118 119 120 121 124 126 127 128 129 131 132 Annual report 2022 | Tryg A/S | 54 54 NotesAnnual report 2022 | Tryg A/S | Statement by the Supervisory Board and the Executive Board Financial statements - Contents The Supervisory Board and the Executive Board have today considered and adopted the annual report for 2022 of Tryg A/S and the Tryg Group. The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU and the additional Danish disclosure requirements of the Danish Financial Business Act on annual reports prepared by listed financial services companies and the requirements of NASDAQ Copenhagen for the presentation of the financial statements of listed companies. The an- nual report of the parent company is prepared in accordance with the executive order on financial reports presented by insurance companies and lateral pension funds issued by the Danish FSA. In our opinion, the accounting policies applied are appropriate, and the annual report gives a true and fair view of the Group’s and the parent company’s assets, liabilities and financial posi- tion at 31 December 2022 and of the results of the Group’s and the parent company’s opera- tions and the cash flows of the Group for the financial year 1 January 2022 - 31 December 2022. Furthermore, in our opinion the management’s review gives a true and fair view of developments in the activities and financial position of the Group and the parent company, the results for the year and of the Group’s and the parent com- pany’s financial position in general and describes significant risk and uncertainty factors that may affect the Group and the parent company. In our opinion, the annual report of Tryg A/S for the financial year 1 January to 31 December 2022 with the file name TRYG-2022-12-31-en. zip is prepared, in all material respects, in com- pliance with the ESEF Regulation. We recommend that the annual report be adopt- ed by the shareholders at the annual general meeting. Ballerup, 26 January 2023 Executive Board Morten Hübbe Group CEO Barbara Plucnar Jensen Group CFO Lars Bonde Group COO Johan Kirstein Brammer Group CCO Supervisory Board Jukka Pertola Chairman Torben Nielsen Deputy Chairman Mari Thjømøe Thomas Hofman-Bang Carl-Viggo Östlund Mengmeng Du Claus Wistoft Ida Sofie Jensen Jørn Rise Andersen Tina Snejbjerg Charlotte Dietzer Elias Bakk Mette Osvold Lena Darin 55 Annual report 2022 | Tryg A/S | Independent Auditor’s Reports To the shareholders of Tryg A/S Report on the audit of the Financial Statements Our opinion In our opinion, the Consolidated Financial Statements give a true and fair view of the Group’s financial position at 31 December 2022 and of the results of the Group’s operations and cash flows for the financial year 1 January to 31 December 2022 in accordance with Internation- al Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Business Act. Moreover, in our opinion, the parent company Financial Statements give a true and fair view of the parent company’s financial position at 31 December 2022 and of the results of the parent company’s operations for the financial year 1 January to 31 December 2022 in accordance with the Danish Financial Business Act. Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Directors. What we have audited The Consolidated Financial Statements of Tryg A/S for the financial year 1 January to 31 December 2022 comprise the consolidated income statement and statement of other com- prehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and notes, including summary of significant accounting policies. The parent company Financial Statements of Tryg A/S for the financial year 1 January to 31 December 2022 comprise the income state- ment and statement of other comprehensive income, the balance sheet, the statement of changes in equity and notes, including summary of significant accounting policies. Collectively referred to as the “Financial State- ments”. Basis for opinion We conducted our audit in accordance with In- ternational Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Audi- tor’s responsibilities for the audit of the Financial Statements section of our report. Financial statements - Contents Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements for 2022. These matters were addressed in the context of our audit of the Financial State- ments as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Measurement of provisions for insurance contracts The Group’s provisions for insurance contracts total DKK 48,770m, which constitutes 43% of the balance sheet total. Provisions for insurance contracts primarily comprise premium and claims provisions. Premium provisions are calculated as the net present value of a best estimate of expected future cash-flows relating to insurance events after the balance sheet date on insurance contracts entered into on this date, includ- ing direct and indirect costs relating to these contracts. Claims provisions are calculated as the present value of a best estimate of expected payments relating to insurance events incurred at the balance sheet date in addition to payments already made in connection with these events. The estimate includes direct and indirect costs relating to the settlement of claims. Accounting estimates in respect of provisions for insurance contracts is an experience-based estimate involving use of historic claims data and complex actuarial methods and models, which involve significant assumptions on the frequency and extent of insurance events relating to the insurance contracts. We focused on the measurement of provisions for insur- ance contracts, as the accounting estimate is by nature complex and influenced by subjectivity and thus to a large extent associated with estimation uncertainty. Reference is made to the description in the Financial Statements of “Risk and capital management” in Note 1 and in “Accounting policies” in Note 29. We performed risk assessment procedures with the purpose of achieving an understanding of it-systems, procedures and relevant controls relating to claims processing and insurance provisioning. In respect of controls, we assessed whether these were designed and implemented effectively to address the risk of material misstatement. For selected controls, on which we planned to rely on, we tested whether these controls had been performed on a consistent basis. We used our own actuaries in the evaluation of the actuarial methods and models applied by the Group as well as assumptions applied, and calculations made. For a sample of provisions for insurance contracts, we tested the calculation and the data used to underlying documentation. We assessed and challenged the methods and models and significant assumptions applied based on our ex- perience and industry knowledge with a view to ensure that these are in line with regulatory and accounting requirements. This comprised an assessment of the continuity in the basis for the calculation of provisions for insurance contracts. We tested the calculation of provisions for insurance contracts on a sample basis. We assessed whether the disclosures on provisions for insurance contracts were adequate. 56 Annual report 2022 | Tryg A/S | Key audit matter How our audit addressed the key audit matter We assessed whether the acquisitions met the criteria of a business combination. We audited the opening balance sheet and the PPA adjustments and assessed the completeness of assets and liabilities. Further, we involved our internal valuation spe- cialists in assessing the valuation methodologies used by Management and the fair valuation of the acquired assets and liabilities. We challenged key judgements and the significant assumptions used to determine the fair value of the acquired assets and liabilities in the business combination, including the fair value of the acquired customer relations, brands and provisions for insurance contracts. Finally, we assessed the adequacy of disclosures relating to the business combination. Trygg-Hansa and Codan Norway Purchase Price Allocation RSA Scandinavia was acquired with accounting effect as at 1 June 2021 comprising RSA’s Swedish (Trygg-Hansa) and Norwegian (Codan Norway) businesses and a co-share of RSA’s Danish business. Collectively referred to as RSA Scandinavia. According to the shareholders’ agreement, Tryg A/S did not have control of RSA Scandinavia but did have significant influence. Tryg A/S’ access to informa- tion was restricted to ensure compliance with the competition law. Accordingly, the investment was classified as an investment in associates until 31 March 2022. On 1 April 2022, the demerger separating Codan Denmark from Trygg-Hansa in Sweden and Codan in Norway was completed. Tryg A/S obtained control over the Swedish and Norwegian businesses and started full consolidation in the Group’s Financial Statements on a line-by-line basis. Management prepared a purchase price allocation (’PPA’) for the acquisition of Trygg-Hansa and Codan Norway, resulting in assets and liabilities being separately recognised and valued at fair value in the opening balance sheet. When performing the PPA, Management used the Group’s valuation methodologies. In order to determine the fair value of the separately identified assets and liabilities in a business combination, the valuation methodologies require input based on assumptions about the applied cash flow forecasts - based on, amongst others, customer churn rates and claims ratios - and determination of the WACC. The significant judgements and estimates involved in the PPA and opening balance mainly relate to assessing the fair value of acquired customer relationships, brands and other acquired assets and liabilities including provisions for insurance contracts at the opening balance sheet date. We focused on this area because the PPA, which includes identification of the acquired assets and liabilities and their respective fair values, requires complex judgements and significant estimates by Management. Reference is made to the Financial Statements “Intangible assets” and “Equity investments in associates” in Note 11, 14 and 26 and “Accounting policies” section “Business Combinations” and “Measurement of Goodwill, Trademarks and Cus- tomer relations” in note 29. Financial statements - Contents We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark. We have also fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. To the best of our knowledge and belief, pro- hibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 were not provided. Appointment We were first appointed auditors of Tryg A/S on 26 March 2021 for the financial year ending 31 December 2021. We have been reappointed annually by shareholder resolution for a total pe- riod of uninterrupted engagement of two years including the financial year 2022. Statement on Management’s Review Management is responsible for Management’s Review. Our opinion on the Financial Statements does not cover Management’s Review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements, our responsibility is to read Man- agement’s Review and, in doing so, consider whether Management’s Review is materially in- consistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Moreover, we considered whether Manage- ment’s Review includes the disclosures required by the Danish Financial Business Act. Based on the work we have performed, in our view, Management’s Review is in accordance with the Consolidated Financial Statements and the parent company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Business Act. We did not identify any material misstate- ment in Management’s Review. Management’s responsibilities for the Financial Statements Management is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with Interna- tional Financial Reporting Standards as adopted by the EU and further requirements in the Dan- ish Financial Business Act, and for the prepa- ration of parent company financial statements that give a true and fair view in accordance with the Danish Financial Business Act, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstate- ment, whether due to fraud or error. 57 Annual report 2022 | Tryg A/S | In preparing the Financial Statements, Manage- ment is responsible for assessing the Group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Man- agement either intends to liquidate the Group or the parent company or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Statements Our objectives are to obtain reasonable assur- ance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Rea- sonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements. As part of an audit in accordance with ISAs and the additional requirements applicable in Den- mark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, inten- tional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal con- trol relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the parent company’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. Conclude on the appropriateness of Man- agement’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the parent company’s ability to continue as a going con- cern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the parent company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underly- ing transactions and events in a manner that gives a true and fair view. • • • • • Obtain sufficient appropriate audit evidence regarding the financial information of the en- tities or business activities within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely respon- sible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and sig- nificant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with govern- ance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independ- ence and, where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter. Financial statements - Contents Report on compliance with the ESEF Regulation As part of our audit of the Financial Statements, we performed procedures to express an opinion on whether the annual report of Tryg A/S for the financial year 1 January to 31 December 2022 with the filename TRYG-2022-12-31-en.zip is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Elec- tronic Format (ESEF Regulation) which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tag- ging of the Consolidated Financial Statements including notes. Management is responsible for preparing an annual report that complies with the ESEF Regu- lation. This responsibility includes: • The preparing of the annual report in XHTML • format; The selection and application of appropri- ate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all financial information required to be tagged using judgement where necessary; • Ensuring consistency between iXBRL tagged data and the Consolidated Financial State- ments presented in human-readable format; • and For such internal control as Management de- termines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. 58 Annual report 2022 | Tryg A/S | Hellerup, 26 January 2023 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab CVR No 3377 1231 Christian Fredensborg Jakobsen State Authorised Public Accountant mne16539 Per Rolf Larssen State Authorised Public Accountant mne24822 Our responsibility is to obtain reasonable assur- ance on whether the annual report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of procedures selected depend on the auditor’s judgement, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include: • Testing whether the annual report is pre- pared in XHTML format; • Obtaining an understanding of the compa- ny’s iXBRL tagging process and of internal control over the tagging process; • Evaluating the completeness of the iXBRL tagging of the Consolidated Financial State- ments including notes; • Evaluating the appropriateness of the com- pany’s use of iXBRL elements selected from the ESEF taxonomy and the creation of exten- sion elements where no suitable element in the ESEF taxonomy has been identified; • Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and • Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements. In our opinion, the annual report of Tryg A/S for the financial year 1 January to 31 December 2022 with the file name TRYG-2022-12-31-en. zip is prepared, in all material respects, in com- pliance with the ESEF Regulation. Financial statements - Contents 59 Annual report 2022 | Tryg A/S | Financial highlights Financial statements - Contents DKKm NOK/DKK, average rate for the period SEK/DKK, average rate for the period 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 a) 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 for the period Run-off gains/losses, net of reinsurance Run-off gains/losses, Gross 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 Operating ratio Relative run-off gains/losses Return on equity after tax (%) 2022 73.95 70.33 33,938 -22,407 -4,783 6,748 -723 152 6,177 -1,193 -1,933 3,051 -804 2,247 0 2,247 1,380 1,449 48,770 1,851 42,504 114,113 66.0 2.1 68.2 14.1 82.2 81.9 5.7 4.9 2021 72.92 73.39 24,137 -16,275 -3,394 4,468 -731 -29 3,709 870 -624 3,956 -795 3,161 -3 3,158 963 949 33,588 1,494 49,008 100,392 67.4 3.0 70.5 14.1 84.5 84.6 4.0 7.8 2020 69.63 70.95 22,653 -15,437 -3,202 4,014 -499 -20 3,495 311 -265 3,541 -768 2,773 0 2,773 1,145 1,130 32,488 1,377 12,264 60,916 68.1 2.2 70.3 14.1 84.5 84.6 4.9 22.5 2019 75.80 70.62 21,741 -14,857 -3,081 3,803 -566 1 3,237 579 -188 3,628 -783 2,845 -2 2,843 1,194 1,173 32,224 1,501 12,085 59,059 68.3 2.6 70.9 14.2 85.1 85.1 5.1 24.6 Note: Tryg’s acquisition of the activicies in Trygg-Hansa and Codan Norway were fully consolidated in the Financial Statements from the 1 April 2022. a) Tryg’s acquisition of RSA Scandinavia affects the Financial Statement from closing the 1 June 2021. The investment return includes income from RSA Scandinavia of DKK 34m (2021: DKK 1,206m) and includes net effect from demerger and sale of Codan DK in 2022. Following demerger 1 April, Tryg has started fully consolidation of Codan Norway and Trygg-Hansa. Please see the income overview in Management’s review for further details. 2018 77.53 72.67 18,740 -12,636 -2,704 3,400 -624 -10 2,766 -332 -172 2,262 -529 1,733 -2 1,731 1,221 1,236 31,948 1,415 11,334 56,545 67.4 3.3 70.7 14.4 85.1 85.2 5.4 14.9 60 Annual report 2022 | Tryg A/S | Income statement Financial statements - Contents DKKm 2022 2021 DKKm 2022 2021 Note General insurance Gross premiums written Ceded insurance premiums Change in premium provisions Change in reinsurers' share of premium provisions Premium income, net of reinsurance 34,658 -1,673 157 -3 33,139 25,413 -1,564 -44 -37 23,768 Note 14 7 8 7 Investment activities Profit/Loss from associates Income from investment property Interest income and dividends Value adjustments Interest expenses Administration expenses in connection with investment activities Insurance technical interest, net of reinsurance 152 -29 Claims paid Reinsurance cover received Change in claims provisions Change in the reinsurers' share of claims provisions Claims, net of reinsurance Bonus and premium discounts Acquisition costs Administration expenses Acquisition costs and administration expenses Reinsurance commissions and profit participation from reinsu- rers Insurance operating costs, net of reinsurance Technical result -22,046 398 -361 325 -21,683 -877 -3,695 -1,088 -4,783 229 -4,554 6,177 -15,497 471 -778 141 -15,663 -1,232 -2,655 -739 -3,394 257 -3,137 3,709 Total investment return Return on insurance provisions Total investment return after insurance technical interest Other income Other costs Profit/loss before tax Tax 9 10 Profit/loss on continuing business Profit/loss on discontinued and divested business Profit/loss for the year 24 Earnings per share 3 4 5 6 2 -19 48 918 -913 -154 -145 -265 -928 -1,193 150 -2,083 3,051 -804 2,247 0 2,247 3.47 1,161 41 538 -472 -182 -153 932 -62 870 139 -763 3,955 -795 3,161 -3 3,158 5.51 61 Annual report 2022 | Tryg A/S | Statement of comprehensive income Financial statements - Contents DKKm Note Profit/loss for the year Other comprehensive income Other comprehensive income which cannot subsequently be reclassified as profit or loss Actuarial gains/losses on defined-benefit pension plans Tax on actuarial gains/losses on defined-benefit pension plans Other comprehensive income which can subsequently be reclassified as profit or loss Deferred tax related to receivable balance Exchange rate adjustments of foreign entities Exchange rate adjustments of foreign material associates Hedging of currency risk in foreign entities Tax on hedging of currency risk in foreign entities Total other comprehensive income Comprehensive income 2022 2,247 -2 1 -2 -50 -2,217 52 496 -109 -1,828 -1,830 417 2021 3,158 0 0 0 0 93 -52 -99 22 -36 -36 3,122 62 Annual report 2022 | Tryg A/S | Statement of financial position Financial statements - Contents 2022 2021 DKKm 2022 2021 DKKm Note 11 Assets Intangible assets Operating equipment Owner-occupied property Total property, plant and equipment Investment property Equity investments in associates Total investments in associates 12 13 14 Equity investments Unit trust units Bonds Other lending Derivative financial instruments Reverse repurchase lending Total other financial investment assets 15 Total investment assets Reinsurers' share of premium provisions Reinsurers' share of claims provisions Total reinsurers' share of provisions for insurance contracts 19 16 15 17 Receivables from policyholders Total receivables in connection with direct insurance contracts Receivables from insurance enterprises Other receivables Total receivables Current tax assets Cash at bank and in hand Other Total other assets Interest and rent receivable Other prepayments and accrued income Total prepayments and accrued income 32,716 178 693 871 1,017 222 222 4,647 8,330 55,800 75 1,340 194 70,387 71,626 264 1,587 1,851 1,621 1,621 498 414 2,534 854 2,662 1 3,516 231 769 1,000 Note 18 Equity and liabilities Equity 1 Subordinated loan capital 19 19 20 21 22 15 17 23 1 25 26 27 28 29 30 Premium provisions Claims provisions Provisions for bonuses and premium discounts Total provisions for insurance contracts Pensions and similar obligations Deferred tax liability Other provisions Total provisions Debt relating to direct insurance Debt relating to reinsurance Amounts owed to credit institutions Debt relating to repos Derivative financial instruments Current tax liabilities Other debt Total debt Accruals and deferred income Total equity and liabilities Risk and capital management Contractual obligations, collateral and contingent liabilities Acquisition of activities Related parties Financial highlights Accounting policies Transition to IFRS 9 & IFRS 17 at 1 January 2023 7,025 158 604 762 1,040 37,067 37,067 3,487 8,231 35,611 75 913 460 48,778 86,885 262 1,232 1,494 1,678 1,678 407 485 2,570 265 802 1 1,068 134 453 588 Total assets 114,113 100,392 42,504 4,154 7,700 39,227 1,843 48,770 85 3,542 94 3,721 895 123 1,305 4,287 2,398 83 5,820 14,911 52 49,008 4,442 6,183 25,587 1,818 33,588 108 806 40 954 819 77 835 2,417 879 218 7,084 12,329 71 114,113 100,392 63 Annual report 2022 | Tryg A/S | Statement of changes in equity DKKm Share capital Reserve for exchange rate adjustment Other reserves Retained earnings Proposed dividend Non- controlling interest Equity at 31 December 2021 3,273 -11 1,735 43,309 700 2022 Profit/loss for the year Other comprehensive income Total comprehensive income Dividend paid Dividend own shares Purchase and sale of own shares Share based payments Total changes in equity in 2022 Equity at 31 December 2022 Equity at 31 December 2020 2021 Profit/loss for the year Other comprehensive income Total comprehensive income Dividend paid Dividend own shares Purchase and sale of own shares Issue of new shares a) Share based payments Total changes in equity in 2021 Equity at 31 December 2021 0 -1,778 -1,778 0 3,273 1,511 0 1,763 1,763 3,273 -1,778 -1,789 25 -36 -36 -36 -11 2,989 2,989 2,989 4,724 1,706 29 29 29 1,735 -4,860 -52 -4,912 38 -3,253 65 -8,062 35,247 8,492 327 0 327 3 -137 34,557 66 34,817 43,309 4,118 4,118 -3,771 347 1,047 529 2,802 2,802 -2,630 172 700 1 0 0 0 0 0 0 0 0 1 1 0 0 1 Total 49,008 2,247 -1,830 417 -3,771 38 -3,253 65 -6,504 42,504 12,264 3,158 -36 3,122 -2,630 3 -137 36,320 66 36,744 49,008 Financial statements - Contents Proposed dividend per share is calculated as the total dividend proposed by the Supervisory Board after the end of the financial year divided by the total number of shares at the end of the year (654,653,980 shares). The possible payment of dividend from Tryg Forsikring A/S to Tryg A/S is influenced by contingency fund provisions of DKK 4,724m (DKK 1,735m in 2021). 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. a) 352,505,989 new shares of nominal DKK 5 at a price of 105 per share were issued. Costs related to the issue of new shares are deducted in proceeds recognised in retained earnings with DKK 694m. 64 Annual report 2022 | Tryg A/S | Financial statements - Contents Cash flow statement DKKm Note Cash flow from operating activities Premiums Claims Ceded business Costs Change in other debt and other amounts receivable Cash flow from insurance activities Interest income Interest expenses Dividend received Taxes Other income and costs Total cash flow from operating activities Cash flow from investment activities Sale of property Purchase/sale of equity investments and unit trust units (net) Purchase/sale of bonds (net) Purchase/sale of operating equipment (net) Acquisition/sale of associate Hedging of currency risk Total cash flow from investment activities Cash flow from financing activities Issue of new shares Purchase and sale of own shares (net) Subordinated loan capital Dividend paid Change in lease liabilities Change in amounts owed to credit institutions Total cash flow from financing activities 2022 2021 DKKm 32,590 -26,366 -1,126 -3,415 177 1,859 567 -149 152 -1,039 -1,147 243 0 -222 1,810 -50 6,340 496 8,374 0 -3,253 0 -3,771 -194 471 -6,747 24,605 -14,597 -906 -3,296 -686 5,120 311 -182 112 -1,200 -490 3,670 160 -891 -2,501 -22 -36,357 -36 -39,647 36,320 -137 2,297 -2,630 -137 -356 35,357 Change in cash and cash equivalents, net Exchange rate adjustment of cash and cash equivalents, 1 January Change in cash and cash equivalents, gross Cash and cash equivalents at 1 january Cash and cash equivalents at 31 December Liabilities arising from financing activities 2022 Carrying amount at 1 January Exchange rate adjustments Amortisation Cash flow Carrying amount at 31 December 2021 Carrying amount at 1 January Exchange rate adjustments Amortisation Cash flow Carrying amount at 31 December 2022 1,870 -11 1,860 802 2,662 Subordinated loans 4,442 Amounts owed to credit institutions 835 -290 2 0 4,154 2,801 -658 2 2,297 4,442 0 0 471 1,305 1,191 0 0 -356 835 2021 -620 32 -588 1,390 802 Total 5,277 -290 2 471 5,459 3,992 -658 2 1,941 5,277 65 Annual report 2022 | Tryg A/S | Financial statements - Contents 1 Risk and capital management Risk management in Tryg The Supervisory Board defines the basis for the risk appetite through the business model and the current strategy. The Supervisory Board has regulated the management of risk activities through policies and guidelines to the business supported by underlying business processes and a power of attorney structure. The company’s risk management forms the basis for the risk profile being in line with the specified risk appetite at all times. Tryg’s risk profile is continuously measured, quantified and reported to the manage- ment and the Supervisory Board. In Tryg, we have adopted a three lines of defence governance model across the organisation. This is to ensure robust governance and effective communica- tion between the business areas, key functions and internal audit as well as reporting to the Supervisory Board and the Supervisory Board’s Risk Committee. 1st line of defence is the Business Management 2nd line of defence is Compliance-, Actuarial- and Risk Management function 3rd line of defence is Internal Audit and Internal Audit function The 1st line consists of the Business Management: The business areas are responsible for the daily risk management and for carrying out every day work based on Tryg’s policies and instructions regarding the management of risks and are responsible for being compliant with both internal and external require- ments. This means that there must be procedures and guidelines in place for vital areas, and that internal controls are carried out in such a way that risks are identified in a timely manner and necessary risk miti- gation activities are implemented. The 2nd line consists of the Compliance, Actuarial and Risk Management function: The compliance function has the overall responsibility for overseeing and monitoring compliance with applicable laws and legislation as well as internal policies and guidelines. The key responsibility of the actuarial function is to ensure and assess the adequacy of the provisions. The risk management function is responsible for the facil- itation, monitoring and implementation of effective risk management practices and reporting of adequate risk-related information throughout the organisation. The risk management function ensures a consistent approach to risk identification across the organisation, risk assessment of the most significant risks at Group level and reporting to the Supervisory Board. Lines of defence Executive Board Supervisory Board Supervisory Board’s Risk Committee Supervisory Board’s Audit Committee Reporting Right to be heard, cf. draft for Executive order on Management What risk profile does Tryg want? - Business model - Strategy - Policies How is this supported? Tactically - Policies - Capital plan - Contingency plan Operationally - Frameworks - Limitations - Instructions - Allocated capital - Contingency plans How is the actual risk profile meas- ured? Tactically - Risk reports - Internal controls - Capital model - Stress tests 1st line of defence 2nd line of defence 3rd line of defence External audit • Business Management • Compliance function • Actuarial function • Risk management function • Internal audit • Internal audit function Tryg’s risk management environment Supervisory Board • Risk appetite • Capital • Strategy • Crisis management Supervisory Board’s Risk Committee Risk management environment Business areas Policies Executive Board Policies and guidelines Risk Committee Risk reporting recommen- dations Insurance risk Model risk Compliance risk Market risk Operational risk Systematic risk assessment reporting • Contingency • Control • Risk identification • Risk management 66 NotesAnnual report 2022 | Tryg A/S | Furthermore, the function prepares specific rec- ommendations in relation to capital management, reinsurance, investment risk management and more. Tryg’s risk management function is also responsi- ble for determining the company’s solvency capital requirement. The functions in the second line of defence must have an overview of business processes and risks across the organisation. The 3rd line consists of internal audit: The third line must ensure an independent and objective audit of the organization’s internal controls, risk management and governance processes. Internal audit reports independently to the Supervisory Board and to its Audit Committee. The Supervisory Board has organised their own Risk Committee consisting of 4 members of the Supervi- sory Board. In addition to these 4 members, the Chief Financial Officer, Chief Risk Officer and the General Counsel (in Capacity as overseeing the Compliance function) are part of the Committee. The Supervisory Board’s Risk Committee was established to ensure that all risk and capital related topics are discussed thoroughly before discussed in the Supervisory Board. The Supervisory Board meets minimum 4 times annually. Capital management Tryg’s capital management is based on the key busi- ness objectives: • A solid capital base, supporting both the statutory requirements and a single ‘A’ rating from Moody’s. • Support of a steadily increasing nominal dividend per share, with a payout ratio in the interval 60-90% (of operating earnings) Tryg’s capital base currently consist of Tier 1 and 2 capital, such as shareholders’ equity and subordinated loans. The capital base is continuously measured against the capital requirement calculated on the basis of Tryg’s partial internal model, where insurance risks are modelled using an internal model, while other risks are described using the standard formula. The model calculates Tryg’s capital requirement with 99.5% solvency level with a 1-year horizon, which means that Tryg will be able to fulfil its obligations in 199 out of 200 years. The partial internal model has been used for a number of years, and was approved by the Danish Financial Supervisory Authority (DFSA) in December 2015. A major model change was last approved by DFSA in April 2020. Monitoring of the capital base also involves capital projections based on expected business plans within the strategic planning period and selected stress scenarios. Company’s Own Risk and Solvency Assessment (ORSA) ORSA is the company’s own risk assessment based on the Solvency II principles, which implies that Tryg must assess all material risks that the company is or may be exposed to. The ORSA report also contains an assessment of whether the calculation of solvency capital requirement is reasonable and is reflecting Tryg’s actual risk profile. Tryg’s risk activities are implemented via continuous risk management processes, where the main results are reported to the Supervisory Board and its Risk Committee during the year. Therefore, the ORSA report is an annual summary document assessing all these processes. Insurance risk Insurance risk comprises two main types of risks: Underwriting risk and reserving risk. Underwriting risk Underwriting risk is the risk that insurance premiums will not be sufficient to cover the compensations and other costs associated with the insurance business. Underwriting risk is managed primarily through the company’s insurance policy defined by the Super- visory Board, and administered through business procedures, underwriting guidelines etc. Underwriting risk is assessed in Tryg’s capital model, determining the capital impact from insurance products. Reinsurance is used to reduce the underwriting risk in situations where this cannot be achieved to a sufficient degree via ordinary diversification. The main components of the reinsurance programme as of January 1, 2023 are: • In case of major events involving damage to build- ings and contents, Tryg’s reinsurance programme provides sufficient protection to cover a loss defined by the Solvency II Standard Scenario which corresponds to a 1 in 200 year event. Retention for such events is DKK 300m. • In addition Tryg has bought a specific cover for aggregation of natural disasters with a retention of DKK 500m. • Tryg has also taken out reinsurance on a per risk ba- sis for large claims occurring in business lines with very high sums insured. Retention for large claims is DKK 150m, gradually dropping to DKK 50m. • Tryg has a reinsurance cover of other lines with retention of DKK 100m for the first claim and DKK 25m for subsequent claims. For the individual sec- tors, individual cover has subsequently been taken out as needed. The use of reinsurance creates a natural counterparty risk. This risk is handled by applying a wide range of reinsurers with a suitable rating and adequate capital level as defined by the Supervisory Board. Reserving risk Reserving risk relates to the risk of Tryg’s insurance provisions being inadequate. The Supervisory Board lays down the overall framework for the handling of reserving risk in the insurance policy, while the overall risk is measured in the capital model. The uncertainty associated with the calculation of claims reserves affects Tryg’s results through the run-off on reserves. Long-tailed reserves in particular are subject to inter- Financial statements - Contents est rate and inflation risk. Interest rate risk is hedged by means of Tryg’s match portfolio which corresponds to the discounted claims reserves. In order to manage the inflation risk of claims reserves, Tryg has bought zero coupon inflation swaps. After Trygs acquisition of Trygg-Hansa, Tryg’s portfolio of long tailed Swedish motor third party liability and personal accident has increased significantly. Tryg determines the claims reserves via statistical methods as well as individual assessments. At the end of 2022, Tryg’s claims reserves net of reinsurance totalled DKK 37,639m with an average discounted duration of approximately 5.2 years (aver- age duration undiscounted 7.2 years). Investment risk The overall framework for managing investment risk is defined by the Supervisory Board in Tryg’s investment policy. In overall terms, Tryg’s investment portfolio is divided into a match portfolio and a free portfolio. The match portfolio corresponds to the value of the dis- counted claims reserves and is designed to hedge the interest rate sensitivity of these as closely as possible. Tryg carries out daily monitoring, follow-up and risk management of the Group’s interest rate risk. The free portfolio is subject to the framework defined by the Supervisory Board through the investment pol- icy. The purpose of the free portfolio is to achieve the highest possible return relative to risk. Tryg’s property portfolio constitutes the company’s largest invest- ment risk. The Property portfolio comprises primarily well-diversified and liquid property investment funds, but also a small proportion of directly held investment properties, the value of which is adjusted based on the conditions on the property market through internal valuations backed by external valuations. At the end of 2022, investment properties accounted for 6.7% (including property funds) and Tryg’s equity portfolio accounted for 5.1% of the total investment assets. Tryg does not want to speculate in foreign currency, but since Tryg invests and operates its insurance busi- ness in other currencies than Danish kroner, Tryg is 67 NotesAnnual report 2022 | Tryg A/S | exposed to currency risk. Tryg is primarily exposed to fluctuations in the other Scandinavian currencies due to its ongoing insurance activities. Premiums earned and claims paid in other currencies create a natural currency hedge, for which reason other risk mitigation measures are not required in this area. However, the part of equity held in other currencies than Danish kro- ner will be exposed to currency risk. This risk is hedged on an ongoing basis using currency swaps. In addition to the above-mentioned risks, Tryg is ex- posed to credit, counterparty and concentration risk. These risks primarily relate to exposures in high-yield bonds, emerging market debt exposures as well as Tryg’s investments in AAA-rated Nordic and European government and mortgage bonds. These risks are also managed through the investment policy and the framework for reinsurance defined in the insurance policy. For a non-life insurance company like Tryg, liquidity risk is practically non-existent, as premium payments fall due before claims payments. The only significant assets on Tryg’s balance sheet, which by nature is somewhat illiquid, are the property portfolio. Operational risk Operational risk relates to errors or failures in internal procedures, fraud, breakdown of infrastructure, IT secu- rity and similar factors. As operational risks are mainly internal, Tryg focuses on an adequate control environ- ment for its operations. In practice, this work is organ- ised by means of procedures, controls and guidelines covering the various aspects of the Group’s operations. The Supervisory Board defines the overall framework for managing operational risk in Tryg’s Operational risk policy and in the Information Security Policy. A special crisis management structure is set up to deal with the eventuality that Tryg is hit by major crises. This comprises a Crisis Management Team at Group level, national contingency teams at country level and finally business continuity teams in the individual areas. Tryg has prepared contingency plans to address the most important areas among these ensuring servicing of customers. In addition, comprehensive IT contingency plans have been established, primarily focusing on the business critical systems. Other risks Strategic risk The strategic risk is the risk of loss as a result of Tryg’s chosen strategic position. The strategic position covers both business transactions, IT strategy, choice of business partners and changed market conditions. Tryg’s strategic position is determined by Tryg’s Super- visory Board in close collaboration with the Executive Board. Before determining the strategic position, the strategic decisions are subject to a risk assessment, explaining the risk of the chosen strategy to Tryg’s Supervisory Board and Executive Board. Compliance risk Compliance risk means the risk of Tryg being subject to legal sanctions , authority sanctions, suffering financial losses or deterioration of reputation due to non compliance with legislation, market standards or internal regulations. The Compliance function must control assess and report whether Tryg’s methods and procedures for complying with the legislation are relia- ble and function effectively. The compliance functions conducts a risk assessment annually and identifies the areas to be reviewed in the coming year. Compliance continuously deals with the identified compliance risks until they are mitigated and monitors and assesses whether any new risks are being handled. In addition, the Compliance Function also provides ongoing training in compliance matters, e.g. Code of conduct and GDPR training as part of our mandatory compliance training courses. In 2022, 99% of our employee completed and passed the training on time. Financial statements - Contents 2022 2021 +/-339 -150 -200 +/-241 -150 -200 +/- 1.240 +/- 400 +/- 2.780 +/- 1,745 -252 173 -79 -936 1,164 228 -723 596 -128 -505 32 -694 -3,177 2,904 -273 -183 178 -5 -152 192 40 -813 734 -78 -516 18 -508 -1,237 1,226 -11 Sensitivity analysis DKKm Insurance risk Effect of 1% change in: Combined ratio (1 percentage point) Large single loss Catastrophe event Reserving risk 1% change in inflation on person-related lines of business a) 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: NOK: Impact of interest-bearing securities Higher discounting of claims provisions Net effect of interest rate rise SEK: Impact of interest-bearing securities Higher discounting of claims provisions Net effect of interest rate rise DKK, EUR and Other: Impact of interest-bearing securities Higher discounting of claims provisions Net effect of interest rate rise Equity market 15 % decline in equity market Impact of derivatives and related thereto 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 Net impact of exchange rate decline Technical result per year: Impact of 15% change in NOK and SEK exchange rates relative to DKK +/- 524 +/- 183 a) Including the effect of the zero coupon inflation swap 68 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents Emerging risk Emerging risk covers both new risks and already known risks, with changing characteristics. The man- agement of this type of risk is handled in a strategic level by the Supervisory Board and Executive Board, and also at an operational level by the individual business areas, which monitor the market and adapt the products as the conditions change. In the event of a change in insurance terms, it is ensured that Tryg’s reinsurance cover is consistent with the new condi- tions. Emerging risk is also a part of the systematically implemented risk identification process in Tryg. Liquidity risk Liquidity risk is the risk of loss as a result of not being able to meet payments when they fall due. In insurance companies the liquidity risk is very limited as premiums are paid prior to the beginning of the risk period. The majority of Tryg’s investment portfolio are placed in AAA or AA rated bonds which can be either sold or repoed in a short time span. Provisions for claims Gross (DKKm) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Estimated accumulated claims End of year 1 year later 2 year later 3 year later 4 year later 5 year later 6 year later 7 year later 8 year later 9 year later 10 year later Cumulative payments to date Provisions before discounting, end of year Discounting Reserves from 2011 and prior years Gross provisions for claims, end of year Estimated accumulated claims regarding Trygg-Hansa and Codan Norway 12,953 12,946 12,976 12,796 12,545 12,461 13,653 13,586 13,478 13,422 15,191 15,191 -12,780 2,411 -853 13,359 13,632 13,294 13,131 13,113 14,413 14,204 14,070 14,034 14,176 12,206 12,522 12,350 12,266 13,577 13,420 13,164 13,097 13,373 14,176 -13,312 13,373 -12,468 864 -178 905 -196 14,192 14,130 14,089 15,459 15,397 15,380 15,344 15,734 15,734 -14,595 1,139 -230 12,400 12,252 13,720 13,688 13,663 13,632 14,076 12,256 13,920 13,831 13,745 13,738 14,407 15,007 14,994 14,972 14,982 15,783 15,699 15,730 15,693 16,613 16,497 16,311 17,217 16,953 20,577 25,475 14,076 -12,777 1,299 -252 14,407 -12,812 1,595 -304 15,783 -13,687 2,097 -389 16,613 -13,727 2,886 -475 17,217 -13,372 3,844 -586 20,577 -13,445 7,132 -869 25,475 -13,108 12,367 -902 182,622 -146,083 36,539 -5,235 7,923 39,227 1,879 306 449 526 572 732 862 1,032 1,557 3,011 6,605 17,530 The amounts in foreign currency in the table are translated to Danish kroner using the exchange rate at 31 December 2022 to prevent the impact of exchange rate fluctuations. 69 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents Provisions for claims (continued) Ceded business (DKKm) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Estimated accumulated claims End of year 1 year later 2 year later 3 year later 4 year later 5 year later 6 year later 7 year later 8 year later 9 year later 10 year later Cumulative payments to date Provisions before discounting, end of year Discounting Reserves from 2011 and prior years Provisions for claims, end of year 210 238 274 268 256 246 259 258 325 325 332 332 -256 76 -3 535 1,464 1,247 1,241 1,257 1,285 1,334 1,294 1,292 1,285 1,285 -1,244 41 -1 260 293 288 284 305 302 304 304 306 306 -293 14 0 2,053 1,859 1,891 1,868 1,898 1,911 1,903 1,899 1,899 -1,883 16 -1 Estimated accumulated claims regarding Trygg-Hansa and Codan Norway 0 0 3 0 195 244 237 236 232 232 230 230 -227 3 0 0 275 376 371 382 353 383 383 -342 41 -2 594 638 665 675 683 683 -631 51 -2 351 431 452 448 448 -334 114 -6 717 778 705 705 -516 189 -8 524 557 754 557 -231 326 -12 754 -94 661 -25 7,581 -6,051 1,530 -61 118 1,587 11 1 0 2 8 39 63 The amounts in foreign currency in the table are translated to Danish kroner using the exchange rate at 31 December 2022 to prevent the impact of exchange rate fluctuations. 70 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents Provisions for claims (continued) Net of reinsurance (DKKm) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Estimated accumulated claims End of year 1 year later 2 year later 3 year later 4 year later 5 year later 6 year later 7 year later 8 year later 9 year later 10 year later Cumulative payments to date Provisions before discounting, end of year Discounting Reserves from 2011 and prior years Provisions for claims, net of reinsurance, end of the year 2,335 -850 12,744 12,708 12,702 12,529 12,290 12,215 13,394 13,328 13,153 13,097 14,859 14,859 -12,524 12,824 12,168 12,047 11,891 11,856 13,128 12,871 12,776 12,742 12,891 11,946 12,229 12,062 11,981 13,271 13,117 12,860 12,793 13,067 12,891 -12,068 13,067 -12,175 823 -177 891 -196 12,139 12,271 12,198 13,591 13,500 13,468 13,441 13,835 13,835 -12,712 1,123 -229 12,205 12,008 13,483 13,452 13,431 13,400 13,846 11,981 13,544 13,460 13,363 13,385 14,024 14,413 14,357 14,307 14,307 15,101 15,348 15,299 15,241 16,165 15,780 15,534 16,511 16,429 20,020 24,721 13,846 -12,550 1,296 -252 14,024 -12,470 1,554 -302 15,101 -13,056 2,045 -387 16,165 -13,393 2,772 -469 16,511 -12,856 3,655 -578 20,020 -13,214 6,806 -857 24,721 -13,015 11,707 -877 175,040 -140,032 35,009 -5,174 7,805 37,640 Estimated accumulated claims regarding Trygg-Hansa and Codan Norway 1,879 306 446 526 572 721 861 1,031 1,555 3,003 6,566 17,467 The amounts in foreign currency in the table are translated to Danish kroner using the exchange rate at 31 December 2022 to prevent the impact of exchange rate fluctuations. 71 NotesAnnual report 2022 | Tryg A/S | DKKm 2022 Claims provisions, gross Claims provisions, ceded 2021 Claims provisions, gross Claims provisions, ceded Expected cash flow, not discounted 0-1 year 1-2 years 2-3 years > 3 years Total 13,458 -980 12,478 8,950 -700 8,251 6,287 -345 5,942 4,227 -272 3,955 4,057 -155 3,903 2,645 -130 2,516 23,527 -180 23,348 10,714 -137 10,578 47,329 -1,659 45,670 26,537 -1,239 25,299 Financial statements - Contents 72 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents 2022 DKKm 53,343 2,502 725 1,016 606 1,098 59,291 1,548 167 1,715 % 90.0 4.2 1.2 1.7 1.0 1.9 100.0 90.3 9.7 100.0 2021 DKKm 33,323 764 1,036 736 424 1,121 37,403 1,207 183 1,390 DKKm 2022 2021 DKKm Investment risk The notes below are based on Tryg's investment portfolio without the external customers share Bond portfolio including interest derivatives Duration 1 year or less Duration 1 - 5 years Duration 5 - 10 years Duration more than 10 years Total Duration 20,494 20,459 10,350 4,513 55,816 3.8 Credit risk Bond portfolio by ratings 17,152 11,364 5,352 3,698 37,566 3.1 AAA AA A BBB BB B or lower Total 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. Shares Nordic countries Europe ex. Nordic contries North America Others Total 193 240 1,752 1,642 3,827 73 442 1,684 1,108 3,307 Tryg’s share exposure includes exposure from share derivatives of DKK -214m (DKK -117m in 2021) and exclud- ing shares related to propertiy exposure. Unlisted equity investments are based on an estimated market price. Exposure to exchange rate risk Assets and debt 7,271 2,257 292 5,033 4,941 1,113 2022 Hedge -7,106 -973 -274 -5,066 -4,862 -854 Exposure Assets and debt 166 1,284 18 33 80 259 1,840 5,114 2,105 308 2,711 -495 637 2021 Hedge -5,041 -709 -300 -2,703 484 -616 Exposure 74 1,396 8 7 11 21 1,516 USD EUR a) GBP NOK SEK Other Total a) Due to correlation between DKK and EUR the exposure limit is higher than all other currencies. Reinsurance balances AAA to A Not rated Total Liquidity risk Maturity of the Group’s financial obligations including interest 2022 0-1 year 1-5 years > 5 years Subordinated loan capital Amounts owed to credit institutions Debt relating to unsettled funds transactions and repos Other debt Total 152 1,305 4,287 7,021 12,765 607 0 0 0 607 5,250 0 0 0 5,250 2021 0-1 year 1-5 years > 5 years Subordinate loan capital Amounts owed to credit institutions Debt relating to unsettled funds transactions and repos Other debt Total 110 835 2,417 8,248 11,609 439 0 0 0 439 5,172 0 0 0 5,172 Interest on loans for a perpetual term has been recognised for the first fifteen years. % 89.1 2.0 2.8 2.0 1.1 3.0 100.0 86.8 13.2 100.0 Total 6,009 1,305 4,287 7,021 18,622 Total 5,720 835 2,417 8,248 17,220 73 NotesAnnual report 2022 | Tryg A/S | Subordinated loan capital DKKm Amortised cost value of the loan recognised in statement of financial position The fair value of the loan at the statement of finan- cial position date The fair value of the loan at the statement of finan- cial position date is based on a price of Total capital losses and costs at the statement of the financial position date Interest expenses for the year Effective interest rate Loan terms: Lender Principal Issue price Issue date Maturity year Loan may be called by lender as from Repayment profile Interest structure a) Cancelled in 2021 Financial statements - Contents Bond loan SEK 1,000m 2022 2021a) - - - - - - - - - - 8 6.9% Listed bonds SEK 1,000m 100 May 2016 2046 2021 The share of subordinated loan capital included in Own Funds totals DKK 4,163m (DKK 4,453m in 2021). The loans are initially recognised at fair value on the date on which a loan is entered and subsequently measured at amortised cost. The loans are taken by Tryg Forsikring A/S. The credi- tors have no option to call the loans before maturity or otherwise terminate the loan agreements. The loans are automatically accelerated upon the liquidation or bankruptcy of Tryg Forsikring A/S. Prices used for determination of fair value in respect of the loans are based on actual traded prices from Bloomberg. b) Interest on the Notes is due and payable only at the sole and absolute discretion of Tryg. Accordingly, Tryg may at any time in its sole and absolute discretion elect to cancel any interest payment (or any part the- reof) which would otherwise be payable on any inte- rest payment date. Will become payable only in the event of Tryg Forsikring A/S’s bankruptcy. Bond loan NOK 800mb) Bond loan NOK 1,400m 2022 2021 2022 989 990 100 1 46 4.7% 566 567 100 0 32 5.7% 596 616 103 1 25 4.1% Listed bonds NOK 800m 100 March 2013 Perpetual 2023 2021 1,042 1,103 106 2 33 3.2% Listed bonds NOK 1,400m 100 November 2015 2045 2025 Interest-only Interest-only Interest-only 3.75 % above NIBOR 3M (until 2023) 4.75 % above NIBOR 3M (from 2023) 2.75 % above NIBOR 3M (until 2025) 2.75 % above STIBOR 3M (until 2026) 3.75 % above NIBOR 3M (from 2025) 3.75 % above STIBOR 3M (from 2026) 74 NotesAnnual report 2022 | Tryg A/S | Subordinated loan capital (continued) DKKm 2022 2021 2022 2021 2022 2021 Bond loan NOK 850m Bond loan SEK 1,300m Bond loan SEK 700mb) Amortised cost value of the loan recognised in statement of financial position The fair value of the loan at the statement of finan- cial position date The fair value of the loan at the statement of finan- cial position date is based on a price of Total capital losses and costs at the statement of the financial position date Interest expenses for the year Effective interest rate 600 563 94 1 19 3.1% Loan terms: Lender Principal Issue price Issue date Maturity year Loan may be called by lender as from Repayment profile Interest structure 633 631 100 1 7 1.7% Listed bonds NOK 850m 100 May 2021 May 2051 2027 867 830 95 2 18 2.0% 942 944 100 2 7 1.1% Listed bonds SEK 1,300m 100 May 2021 May 2051 2026 466 463 99 2 16 3.4% 506 515 101 2 13 2.5% Listed bonds SEK 700m 100 April 2018 Perpetual 2023 Interest-only 1.25 % above NIBOR 3M (until 2031) 1.15 % above STIBOR 3M (until 2031) 2.25 % above NIBOR 3M (from 2031) 2.15% above STIBOR 3M (from 2031) Interest-only Interest-only 2.5 % above STIBOR 3M Financial statements - Contents b) Interest on the Notes is due and payable only at the sole and absolute discretion of Tryg. Accordingly, Tryg may at any time in its sole and absolute discretion elect to cancel any interest payment (or any part the- reof) which would otherwise be payable on any inte- rest payment date. Will become payable only in the event of Tryg Forsikring A/S’s bankruptcy. 75 NotesAnnual report 2022 | Tryg A/S | Subordinated loan capital (continued) DKKm Amortised cost value of the loan recognised in statement of financial position statement of financial position 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 the financial position date Interest expenses for the year Effective interest rate Loan terms: Lender Principal Issue price Issue date Maturity year Loan may be called by lender as from Repayment profile Interest structure Amortised cost value of the loan recognised in statement of financial position Bond loan NOK 800m Bond loan NOK 1,400m Bond loan NOK 850m Bond loan SEK 1,300m Bond loan SEK 700m Bond loan SEK 1,000m Total amortised cost value of the loan recognised in statement of financial position Financial statements - Contents b) Interest on the Notes is due and payable only at the sole and absolute discretion of Tryg. Accordingly, Tryg may at any time in its sole and absolute discretion elect to cancel any interest payment (or any part the- reof) which would otherwise be payable on any inte- rest payment date. Will become payable only in the event of Tryg Forsikring A/S’s bankruptcy. 76 Bond loan SEK 1,000mb) 2022 666 638 95 3 21 3.2% 2021 723 740 102 3 15 2.4% Listed bonds SEK 1,000m 100 February 2021 Perpetual 2026 Interest-only 2.4 % above STIBOR 3M 2022 2021 566 989 600 867 466 666 4,154 596 1.042 633 942 506 723 4,442 NotesAnnual report 2022 | Tryg A/S | The main part of Tryg’s investment assets are classified as level 1 and 2 and are valuated based on listed prices. This involves the bond portfolio, the main part of shares and unit trust units as well as the statement of financial instruments. Assets, which can be classified as level 3, can be attributed to unlisted assets, specific unlisted unit trusts and investment property. As these investment assets are not valued based on observable input, there will be a discretionary element in this hierarchy. On 31 December 2022, the value amounts to DKK 1,145m (DKK 1,114m on 31 December 2021). Situation in Ukraine International tensions have increased since the beginning of 2022 and escalated dramatically after mid-February following Russia’s invasion of Ukraine. These events have created some turmoil and heigtened volatility in capital markets. Tryg has a very modest (i.e. negligible) exposure to the region both in terms of assets and liabilities. The exposure to Russia/Ukraine equities or bonds is extremely low while also the business exposure is insignificant. Financial impact on Trygs result is expected to be isolated to the effect on investment results following from the general turmoil in financial markets. Valuation of investments assets The valuation of the investment assets can be distributed in the fair value hierarchy model, which is determined in accordance with IFRS 13. The model distributes the total investments as- sets based on the price at which the investment assets are set. Reference is made to note 15, for further description of the fair value hierarchy. Financial statements - Contents 77 NotesAnnual report 2022 | Tryg A/S | DKKm 2 Operating segments Privatea) Commercial Corporate Other Group 2022 Gross premium income Gross claims Gross operating expenses Profit/loss on ceded business Insurance technical interest, net of reinsurance Technical result Investment return and Other income and costs Profit/loss before tax Tax and other items 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 21,960 -14,915 -2,961 -358 86 3,813 338 28,793 0 55 13 4,764 22,094 1,723 8,350 -5,239 -1,360 -126 44 1,670 560 2,809 0 61 630 2,072 9,992 120 3,628 -2,253 -462 -239 21 694 482 0 0 147 944 863 7,141 0 0 0 0 0 0 0 0 1,114 222 0 0 0 0 0 0 0 33,938 -22,407 -4,783 -723 152 6,177 -3,127 3,051 -804 2,247 1,380 32,716 222 264 1,587 79,324 114,113 7,700 39,227 1,843 22,839 71,609 Financial statements - Contents Description of segments Please refer to the accounting policies for a descrip- tion of operating segments. a) From H1 2022 Tryg’s Operating segments are reduced from four to three operating segments, with the segment previous reported as “Sweden” is moved to the Segment “Private” and comparative figures are restated accordingly. 78 NotesAnnual report 2022 | Tryg A/S | DKKm Privatea) Commercial Corporate Other Group 2 Operating segments (continued) 2021 Gross premium income Gross claims Gross operating expenses Profit/loss on ceded business Insurance technical interest, net of reinsurance Technical result Investment return and Other income and costs Profit/loss before tax Tax and other items 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 Non-current assets by country Denmark Norway Sweden Other Total 15,386 -10,518 -2,087 -267 -18 2,496 372 6,070 55 48 3,743 9,766 1,712 5,294 -3,334 -913 -191 -7 850 309 60 33 377 1,451 7,573 102 3,457 -2,423 -396 -273 -4 361 282 0 174 806 990 8,249 4 0 1 1 0 0 2 1 895 37,067 0 0 0 0 0 0 0 2022 6,817 25,075 1,685 10 33,587 24,137 -16,275 -3,394 -731 -29 3,709 247 3,956 -798 3,158 963 7,025 37,067 262 1,232 54,805 100,392 6,183 25,587 1,818 17,796 51,384 2021 6,785 462 539 1 7,787 Financial statements - Contents Description of segments Please refer to the accounting policies for a descrip- tion of operating segments. a) From H1 2022 Tryg’s Operating segments are reduced from four to three operating segments, with the segment previous reported as “Sweden” is moved to the Segment “Private” and comparative figures are restated accordingly. 79 NotesAnnual report 2022 | Tryg A/S | DKKm 2 Geographical segments 2022 2021 2020 2019 2018 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 Run-off, net of reinsurance (%) Number of full-time employees, end of period Norwegian general insurance NOK/DKK, average rate for the period 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 Run-off, net of reinsurance (%) Number of full-time employees, end of period 15,612 2,685 752 14,326 2,448 644 13,902 2,694 639 13,126 2,595 717 10,375 1,986 714 67.2 1.7 68.8 14.2 83.1 -4.8 3,345 73.95 8,386 1,267 319 66.9 4.9 71.8 13.6 85.5 -3.8 1,344 66.2 2.0 68.2 14.4 82.7 -4.5 3,062 72.92 7,263 938 215 69.1 5.0 74.1 13.1 87.2 -3.0 1,139 65.5 1.1 66.6 13.9 80.4 -4.6 2,826 69.63 6,411 473 247 75.3 3.4 78.7 14.1 92.7 -3.9 1,099 64.9 1.5 66.4 13.6 80.0 -5.5 2,622 75.80 6,472 469 283 73.7 5.1 78.8 14.4 93.1 -4.4 1,083 61.4 5.4 66.8 13.9 80.7 -6.9 2,501 77.53 6,302 791 520 72.6 1.2 73.8 13.9 87.7 -8.3 1,105 Financial statements - Contents 80 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents DKKm 2 Geographical segments 2022 2021 2020 2019 2018 a) Comprises credit & surety insurance (Tryg Garanti) in Finland, Netherlands, Austria, Switzerland, Belgium, Germany and amounts relating to one-off items. Swedish general insurance SEK/DKK, average rate for the period 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 Run-off, net of reinsurance (%) Number of full-time employees, end of period Other a) Gross premium income Technical result Run-off gains/losses, net of reinsurance Number of full-time employees, end of period Tryg (total) 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 Combined ratio Run-off, net of reinsurance (%) Number of full-time employees, end of period 70.33 9,730 2,227 289 63.1 0.5 63.6 14.1 77.7 -3.0 1,781 211 -2 20 49 33,938 6,177 -1,193 -1,933 3,051 1,380 66.0 2.1 68.2 14.1 82.2 -4.1 6,518 73.39 2,390 279 113 71.4 2.2 73.6 14.6 88.3 -4.7 431 159 43 -8 42 24,137 3,709 1,008 -624 4,093 963 67.4 3.0 70.5 14.1 84.5 -4.0 4,674 70.95 2,234 331 274 65.8 4.0 69.9 15.3 85.1 -12.3 441 105 -3 -15 33 22,653 3,495 311 -265 3,541 1,145 68.1 2.2 70.3 14.1 84.5 -5.1 4,400 70.62 2,120 169 205 74.0 2.0 75.9 16.1 92.0 -9.7 419 24 4 -12 28 21,741 3,237 579 -188 3,628 1,194 68.3 2.6 70.9 14.2 85.1 -5.5 4,151 72.67 2,073 94 -9 82.3 -1.7 80.6 14.6 95.2 0.4 402 -10 -105 -4 19 18,740 2,766 -332 -172 2,262 1,221 67.4 3.3 70.7 14.4 85.1 -6.5 4,027 81 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents 2 Technical result, net of reinsurance, by line of business DKKm Accident and health Health care Worker's compensation Motor TPL Motor comprehensive insurance Marine, aviation and cargo insurance 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 DKKm 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 2022 5,454 5,122 - 3,042 - 681 - 10 24 1,413 59.4 72.9 6.9% 11,990 274,306 2021 2,989 2,751 - 1,844 - 409 - 11 - 3 484 67.0 82.3 4.4% 21,155 89,800 2022 773 753 - 583 - 111 0 2 61 77.4 92.2 33.0% 5,786 109,839 2021 633 637 - 506 - 75 0 - 1 55 79.4 91.2 63.2% 5,332 103,853 2022 1,065 1,045 - 241 - 123 - 4 5 682 23.1 35.2 15.9% 77,362 11,618 Fire and contents (Private) Fire and contents (Commercial) Change of ownership 2022 7,901 7,805 - 5,457 - 1,214 - 247 28 915 69.9 88.6 10.4% 9,690 568,677 2021 6,150 5,875 - 4,195 - 759 - 238 - 21 662 71.4 88.4 9.9% 9,697 445,872 2022 3,578 3,865 - 2,704 - 594 - 271 26 322 70.0 92.3 8.0% 64,195 41,024 2021 2,903 2,874 - 1,930 - 465 - 256 - 5 218 67.2 92.2 16.9% 49,458 35,556 2022 0 12 - 2 - 4 0 0 6 16.7 50.0 2.9% 24,374 310 2021 954 933 - 681 - 116 - 14 8 130 73.0 86.9 16.3% 96,143 10,238 2021 0 21 2 - 6 0 0 17 -9.5 19.0 3.7% 29,369 521 2022 2,911 2,953 - 1,348 - 445 - 41 13 1,132 45.6 62.1 6.7% 10,313 158,615 2021 2,033 2,010 - 1,251 - 291 - 29 2 441 62.2 78.2 5.7% 19,677 87,435 2022 8,375 7,954 - 5,714 - 975 - 93 31 1,203 71.8 85.3 27.4% 7,968 709,220 2021 5,748 5,458 - 3,616 - 747 - 88 - 6 1,001 66.3 81.6 23.4% 8,634 423,792 2022 281 275 - 136 - 48 - 31 1 61 49.5 78.2 27.0% 21,721 6,259 2021 234 228 - 94 - 34 - 33 0 67 41.2 70.6 16.6% 50,844 2,147 Liability insurance Credit and surety insurance Tourist assistance insurance 2022 1,677 1,711 - 926 - 285 - 26 12 486 54.1 72.3 6.4% 65,281 15,790 2021 1,356 1,298 - 1,006 - 212 - 6 - 1 73 77.5 94.3 10.9% 83,708 11,533 2022 739 738 - 559 - 114 61 2021 651 647 - 308 - 96 - 60 1 127 75.7 82.9 0.3% 1,024,542 709 - 1 182 47.6 71.7 0.0% 4,923,206 63 2022 1,067 1,041 - 1,041 - 116 - 59 4 - 171 100.0 116.8 22.5% 6,412 163,672 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 in the year. 2021 1,006 844 - 360 - 120 3 - 2 365 42.7 56.5 9.4% 6,901 63,963 82 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents 2 Technical result, net of reinsurance, by line of business (continued) DKKm 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 Total exclusive of Group Life Group Life, one-year policies a) Total a) Group Life, one-year policies related to Norwegian Group Life and Alka Group Life. 2022 33,821 33,274 - 21,753 - 4,710 - 721 147 6,237 65.4 81.7 2021 24,657 23,576 - 15,789 - 3,330 - 732 - 30 3,695 67.0 84.2 2022 837 664 - 654 - 73 - 2 4 - 61 98.5 109.8 2021 756 561 - 486 - 64 1 1 13 86.6 97.9 2022 34,658 33,938 - 22,407 - 4,783 - 723 152 6,177 66.0 82.2 2021 25,413 24,137 - 16,275 - 3,394 - 731 - 29 3,709 67.4 84.5 83 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents 2022 2021 DKKm 2022 2021 DKKm 3 Premium income, net of reinsurance Direct insurance Indirect insurance Unexpired risk provision Ceded direct insurance 34,744 72 34,816 -1 34,815 -1,676 33,139 25,304 65 25,369 0 25,369 -1,601 23,768 Ceded -762 -281 -558 -1,601 Direct insurance, by location of risk 2022 2021 Denmark Other EU countries b) Other countries a) a) Primarily Norway b) Primarily Sweden Gross 16,381 9,913 8,449 34,743 Ceded -757 -384 -535 -1,676 Gross 15,404 2,572 7,328 25,304 4 5 Insurance technical interest, net of reinsurance Return on insurance provisions Discounting transferred from claims provisions Claims, net of reinsurance Claims Run-off previous years, gross Reinsurance cover received Run-off previous years, reinsurers' share 2022 2021 928 -776 152 -23,855 1,449 -22,407 792 -68 -21,683 62 -91 -29 -17,224 949 -16,275 598 14 -15,663 6 Insurance operating costs, net of reinsurance Commissions regarding direct insurance contracts Other acquisition costs Total acquisition costs Administration expenses Insurance operating costs, gross Commission from reinsurers Fees to the auditors appointed by the annual general meeting: PwC, included in administrative expenses The fee is divided into: Statutory audit Other audit assignments Other services Expenses for the Group´s Internal Audit Department. -420 -3,275 -3,695 -1,088 -4,783 229 -4,554 -8 -8 -6 0 -2 -8 -14 -223 -2,432 -2,655 -739 -3,394 257 -3,137 -7 -7 -4 -1 -2 -7 -9 Fees for non-audit services provided by PricewaterhouseCoopers to the Group amount to DKK 2m (DKK 3m in 2021) and consist of general tax and accounting advice and consulting services. 84 NotesAnnual report 2022 | Tryg A/S | DKKm 2022 2021 6 Insurance operating costs, gross, classified by type (continued) Commissions Staff expenses Other staff expenses Office expenses, fees and headquarter expenses IT operating and maintenance costs, software expenses Depreciation, amortisation and impairment losses and write-downs Other income Please refer to note 12 and 23 for leases recognised according to IFRS 16. Total staff expenses recognized in income statement: Salaries and wages Commision Allocated conditional and matching shares Pension plans Other social security costs Payroll tax -421 -2,677 -199 -1,357 -318 -118 305 -4,783 -223 -2,212 -126 -798 -247 -107 318 -3,395 -3,866 -3,167 -5 -64 -530 -8 -828 -7 -55 -427 -7 -623 -5,301 -4,286 Please refer to note 27 for specification of Remuneration for the Supervisory Board and Executive Board. Average number of full-time employees during the year (continuing business) 5,944 4,544 Financial statements - Contents 85 NotesAnnual report 2022 | Tryg A/S | DKKm 6 Share-based payment Matching shares 2022 Matching shares allocated in 2022 Allocated in 2011-2021 Category changes and addition Cancelled Exercised Total 31.12.22 2021 Matching shares allocated in 2021 Allocated in 2011-2020 Category changes and addition Cancelled Exercised Total 31.12.21 Total Numbers Fair Value Executive Board Risk-takers Other Total Average value per matching share at grant date DKK Total value at time of alloca- tion DKKm Value per matching share at 31 December DKK Total fair value at 31 December DKKm 0 6,695 62,494 69,189 295,068 0 -14,328 -196,558 84,182 93,636 7,788 -7,476 -72,467 21,481 287,096 -7,788 -47,272 -173,163 58,874 675,800 0 -69,076 -442,188 164,536 172 134 134 134 134 134 12 91 0 -9 -59 22 165 165 165 165 165 165 11 112 0 -11 -73 27 Executive Board Risk-takers Other Total Average value per matching share at grant date DKK Total value at time of alloca- tion DKKm Value per matching share at 31 December DKK Total fair value at 31 December DKKm 0 2,680 74,216 76,896 295,068 0 -14,328 -112,806 167,934 89,859 1,097 -7,476 -45,487 37,993 206,880 6,000 -40,572 -139,235 33,073 591,807 7,097 -62,376 -297,528 239,000 149 133 133 133 133 133 11 78 1 -8 -39 32 162 162 162 162 162 162 12 96 1 -10 -48 39 Financial statements - Contents Matching shares In accordance with the Group’s remuneration policy Tryg has on agreed terms allocated matching shares for some employees. Executive Board, Risk-takers and Other employees are allocated one share in Tryg A/S for each share they acquire in Tryg A/S at market rate for liquid cash at a contractually agreed sum over deferral period of up to 4 years. In 2022, the recognised fair value of matching shares for the Group amounted to DKK 18m (DKK 15m in 2021). At 31 December 2022, total fair value for matching shares amounted to DKK 38m. The fair val- ue is adjusted for dividend paid, no expected dividend is included. 86 NotesAnnual report 2022 | Tryg A/S | DKKm 6 Share-based payment Conditional shares 2022 Conditional shares allocated in 2022 Allocated in 2018-2021 Category changes and addition Cancelled Exercised Total 31.12.22 2021 Conditional shares allocated in 2021 Allocated in 2018-2020 Category changes and addition Cancelled Exercised Total 31.12.21 Total Numbers Fair Value Executive Board Risk-takers Other Total Average value per condi- tional share at grant date DKK Total value at time of alloca- tion DKKm Value per con- ditional share at 31 Decem- ber DKK Total fair value at 31 December DKKm 70,169 30,973 4,314 105,456 135,949 0 0 -10,077 125,872 405,078 54,674 0 -106,742 353,010 212,088 10,594 -8,231 -139,496 74,955 753,115 65,268 -8,231 -256,315 553,837 162 172 172 172 172 172 17 130 11 -1 -44 95 165 165 165 165 165 165 17 125 11 -1 -42 92 Executive Board Risk-takers Other Total Average value per condi- tional share at grant date DKK Total value at time of alloca- tion DKKm Value per con- ditional share at 31 Decem- ber DKK Total fair value at 31 December DKKm 98,776 158,233 89,662 346,671 37,173 0 0 -5,613 31,560 242,856 3,989 0 -33,230 213,615 91,775 30,651 -8,231 -56,105 58,090 371,804 34,640 -8,231 -94,948 303,265 167 176 176 176 176 176 58 66 6 -1 -17 53 162 162 162 162 162 162 56 60 6 -1 -15 49 Financial statements - Contents Conditional shares In accordance with the Group’s remuneration policy Tryg has on agreed terms allocated conditional shares for some employees. Executive Board, Risk-takers and Other employees are allocated shares in Tryg A/S if certain conditions are fulfilled over a period of up to 4 years. In 2022, the recognised fair value of conditional shares for the Group amounted to DKK 46m (DKK 40m in 2021). At 31 December 2022, total fair value of condi- tional shares amounted to DKK 109m. 87 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents 2022 2021 DKKm 2022 2021 DKKm 7 Interest and dividends Interest income and dividends Dividends Interest income, bonds Interest income, other Interest expenses Interest expenses subordinated loan capital, credit institutions and cash at bank Interest expenses, other a) 152 763 2 918 -152 -3 -154 763 a) Hereof DKK 33m in 2021 related to the RSA acquisition, please refer to note 26 for specification of the acquisition. 8 Value adjustments Value adjustments concerning financial assets or liabilities at fair value with value adjustment in the income statement: Equity investments Unit trust units Bonds Derivatives (Equity and Interest) a) Value adjustments concerning assets or liabilities that cannot be attributed to IAS 39: Investment property Discounting Other statement of financial position items 704 -1,481 -2,117 -1,343 -4,236 9 3,418 -103 3,324 -913 Exchange rate adjustments concerning financial assets or liabilities which cannot be stated at fair value total DKK 247m (DKK -336m in 2021) a) Hereof value adjustment of currency hedge in 2021 DKK 1,035m related to RSA acquisition, which consists of the premium paid and exchange rate adjustments which cannot be attributed to hedge ac- counting. 112 422 4 538 -107 -75 -182 356 269 1,095 -312 -1,750 -698 64 527 -365 226 -472 9 Other income and costs Include income and costs which cannot be directly ascribed to the insurance portfolio or investment assets. Other income Income related to the sale of pension products and car care Other income Other costs Costs related to the sale of pension products and car care Depreciations of customer relations and trademarks Integration and restructuring costs related to RSA acquisition a) Other costs 126 24 150 -100 -786 -949 -248 -2,083 -1,933 a) Integration and restructuring costs primarily relates to it integration, fees to advisors 10 and staff expenses. 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 Change in tax rate Other taxes -671 -21 -11 -90 19 -30 0 -804 % 22.0 1.0 0.5 3.0 -1.0 1.0 0.0 26.5 108 31 139 -102 -136 -349 -176 -763 -624 -763 -156 105 35 -1 0 -15 -795 % 22.0 3.5 -2.5 -1.0 0.0 0.0 0.5 22.5 88 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents DKKm 11 Intangible assets DKKm 11 Intangible assets (continued) Trademarks and customer relations Goodwill Assets under con- struction a) Software a) 4,880 -34 1,863 -16 15,827 10,441 20,673 12,287 -104 0 0 0 0 -510 12 -756 0 0 2,267 -29 215 77 74 -7 2,597 -1,637 19 -233 -7 7 -104 -1,254 -1,851 267 -4 -215 281 40 369 0 0 0 0 0 0 Total 9,276 -84 0 358 26,382 -7 35,926 -2,251 31 -988 -7 7 -3,209 2022 Cost Cost at 1 January Exchange rate adjustments Transferred from assets under construction Additions for the year Additions, demerger of Trygg-Hansa, Codan Norway Disposals for the year Cost at 31 December Amortisation and write-downs Amortisation and write-downs at 1 January Exchange rate adjustments Amortisation for the year Impairment losses and write-downs for the year Reversed amortisation Amortisation and write-downs at 31 December Trademarks and customer relations Goodwill Assets under con- struction a) Software a) 4,885 -5 1,865 -2 0 0 0 0 0 4,880 0 1,863 -104 0 0 0 0 -375 1 -136 0 0 2,154 22 208 72 -190 2,267 -1,523 -12 -212 -79 188 -104 -510 -1,637 222 4 -208 249 0 267 0 0 0 0 0 0 Total 9,127 18 0 321 -190 9,276 -2,002 -11 -348 -79 188 -2,251 2021 Cost Cost at 1 January Exchange rate adjustments Transferred from asset under construction Additions for the year Additions, demerger of Trygg-Hansa, Codan Norway Disposals for the year Cost at 31 December Amortisation and write-downs Amortisation and write-downs at 1 January Exchange rate adjustments Amortisation for the year Impairment losses and write-downs for the year Reversed amortisation Amortisation and write-downs at 31 December Carrying amount at 31 December 20,569 11,033 746 369 32,716 Carrying amount at 31 December 4,776 1,353 630 267 7,025 Material intangible assets Trygg-Hansa Brand DKK 2,557m not depreciated Trygg-Hansa Customer relations Private customers DKK 6,425m depreciated over 10 years Trygg-Hansa Customer relations Commercial customers DKK 815m depreciated over 7 years a) Hereof proprietary software and assets under construction DKK 445m (DKK 377m at 31 December 2021). 89 NotesAnnual report 2022 | Tryg A/S | DKKm 11 Intangible assets (continued) DKKm 11 Impairment test Goodwill The Value-in-use method is used when testing the Goodwill for impairment. Primary assumptions for impairment test: When assessing the cash flow management has based its estimates of premiums earned on the insurance portfolio adjusted to reflect the expected effect of business decisions and market development from past experiences. The portfolio is indexed with the wage and salary index. Claims incurred are based on expect- ed claims ratios, which corresponds to normalised large- and weather claims. Reinsurance is taken into account when looking at the overall technical result together with the expected expense ratio. Required returns are based on management’s requirements for returns of the individual cash generation units and are not expected to change significantly in the near future. Alka In 2018, Tryg acquired Forsikrings-Aktieselskabet Alka. The insurance activities were incorporated into the Tryg Group’s business structure from 8 November 2018. Comprises the sale of insurance products to customers under the ‘Alka’ brand. At 31 December 2022, 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. The cash flows appearing from the latest prognosis approved by management for the next 6 quarters are used when calculating the value in use of Private DK. The cash flows in the latest prognosis period have been extrapolated for financial years after the prognosis periods (terminal period) and adjusted for expect- ed 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 compared with the market’s expectations for the Group. The impairment test shows a calculated value in use of approximately DKK 26.9bn (DKK 36.5bn) relative to the value of the CGU of DKK 13.7.bn (DKK 12.7bn) and does not indicate any impairment in 2022. Goodwill amounts to DKK 4.2bn (DKK 4.2bn). According to the sensitivity information below a change in the required return rate will have the highest ef- fect on the equity. An increase in the required return of approx. 3.3% will result in a write down of goodwill. Financial statements - Contents 2022 2021 3% 2% 9% 82% 1.1bn -1.1bn -4.1bn 5.9bn -1.4bn 1.4bn 4% 2% 6% 81% 1.7bn -1.6bn -7.1bn 11.6bn -1.8bn 1.8bn Intangible assets (continued) - Earned premium assumed CAGR 0 - 10 years - Earned premium assumed CAGR > 10 years (terminal period) - Required return before tax - Expected level of combined ratio Sensitivity information Impact on the calculated present value from the following changes: CAGR +1.0 percentage point (0 - 10 years) CAGR -1.0 percentage point (0 - 10 years) Required return +1.0 percentage point Required return -1.0 percentage point Combined ratio +1.0 percentage point Combined ratio -1.0 percentage point The above changes have no impact on equity. Norway In 2022, Tryg acquired the Norwigian branch Codan Norway. See note 26. The insurance activities were incorporated into the Tryg Group’s business structure from 1 April 2022 and distributed under the Tryg Brand. In 2017, Tryg acquired Obos’ insurance portfolio. The insurance activities were incorporated into the Tryg Group’s business structure from 1 June 2017. At 31 December 2022, 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. The cash flows appearing from the latest prognosis approved by management for the next 6 quarters are used when calculating the value in use of private Norway. The cash flows in the prognosis period have been extrapolated for financial years after the prognosis 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 compared with the market’s expectations for the Group. The impairment test shows a calculated value in use of approximately DKK 9.6bn (DKK 0.5bn) relative to the value of the CGU of DKK 3,3.bn (DKK 159m) and does not indicate any impairment in 2022 Goodwill amounts to DKK 1.2bn (DKK 48m). According to the sensitivity information below a change in the required return rate will have the highest ef- fect on the equity. An increase in the required return of approx. 4.4% will result in a write down of goodwill. 90 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents DKKm 11 2022 2021 DKKm 2022 2021 Intangible assets (continued) - Earned premium assumed CAGR 0 - 10 years - Earned premium assumed CAGR > 10 years (terminal period) - Required return before tax - Expected level of combined ratio Sensitivity information Impact on the calculated present value from the following changes: CAGR +1.0 percentage point (0 - 10 years) CAGR -1.0 percentage point (0 - 10 years) Required return +1.0 percentage point Required return -1.0 percentage point Combined ratio +1.0 percentage point Combined ratio -1.0 percentage point The above changes have no impact on equity. 3% 2% 9% 88% 0.3bn -0.3bn -1.4bn 2.0bn -1.0bn 1.0bn 4% 2% 10% 87% 25 -23 -88 123 -50 50 11 Intangible assets (continued) - Earned premium assumed CAGR 0 - 10 years - Earned premium assumed CAGR > 10 years (terminal period) - Required return before tax - Expected level of combined ratio Sensitivity information Impact on the calculated present value from the following changes: CAGR +1.0 percentage point (0 - 10 years) CAGR -1.0 percentage point (0 - 10 years) Required return +1.0 percentage point Required return -1.0 percentage point Combined ratio +1.0 percentage point Combined ratio -1.0 percentage point The above changes have no impact on equity. 2% 2% 10% 78% 1.5bn -1.4bn -5.0bn 7.1bn -1.5bn 1.5bn 2% 2% 10% 88% 92 -87 -354 498 -199 199 Sweden In 2022, Tryg acquired the Swedish branch Trygg-Hansa. See note 26. The insurance activities were incorporat- ed into the Tryg Group’s business structure from 1 April 2022 and distributed under the Trygg-Hansa Brand. In 2016, Tryg acquired Skandia’s child and adult accident insurance portfolio. The insurance activities were incorporated into the Tryg Group’s business structure from 1 September 2016. At 31 December 2022, 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. Trygg-Hansa portfolio consists from 1 April 2022 of Trygg-Hansa, Moderna, Securator and Skandia, considered a cash-generating unit. The reason behind the the single cash-generating unit, is that they are all managed together as part of the Swedish private business and reported as part of the operating segment “Private” Comprises the sale of insurance products to private customers under the ‘Trygg-Hansa’ and ‘Moderna’ brand. Moreover, insurance is sold under the brands Atlantica, Bilsport & MC and Moderna Djurförsäkrin- gar. Sales take place through its own sales force, call centres and online. The cash flows appearing from the latest prognosis approved by management for the next 6 quarters are used when calculating the value in use of “Sweden”. The cash flows in the latest prognosis period have been extrapolated for financial years after the prognosis 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 compared with the market’s expectations for the Group. The impairment test shows a calculated value in use of approximately DKK 30.5bn (DKK 2.5bn) relative to the value of the CGU of DKK 26.3bn (DKK 0.7bn) and does not indicate any impairment in 2022. Good- will amount to DKK 15.1bn (0.5bn). According to the sensitivity information below a change in the required return rate will have the highest effect on the equity. An increase in the required return of approx. 0.9% will result in a write down of goodwill. Trademarks and customer relations As at 31 December 2022 management performed an assessment of the carrying amounts of customer relations as an integral part of the Sweden, Norway and Alka portfolio goodwill test. Software and assets under construction As at 31 December 2022 management performed a test of the carrying amounts of software and assets under construction. The impairment test compares the carrying amount with the estimated present value of furture cash flows. The test did indicate an impairment of DKK 7m (DKK 79m) of it systems, due to higher related costs and some lower expected systems benefits, a write-down has been recognized. The cost is recog- nised as write-downs under depreciations in the income statement. Assets under construction are not depreciated but tested once a year for impairment or when there is any indication of a decrease in value. Amortised software is assessed for impairment at the balance sheet date or when there are indications that the future cash flow cannot justify the carrying amount. If the recoverable amount is lower than the carrying amount, the difference is recognised in the income statement. The recoverable amount is the higher of fair value less sales costs and value in use. 91 NotesAnnual report 2022 | Tryg A/S | 12 Property, plant and equipment DKKm 2022 Cost Cost at 1 January Exchange rate adjustments Additions for the year Additions, demerger of Trygg-Hansa, Codan Norway Disposals for the year Cost at 31 December Accumulated depreciation and value adjustments Accumulated depreciation and value adjustments at 1 January Exchange rate adjustments Depreciation for the year Reversed depreciation and value adjustments Accumulated depreciation and value adjustments at 31 December Carrying amount at 31 December 2021 Cost Cost at 1 January Exchange rate adjustments Additions for the year Disposals for the year Cost at 31 December Accumulated depreciation and value adjustments Accumulated depreciation and value adjustments at 1 January Exchange rate adjustments Depreciation for the year Reversed depreciation and value adjustments Accumulated depreciation and value adjustments at 31 December Carrying amount at 31 December Operating equipment Leases ROU equipment a) Leases ROU Group-occupied property b) 251 -3 28 20 -1 295 -121 2 -15 1 -133 162 246 2 23 -19 251 -126 -1 -11 17 -121 130 103 0 0 2 0 105 -75 0 -14 0 -89 16 88 0 17 -1 103 -62 0 -14 0 -75 28 983 -19 95 144 0 1,203 -379 10 -141 0 -510 693 904 11 87 -19 983 -274 -4 -101 0 -379 604 Total 1,337 -22 123 166 -1 1,603 -575 12 -170 1 -732 871 1,239 13 126 -40 1,337 -462 -5 -125 17 -575 762 Financial statements - Contents a) Lease assets (Right of use-assets (ROU)) equipment only consists of leases of vehicles with a lease term of three to four years. The monthly amounts are fixed and there is no option for purchase or extension. Short term leases are not recognised as Right of use-assets. b) Lease assets (Right of use-assets), Group occupied property consists of leases of offices buildings. Contract terms are from 1 to 14 years and with yearly rent adjustments. Tryg has no lease contracts with variable lease payments based on sale or similar. 92 NotesAnnual report 2022 | Tryg A/S | DKKm 13 Investment property Fair value at 1 January Exchange rate adjustments Additions for the year Disposals for the year Value adjustments for the year Reversed on sale Fair value at 31 December Total rental income amounts to DKK 57m (DKK 64m in 2021). Total expenses amounts to DKK 12m (DKK 20m in 2021). External experts were involved in valuing the majority of the investment properties. Return percentages, weighted average Business property Office property Residential property Total 2022 5.1 5.5 4.0 5.4 2021 4.6 5.1 4.2 5.0 Sensitivity Tryg’s property valuations are based on the market-based rental income and operating expenses of the individual property relative to the required rate of return. The most important factors impacting the va- luations are the applied rates of return, annual net rental income and occupancy rates. The average ra- tes of return applied are stated above. Impacts on the fair value of properties Increase in applied rate of return of 0.25% Decrease in applied rate of return of 0.25% Decrease in net rental income of 3% Decrease in occupancy rate of 3% 2022 -34 36 -30 -7 2021 -39 42 -31 -6 Financial statements - Contents 2022 2021 DKKm 2022 2021 1,040 -26 1 -6 7 0 1,017 1,117 25 3 -166 66 -4 1,040 14 Equity investments in associates Cost Cost at 1 January Additions for the year Additions, demerger of Trygg-Hansa, Codan Norway Disposals for the year* Cost at 31 December Revaluations at net asset value Revaluations at 1 January Reversed on sale Value adjustments for the year Revaluations at 31 December 36,035 56 19 -35,713 396 1,032 -1,188 -19 -175 96 35,939 0 0 36,035 -81 0 1,112 1,032 Carrying amount at 31 December 222 37,067 Tryg no longer has any associates material to the Group. In relation to the full year figures for 2021, Tryg had the following associates that were material to the Group: Scandi JV Co A/S Scandi JV Co A/S Nature of relationship with the Group Principal place of business / Country of incorporation Ownership interest / Voting rights held Financial Holding company which sole purpose is to own Codan A/S Denmark 89.3% / 50% 93 NotesAnnual report 2022 | Tryg A/S | DKKm 14 Equity investments in associates (continued) DKKm 15 The following is summarised financial information based on the interim report for Q3 2021 prepared in accordance with the Danish Financial Business Act, including the Danish Financial Supervisory Authori- ty's Executive Order on Financial Reports for Insurance Companies and Multi-Employer Occupational Pension Funds. The disclosed figures show the entire Scandi JV Co Group. The full-year figures for 2021 were not avai- lable when this report was published. The company had no activities in 2020. The holdings in Codan A/S are classified as held for sale according to IFRS 5. Consequently the holdings are measured at the lower of its carrying amount and fair value less cost to distribute. Consequently, no amortization on intangible assets is performed. Total comprehensive income reported is attributable to discontinued operations. Please refer to note 26 regarding Acquisitions of activities. DKKm 30 Sep 2021 Assets Other investment assets Assets classified as held for sale Other assets Total assets Equity and liabilities Equity Liabilities directly associated with assets classified as held for sale Other liabilities Total equity and liabilities Income statement Investment return Income from discontinued operations Other expenses Profit before tax Tax Profit for the period Other comprehensive income Total comprehensive income Tryg’s interest in net assets of investee at 30 Sep 2021 Value adjustments in Q4 2021 Carrying amount of interest in investee at 31 Dec 2021 570 77,058 140 77,768 41,665 36,099 4 77,768 01 Jun 2021 - 30 Sep 2021 -2 905 -4 899 12 911 -7 904 37,207 -155 37,052 Financial statements - Contents 2022 2021 20,643 49,472 78 6,244 76,437 2,394 3 16,668 19,065 19,231 29,054 32 4,098 52,415 879 0 15,892 16,771 Financial assets Financial assets held for trading Financial assets designated at fair value Derivative financial instruments at fair value used for hedge ac- counting with value adjustment in other comprehensive in- come 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 Derivative financial instruments at fair value with value adjust- ments in the income statement Derivative financial instruments at fair value with value adjust- ments in other comprehensive income Financial liabilities at amortised cost Total financial liabilities Please refer to note 1 for valuation of subordinate loan capital at fair value. Other financial liabilities measured at amortised cost only deviate to a minor extent from fair value. 94 NotesAnnual report 2022 | Tryg A/S | 15 Financial assets (continued) The Fair value hierarchy "Quoted market prices and consolidated reference prices" (level 1) consists of financial instruments that are quoted and traded in a principal and active market (markets generally accessible and with substantial volume and trade frequency). Valuation based on observable input (level 2) consists of financial instruments that are valued sub- stantially on the basis of observable input other than quoted price or consolidated reference price for the instrument itself. If a financial instrument is quoted in a market that is not active, Tryg bases its measurement on the most recent transaction price. Adjustment is made for subsequent changes to market conditions, for instance, by including transa- ctions in similar financial instruments that are assumed to be motivated by normal business consi- derations. For a number of financial assets and liabilities, no market exists. In such cases, Tryg uses recent transactions in similar instruments and discounted cash flows or other generally accepted estimation and valuation techniques based on market conditions at the balance sheet date to calculate an estimated value. This category covers instruments such as deri- vatives valued on the basis of observable yield curves and exchange rates and illiquid mortgage bonds valued by reference to the value of similar liquid bonds. Equity investments includes private equity with underlying real estate. Valuation based on significant non-observable input (level 3) consists of certain financial instru- ments based substantially on non-observable input. Such instruments primarily includes unlisted shares and some unlisted bonds. The fair value of Investment property is also based on non-obser- vable input. Please refer to note 13 and accounting policies section Investment property. If, at the balance sheet date, a financial instrument’s classification differs from its classification at the beginning of the year, the classification of the instrument changes. Changes are considered to have taken place at the balance sheet date. Developments in the financial markets can result in re- classifications between the categories. Some bonds have become illiquid and have therefore been moved from ”Quoted prices or consolidated reference prices” to the ”Observable input” category, while other bonds have become liquid and have been moved from ”Observable input” to the ”Quo- ted prices or consolidated reference prices” category. DKKm Financial statements - Contents DKKm 15 Financial assets (continued) Fair value hierarchy for financial instruments and investment property measured at fair value in the statement of financial position Quoted market prices or consolidated reference pricesa) Observable input Non- observable input 2022 Investment property Equity investments Unit trust units Bonds Derivative financial instruments, assets Derivative financial instruments, debt 0 0 6,917 55,372 15 0 62,304 0 4,554 1,377 428 1,325 -2,398 5,287 a) Consolidated reference prices mean Nasdaq consolidated reference prices 2021 Investment property Equity investments Unit trust units Bonds Derivative financial instruments, assets Derivative financial instruments, debt 0 308 7,259 35,326 9 0 42,903 0 3,142 935 285 904 -879 4,387 1,017 92 36 0 0 0 1,145 1,040 38 36 0 0 0 1,114 Total 1,017 4,647 8,330 55,800 1,340 -2,398 68,737 1,040 3,487 8,231 35,611 913 -879 48,403 Bonds measured on the basis of observable inputs consist of Norwegian and Swedish bonds issued by banks and to some extent Danish semi-liquid bonds, where no quoted prices or consolidated reference prices based on actual trades are available. Financial instruments transferred from "Quoted market prices or con- solidated reference prices" to "Observable input" Financial instruments transferred from "Non-observable input" to "Ob- servable input" 2022 2021 0 0 138 1,142 95 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents DKKm 15 2022 2021 DKKm 2022 2021 Financial assets (continued) Financial instruments measured at fair value in the statement of finan- cial position on the basis of non-observable input: Carrying amount at 1 January Exchange rate adjustments Additions, demerger of Trygg-Hansa, Codan Norway 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 value adjustments 1,114 -25 50 6 9 -8 0 1,145 1,186 24 0 66 14 -170 -5 1,114 -1 -1 15 Financial assets (continued) Reconciliation of Tryg's Investment portfolio Investment assets according to balance sheet 71,626 86,885 Investment assets according to investment activities Other, hereof financial instrument in liabilities a) External customers b) Tryg's investment portfolio b) Match portfolio RSA Scandinavia Free portfolio -6,964 -1,972 62,689 -45,032 0 17,656 -2,634 -4,052 80,200 -29,674 -37,052 13,475 a) Primarily debt relating to repos and derivatives. b) The setup of Tryg invest is impacting Tryg’s balance sheet as external customers investments are booked under “Total other financial investments” with opposing liabilities entries as “other debt”. 96 NotesAnnual report 2022 | Tryg A/S | DKKm 15 Financial assets (continued) Derivative financial instruments Derivatives with value adjustments in the income statement at fair value: DKKm 15 DKKm Interest derivatives Share derivatives Exchange rate derivatives* Inflation derivatives Total derivative financial instru- ments Due after less than 1 year Due within 1 to 5 years Due after more than 5 years 2022 2021 Fair value in statement of financial position -1,548 44 270 591 Nominal 58,339 221 19,359 4,588 Nominal 36,333 150 9,094 4,140 82,507 -643 49,717 27,304 22,404 32,799 103 -894 148 32,350 6,682 10,686 Fair value in statement of financial position 224 19 -209 -181 -147 -6,292 111 6,034 Derivatives are used continuously as part of the cash and risk management carried out by Tryg and its portfolio managers. *hereof used for hedging of foreign entities nom. SEK 6.1bn (2021: SEK 0.6bn) and NOK 3.6bn (2021: NOK 2.5bn) Financial statements - Contents Financial assets (continued) Derivative financial instruments used in connection with hedging of foreign entities for accounting purposes Gains and losses on hedges charged to other comprehensive income: Gains and losses at 1 January Value adjustments for the year Gains and losses at 31 December Gains 3,986 889 2022 Losses -3,767 -393 Net 219 496 Gains 3,753 233 2021 Losses -3,435 -333 4,876 -4,160 715 3,986 -3,767 Net 318 -99 219 Value adjustments Value adjustments of foreign entities recognised in other comprehensive income in the amount of: Value adjustments at 1 January Value adjustment for the year Exchange rate adjustment for the year recognized in profit/loss Value adjustments at 31 December Receivables 2022 2021 -183 -2,217 52 -2,348 -225 42 0 -183 Total receivables in connection with direct insurance contracts 1,621 1,678 Receivables from insurance enterprises Unsettled transactions Other receivables Specification of write-downs on receivables from insurance contracts: Write-downs at 1 January Exchange rate adjustments Write-downs and reversed write-downs for the year Additions, demerger of Trygg-Hansa, Codan Norway Write-downs at 31 December 498 136 278 407 0 485 2,534 2,570 112 118 -3 15 29 3 -9 0 153 112 Receivables are written down in full when submitted for debt collection. The write-down is reversed if payment is subsequently received from debt collection and amounts to DKK 34m (DKK 32m in 2021). Other receivables do not contain overdue receivables. 97 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents 16 Reinsurer's share Impairment test As at 31 December 2022, management performed a test of the carrying amount of total reinsurers’ share of provisions for insurance contracts and receivables. The impairment test resulted in impairment write-down totalling DKK 4m (DKK 3m in 2021). The use of reinsurance creates a natural counterparty risk. The Risk will be handled by applying a wide range of reinsurers with at least an ’A’ rating. 17 Current tax Tryg recognizes the role that taxes play in society and we acknowledge that business must have a re- sponsible approach to handling tax matters in order to ensure sustainable societies. Our tax policy is inspired by the GRI Sustainability Reporting standard #207 regarding tax. Tax matters are handled on a daily basis by the tax team in Tryg but is overseen by the Group CFO. The Tryg Tax Policy is ultimately the responsibility of Tryg’s Executive Board and is approved and re- viewed annually by the Executive Board and the Supervisory Board of Tryg. Tryg has established a Corporate Responsibility Board with management representatives from key departments within Tryg with Tryg’s Group CFO as chair. The adherence to the tax policy is secured as part of the ongoing work and the existing practices of the Tryg tax team. The Tryg Tax Policy applies to all entities within the Tryg Group and, to the extent possible, also to in- vestments made by Tryg. For further information on the Tryg Tax Policy reference is made to our webpage www.Tryg.com. DKKm 17 Current tax (continued) Current tax Net current tax at 1 January Exchange rate adjustments Current tax for the year Current tax on equity entries Adjustment of current tax in respect of previous years Additions, demerger of Trygg-Hansa, Codan Norway Tax paid for the year Net current tax at 31 December Current tax is recognised in the statement of financial position as follows: Under assets, current tax Under liabilities, current tax Net current tax 2022 2021 47 12 -385 -109 8 159 1,039 770 854 -83 770 -306 -15 -874 20 22 0 1,200 47 265 -218 47 Due to IFRIC 23, uncertain tax positions should be valuated and recognized in the tax balance. Tryg Forsikring A/S has asked the Danish tax authorities for a repayment of tax for unused tax loss in the closed Finnish branch in 2012. 80% of the expected tax repayment has been included in the balance of current tax. The figures below show result before tax compared to actual tax payments. 2022 (DKKm) 1,187 1,252 1,422 925 943 617 476 195 216 2021 (DKKm) 2,363 1,287 1,287 1,130 910 75 -4 11 224 262 172 59 43 7 66 Denmark Norway Sweden Other Denmark Norway Sweden Other Result before tax Corporate tax paid Other taxes Result before tax Corporate tax paid Other taxes 98 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents DKKm 17 Current tax (continued) DKKm 18 Equity The figures below show result before tax compared to actual tax payments for other countries. Number of shares (1,000) Other Countries: 2022 Other Countries: 2021 58 18 11 6 6 0 9 0 0 1 0 0 0 0 -1 -10 -11 -6 59 38 7 19 5 0 0 1 0 1 0 0 0 0 0 -5 -1 -8 Finland Germany Netherlands Austria Schwitzerland Belgium Finland Germany Netherlands Austria Schwitzerland Belgium Result before tax Corporate tax paid Other taxes Due to local tax regulations, there may be variations in the timing of tax payment between the coun- tries. Corporate tax payment for the year is the actual payments during the year made to the respective countries. This can be payment for current year as well as payments for previous years. Therefore, there may be a difference in the periodization of the result before tax for the year and the actual tax paid. Beside corporate tax, Tryg Group also pays other taxes consisting of employer/social taxes, insurance premium taxes and consumption taxes, such as VAT. These are specified in the figures below. 18 DKKm 2022 2021 Employer Tax 411 257 177 5 850 Denmark Norway Sweden Other countries Total Insur- ance duties 716 1,126 211 28 2,081 Employer Tax 380 141 69 5 595 Total 1,252 1,422 476 75 3,225 VAT 125 39 89 42 295 Insur- ance duties 734 958 79 23 1,794 VAT 173 32 24 38 267 Total 1,287 1,130 172 66 2,656 Shares outstanding Own shares Number of shares of DKK 5 2022 2021 2022 Number of shares at 1 January Bought during the year Rights issue Exercise of incentive programme Number of shares at 31 December Number of shares as a percentage of issued shares at 31 December Nominal value at 31 December (DKKm) 653,447 -20,669 0 932 301,750 -1,399 352,506 590 1,207 20,669 0 -932 633,710 653,447 20,944 96.80 3,169 99.82 3,267 3.20 105 2021 398 1,399 0 -590 1,207 0.18 6 Pursuant to the authorisation granted by the shareholders, Tryg may acquire up to a total face value DKK 327m of the share capital in the period up until 31 December 2023. Own shares are acquired for writing down the share capital and for use in the Group’s incentive programme. 2022 2021 Equity (continued) Solvency II - Own funds Equity according to annual report Proposed dividend Share buyback Intangible assets Not eligible shares in associate Eligible Own funds from shares in associate Profit margin, solvency purpose Taxes Subordinated loan capital Solvency II - Own funds 42,504 -1,047 -1,786 -32,717 0 0 3,000 1,896 4,162 16,012 49,008 -700 0 -7,025 -37,052 8,283 1,408 185 4,453 18,559 99 NotesAnnual report 2022 | Tryg A/S | DKKm 19 Premium provisions Premium provision at 1 January Additions, demerger of Trygg-Hansa, Codan Norway Exchange rate adjustments Paid in the financial year Change in premiums in the financial year Exchange rate adjustments Premium provisions at 31 December 19 Claims provisions 2022 Claims provisions at 1 January Additions, demerger of Trygg-Hansa, Codan Norway Exchange rate adjustments Paid in the financial year in respect of the current year Paid in the financial year in respect of prior years Change in claims in the financial year in respect of the current year Change in claims in the financial year in respect of prior years Discounting and exchange rate adjustments Claims provisions at 31 December 2022 2021 DKKm 6,183 6,036 19 Claims provisions (continued) 1,980 -157 33,805 -34,118 6 7,700 0 48 25,705 -25,614 8 6,183 2021 Claims provisions at 1 January Exchange rate adjustments Paid in the financial year in respect of the current year Paid in the financial year in respect of prior years Change in claims in the financial year in respect of the current year Change in claims in the financial year in respect of prior years Discounting and exchange rate adjustment Claims provisions at 31 December Gross Ceded Net of reinsurance 25,587 -1,232 24,355 16,539 -626 41,500 -13,313 -8,435 -21,748 23,454 -1,381 22,073 -2,598 39,227 -86 36 -1,281 299 297 597 -925 11 -915 12 -1,587 16,453 -589 40,219 -13,014 -8,137 -21,151 22,528 -1,370 21,158 -2,586 37,639 Financial statements - Contents Gross 24,957 320 25,278 -8,935 -6,592 -15,527 17,184 -883 16,301 -465 25,587 Ceded -1,087 -22 -1,108 91 386 478 -535 -78 -613 12 -1,232 Net of reinsurance 23,871 299 24,170 -8,844 -6,205 -15,049 16,649 -961 15,688 -453 24,355 100 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents DKKm 20 Pensions and similar obligations Jubilees Compensation liability Recognised liability Defined-benefit pension plans: Present value of pension obligations funded through operations Specification of change in recognised pension obligations: Recognised pension obligation at 1 January Exchange rate adjustments Capital cost of previously earned pensions Actuarial gains/losses Paid during the period Recognised pension obligation at 31 December Total pensions and similar obligations at 31 December Total recognised obligation at 31 December Specification of pension cost for the year: Present value of pensions earned during the year Total year's cost of defined-benefit plans 2022 2021 DKKm 2022 2021 37 24 61 24 29 -1 1 2 -7 24 24 85 1 1 41 38 79 29 34 2 0 -1 -7 29 29 108 0 0 20 Pensions and similar obligations (continued) The premium for the following financial years is estimated at Number of pensioners Assumptions used Discount rate Salary adjustments Pension adjustments G adjustments Turnover Employer contributions Mortality table 1 110 % 2.7 3.8 1.7 3.5 7.0 19.1 K2013 0 116 % 1.1 2.5 0 2.3 7.0 19.1 K2013 Description of the Swedish plan Trygg-Hansa, 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 premium paid to FPK amounted to DKK 21m (DKK 5m in 2021), which is about 4.2 % of the annual premium in FPK (2021). FPK writes in its annual report for 2021 that it had a solvency ratio of 139 at 31 December 2021 (Solvency ratio of 141 at 31 December 2020). The Solvency Ratio is defined as the own funds relative to the solvency capital requirement. 101 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents DKKm 21 Deferred tax Tax asset Operating equipment Bonds Capitalised tax loss Tax liability Intangible rights Land and buildings Debt and provisions Contingency funds Deferred tax Development in deferred tax Deferred tax at 1 January Exchange rate adjustments Change in deferred tax relating to change in tax rate Change in deferred tax previous years Additions, demerger of Trygg-Hansa, Codan Norway Change in capitalised tax loss Change in deferred tax recognised in income statement Change in deferred tax taken to equity Deferred tax at 31 December 2022 2021 DKKm 21 17 137 175 2,368 80 97 1,173 3,718 3,542 806 -32 30 19 2,367 24 347 -17 3,542 10 73 0 83 319 -43 130 483 889 806 851 24 0 -86 0 0 17 0 806 Tax value of non-capitalised tax loss Denmark Sweden Norway Finland Germany England Schwitzerland The Netherlands Austria Belgium Total 2022 Loss 2022 Tax value 2021 Loss 2021 Tax value - - - - - 1 19 26 6 6 58 - - - - - 0 3 5 2 2 12 72 - - - - - 8 17 4 1 102 16 - - - - - 1 3 1 0 22 Loss determined according to Finnish, German, Belgian and Austrian rules can be carried forward inde- finitely. In Netherlands tax losses can be carried forward 6 years In Switzerland tax losses can be carried forward 7 years. The losses are not recognised as tax assets until it has been substantiated that the company can gene- rate 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 -109m (DKK 27m at 31 December 2021). 102 NotesAnnual report 2022 | Tryg A/S | DKKm 22 Other provisions Other provisions at 1 January Exchange rate adjustments Change in provisions Other provisions 31 December Other provisions relate to provisions for the Group’s own insurance claims, restructuring costs and in 2022 DKK 50m related to bankruptcy of Gefion. Additions to the provision for restructuring costs and own insurance claims during the year amounts to DKK 81m (DKK 18m at December 2021) and use of existing restructuring provisions amounts to DKK 28m (DKK 36m at December 2021) The balance as at 31 December 2022 excluding own insurances amounts to DKK 88m (DKK 35m at 31 December 2021). 23 Other debt and debt to group undertakings Other debt amounts to DKK 5,820m (DKK 7,084m at 31 December 2021) and mainly consists of debt related to external customers’ investments in Tryg Invest, leasing and accrued costs. Debt related to external customers invesments in Tryg Invest investments funds amounts to DKK 1,972m. (DKK 4,052m at 31 December 2021). Financial statements - Contents 2022 2021 DKKm 2022 2021 40 -1 55 94 57 1 -18 40 23 Other debt Maturity of undiscounted lease liabilities Due 1 year or less Due 2 - 5 years Due more than 5 years Total Lease liabilities 31 December 181 399 359 939 44 194 -38 138 331 402 871 11 137 -32 Lease liabilities included in the statement of financial position Hereof future cashflow options Amounts recognised in statement of cash flow Total cash out-flow for leases Amounts recognised in income statement Interest on lease liabilities There are no short team-leases recognised in the financial statement. Debt related to Leasing are inclu- ded in Other debt. Please refer to note 12 for specification of ROU assets. 103 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents 2022 2021 DKKm 25 Contractual obligations, collateral and contingent liabilities (continued) DKKm 24 Earnings per share Profit/loss from continuing business Profit/loss on discontinued and divested business Profit/loss for the year Depreciation on intangible assets related to Brands and Custo- mer relations after tax Operating Profit/loss for the year Average number of shares (1,000) Diluted number of shares (1,000) Earnings per share, continuing business Diluted earnings per share, continuing business Earnings per share Diluted earnings per share Operating earings per share a) a) Calculated as operating profit/loss for the year divided by average num ber of shares in the period. 25 Contractual obligations, collateral and contingent liabilities 2,247 0 2,247 622 2,870 646,977 646,977 3.47 3.47 3.47 3.47 4.43 3,161 -3 3,158 106 3,263 572,688 572,688 5.52 5.52 5.51 5.51 5.70 2022 Tryg has signed the following contracts above DKK 50m: Tryg is committed to invest in some investment funds. The commitment amounts to DKK 1.196m. DKK 363m are expected called during 2023 and additionally DKK 833m within 5 years. Tryg has signed IT infrastructure agreements with commitments amounting to DKK 416m within 5 years. 2021 Tryg is comitted to invest in some investment funds. The commitment amounts to DKK 910m. DKK 450m are expected called during 2022 and additionally DKK 450m within 5 years. Tryg has signed IT infrastructure agreements with commitments amounting to DKK 361m within 5 years. The Danish companies in the Tryg Group are jointly taxed with TryghedsGruppen smba. The companies and the other jointly taxed companies are liable for any obligations to withhold taxes at source on inte- rest, royalties, dividends and income taxes etc. in respect of the jointly taxed companies. 2022 2021 Tryg Livsforsikring A/S, Forsikrings-Aktieselskabet Alka Liv II and Holmia Livförsäkring AB have registered the following assets as having been held as secu- rity for the insurance provisions: Contractual obligations 2022 Other contractual obligations a) <1 year 748 748 Obligations due by period 3-5 years 1-3 years > 5 years 755 755 424 424 11 11 Total 1,938 1,938 Equity investments Bonds Interest and rent receivable Total 313 748 2 1,063 175 1,029 5 1,209 2021 <1 year 1-3 years 3-5 years > 5 years Total Other contractual obligations a) 695 695 587 587 181 181 14 14 1,478 1,478 a) Other contractual obligations mainly consists of investment commitments, IT and outsourcing agre- ements. Please refer to note 12 for lease agreements recognised as ROU. 104 NotesAnnual report 2022 | Tryg A/S | DKKm 25 Contractual obligations, collateral and contingent liabilities (continued) Offsetting and collateral in relation to financial assets and obligations Collateral which is not offset in the statement of financial position Gross amount before offsetting According to the statement of financial position Further offsetting, master netting agreements Offsetting Collateral Net amount 2022 Assets Reverse repos Derivative financial instruments a) Liabilities Repo debt Derivative financial instruments a) 194 2,114 2,308 4,287 2,748 7,035 a) Of which inflation derivatives, recognised in claims provisions: Assets Liabilities 423 0 2021 Assets Reverse repos Derivative financial instruments a) Liabilities Repo debt Derivative financial instruments a) 460 1,072 1,532 2,417 1,220 3,637 a) Of which inflation derivatives, recognised in claims provisions: Assets Liabilities 151 332 0 -350 -350 0 -350 -350 0 0 0 -8 -8 0 -8 -8 0 0 194 1,763 1,958 4,287 2,398 6,684 423 0 460 1,064 1,524 2,417 1,211 3,628 151 332 0 -1,255 -1,255 0 -1,255 -1,255 0 -800 -800 0 -800 -800 -194 -456 -651 -4,287 -1,052 -5,339 460 -239 221 -2,417 -336 -2,753 0 52 52 0 91 91 0 24 24 0 75 75 Financial statements - Contents Financial assets and liabilities are offset and the net amount reported when the Group and the counterparty have a legally enforceable right of set-off and have agreed to settle on a net basis or to realise the asset and settle the liability. Positive and negative fair values of derivative financial instruments with the same counterparty are offset if it has been agreed to settle contractual payments on a net basis when cash payments are made or collateral is provided on a daily basis in case of fair value changes. The Group’s netting of positive and negative fair values of derivative financial instruments may be cleared through LCH (CCP clearing). Furthermore, netting is carried out in accordance with enforceable master netting agreements. Master netting agreements and similar agreements entitle parties to offset in the event of default, which further reduces the exposure to a defaulting counterparty but does not meet the conditions for accounting offsetting in the balance sheet. Contingent liabilities Price adjustments 2016-2020 At the end of October (2020) Tryg received the Forbrugerombuds- mand’s (FO or Consumer Ombudsman) assessment of the case. In FO’s opinion Tryg was not complying with regulations on price adjust- ments for residential customers when increasing prices above index- ation between March 2016 and February 2020. The case is related to a part of the private portfolio in Denmark. Based on this assessment the FO is concluding that certain customers may have a recovery claim against Tryg. Tryg does not agree with the FO’s assessment as the company believes it has followed the guidelines stated by the Danish FSA in terms of price increases. The FO has now decided that the case should be decided in court. Management has decided not to disclose an estimated amount but this is deemed immaterial. Other Companies in the Tryg Group are party to a number of other disputes in Denmark, Norway and Sweden, which management believes will not affect the Group’s financial position significantly beyond the obligations recognized in the statement of financial position at 31 December 2022. 105 NotesAnnual report 2022 | Tryg A/S | 26 Equity investments in associates 26 Equity investments in associates (continued) Financial statements - Contents RSA Scandinavia (Trygg-Hansa and Codan Norway) 1 June 2021 Investment in associate On 1 June 2021, all regulatory and legal approvals regarding the acquisition of RSA Insurance Group plc were obtained. Tryg acquired RSA’s Swedish and Norwegian businesses (Trygg-Hansa and Codan Norway), and a 50%-stake in RSA’s Danish business (Codan Denmark). Hence the insurance portfolio in Sweden and Norway was by way of agreement managed by Tryg in coorporation with Codan. The transaction was conducted together with Intact Financial Corporation. Tryg did not have control of any of the businesses until the separation became effective on 1 April 2022, but the company had significant influence over the entire Scandinavian business. Accordingly, the investment was classified as an investment in associates and accounted for by applying the equity method, whereby Trygs shares of the current profit/loss was recognised in the investment activities as profit/loss from associates from 1 June 2021 until 1 April 2022. Tryg’s purchase price amounted to £4.2 billion and did not include any contingent elements. The Group has incurred transaction and advisory costs of DKK 780m in connection with the investment. 1 April 2022 Demerger Upon separation of the businesses, which came effective through a demerger on 1 April 2022, Tryg obtained control of the Swedish and Norwegian businesses and started full consolidation in the Group’s financial statements on a line-byline basis from 1 April 2022. A preliminary estimate of the fair value of the assets and liabilities of the acquired activities in Sweden and Norway is outlined below. Tryg is currently working on the system integration of the acquired activities. The system integration has not yet been concluded. IFRS 3 furthermore stipulates that the pre-acquisition balance sheet in some instances may be adjusted for a period of up to 12 months after the date of acquisition. At the date of presentation of the Annual Report, no areas have been identified that may significantly affect the balance sheet. Net assets acquired (DKKbn) Assets Intangible assets Tangible assets Financial assets Total reinsurance of provisions Receivables Other assets and accrued income Liabilities Total provisions for insurance contracts Debt and accruals and deferred income Total identifiable net assets acquired Purchase price (Shares in Tryg Forsikring A/S) Goodwill 31 December 2022 11,3 0,2 23,9 0,1 3,7 0,9 19,8 7,4 12,9 29,9 17,0 The measurement at fair value of identifiable acquired assets and liabilities at the acquisition date, in- cluding intangible assets (customer relations and brands) and provisions for insurance contracts, re- sults in a goodwill of DKK 17.0bn. This goodwill relates to expected synergies between the acquired activities and the Group’s existing activities. The goodwill acquired is not tax deductible. The fair value measurements have been based on the actual purchase price paid to the shareholders of RSA on 1 June 2021. The purchase price have been adjusted for the income from RSA Scandinavia from 1 June 2021 until demerger 1 April 2022 and the sale of Codan DK to Alm. Brand. The fair value of the shares as at 1 April 2022 is considered to eqaul thier carrying amount based on the asessment that the business case and the required rate of return are largely unchanged. The fair value measure- ment is considered a level 2 measurement. The fair value of assets and liabilities acquired is for the Fi- nancial assets and liabilities primarily level 1 and some level 3. All other assets and liabilities are based on current value or amortisized costs as a proxy for fair value and will as such be level 3. As the acquisition date was April 1, 2022, the acquired businesses have not impacted the Group’s pre- mium income or net income for the first quarter of 2022 as the profit/loss was recognised in the in- vestment result. Due to the ongoing system integration of the acquired activities including migration of the policy administration systems it is not possible to publish the full year premium income and net income for the acquired business separately. If the acquisition date was January 1, 2022 the premium income of the Group would have been DKK 36.5bn and net income of the Group would have been DKK 2.2bn. The determination of these pro forma amounts for premium income and net income for the period to the acquisition is based on the following significant assumptions: • Premiums and claims have been calculated on the basis of the fair values determined in the acquisi- tion balance sheets for premium and claims provisions, rather than the original carrying amounts. • Other costs, including amortisation of intangible assets, have been calculated on the basis of the fair values determined in the acquisition balance sheets, rather than the original carrying amounts. On June 11 2021, it was announced that Codan DK was acquired by Alm. Brand for a total cash consi- deration of DKK 12.6bn. Tryg receives 50% of the sales proceeds amounting to approximately DKK 6.3bn. The sale was completed on 2 May 2022. Following the demerger of Trygg-Hansa and Codan Norway and the sale of Codan DK to Alm. Brand Tryg has recorded a net profit of 0.2bn. 106 NotesAnnual report 2022 | Tryg A/S | DKKm 27 Related parties The group has no related parties with a controlling influence other than the parent company, TryghedsGruppen smba and the subsidiaries of TryghedsGruppen smba (other related par- ties). Related parties include the Supervisory Board, the Executive Board (which is considered Key Management) and their members’ family. 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 0.6 0.6 2.3 0.1 0.2 0.3 0.5 0.5 2.1 0.0 0.1 0.3 2022 Supervisory Board Executive Board Risk-takers investment functions Risk-takers staff functions Risk-takers independent control functions Risk-takers other functions Number of persons Base salary incl, car allowance Share- based variable salary a) Cash variable salary Pension Total 18 4 11 23 4 31 91 11 31 15 39 8 68 172 0 16 1 7 0 15 40 0 0 2 6 0 11 19 0 8 2 7 1 12 29 11 55 20 59 10 107 261 a) Total expenses recognised in 2022 for matching shares and conditional shares allocated in 2022 and previous year. Financial statements - Contents 2022 2021 DKKm 27 Related parties (continued) Of which retired Supervisory Board Executive Board Risk-takers Number of persons Severance pay 4 0 2 6 0 0 0 0 2021 Supervisory Board Executive Board Risk-takers investment functions Risk-takers staff functions Risk-takers independent control functions Risk-takers other functions Number of persons Base salary incl, car allowance Share- based variable salary b) Cash variable salary Pension Total 13 4 12 19 5 18 71 10 30 16 38 9 44 147 0 12 2 7 0 11 32 0 0 2 7 0 7 16 0 7 2 6 1 7 25 10 50 22 59 11 69 220 b) Total expenses in 2021 for matching shares and conditional shares allocated in 2021 and previous year. Of which retired Supervisory Board Executive Board Risk-takers Number of persons Severance pay 0 0 0 0 0 0 0 0 107 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents 27 Related parties (continued) Base salary are charges incurred during the financial year. Variable salary includes the charges for matching shares and conditional shares, which are recognised over a deferral period up to 4 years. The Executive Board and risk-takers are included in incentive programmes. Please refer to note 6 for more informations. The members of the Supervisory Board in Tryg A/S are paid with a fixed remuneration and are not cove- red by the incentive schemes. The members of the Executive Board are paid a fixed remuneration, car allowance, pension etc. The variable salary is awarded in the form of share-based remuneration and cash. Each member of the Executive Board is entitled to 12 months’ notice and severance pay equal to 12 months’ salary plus pension contribution except Group CEO who is entitled to severance pay equal to 18 months’ salary. If a change of control clause is actioned Group CEO and Group COO are entitled to severance pay equal to 36 months´salary. 27 Related parties (continued) 2022 In 2022 Tryg A/S paid TryghedsGruppen smba dividends of DKK 1,697m. The transactions between TryghedsGruppen smba and Tryg A/S is conducted on an arm’s length basis. Intra-group transactions with TryghedsGruppen smba from Tryg Forsikring A/S consists of administra- tive services, IT and data deliveries. The transactions amounts to DKK 4.2m. Investment management delivered from Tryg Invest A/S amounts to DKK 0.5m. All transactions are conducted on an arm´s length basis. 2021 In 2021 Tryg A/S paid TryghedsGruppen smba dividends of DKK 1,224m. 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. TryghedsGruppen smba has exercised pre-empitive rights and subscribed for new shares in Tryg A/S to- talling DKK 14.0bn during the subscribtion period in Q1 2021. Parent company TryghedsGruppen smba TryghedsGruppen smba controls 45% (2021: 45%) of the total shares in Tryg A/S. This amounts to Tryg- hedsGruppen smba controlling 46.5% of the shares outstanding in Tryg A/S as at 31 December 2022. The transactions between TryghedsGruppen smba and Tryg A/S is conducted on an arm’s length basis. Intra-group transactions with TryghedsGruppen smba from Tryg Forsikring A/S consists of call center and customer support, marketing services, IT and data deliveries. The transactions amounts to DKK 4.5m. Investment management delivered from Tryg Invest A/S amounts to DKK 0.5m. All transactions are conducted on an arm´s length basis. 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. 28 Financial highlights Please refer to page 60. 108 NotesAnnual report 2022 | Tryg A/S | 29 Accounting policies The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU on 31 Decem- ber 2022 and the additional Danish disclosure require- ments of the Danish Financial Business Act on annual reports prepared by listed financial services compa- nies. The annual report of the parent company is pre- pared in accordance with the executive order on finan- cial reports presented by insurance companies and lateral pension funds issued by the Danish FSA. The deviations from the recognition and measurement re- quirements of IFRS are: The Danish FSA’s executive order does not allow provi- sions for deferred tax of contingency reserves alloca- ted 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 Tryg has not implemented any new significant accoun- ting policies or IFRS standards in 2022. The accounting policies have been applied consi- stently with last year. Classification error A classification error has been found in the annual re- port 2021. The classification error does not affect pro- fit for the year or Equity. It affects the line item “Tax” which should have been less negative with DKK 138m and the line item “Value adjustment” which is part of “Total investment return” should have been lower with the same amount. The comparative figures for 2021 have been restated accordingly. Accounting regulation Implementation of changes to accounting standards and interpretation in 2022 The International Accounting Standards Board (IASB) has issued several changes to the international ac- counting standards, and the International Financial Re- porting Interpretations Committee (IFRIC) has also is- sued a number of interpretations. No standards have been implemented for the first time for the accounting year that began on 1 January 2022 that will have a sig- nificant impact on the group. See below regarding IFRS 9 ‘Financial instruments’. There has not been implemented any new or amended standards and interpretations that have affected the group significantly. Future orders, standards and interpretations that the group has not implemented, and which have still not en- tered into force but could affect the group significantly: • • IFRS 9 ‘Financial Instruments’1 IFRS 17 ‘Insurance Contracts’2 1 Enters into force for the accounting year commencing 1 January 2018 - Insurance companies are allowed to postpone the implementation to 1 January 2023 if certain criteria are met. 2 Expected to enter into force for the accounting year com- mencing 1 January 2023. The implementation of IFRS 9 ‘financial instruments’ is not expected to significantly change the group’s finan- cial position. Regarding IFRS 9, the assessment of no significant im- pact on the statement of financial position or profit and loss is based on the assumption that Tryg already carry all financial instruments at fair value through profit and loss. The implementation of IFRS 9 will not affect Tryg’s recognition and measurement. Tryg has postponed the implementation of IFRS 9 to 1 January 2023, when IFRS 17 Insurance Contracts will be applicable. Tryg can postpone IFRS 9 due to the fact that our activities are predominantly connected with insurance and that our liabilities connected with insurance is relatively greater than 80 per cent of the total liabilities. The impact of IFRS 17 (Insurance Contracts) is currently being assessed in a structured and formal manner and is expected to be concluded in due course ahead of the Financial statements - Contents rial scenarios and other short and long-term risks not reflected in standard actuarial models. The projections are based on Tryg’s knowledge of historical develop- ments, 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 pro- visions for known claims, which cover estimated com- pensation for losses that have been incurred but are not yet reported to the Group (known as IBNR reser- ves) and future developments in claims which are known to the Group but are not finally settled. Claims provisions also include direct and indirect claims sett- lement 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 in- herently uncertain and, by necessity, relies upon the making of certain assumptions about factors such as court decisions, amendments to legislation, social in- flation and other economic trends, including inflation. The Group’s actual liability for losses may 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, wor- kers’ compensation classes, including sickness and personal accidents, in particular. implementation date. Whilst the Tryg Group anticipates minor changes in certain of its key figures, such as pre- miums growth and claims ratio as a result of changes to the definitions of premiums and costs under IFRS 17 (Insurance Contracts), Tryg Group currently expects that the implementation of IFRS (Insurance Contracts) will not significantly change the Tryg Group’s financial position, including in relation to its technical result or profit/loss after tax. The standars and their impact as at 1 January 2023 are described in note 30, which is a supplement to the accounting policies. The changes will be implemented going forward from the effective date. Significant accounting estimates and assess- ments The preparation of financial statements under IFRS requires the use of certain critical accounting estima- tes and requires management to exercise its judge- ment in the process of applying the Group’s accoun- ting policies. The areas involving more judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are: Liabilities under insurance contracts Fair value of financial assets and liabilities • • • Valuation of property • Business Combinations • Measurement of Goodwill, Trademarks and Customer relations • Control of subsidiaries Liabilities under insurance contracts Estimates of provisions for insurance contracts repre- sent the Group’s most critical accounting estimates, as these provisions involve several uncertainty factors. The Financial Supervisory Authority’s discount curve, which is based on EIOPA’s yield curves, is used to discount Danish, Norwegian and Swedish claims pro- visions in relation to the relevant functional currencies. Claims provisions are management’s best estimate based on actuarial and statistical projections of claims and administration of claims, including a margin incor- porating the uncertainty related to the range of actua- Several assumptions and estimates underlying the calculation of the claims provisions are mutually de- pendent. This has the greatest impact on assumptions regarding interest rates and inflation. 109 NotesAnnual report 2022 | Tryg A/S | 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 obser- vable market data are not subject to material estima- tes. For securities that are not listed on a stock ex- change, or for which no stock exchange price is quoted that reflects the fair value of the instrument, the fair value is determined using a current OTC price of a similar financial instrument or using a model calculation. The valuation models include the discoun- ting of the instrument cash flow using an appropriate market interest rate with due consideration for credit and liquidity premiums. The fair value of deal contin- gent derivatives (DCF) that Tryg has entered into in con- nection with a recommended cash offer together with Intact (a leading Canadian Insurer), to acquire RSA Insurance Group plc is further explained in note 26. Valuation of property The fair value is calculated based on a market-deter- mined 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 va- lue. The calculation of fair value is based on market prices, considering the type of property, location and maintenance standard, and based on a market-deter- mined rental income and operating expenses in pro- portion to the property’s required rate of return. Cf. note 12, 13 and 15. Business Combinations In Business Combinations, significant assessments are made when considering the fair value of the assets re- quired and liabilities assumed and when identifying intangible assets, such as Trademarks, Customer rela- tions and goodwill as part of the transactions. Measurement of Goodwill, Trademarks and Customer relations Goodwill, Trademarks and Customer relations was acquired in connection with the acquisition of busines- ses. Goodwill is allocated to the cash-generating units under which management manages the investment. The carrying amount is tested for impairment at least annually. Impairment testing involves estimates of fu- ture cash flows and is affected by several factors, in- cluding discount rates and other circumstances de- pendent on economic trends, such as customer behaviour and competition. Cf. note 11. Control of subsidiaries Control of subsidiaries is assessed yearly. Hence, whether a subsidiary should still be part of the consoli- dation on line by line basis or as a single line item in the balance sheet. Description of accounting policies Recognition and measurement The annual report has been prepared under the histo- rical cost convention, as modified by the revaluation of owner-occupied property, where increases are recog- nised in other comprehensive income, and revaluation of investment property, financial assets held for tra- ding and financial assets and financial liabilities (inclu- ding derivative instruments) at fair value are recogni- sed in the income statement. Assets are recognised in the statement of financial po- sition when it is probable that future economic bene- fits 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 be- nefits will flow out of the Group, and the value of such liabilities can be measured reliably. On initial recognition, assets and liabilities are mea- sured at cost, with the exception of financial assets, which are recognised at fair value. Measurement after initial recognition is affected as described below for each item. Anticipated risks and losses that arise be- fore 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 ear- ned, whereas costs are recognised by the amounts at- Financial statements - Contents the date of acquisition and the date of formation, respe- ctively. The date of acquisition is the date on which con- trol of the acquired enterprise actually passes to Tryg. Divested or discontinued enterprises are recognised in the consolidated statement of comprehensive income up to the date of disposal or the settlement date. The date of disposal is the date on which control of the dive- sted enterprise actually passes to a third party. The purchase method is applied for new acquisitions if the Group gains control of the acquired enterprise. Subsequently, identifiable assets, liabilities and contin- gent liabilities in the acquired enterprises are mea- sured at fair value at the date of acquisition. Non-cur- rent assets which are acquired with the intention of selling them are, however, measured at fair value less expected selling costs. Restructuring costs are recog- nised in the pre-acquisition balance sheet only if they constitute an obligation for the acquired enterprise. The tax effect of revaluations is taken into account. The acquisition price of an enterprise consists of the fair value of the price paid for the acquired enterprise. If the final determination of the price is conditional upon one or more future events, such events are re- cognised at their fair values at the date of acquisition. Costs relating to the acquisition are recognised in the income statement as incurred. Any positive balances (goodwill) between the acquisi- tion price of the acquired enterprise, the value of mino- rity interests in the acquired enterprise and the fair va- lue of previously acquired equity investments, on the one hand, and the fair value of the acquired assets, lia- bilities and contingent liabilities, on the other hand, is recognised as an asset under intangible assets, and are tested for impairment at least once a year. If the carry- ing amount of the asset exceeds its recoverable amount, it is impaired to the lower recoverable amount. tributable to this financial year. Value adjustments of financial assets and liabilities are recognised in the in- come statement unless otherwise described below. All amounts in the notes are shown in millions of DKK unless otherwise stated. Consolidation Consolidated financial statements The consolidated financial statements comprise the fi- nancial statements of Tryg A/S (the parent company) and the enterprises (subsidiaries) controlled by the pa- rent company. The parent company is regarded as controlling an enterprise when it i) exercises a controlling influence over the relevant activities in the enterprise in question, is exposed to or has the right to a variable return on its investment, and can exercise its controlling influence to affect the variable return. ii) iii) Enterprises in which the Group directly or indirectly holds between 20% and 50% of the voting rights and exercises significant influence but no controlling influ- ence are classified as associates. Basis of consolidation The consolidated financial statements are prepared ba- sed on the financial statements of Tryg A/S and its subsi- diaries. The consolidated financial statements are prepa- red by combining items of a uniform nature. The financial statements used for the consolidation are prepared in accordance with the Group’s accounting policies. On consolidation, intra-group income and costs, in- tra-group accounts and dividends, and gains and los- ses arising on transactions between the consolidated enterprises are eliminated. Items of subsidiaries are fully recognised in the conso- lidated financial statements. Business combinations Newly acquired or newly established enterprises are re- cognised in the consolidated financial statements from If at the date of acquisition, there is uncertainty as to the identification or measurement of acquired assets, liabilities or contingent liabilities or the determination of the acquisition price, initial recognition is based on a preliminary determination of values. The preliminarily determined values may be adjusted, or additional as- 110 NotesAnnual report 2022 | Tryg A/S | sets or liabilities may be recognised up to 12 months after the acquisition, provided that new information has come to light regarding matters existing at the date of acquisition which would have affected the determi- nation of the values at the date of acquisition, had such information been known. Generally, subsequent changes in estimates of conditi- onal acquisition prices are recognised directly in the income statement. Currency translation A functional currency is determined for each of the re- porting entities in the Group. The functional currency is the currency used in the primary economic environ- ment in which the reporting entity operates. Transacti- ons in currencies other than the functional currency are transactions in foreign currencies. On initial recognition, transactions in foreign curren- cies 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 ex- change rates applicable at the statement of financial position date. Income and expense items are transla- ted using the average exchange rates for the period. Exchange rate differences arising on translation are classified as other comprehensive income and trans- ferred to the Group’s translation reserve. Such transla- tion differences are recognised as income or as expen- ses 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 reporting Segment information is based on the Group’s manage- ment and internal financial reporting system and sup- ports the management decisions on allocation of re- sources and assessment of the Group’s results divided into segments. Execute Board is considered Key ope- rating dicision makers. The operational business segments in the Tryg are Pri- vate, Commercial and Corporate.. Private encompas- ses the sale of insurances to private individuals in Den- mark, Sweden and Norway. Commercial encompasses the sale of insurances to small and medium sized busi- nesses, in Denmark, Sweden and Norway. Corporate sells insurances to industrial clients primarily in Den- mark, Norway and Sweden. In addition, Corporate handles all business involving brokers. Geographical information is presented based on the economic environment in which the Tryg Group opera- tes. The geographical areas are Denmark, Norway and Sweden. Segment income and segment costs as well as seg- ment 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 prima- rily comprise assets and liabilities concerning invest- ment activity managed at Group level. Key ratios Earnings per share (EPS) are calculated according to IAS 33. This and other key ratios are calculated in ac- cordance with Recommendations and Ratios issued by the The Danish Finance Society and the Executive Or- der 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 ad- justed for changes in premium provisions, correspon- ding 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 accor- dance with the risk exposure over the cover period, calculated separately for each individual insurance contract. The calculation is generally based on the pro rata method, although this is adjusted for an unevenly divided risk between lines of business with strong sea- sonal 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 premium provisions. The portion of premiums paid to reinsurers that relate to unexpired risks at the statement of financial posi- tion date is reported as the reinsurers’ share of pre- mium provisions. Technical interest Technical interest is presented as a calculated return on the year’s average insurance liability provisions, net of reinsurance. The calculated interest return for grou- ped classes of risks is calculated as the monthly average provision plus an actual interest from the pre- sent yield curve for each individual group of risks. The interest is applied 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 unwin- ding. Claims Claims are claims paid during the year 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 Financial statements - Contents and assessing claims, costs to prevent, combat and mitigate damage and other direct and indirect costs associated with the handling of claims incurred. Claims prevention expenses are defined in accordance with Executive Order no. 1592 of 9/11 2020 § 37 para. 1 of the Executive Order. Changes in claims provisions due to changes in yield curve and exchange rates are recognised as a price ad- justment. Tryg hedges the risk of changes in future pay and price figures for provisions 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. Bonus and premium discounts Bonuses and premium discounts represent anticipa- ted and refunded premiums to policyholders, where the amount refunded depends on the claims record, and for which the criteria for payment have been defi- ned prior to the financial year or when the insurance was taken out. Insurance operating costs Insurance operating costs represent acquisition costs and administration expenses less reinsurance com- missions received. Expenses relating to acquiring and renewing the insurance portfolio are recognised at the time of writing the business. Underwriting commission is recognised when a legal obligation occurs. Admini- stration expenses are all other expenses attributable to the administration of the insurance portfolio. Admini- stration expenses are accrued to match the financial year. Share-based payment The Tryg Group’s incentive programmes comprise an employee bonus scheme and incentive programmes for Executive Board, risk takers and other employees. 111 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents Employee bonus scheme According to the remuneration policy, the Group’s employees can be granted a bonus in the form of free shares. When the bonus is granted, employees can choose between receiving shares or cash. The expec- ted value of the shares will be expensed over the per- formance period. The scheme will be treated as a financial instrument, consisting of the right to cash settlement and the right to request delivery of shares. The difference between the value of shares and the cash payment is recognised in equity and is not reme- asured. The remainder is treated as a liability and is re- measured until the time of exercise, such that the total recognition is based on the actual number of shares or the actual cash amount. Conditional shares Conditional shares have been allocated to some employees in accordance with the incentive pro- gramme. Equity-settled conditional shares are measured at the fair value at the allotment date and recognised under staff costs over the period from the allotment date un- til the end of the deferral period (the transfer date), where the holder receive free shares. The shares are recognised at market value and are ac- crued from up to four years. Matching shares Matching shares have been allocated to some emplo- yees in accordance with the incentive programme. As part of the matching shares-program, employees have bought investment shares in Tryg A/S at market price, using taxed funds, for up to the amount decided. The purchase of investment shares entitles the holder to a number of matching shares, corresponding to the number of investment shares which the holder has bought. The shares (matching shares) are provided free of charge, four or three years after the time of purchase of the investment shares. The holder may not sell the shares until six months after the matching date. The shares are recognised at market value and are ac- crued over the four and tree year maturation period, based on the market price at the time of acquisition. Recognition is from the end of the month of acquisi- tion under staff expenses with a balancing entry direc- tly in equity. If the holder retires during the maturation 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. Income from investment properties before fair value adjustment represents the profit from property opera- tions 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 cur- rency translation adjustments and the effect of move- ments in the yield curve used for discounting, are re- cognised as value adjustments. Investment management charges represent expenses relating to the management of investments including salary and management fees on the investment area. The external investors share of the result in Kapitalfor- eningen Tryg Invest Funds and Tryg Invest Real Estate are either deducted (in case of a profit) from or added (in case of a loss) to the investment result. 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 Velliv, Pension & Livsforsikring A/S, Dan- ske Bank and depreciations of intangibles assets iden- tified in Business combinations. divested business includes gross premiums, gross claims, gross costs, profit/loss on ceded business, in- surance technical interest net of reinsurance, invest- ment return after insurance technical interest, other income and costs and tax in respect of the disconti- nued business. Any reversal of earlier impairment is recognised under other income and costs. certainty that future earnings will exceed the costs in more than one year, are reported as intangible assets. Direct costs include personnel costs for software de- velopment and directly attributable relevant fixed costs. All other costs connected with the development or maintenance of software are continuously charged as expenses. 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 held for sale. Statement of financial position Intangible assets Goodwill Goodwill is acquired in connection with acquisition of business. Goodwill is calculated as the difference bet- ween the cost of the undertaking and the fair value of acquired identifiable assets, liabilities and contingent liabilities at the time of acquisition. Goodwill is alloca- ted to the cash-generating units under which manage- ment manages the investment and is recognised under intangible assets. Goodwill is not amortised but is te- sted for impairment at least once per year. Trademarks and customer relations Trademarks and customer relations have been identi- fied as intangible assets on acquisition. The intangible assets are recognised at fair value at the time of acqui- sition and amortised on a straight-line basis over the expected economic lifetime of 5–15 years. 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 8 years. After completion of the development work, the asset is amortised according to the straight-line method over the assessed economic lifetime, though over a maxi- mum of 8 years. The amortisation basis is reduced by any impairment and write-downs. Assets under construction Group-developed intangibles are recorded under the entry “Assets under construction” until they are put into use, whereupon they are reclassified as software and are amortized in accordance with the amortization periods stated above. Fixed assets Operating equipment Fixtures and operating equipment are measured at cost less accumulated depreciation and any accumu- lated impairment losses. Cost encompasses the pur- chase price and costs directly attributable to the acqu- isition 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 eco- nomic lifetime as follows: • 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. Discontinued and divested business Discontinued and divested business is consolidated in one item in the income statement. Discontinued and Costs for group developed software that are directly connected with the production of identifiable and unique software products, where there is sufficient Gains and losses on disposals and retired assets are determined by comparing proceeds with carrying amounts. Gains and losses are recognised in the in- 112 NotesAnnual report 2022 | Tryg A/S | come statement. When revalued assets are sold, the amounts included in the revaluation reserves are transferred to retained earnings. Leasing Right-of-use assets At inception of a contract, Tryg assesses whether a contract is, or contains, a lease. It has the following prerequisites: • • • The underlying asset is identifiable The group has the right to obtain substantially all the economic benefits from use of the asset th- roughout the period of use The group has the right to direct the use of the asset Tryg recognises a right-of-use asset and a correspon- ding lease liability with respect to all lease agreements in which it is the lessee, excluding short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. At inception or on reassessment of a contract that contains lease components, Tryg allocates the consi- deration in the contract to each lease component ba- sed on their relative stand-alone prices. Right-of-use asset (ROU asset) and lease liability are re- cognised at the lease commencement date. The ROU asset is initially measured the cost, which comprises the initial amount of the lease liability adjusted for • • • • lease payments made at or before the commence- ment date any initial direct cost incurred estimate of costs to dismantle and remove the un- derlying asset or to restore the underlying asset lease incentives received ROU assets are tested for impairment. Lease liability The lease liability is initially measured at the present va- lue of the lease payments that are not paid at the com- mencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, Tryg uses its incremental borrowing rate. Subsequently, the lease liability is measured at amortised cost using the effective interest method and is presented as part of other debt. It is remeasured when there is a change in future lease payments. A corresponding adjustment is made to the carrying amount of the ROU asset. Land and buildings Land and buildings are divided into owner-occupied property and investment property. The Group sold the owner-occupied property in Høje Taastrup and have no longer any owner-occupied properties. All remai- ning properties are classified as investment property. Investment property Properties held for renting yields that are not occupied by the Group are classified as investment properties. Investment property is recognised at fair value. Fair va- lue is based on transaction prices for similar proper- ties, adjusted for any differences in the nature, location or maintenance condition of specific assets. If this in- formation is not available, the Group uses alternative valuation methods such as discounted cash flow pro- jections and recent prices in the market. The fair value is calculated on the basis of market-speci- fic 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. The value is subse- quently adjusted with the capitalised value of the return on prepayments and deposits and adjustments for spe- cific property issues such as vacant premises or special tenant terms and conditions. Cf. note 15. Changes in fair values are recorded in the income sta- tement. Impairment test for intangible assets, property and operating equipment Operating equipment and intangible assets are asses- sed at least once per year to ensure that the deprecia- tion method and the depreciation period that is used are connected to the expected economic lifetime. This also applies to the salvage value. Write-down is perfor- med if impairment has been demonstrated. Goodwill is tested annually for impairment, or more of- ten if there are indications of impairment, and impair- ment 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 subsidia- ries are recognised and measured using the equity method. The parent company’s share of the enterpri- ses’ profits or losses after elimination of unrealised in- tra-group profits and losses is recognised in the in- come 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 recog- nised at zero value. Any receivables from these enter- prises 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 va- lue 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 trans- lation of the items in the income statement using average exchange rates for the period unless they devi- ate significantly from the transaction day exchange ra- Financial statements - Contents tes. Income and costs in domestic enterprises denomi- nated in foreign currencies are translated using the exchange rates applicable on the transaction date. Statement of financial position items of foreign subsi- diaries are translated using the exchange rates appli- cable at the statement of financial position date. When it is assessed that the parent company no longer has control over the subsidiary, it will be transferred to either assets held for sale or unquoted shares and when sold, it will be derecognised. Equity investments in associates Associates are enterprises in which the Group has sig- nificant 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 and the carrying amount of the investment represents the Group’s pro- portionate share of the enterprises’ net assets. Signifi- cant transaction costs are recognised as part of the acquisition price. Profit after tax from equity investments in associates is included as a separate line in the income statement. Income is made up after elimination of unrealised in- tra-group profits and losses. Associates with a negative net asset value are mea- sured at zero value. If the Group has a legal or con- structive 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 classifi- cation depends on the purpose for which the invest- ments 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 recogni- tion of value adjustments in the income statement comprise assets that form part of a trading portfolio 113 NotesAnnual report 2022 | Tryg A/S | and financial assets designated at fair value with value adjustment via the income statement. transactions, reference to other similar instruments or discounted cash flow analysis. The investment portfolio is divided into a match port- folio corresponding to the technical provisions, and a free portfolio. The objective for the return on the match portfolio is to approximately offset the capital gains and losses on the assets with the corresponding developments on the insurance provisions. The free portfolio is invested in different asset classes with a view to obtaining the best risk-adjusted return. To avoid an accounting mismatch fixed income finan- cial assets in the match portfolio are designated as measured at fair value through profit or loss. 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 ma- naged in accordance with fair value. Derivative finan- cial instruments are similarly classified as financial as- sets held for sale, unless they are classified as hedging instruments. Realised and unrealised profits and losses that may arise because of changes in the fair value for the cate- gory 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 expi- red, 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 ex- change, or for which no stock exchange price is quo- ted that reflects the fair value of the instrument, the fair value is determined using valuation techniques. These include the use of similar recent arm’s length Derivative financial instruments and hedge accounting The Group’s activities expose it to financial risks, inclu- ding changes in share prices, foreign exchange rates, interest rates and inflation. Forward exchange contra- cts and currency swaps are used for currency hedging of portfolios of shares, bonds, hedging of foreign enti- ties and insurance statement of financial position items. Interest rate derivatives in the form of futures, forward contracts, swaps and FRAs are used to ma- nage 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 fi- nancial position at fair value. Positive fair values of derivatives are recognised as derivative financial in- struments under assets. Negative fair values of deriva- tives are recognised under derivative financial instru- ments under liabilities. Positive and negative values are only offset when the company is entitled or in- tends to make net settlement of more financial instru- ments. Discounting based on 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 in- strument 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 qu- alify as net investment hedges in foreign entities and which provide effective currency hedging of the net in- vestment are recognised in other comprehensive in- come. The net asset value of the foreign entities esti- mated at the beginning of the financial year is hedged 90-100% by entering into short-term forward ex- change 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 provisi- ons for insurance contracts. Contracts that do not meet these classification requirements are classified as financial assets. The benefits to which the Group is entitled under its reinsurance contracts held are recognised as assets and reported as reinsurers’ share of provisions for in- surance 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 as- sets 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 re- coverable amount. Impairment losses are recognised in the income statement. 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. Financial statements - Contents Receivables that arise because of insurance contracts are classified in this category and are reviewed for im- pairment as a part of the impairment test of accounts receivable. Receivables are recognised initially at fair value and are subsequently assessed at amortised cost. The in- come statement includes an estimated reservation for expected unobtainable sums when an objective evi- dence of the asset impairment is observed. The reser- vation entered is assessed as the difference between the carrying amount of an asset and the present value of expected future cash flows. 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. Reverse repur- chase lending to credit institutions are recognised and measured at amortised cost, and the return is recogni- sed as interest income in the income statement. Prepayments and accrued income Prepayments include expenses paid in respect of sub- sequent financial years and interest receivable. Ac- crued underwriting commission relating to the sale of insurance products is also included. Equity Share capital Shares are classified as equity when there is no obliga- tion to transfer cash or other assets. Costs directly at- tributable 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 comprehensive income unless the revaluation offsets a previous impairment loss. 114 NotesAnnual report 2022 | Tryg A/S | 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 Other comprehensive income. When an entity is wound up or sold, the balance is transferred to the in- come statement. The hedging of the currency risk in respect of foreign entities is also offset in other com- prehensive 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 and security reserve. The Danish and Swe- dish provisions comprise contingency fund provisions. Deferred tax on the Norwegian and Swedish contin- gency fund reserves is allocated. Dividends Proposed dividend is recognised as a liability at the time of adoption by the shareholders at the annual ge- neral meeting (date of declaration). Own shares The purchase and sale sums of own shares and divi- dends thereon are taken directly to retained earnings under equity. Own shares include shares acquired for incentive programmes and share buyback pro- gramme. Proceeds from the sale of own shares in connection with the or matching shares are taken directly to equity. Subordinate loan capital Subordinate loan capital is recognised initially at fair value, net of transaction costs incurred. Subordinate loan capital is subsequently stated at amortised cost; any difference between the proceeds (net of transac- tion costs) and the redemption value is recognised in the income statement over the borrowing period using the effective interest method. Interest on the Notes is due and payable only at the sole and absolute discretion of Tryg. Accordingly, Tryg may at any time in its sole and absolute discretion elect to cancel any interest payment (or any part the- reof) which would otherwise be payable on any inte- rest payment date. In case interest payments are cancelled Tryg shall, in general, solicit interest from new investors for the pur- chase and subscription of replacement securities and redeem the original notes at a price equal to their outstanding principal amount together with any ac- crued interest and accrued and unpaid interest. Accor- dingly, perpetual additional capital with discretionary payment of interest and principal is recognised as debt. Provisions for insurance contracts Premiums written are recognised in the income state- ment (premium income) proportionally over the pe- riod of coverage and, where necessary, adjusted to re- flect any time variation of the risk. The portion of premiums written on in-force contracts that relates to unexpired risks at the statement of financial position date is reported as premium provisions. Premium pro- visions 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 temporis prin- ciple 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 poli- cyholders. They include direct and indirect claims handling costs that arise from events that have occur- red up to the statement of financial position date even if they have not yet been reported to the Group. Claims provisions are estimated using the input of assess- ments for individual cases reported to the Group and statistical analyses for the claims incurred but not re- ported and the expected ultimate cost of more com- plex claims that may be affected by external factors (such as court decisions). The provisions include claims handling costs. Claims provisions are discounted. Discounting is ba- sed on a yield curve reflecting duration applied to the expected future payments from the provision. Discounting affects the motor liability, professional lia- bility, workers’ compensation and personal accident and health insurance classes, in particular. Provisions for bonuses and premium discounts etc. re- present 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 busi- ness based on actuarial methods. Where such busi- ness 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, Bornhu- etter-Ferguson, the Loss Ratio 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 in- sufficient information about the future run-off perfor- mance. The provision for annuities under workers’ compensa- tion insurance is calculated on the basis of a mortality corresponding to the G82 calculation basis (official mortality table). In some instances, the historic data used in the actua- rial models is not necessarily predictive of the expec- ted future development of claims. For example, this is the case with legislative changes where an a priori Financial statements - Contents estimate is used for premium increases related to the expected increase in claims. In connection with legi- slative changes, the same estimate is used for deter- mining the change in the level of claims. Subsequently, this estimate is maintained until new loss history ma- terialises which can be used for re-estimation. Several assumptions and estimates underlying the calculation of the claims provisions are mutually de- pendent. 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 in- flation assumptions are used, with annuities for the in- sured being indexed based on the workers’ compensa- tion 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 in- dex. For other lines of business, the inflation assumptions, because present only implicitly in the actuarial mo- dels, will cause a certain lag in predicting the level of future losses when a change in inflation occurs. On the other hand, the effect of discounting will show imme- diately as a consequence of inflation changes to the extent that such changes affect the interest rate. Other correlations are not deemed to be significant. Liability adequacy test Tests are continuously performed to ensure the ade- quacy 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 recogni- sed in the income statement. Employee benefits Pension obligations The Group operates various pension schemes. The schemes are funded through contributions to in- surance companies or trustee-administered funds. In 115 NotesAnnual report 2022 | Tryg A/S | Financial statements - Contents Norway, the Group operated a defined-benefit plan which was closed at 01 January 20. In Denmark, the Group operates a defined-contribution plan. A defi- ned-contribution plan is a pension plan under which the Group pays fixed contributions into a separate en- tity (a fund) and will have no legal or constructive obli- gation 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. Försäk- ringsbranschens Pensionskassa (FPK) is unable to pro- vide sufficient information for the Group to use defi- ned-benefit accounting. The plan is on that basis accounted for as a defined-contribution plan. As part of the termination of the defined-benefit plan in Norway, an agreement of compensation to the emplo- yees covered by the plan was agreed. A liability has been established to cover the expected compensation to be paid to the employees upon retirement from the company. If the employee leaves before retirement only a part of the compensation is paid. There is no fu- ture actuarial assumptions related to the liability, only uncertainty is whether the employees stays to retire- ment or not. Other employee benefits Employees of the Group are entitled to a fixed pay- ment 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 sig- ning 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 sta- tistical models. 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 recogni- sed 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. Deferred tax is measured according to the statement of financial position liability method on all timing diffe- rences 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. 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 rea- lised against which the temporary differences can be offset. Deferred income tax is provided on temporary diffe- rences concerning investments, except where Tryg controls when the temporary difference will be reali- sed, 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 because 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 esti- mate by management of the expenditure required to settle the present obligation. Provisions for restructurings are recognised as obliga- tions when a detailed formal restructuring plan has been announced prior to or at the statement of finan- cial position date at the latest to the persons affected by the plan. 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 pro- visions. Debt Debt comprises debt in connection with direct in- surance and reinsurance, amounts owed to credit in- stitutions, current tax obligations, debt to group under- takings and other debt. Other liabilities are assessed at amortised cost based on the effective interest method. Debt related to leasing and the external investors share of Kapitalforeningen Tryg Invest Funds and Kapi- talforeningen Tryg Invest are included in other debt. The external investors share of Kapitalforeningen Tryg Invest relates to shares, bonds and investment proper- ties. Repo deposits from credit institutions are recognised and measured at amortised cost, and the return is re- cognised as interest expenses in the income state- ment. 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 begin- ning and end of the financial year. No separate cash flow statement has been prepared for the parent com- pany because it is included in the consolidated cash flow statement. 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 pay- ments in connection with the purchase and sale of int- angible assets, property, plant and equipment as well as financial assets and deposits with credit institutions. Cash flows from financing activities comprise changes in the size or composition of Tryg’s share capital and re- lated 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 de- mand deposits. Other The amounts in the report are disclosed in whole num- bers of DKKm, unless otherwise stated. The amounts have been rounded and consequently the sum of the rounded amounts and totals may differ slightly. 116 NotesAnnual report 2022 | Tryg A/S | 30 Transition to IFRS 9 & IFRS 17 at 1 January 2023 The description below is a supplement to note 29, accounting policies. Accounting regulation applicable 1 January 2023 IFRS 9 / IFRS 17 In July 2014, the IASB issued the final IFRS 9 “Financial Instruments”. The standard includes new provisions governing “clas- sification and measurement of financial assets”, im- pairment of financial assets and “hedge accounting”. IFRS 9 entered into force for the accounting year com- mencing 1 January 2018 • Insurance companies are allowed to postpone the implementation to 1 January 2023. The implementation of IFRS 9 “financial instruments” is not expected to significantly change the Tryg Group’s financial position. Regarding IFRS 9 the assessment of no significant im- pact on the statement of financial position or profit and loss is based on the assumption that Tryg already carry substantially all financial instruments at fair va- lue through profit and loss. The implementation of IFRS 9, will not affect Tryg’s recognition and measure- ment. Tryg has postponed the implementation of IFRS 9 to 1 January 2023 when IFRS 17 Insurance Contra- cts will be applicable. Tryg can postpone IFRS 9 due to the fact that our acti- vities are predominantly connected with insurance and that our liabilities connected with insurance is re- latively greater than 80 per cent of the total liabilities. Classification and measurement The general principles for measurement of financial as- sets and liabilities will generally change following im- plementation of IFRS 9. But for the Tryg Group the im- plementation has not given rise to significant changes. After initial recognition, financial assets must still be measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss. Going forward, classification of financial instru- ments will be based on the following business models: The asset is held to collect cash flows from payments of principal and interest (Hold to Collect model). Measured at amortised cost. The asset is held to collect cash flows from payments of principal and interest and selling the asset (Hold to Collect and Sell business model). Measured at fair va- lue with changes recognised through other compre- hensive income with reclassification to the income statement on realisation of the assets. Other financial assets value adjusted through profit or loss (fair value) Relative to the first two categories, the business model should be based on collection of cash flows from pay- ment of interest and principal combined with limited sales activity. If the business model is not founded on these assump- tions, the financial assets will be placed in a category, which is subject to value adjustment through profit or loss. Financial assets, which, if measured at amortised cost or at fair value through other comprehensive in- come would result in measuring inconsistencies, are also recognised in this category. Financial statements - Contents Having reviewed the Group’s business models in rela- tion to assessing the significance of collecting cash flows, current classification and measurement are lar- gely unchanged compared with current practice. In particular, it should be noted that Tryg does not have a business model that implies recognising fair value ad- justments in other comprehensive income. Thus, bank loans and deposits are essentially still mea- sured at amortised cost. IFRS 17 replaces IFRS 4 Insurance Contracts for repor- ting periods beginning on or after 1 January 2023. The adoption of IFRS 17 will not change the classifica- tion of the Company’s insurance contracts. The impact of IFRS 17 (Insurance Contracts) is cur- rently being assessed in a structured and formal man- ner and is expected to be concluded in due course ahead of the implementation date. Tryg Group currently expects that the implementation of IFRS 17 (Insurance Contracts) will not significantly change the Tryg Group’s financial position. Under IFRS 17 the Group’s insurance contracts issued and re-insurance contracts held are eligible to be mea- sured using the simplification, Premium Allocation Approach (PAA). As the current accounting principles apply PAA, the major changes will predominantly be presentational. The only consequential changes that will have an im- pact on the technical result will be the reclassification of education and development costs to “Other income and costs” and the reclassification of the effects of the inflation swap which will be included in “Investment activities”. IFRS 17 will introduce a new vocabulary that will affect the look of the statement of profit or loss: • ”Insurance revenue” will replace ”Gross pre- mium income” as the topline figure • ”Insurance service expense” will be a single line comprising both claims and expenses including “Bonus and premium discounts” • The result of reinsurance contracts will be repor- ted in a single line, ”Net expenses from reinsurance contracts” “Insurance service result” will replace “Technical result” • These presentational changes will not affect the tech- nical result or the profit/loss for the year. The changes will be implemented from the effective date. 117 NotesAnnual report 2022 | Tryg A/S | Income statement for Tryg A/S (parent company) Financial statements - Contents DKKm Note 1 10 2 10 Investment activities Income from Group undertakings Income from associates Interest income Value adjustments Interest expenses Administration expenses in connection with investment activities Total investment return 3 Other expenses Profit/loss before tax 4 Tax 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 earnings 2022 2021 DKKm 2022 2021 Statement of comprehensive income Profit/loss for the year Other comprehensive income Other comprehensive income which cannot subsequently be reclassified as profit or loss Actuarial gains/losses on defined-benefit pension plans Tax on actuarial gains/losses on defined-benefit pension plans Other comprehensive income which can subsequently be re- classified as profit or loss Deferred tax related to receivable balance Exchange rate adjustments of foreign entities Exchange rate adjustments of foreign material associates Hedging of currency risk in foreign entities Tax on hedging of currency risk in foreign entities Total other comprehensive income Comprehensive income 2,570 34 5 -18 -365 -5 2,222 -96 2,126 121 2,247 4,118 163 -2,033 2,247 3,120 1,206 1 -1,015 -34 -5 3,272 -82 3,190 -33 3,158 2,802 1,696 -1,340 3,158 2,247 3,158 -2 1 -2 -50 -2,217 52 496 -109 -1,828 -1,830 417 0 0 0 0 93 -52 -99 22 -36 -36 3,122 118 Annual report 2022 | Tryg A/S | Statement of financial position for Tryg A/S (parent company) Financial statements - Contents DKKm Note 5 6 Assets Equity investments in Group undertakings Equity investments in associates Total investments in associates and Group undertakings Total investment assets Receivables from subsidiaries Total other assets 7 Current tax assets Other Total other assets Total prepayments and accrued income 2022 2021 DKKm 2022 2021 72,524 185 72,709 13,029 37,052 50,081 72,709 50,081 65 65 106 1 107 34 0 0 0 1 1 55 Note Equity and liabilities Equity Debt to Group undertakings Tax liabilities Other debt Total debt 42,504 49,008 30,331 0 81 30,412 1,092 33 4 1,129 Total equity and liabilities 72,915 50,137 8 9 10 11 12 Deferred tax assets Contractual obligations, contingent liabilities and collateral Related parties Reconciliation of profit/loss and equity Accounting policies Total assets 72,915 50,137 119 Annual report 2022 | Tryg A/S | Statement of changes in equity (parent company) Financial statements - Contents Proposed dividend per share is calculated as the total dividend proposed by the Supervisory Board after the end of the financial year divided by the total number of shares at the end of the year (654,653,980 shares). a) 352,505,989 new shares of nominal DKK 5 at a price of 105 per share were issued. Cost related to the issue of new shares are deducted in proceeds recognised in retained earnings with DKK 694m. Total changes in equity in DKKm Equity at 31 December 2021 2022 Profit/loss for the year Other comprehensive income Total comprehensive income Dividend paid Dividend own shares Purchase and sale of own shares Share-based payments Total changes in equity in 2022 Equity at 31 December 2022 Equity at 31 December 2020 2021 Profit/loss for the year Other comprehensive income Total comprehensive income Dividend paid Dividend own shares Purchase and sale of own shares Issue of new shares a) Share-based payments Total changes in equity in 2021 Equity at 31 December 2021 Share capital 3,273 Revaluation reserves 5,119 Retained earnings 39,915 163 -1,830 -1,667 -1,667 3,451 3,458 1,696 -36 1,660 1,660 5,119 -2,033 -2,033 38 -3,253 65 -5,183 34,731 6,765 -1,340 -1,340 3 -137 34,557 66 33,150 39,915 0 0 3,273 1,511 0 1,763 1,763 3,273 Proposed dividend Non-controlling interest 700 4,118 4,118 -3,771 347 1,047 529 2,802 2,802 -2,630 172 700 1 0 0 1 1 0 0 0 1 Total 49,008 2,247 -1,830 417 -3,771 38 -3,253 65 -6,504 42,504 12,264 3,158 -36 3,122 -2,630 3 -137 36,320 66 36,744 49,008 120 Annual report 2022 | Tryg A/S |  (parent company) Financial statements - Contents DKKm 2022 2021 DKKm 2022 2021 1 Income from Group undertakings Tryg Invest A/S Alka Fordele A/S Scandi JV Co A/S Tryg Forsikring A/S 2 Value adjustments 20 -23 285 2,287 2,570 8 -25 0 3,137 3,120 In 2022 consists only of currency adjustments. In 2021 primarily value adjustment of currency hedge DKK -1,035m related to RSA acquisition which consists of the premium paid and exchange rate adjust- ments which cannot be attributed to hedge accounting. 5 Equity investments in Group undertakings Cost Cost at 1 January Additions for the year Cost at 31 December Revaluation and impairment to net asset value Revaluation and impairment at 1 January Revaluations for the year Dividend paid Revaluation and impairment at 31 December 9,053 60,008 69,061 3,976 686 -1,200 3,463 9,005 48 9,053 3,470 3,137 -2,630 3,976 3 Other expenses Administration expenses Carrying amount at 31 December 72,524 13,029 -96 -96 -82 -82 Name, registered office and activity Ownership share in % Profit/loss Equity Remuneration for the Executive Board is paid partly by Tryg A/S and partly by Tryg Forsikring A/S and is charged to Tryg A/S via the cost allocation. Refer to Note 6 in the Tryg Group for a specification of the audit fee. Average number of full-time employees for the year 9 8 4 Tax Reconciliation of tax costs Tax on profit/loss for the year Tax adjustments, previous years Adjustment of non-taxable income and costs 2022 Tryg Invest A/S, Ballerup Alka Fordele A/S, Ballerup Scandi JV Co A/S (Under voluntary liquida- tion) Tryg Forsikring A/S, Ballerup 106 16 0 121 -16 0 -18 -33 2021 Tryg Invest A/S, Ballerup Alka Fordele A/S, Ballerup Tryg Forsikring A/S, Ballerup Tax on profit/loss for the year in the parent company is calculated exclusive of profit/loss and tax in Group undertakings. Effective tax rate Tax on profit/loss for the year Tax adjustment, previous years Adjustment of non-taxable income and costs 22 3 0 25.0 % 22 0 24.5 46.5 6 Equity investments in associates Please refer to note 14 Equity investments in associates in Tryg Group. 100 100 100 100 100 100 100 20 -23 285 2,287 8 -25 3,137 60 28 30,255 42,182 39 28 12,962 121 NotesAnnual report 2022 | Tryg A/S |  (parent company) Financial statements - Contents DKKm 2022 2021 DKKm 7 8 9 Current tax assets Tax receivable at 1 January Adjustment to previous years Current tax for the year Tax paid for the year Tax receivable at 31 December Deferred tax assets Capitalised tax losses Tryg A/S Tax value of non-capitalised tax losses Tryg A/S -33 16 106 17 106 0 0 20 0 -33 -20 -33 72 16 Contractual obligations, contingent liabilities and collateral The Danish companies in the Tryg Group are jointly taxed with TryghedsGruppen smba. The companies and the other jointly taxed companies are liable for any obligations to withhold taxes at source on inte- rest, royalties, dividends and income taxes etc. in respect of the jointly taxed companies. Companies in the Tryg Group are party to a number of disputes in Denmark, Norway and Sweden. Management believes that the outcome of these disputes will not affect the Group’s financial position over and above the receivables and liabilities recognised in the statement of financial position at 31 De- cember 2022. 10 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 Executive Board (which is considered Key Management) and their members’ related family. Specification of remuneration 2022 Supervisory Board Executive Board Risk-takers b) Number of persons Base salary incl. car al- lowance Share-based variable salary a) Cash variable salary 18 4 1 23 11 31 0 42 0 16 0 16 0 0 0 0 Pension Total 0 8 0 8 11 55 0 66 a) Total expenses recognised in 2022 for matching shares and conditional shares allocated in 2022 and previous years. b) Risk-takers in Tryg A/S includes only one employee, wherefore salary and pension is not presented. The amounts are included in note 27 for Tryg Group. Of which retired Supervisory Board Executive Board Risk-takers Number of persons 4 0 0 4 Severance pay 0 0 0 0 122 NotesAnnual report 2022 | Tryg A/S |  (parent company) Financial statements - Contents DKKm 10 Related parties (continued) DKKm 10 2021 Supervisory Board Executive Board Risk-takers b) Number of persons Base salary Share-based variable salarya) Cash variable salary Pension Total 13 4 1 18 10 30 0 40 0 12 0 12 0 0 0 0 0 7 0 7 10 50 0 60 a) Total expenses recognised in 2021 for matching shares and conditional shares allocated in 2021 and previous year. b) Risk-takers in Tryg A/S includes only one employee, wherefore salary and pension is not presented. The amounts are included in note 27 for Tryg Group. Of which retired Supervisory Board Executive Board Risk-takers Number of persons 0 0 0 0 Severance pay 0 0 0 0 Base salary are charges incurred during the financial year. Variable salary includes the charges for matching shares and conditional shares, which are recognised over 4 years. The Executive Board and risk-takers are included in incentive programmes. Please refer to note 6 for more information. The members of the Supervisory Board in Tryg A/S are paid with a fixed remuneration and are not cove- red by the incentive schemes. 11 The members of the Executive Board are paid a fixed remuneration, car allowance, pension etc. The variable salary is awarded in the form of share-based remuneration and cash. see ’Corporate gover- nance’. Related parties (continued) Each member of the Executive Board is entitled to 12 months’ notice and severance pay equal to 12 months’ salary plus pension contribution (Group CEO is entitled to severance pay equal to 18 months’ salary). If a change of control clause is actioned CEO and COO are instead entitled to Severance pay equal to 36 months’ salary. 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 45% (45%) of the total shares in Tryg A/S. This amounts to Trygheds- Gruppen smba controlling 46.5% of the shares outstanding in Tryg A/S as at 31 December 2022. Transactions with Group undertakings and associates Tryg A/S exercises full control over Tryg Forsikring A/S, Scandi JV Co A/S, Scandi Co 3 A/S, Alka Fordele A/S and Tryg Invest A/S. In 2022 Tryg Forsikring A/S paid Tryg A/S DKK 1,200m and Tryg A/S paid TryghedsGruppen smba DKK 1,697m in dividends. Intra-group trading involved - Providing and receiving services - Intra-group accounts - Interest 2022 1 -30,265 -359 2021 11 1,092 0 The intra-group trading is primarily against Tryg Forsikring A/S. Administration fee, etc. is settled on a cost-recovery basis. Intra-group accounts are offset and carry interest on market terms. 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. There is no difference in profit/loss or equity recognised after Danish FSA and IFRS. 12 Accounting policies Please refer to Tryg Group's accounting policies. 123 NotesAnnual report 2022 | Tryg A/S | Q4 2022 Quarterly outline DKKm Private Gross premium income Technical result Key ratios Gross claims ratio Net reinsurance ratio Claims ratio, net of reinsurance Gross expense ratio Combined ratio Combined ratio exclusive of run-off Commercial Gross premium income Technical result Key ratios Gross claims ratio Net reinsurance ratio Claims ratio, net of reinsurance Gross expense ratio Combined ratio Combined ratio exclusive of run-off Corporate Gross premium income Technical result Key ratios Gross claims ratio Net reinsurance ratio Claims ratio, net of reinsurance Gross expense ratio Combined ratio Combined ratio exclusive of run-off Q4 2022 5,847 1,073 67.3 1.9 69.2 13.1 82.4 83.4 Q3 2022 6,107 1,203 65.8 1.4 67.1 13.7 80.9 82.9 Q2 2022 6,020 1,200 65.5 1.4 66.9 13.4 80.3 81.9 Q1 2022 3,985 336 75.7 2.0 77.7 13.8 91.5 93.0 Q4 2021 3,840 681 68.4 1.7 70.1 12.1 82.2 84.6 Q3 2021 3,927 607 68.5 1.8 70.3 14.1 84.4 86.6 Q2 2021 3,877 729 65.1 1.9 67.0 14.1 81.1 83.3 Q1 2021 3,743 479 71.5 1.5 73.1 14.0 87.1 90.0 Q4 2020 3,638 633 67.3 2.2 69.6 12.9 82.5 85.1 Q3 2020 3,610 657 66.9 0.4 67.3 14.4 81.7 84.1 2,292 452 2,339 501 2,305 435 1,415 281 1,352 109 1,338 278 1,316 241 1,288 222 1,261 179 1,248 253 65.7 -1.3 64.4 16.7 81.1 90.0 903 164 58.8 8.3 67.1 15.5 82.7 93.3 60.3 3.6 63.8 15.5 79.3 84.7 917 127 66.6 7.8 74.4 12.7 87.1 99.7 66.7 -1.6 65.1 16.4 81.4 86.6 932 266 53.1 7.4 60.5 11.4 71.9 85.3 55.5 7.9 63.4 16.7 80.1 87.8 876 136 70.4 2.6 73.0 11.4 84.4 101.1 67.3 4.9 72.2 19.7 91.9 97.6 850 36 81.4 0.6 82.0 13.7 95.7 102.8 56.4 7.0 63.4 15.7 79.1 86.7 869 103 68.5 8.1 76.6 11.5 88.0 93.5 65.7 -0.8 64.9 16.6 81.5 87.3 864 174 55.1 14.1 69.2 10.5 79.7 89.0 62.4 3.2 65.6 16.9 82.5 86.6 875 47 75.6 8.5 84.2 10.2 94.4 105.1 61.9 5.4 67.3 18.4 85.7 96.6 844 -32 86.7 4.5 91.2 12.5 103.7 113.1 55.5 7.9 63.4 16.1 79.6 85.3 860 70 59.8 21.9 81.7 10.0 91.7 104.7 Financial statements - Contents A further detailed version of the presentation can be downloaded from tryg.com/uk>investor> Downloads>tables 124 Annual report 2022 | Tryg A/S | Q4 2022 Quarterly outline DKKm Othera) Gross premium income Technical result Tryg total Gross premium income Technical result Investment return Other income and costs Profit/loss before tax Profit/loss Key ratios Gross claims ratio Net reinsurance ratio Claims ratio, net of reinsurance Gross expense ratio Combined ratio Combined ratio exclusive of run-off Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021 Q4 2020 Q3 2020 0 0 9,042 1,689 317 -629 1,377 1,081 66.1 1.7 67.8 14.3 82.1 86.1 0 0 9,363 1,832 -348 -521 964 628 64.5 2.5 67.0 14.1 81.1 85.0 0 0 9,257 1,902 -878 -517 508 430 64.5 1.3 65.8 13.9 79.7 83.4 0 0 6,276 754 -284 -266 204 109 70.4 3.4 73.8 14.1 87.9 93.0 0 0 6,041 826 941 -171 1,596 1,370 70.0 2.2 72.2 14.0 86.2 90.1 0 0 6,133 988 481 -267 1,201 1,037 65.8 3.9 69.7 14.1 83.8 87.6 0 0 6,057 1,144 -757 -113 274 -63 63.8 3.1 66.9 14.1 81.0 85.0 0 2 5,906 751 343 -72 1,022 814 70.1 2.9 73.1 14.1 87.1 91.5 0 0 5,744 780 513 -70 1,223 1,038 69.0 3.3 72.3 14.0 86.3 91.8 0 0 5,719 980 237 -67 1,150 930 63.4 5.2 68.6 14.1 82.7 87.4 Financial statements - Contents a) Amounts relating to eliminations and one-off items are included under 'Other'. A further detailed version of the presentation can be downloaded from tryg.com/uk>investor> Downloads>tables 125 Annual report 2022 | Tryg A/S | Q4 2022 Geographical segments Financial statements - Contents DKKm Q4 2022 Q4 2021 2022 2021 DKKm Q4 2022 Q4 2021 2022 2021 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 Run-off, net of reinsurance (%) Number of full-time employees, end of period Norwegian general insurance NOK/DKK, average rate for the period 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 Run-off, net of reinsurance (%) Number of full-time employees, end of period 3,950 745 217 66.7 1.7 68.4 13.6 81.9 -5.5 71.66 2,115 273 95 66.5 6.0 72.5 15.2 87.7 -4.5 3,522 500 133 67.9 3.1 71.0 14.5 85.6 -3.8 73.94 1,889 179 29 75.4 2.6 78.0 12.7 90.7 -1.6 15,612 2,685 752 14,326 2,448 644 Swedish general insurance SEK/DKK, average rate for the period Gross premium income Technical result Run-off gains/losses, net of reinsurance 67.2 1.7 68.8 14.2 83.1 -4.8 3,345 73.95 8,386 1,267 319 66.9 4.9 71.8 13.6 85.5 -3.8 1,344 66.2 2.0 68.2 14.4 82.7 -4.5 3,062 72.92 7,263 938 215 69.1 5.0 74.1 13.1 87.2 -3.0 1,139 Key ratios Gross claims ratio Net reinsurance ratio Claims ratio, net of ceded business Gross expense ratio Combined ratio Run-off, net of reinsurance (%) Number of full-time employees, end of period Other a) Gross premium income Technical result Run-off gains/losses, net of reinsurance Number of full-time employees, end of period Tryg (total) 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 Combined ratio Run-off, net of reinsurance (%) Number of full-time employees, end of period 68.18 2,920 682 55 62.4 0.5 62.9 14.6 77.5 -1.9 57 -11 -4 9,042 1,689 317 -629 1,377 362 66.1 1.7 67.8 14.3 82.1 -4.0 73.45 584 110 72 67.6 -1.2 66.4 14.7 81.1 -12.2 46 36 -2 6,041 826 941 -171 1,596 232 70.0 2.2 72.2 14.0 86.2 -3.8 70.33 9,730 2,227 289 63.1 0.5 63.6 14.1 77.7 -3.0 1,781 211 -2 20 49 33,938 6,177 -1,193 -1,933 3,051 1,380 66.0 2.1 68.2 14.1 82.2 -4.1 6,518 73.39 2,390 279 113 71.4 2.2 73.6 14.6 88.3 -4.7 431 159 43 -8 42 24,137 3,709 870 -624 3,956 963 67.4 3.0 70.5 14.1 84.5 -4.0 4,674 a) Comprises credit & surety insurance (Tryg Garanti) in Finland, Netherlands, Austria, Switzerland, Belgium, Germany and amounts relating to one-off items. 126 Annual report 2022 | Tryg A/S | Other key figures Financial statements - Contents 2022 2021 2020 2019 2018 Key ratios are calculated in accordance with ’’Recom- mendations & Financial Ratios’’ issued by the Danish Society of Financial Analysts. Share performance Earnings per share (DKK) Diluted earnings per share (DKK) Earnings per share of continuing business (DKK) Operating earnings per share (DKK) Number of shares (1,000) Average number of shares (1,000) Diluted average number of shares (1,000) Share price (DKK) Net asset value per share (DKK) Market price/net asset value Ordinary dividend per share (DKK) Extraordinary dividend per share (DKK) Price/Earnings 3.47 3.47 3.47 4.43 633,710 646,977 646,977 165.35 67.07 2.5 6.29 0.00 47.6 5.51 5.51 5.52 5.70 653,447 572,688 572,688 161.50 75.00 2.2 4.28 0.00 29.3 9.19 9.19 9.19 9.54 301,750 301,678 301,678 192.10 40.64 4.7 7.00 0.00 20.9 9.42 9.42 9.42 9.82 301,700 301,954 301,954 197.50 40.05 4.9 6.80 1.65 21.0 5.73 5.73 5.74 5.84 301,743 302,043 302,043 163.90 37.56 4.4 6.60 0.00 28.6 Number of full-time employess, continued business, at 31 December 6,518 4,674 4,400 4,151 4,027 127 Annual report 2022 | Tryg A/S | Group chart Financial statements - Contents TryghedsGruppen smba (45%) Other shareholders (55%) Alka Fordele A/S Tryg Invest A/S Tryg A/S Tryg Forsikring A/S Scandi JV Co A/S Under voluntary liquidation Scandi JV Co 2 A/S (50%) Scandi Co 3 A/S Under voluntary liquidation Tryg Forsikring (Branch Germany) Tryg Forsikring (Branch Finland) Trygg-Hansa Försäkring (Branch Sweden) Tryg Forsikring incl. Enter (Branch Norway) Tryg Livsforsikring A/S Holmia Livsförsäkring AB (Sweden) Tryg Ejendomme A/S Respons Inkasso AS (Norway) Tryg Forsikring (Branch Austria) Tryg Forsikring (Branch The Netherlands) Tryg Forsikring (Branch Belgium) Tryg Forsikring (Branch Switzerland) Forsikrings- Aktieselskabet Alka Liv II Kapitalforeningen Tryg Invest Funds (82%) Group chart at 1 January 2023. Companies and branches are wholly owned by Danish owners and domiciled in Denmark, unless otherwise stated. Company Branch 128 Annual report 2022 | Tryg A/S | Glossary, Key Ratios and alternative performance measures 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 occupa- tional pension funds, and also comply with ‘Recommendations & Ratios’ issued by the CFA Society Denmark. Financial statements - Contents Claims ratio, net of ceded business Gross claims ratio + net reinsurance ratio. Dividend per share Market price/net asset value Proposed dividend Number of shares at year-end 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, Tryg Livsforsikring A/S, Forsikrings-Aktieselskabet Liv II and excluding the Norwegian and Swedish branches. Earnings per share Net asset value per share Profit or loss for the year Average number of shares Equity at year-end Number of shares at year-end Earnings per share of continuing business Diluted earnings from continuing business after tax Diluted average number of shares Net reinsurance ratio Profit or loss from reinsurance x 100 Gross premium income Diluted average number of shares Average number of shares adjusted for number of share options which may potentially dilute. Gross claims ratio Gross claims x 100 Gross premium income Discounting Expresses recognition in the financial statements of expected future payments at a value below the nomi- nal 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 expense ratio without adjustment Gross insurance operating costs x 100 Gross premium income Gross premium income Calculated as gross premium income adjusted for change in gross premium provisions, less bonus and premium discounts. Norwegian general insurance Comprises Tryg Forsikring A/S, Norwegian branch. Operating ratio Calculated as the combined ratio plus insurance tech- nical interest in the denominator. Claims + insurance operating costs + profit or loss from reinsurance x 100 Gross premium income + insurance technical interest Other insurance Comprises Finnish, Dutch, Austrian, Swiss, Belgium and German credit & surety insurance and amounts relating to one-off items. Own funds Equity plus share of qualifying solvency debt and profit margin (solvency purpose), less intangible assets, tax asset and proposed dividend. Price/Earnings Share price Earnings per share Relative run-off result Run-off gains/losses net of reinsurance divided by claims provisions net of reinsurance beginning of year. Return on equity after tax (%) Profit or loss for the year after tax Weighted average equity Run-off gains/losses The difference between the claims provisions at the beginning of the financial year (adjusted for foreign currency translation adjustments and discounting effects) and the sum of the claims paid during the financial year and the part of the claims provisions at the end of the financial year pertaining to injuries and damage occurring in earlier financial years. 129 Annual report 2022 | Tryg A/S | Solvency II Solvency requirements for insurance companies issued by the EU Commission. Weather claims, net of reinsurance Weather claims, net of reinsurance, as calculated by the Tryg Group, represents: Tangible Equity Tangible Equity is defined as weighted average equity excluding intangible assets and deferred tax related to intangible assets Financial statements - Contents Solvency ratio Ratio between own funds and capital requirement. Weather claims, net of reinsurance, is defined as claims related to storm, cloudbursts, natural perils and winter, adjusted for reinsurance. Swedish general insurance Comprises Tryg Forsikring A/S, Swedish branch. Weather claims, net of reinsurance Gross Premium income. Total reserve ratio Reserve ratio, claims provisions + premium provisions divided by premium income. Run-off, net of reinsurance Run-off, net of reinsurance, as calculated by the Tryg Group, represents 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. Alternative performance measures The following financial measures included in this annual report are not measures of financial perfor- mance or liquidity under IFRS, as adopted by the EU or 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 but are defined by man- agement as follows: Large claims, net of reinsurance Large claims, net of reinsurance, as calculated by the Tryg Group, represents Large claims, net of reinsurance is defined as single claims or claims events gross above 10m in local currencies adjusted for reinsurance. Large claims, net of reinsurance Gross Premium income Run-off, net of reinsurance Gross Premium income. Premium proforma growth in local currencies Premium proforma growth in local currencies is based on proforma figures that includes Trygg-Hansa and Codan Norway. As calculated by the Tryg Group, represents: (Premium income including Trygg-Hansa and Codan Norway pro-forma in year X - Premium income including Trygg-Hansa and Codan Norway pro-forma in year X-1) Premium income including Trygg-Hansa and Codan Norway pro-forma in year X-1 Return On Own Funds (ROOF) Profit for the year after tax x 100 (Own Funds Primo + Own Funds Ultimo)/2 Return On Tangible Equity (ROTE) Profit for the year after tax x 100 (Tangible Equity primo + Tangible Equity Ultimo)/2 130 Annual report 2022 | Tryg A/S | Product overview Financial statements - Contents Being the largest insurance company in Scandinavia, Tryg offers a broad range of insurance products to both private individuals and businesses. Tryg continuously develops new products and adapts existing peace of mind solutions to customer requirements and developments in society. Also, Tryg focuses strongly at all times on striking a better balance between price and risk. Tryg sells its products primarily via its own sales channels such as call centres, the Internet, tied agents, franchisees (Norway), interest organisa- tions, car dealers, real estate agents, insurance brokers and Nordea branches. Moreover, Tryg engages in international cooperation with the AXA Group. It is an important element of Tryg’s distribution strategy to be available in places where customers want it and that most distribution takes place via the company’s own sales channels. Motor 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. Fire and contents – Commercial Commercial fire and contents insurance, which includes building insurance, represents 11% 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. Workers’ compensation insurance Workers’ compensation insurance accounts for 3% 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). 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. Health insurance Health insurance represents 2% of total premium income. The insurance cov- ers the costs of examinations, treatment, medicine, surgery and rehabilitation at a private health facility. 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 23% 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 con- tents and covers in and outside of the home. Moreover, the insurance includes liability and legal assistance, to which can be added a number of supplemen- tary covers, for example cover of sudden damage and damage to electronic equipment. Personal accident insurance Personal accident insurance accounts for 15% of total premium income and covers accidental bodily injury and death resulting from accidents. 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 supplementary covers, including treatment by a physiotherapist or chiropractor. 131 Annual report 2022 | Tryg A/S | Disclaimer Certain statements in this annual report are based on the beliefs of our management as well as assumptions made by and information currently available to management. Statements regarding Tryg’s future operating results, finan- cial position, cash flows, business strategy, plans and future objectives other than statements of historical fact can generally be identified by the use of words such as ‘targets’, ‘believes’, ‘expects’, ‘aims’, ‘intends’, ‘plans’, ‘seeks’, ‘will’, ‘may’, ‘anticipates’, ‘would’, ‘could’, ‘continues’ or similar expressions. A number of different factors may cause the actual performance to deviate significantly from the forward-looking statements in this annual report, including but not limited to general economic developments, changes in the competitive environment, developments in the financial markets, extraordinary events such as natural disasters or terrorist attacks, changes in legislation or case law and reinsurance. Should one or more of these risks or uncer- tainties materialise, or should any underlying assumptions prove to be incorrect, Tryg’s actual financial condition or results of operations could materially differ from that described herein as anticipated, believed, estimated or expected. Tryg is not under any duty to update any of the forward-looking statements or to conform such statements to actual results, except as may be required by law. Read more in the chapter Capital and risk man- agement and in Note 1 Risk and capital man- agement for a description of some of the factors which may affect the Group’s performance or the insurance industry. 

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