Topdanmark — Annual Report 2011

Mar 6, 2012

Annual Report 2011

Share profile

The Topdanmark share is a value case – not a growth case

Focused strategy

• y Danish player
• y Stable insurance risks
• y Low expense ratio
• y Limited financial risk
• y Efficient capital management
• y Limited top line growth
• y Profitable growth in that order
• y High net result
• y Large share buy-back programme
• y No protection against a take-over in the Articles of Association

Read more about Topdanmark's equity story on www.topdanmark.com ¬ Share profile.

Topdanmark Annual Report 2011 6 March 2012 Announcement No. 02/2012

2011 Key features

2011

• Post-tax profit of DKK 1,023m (2010: DKK 1,168m).
• Better than assumed result as most recent profit forecast model for 2011 was DKK 900-1,000m (Q1- Q3 2011 interim report).
• Profit per share was DKK 74.4 (2010: DKK 77.2).
• Combined ratio improved to 90.3% (2010: 93.3%). 1.5pp of the improvement was due to lower weatherrelated claims.
• Combined ratio excluding run-off profits improved to 92.0% (2010: 95.7%).
• Premiums increased 1.4% in non-life insurance but declined 2.7% in life insurance.
• Investment return declined to DKK 622m (2010: DKK 879m)
• Result of life insurance was DKK 187m after transfer of DKK 114m to shadow account (2010: DKK 384m after recognition as income of shadow account balance of DKK 144m).
• Topdanmark bought back own shares of DKK 1,159m. Buy-back programme was DKK 1,200m; consequently DKK 41m transferred to the 2012 programme.

Q4 2011

• Post-tax profit of DKK 350m (Q4 2010: DKK 488m).
• Combined ratio increased to 89.6% (Q4 2010: 89.2%).
• Combined ratio excluding run-off profits improved to 91.5% (Q4 2010: 93.2%).
• Premiums increased 2.3% in non-life insurance and 16.4% in life insurance.

Profit forecast model for 2012

• Assumed combined ratio for 2012 continues at 91-92%, excluding run-off profits / losses.
• Assumed premium growth in non-life insurance continues at 1-2%.
• Post-tax profit forecast model is DKK 1,150-1,250m, excluding run-off profits / losses, being DKK 90 profit per share.
• Share buy-back programme is DKK 1,300m; a 10.6% yield.

Capital

• Forecast for necessary solvency capital on change to Solvency II raised from DKK 4.5bn to DKK 4.7bn, primarily due to lower interest rates.

In a webcast today Topdanmark's CEO, Christian Sagild, presents the financial highlights and comments on the forecast.

A conference call will be held today at 15:30 (CET) when Christian Sagild, CEO, and Lars Thykier, CFO, will be available for questions based on the Annual Report and the webcast. The call will be conducted in English.

In order to participate in the conference call, please phone:

UK dial in number: +44 (0)20 7162 0125 US dial in number: +1 866 803 8344 quoting reference 912852 10-15 minutes before the conference asking the operator to connect you to the Topdanmark conference call – or listen to the live transmission of the call.

Please direct any queries to:

Christian Sagild Chief Executive Officer Direct tel.: +45 4474 4450

Lars Thykier Chief Financial Officer Direct tel.: +45 4474 3714

Steffen Heegaard

Head of IR and Group Communications Direct tel.: +45 4474 4017, mobile: +45 4025 3524

Contents

Management's review

• 1 2011 key features
• 3 Financial highlights
• 4 Profit of DKK 1,023m in 2011
• 5 Non-life insurance
• 11 Life insurance
• 14 Investment activities
• 16 Parent company etc.
• 16 Taxation
• 16 Prospects for 2012
• 18 Share buy-back
• 19 Value creation in Topdanmark
• 21 Risk management
• 32 Solvency
• 34 Capital model
• 35 The process of accounts preparation
• 36 Corporate Governance
• 41 Remuneration structure
• 43 CSR
• 43 Investor Relations
• 45 Annual General Meeting
• 45 Financial calendar
• 46 List of company announcements and trading reports
• 47 Board of Directors and Board of Management
• 51 Five-year summary Group

Annual accounts - Group

• 52 Profit and loss account
• 53 Statement of comprehensive income
• 54 Assets
• 55 Shareholders' equity and liabilities
• 56 Cash flow statement
• 57 Movements in shareholders' equity
• 58 Notes to the accounts
• 86 Accounting policies

97 Annual accounts - Parent company

• 105 Disclaimer
• 106 Statement by Management on the Annual Report

Auditors' reports

• 107 Internal auditor's report
• 108 Independent auditor's report
• 109 Group Structure

Financial highlights
(DKKm)	2007	2008	2009	2010	2011	Q4 2010	Q4 2011
Premiums earned:
Non-life insurance	8,883	8,952	8,665	8,548	8,668	2,153	2,201
Life insurance	3,556	3,980	3,208	3,395	3,303	831	968
	12,439	12,932	11,873	11,943	11,971	2,984	3,169
Results:
Non-life insurance	1,580	91	1,592	1,092	1,086	377	374
Life insurance	50	(57)	292	384	187	190	69
Parent company etc.	27	(58)	(21)	31	76	38	13
Pre-tax profit / (loss)	1,657	(24)	1,863	1,506	1,349	605	457
Tax	(386)	(165)	(417)	(338)	(326)	(117)	(106)
Profit / (loss)	1,271	(189)	1,446	1,168	1,023	488	350
Shareholders' equity of parent company
at 1 January	4,366	3,716	3,243	4,465	4,900	4,594	4,738
Profit	1,271	(189)	1,446	1,168	1,023	488	350
Share buy-back	(2,026)	(371)	(376)	(892)	(1,159)	(210)	(186)
Share-based payments	104	77	150	159	150	28	12
Other movements in shareholders' equity	1	10	2	1	1	0	0
Shareholders' equity of parent company
end of period	3,716	3,243	4,465	4,900	4,915	4,900	4,915
Deferred tax on security funds	(348)	(348)	(348)	(348)	(348)	(348)	(348)
Shareholders' equity of Group end of period	3,368	2,895	4,117	4,553	4,567	4,553	4,567
Capital base, parent company*)	4,118	3,645	4,868	5,305	5,319	5,305	5,319
Total assets, parent company	4,826	4,819	5,467	5,712	6,408	5,712	6,408
Total assets, Group	44,645	52,035	56,554	57,542	61,013	57,542	61,013
Provisions for insurance and investment contracts:
Non-life insurance	13,314	13,685	14,478	15,139	16,228	15,139	16,228
Life insurance	25,093	24,938	28,882	31,166	30,618	31,166	30,618
Financial ratios (parent company)
Post-tax profit / (loss) as a % of shareholders' equity	31.2	(5.6)	36.6	24.1	21.1	10.2	7.2
Post-tax profit / (loss) per share (DKK)	75.0	(12.1)	92.2	77.2	74.4	33.5	26.0
Post-tax profit / (loss) per share, diluted (DKK)	73.3	(12.1)	91.7	77.0	74.4	33.5	26.0
Net asset value per share (DKK)	232.3	207.1	288.1	338.6	368.7	338.6	368.7
Share buy-back per share (DKK)	116.8	23.4	23.8	58.8	84.3	14.4	13.8
Listed share price end of period	734	687	703	738	895	738	895
Average number of shares ('000)	16,948	15,640	15,688	15,131	13,741	14,561	13,448
Average number of shares, diluted ('000)	17,351	15,640	15,769	15,159	13,746	14,583	13,448
Number of shares end of period ('000)	15,995	15,663	15,496	14,472	13,332	14,472	13,332
Ratios non-life insurance (%)
Gross loss ratio	65.9	64.6	73.1	75.5	78.2	68.0	72.1
Net reinsurance ratio	3.9	3.1	3.1	2.4	(3.6)	4.9	1.6
Claims trend	69.8	67.7	76.2	77.9	74.6	72.9	73.7
Gross expense ratio	14.5	14.7	14.9	15.4	15.7	16.3	15.9
Combined ratio	84.3	82.4	91.1	93.3	90.3	89.2	89.6
Operating ratio	82.7	80.4	90.1	92.7	89.6	88.9	89.3
*) Shareholders' equity and loan capital

Profit of DKK 1,023m in 2011

Topdanmark's post-tax profit for 2011 was DKK 1,023m (2010: DKK 1,168m) representing a profit per share of DKK 74.4 (2010: DKK 77.2).

This was better than the DKK 900-1,000m assumed in the

most recent profit forecast model for 2011 (Q1-Q3 2011 report) due to both the technical result of non-life insurance and the life insurance result being better than assumed.

Comparison between actual results and profit forecast model results
	Actual			Forecast for 2011	Actual
	results for			as in Q1-Q3	results for
(DKKm)	2010			interim report	2011
Non-life insurance
- Technical result	626	820	–	870	907
- Investment return after transfer to technical result etc.	465	150	–	200	179
Profit on non-life insurance	1,092	970	–	1,070	1,086
Life insurance	384	140	–	170	187
Parent company etc.	31	70	–	80	76
Pre-tax profit	1,506	1,180	–	1,320	1,349
Taxation	(338)	(280)	–	(320)	(326)
Profit for the year	1,168	900	–	1,000	1,023

Pre-tax profit was DKK 1,349m (2010: DKK 1,506m). Trend in pre-tax result

The technical result increased DKK 281m to DKK 907m benefitting from weather-related claims being DKK 125 lower than the 2010 level but adversely affected by run-off profits being DKK 56m lower than in 2010.

The investment return in non-life insurance declined DKK 286m due to the generally more adverse financial markets than in 2010.

Profit on life insurance declined by DKK 197m because the developments in the financial markets caused a DKK 114m transfer to the shadow account whereas in 2010 DKK 144m was transferred from the shadow account.

The result of the parent company etc. increased DKK 45m due to higher earnings in Topdanmark Kapitalforvaltning (asset management).

(DKKm)	2010	2011
Non-life insurance
- Technical result	626	907
- Investment return after transfer
to technical result etc.	465	179
Profit on non-life insurance	1,092	1,086
Life insurance	384	187
Parent company etc.	31	76
Pre-tax profit	1,506	1,349

Profit of DKK 350m in Q4 2011

Post-tax profit was DKK 350m in Q4 2011 (Q4 2010: DKK 488m) which was somewhat better than assumed in the profit forecast model for 2011 in the Q1-Q3 2011 report (Q4 2011: DKK 227-327m). As described above, the improvement was due to both the technical result and the life insurance result being better than assumed.

Pre-tax profit was DKK 457m (Q4 2010: DKK 605m).

Although weather-related claims increased DKK 39m and run-off profit declined DKK 45m from Q4 2010, the underlying technical result declined only DKK 4m to DKK 236m in Q4 2011 primarily due to a favourable underlying trend in the SME and agricultural sector.

The investment return increased DKK 1m to DKK 138m.

Profit on life insurance declined DKK 121m to DKK 69m. In 2010 the investment return was high enough to include in income both the risk allowance and the shadow account balance of the DKK 144m. In Q4 2011 it was possible to include in income the risk allowance in Life V while the risk allowance of DKK 27m in Life I was transferred to the shadow account.

The result of the parent company etc. declined DKK 25m to DKK 13m in Q4 2011 due to an interest rate compensation of DKK 25m in 2010 relating to taxation.

Trend in pre-tax result (DKKm)	Q4 2010	Q4 2011
Non-life insurance
- Technical result	240	236
- Investment return after transfer
to technical result etc.	137	138
Profit on non-life insurance	377	374
Life insurance	190	69
Parent company etc.	38	13
Pre-tax profit	605	457

Non-life insurance Danish non-life insurance market

Key features of the Danish non-life insurance market in 2011:

• Price increases
• Premium growth of 1-2%
• Weather-related claims
• Retirement reform
• Increase in payroll tax
• Decline in interest rates
• Generally improved claims trend in motor insurance etc.

It is estimated that the overall combined ratio for the Danish market was around 96% in 2011.

Most major insurance companies in the Danish market implemented extraordinary price increases in 2010 and 2011, particularly on house, contents and SME policies. Subsequently, a number of small and medium-sized insurance companies announced price increases during the year. It is believed that these price increases will have a positive effect of about 1pp on both gross premiums earned and the combined ratio.

Automatic price indexation in the personal and SME market was 2.6%, which is estimated to have an effect of around 1.5% on all insurance products. Furthermore, there was also the 1pp effect of the price increases. On the other hand, the recession and price pressure in particularly the industrial market had an adverse impact on premiums. Overall it is believed that the growth in gross premiums earned by the market was 1-2%.

The claims trend in the Danish market in 2011 was affected by storm claims in Q1 and Q4 of approximately DKK 500m which was not reimbursed by the reinsurance companies. The claims trend was also affected by rainstorm claims in Q3 of just over DKK 5bn before reinsurance cover and DKK 1bn after cover from the reinsurance companies. Claims in Q3 2011 were particularly affected by an isolated rainstorm which hit central Copenhagen on 2 July. 2010 was impacted by extraordinarily large snow loading and rainstorm claims and for the entire Danish non-life insurance market it is believed that the 2011 level of weather-related claims was unchanged from that in 2010.

The payroll tax for all financial businesses increased from 9.1% to 10.5% of payroll expenses, which caused a deterioration in the combined ratio of around 0.2pp.

As provisions for outstanding claims are discounted to present value, lower interest rates will increase the claims trend. The decline in interest rates in 2011 had only a marginal effect on the combined ratio in 2011 because most of the decline was seen at the end of the year and average rates were similar to those in 2010.

2011 benefitted from a generally better claims trend in, for example, motor insurance and as a consequence of the mild winter in Q4.

It is believed that the overall combined ratio excluding any run-off profits / losses for the entire market in 2011 was around 96. However, the combined ratio for each company differs significantly. Generally, the combined

ratio for major companies was lower than the average whereas the combined ratio for small and medium-sized companies was higher.

Result of non-life insurance in Topdanmark Premiums earned

Premiums increased 1.4% to DKK 8,668m in 2011, which was in line with the assumed premium growth of 1-2% (as in the Q1-Q3 2011 interim report).

Premiums benefitted 1.7pp from automatic price indexation and 1.1pp from price increases. Furthermore, in 2011 premiums benefitted from a lower level of negative premium adjustments for the previous year than in 2010 corresponding to a positive effect of 0.3pp.

As announced in the 2010 Annual Report Topdanmark sold the portfolio of Nykredit Arbejdsskadeforsikring (workers' compensation insurance) to Gjensidige Forsikring with effect from 1 January 2011 having a 0.4pp adverse effect on premiums.

It was also announced in the 2010 Annual Report that one large customer had given notice to terminate its relationship with the life insurance company and that the customer would also reduce its portfolio of illness / accident policies administered by life insurance (I/A). The loss of this portfolio had a 0.4pp adverse effect on premiums.

Claims trend

The claims trend improved to 74.6% in 2011 (2010: 77.9%) This 3.3pp improvement was a combination of a number of factors:

Weather-related claims declined to DKK 285m net of reinsurance in 2011 (2010: DKK 410m) corresponding to 1.5pp. In 2010 Denmark was extraordinarily hard hit by weather-related claims such as snow loading, rainstorm and frost-related claims.

On 2 July 2011 the Copenhagen area was hit by a massive rainstorm causing Topdanmark gross claims of around DKK 680m. Topdanmark's retention is DKK 50m and the reinstatement premium was around DKK 65m. Overall expenses relating to the rainstorm on 2 July were therefore around DKK 115m.

Besides this significant rainstorm there were a number of smaller claims due to lightning strikes and rainstorms totalling DKK 25m.

In Q1 and Q4 Topdanmark was hit by storm claims of DKK 70m and DKK 69m respectively, net of reinsurance.

Price increases improved the claims trend by 0.8pp.

The claims trend in motor insurance improved 0.6pp due to, among other factors, the mild winter of Q4.

In general the claims trend improved in both SME / agricultural and personal areas with a 0.5pp and 0.3pp positive effect, respectively, on the claims trend.

The claims level in I/A before run-off was relatively low which, seen in isolation, improved the claims trend by 0.4pp.

The abovementioned premium adjustments for previous years were DKK 31m lower than the 2010 level which improved the claims trend by 0.2pp.

The interest rate curve used to discount the provisions for outstanding claims was slightly higher than in 2010 which improved the claims trend marginally by 0.1pp.

Run-off profits were DKK 148m in 2011 (2010: DKK 204m). As compared to 2010 run-off profits had a 0.7pp adverse effect on the claims trend. Run-off profits in workers' compensation insurance represented DKK 130m of run-off profits in 2011.

Workers' compensation insurance had a 0.5pp adverse effect on the claims trend due to the retirement reform and an increase in the number of reported claims.

Fire claims, before reimbursement from the reinsurance companies, increased DKK 78m due to an increase in large-scale claims in SME and Industrial, in particular the fire in the KB Hall in Q3 which caused claims estimated to be DKK 95m gross and DKK 25m after reimbursement from the reinsurance companies. Fire claims after reimbursement from the reinsurance companies had a 0.3pp adverse effect on the claims trend.

The expense ratio increased to 15.7% (2010: 15.4%) due to, among other factors, investment in increased market pressure and the increase in payroll tax from 9.1% to 10.5% with effect from 1 January 2011. Weather-related claims of the year had a 3.3pp effect on

Combined ratio

Overall expenses on claims, reinsurance, sales and administration as a percentage of gross premiums earned

Expense ratio (combined ratio) improved to 90.3% (2010: 93.3%); excluding run-off profits the combined ratio improved to 92.0% (2010: 95.7%).

the claims trend which was 1.3pp higher than a normal level of DKK 170m. Accordingly, the underlying combined ratio was 90.7% (2010: 92.7%) excluding run-off profits.

Financial highlights – Non-life insurance	Q4	Q4
(DKKm)	2010	2011	2010	2011
Gross premiums earned	2,153	2,201	8,548	8,668
Technical interest	8	7	58	65
Claims incurred	(1,464)	(1,587)	(6,456)	(6,773)
Expenses	(350)	(351)	(1,320)	(1,365)
Net reinsurance	(106)	(35)	(204)	312
Technical profit	240	236	626	907
Investment return after transfer to technical result	131	130	445	123
Other items	5	8	20	55
Profit on non-life insurance	377	374	1,092	1,086
Run-off profits, net of reinsurance	86	41	204	148
Gross loss ratio (%)	68.0	72.1	75.5	78.2
Net reinsurance ratio (%)	4.9	1.6	2.4	(3.6)
Claims trend (%)	72.9	73.7	77.9	74.6
Gross expense ratio (%)	16.3	15.9	15.4	15.7
Combined ratio (%)	89.2	89.6	93.3	90.3
Operating ratio (%)	88.9	89.3	92.7	89.6

Developments in Q4

Premiums earned in Q4 2011 increased 2.3% to DKK 2,201m.

The claims trend deteriorated 0.8pp to 73.7% in 2011 (2010: 72.9%) due to an increase in weather-related claims (1.8pp) and lower run-off profits (2.1pp). On the other hand SME and Agricultural were hit by only a few large-scale claims which together with fewer fire claims helped improve the claims trend by 2.8pp. Furthermore, the mild winter weather in Q4 2011 caused fewer traffic accidents which had a 0.5pp favourable effect on the claims trend.

Two storms in Q4 caused total claims of DKK 69m. In Q4 2010 weather-related claims were DKK 30m.

The expense ratio declined to 15.9% in Q4 2011 (Q4 2010: 16.3%).

The combined ratio was 89.6% this quarter (Q4 2010: 89.2%). Excluding run-off profits it improved to 91.5% (Q4 2010: 93.2%).

Segment reporting

Personal

The Personal segment sells policies for individual households in Denmark.

Premiums earned increased 0.8% to DKK 4,756m in 2011 and in Q4 growth was 0.9%. On the one hand growth was affected by the price increases implemented in house and contents insurance and on the other hand lower sales through banks. Furthermore, it was affected by a decline in premiums earned in I/A due to the termination of the major customer relationship referred to above.

Sales through Topdanmark's own sales channels increased 5.2% from 2010 even though H2 was adversely affected by the change in the decentralised sales organisation from insurance outlets to larger sales centres - a change which is expected to increase market pressure in the future.

Competition is severe, particularly in motor insurance. Premiums earned declined 2.8pp due to both competition and a general trend towards more small cars.

The technical result increased DKK 31m to DKK 501m in 2011.

The claims trend improved 1.3pp to 74.4% in spite of the rainstorm in July which had a 1.0pp adverse effect on the claims trend. Price increases improved the claims trend by 1.5pp while the remaining improvement was seen in motor and I/A insurance.

Run-off profits were DKK 23m in 2011 (2010: DKK 173m) which had a 3.2pp negative effect on the claims trend as compared to 2010. The run-off result in 2011 was a combination of a loss on I/A and profits on, for example, accident and unemployment insurance.

The expense ratio increased to 15.8% from 15.0% due to expansion of the sales team and the increase in pay-roll tax at 1 January 2011.

The combined ratio improved to 90.2% from 90.7%. Excluding run-off it improved to 90.7% from 94.3%.

Personal	Q4	Q4
(DKKm)	2010	2011	2010	2011
Gross premiums earned	1,199	1,210	4,720	4,756
Technical interest	5	5	30	33
Claims incurred	(822)	(903)	(3,585)	(3,762)
Expenses	(190)	(197)	(708)	(753)
Net reinsurance	(39)	0	12	226
Technical result	152	114	470	501
Run-off profits, net of reinsurance	62	14	173	23
Gross loss ratio (%)	68.6	74.6	76.0	79.1
Net reinsurance ratio (%)	3.2	(0.0)	(0.3)	(4.7)
Claims trend (%)	71.8	74.6	75.7	74.4
Gross expense ratio (%)	15.9	16.3	15.0	15.8
Combined ratio %	87.7	90.9	90.7	90.2
Operating ratio (%)	87.3	90.6	90.1	89.5

SME and Industrial

The SME and Industrial segment offers policies for Danish-based SME, agricultural and industrial businesses.

Premiums earned increased 2.2% to DKK 3,934m and in Q4 they increased 4.1%. This improvement was due to one new large customer, a small decline in customer losses and fewer negative premium adjustments than in 2010.

The technical result increased DKK 249m to DKK 403m in 2011.

The claims trend improved 5.9pp to 74.9% primarily due to a favourable agricultural claims trend with no

extraordinary winter claims as in 2010. On the other hand the claims trend was affected by rainstorm claims in Q3 and the fire in the KB Hall in Q3 (DKK 25m after reimbursement from the reinsurance companies.) Fire claims in Q4 were 16.5% lower than in the same period in 2010.

Run-off profits were DKK 125m in 2011 (2010: DKK 31m) giving a 2.4pp positive impact on the claims trend. This run-off profit relates primarily to workers' compensation.

The expense ratio declined 0.3pp to 15.6%.

The combined ratio improved to 90.5% in 2011 (2010: 96.7%). Excluding run-off profits it declined to 93.7% (2010: 97.5%.)

SME and Industrial	Q4	Q4
(DKKm)	2010	2011	2010	2011
Gross premiums earned	957	997	3,849	3,934
Technical interest	3	2	28	31
Claims incurred	(647)	(689)	(2,892)	(3,034)
Expenses	(160)	(155)	(613)	(614)
Net reinsurance	(67)	(35)	(217)	86
Technical result	88	120	154	403
Run-off profits, net of reinsurance	23	27	31	125
Gross loss ratio (%)	67.5	69.2	75.1	77.1
Net reinsurance ratio (%)	7.0	3.5	5.6	(2.2)
Claims trend (%)	74.5	72.7	80.8	74.9
Gross expense ratio (%)	16.7	15.5	15.9	15.6
Combined ratio %	91.2	88.2	96.7	90.5
Operating ratio (%)	90.9	88.0	96.0	89.8

Life insurance Danish life and pension market

In 2011 the Danish life and pension market was characterised by:

• Decline in payments into pension savings due to the financial crisis and limitations on deductibility
• Increase in competition between insurance brokers and insurance companies
• Historically low interest rates for with-profit schemes
• Introduction of a new discount rate curve

After many years experience of a continued increase in payments made into pension savings, in 2010 and 2011 the market was characterised by a decline in payments, primarily due to the consequences of the rules which were introduced in 2009 limiting the deductibility of payments into term life insurance and terminable annuities to DKK 100,000. This both intensified competition in the market and increased the focus on costs, product alignments etc., which, among others, resulted in several companies reducing their indirect expenses on pension schemes.

Competition between insurance brokers and insurance companies has also intensified. The market served by brokers has moved from large and medium-sized corporate pension schemes increasingly to also smaller pension schemes which previously were rarely served by brokers. At the same time there has been a trend that the largest corporate pension schemes in the market were

being directly served by pension fund companies not using insurance brokers to regularly service the schemes.

In the past year the life and pension market was also affected by very low interest rates which challenged the guarantees and were one of the reasons why in 2011 a number of companies were compelled to lower their interest rates for with-profit schemes to an historically low level.

In December 2011 the DFSA introduced a new discount rate curve, where the inclusion of the interest rate spread between Danish and German zero coupon rates is based on a 12-month moving average. It is believed that virtually all life insurance and pension fund companies have changed to the new curve. The decision to use this new interest rate curve adjusted for country spreads is binding until Solvency II takes effect.

Result of life insurance

Topdanmark's result from life insurance was a profit of DKK 187m in 2011 (2010: DKK 384m).

Profit on life insurance activities comprises the sum of the profits generated by Life I and Life V plus the financing result of Life Holding. These profits were calculated in accordance with the stated policy on the calculation of profit for the life insurance companies, see

www.topdanmark.com → Investor →Business → Life insurance → Policy for the calculation of profit in life insurance.

Result of life insurance
			2010			2011
(DKKm)	Life I	Life V	Group	Life I	Life V	Group
Investment return	40	50	91	63	41	105
Risk allowance	79	51	130	117	61	178
Transferred, shadow account	144	0	144	(112)	(2)	(114)
Other			20			18
Profit on life insurance			384			187
Shadow account end of period	0	0	0	112	2	114

Most of the customers are spread across the three companies, Life I, Life V and Link. Policies written since 1 July 1994 with guaranteed pension benefits of 2.5%, 1.5% and 0.5% are placed in Life I which is also the company for new customers with guaranteed benefits. Unit-linked schemes are written by Topdanmark Link. Schemes written before 1 July 1994 with guaranteed pension benefits of 4.5% are placed in Life V.

The decline in profit to DKK 187m in 2011 (2010: DKK 384m) was primarily due to the recognition as income of DKK 144m from the shadow account in 2010 whereas in 2011 DKK 114m was transferred to the shadow account. The balance of the shadow account will be recognised as income in line with profits being generated in those contribution groups which have made transfers to the shadow account.

The investment return on shareholders' equity increased to DKK 105m in 2011 (2010: DKK 91m).

The return on funds owned by customers, before pension return tax, was a 0.2% loss in Life I and 11.2% in Life V.

The investment return on shareholders' equity was 4.9% in Life I and 4.7% in Life V in 2011. The investment return on shareholders' equity is different from that on customers' funds due to different investment strategies and separate portfolios for each; for example, at present shareholders' equity does not invest in equities nor does use instruments to hedge the guaranteed benefits.

Topdanmark has chosen to use the new interest rate curve adjusted for country spreads. Furthermore, Topdanmark has adjusted the mortality rate to better match expectations, see Accounting policies. The individual and collective bonus potential is affected by these changes but they have only a marginal impact on the result and shareholders' equity.

Trend in premiums

Gross premiums declined 2.7% to DKK 3,303m in 2011 (2010: DKK 3,395m).

Regular premiums declined 10.1% to DKK 2,312m in 2011 as per the forecast of around 10% (in the Q1-Q3 2011 interim report).

There was an overall increase of 33.9% in premiums in unit-linked pension schemes. Regular premiums increased 2.9% to DKK 520m in 2011 and single premiums 75.0% to DKK 667m. The share of new business written by unit-linked savings increased to 52.6% in 2011 (2010: 46.2%).

Sources of gross premiums
	Q4	Q4
(DKKm)	2010	2011	2010	2011
Individual schemes	154	141	370	348
Corporate schemes	307	245	1,284	1,035
Group life	45	36	413	409
Unit-linked schemes	136	140	506	520
Regular premiums	642	562	2,572	2,312
Individual schemes	12	15	61	55
Corporate schemes	78	93	380	268
Unit-linked schemes	99	297	381	667
Single premiums	189	406	822	991
Gross premiums	831	968	3,395	3,303

Developments in Q4 2011

The decline in profit to DKK 69m in Q4 2011 (Q4 2010: DKK 190m) was due to the recognition as income of DKK 144m from the shadow account in 2010 whereas DKK

19m was transferred to the shadow account in 2011. However, the investment return on shareholders' equity increased DKK 22m to DKK 28m.

Result of life insurance			Q4 2010			Q4 2011
(DKKm)	Life I	Life V	Group	Life I	Life V	Group
Investment return	8	(2)	6	17	11	28
Risk allowance	20	13	32	27	14	42
Transferred, shadow account	144	0	144	(27)	7	(19)
Other			8			19
Profit on life insurance			190			69

Overall premiums increased 16.4% to DKK 968m in Q4 while regular premiums declined 12.5% to DKK 562m.

Rate of interest on policyholders' savings in 2011 and 2012

On 1 December 2011 the rate of interest on policyholders' savings in Life I before pension return tax was reduced to 2.25% from 3.25% while the rate of 4.35% in Life V has been maintained. As in previous years these rates may be subject to change later in the year if the development in the financial markets is different from expectations.

Loss participation scheme

Loss participation is a temporary measure introduced in periods where the market value of the customers' assets is lower than the sum of their savings and only serves a purpose when customers who want to leave the scheme prematurely need to have their surrender value calculated correctly. Should customers choose to leave their schemes prematurely, the loss participation is taken into

account in the calculation of the surrender value of their policies in order to ensure that those customers who leave do not take with them funds owned by those who stay. Loss participation only applies to with-profits products and it is not deductible in the event of retirement, death and disability.

Due to the development in the financial markets with a decline in equity prices and declining interest rates, Life I introduced loss participation in 2011. As long as the loss participation scheme is in force the risk allowance of Life I will be transferred to the shadow account to be included in income in a subsequent period. The loss participation scheme is calculated and adjusted once a month. The most recently calculated loss participation is 1% for the portfolio guaranteed an interest rate of 3%.

Loss participation has at no time been introduced in Life V.

Investment activities Topdanmark Group excluding the life insurance group

The investment return in the Topdanmark Group excluding life insurance was DKK 622m in 2011 including a revaluation of provisions and income from associated companies but before the transfer to the technical result (2010: DKK 879m).

It is Topdanmark's policy to accept a certain level of financial risk, given its strong liquid position and stable, high earnings from insurance operations. Topdanmark has invested in, among others, equities, properties and CDOs in order to improve the average investment return. The return in Q4 2011 and 2011 on the most significant classes of assets is disclosed in the following table:

Investment return	Portfolio 31 Dec
	2010	2011	Return Q4 2010		Return Q4 2011			Return 2010		Return 2011
		(DKKbn)	(DKKm)	%	(DKKm)	%	(DKKm)	%	(DKKm)	%
Danish equities	0.4	0.3	27	7.6	8	1.5	72	22.4	(55)	(14.1)
Foreign equities	0.9	0.8	72	8.0	31	3.7	112	12.6	(56)	(6.8)
Government and
mortgage bonds	12.3	12.7	28	0.2	48	0.4	232	2.0	277	2.2
Credit bonds	0.7	0.5	5	0.7	(7)	(0.8)	61	8.7	6	1.0
CDOs	0.7	0.7	60	8.8	58	8.5	148	22.6	173	26.0
Properties	1.3	1.4	16	1.3	33	2.5	68	5.3	100	7.7
Assets re I/A	1.6	1.8	13	0.8	48	2.7	91	5.9	113	6.6
Money market etc.	0.8	2.9	24	1.3	(1)	(0.1)	86	3.5	26	0.9
Capital base	(0.8)	(1.2)	(9)	(1.2)	(17)	(1.4)	(27)	(3.7)	(52)	(5.3)
Interest-bearing debt	(1.4)	(2.7)	(4)	(0.2)	(8)	(0.2)	(18)	(1.0)	(27)	(1.0)
	16.5	17.2	232	1.4	194	1.1	824	4.8	504	2.9
Asset management			24		29		55		118
Total investment return			256		223		879		622
Transferred return technical provisions
Discounting			(69)		(65)		(304)		(323)
Technical interest			(8)		(7)		(58)		(65)

The exposure in foreign equities and credit bonds has been adjusted by use of derivatives. The return percentages are calculated as the ratio between the return on financial instruments and the size of the exposure of the underlying asset. The return on government and mortgage bonds and assets related to I/A (illness/accident) includes revaluations of claims provisions.

The post-tax equity exposure was DKK 615m (pre-tax: DKK 820m) excluding associated companies but including the impact of derivatives.

The equity portfolios are well diversified with no large individual positions. The composition of the portfolios is based on OMXCCAP for Danish equities (representing around 30% of the portfolio at 31 December 2011) and MSCI World in the original currency for foreign equities.

The Group's investments have no significant concentration of credit risk except for AAA-rated Danish mortgage bonds which are considered to be particularly safe assets according to the Danish Financial Business Act.

Since 31 October 2008 Danish insurance companies and pension funds have calculated the value of provisions by using a discount rate representing the combined weighting of the swap rate and the option-adjusted Danish mortgage credit rate. The portfolio is dominated by high-quality mortgage bonds, which ensures consistency between the investment return and the discount rate.

The class of government and mortgage bonds comprises primarily Danish mortgage bonds and revaluation of technical provisions. In addition, there are government and covered bonds and derivatives. Covered bonds are AAA-rated mortgage bonds where the size of the loan may not exceed 70% of the value of the security. If the value of the security declines so much that the requirement is not fulfilled, the issuer will provide further security.

Credit bonds with a rating lower than BBB (DKK 262m) comprise senior secured bank loans and high yield bonds, part of which are convertible, and subordinated bank capital issued by EU banks. Credit bonds with a rating of BBB and A (DKK 227m) are ordinary and convertible corporate bonds, annuity policies and subordinated bank capital issued by EU banks. Credit bonds with a rating higher than A (DKK 23m) are corporate bonds.

The underlying assets of CDOs are mostly senior secured bank loans (DKK 524m) while the remainder are primarily CDOs with investment grade investments as the underlying assets.

The maturity of the CDO investments is dependent on any changes in the payments made by the underlying assets which in turn are dependent on changes in the general economy and, therefore, it is not possible to outline the maturity distribution for the portfolio.

The property portfolio comprises mainly owner-occupied property (DKK 818m), rental property (DKK 366m), rental office property (DKK 68m) and property rented for hotel use (DKK 121m). The tenancies for the residential and hotel properties are subject to a short termination notice but re-letting is not considered to be a problem. The office property is rented under contracts with no option to terminate prior to 2015. Over 99% of the property portfolio is currently let. The properties are valued in accordance with the rules of the DFSA i.e. at market value taking into account the level of rent and the terms of the tenancy agreements.

The class of "Assets related to IA" (illness / accident) comprises the investments in Topdanmark Livsforsikring corresponding to the size of the illness / accident provisions.

"Money market etc." comprises primarily money market deposits and intra-group balances but also the result of currency positions.

"Capital base" comprises hybrid capital issued by the parent company and subordinated loans issued by Topdanmark Forsikring. "Interest-bearing debt" comprises other debt.

Financing

Up to now the goal of Topdanmark's capital structure has been to ensure that its capital base (shareholders' equity and hybrid capital) is sufficient to support its current operations. Equity in excess of this amount has been distributed to shareholders by way of regular share buybacks throughout the year. As a result of this approach to capital structure Topdanmark is financing part of the investment in the insurance group with loans.

It is expected that Solvency II will require a minimum level of solvency capital in insurance holding companies corresponding to the solvency requirements of the underlying group companies. Topdanmark has no intention of accumulating unnecessary capital in the group companies and therefore, when Solvency II has taken effect, the capital base of the parent company will be sufficient to finance the investments in the group companies. Consequently, the parent company will not need net financing in excess of its capital base.

However, until Solvency II takes effect, Topdanmark is subject to Solvency I, in accordance with which in its solvency cover it is only allowed to use a small portion of the tier 2 capital issued as solvency resources in relation to Solvency II. As a consequence, some of the planned distribution of dividend from the insurance group needs to be postponed until Solvency II takes effect. In the meantime the parent company Topdanmark continues to have some loan financing via intergroup accounts with the insurance group or in the money market.

For details on the liquidity base see Market risk in this report.

Parent company etc.

The parent company Topdanmark A/S does not perform any independent activities. The result of the parent company, Topdanmark A/S, includes the results of subsidiaries excluding insurance business, (primarily Topdanmark Kapitalforvaltning, the asset management company), and financing costs.

Profit increased to DKK 76m in 2011 (2010: DKK 31m) primarily due to a higher performance fee paid to Topdanmark Kapitalforvaltning.

Topdanmark Kapitalforvaltning manages the Group's financial assets and liabilities and its result is dependent on the investment performance.

Taxation

The tax charge was DKK 326m on a pre-tax profit of DKK 1,349m corresponding to an effective tax rate of 24.2% (2010: 22.5%). Most of the tax charge is paid in Denmark, see "Tax payment" in the CSR report on www.topdanmark.com → Investor → Report and presentations → CSR reports.

Prospects for 2012

Expected trend in Danish non-life insurance market

It is expected that in 2012 the Danish non-life insurance market will be characterised by:

• Continued low economic growth
• Positive but lower impact of price increases
• Taxation of health insurance policies
• 1.5-2% growth in premiums

• Lower interest rates

• Continued disciplined market

• Increase in expenses on reinsurance
• 1.5pp improvement in combined ratio due to normal level of weather-related claims

Overall, excluding any run-off profits / losses, the combined ratio is expected to be around 96.

2012 is expected to be affected by continued low economic growth. It is expected that BNP growth in the Danish economy will be around 1.0%.

In 2010 and 2011 most major insurance companies implemented price increases and in 2011 a number of small and medium-sized companies introduced price increases going into 2012. A few companies have given notice of further price increases which will take effect for customers in 2012. It is believed that price increases will have an effect on gross premiums of around 0.5pp in 2012.

The Danish Finance Act for 2012 provides future taxation of the value of health insurance policies, which is expected to have a 10-25% adverse effect on the portfolio of health insurance policies.

In the personal and SME markets automatic price indexation, allowing for claims inflation, is 1.9% which, in turn, is estimated to have an overall increase of around 1.3% on all insurance products. Prices in the industrial market are expected to continue to be under pressure in 2012 due to competition from, among others, foreign insurance companies. Including the effect of price increases growth in gross premiums earned is estimated to be 1.5-2%.

Interest rates declined markedly in 2011, particularly in Q4. If interest rates remain at the low level seen at the turn of the year, the combined ratio will deteriorate by around 1.5pp in 2012 from the previous year.

Continued disciplined competition is expected in the Danish market. Accordingly, all of the six largest insurance companies, representing a market share of 75%, are quoted on the stock exchange or owned by a quoted company. Furthermore, the prospects of an increase in capital requirement under Solvency II will increase the focus on profitability.

It is expected that the increase in rainstorm claims in 2011 will cause an increase in reinsurance expenses in 2012 corresponding to an adverse effect of around 0.5pp on the claims trend.

The claims trend in 2011 was affected by both storm and rainstorm claims exceeding the normal level. If the level of weather-related claims will be normal in 2012, the claims trend will improve around 1.5pp.

Assuming a normal level for large-scale claims, it is expected that the combined ratio for the market, excluding any run-off profits / losses, will be around the 2011 level of 96%.

Expected trend in Danish life and pension market

It is expected that in 2012 the life and pension market in general will be characterised by:

• Limitations on the deductibility of term life premiums
• No increase from the 2011 level in overall payments into pension savings

Due to the limitation on the deductibility of term life premiums from an annual DKK 100,000 to DKK 50,000, the savings of term life insurance will reduce. On the other hand, there will be an increased demand for annuities for which full deductibility continues.

It is expected that overall payments into pension savings in 2012 will not exceed the 2011 payments. The rate of increase is expected to follow wage increases in the future.

Topdanmark's profit forecast model for 2012

Traditionally Topdanmark does not publish actual profit forecasts but instead the expected level of results if a number of assumptions of the return in the financial markets are met. As the return in the financial markets changes on a daily basis, Topdanmark's profit forecast model will already deviate from actual expectations by the time it is published. Therefore set out in Risk scenarios is additional information on how changes in the assumptions underlying the profit forecast model will affect the results.

As can be seen, the investment return forecast model is not based on a specific estimate of the expected investment return for the rest of the year but solely on a long-term standard assumption of the return.

Non-life insurance

In the interim report for Q1-Q3 2011 Topdanmark expected, for 2012, premium growth of 1-2% and a combined ratio of 91-92%, excluding any run-off profits / losses, based on the following assumptions:

• Price increases implemented in 2011 will have an annual effect of DKK 17m which will be recognised in the accounts for Q1 2012. As stated in Value creation in Topdanmark, Topdanmark plans no further general price increases. Instead it will implement profitability promoting initiatives for less profitable customers.
• A normal year for weather with weather-related claims corresponding to a level of DKK 170m, broken down by quarters:
• Q1: DKK 50m
• Q2: DKK 25m
• Q3: DKK 45m
• Q4: DKK 50m
• Limited increase in expenses on reinsurance.
• A level of interest rates corresponding to the interest rate curve on 4 November 2011.
• A favourable effect of profitability promoting initiatives
• An expense ratio of 16%.

Since the most recent profit forecast model was published in the Q1-Q3 2011 report interest rates have declined causing a 0.5pp increase in the combined ratio. None of the other material assumptions have changed.

For 2012 Topdanmark continues to assume premium growth of 1-2% and a combined ratio of 91-92%, excluding any run-off profits / losses. Overall the pre-tax result of non-life insurance is assumed to be DKK 1,120- 1,220m.

Life insurance

Due to the limitation on deductibility of term life premiums, the sale of term life insurance schemes is expected to be lower in 2012 than in 2011. On the other hand, as a direct consequence of the reduced deductibility, Topdanmark Livsforsikring expects to increase the sale of annuities through its alliance partners Nykredit and Sydbank.

Overall Topdanmark assumes a decline in regular premiums of around 5%.

In the profit forecast model for 2012 it is assumed that the investment return will be sufficiently high to include an allowance for risk in income. It is also assumed that at the end of 2012 a net amount of DKK 90m from the shadow account will be included in income, after which the balance of the shadow account will be around DKK 30m.

Any recognition of risk allowances as income will be considered in the preparation of the 2012 Annual Report.

Overall the pre-tax result of life insurance is assumed to be DKK 380-410m.

Parent company

The profit forecast model for the parent company Risk factors and financial goals including subsidiaries outside of the insurance group shows a pre-tax profit of DKK 20-30m.

Taxation

Given a corporation tax rate of 25%, the tax charge is expected to be DKK 370-410m.

The overall post-tax profit forecast model is assumed to be DKK 1,150-1,250m in 2012 representing a profit per share of DKK 90.

This profit forecast model is subject to an annual 7.0% return on equities and unchanged foreign exchange rates from the level on 23 February 2012. Furthermore it is assumed that the return on interest-bearing assets hedging the discounted provisions is just sufficient to cover discounting and revaluation of the provisions while the return on the remaining interest-bearing assets is assumed to be 2.89% (risk-free interest rate plus 2.0pp.)

Topdanmark's profit forecast model for 2012 is sensitive to changes in the forecast assumptions for investment return in Life I as negative deviations of around DKK 200m will practically, krone for krone, be reflected in Topdanmark's pre-tax result.

"Risk factors" shows an exposure analysis of Total Group profit Topdanmark's most significant risk factors.

A description of Topdanmark's financial goals for non-life insurance is available in Value creation in Topdanmark.

Profit forecast 2012			Forecast for 2012
(DKKm)	2011	23 February 2012
Non-life insurance
- Technical result	907	770	–	820
- Investment return after transfer to technical result etc.	179	350	–	400
Profit on non-life insurance	1,086	1,120	–	1,220
Life insurance	187	380	–	410
Parent company etc.	76	20	–	30
Pre-tax profit	1,349	1,520	–	1,660
Taxation	(326)	(370)	–	(410)
Profit for the year	1,023	1,150	–	1,250

Share buy-back

In the Q1-Q3 interim report for 2011 it was announced that the share buy-back for the year was unchanged at DKK 1,200m.

In 2011 the actual share buy-back totalled DKK 1,159m 1,250m for 2012. representing a buy-back yield of 9.9%.

The reduction in shareholders' equity of DKK 1,159m was partly offset by DKK 150m strengthening of shareholders' equity by the sale of share options, redemption of share options and issue of employee shares.

In 2012 it is intended to buy back own shares of DKK 1,300m including the buy-back of DKK 41m transferred from 2011. The buy-back of DKK 1,300m assumes a profit in line with the profit forecast model of DKK 1,150-

The share buy-back programme for 2012 represents a buy-back yield of 10.6% (calculated on the basis of the price of Topdanmark's shares on 23 February 2012).

To date in 2012 Topdanmark has bought back own shares of DKK 133m which leaves a balance of DKK 1,167m of the 2012 programme. Since 2000 the annual average buy-back yield has been 9%.

The number of Topdanmark's shares was 14,825,896 on 23 February 2012 of which 566,104 shares are held by Topdanmark to cover Management's share option scheme. Furthermore, at present Topdanmark holds 1,075,896 of own shares to be written down at the AGM on 19 April 2012. If before the AGM, contrary to expectation, no further shares to be written down are bought back, the number of voting shares will be 13,183,896 shares at 19 April.

Since 1998 when Topdanmark started buying back own shares, it has made decisions to cancel DKK 9.5bn of shares representing a 64.1% write-down of the share capital, with an average price of DKK 358 per share that has been written down.

Topdanmark does not buy back own shares in those periods where the Company would be considered an insider and during the three weeks immediately preceding the announcement of interim and annual reports. Furthermore, it does not buy back own shares during the period of five banking days after the announcement of a quarterly report as this is the period in which the executives may exercise their share options or warrants. In addition it does not buy back own shares for another three days after the announcement of the interim report for Q1-Q3 2012 due to the allocation of employee shares. Below is a table of the periods when Topdanmark is allowed to buy back own shares.

Share buy-back allowable
14 Mar 2012	–	30 Apr 2012
31 May 2012	–	30 Jul 2012
29 Aug 2012	–	22 Oct 2012
26 Nov 2012	–	11 Feb 2013

Share buy-back not allowable
14 Feb 2012	–	13 Mar 2012
01 May 2012	–	30 May 2012
31 Jul 2012	–	28 Aug 2012
23 Oct 2012	–	23 Nov 2012
12 Feb 2013	–	12 Mar 2013

Value creation in Topdanmark

Topdanmark's focus on value creation is based on its value creation model.

Topdanmark's value creation efforts are intended to increase its current cash flow while at the same time reduce the discount rate used by the market to discount the future cash flow to net present value.

Topdanmark's systematic value creation efforts have built a strong business model which, with relatively limited financial risk, substantially ensures a profit is made even in years with devastating financial markets.

Cash flow

Topdanmark believes that success in the Danish insurance market is best achieved by combining distribution power with risk-appropriate prices, an efficient organisation and satisfied customers.

Distribution power

Topdanmark has a multi-distribution strategy in which its own sales channels (certified insurance sales representatives, sales centres, telephone sales etc.) are supplemented by sales or referral of leads through its distribution partners such as banks, car dealers and insurance brokers.

Activities under distribution power

• Topdanmark has renewed its distribution agreement for non-life insurance with Danske Bank. Non-life insurance continues to be a strategically important product for Danske Bank. However, in the future Topdanmark will be responsible for sales and advice while Danske Bank will only refer leads to Topdanmark's sales organisation. This new distribution agreement is expected to have a minor adverse effect on premium growth in 2012 but to improve growth from 2013.
• Topdanmark has decided to concentrate sales through its own sales channels in the personal market. It has therefore been decided to close down 26 small insurance sales centres and instead increase the number of large sales centres from four to nine. This is intended to increase market pressure and create more efficient outbound sales environments in the sales centres. It is expected that growth will be slightly lower in 2012 due to the change in the sales organisation but that premium growth will benefit from it in future years.

Pricing

Topdanmark's pricing philosophy is that it has differentiated pricing based on risk-appropriate prices, i.e. micro rating. This makes Topdanmark an attractive insurance company to customers with relatively favourable claims trends while typically customers with less favourable claims trends change to other insurance companies with a less risk-dependent pricing structure.

Activities under pricing

• Topdanmark continues its work with more finely meshed and risk-based prices.
• Topdanmark has no immediate plans to make general price increases. Instead it is implementing measures for less profitable customers (e.g. loss prevention, lower sums insured, increased retention and selective price increases).
• The rejection of general price increases and Topdanmark's initiatives for less profitable customers will improve its competitive strength in profitable customer segments in the long term.

Efficiency

Topdanmark wishes to operate its insurance business as efficiently as possible in order to combine value creation for customers by providing good service and offering competitive prices with value creation for shareholders by generating a significant return. A number of activities have been implemented which impact upon both the expense ratio and the claims trend.

Activities under efficiency

• With payments of just under DKK 7bn on claims Topdanmark is a significant buyer of work time and materials. Therefore it is focusing on utilising the Company's purchasing power.
• In 2011 Topdanmark merged its two business areas of SME and Industrial into a larger and more efficient unit: "SME and Industrial".
• Topdanmark has an internal Lean concept (TRIM) which regularly reviews relevant departments in the Company in order to create efficiency gains.

Customer satisfaction

It is Topdanmark's ambition that its customers feel "wellhelped" in all communication between them and the Company. Therefore all customer contacts are regularly measured: Telephone, email, letters or personal contact showing the customers' opinion of their contact with Topdanmark. Around 60,000 customer interviews are conducted each year and if a customer's answer indicates that Topdanmark's services were not satisfactory, they will be contacted within 24 hours. Besides the internal monitoring, Topdanmark also participates in the annual EPSI survey across most major insurance companies.

Activities under customer satisfaction

• Topdanmark sponsors "the Golden Four", Denmark's most winning rowing boat ever, having won, among others, gold medals in three of the last four Olympic Games. The sponsorship is aimed internally at Topdanmark's 950 customer-oriented service and claims employees. Based on the working methods used by "the Golden Four", it is intended to motivate and inspire employees to provide even better customer service.
• Topdanmark wishes to be good with new customers but best with existing customers. Generally, profitability is better for existing customers than for new customers. Therefore Topdanmark has implemented a number of initiatives in order to increase its retention percentage, which was just over 90% in the personal segment in 2011.

Discount rate

To help increase the value of its future cash flow Topdanmark continually works to reduce the risk premium used by the equity market to price Topdanmark's shares, which is achieved by focusing on:

• Risk management
• Capital consumption
• Corporate Governance
• Remuneration policy
• CSR
• Investor Relations

Detailed description of each element is available on www.topdanmark.com → Investor Relations.

Financial goals

Topdanmark's operational goals in non-life insurance are unchanged:

Premium growth

• To ensure that growth in gross premiums earned is 1pp higher than ordinary indexation, adjusted for any price changes.

Expense ratio

• To ensure that the expense ratio is lower than the general Danish market level.

Earnings

• To ensure a profit margin of 10% which, given the current level of interest rates, corresponds to a combined ratio of around 91% excluding any run-off profits / losses.

Risk management Risk profile

Topdanmark's policy is to hedge against risks arising from the Company's activities or to limit such risks to a level that allows the Company to maintain normal operations and implement its planned measures even in the case of highly unfavourable events in the outside world.

As a consequence of this policy the Company has for a number of years identified and reduced or eliminated those risks which could potentially cause losses exceeding what Topdanmark considers to be acceptable. For example, major strategic shareholdings have been sold, the catastrophe cover for storm or terror has been increased significantly and the financial risk reduced.

In this light it is Topdanmark's opinion that the Company's future annual results would, with a very high probability, be a profit even in the event of, for example, another breakdown in the financial markets as in 2008.

In order to ensure strict control of the overall risk, the exposures are calculated as often as deemed necessary, i.e. daily, monthly or in a few cases more rarely according to the nature of the exposure.

The elements of the overall risk profile are brought together in the central risk management function which is responsible for ensuring that the data for and processes of risk calculations and profiling are of a high quality. The risk management function reports to the Risk Committee which is responsible for the SCR (solvency capital

requirements) calculation, internal model, use test, risk limits, risk policies, standard calculation and ORSA (own risk and solvency assessment). The members of the Risk Committee are the CFO of the Group, a representative from the board of management of the life insurance company and the heads of the primary risk areas: Asset Management, Statistical Services, Life Actuarial Services, Group Finance, Life Finance and Reinsurance. The Risk Committee reports, recommends and proposes to the Board of Directors via the Board of Management.

The Board of Directors determines the overall risk policies • Credit risk and limits. The internal auditors report to the Board of Directors on, among other things, the observance of the risk policies and limits set within them.

Topdanmark's risk management relates to the following main areas:

• Insurance risk

• Market risk

• Operational risk

Insurance risk Acceptance policy

Review Topdanmark's acceptance policy is based on a desire to make a profit from both products and customers. Topdanmark varies the pricing of its products depending on the relevant risk criteria and the costs of administering those products.

Topdanmark's pricing has been aligned with the individual markets and types of customers. In the personal and commercial markets prices are mostly based on standardised rates while major commercial and industrial customers are offered more individualised charges.

Follow-up policy

In order that both products and customers are profitable, Topdanmark systematically acts upon changes in its customer portfolios.

The historical profitability of major industrial and commercial customers with individual insurance schemes is monitored using customer assessment systems.

General insurance rates are re-calculated at least every three years and, for example, in motor and workers' compensation they are reviewed annually.

Provisions are generally calculated on a monthly basis across all lines of business. The claims trend is assessed monthly, followed up by any necessary price changes. For example, in both 2009 and 2010, the prices of the house and contents policies were adjusted. In 2011 the price of change of ownership policies was raised significantly.

Topdanmark continues to improve its administration systems to achieve more finely meshed data capture which in turn enables it to identify the claims trends at an earlier point in time and compile information on the constituent parts of the various types of claims. An example of this is the new claims system which was first implemented in 2007 and which now manages all claims handling.

Claims handling

In order to ensure uniform and efficient claims handling Topdanmark has grouped the handling of all types of claims into one operational unit.

The handling of claims is intended to make the customers feel "well-helped" while at the same time ensure efficient management and control of the claims incurred.

Topdanmark is continuously focusing on making its claims handling processes more efficient under the following three main headings:

• Promptness
• Better replacement purchasing power
• Quality

Promptness

It is important to promptly obtain an overall impression of the size of a claim, implement any damage controlling actions and / or commence the claims handling process. Prompt attention not only reduces the compensation paid but also provides a better experience for the customer.

Typically, the claims department operates with day-to-day management of claims notifications and other claims handling in order that the value of the claim does not increase. Simple notification is attended to immediately over the telephone. The time it takes to handle a claim is continuously monitored.

Better replacement purchasing power

The claims department's purchasing power in terms of replacement products and services provides financial advantages for customers and shareholders alike.

The responsibility for arranging service and purchase agreements has been channelled into one centralised purchasing function to ensure the highest possible discount, quality and security when delivering products and services. Service agreements have been made with, for example, Falck, Falck Health Care, Scalepoint, Bygma, tradesmen, garages and damage service companies.

Quality

Topdanmark has developed routines for all major claims processes to ensure that they are handled in a uniform and controlled manner. These are supplemented by rules governing the level of professional and financial competence expected of each of the claims employees.

The overall professionalism is controlled by regular quality assessment of a random sample of claims. For example, it is investigated whether the cover, reason for the claim and provisioning are correct, the recourse possibilities have been tested and that the excess, VAT etc. have all been charged.

Claims handling supported by a new claims handling system

Topdanmark has implemented a new claims handling system intended to support, among other things, professional accuracy. From measurements taken of the system it can be seen that there has been a significant improvement in the quality of claims handling.

The claims organisation has implemented the Lean / TRIM concept in several departments where it has improved the time it takes to handle a claim, the quality of the claims handling and employee satisfaction.

Customers' satisfaction with telephone and internet contact is monitored daily to act immediately on dissatisfied customers.

Emergency plan

Topdanmark has an emergency plan to ensure that prompt, correct and targeted action is taken on a major weather event such as storm, hurricane, rainstorm or flood. The emergency programme is on several levels which enables a proportional response depending on the size of the event. Topdanmark has appointed emergency helpers throughout the company whose claims handling knowledge is regularly kept up-to-date. Furthermore alert drills are held twice a year in order to prepare the employees and improve the emergency programme.

Provisioning risk

Provisions for unearned premiums

The risk on provisions for unearned premiums is relevant particularly within change of ownership insurance where typically the policy covers a period of ten years and the full ten-year payment is made up front.

Topdanmark's level of provisions for change of ownership policies is based on statistical analyses of the pattern of claims notifications as compared to the remaining period of the policies.

Provisions for outstanding claims

Traditionally, the insurance classes are divided into shorttail (i.e. those lines where the period from notification until settlement is short) and long-tail (those lines where the period from notification until settlement is long).

Examples of short-tail lines are building, personal property and comprehensive motor insurance. Long-tail lines relate to personal injury and liability: workers' compensation, commercial liability, accident and third party insurance.

The following chart shows the distribution of Topdanmark's total provisions for outstanding claims.

The much higher provision risk in long-tail than in shorttail lines is due to the longer period of claims settlement. It is not unusual that claims in long-tail lines are settled three to five years after notification and in rare cases up to 10-15 years.

During such a long period of settlement the levels of compensation could be significantly affected by changes in legislation, case-law or practice in the award of damages adopted by the Danish National Board of Industrial Injuries who awards compensation for injury and disability in all cases of serious industrial injuries.

The practice adopted by the Danish National Board of Industrial Injuries also has some impact on the levels of compensation for accident and personal injury within motor, liability and commercial liability insurance.

The provisioning risk represents mostly the ordinary uncertainty of calculation and claims inflation, i.e. an increase in the level of compensation due to the annual increase in compensation per policy being higher than the level of general indexation or due to a change in judicial practice / legislation.

The sufficiency of the provisions is tested in key lines by calculating the provisions using alternative models as well and then comparing the compensation with information from external sources, primarily statistical material from the National Board of Industrial Injuries and the Danish Road Sector / Road Directorate.

The actuarial team is in constant dialogue with the claims departments on any changes in the practices flowing from new legislation, case law or compensation awards as well as the impact of such changes on the routines used to calculate individual provisions.

Reinsurance

Topdanmark has a restrictive acceptance policy in its choice of reinsurance companies as normally it only buys cover from insurance companies which, as a minimum, have a rating corresponding an S&P rating of A-.

Weather

The reinsurance contracts for storm cover claims up to DKK 5.1bn with a retention of DKK 100m. Events like snow loading, snow thawing and rainstorm are covered by the same contract as the storm cover. When using its reinsurance cover, Topdanmark will have to pay a reinstatement premium proportional to the amount of the reinsurance programme that has been utilised.

In the event of another storm within the same year the reinsurance contracts will cover further storm claims up to DKK 5.1bn with a retention of DKK 100m.

In the event of a third or fourth storm in the same year there is cover up to DKK 670m with a retention of DKK 20m. Most of the cover of the third and fourth storm is dependent on it not having been hit previously by two individual storms each exceeding DKK 3.8bn.

Unlike other reinsurance cover, which follows the calendar year, the storm programme is renewed annually on 1 July.

Topdanmark has specific reinsurance cover of DKK 100m for rainstorms. This cover takes effect if accumulated annual rainstorm claims exceed DKK 50m. For a claim to be accumulated, the event must exceed DKK 10m. Topdanmark's maximum retention in the event of an extreme rainstorm is DKK 75m plus reinstatement premiums.

Fire

Topdanmark has a proportional reinsurance programme for fire with a maximum retention of DKK 25m per claim on any one business.

Terror

Until the end of 2001 reinsurance cover included terror. Since 11 September 2001 reinsurance companies have particularly focused on the cover of terrorist attacks. Generally, losses resulting from acts of terror are covered by reinsurance contracts with certain restrictions as to the size of cover and the number of terror attacks covered.

A national guarantee scheme of DKK 15bn covering terror claims including an element of NBCR (nuclear, biological, chemical, radiological) was established on 31 March 2010. The Danish Terror Insurance Board decides whether an event is an NBCR event or not. The national guarantee scheme covers any market retention in excess of DKK 5bn. On 1 January 2011 the Danish non-life insurance companies established a terror pool to protect the market retention, with each company's share of the pool being based on its market share of the non-life insurance market.

The Workers' Compensation Act has been changed such that the cover of industrial injuries caused by any type of terror has now been taken over by the Government except that those injured persons whose job it is to hinder, prevent or avert acts of terror and those rescuers deployed in the aftermath of terror attacks are not covered. This also applies to individuals sent out to work in countries where there is a particular risk of terror.

Cumulative risk

Cumulative risk comprises both known and unknown cumulative risks.

Known cumulative risk is where it has been recognised prior to the event that several policyholders could suffer from the same event. An example of known cumulative risk is where Topdanmark insures several shops in the same shopping centre. In the event of a fire it is foreseeable that several policyholders could suffer together.

Unknown cumulative risk is where several policyholders could suffer from the same individual event without the common risk being recognised prior to the event occurring. An example of this is the fireworks disaster in Seest in 2004 when many personal, commercial and

industrial customers, quite unexpectedly, were hit by the same event.

In personal lines Topdanmark's retention on known cumulative risk is DKK 15m for the first claim and / or event, DKK 5m for the second and DKK 15m for any third or subsequent risk. The retention is a maximum of DKK 25m in SME and industrial lines and on unknown cumulative risk it is a maximum of DKK 50m.

Industrial accident and disease

Industrial accident insurance is a compulsory policy paid by employers by taking out workers' compensation policies with Danish insurance companies. In workers' compensation the reinsurance companies cover up to DKK 1bn of all claims with a retention of DKK 30m.

Insurance against industrial disease can not be taken out with insurance companies but only with the public institution AES, a self-funding institution financed by compulsory payments from employers.

Floods and storm-damaged forests

Danish insurance companies do not cover damage arising from floods, including those from lakes and streams, or the cost of replanting forests following storms. These types of claim are covered by the Danish Flood Fund which is a self-sustaining, public fund financed by an annual fee of DKK 30 per fire policy charged on to the customers by the insurance companies.

War, earthquake and nuclear perils

Danish insurance companies do not cover claims directly or indirectly relating to the following:

• War, warlike acts, neutrality violence, civil war, rebellion or civil commotion
• Earthquake or other natural disasters
• Release of nuclear energy or radioactive power unless the damage is due to nuclear reactions for specific industrial, medical or scientific purposes

Market risk

Market risk represents the risk of losses due to changes in the market value of the Group's assets, liabilities and off-balance items as a result of changes in market conditions. Market risk includes interest rate, equity, property, currency, inflation and liquidity risk.

The limits for these financial risks are fixed by Topdanmark's Board of Directors. In practice, Topdanmark Kapitalforvaltning (asset management) handles the investment, finance and risk alignment processes. It is controlled on a day-to-day basis to ensure that the limits set by the Board of Directors are observed. The result of this is reported to the Board of Directors.

Interest rate risk

Topdanmark's provisions for outstanding claims are recorded net of discount using the DFSA's current adjusted discount rates (however, the new discount rates adjusted for country spreads are used in illness and accident insurance). The resulting interest rate exposure is alleviated by investing in interest-bearing assets in order to reduce the overall interest rate exposure of the assets and liabilities to the desired level. When calculating the interest rate exposure, the Group's debt is included on the same basis as the calculation of the assets.

The interest rate exposure is calculated as the value of the change in the event of a 1pp parallel shift in the interest rate curve ignoring convexity.

Equity risk

Topdanmark is exposed to equity risk from direct investments as well as those investments made via derivatives. The equity risk is calculated as the loss arising if there was a 10% decline in all equities.

Property risk

Topdanmark is exposed to property risk from investments in properties rented out for business or private residence. The property risk is calculated as the loss arising if there was a 10% decline in the value of all properties.

Currency risk

Topdanmark's currency risk relates in practice only to investments and is alleviated by derivatives. The risk is calculated by the value-at-risk method as the size of the loss which, with a 97.5% probability, will not be exceeded.

Inflation risk

Future inflation is implicitly included in a number of the models Topdanmark uses to calculate its provisions. An expected higher future inflation rate would generally be included in the provisions with a certain time delay while at the same time the result would be impacted by higher future indexation of premiums. Therefore a change in the expected future inflation rate would only have a marginal impact on the profit for the year.

Workers' compensation and illness / accident insurance differ from the general principles regarding the inclusion of an allowance for inflation. The provisions in workers' compensation insurance are directly linked to the expected future indexation of wages and salaries and those in illness / accident insurance are directly linked to the net price index.

In order to reduce the risk of inflation within workers' compensation and illness / accident insurance Topdanmark has written inflation swap contracts and bought index-linked bonds hedging a significant proportion of the expected cash flows if the trend in real earnings remains stable. Consequently, any changes in the expected future inflation rate will have a relatively limited effect on the result from these lines of business.

Liquidity risk

In 2007 the parent company Topdanmark issued EUR 55m (nominal value) of hybrid capital (subordinated notes). This hybrid capital has no defined maturity and in terms of capital management it is considered to be equivalent to shareholders' equity. In the years 2007- 2009 Topdanmark has issued DKK 75m of employee bonds with a five-year maturity. Topdanmark also finances its activities by using its subsidiaries' surplus liquidity via inter-group accounts. If Topdanmark has further financing requirements, they are covered by shortterm money market loans, with a typical maturity of a maximum of one month. Outstanding debt is reduced after receiving dividends from the subsidiaries. To secure a sufficiently liquid base in situations where the possibility of utilising the sources of financing previously used might decline, Topdanmark has purchased an irrevocable right to raise loans on normal terms. This right comprises a loan of up to DKK 500m with expiry no later than in 2013.

The liabilities of the Group's insurance companies are primarily technical provisions on which the payment obligation is met by means of the cash flow generated from operations.

The Group uses derivatives to hedge investment risks. The hedging of currency risk in particular often results in significant positive or negative changes to balance sheet values.

Topdanmark pays or receives cash security for any changes in value. The extent of these daily changes is limited such that there is no challenge to liquidity.

Generally, there are no maturity concentrations on derivative contracts.

In June 2011 Topdanmark Forsikring raised a new subordinated loan of DKK 400m expiring in 2019, which may be terminated by Topdanmark Forsikring in 2016. Previously it raised another subordinated loan of DKK 350m expiring in 2018, which may be terminated by Topdanmark Forsikring in 2015.

All of the Group's insurance companies may raise money market loans as part of the day-to-day liquidity management. Typically the maturity of such loans is less than a month. Both the subordinated loans raised by Topdanmark Forsikring and any outstanding money market loans will be repaid from the cash generated from operations.

Furthermore, the Group has a significant liquidity base of high-quality liquid bonds.

Risk of investments in the life insurance group

The goal and risk profile for those customers who are saving in the life insurance companies is different from the profile for Topdanmark's investment in the shareholders' equity of the life insurance group.

Consequently, from Q4 2004 Topdanmark separated its investment policy for funds owned by customers, (the life insurance provisions) from that of the funds owned by shareholders (the shareholders' equity of the life insurance group and provisions for illness / accident insurance). This ensures an appropriate distribution of risk and return.

Bonus potential

The DFSA has issued a new contribution order taking effect on 1 January 2011 applying to all life insurance policies entitled to a bonus. As a result of the new order, all insurance policies are to be split into interest rate, risk and cost groups of homogeneous characteristics. The interval between the interest rate groups must not exceed 1 pp. Accordingly, each policy will belong to one interest rate group, one / more risk groups and one cost group.

The old contribution order treated the elements of interest rates, risk and cost result as one single item in the "insurance technical result before bonus", which allowed for a set-off of losses of one group against profits of another. The new contribution order requires that the "insurance technical result before bonus" be distributed

on basis of the Company's contribution groups and consequently transferred to those policies within those groups. In the event of a loss in a group, this loss must be transferred to a shadow account which can only be recognised as income when that group returns to being in profit. Therefore, from now on, shareholders will not be allowed to recognise an allowance for risk as income if there is a balance in the shadow account. Seen in isolation this implies a greater risk for the owners.

A proportion of the customers' accumulated value comprises both collective and individual bonus potential. The collective bonus potential is an undistributed reserve acting as a buffer against fluctuations in the value of the customers' share of assets and liabilities. At 31 December 2011 the overall collective bonus potential for the interest rate, risk and cost groups was DKK 24m in Life I and DKK 516m in Life V.

Looking at it simply, the individual bonus potential is calculated as the difference between the customer's savings and the market value of the accrued commitment earned by the customers at the time of the calculation. If the market value of the customers' share of the assets is lower than their savings, the individual bonus potential will be reduced. Thus the individual bonus potential also acts as a buffer against fluctuations in the value of the customers' share of assets and liabilities. A significant proportion of the individual bonus potential in Life I can be used before its shareholders' equity would be affected. In Life V the adverse fluctuations exceeding the value of the collective bonus potential will be partially covered by a reduction in the individual bonus potential. The remainder will be covered by shareholders' equity. As the total individual bonus potential was DKK 2,228m in Life I and DKK 78m in Life V at 31 December 2011, together they represent considerable protection of shareholders' equity.

The order applies to all life insurance policies entitled to a bonus, with classical saving in with-profit schemes.

Hedging / guaranteed benefits

The Group has guaranteed that policyholders will receive a pension benefit of 0.5%, 1.5%, 2.5% or 4.5%, according to when the policy was written. These benefit guarantees are linked to the risk of a downturn in the financial markets.

Topdanmark changed its bonus rules in 1998 with the effect that any bonus added to the individual policy would be included to cover the overall pension benefits until

expiry. Previously the bonus was used for an annual improvement of the guaranteed pension benefits.

In January 2004 all the 4.5% policies were transferred to a newly established company (Life V), the investment policy of which is intended to ensure that the company can meet the benefits guaranteed. The proportion of equities is low and most of the interest rate risk in liabilities has been hedged.

Risk of increase in life expectancy

Topdanmark has introduced a new mortality rate assumption to calculate its life insurance provisions at market value. This new rate is calculated by considering the DFSA's population mortality rate, Topdanmark's own observed mortality rate and the DFSA's assessed improvement in future life expectancy.

Until the end of 2011 the mortality rate used had been based on an increase of up to five years for men and 6.6 years for women from the G82 life expectancy assumptions developed by the insurance industry in the 1980's.

An increase in life expectancy above the existing best estimate will increase the life insurance provisions and will be covered by the collective and individual bonus potential as described above. A significant change of a 20% reduction in the mortality rate assumptions as at 31 December 2011 would reduce the collective bonus potential about DKK 95m in Life I and about DKK 175m in Life V.

Credit risk

Credit risk is the risk of losses caused by one or more counter-parties' full or partial breach of their payment obligations.

Topdanmark is exposed to credit risk in both its insurance and investment business. Within insurance the reinsurance companies' ability to pay is the most important risk factor. Topdanmark minimises this risk by spreading and primarily buying reinsurance cover from reinsurance companies with a minimum rating of A-. Accordingly almost all of its storm cover has been placed with such reinsurance companies.

Topdanmark's investment risk is the inability of bond, loan or financial contract counter-parties to meet their obligations. Most of Topdanmark's interest-bearing assets comprise Danish mortgage bonds and debt issued or

guaranteed by top-rated European states. The risk of losses is considered to be very small due to the high quality of the issuers and a desired spread on both issuers and issues. To limit the risk on other bond and loan debtors the portfolio is well diversified both geographically and with regard to type of debtor - and therefore the exposure to the concentration of risks is insignificant. To limit the counter-party risk of financial contracts the choice of counter-parties is restrictive and security is required when the value of the financial contracts exceeds the predetermined limits. The size of the limits depends on the counter-party's credit rating and the term of the contract.

CDOs

CDO is a general term for a class of independent legal entities established to invest in a portfolio of interestbearing assets and allocate the return in accordance with the investors' risk appetite.

The assets of the CDO are financed by investors in loan and equity tranches. The top tranche has an AAA-rating, the intermediary tranches have ratings typically decreasing to BB while the lower tranche (or tranches) are not rated. The rated tranches usually bear interest at LIBOR plus a margin. The bottom tranche, referred to as the equity or sub-tranche, receives the residual return after payment of the return promised to the higher ranking tranches.

The return on the assets is allocated periodically to the investors according to their position in the subordination order, the so-called "waterfall". The Articles of Association of the CDO provide a set of rules and tests on how far down in the subordination order the return will be allocated. If all the tests have been met, the return will be allocated to all the tranches.

If there are tests that have not been met, the return will be allocated only to those tranches specified in the Articles of Association. Normally the tests will include factors such as excess cover, rating quality, diversification and liquidity security. The investors of the top tranche will incur losses only if these are of such a size that the lower tranches lose their value. It is opposite for the sub-tranche in the opposite end of the subordination order. The sub-tranche is the first to bear any losses that cannot be covered by earnings but is not without protection. If the underlying assets perform adversely, the cash flow of the subtranche will stop for a shorter or longer period or stop completely but before then a good deal of the original investment will have returned by way of regular payments.

Operational risk

Operational risk is a term for all those risks of financial losses a company is exposed to besides credit risk, market risk and liquidity risk. It includes the occurrence of unforeseen events with an adverse impact on the company, for example, errors in internal processes, human errors, system errors, breakdowns of IT systems and losses incurred due to external events.

Topdanmark is continuing to develop IT systems, routines and procedures. The responsible business units are also responsible for the risk management of this development. Risk assessments are carried out for all projects to establish the risks, possible consequences and measures to limit these risks, combined with the implementation of new IT systems only being effected after extensive testing.

Topdanmark's IT security policy is reviewed once a year by the Board of Management and accepted by the Board of Directors.

The routines and procedures in all critical areas are regularly checked by the auditors in order to assess the risks and recommend measures to limit each individual risk.

IT exposure

Topdanmark's IT emergency strategy is revised each year by the Board of Management to be accepted by the Board of Directors. The actual IT emergency plan includes plans for re-establishing the IT environment if the systems suffer breakdowns. The IT emergency plan is tested regularly.

Topdanmark's business critical systems can be inaccessible for 24 hours without causing significant business problems.

In order to reduce the probability of breakdowns of the IT systems and limit the duration of them, Topdanmark has invested in, for example, emergency power plants with a diesel generator, disk mirroring, alarms and automatic fire fighting equipment. Critical IT equipment is in duplicate and placed in two physically separated machine rooms.

Periodically Topdanmark's critical IT systems are tested to see if they can be compromised from outside and whether the IT systems have vulnerabilities to be repaired. These tests are made by an external company with special expertise in this area. Topdanmark's IT security committee discusses and prioritizes the performance and results of the tests.

It is Topdanmark's goal that the accessibility of its main systems is no less than 99.5%, and for many years it has been better for the central applications.

Risk scenarios

The Group's risk factors are illustrated in the table overleaf. This table is an illustration of the impact of various assumptions on the most significant risk factors. The given assumptions do not reflect Topdanmark's expected risks, but are shown only as examples.

In the column "Overall effect on Group results" and the two following columns it is assumed that the bonus reserves and the individual bonus potential in the life insurance group could offset adverse fluctuations at the levels described as the overall collective bonus potential was DKK 540m (2010: DKK 554m) and the individual bonus potential DKK 2,306m (2010: 4,260m) at 31 December 2011.

If all the events of the table occurred at the same time, the losses would to a great extent be covered by the collective and individual bonus potential. The overall effect for Topdanmark would be a loss of DKK 492.1m (2010: DKK 592.2m) representing 10.0% (2010: 12.1%) of the parent company's shareholders' equity.

Risk factors in the event of realisation of different risk scenarios - after taxation and pension return tax

					Change in
	Risk scenario	Life insurance group (DKKm)	Rest of Topdanmark Group (DKKm)	Overall effect on Group results (DKKm)	parent company's sharehold- ers' equity (%)	Change in net asset value per share (DKK)
31 December 2010
Interest-bearing assets Provisions for claims and benefits Index-linked bonds Foreign exchange Equities CDOs < AA Properties Expenses Gross claims incurred Reinsurers' share Storm disasters, net of reinsurance	a a b c d e f g h h i	(461.5) 87.6 (56.5) (27.5) (384.5) (94.2) (387.1) (2.5)	(368.7) 292.9 (12.1) (4.8) (71.3) (47.1) (98.6) (10.6) (47.7) 2.9 (75.0)	(448.1) 310.3 (21.0) (9.5) (73.3) (62.5) (156.4) (11.9) (47.7) 2.9 (75.0)	(9.1) 6.3 (0.4) (0.2) (1.5) (1.3) (3.2) (0.2) (1.0) 0.1 (1.5)	(31.0) 21.4 (1.5) (0.7) (5.1) (4.3) (10.8) (0.8) (3.3) 0.2 (5.2)
31 December 2011
Interest-bearing assets Provisions for claims and benefits Index-linked bonds Foreign exchange Equities CDOs < AA Properties Expenses Gross claims incurred Reinsurers' share Storm disasters, net of reinsurance	a a b c d e f g h h i	(358.7) 130.4 (67.4) (34.1) (333.6) (95.3) (376.3) (2.6)	(355.5) 364.2 (19.0) (5.2) (60.4) (44.4) (105.0) (10.7) (48.0) 2.8 (75.0)	(492.8) 472.9 (29.7) (14.5) (61.5) (61.1) (172.3) (12.7) (48.0) 2.8 (75.0)	(10.0) 9.6 (0.6) (0.3) (1.3) (1.2) (3.5) (0.3) (1.0) 0.1 (1.5)	(37.0) 35.5 (2.2) (1.1) (4.6) (4.6) (12.9) (0.9) (3.6) 0.2 (5.6)
a: One percentage point increase in effective interest rate b: 5% decline in market price c: Annual loss on foreign exchange, with a 2.5% probability or less d: 10% loss on equity portfolios e: 10% loss on CDOs with ratings lower than AA f: 10% decline in market value of properties g: 1% increase in expenditure h: 1% increase in claims i: Storms generating claims, net of reinsurance, of up to DKK 100m

The scenarios above show a "here and now" effect of the events stated.

In a period one year hence, a change in interest rates would cause a compensating change in the current return, implying the net effect in a year's time would be much smaller than the immediate effect.

It is illustrated below:

A 1pp parallel shift upwards in the zero-coupon rate structure would have the following overall immediate effect on the results for the investment assets and existing provisions of the Topdanmark Group:

DKKm	Post tax
Revaluation of investment assets Revaluation of claims provisions	(493) 473
Non-recurring effect of increase in interest rates	(20)

However, the higher interest rates would also result in a better return on Topdanmark's interest-bearing assets and a lower loss ratio.

Assuming a 1pp increase in interest rates from one day to the next and unchanged inflation, the first year's effect of the increase in interest rates is illustrated as follows:

	Post
DKKm	tax
Excess return on interest-bearing assets	11
1.2 percentage point decline in loss ratio	81
One year's effect of increase in interest rates Non-recurring effect of increase in	92
interest rates	(20)
Total effect on results	72

Solvency

Danish insurance companies are subject to European and Danish solvency rules ensuring that the companies hold sufficient capital relative to the risks they accept. The most important rules which are reported to the DFSA today are:

• Solvency I the current European solvency rules
• Traffic light rule
• Individual solvency requirement

The current European solvency rules and the traffic light rule have been used for many years while the individual solvency requirement was reported on for the first time at the beginning of 2008.

The companies of the Group observed the current solvency rules in 2011.

Those rules imposing the greatest requirements on the Topdanmark Group's capital are the rules on individual solvency requirement, and in reality these rules are included in Topdanmark's capital planning.

New EU solvency rules – called Solvency II – are on their way, expected to take effect on 1 January 2014.

Individual solvency requirement

Individual solvency requirement is a set of Danish rules in force until the new Solvency II rules take effect. Topdanmark views the individual solvency requirement as a temporary solution for the introduction of the Solvency II rules in respect of both the solvency calculation in numerical terms and the insurance companies' risk management.

The individual solvency requirement rules calculate the capital requirement on each insurance company whereas the parent company and the Group are not covered by these rules.

The companies are to calculate a solvency requirement representing their minimum required capital based on the risks they accept. Additionally the companies are required to provide documentation for how they identify, manage, limit and calculate risks.

The DFSA's guidance prescribes no specific methods to calculate individual solvency requirement, thus companies may choose their own calculation methods but are to address all significant risks.

Topdanmark bases its calculation of individual solvency requirement on the expectations available for the future rules on solvency calculation under Solvency II, specifically the most recent Solvency II test calculation QIS5 from the EU which is not the final calculation model but Topdanmark considers it to be the most relevant, but with significant additions:

• For non-life insurance risks Topdanmark uses an internal model with a random simulation of the risk.
• For the life insurance companies Topdanmark follows the DFSA's supplementary recommendations for the QIS5 model.
• Alignment of the calculation of individual solvency requirement to expected significant changes in the final set of rules.

The rules of individual solvency requirement will lapse when Solvency II takes effect. Topdanmark does not expect this to significantly change the capital requirement as already in its individual solvency requirement Topdanmark aims to meet the Solvency II capital requirement.

Solvency II

Solvency II is a future EU regulation for insurance companies setting requirements on solvency calculations, capital base, risk management and detailed reporting on risk management to supervisory authorities and for publication. Solvency II is expected to take effect in January 2014.

The Solvency II rules have been divided into three levels. Level 1 is a directive which was adopted in 2009 and is expected to be changed in the spring of 2012. Level 2 is available as a draft regulation. Drafts are only available

for some of the Level 3 rules which will be available as guidelines. The process of adopting the rules of Levels 2 and 3 is awaiting the changed directive. The final rules at all three levels are not expected to be in place until mid-2013 at the earliest, creating continued significant uncertainty, in particular, on the specific formulation of the very detailed and cost-intensive reporting to the DFSA as required by Solvency II.

Solvency calculation and capital requirements

The EU's goal of Solvency II has been to promote good risk management. The intention has been that Solvency II will be based on market values and actual risk calculations. Solvency II will include a standard model for calculation of solvency requirements which will be common to all insurance companies in the EU. Although the model will provide the opportunity of company-specific values for some variables, the standard model will not provide a fair view of all the risk elements of all companies.

Therefore Solvency II gives the companies the opportunity to fully or partially develop their own risk model (internal model) for the solvency calculation. However, the DFSA must approve the model that is used for the calculation of Solvency II capital requirements.

Today Topdanmark uses a risk model it developed inhouse to calculate the non-life risk. The inclusion of nonlife risks in Topdanmark's calculation of the individual solvency requirement has been based on this model.

Topdanmark is in constant dialogue with the DFSA on the model with the intention to have it approved as a partial, internal model to calculate capital requirements under Solvency II. Topdanmark expects that its model will be approved to be used when Solvency II takes effect. The first draft application was submitted to the DFSA at the beginning of 2012 and it is expected that the final application will be submitted to the DFSA in May / June 2013.

In its 2009 and 2010 Annual Reports Topdanmark reported that the necessary solvency capital to meet the Solvency II requirements would be in place in 2012. Up to now the necessary solvency capital has been forecast to be DKK 4,500m before allocation of solvency capital for growth in 2009 to 2011. Topdanmark's premium growth in that period has not caused any changes in the forecast but due to declining interest rates, provisions – particularly those for outstanding claims – have

increased. As the solvency requirement from the primary business is dominated by the solvency requirement caused by the risk of provisions, the forecast for the necessary solvency capital is being increased from DKK 4,500m to DKK 4,700m in 2012.

The necessary solvency capital is assumed to comprise shareholders' equity (DKK 4,050m), hybrid capital (DKK 400m) and subordinated loan capital (DKK 250m), see www.topdanmark.com → Investor Relations → Capital Model. If the capital requirement is higher than expected, the difference will be covered by issuing further supplementary loan capital. In June 2010 Topdanmark Forsikring redeemed a subordinated loan of DKK 250m and issued a new subordinated loan of DKK 350m. Furthermore, Topdanmark Forsikring issued another subordinated loan of DKK 400m in June 2011. The difference of DKK 500m between the DKK 750m of subordinated loans and the DKK 250m of subordinated loan capital included in the necessary solvency capital is considered to be a safety margin to the forecast capital requirement.

Under the Solvency II rules the companies may influence the solvency requirement themselves by adjusting their risk. This means that if the solvency requirement increases, Topdanmark will consider an adjustment of the risk before increasing its capital base. However, the capital base will be regularly increased in line with the natural growth in portfolios, provisions and financial investments. This adjustment will be made when excess capital is allocated to share buy-back.

The solvency requirement of DKK 4,700m for the Topdanmark Group under Solvency II has been based on an expected approval of Topdanmark's internal model for non-life insurance risk. If it is not approved, the solvency requirement under Solvency II will increase by DKK 600- 700m. This potential increase in the capital requirement can broadly be covered by the safety margin of DKK 500m referred to above supplemented by a marginal adjustment of the financial risk.

Topdanmark's Solvency II project

Topdanmark is preparing for Solvency II by having employees from claims actuarial services, life actuarial services, asset management, financial and compliance departments, IT, Group Development and others working together on a project reporting to the CFO.

The three most important elements of this project are to prepare new, very detailed external reports to the DFSA and for publication on the website, to adapt data processes and calculation methods in the life insurance business and to adapt Topdanmark's own risk model for non-life insurance risk to be approved as a partial, internal model under Solvency II.

The RSR and QRT reporting to the DFSA and the SFCR reporting for publication on the website are the most resource-demanding part of the Solvency II project. This reporting is extensive.

Topdanmark's Solvency II project regularly revises contents, resources and use of time to ensure that Topdanmark will meet the Solvency II rules when they take effect.

Topdanmark has taken into account the expected numerical consequences of Solvency II in its capital model.

Capital model

Topdanmark wishes to pursue a policy of keeping its shareholders' equity at a relatively low level and pay out to shareholders any amounts in excess of the conservatively estimated shareholders' equity necessary to support the underlying business.

However, as Topdanmark is subject to public regulation, it must meet the capital requirements of Solvency II. Initially Solvency II was intended as a risk-based regulation but due to the financial crisis, amongst other factors, a number of additional buffers and requirements have been suggested which are not proportional to the actual risk. As a result of this Topdanmark has been particularly hit by the fact that the solvency requirement is adjusted, only on a limited basis, for profitability and consequently the capital requirement on Topdanmark is not much lower than that on a similar company with significantly lower profitability and consequently higher risk.

The externally imposed prudence following the financial crisis has forced Topdanmark to operate with a higher solvency capital than what is required by its risk base. Against this background Topdanmark needs to meet the regulatory requirements in the most cost efficient way through the composition of tier 1, tier 2 and tier 3 solvency capital. The immediate consequence of this is that much of the financing should be by way of tier 2 and tier 3

solvency capital but Topdanmark believes that the uncertainty of the refinancing of such supplementary capital requires some discretion.

In this light Topdanmark has decided on a capital model that has a relatively high proportion of shareholders' equity. Topdanmark expects that this model provides adequate solvency capital which will meet the requirements of Solvency II when it is implemented. At the same time the amount of equity within the solvency capital will be sufficient to cover any further regulatory requirements solely by issuing further supplementary capital.

Detailed information on, among other subjects, Topdanmark's capital structure model and model for calculation of share buy-back potential is available on www.topdanmark.com → Investor Relations → Capital Model.

Topdanmark's Board of Directors has an authorisation granted in the Articles of Association to increase the Company's share capital, to raise convertible loans and / or issue warrants. The issues may be with or without preemptive rights for the Company's shareholders. The total authorisation is restricted to 250,000 shares. The current authorisation expires on 15 April 2013.

Furthermore, the Board of Directors is authorised to issue up to 100,000 employee shares. This authorisation also expires on 15 April 2013.

Finally, for the period until the Annual General Meeting in 2015 the Board of Directors is authorised to acquire own shares up to 15% of the share capital for the purpose of ownership or security. The shares can be acquired at a minimum market price of DKK 10.5 per share and a maximum price of current market value plus 10%. It is a standing authorisation which, subject to the approval of the general meeting, is renewed regularly.

At 31 December 2011 Topdanmark's share capital totalled DKK 148,258,960 divided into 14,825,896 shares of DKK 10 each, corresponding to 14,825,896 voting rights. As of 6 March 2012, Topdanmark holds 1,642,000 of own shares representing 11.1% of the share capital, of which 566,104 shares are earmarked to cover Management's share option scheme.

The process of accounts preparation

The Board of Directors and the Board of Management have the overall responsibility for the risk management and the organisation of controls of the Topdanmark Group in respect of the process of accounts preparation including the observance of relevant legislation and other regulations related to the accounts preparation.

Control environment

The Board of Directors has adopted a working plan to ensure that at least once a year it considers the Group's:

• Risk profile and policies
• Organisation
• Plans and budgets
• Risk of fraud
• Existence of internal rulings and guidelines

The Board of Directors and the Board of Management have adopted a number of policies, manuals, procedures etc. for significant areas of the accounts preparation. The Board of Directors has adopted, among other things, a risk management policy, a policy and guidelines for operational risks, a data quality policy and a reporting policy.

The Board of Management continuously monitors the observance of relevant legislation and other rules and provisions on the accounts preparation and regularly reports on this to the Board of Directors.

The Board of Directors of Topdanmark has set up an audit committee and the Board of Directors of Topdanmark Forsikring has set up a joint audit committee for those relevant companies of the Topdanmark Forsikring Group. The two audit committees have identical members.

The working plans adopted for the audit committees include:

• Monitoring of the process of accounts preparation including regular checks and assessment of annual and interim reports, schedules for closing of interim accounts, the organisation of and abilities within the accounting function as well as material accounting policies and accounting estimates.
• Monitoring of the efficiency of internal risk management and control systems including the checking and assessment of systems for identification, quantification, prioritisation and prevention of financial and operational risks, checks and assessment of incentive to accounting manipulation or other fraud and management

reporting intended to prevent / identify and respond to accounting manipulation.

Furthermore, the Company has internal auditors who refer and report to the Board of Directors and, in accordance with an audit plan adopted by the Board of Directors, randomly select and audit certain routines and internal controls in significant and high risk areas which include the Consolidated and Annual Accounts and preparation of the accounts.

Risk assessment

The Board of Directors' working plan ensures that at least once a year the Board of Directors, the audit committee and the Board of Management make a general assessment of the risks relating to the accounts preparation process. In this assessment the Board of Directors specifically considers the organisation of the Topdanmark Group in respect of:

• Division into organisational units
• Division of duties or compensating procedures
• Procedures intended to handle and prevent conflicts of interest
• Routines / working procedures / emergency plans / systems / other tools
• Accounting and budget organisation
• Risk measurement and risk management
• Passing on of authorities including outsourcing and the authority to bind the company
• Control
• Appropriate and sufficiently diverse employee resources
• Appropriate IT systems and support
• Appropriate methods for communication across the company

The Board of Directors regularly and at least quarterly takes a position on budget and forecast, capital, liquidity, material decisions and specific risks.

As part of the risk assessment the Board of Directors makes annual decisions on the risk of fraud and discusses:

• Potential incentives or motives for manipulating the accounts or undertaking other types of fraud
• Management reporting in order to prevent or identify and respond to any accounting manipulation

Day-to-day risk management is performed at segment level and by the administrative departments on the basis of risk limits set by the Board of Management and approved by the Board of Directors.

Risk management is coordinated by a risk committee comprising those responsible of the primary risk areas. The risk committee reports to the Board of Management who reports to the Board of Directors.

Control activities

The control activities are based on the risk assessment. They are intended to ensure that the policies, manuals, procedures etc. decided by the Boards of Directors and Management are observed and errors and faults are prevented or found and corrected in time.

The accounting department is responsible for the preparation of interim and annual reports. Key contributors are:

• Non-life and life actuarial services (technical provisions)
• Asset management (financial assets and liabilities)
• Finance functions (calculation and distribution of costs etc.)

The Group's two finance functions, Life Finance and Group Finance, prepare internal account reporting, profit forecasts etc. and are responsible for controlling the accounts, including reconciliation of internal accounts and reporting of deviations from forecasts.

The Board of Management and Group Finance hold quarterly forecast meetings with each segment and business sector to review changes in their portfolios, the results of the past period and the forecast for the year.

The Management's Review is prepared by the Investor Relations department (IR) on the basis of information provided by a number of departments such as the accounting and finance functions, Asset Management and business segments.

Prior to each annual and quarterly report being published the report is discussed at a meeting between the Board of Management and the auditors, also attended by the IR and accounting departments.

Information and communication

The risk management and internal controls surrounding the preparation of the accounts are intended to present an annual report which meets International Financial Reporting Standards as adopted by the EU and the additional Danish disclosure requirements of NASDAQ OMX, Copenhagen and the Danish Financial Business Act on annual reports prepared by listed financial services companies.

As a consequence of its regular work to keep up with changes in the rules for accounts presentation (primarily IFRS and the Danish Accounting Order) the accounting department plans and takes initiatives for its future annual reports and regularly updates accounting policies and the presentation of the accounts and notes (by using, for example, detailed check lists).

Monitoring

The Group's internal control and risk management systems are regularly updated and have been established in order to eliminate misstatement and omissions in the accounts. However, the internal control and risk management systems do not absolutely ensure that all material misstatement and omissions are found and corrected.

Internal and external auditors review the book keeping, the presentation of the accounts and the Annual Report in general by focusing particularly on the most significant risk elements.

The regular audit reviews made by internal auditors are documented in audit reports, management letters and an audit database to ensure that the recommendations given are regularly acted upon.

Corporate Governance

Topdanmark's practical approach to Corporate Governance means that it is not sufficient for the Board of Directors and Board of Management to just observe a set of academic rules. Corporate Governance envelops the concept of supporting the trinity between shareholders, customers and employees.

This is done by, among other things, incorporating and maintaining a responsible company culture with good management throughout the organisation. Topdanmark has a decentralised organisational structure based on framework control. In the day-to-day activities homogenous behaviour is supported by a set of management and customer-oriented values, see (in Danish not available in English) www.topdanmark.com → Job og karriere → Vores arbejdsplads → Ledelsesprincipper.

The Board of Directors has been focusing on Corporate Governance for a number of years and has regularly aligned the Company's Articles of Association etc. with the principles of Corporate Governance.

General meetings

The general meeting is Topdanmark's supreme decisionmaking vehicle. About four weeks before the Annual General Meeting those shareholders who are registered by name and have requested an invitation, are invited by letter to attend the meeting. The Annual General Meeting is convened in accordance with the provisions of the

Danish Companies Act with a notice period of between three and five weeks.

All shareholders are entitled to attend and vote at general meetings. Shareholders who are not able to attend general meetings can vote by proxy or letter on each item of the agenda, however their proxy is only valid for one general meeting.

Shareholders can, by e-mail or postal letter, send questions to be answered at general meetings.

Topdanmark has only one class of shares and each share entitles the holder to one vote.

Decisions at general meetings are made by a simple majority of votes unless a special majority or representation is required by the Danish Companies Act or the Articles of Association. The Articles of Association provide that decisions on the alteration of the Articles of Association are only valid if adopted by an affirmative vote of not less than two thirds of the votes cast as well as of the capital represented at the general meeting. The Articles of Association provide no restrictions on voting rights.

The AGM is transmitted live via a webcast.

Board of Directors

The Board of Directors, which is elected by the general meeting and the Topdanmark Group's employees, is the Company's top threshold of management formulating the Company's objectives, goals and strategies and making decisions on matters that are of significant importance or unusual in nature to the Company.

The Board of Directors supervises the Company ensuring that it is managed in a proper way in accordance with legislation and the Articles of Association. It does not participate in day-to-day management of the Company.

The Board holds six or seven ordinary Board meetings a year plus an annual Board seminar dealing with strategic issues and other forward-looking topics.

Topdanmark's Board of Directors comprises nine members, six of them elected by shareholders in general meeting and three by Topdanmark's employees in accordance with the Danish Companies Act.

In accordance with this Act the number of Board members elected by employees should be equivalent to no fewer than half the number of those elected by shareholders in general meeting. The rights, duties and responsibility of the Board members elected by employees are the same as those of the Board members elected by shareholders in general meeting.

Shareholders who are not associated with the Company by their employment or who are not employed by a competing company are eligible for election to the Board of Directors by shareholders in general meeting.

The age limit for Board members is 70 and the term of office for members elected by shareholders in general meeting is one year, while in accordance with legislation, it is four years for members elected by employees.

Board members are elected individually, and no Board member may be appointed by any individual shareholder. More than half of the Board members elected by the shareholders in general meeting meet the definition of independence set out by the Committee on Corporate Governance.

Topdanmark has no fixed general selection criteria. It believes that by imposing very specific requirements on the Board of Directors it may prevent the election of an obviously qualified Board candidate who does not fully meet the requirements. Instead an individual decision will be made on each Board candidate based upon an overall consideration of their qualifications, the Company's present needs and the composition of the rest of the Board of Directors. Topdanmark believes that in a company like Topdanmark, between them its Board members ought to possess skills within accounting, finance, financing, insurance operations, reinsurance and marketing and sales in the personal and professional markets. With its current composition Topdanmark's Board of Directors possesses all these skills.

Topdanmark's current Board of Directors reflects diversity in many areas including professional background and education, sex and age. Its members have experience from both the financial, industrial and agricultural sectors, nationally and internationally. The Board of Directors believes that this composition enables it to consider a given problem from many different angles which is confirmed by experience from the day-to-day Board work. Read more about each Board member's background and competence on www.topdanmark.com → About

Topdanmark → Board of Management and Board of Directors and Board of Directors and Board of Management in this Annual Report.

Topdanmark has joined "Operation Chain Reaction" initiated by the Danish Ministry of Gender Equality. The aim is to increase the diversity of boards of directors of businesses without imposing real quotas for female managers. Correspondingly Topdanmark has signed up to the UN Global Compact intended to ensure, among other things, the prevention of discrimination in businesses.

Topdanmark believes that diversity provides business value and that it is important that the greatest management talents, irrespective of gender, nationality, religion or other characteristic achieve the highest executive positions at all levels. Topdanmark has no wish to favour women over men and therefore it has not imposed real quotas. Instead it has defined initiatives and policies for diversity which it aims to meet.

In 2011 Topdanmark focused on, among other things, women in management. A number of specific initiatives have been planned for 2011/2012 including a questionnaire survey among Topdanmark's executives, for example whether specific initiatives are necessary in order to motivate women to apply for top executive positions. Topdanmark has also held a meeting after hours for employees intended to inspire women to apply for executive positions and established an internal website allowing employees to discuss gender questions and get helpful advice from female executives. Furthermore, it is Topdanmark's ambition to invite at least one female candidate for a job interview when an executive vacancy is to be filled. This goal has been met in all situations except for one executive position where there were no female applicants.

Four of the nine Board members are women, one of them elected by the general meeting and three by Topdanmark's employees. The proportion of female Board members elected by the AGM has been stable since 2004. In 2011 the number of female Board members elected by employees increased from one to three.

The Board of Directors evaluates its work and its cooperation with the Board of Management as required, without the participation of the Board of Management. Taking this evaluation into account, the Board of Directors assesses itself during the annual Board seminar. Selfassessment is included in the rules of procedure and the working plan of the Board of Directors. The Board of Directors also evaluates the co-operation between the Board of Management and itself at the annual Board seminar.

Audit committee

According to Section 31 of the Danish Audit Act the Board of Directors of Topdanmark has set up an audit committee. According to Sections 6(1) and 2(4) of the executive order on audit committees in companies and groups that are subject to supervision by the Danish Financial Supervisory Authority, the Board of Directors of Topdanmark Forsikring has set up a joint audit committee for those relevant companies of the Topdanmark Forsikring Group. The two audit committees have identical members.

The Board of Directors has elected Michael Pram Rasmussen, Chairman of the Board, Annette Sadolin, Board member, and Søren Thorup Sørensen, Board member, to be members of the audit committee. The Board of Directors has elected Søren Thorup Sørensen to be chairman of the audit committee.

All members of the audit committee meet all the criteria of independence set out in the "Recommendations for Corporate Governance" of August 2011 by the Committee on Corporate Governance.

The details of the background, qualifications and occupation of the members of the audit committee are available in Board of Directors and Board of Management in this report. The Board of Directors believes that due to their many years' managerial positions in listed and financial services companies, and in respect of Søren Thorup Sørensen also his educational qualifications as a state authorised public accountant, all three members possess the necessary accounting qualifications to perform the tasks required of the audit committee.

Therefore the Board of Directors firmly believes that all three members of the audit committee possess the qualifications and experience which enable them to make an independent assessment of whether the Topdanmark Group's accounts, internal control, risk management and statutory audit have been prepared and performed in an appropriate way considering its size and complexity.

The Board of Directors therefore considers all three members of the audit committee to be independent members with appropriate accounting qualifications.

The audit committee holds at least four meetings a year. On www.topdanmark.com → Investor Relations → Corporate Governance → Internal controls, Auditors →Audit committee → The rules of procedure for the audit committee of Topdanmark A/S and the joint audit committee for Topdanmark Forsikring Group are available.

Remuneration committee

Pursuant to Section 77(c) of the Danish Financial Business Act, the Board of Directors of Topdanmark A/S and Topdanmark Forsikring A/S has set up a remuneration committee for Topdanmark A/S and a joint remuneration committee for the Topdanmark Forsikring Group. The two committees have identical members.

The Board of Directors has elected Michael Pram Rasmussen, Chairman of the Board, and Anders Knutsen, Deputy Chairman of the Board, to be members of the remuneration committee. The Board of Directors has elected Michael Pram Rasmussen to be chairman of the remuneration committee.

The Board of Directors believes that due to their many years' managerial positions in listed and financial services companies both members possess the necessary qualifications to make a qualified and independent assessment of whether remuneration in Topdanmark is in accordance with the remuneration policy adopted by the AGM and relevant legislation. The details of the background, qualifications and occupation of the members of the remuneration committee are available in Board of Directors and Board of Management in this report.

The remuneration committee holds two ordinary meetings a year. The objective of the work of the remuneration committee is to make an independent evaluation of whether Topdanmark's remuneration policy and other remuneration matters are appropriate and observed in respect of the Company's and Group's size and complexity and in accordance with relevant legislation. Furthermore, the remuneration committee is in charge of the preparatory work for the decisions to be made by the Board of Directors on remuneration, including the policy on salaries, the relevant rules of procedure and other decisions in this respect which may influence the

Company's risk management. The rules of procedure for the remuneration committee of Topdanmark A/S and Topdanmark Forsikring A/S are available on www.topdanmark.com → Investor Relations → Corporate Governance → Remuneration structure → Read more about the Remuneration Committee of the Topdanmark Group.

The Committee on Corporate Governance's Recommendations for Corporate Governance

At the end of 2001 the Nørby Committee published its first report on Corporate Governance in Denmark. Since then the Board of Directors has made a precise response to each item of the Nørby Committee's recommendations and Topdanmark has met all significant recommendations included in that report.

In August 2011 the Committee on Corporate Governance published its latest version of recommendations for Corporate Governance in Denmark. They are available to the public on the Committee's website www.corporategovernance.dk.

In accordance with Section 131 of the executive order on financial reporting for insurance companies and lateral pension funds, Topdanmark is liable to outline in its annual report its approach to the recommendations. The outline should follow the "comply or explain" principle which has been decided at EU level and follows from Provision 4.3 of Rules for issuers of shares issued by NASDAQ OMX Copenhagen.

The Board of Directors believes that Topdanmark meets all the recommendations which are important and relevant to a company like Topdanmark.

However, Topdanmark does not fully meet the following recommendations:

5.7.2 bullet 3:

• The Committee recommends that the annual report contain the following information about the members of the supreme governing body:
• "… The number of shares, options, warrants, etc. that the member holds in the company and its consolidated companies and any changes in such holdings during the financial year"

On its website Topdanmark discloses information on holding of shares, options etc. at a group level, for

the entire Board of Directors and the entire Board of Management etc., see note.

Furthermore, in accordance with the rules of the Danish Securities Trading Act, Topdanmark regularly discloses information on transactions in Topdanmark's shares, options etc. made by members of the Board of Directors and the Board of Management. The trading reports published on such transactions are saved and available on Topdanmark's website. The Board of Directors believes there is no further need of separate disclosure in the Annual Report of each Board member's holding of and trade in shares, options etc. The Board believes that the market will receive no new relevant information by disclosing this information at an individual level in the Annual Report.

5.10.7:

• The Committee recommends that the supreme governing body establish a nomination committee with at least the following preparatory tasks:
• Describe the qualifications required in the two governing bodies and for a given position, state the expected time commitment for a position and evaluate the balance of skills, knowledge and experience available in the two governing bodies.
• Annually evaluate the structure, size, composition and performance of the governing bodies and make recommendations to the supreme governing body with regard to any changes.
• Annually evaluate the skills, knowledge and experience of the individual members of the governing bodies and report such details to the supreme governing body.
• Consider proposals submitted by relevant persons, including shareholders and members of the governing bodies, for candidates for executive positions.
• Identify and recommend to the supreme governing body candidates for the governing bodies.

Topdanmark has chosen to have a small and active Board of Directors. As one of the consequences of this decision Topdanmark has chosen not to set up an independent nomination committee but instead the entire Board of Directors performs those tasks

which would be performed by a nomination committee in other companies. This is not contrary to the Recommendations on Corporate Governance which point out that the functions of a board committee may be performed by the entire Board of Directors.

Topdanmark believes that a wide use of board committees could contribute to diluting the Board work in spite of the Recommendations pointing out that the entire Board of Directors should not be deprived of responsibility and insight. The use of board committees removes insight and knowledge from the Board of Directors without depriving it of responsibility. An increased use of board committees could result in increased bureaucracy and much of the work of the Board and particularly its Chairman will be receiving reports from various committees instead of considering and addressing the Board relevant tasks and problems themselves.

The recommendation does not seem well-founded, particularly considering that the Recommendations say that the tasks of the nomination committee may be performed by the entire supreme governing body.

Topdanmark's Board of Directors regularly addresses the following recommendations, at least once a year when assessing itself and the co-operation between it and the Board of Management:

• The qualifications required to be a member of Topdanmark's governing bodies, to hold a given position, the estimated time commitment for a position and skills, knowledge and experience available in Topdanmark's governing bodies.
• The structure, size, composition and results of the governing bodies.
• The skills, knowledge and experience held by each member of the governing bodies.
• Any proposal for candidates for Topdanmark's governing bodies.

Detailed information on Topdanmark's initiatives on Corporate Governance, including a review of its response to each item of the Committee on Corporate Governance's "Recommendations for Corporate Governance, August 2011" is available on www.topdanmark.com → Investor Relations → Corporate Governance → Recommendations. This information is regularly updated.

Remuneration structure

Topdanmark's remuneration policy is intended to optimise long-term value creation at a group level. In accordance with Section 77(d) of the Danish Financial Business Act and Section 139 of the Danish Companies Act, the AGM has adopted "Remuneration policy of the Topdanmark Group including general guidelines for performancerelated pay."

Besides salary policy, the remuneration policy also includes Topdanmark's general guidelines for performance-related pay, its pension policy and its guidelines for the granting of severance pay. The remuneration policy covers Topdanmark's Board of Directors, Board of Management, significant risk takers and, as provided by legislation, employees involved in control functions and audit work. If specifically stated, Topdanmark's remuneration policy also covers its executive team, comprising a number of the heads of business sectors and administrative departments ("the Friday Team") and certain other employees at the discretion of the Board of Directors. The remuneration policy etc., as adopted by the AGM, is available on www.topdanmark.com → Investor Relations → Corporate Governance → Remuneration structure.

The share price reflects expected value creation potential at group level. This is one of the reasons why Topdanmark believes that share options rather than the receipt of individual bonuses encourage the executives to be more holistic in their approach to value creation.

The remuneration package of the Board of Management, the Friday Team and significant risk takers is based upon a fixed basic salary, 10% of which is paid as share options. Individual bonuses or other types of variable salary are not paid. The fixing of the fixed basic salary paid to the Board of Management and the Friday Team is based on a specific assessment of the employee. In its assessment Topdanmark includes, among other factors, their position, characteristics and performance.

Besides options, which in accordance with the revolving option scheme are paid to the Board of Management, significant risk takers and the Friday Team as part of their fixed salaries, the Board of Management may grant a total of up to 20,000 options to employees who are expected to make a special effort or otherwise contribute extraordinarily to value creation in the Company in that year of granting.

No special pension contribution is paid to the Board of Management, and therefore they are paid a personal allowance of 25% of their cash salary. Consequently Topdanmark has no pension commitments towards the Board of Management and no type of pension compensation on retirement is granted. The Friday Team and significant risk takers receive a pension contribution of up to 25% of their cash salary. The amount is paid to the chosen pension provider and consequently all pension obligations are fully covered by them.

Employee shares

Topdanmark issued employee shares in 2011. The allocation was effected simultaneous with a reduction in the recipient's cash salary.

Employee shares are not issued in accordance with an creation in the Company. on-going published plan for allocation but each issue is specifically decided upon and managed by the Board of Directors at the time.

In 2011 Topdanmark allocated 38,402 free employee shares and sold 30,099 employee shares at an advantageous price.

The cost of the issue of employee shares was DKK 46m in 2011 compensated by a corresponding reduction in salaries. The cost has been calculated at fair value according to the IFRS 2 on share-based payments.

Options

For 2012 Topdanmark has granted 40,261 share options to its Board of Management and a number of executives. The strike price of DKK 988 was fixed at 110% of the market price of Topdanmark's shares on 30 December 2011 (average of all trades).

Besides the revolving scheme above a further 19,900 share options have been granted for 2012 to a number of other executives who are expected to make a special effort or otherwise contribute extraordinarily to value

Breakdown of share options / warrants granted since 2008
Year	Board of Management	Executives	Total
2008	39,224	110,776	150,000
Market value of those options granted (DKKm)	4	13	17
2009	36,676	113,324	150,000
Market value of those options granted (DKKm)	4	11	15
2010	37,300	112,700	150,000
Market value of those options granted (DKKm)	4	12	16
2011	13,222	49,549	62,771
Market value of those options granted (DKKm)	1	6	7
2012	12,669	47,492	60,161
Market value of those options granted (DKKm)	2	6	7

The options granted for 2012 may not be exercised any earlier than subsequent to the publication of the 2014 Annual Report in 2015 and no later than subsequent to the publication of the 2016 Annual Report in 2017. In the intervening period the options can only be exercised up to three banking days subsequent to Topdanmark's publication of annual and interim reports.

The market value of the options for 2012 has been calculated to be DKK 7m at the time of granting.

The value was calculated using the Black and Scholes model based on a share price of DKK 897.78, an interest rate corresponding to the zero coupon rate based on the swap curve on 30 December 2011, future annual volatility of 22%, corporation tax rate of 25% and a pattern of exercise similar to Topdanmark's previous granting of share options, see IFRS 2 on share-based payments.

At the end of 2011 the exposure of the options held by the Board of Management represented 1.0% of the number of outstanding shares.

Detailed information on Topdanmark's option scheme is available on www.topdanmark.com → Investor Relations → Corporate Governance → Remuneration structure

Severance pay

In order to ensure full loyalty, focus and performance for Topdanmark during the period until a potential take-over is finalised, Topdanmark has agreed with the Board of Management and four other members of the Friday Team that under certain circumstances they will receive compensation in the form of an extended period of notice and an increased severance pay if they resign or are dismissed, or if their position is made redundant because Topdanmark is taken over by or merges with a company outside of the Group or if one or more owners take control of Topdanmark. The maximum amount of compensation will represent two years' salary.

CSR

Topdanmark's "Statutory report on Corporate Social Responsibility, see Section 132 of Executive Order on Financial Reports for insurance Companies and Lateral Pension Funds" is available on www.topdanmark.com → Investor Relations → Reports and presentations → CSR reports (http://inv.topdanmark.com/csr.cfm).

Investor Relations

Topdanmark wishes to openly and sufficiently inform investors, analysts and other stakeholders on the Group's matters in order to ensure that as far as possible:

• Value creating activities are reflected in a fair price for Topdanmark's shares
• The liquidity of its shares is high enough in order that they are not traded at a discount due to lack of liquidity
• There is a high level of knowledge of and confidence in Topdanmark's shares.
• There is low price volatility in Topdanmark's shares secured through the provision of uniform and consistent information, thereby helping to reduce the cost of capital.

Topdanmark endeavours to proactively reach out to investors in Denmark and abroad by using information channels such as:

• Investor meetings
• Telephone meetings
• Conference calls
• Web casts
• Investment and insurance conferences

Topdanmark's shares are listed on NASDAQ OMX Copenhagen and included in a number of share indices, one of them being the OMX Copenhagen 20 index (OMXC20).

Distribution policy

It is Topdanmark's policy to pay out to shareholders all surplus capital by way of share buy-backs.

Since the buy-back programme was initiated in 1998, Topdanmark has cancelled DKK 9.5bn of own shares representing a 64.1% write-down of the share capital. In the years 2000-2011 the annual average buy-back yield has been 9%.

Trading in Topdanmark's shares

Daily share trading on all trading platforms was DKK 49m in 2011 (2010: DKK 52m). At NASDAQ OMX Copenhagen daily trading was DKK 43m (2010: DKK 47m). New trading platforms such as Chi-X, BATS Europe, Turquoise and Burgundy represented 12% of the trading in Topdanmark's shares in 2011.

Breakdown of those brokers with the highest trading activity in Topdanmark's shares at NASDAQ OMX Copenhagen:

Most active brokers at NASDAQ
OMX Copenhagen in 2011	%
Danske Bank	21
Svenska Handelsbanken	12
Credit Suisse	7
Deutsche Bank	6
Morgan Stanley	5
Carnegie	5
Nomura	5
SEB Enskilda	4
Nordea	4
Citadel	3

Topdanmark is followed by 21 analysts. Share analysts' recommendations of Topdanmark's shares are available on Topdanmark's investor site www.topdanmark.com → Investor Relations → Share profile → Analysts.

Shareholders

At the end of February 2012 Topdanmark had 50,826 shareholders registered by name.

The following shareholders own more that 5% of the share capital:

Shareholder	Holding (%) 31 Dec 2011
If P&C Insurance Holding Ltd (publ) Barks Väg, Solna 10680 Stockholm Sweden	5.7
If P&C Insurance Company Ltd Barks Väg, Solna 10680 Stockholm Sweden	15.6
ATP, AES Kongens Vænge 8 3400 Hillerød Denmark	5.0

Accounting award

In 2011 Topdanmark received PwC's C20 Accounting Award for its 2010 Annual Report in the category of "Business performance and follow-up on the expectations announced".

Annual General Meeting

The AGM will be held on Thursday 19 April 2012, 15:00 (CET) at:

Tivoli Hotel & Congress Center Arni Magnussons Gade 2-4 1577 Copenhagen V

All of Topdanmark's Board members elected by the AGM are up for election. Knud J. Vest does not offer himself for re-election. The Board of Directors proposes that Anders Colding Friis is elected as a new member of the Board; all other members of the Board are to be re-elected.

The Board of Directors proposes the election of:

• Anders Knutsen
• Jens Maaløe
• Michael Pram Rasmussen
• Annette Sadolin
• Søren Thorup Sørensen
• Anders Colding Friis

Proposals to be transacted at the AGM must be received by Topdanmark no later than 7 March 2012.

The agenda for the AGM will be published in mid-March 2012.

Financial calendar

Deadline for submitting items for AGM agenda	07 Mar 2012
AGM	19 Apr 2012
Q1 2012 Interim Report	22 May 2012
2012 Half-year Report	21 Aug 2012
Q1-Q3 2012 Interim Report	13 Nov 2012
2012 Annual Report	05 Mar 2013

List of company announcements and trading reports Company announcements

Topdanmark submits announcements to Nasdaq OMX, Copenhagen with information on material and relevant events in the Group which can affect the price of Topdanmark's shares. The announcements are also sent to the press, share analysts, investors and other interested parties.

The announcements are available on www.topdanmark.com → Investor Relations → Company announcements.

2012

02 Jan 01/2012: Issue of options

2011

• 19 Dec 22/2011: Topdanmark increases its holding of own shares 28 Nov 21/2011: Result of sale of employee shares 15 Nov 20/2011: Topdanmark Interim Report Q1-Q3 2011 04 Oct 19/2011: Employee shares 23 Aug 18/2011: Topdanmark 2011 Half Year Report
• 21 June : Topdanmark Forsikring A/S issues DKK 400m of subordinated notes (subordinated loan capital)
• 31 May 17/2011: Share capital and voting rights in Topdanmark
• 24 May 16/2011: Topdanmark's holding of own shares under 10%
• 24 May 15/2011: Topdanmark Interim Report for Q1 2011
• 23 May 14/2011: Write-down of share capital
• 17 May 13/2011: Capital no longer holds shares in Topdanmark
• 16 May 12/2011: If owns more than 20% of Topdanmark
• 12 Apr 11/2011: Annual General Meeting of Topdanmark on 12 April 2011
• 31 Mar 10/2011: Share capital and voting rights in Topdanmark
• 29 Mar 09/2011: Election of employees to Topdanmark's Board of Directors
• 18 Mar 08/2011: Notice convening AGM of Topdanmark
• 16 Mar 07/2011: Exercise of warrants Topdanmark increases its holding of own shares
• 08 Mar 06/2011: Capital's shareholding in Topdanmark exceeds 5%
• 08 Mar 05/2011: Topdanmark's Annual Report 2010
• 28 Feb 04/2011: Share capital and voting rights in Topdanmark
• 24 Feb 03/2011: Topdanmark's holding of own shares under 10%
• 24 Feb 02/2011: CORRECTION: Write-down of share capital
• 24 Feb 02/2011: Write-down of share capital
• 03 Jan 01/2011: Issue of options

Trading reports

2012

02 Jan 01/2012: Trading in Topdanmark's shares by insiders

2011

• 30 Nov 06/2011: Trading in Topdanmark's shares by insiders
• 01 Jun 05/2011: Trading in Topdanmark's shares by insiders
• 26 May 04/2011: Trading in Topdanmark's shares by insiders
• 25 May 03/2011: Trading in Topdanmark's shares by insiders
• 16 Mar 02/2011: Trading in Topdanmark's shares by insiders
• 03 Jan 01/2011: Trading in Topdanmark's shares by insiders

Boards of Directors and Board of Management Board of Directors

Michael Pram Rasmussen, Chairman, , **
DOB:	14 January 1955
Joined Topdanmark's Board of Directors:	2006
Current position held:	Chairman
Previous positions held:	1979-1982: Nye Danske Lloyd A/S
	1982-1984: Baltica Forsikring A/S
	1984-1986: Deputy General Manager, Baltica Forsikring A/S
	1986-1988: General Manager, Baltica Forsikring A/S
	1988-1995: Group Managing Director, Baltica Forsikring A/S
	1995-1996: Group Managing Director, Tryg-Baltica Forsikring A/S
	1996-2006: CEO of Topdanmark A/S and Topdanmark Forsikring A/S
Education:	Law degree, University of Copenhagen
Offices held:	Member of the Boards of Directors of:
	• A.P. Møller-Mærsk A/S (Chairman)
	– and one subsidiary
	• Coloplast A/S (Chairman)
	• Semler Holding A/S (Chairman)
	– and one subsidiary
	• Louisiana Museum of Modern Art
Independence:	Michael Pram Rasmussen meets the definition of independence set out
	by the Committee on Corporate Governance
Anders Knutsen, Deputy Chairman, ***
DOB:	4 May 1947
Joined Topdanmark's Board of Directors:	1999
Current position held:	Chairman
Previous positions held:	1977-1983: Factory Manager, Bang & Olufsen A/S
	1983-1986: Production Manager, Alcatel Danmark A/S
	1986-1991: Technical Manager, Bang & Olufsen A/S
	1991-2001: CEO, Bang & Olufsen Holding A/S
Education:	MSc (Economics)
Offices held:	Member of the Boards of Directors of:
	• Rossini Caviar A/S (Chairman)
	• Hersild & Heggov (Chairman)
	• kaluna Nordic AS (Chairman)
	• kaluna Norge AS (Chairman)
	• Purix ApS
	• Fritz Hansen A/S
	• Augustinus Fabrikker A/S
	• kk-group A/S
Independence:	As Anders Knutsen has been member of the Board of Directors for more
	than 12 years, he does not meet the definition of independence set by the
	Committee on Corporate Governance
Charlotte Hougaard**
DOB:	1 October 1964
Joined Topdanmark's Board of Directors:	2007
Current position held:	Chairman of Topdanmark's staff association

Jens Maaløe*
DOB:	10 January 1955
Joined Topdanmark's Board of Directors:	2003
Current position held:	CEO of TERMA A/S
Previous positions held:	1983-1990: Development / Sales Manager, NKT Elektronik A/S
	1991-1993: CEO, NKT Dedicom A/S
	1994-1995: Managing Director, DSC Communications A/S
	1995-1997: Regional Manager, Tele Danmark A/S
	1997-2002: CEO, NetTest Danmark as
Education:	MSc (Engineering), DTU
	Licentiate (Tech.), thesis: radar technology and optical communication
Offices held:	Member of the Boards of Directors of:
	• DI's (The Confederation of Danish Industry) Research and
	Education Committee (Chairman)
	• Grundfos Holding A/S
	• The Poul Due Jensen Foundation
	• NKT A/S
	• Danmarks Eksportråd (Trade Council of Denmark)
	• DI's Governing Body
	• FAD (Danish Defence and Aerospace Industry)
	• PA (Federation of Employers in the Provincial Industry)
Independence:	Jens Maaløe meets the definition of independence set out by the
	Committee on Corporate Governance
Annette Sadolin,**
DOB:	4 January 1947
Joined Topdanmark's Board of Directors:	2004
Current position held:	Since 2003 solely directorships
Previous positions held:	1980-1986: Assistant to management and subsequently Divisional
	Manager, Baltica Re / Baltica-Nordisk Re
	1986-1989: Ass. General Manager, Baltica-Nordisk Re
	1989-1993: Deputy General Manager, Employers Reinsurance
	International, Copenhagen
	1993-1996: CEO, Employers Reinsurance International, Copenhagen
	1996-2003: Member of Board of Management, GE Frankona
	Rückversicherungs-Aktiengesellschaft, Munich
Education:	Law degree, University of Copenhagen
	Special law programme, Columbia University, NY, USA
	GE training programmes incl. Six Sigma GB Certificate
Offices held:	Member of the Boards of Directors of:
	• DSB
	• DSV A/S
	• Ratos AB
	• Lindab International AB
	• Blue Square Re
	• Skodsborg Kurhotel & Spa A/S
Independence:	Annette Sadolin meets the definition of independence set out by the

Desirée Schultz**
DOB:	11 May 1952
Joined Topdanmark's Board of Directors:	2011
Current position held:	Head of department
Offices held:	Chairman of Topdanmark's Senior Officers' Association
Søren Thorup Sørensen*, ***
DOB:	29 September 1965
Joined Topdanmark's Board of Directors:	2010
Current position held:	CEO of KIRKBI A/S
Previous positions held:	1987-2006: KPMG Denmark and UK
	2006-2009: Group CFO and member of Group Executive Board,
	A.P. Møller-Mærsk A/S
Education:	MSc (Business Administration and Auditing), Copenhagen Business
	School, Denmark
	State-authorised public accountant
	Advanced Management Programme, Harvard Business School, USA
Offices held:	Member of the Boards of Directors of:
	• TDC A/S
	• 7 subsidiaries of KIRKBI A/
	• Koldingvej 2, Billund A/S
	• KIRKBI AG
	• Merlin Entertainments Ltd.
	• Falck Holding A/S
	• Falck A/S
	• Boston Holding A/S
Independence:	Søren Thorup Sørensen meets the definition of independence set out by
	the Committee on Corporate Governance
Knud J. Vest*
DOB	6 July 1946
Joined Topdanmark's Board of Directors:	1994
Current position held:	Fur breeder, Farmer
Education:	Farmer
Offices held:	Member of the Boards of Directors of:
	• EFBA (Chairman)
	• Danish Agro
	• Dansk Pelsdyravlerforening/Danske Pelsauktioner (Danish Fur
	Breeders Association / Danish Fur Auctions)
Other activities:	Member of:
	• Landbrug og Fødevarers Virksomhedsbestyrelse (Company Board
	of Danish Agriculture and Food Council)
	• Landbrug og Fødevarers Fællesbestyrelse (Common Board of
	Danish Agriculture and Food Council)
Independence:	As Knud J. Vest has been member of the Board of Directors for more
	than 12 years, he does not meet the definition of independence set by the
	Committee on Corporate Governance
Trine Zappe**
DOB:	5 April 1977
Joined Topdanmark's Board of Directors:	2011
Current position held:	Claims handler
* Elected by shareholders in general meeting	** Elected by employees

*** Member of Topdanmark's Audit Committee **** Member of Topdanmark's Remuneration Committee

Board of Management Christian Sagild

CEO of Topdanmark A/S

DOB 1959, joined Topdanmark in 1996, joined Topdanmark's Board of Management on 1 January 2006

Managerial responsibilities:

• Life insurance
• HR
• IT
• Group Development
• Communications, IR, CSR
• Group Secretariat, Corporate Legal Matters

Member of the Boards of Directors of:

• The Danish Insurance Association
• The Danish Employers' Association for the Financial Sector

Kim Bruhn-Petersen

Group Managing Director of Topdanmark A/S DOB 1956, joined Topdanmark in 1989, joined Topdanmark's Board of Management on 1 January 2006

Managerial responsibilities:

• Personal
• SME and Industrial
• Marketing
• Claims Administration

Member of the Boards of Directors of:

• Forsikringsakademiet A/S (Danish Insurance Academy)
• Bornholms Brandforsikring A/S

Lars Thykier

CFO of Topdanmark A/S DOB 1955, joined Topdanmark in 1986, joined Topdanmark's Board of Management on 1 June 2009

Managerial responsibilities:

• Asset Management
• Finance
• Accounts
• Statistical Services
• Reinsurance
• Tax
• Credits

Information on the Board of Management's responsibilities, as required by Article 80 of the Danish Financial Business Act, is shown in the Annual Report for Topdanmark Forsikring A/S

Five-year summary • Group

(DKKm)	2007	2008	2009	2010	2011
NON-LIFE INSURANCE
Gross premiums earned* Technical interest	8,955 181	9,029 222	8,707 102	8,622 58	8,709 65
Gross claims incurred	(5,840)	(5,770)	(6,324)	(6,444)	(6,759)
Bonuses and rebates	(72)	(77)	(42)	(74)	(41)
Total operating expenses	(1,278)	(1,308)	(1,272)	(1,298)	(1,340)
Net reinsurance TECHNICAL PROFIT ON NON-LIFE INSURANCE	(345) 1,601	(272) 1,824	(266) 905	(204) 660	312 945
LIFE INSURANCE
Gross premiums written Allocated investment return, net of reinsurance	3,556 191	3,980 (2,143)	3,208 2,443	3,395 2,233	3,303 579
Claims and benefits	(1,908)	(2,038)	(1,423)	(2,875)	(3,691)
Change in the life insurance provisions	(1,418)	(1,223)	(2,829)	(900)	435
Bonus	421	1,766	(118)	(369)	14
Change in the provisions for unit-linked contracts	(529)	(61)	(851)	(968)	(294)
Operating expenses	(290)	(320)	(305)	(302)	(308)
Net reinsurance	(2)	(2)	(2)	0	1
TECHNICAL PROFIT / (LOSS) ON LIFE INSURANCE	21	(41)	123	214	38
Profit / (loss) on investment activities after transfer to technical results	67	(1,765)	878	668	359
Other income	7	6	5	11	47
Other expenses	(39)	(48)	(48)	(47)	(40)
PRE-TAX PROFIT / (LOSS)	1,657	(24)	1,863	1,506	1,349
Taxation	(386)	(165)	(417)	(338)	(326)
PROFIT / (LOSS) FOR THE YEAR	1,271	(189)	1,446	1,168	1,023
Run-off profits, net of reinsurance	324	506	214	204	148
Provisions for insurance and investment contracts:
Non-life insurance	13,314	13,685	14,478	15,139	16,228
Life insurance	25,093	24,938	28,882	31,166	30,618
Total insurance assets	669	651	656	768	1,184
Total shareholders' equity	3,368	2,895	4,117	4,553	4,567
Total assets	44,645	52,035	56,554	57,542	61,013
Gross loss ratio (%)	65.9	64.6	73.1	75.5	78.2
Net reinsurance ratio (%)	3.9	3.1	3.1	2.4	(3.6)
Claims trend (%)	69.8	67.7	76.2	77.9	74.6
Gross expense ratio (%)	14.5	14.7	14.9	15.4	15.7
Combined ratio (%)	84.3	82.4	91.1	93.3	90.3
Operating ratio (%)	82.7	80.4	90.1	92.7	89.6
Relative run-off profits, net of reinsurance (%)	3.4	5.0	2.1	1.8	1.3
Return on shareholders' equity (%)	34.2	(6.3)	40.1	26.0	22.7
Solvency ratio (%)	58.0	32.7	71.0	75.1	60.7

* Before deducting bonuses and rebates

Profit and loss account • Group

(DKKm)	Note	2010	2011
NON-LIFE INSURANCE
Gross premiums written Reinsurance ceded	1	8,661 (644)	8,734 (703)
Change in the provisions for unearned premiums, gross Change in the reinsurers' share of the provisions	1	(39)	(26)
for unearned premiums		(8)	2
Premiums earned, net of reinsurance		7,971	8,008
Technical interest, net of reinsurance	2	58	65
Gross claims paid		(6,351)	(6,750)
Reinsurance cover received		260	555
Change in the provisions for claims, gross		(93)	(9)
Change in the reinsurers' share of the provisions for claims		107	390
Claims incurred, net of reinsurance	3	(6,077)	(5,814)
Bonuses and rebates		(74)	(41)
Acquisition costs		(748)	(797)
Administrative expenses		(550)	(543)
Reinsurance commission and share of profits		80	67
Total operating expenses, net of reinsurance		(1,218)	(1,273)
TECHNICAL PROFIT ON NON-LIFE INSURANCE	4	660	945
LIFE INSURANCE
Gross premiums written	5	3,395	3,303
Reinsurance ceded		(7)	(5)
Premiums, net of reinsurance		3,388	3,298
Allocated investment return, net of reinsurance		2,233	579
Claims and benefits paid	6	(2,866)	(3,702)
Reinsurance cover received		4	5
Change in the provisions for claims and benefits		(9)	11
Claims and benefits paid, net of reinsurance		(2,871)	(3,686)
Change in the life insurance provisions	7	(900)	435
Change in the reinsurers' share		3	2
Change in the life insurance provisions, net of reinsurance		(897)	437
Bonus		(369)	14
Change in provisions for unit-linked contracts		(968)	(294)
Acquisition costs		(120)	(108)
Administrative expenses		(181)	(201)
Reinsurance commission and share of profits		0	(1)
Total operating expenses, net of reinsurance		(301)	(309)
TECHNICAL PROFIT ON LIFE INSURANCE		214	38

Profit and loss account • Group

(DKKm)	Note	2010	2011
NON-TECHNICAL ACTIVITIES
Technical profit on non-life insurance		660	945
Technical profit on life insurance		214	38
Income from associated companies		59	29
Income from investment properties	8	229	209
Interest income and dividends etc.		1,908	2,058
Revaluations	9	1,532	(683)
Interest charges		(81)	(113)
Expenses on investment business		(41)	(35)
Total investment return		3,607	1,463
Technical interest transferred to non-life insurance business		(362)	(388)
Pension return tax	10	(344)	(138)
Investment return transferred to life insurance business		(2,233)	(579)
Other income	11	11	47
Other expenses	12	(47)	(40)
PRE-TAX PROFIT		1,506	1,349
Taxation	13	(338)	(326)
PROFIT FOR THE YEAR		1,168	1,023
Profit per share, DKK	14	77.2	74.4
Profit per share, diluted DKK	14	77.0	74.4

Statement of comprehensive income ● Group

Profit for the year	1,168	1,023
Revaluation of owner-occupied properties	1	1
Other comprehensive income	1	1
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	1,169	1,024

Assets • Group

(DKKm)	Note	2010	2011
INTANGIBLE ASSETS	15	768	703
Machinery and equipment		148	126
Owner-occupied properties		757	818
TOTAL TANGIBLE ASSETS	16	905	943
Investment properties	17	4,046	4,104
Shares in associated companies	18	388	385
Loans to associated companies	19	762	707
Total investment in associated companies		1,151	1,091
Shares		6,309	5,593
Bonds		36,833	39,070
Loans guaranteed by mortgages		11	9
Other loans		2	1
Deposits with credit institutions		1,011	2,025
Derivatives		785	1,342
Total other financial investment assets		44,951	48,039
TOTAL INVESTMENT ASSETS		50,147	53,235
INVESTMENT ASSETS RELATED TO UNIT-LINKED CONTRACTS	20	3,264	3,283
Reinsurers' share of the provisions for unearned premiums	21	65	68
Reinsurers' share of the life insurance provisions		36	38
Reinsurers' share of the provisions for claims and benefits	22	667	1,079
Total reinsurers' share of provisions		768	1,184
Amounts due from policyholders		417	379
Amounts due from insurance companies		184	79
Amounts due from associated companies		18	4
Other debtors		101	128
TOTAL DEBTORS		1,487	1,774
Current tax assets		58	0
Deferred tax assets	23	19	12
Liquid funds		194	241
Other		49	166
TOTAL OTHER ASSETS		320	419
Accrued interest and rent		501	494
Other prepayments and accrued income		150	161
TOTAL PREPAYMENTS AND ACCRUED INCOME		651	655
TOTAL ASSETS		57,542	61,013

Shareholders' equity and liabilities • Group

(DKKm)	Note	2010	2011
Share capital		171	148
Revaluation reserve		16	17
Security fund		1,104	1,104
Other reserves		20	22
Total reserves		1,124	1,126
Profit carried forward		3,241	3,275
TOTAL SHAREHOLDERS' EQUITY		4,553	4,567
SUBORDINATED LOAN CAPITAL	24	752	1,150
Provisions for unearned premiums	25	2,646	2,678
Guaranteed pension benefits		16,601	20,233
Bonus potential on future premiums		5,831	3,718
Bonus potential on paid-up benefits		4,260	2,306
Total life insurance provisions	26	26,692	26,257
Provisions for claims and benefits	27	12,459	13,545
Collective bonus potential	28	554	540
Provisions for bonuses and rebates		128	89
Provisions for unit-linked contracts	29	3,826	3,737
TOTAL PROVISIONS FOR INSURANCE
AND INVESTMENT CONTRACTS		46,305	46,846
Pensions and similar commitments	30	42	39
Deferred tax liabilities	23	94	121
Deferred tax on security funds		348	348
TOTAL LIABILITIES PROVIDED		485	508
DEPOSITS RECEIVED FROM REINSURERS		90	116
Creditors arising out of direct insurance operations		69	89
Creditors arising out of reinsurance operations		59	61
Bond loans		71	72
Amounts due to credit institutions		3,840	5,997
Amounts due to associated companies		11	0
Current tax liabilities		5	3 0
Derivatives		167	537
Other creditors		1,052	952
TOTAL CREDITORS		5,274	7,738
ACCRUALS AND DEFERRED INCOME		85	87
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES		57,542	61,013

Cash flow statement • Group

(DKKm)	2010	2011
Cash flow from operations
Gross premiums written	8,588	8,648
Claims paid	(6,227)	(6,641)
Expenses paid	(1,197)	(1,239)
Reinsurance ceded	(258)	1
Cash flow from non-life insurance	905	770
Gross premiums written	3,366	3,374
Claims and benefits	(2,891)	(3,704)
Expenses paid	(282)	(315)
Reinsurance ceded	19	19
Cash flow from life insurance	212	(626)
Total cash flow from insurance business	1,117	144
Payments made and received on investment contracts	37	(382)
Dividends from associated companies	0	28
Interest income and dividends etc.	2,065	2,289
Interest charges	(108)	(124)
Pension return tax	181	(325)
Corporation tax	(261)	(207)
Other items	(28)	2
Total cash flow from operations	3,003	1,424
Investments
Shares in associated companies	10	4
Properties	20	(88)
Machinery, equipment and intangible assets	(160)	(73)
Shares	199	38
Bonds	(4,172)	(1,721)
Loans	7	2
Derivatives	(656)	308
Investment assets related to unit-linked contracts	(396)	(385)
Balances with associated companies	(300)	58
Total investments	(5,448)	(1,856)
Financing
Shares bought back	(892)	(1,159)
Share-based payments Subordinated loan capital	94 98	94 398
Amounts due to credit institutions	(2,735)	2,157
Total financing	(3,434)	1,490
Change in cash and cash equivalents	(5,880)	1,058
Cash and cash equivalents at 1 January	7,089	1,205
Revaluation of cash and cash equivalents	(4)	3
Cash and cash equivalents at 31 December	1,205	2,266
Cash and cash equivalents comprise:
Liquid funds	194	241
Deposits with credit institutions	1,011	2,025
	1,205	2,266

The majority of the Group's companies are subject to the relevant legislation on insurance business. Consequently, there are certain restrictions on lending and placement of money.

Movements in shareholders' equity • Group

(DKKm)

	Share capital	Revalu- ation reserve	Security	Other fund reserves	Profit carried forward	Total
2010
Shareholders' equity prior year	169	15	1,104	16	2,812	4,117
Profit for the year Revaluation of owner-occupied properties Total comprehensive income for the year		1 1	0 0	4 0 4	1,164 0 1,164	1,168 1 1,169
Share buy-back Sale of employee shares Issue of share options Exercise of share options / warrants Taxation	2				(892) 46 16 92 3	(892) 46 16 94 3
Other transactions	2				(735)	(733)
Shareholders' equity at 31 December 2010	171	16	1,104	20	3,241	4,553
2011
Shareholders' equity prior year	171	16	1,104	20	3,241	4,553
Profit for the year Revaluation of owner-occupied properties		1	0	2 0	1,021 (0)	1,023 1
Total comprehensive income for the year Cancellation of own shares Share buy-back Sale of employee shares Issue of share options	(24)	1	0	2	1,021 24 (1,159) 46 7	1,024 0 (1,159) 46 7
Exercise of share options / warrants Taxation	1				93 3	94 3
Other transactions	(23)				(987)	(1,009)
Shareholders' equity at 31 December 2011	148	17	1,104	22	3,275	4,567

Segment information
Gross premiums earned - non-life insurance	1
Technical interest, net of reinsurance - non-life insurance	2
Claims incurred, net of reinsurance - non-life insurance	3
Technical result - non-life insurance	4
Gross premiums written - life insurance	5
Claims and benefits paid - life insurance	6
Change in life insurance provisions	7
Income from investment properties	8
Revaluations	9
Pension return tax	10
Other income	11
Other expenses	12
Taxation	13
Profit per share	14
Intangible assets	15
Tangible assets	16
Investment properties	17
Shares in associated companies	18
Loans to associated companies	19
Investment assets related to unit-linked contracts	20
Reinsurers' share of provisions for unearned premiums	21
Reinsurers' share of provisions for claims	22
Deferred tax	23
Subordinated loan capital	24
Provisions for unearned premiums	25
Life insurance provisions	26
Provisions for claims	27
Collective bonus potential	28
Provisions for unit-linked contracts	29
Pensions and similar commitments	30
Profit on life insurance	31
Expenses	32
Auditors' fee	33
Staff costs	34
Related parties	35
Financial assets	36
Financial liabilities	37
Settlement of assets and liabilities	38
Analysis of assets and their return - life insurance	39
Exposure information	40
Shares analysed by industry and region - life insurance	41
Leasing	42
Core capital and capital base	43
Number of shares	44
Own shares	45
Credit risk	46
Liquidity risk	47
Provision of security	48
Contingent liabilities	49
Companies	50
Other disclosures	51
Accounting policies	52

Segment information profit and loss account

		SME and	Eli-				Eli
	Per-	Indus-	min-			Parent	min-
(DKKm)	sonal	trial		ated Non-life	Life	etc.	ated	Group
2010
Non-life insurance Gross premiums earned Technical interest*	4,720 30	3,849 28	(21) (0)	8,548 58				8,548 58
Claims incurred Expenses Net reinsurance	(3,585) (708) 12	(2,892) (613) (217)	22 2 0	(6,456) (1,320) (204)			12 22	(6,444) (1,298) (204)
Technical profit on non-life insurance	470	154	3	626			34	660
Life insurance Gross premiums written Allocated investment return Benefits and change in provisions Expenses Net reinsurance					3,395 2,233 (5,113) (306) 0		5	3,395 2,233 (5,113) (302) 0
Technical profit on life insurance					209		5	214
Total investment return Pension return tax Transferred to technical result				807 (362)	2,711 (344) (2,233)	71	17	3,607 (344) (2,595)
Investment return				445	134	71	17	668
Other items				20	41	(41)	(56)	(36)
Pre-tax profit Taxation Profit for the year				1,092	384	31	0	1,506 (338) 1,168
2011
Non-life insurance Gross premiums earned Technical interest* Claims incurred Expenses Net reinsurance	4,756 33 (3,762) (753) 226	3,934 31 (3,034) (614) 86	(22) 0 23 2 (0)	8,668 65 (6,773) (1,365) 312			14 24	8,668 65 (6,759) (1,340) 312
Technical profit on non-life insurance	501	403	4	907			38	945
Life insurance Gross premiums written Allocated investment return Benefits and change in provisions Expenses Net reinsurance Technical profit on life insurance					3,303 579 (3,536) (314) 1 33		5 5	3,303 579 (3,536) (308) 1 38
Total investment return Pension return tax Transferred to technical result				511 (388)	825 (138) (579)	111	16	1,463 (138) (966)
Investment return				123	109	111	16	359
Other items				55	46	(34)	(60)	7
Pre-tax profit Taxation Profit for the year				1,086	187	76	0	1,349 (326) 1,023
Amortisations:
2010 2011	82 88	65 71		147 160	0 0	0 0		147 160

* After discounting DKK 323m (2010: DKK 304m)

Segment information balance sheet

			Parent	Elimin-
(DKKm)	Non-life	Life	etc.	ated	Group
2010
Intangible assets	768	0	0		768
Tangible assets	895	5	5		905
Investment properties	412	3,487	146		4,046
Loans to affiliated companies	300	0	0	(300)	0
Shares in associated companies	64	324	0		388
Loans to associated companies	0	762	0		762
Other financial investment assets	15,246	29,703	2		44,951
Investment assets related to unit-linked contracts	0	3,264	0		3,264
Reinsurers' share of provisions	732	36	0		768
Amounts due from affiliated companies	468	5	28	(502)	0
Other assets	949	674	67		1,690
Total assets	19,835	38,262	247	(802)	57,542
Subordinated loan capital	348	300	404	(300)	752
Total provisions for insurance and investment contracts	15,139	31,166	0		46,305
Amounts due to affiliated companies	8	338	155	(502)	0
Other liabilities	2,589	3,248	97		5,933
Total liabilities	18,083	35,052	656	(802)	52,990
Purchase of tangible and intangible assets	173	3	1		177
Results from associated companies	8	52	0		59
2011
Intangible assets	703	0	0		703
Tangible assets	930	9	4		943
Investment properties	428	3,522	155		4,104
Loans to affiliated companies	300	0	0	(300)	0
Shares in associated companies	53	332	0		385
Loans to associated companies	0	707	0		707
Other financial investment assets	18,050	29,988	1		48,039
Investment assets related to unit-linked contracts	0	3,283	0		3,283
Reinsurers' share of provisions	1,146	38	0		1,184
Amounts due from affiliated companies	3,040	4	18	(3,062)	0
Other assets	955	703	7		1,665
Total assets	25,606	38,585	185	(3,362)	61,013
Subordinated loan capital	746	300	404	(300)	1,150
Total provisions for insurance and investment contracts	16,228	30,618	0		46,846
Amounts due to affiliated companies	(23)	2,374	711	(3,062)	0
Other liabilities	4,429	3,901	119		8,449
Total liabilities	21,380	37,193	1,234	(3,362)	56,446
Purchase of tangible and intangible assets	141	6	0		148
Results from associated companies	4	25	0		29

Technical provisions, net of reinsurance, relating to illness / accident insurance administered by life insurance, and assets and other liabilities allocated to this portfolio are included in non-life insurance.

(DKKm)	2010	2011
Note 1. Gross premiums earned - non-life
Gross premiums written	8,661	8,734
Change in gross provisions for unearned premiums	(39)	(26)
Gross premiums earned	8,622	8,709
Gross premiums earned, direct business, by location of the risk:
Denmark	8,616	8,703
Other EU-countries	5	4
Other countries	1	1
	8,622	8,709
Note 2. Technical interest, net of reinsurance - non-life insurance
Calculated interest	362	388
Discounting (annual amortisation) of technical provisions and reinsurers' share	(304)	(323)
Technical interest, net of reinsurance	58	65
Note 3. Claims incurred, net of reinsurance - non-life insurance
Run-off profit:
Gross business	258	221
Reinsurance ceded Run-off profit, net of reinsurance	(54) 204	(73) 148
Run-off profit is explained in the report.
Claims incurred include revaluation of inflation swaps hedging
the inflation risk in workers' compensation and illness / accident insurance	(44)	103
Note 4. Technical result - non-life
Gross premiums written	8,661	8,734
Gross premiums earned	8,622	8,709
Gross claims incurred	(6,444)	(6,759)
Bonuses and rebates	(74)	(41)
Gross operating expenses	(1,298)	(1,340)
Net reinsurance	(204)	312
Technical interest, net of reinsurance	58	65
Technical profit	660	945
Gross loss ratio (%)	75.5	78.2
Combined ratio (%)	93.3	90.3
Run-off profits	204	148
Claims provisions, net of reinsurance	11,697	12,382
Number of claims incurred ('000)	422	434
Average value of claim (DKK '000) Annual frequency of claims	16 115	16 120
The annual frequency of claims has been calculated as a per thousand value.

The loss ratio and the combined ratio have been calculated before elimination of internal rent.

Technical profit / (loss) analysed by industry is disclosed on the next page.

Note 4. Technical result - non-life - continued

	2010	2011	2010	2011	2010	2011
						Workers'
	Illness and accident			Health insurance		compensation
Gross premiums written	1,176	1,142	147	146	748	741
Gross premiums earned	1,176	1,137	146	139	765	758
Gross claims incurred	(788)	(785)	(92)	(92)	(648)	(515)
Bonuses and rebates	(38)	(4)	(10)	(6)	(6)	0
Gross operating expenses	(136)	(152)	(9)	(11)	(118)	(96)
Net reinsurance	(13)	2	0	0	(10)	(10)
Technical interest, net of reinsurance	7	8	0	0	7	7
Technical profit / (loss)	207	207	36	30	(11)	145
Gross loss ratio (%)	69.4	69.4	67.1	69.1	85.6	68.1
Combined ratio (%)	82.7	82.8	74.0	77.2	102.7	82.2
Run-off profits / (losses), net of reinsurance	75	10	7	4	(15)	130
Claims provisions, net of reinsurance	2,432	2,752	49	48	5,370	5,845
Number of claims incurred ('000)	21	21	15	15	11	11
Average value of claim (DKK '000)	41	38	7	7	60	60
Annual frequency of claims	22	23	679	644	181	208
		Motor third-party		Motor		Fire and property
		liability		own damage		Personal
Gross premiums written	850	819	1,501	1,474	1,764	1,837
Gross premiums earned	857	828	1,502	1,483	1,715	1,809
Gross claims incurred	(682)	(736)	(961)	(852)	(1,465)	(1,758)
Bonuses and rebates	(2)	(2)	(4)	(3)	(3)	(3)
Gross operating expenses	(118)	(148)	(222)	(202)	(276)	(267)
Net reinsurance	(1)	(4)	(6)	(8)	36	246
Technical interest, net of reinsurance	6	6	10	11	13	14
Technical profit / (loss)	59	(56)	319	428	21	41
Gross loss ratio (%)	80.0	89.3	64.3	57.7	85.7	97.6
Combined ratio (%)	94.1	108.0	79.8	72.2	100.0	99.0
Run-off profits / (losses), net of reinsurance	74	(49)	(17)	2	30	8
Claims provisions, net of reinsurance	1,748	1,697	166	155	587	597
Number of claims incurred ('000)	27	26	93	89	116	132
Average value of claim (DKK '000)	28	26	10	10	13	14
Annual frequency of claims	47	46	194	188	166	195
		Fire and property
		SME		Liability		Other insurance
Gross premiums written	1,638	1,712	321	338	516	524
Gross premiums earned	1,642	1,694	321	336	499	526
Gross claims incurred	(1,188)	(1,423)	(259)	(262)	(361)	(336)
Bonuses and rebates	(8)	(7)	(1)	(1)	(1)	(15)
Gross operating expenses	(301)	(314)	(55)	(59)	(63)	(93)
Net reinsurance	(189)	90	(8)	6	(14)	(10)
Technical interest, net of reinsurance	9	9	2	2	4	7
Technical profit / (loss)	(35)	49	1	22	63	79
Gross loss ratio (%)	72.9	84.5	81.1	78.5	72.6	65.6
Combined ratio (%)	103.1	98.2	100.9	94.6	88.1	85.8
Run-off profits / (losses), net of reinsurance	36	45	(9)	(18)	22	16
Claims provisions, net of reinsurance	606	574	531	517	209	197
Number of claims incurred ('000)	30	39	7	8	101	92
Average value of claim (DKK '000)	42	39	36	30	4	4
Annual frequency of claims	167	225	86	94	162	146

(DKKm)	2010	2011
Note 5. Gross premiums written - life insurance
Individual policies	393	377
Policies which are part of a tenure	1,766	1,526
Group life	413	409
Regular premiums	2,572	2,312
Individual policies	98	148
Policies which are part of a tenure	724	843
Single premiums	822	991
Gross premiums	3,395	3,303
Gross premiums written, direct business, by the policyholders' location:
Denmark	3,361	3,272
Other EU-countries	27	25
Other countries	7	5
	3,395	3,303
Proportion of gross premiums represented by premiums related to
unit-linked contracts not eligible for bonus	887	1,188
Investment risk is taken by the policyholder.
All other gross premiums relate to bonus eligible insurance contracts.
Number of policyholders at 31 December ('000):
Individual policies	61	56
Policies which are part of a tenure	99	86
Group life	193	182
Note 6. Claims and benefits paid - life insurance
Claims payable on death	124	135
Claims payable on maturity	245	256
Pension and annuity payments	538	560
Surrenders	1,753	2,543
Bonuses paid in cash	205	208
Claims and benefits paid	2,866	3,702
Note 7. Change in life insurance provisions
Guaranteed benefits	2,804	3,632
Bonus potential on future premiums	(1,468)	(2,113)
Bonus potential on paid-up benefits	(436)	(1,954)
Change in life insurance provisions	900	(435)
Note 8. Income from investment properties
Rental income	279	264
Operating expenses from properties rented out	(35)	(40)
Operating expenses from properties not rented out	(4)	(5)
Gross profit	241	219
Administrative expenses	(11)	(11)

Income from investment properties 229 209

(DKKm)	2010	2011
Note 9. Revaluations
Held for trading: Shares	1,061	(678)
Unit trusts	3	0
Bonds	840	516
Derivatives	(622)	562
Total held for trading	1,281	400
Designated at fair value: Deposits with credit institutions	2	2
Investment assets related to unit-linked contracts:
Shares Unit trusts	257 113	(261) (59)
Bonds	67	(39)
Derivatives	(54)	(6)
Total designated at fair value	385	(363)
Revaluations of financial assets and liabilities at fair value through
profit and loss account	1,666	37
Of which revaluation of inflation swaps transferred to claims incurred	44	(103)
Investment properties	(3)	31
Provisions for unearned premiums	(2)	(2)
Provisions for claims and benefits	(231)	(654)
Reinsurers' share	2	12
Liquid funds	(6)	1
Other	62	(3)
Revaluations	1,532	(683)
Note 10. Pension return tax
Percentage of return exempt from ta x	2.6	2.3
Note 11. Other income
Gain on sale of workers' compensation portfolio	0	32
Other	11	15
Other income	11	47
Note 12. Other expenses
Holding expenses	32	32
Other	15	8
Other expenses	47	40
Note 13. Taxation
Current tax	435	288
Change in deferred tax	(134)	33
Prior year adjustment	25	(4)
Tax in foreign companies	8	5
Tax for the year	335	323
Current tax taken to shareholders' equity	3	3
Taxation	338	326

(DKKm)	2010	2011
Note 13. Taxation - continued
Calculated tax on profit for the year (25%)	376	337
Adjusted for the tax effect of:
Returns on shares etc. not liable to tax	(44)	(3)
Non-deductible expenses / income not liable to tax	0	( 5)
Prior year adjustment	5	4) (
	338	326
Effective rate of taxation	22.5	24.2
Note 14. Profit per share
Profit for the year	1,168	1,023
Average number of shares ('000)	15,131	13,741
Diluting impact of options ('000)	28	5
Average number of shares, diluted ('000)	15,159	13,746
Profit per share, DKK	77.2	74.4

Profit per share, diluted DKK 77.0 74.4

Note 15. Intangible assets

2010	Goodwill	software	Completed IT developm't under con projects	Developm't projects struction	Total
Cost / valuation at 1 January	453	115	290	62	920
Purchased	0	41	0	75	116
Transferred	0	0	21	(21)	0
Cost / valuation at 31 December	453	156	311	116	1,037
Impairment and amortisation at 1 January	(12)	(99)	(80)	0	(191)
Amortisation for the year	0	(18)	(60)	0	(78)
Impairment and amortisation at 31 December	(12)	(117)	(140)	0	(269)
Intangible assets 2010	441	40	171	116	768
2011
Cost / valuation at 1 January	453	156	311	116	1,037
Purchased	0	12	0	21	33
Transferred	0	0	105	(105)	0
Sold	(12)	0	0	0	(12)
Cost / valuation at 31 December	441	168	416	32	1,057
Impairment and amortisation at 1 January	(12)	(117)	(140)	0	(269)
Amortisation for the year	0	(20)	(78)	0	(98)
Sold during the year	12	0	0	0	12
Impairment and amortisation at 31 December	0	(136)	(218)	0	(355)
Intangible assets 2011	441	31	198	32	703

Completed development projects included the Group's new claims system. Amortisation of intangible assets is primarily included in claims incurred and operating expenses.

Goodwill and development projects under construction are subjected to an impairment test at the end of the financial year. The discounted value of future cash flows is compared with its carrying value. The future cash flows are based on three years' expected technical result and a terminal value of the segments to which goodwill and development projects under constructions relate. The pre-tax discount rate used is 12% (2010: 12%) corresponding to 9% (2010: 9%) post-tax. Goodwill relates to the personal segment.

(DKKm)

Note 16. Tangible assets

	Machinery	Owner-
	& equip-	occupied
2010	ment	properties	Total
Cost / revaluation at 1 January	542	739	1,282
Additions, including improvements	43	18	61
Disposals	(28)	0	(28)
Revaluations taken to shareholders' equity	0	1	1
Revaluations recorded in the profit and loss account	0	(1)	(1)
Cost / revaluation at 31 December	557	757	1,314
Impairment and amortisation at 1 January	(365)	0	(365)
Amortisation for the year	(68)	(1)	(69)
Transferred on revaluation	0	1	1
Reversal of total impairment and amortisation of assets
sold or withdrawn from operations during the year	23	0	23
Impairment and amortisation at 31 December	(409)	0	(409)
Tangible assets 2010	148	757	905
2011
Cost / revaluation at 1 January	557	757	1,314
Additions, including improvements	54	61	115
Disposals	(24)	0	(24)
Revaluations taken to shareholders' equity	0	1	1
Revaluations recorded in the profit and loss account	0	(1)	(1)
Cost / revaluation at 31 December	587	818	1,404
Impairment and amortisation at 1 January	(409)	0	(409)
Amortisation for the year	(60)	(1)	(61)
Transferred on revaluation	0	1	1
Reversal of total impairment and amortisation of assets
sold or withdrawn from operations during the year Impairment and amortisation at 31 December	8 (461)	0 0	8 (461)
Tangible assets 2011	126	818	943
		2010	2011
The valuation of the owner-occupied properties has been based on a required
average return of:		5.7%	5.3%
Cost of revalued owner-occupied properties		635	696
Machinery and equipment includes assets under finance leases of		11	7
Note 17. Investment properties
Fair value at 1 January		4,086	4,046
Additions - acquistions		0	1 0
Additions - improvements		0	1 9
Disposals		(38)	(1)
Revaluation to fair value		(3)	31
Investment properties		4,046	4,104
Non-residential		3,160	3,195
Residential and part residential		886 4,046	909 4,104
The valuation of the properties has been based on a required average return of:
Non-residential		6.1%	6.0%
Residential and part residential		4.6%	4.6%

(DKKm)					2010	2011
Note 18. Shares in associated companies
Book value at 1 January					339	388
Disposals					0	( 4)
Share of profit / (loss)					59	29
Dividends received					(10)	(28)
Shares in associated companies					388	385
		Share
	Percentage	holders'		Liabi
2010	share	equity	Assets	lities	Income	Result
Bornholms Brandforsikring A/S, Rønne	27	90	188	98	96	17
Captives, Luxembourg	10-68	75	367	292	168	4
EjendomsSelskabet af Januar 2002 A/S,
Copenhagen	25	531	845	315	30	32
Dantop Ejendomme ApS, Copenhagen	50	276	281	6	9	12
Det Tyske Ejendomsselskab P/S, Ballerup	50	107	1,484	1,377	-	75
Total		1,079	3,166	2,087	304	141
2011
Bornholms Brandforsikring A/S, Rønne	27	108	208	100	98	18
Captives, Luxembourg	10-68	86	404	318	165	11
EjendomsSelskabet af Januar 2002 A/S,
Copenhagen	25	525	716	191	27	(6)
Dantop Ejendomme ApS, Copenhagen	50	233	238	6	8	(8)

In spite of a shareholding of up to 68% the Group has a substantial but not a controlling influence.

Bornholms Brandforsikring A/S has been recognised on the basis of the most recent financial information at 30 September. The accounting information is according to the companies' most recent annual reports.

Det Tyske Ejendomsselskab P/S, Ballerup 50 168 1,494 1,326 - 61 Total 1,120 3,061 1,941 298 76

Note 19. Loans to associated companies

Average effective interest rate	0.3%	1.1%
Note 20. Investment assets related to unit-linked contracts
Shares	1,649	1,515
Unit trusts	774	691
Bonds	838	1,077
Derivatives	4	1
Investment assets related to unit-linked contracts	3,264	3,283
The return on the above assets and derivatives is allocated to customers.

Note 21. Reinsurers' share of the provisions for unearned premiums

Reinsurers' share at 1 January	73	65
Reinsurance ceded	644	703
Reinsurance earned	(651)	(700)
Reinsurers' share of the provisions for unearned premiums at 31 December	65	68

(DKKm)		2010	2011
Note 22. Reinsurers' share of the provisions for claims
Non-life insurance
Reinsurers' share at 1 January		551	667
Reimbursement of claims relating to previous years Change in expected income relating to previous years		(163) (54)	(246) (73)
Reimbursement of claims relating to this year Expected income relating to this year		(98) 421	(309) 1,018
Discounting effect (annual amortisation) Revaluation		7 2	10 12
Reinsurers' share of the provisions for claims at 31 December		667	1,079
Note 23. Deferred tax	2009	2010	2011
Bonds etc.	(170)	(0)	0
Properties	(57)	(62)	(63)
Machinery and equipment	(38)	(35)	(41)
Liabilities provided	12	11	10
Provisions	(34)	0	(17)
Restriction on deductability	98	11	0
Deferred pension return tax	(28)	0	0
Other	8	1	3
Deferred tax	(209)	(75)	(109)
Recognised as:
Deferred tax assets	40	19	12
Deferred tax liabilities	(249)	(94)	(121)
	(209)	(75)	(109)
Changes relating to the year		134	(33)
Non-capitalised balance of equity losses that can be carried forward		408	411

Note 24. Subordinated loan capital

	Hybrid core capital	Subordinated loan capital	Subordinated loan capital
Borrower	Topdanmark A/S		Topdanmark Forsikring A/S
Principal	EUR 55m	DKK 350m	DKK 400m
Date of issue Maturity If permitted by the DFSA, the borrower can give notice of	July 2007 Bullet	June 2010 18 June 2018	June 2011 24 June 2019
termination from Interest rate Subsequently	15 Sep 2017 EURIBOR 3 months+1.90% to 2017 EURIBOR 3 months+2.90%	18 June 2015 7.150% to 2015 Cibor 3 months+625bp	24 June 2016 6.633% to 2016 Cibor 3 months+525bp

In 2010 Topdanmark Forsikring A/S redeemed a subordinated loan of DKK 250m.

	2010	2011
Interest charges	27	52
Costs of raising the loan	3	2
Hybrid core capital has been fully included in the parent company's capital base	404	404
Subordinated loan capital of Topdanmark Forsikring A/S has been
included in the Company's capital base at up to 25% of the solvency margin	241	252

(DKKm)			2010	2011
Note 25. Provisions for unearned premiums
Provisions for unearned premiums at 1 January			2,601	2,646
Gross premiums written			8,661	8,734
Premiums earned			(8,622)	(8,709)
Discounting			4	4
Revaluation			2	2
Provisions for unearned premiums at 31 December			2,646	2,678
Note 26. Life insurance provisions
Life insurance provisions at 1 January			25,791	26,692
Accumulated revaluation at 1 January			(392)	(870)
Retrospective provisions at 1 January			25,399	25,821
Gross premiums written			2,508	2,115
Accrued interest			739	775
Claims and benefits			(2,623)	(3,110)
Expense loading inclusive of expense bonus			(204)	(184)
Risk gain after allocating policyholders' risk bonus			(58)	(48)
Other			60	(8)
Retrospective provisions at 31 December			25,821	25,360
Accumulated revaluation at 31 December			870	897
Life insurance provisions at 31 December			26,692	26,257
Guaranteed benefits			16,601	20,233
Bonus potential on future premiums			5,831	3,718
Bonus potential on paid-up benefits Life insurance provisions			4,260 26,692	2,306 26,257
Reduction in bonus potential on paid-up benefits when allocating "the insurance technical result before bonus contribution" in Topdanmark Livsforsikring A/S			0	398
Increase in guaranteed benefits as life insurance provisions must not be lower than the guaranteed surrender value			72	3
The increases have been calculated excluding surrender probabilities.
Portfolios analysed by capitalisation rates		Guaran		Bonus potential on
	Capitalisation	teed	future	paid-up
2010	rate	benefits	premiums	benefits
Topdanmark Livsforsikring A/S:
Interest rate group 1	2%	4,082	5,169	3,276
Interest rate group 2	3%	3,208	448	843
Outside of contribution		99	0	13
		7,388	5,616	4,132
Topdanmark Livsforsikring V A/S:
Interest rate group 3	[1%-2%]	499	5	20
Interest rate group 4	]2%-3%]	481	15	32
Interest rate group 5	]3%-4%]	1,083	53	40
Interest rate group 6	]4%-5%[	5,996	139	34
Interest rate group 7	5%	293	2	2
Interest rate group 8	above 5%	48 8,400	0 215	0 128
Group Life		240	0	0
U74-life annuities		531	0	0
Other Total 2010		43 16,601	0 5,831	0 4,260

(DKKm)

Note 26. Life insurance provisions - continued

Portfolios analysed by capitalisation rates		Guaran		Bonus potential on
2011	Capitalisation rate	teed benefits	future premiums	paid-up benefits
Topdanmark Livsforsikring A/S:
Interest rate group 1	2%	7,079	3,253	1,836
Interest rate group 2	3%	3,518	304	380
Outside of contribution		102	1	13
		10,698	3,558	2,228
Topdanmark Livsforsikring V A/S:
Interest rate group 3	[1%-2%]	625	3	17
Interest rate group 4	]2%-3%]	473	10	19
Interest rate group 5	]3%-4%]	1,171	33	14
Interest rate group 6	]4%-5%[	6,175	112	26
Interest rate group 7	5%	253	2	2
Interest rate group 8	above 5%	41	0	0
		8,737	160	78
Group Life		277	0	0
U74-life annuities		465	0	0
Other		56	0	0
Total 2011		20,233	3,718	2,306

The provisions include an allowance for risk corresponding to the percentage which would be demanded by an arms-length purchaser of the company's portfolio of life insurance policies to compensate for the risk of fluctuations in the expected payments. The overall allowance for risk is an estimate calculated as the interest rate used less 5%.

Note 27. Provisions for claims	2010	2011
Non-life insurance:
Gross
Provisions at 1 January	11,777	12,364
Claims paid relating to previous years	(3,015)	(3,306)
Change in expected claims payments relating to previous years	(258)	(221)
Claims paid relating to this year Expected claims payments relating to this year	(3,336) 6,702	(3,444) 6,980
Inflation swaps	(44)	103
Discounting (annual amortisation) Revaluation	307 231	329 654
Provisions at 31 December	12,364	13,461
Net of reinsurance
Provisions at 1 January	11,226	11,697
Claims paid relating to previous years	(2,852)	(3,060)
Change in expected claims payments relating to previous years	(204)	(148)
Claims paid relating to this year	(3,239)	(3,135)
Expected claims payments relating to this year	6,281	5,962
Inflation swaps	(44)	103
Discounting (annual amortisation)	300	320
Revaluation	229	643
Non-life insurance, net of reinsurance, at 31 December	11,697	12,382
Life insurance	95	84
Provisions for claims, net of reinsurance	11,792	12,467
Provisions for workers' compensation insurance, net of reinsurance	5,370	5,845
Average period of settlement	7 years	7 years
Illness / accident insurance, net of reinsurance, administered by
the life insurance business	1,495	1,791
Average period of settlement	14 years	14 years

(DKKm)

Note 27. Provisions for claims - continued

Claims liabilities analysed by claims year

Gross	2011	2010	2009	2008	2007	2006	2005	2004	2003	2002	2001	Total
End of year	7,203	6,814	6,730	6,559	6,400	6,122	7,079	5,888	4,831	4,769	4,436
1 year later		6,834	6,526	6,753	6,426	5,934	6,776	5,677	4,946	4,798	4,381
2 years later			6,585	6,769	6,473	5,778	6,612	5,574	4,906	4,870	4,407
3 years later				6,887	6,492	5,682	6,538	5,611	4,982	5,064	4,491
4 years later					6,576	5,718	6,465	5,652	4,987	5,144	4,637
5 years later						5,737	6,499	5,638	4,994	5,154	4,687
6 years later							6,476	5,656	4,933	5,149	4,664
7 years later								5,661	4,986	5,153	4,686
8 years later									5,029	5,170	4,686
9 years later										5,197	4,715
10 years later											4,840	67,026
Less paid incl. inflation swaps	3,434	4,907	5,137	5,358	5,412	5,028	5,949	5,148	4,692	4,951	4,607	54,622
Provisions before discounting
at 31 December	3,769	1,927	1,448	1,530	1,164	710	527	512	337	246	232	12,403
Discounting	(55)	(31)	(18)	(10)	(6)	(2)	(2)	(1)	(0)	(0)	(0)	(126)
	3,714	1,897	1,430	1,520	1,158	707	525	511	337	246	232	12,278
Provisions relating to previous
years at 31 December												1,183
Gross provisions at 31 December
2011 - non-life insurance												13,461
Net of reinsurance
End of year	6,164	6,385	6,389	6,227	6,073	5,813	5,733	5,316	4,508	4,326	3,957
1 year later		6,433	6,191	6,429	6,096	5,651	5,455	5,057	4,611	4,362	3,901
2 years later			6,286	6,467	6,148	5,505	5,321	4,936	4,561	4,426	3,943
3 years later				6,594	6,168	5,407	5,252	4,949	4,634	4,587	4,025
4 years later					6,249	5,451	5,192	4,983	4,638	4,659	4,176
5 years later						5,470	5,226	4,962	4,643	4,662	4,227
6 years later							5,213	4,981	4,584	4,655	4,205
7 years later								4,986	4,635	4,657	4,225
8 years later									4,674	4,687	4,223
9 years later										4,713	4,252
10 years later											4,375	61,158
Less paid incl. inflation swaps	3,125	4,642	4,889	5,108	5,105	4,776	4,702	4,529	4,342	4,470	4,148	49,837
Provisions before discounting
at 31 December	3,038	1,790	1,397	1,486	1,144	694	511	457	333	244	227	11,321
Discounting	(48)	(26)	(17)	(9)	(5)	(2)	(2)	(1)	(0)	(0)	(0)	(111)
	2,991	1,765	1,380	1,477	1,139	691	509	456	332	243	227	11,210
Provisions relating to previous
years at 31 December												1,172
Gross provisions at 31 December
2011 - non-life insurance												12,382
Reconciliation:
Provisions for claims												13,545
Less amount relating to life insurance												(84)
Less reinsurers' share of provisions												(1,079)
Provisions, net of reinsurance, at 31 December 2011 - non-life insurance												12,382
Composition of expected
payments, net of reinsurance:
Original payment	6,062	6,379	6,361	6,148	6,068	5,807	5,714	5,264	4,496	4,303	3,949	60,552
Loss / (gain) on settlement		(36)	(249)	115	(147)	(578)	(684)	(512)	(108)	208	97	(1,894)
Claims handling etc.
at 1 January 2004									127	37	27	19 1
Discounting / revaluation
workers' compensation
insurance and illness / accident	102	89	174	330	328	241	184	234	160	165	302	2,309
	6,164	6,433	6,286	6,594	6,249	5,470	5,213	4,986	4,674	4,713	4,375	61,158

(DKKm)

Note 27. Provisions for claims - continued

The table shows the historical development in the estimated final liability (the sum of claims payments and provisions) for each claims year from 2001. Significant proportions of the liabilities shown have been calculated without discounting which to a great extent eliminates changes in discounting rates and methods after the change to IFRS. However, workers' compensation and illness / accident administered by the life insurance business are included at discounted values.

The claims handling expenses for the claims years 2001-2003 have been included on an on-going basis at the amounts provided in the opening balance sheet at 1 January 2004 on the change to IFRS.

Note 28. Collective bonus potential		2010	2011
	Capitalisation
Topdanmark Livsforsikring A/S:	rate
Interest rate group 1	2%	97	0
Interest rate group 2	3%	0	0
Risk groups		14	24
Cost groups		6	0
		117	24
Topdanmark Livsforsikring V A/S:
Interest rate group 3	[1%-2%]	33	32
Interest rate group 4	]2%-3%]	33	21
Interest rate group 5	]3%-4%]	70	76
Interest rate group 6	]4%-5%[	262	307
Interest rate group 7	5%	8	2 5
Interest rate group 8	above 5%	1	0
Risk groups		23	49
Cost groups		7	6
		437	516
Collective bonus potential		554	540

Note 29. Provisions for unit-linked contracts

	Insurance	Investment
2010	contracts	contracts	Total
Gross provisions at 1 January	2,128	693	2,821
Retrospective provisions at 1 January	2,128	693	2,821
Gross premiums	887	123	1,010
Return	279	107	385
Claims and benefits	(253)	(86)	(338)
Expense loading inclusive of expense bonus	(32)	(8)	(39)
Risk gain after addition of risk bonus	1	0	1
Premiums waived transferred to life insurance provisions	(14)	0	(14)
Retrospective provisions at 31 December	2,997	829	3,826
Provisions for unit-linked contracts 2010	2,997	829	3,826
2011
Gross provisions at 1 January	2,997	829	3,826
Retrospective provisions at 1 January	2,997	829	3,826
Gross premiums	1,188	59	1,247
Return	(221)	(38)	(259)
Claims and benefits	(581)	(442)	(1,022)
Expense loading inclusive of expense bonus	(35)	(7)	(42)
Risk gain after addition of risk bonus	5	0	5
Premiums waived transferred to life insurance provisions	(14)	0	(14)
Other	(3)	0	(3)
Retrospective provisions at 31 December	3,335	402	3,737
Provisions for unit-linked contracts 2011	3,335	402	3,737
Number of customers with investment contracts		3,660	2,810
The contracts written do not have guarantees.

(DKKm)	2010	2011
Note 30. Pensions and similar commitments
Retirement benefits	18	13
Anniversaries	21	23
Other pension commitments	3	3
Pensions and similar commitments	42	39
Other pension commitments cover former senior executives and their widows.

Note 31. Profit on life insurance

			2010			2011
	Life I	Life V	Total	Life I	Life V	Total
Insurance technical result before bonus	1,181	441	1,622	(223)	287	64
Allocated to:
Policyholders	737	339	1,077	(555)	176	(379)
IIIness / accident	146		146	264		264
Shareholders' equity	298	101	399	68	111	179
Composition of result:
Investment return	40	50	91	63	41	105
Risk allowance	85	51	136	117	61	178
Profit on policies outside of contribution	-	-	-	6	11	17
Result of acquisition costs	(6)	(0)	(6)	(4)	(0)	(4)
Transferred to / from shadow account	144	0	144	(112)	(2)	(114)
Profit / (loss) Topdanmark Link	33		33	(5)		(5)
Profit Nykredit Livsforsikring	3		3	2		2
Share of insurance technical result
taken to shareholders' equity	298	101	399	68	111	179
Interest rate result Life Holding			1			6
Other			(17)			2
Profit on life insurance			384			187
			2010			2011
	Life I	Life V	Total	Life I	Life V	Total
Shadow account at 1 January	137	0	137	0	0	0
Return	7	0	7	0	0	0
Transferred / used	(144)	0	(144)	112	2	114
Shadow account at 31 December	0	0	0	112	2	114
Shadow account by interest rate, risk and cost groups:
Interest rate group 1				76	-	76
Interest rate group 2				26	-	26
Risk groups				5	2	7
Cost groups				4	0	4

The allocation of the insurance technical result before bonus to policyholders is in accordance with the order on contribution principle.

Total shadow account 0 0 0 112 2 114

(DKKm)	2010	2011
Note 32. Expenses
Expenses by their nature:
Commission - non-life insurance	249	226
Commission - life insurance	61	54
Staff costs (excl. commission)	1,555	1,622
Other staff costs	111	111
Premises costs	173	164
IT operations and maintenance	132	139
Impairment and amortisation	147	160
Other expenses Total expenses	112 2,541	111 2,587
These expenses have been disclosed in:
Non-life insurance:
Acquisition costs	748	797
Administrative expenses Claims paid (claims handling and assessment)	550 803	543 807
	2,101	2,148
Life insurance:
Acquisition costs	120	108
Administrative expenses	181	201
	302	308
Income from investment properties (administration and operation)	50	55
Expenses on investment business	41	35
Other expenses	47	40
Total expenses	2,541	2,587
Note 33. Auditors' fee
Fee to the auditors elected by the Annual General Meeting
Deloitte:
Fee for statutory audit of the annual accounts	5	4
Fee for other assurance engagements	0	0
Fee for services, other than audit work	0	1
	5	6
The Group has an internal audit department which carries out most of the audit work.
Note 34. Staff costs
Salaries	1,271	1,309
Pensions	210	222
Social security costs	36	40
Payroll tax Share options	137 12	165 6
Employee shares	45	44
	1,710	1,786
Average number of full-time employees	2,472	2,533

(DKKm)

Note 34. Staff costs - continued

Share options

has been fixed at 110% of the market price on 31 December the prior year. The options can be exercised 3-5 years subsequent to the granting. Topdanmark's share option scheme is for its Board of Management and senior executives. The strike price

The scheme is settled by shares (equity instruments).

The table below is categorised by the option holders' current standing.

				Board of	Senior
		Strike	Board of	Manage-	execu
Total number of options ('000)		price	Directors	ment	tives	Resigned	Total
2010
Outstanding at 1 January			18	133	424	192	767
Granted		776	0	37	113	0	150
Transferred			0	0	(29)	29	0
Exercised			(18)	(15)	(79)	(69)	(180)
	Outstanding at 31 December 2010		0	155	429	152	737
	Average strike price at 31 December 2010			787	805	789
2011
Outstanding at 1 January			0	155	429	152	737
Granted		808	0	13	50	0	63
Transferred			0	0	(4)	4	0
Exercised			0	(31)	(66)	(54)	(151)
Lost			0	0	0	(3)	(3)
	Outstanding at 31 December 2011		0	137	409	100	646
	Average strike price at 31 December 2011			830	832	888
Per granting:	Exercise period
2007	- March 2012	1,033	0	26	80	41	148
2008	March 2011 - March 2013	802	0	28	77	33	138
2009	March 2012 - March 2014	762	0	33	96	20	149
2010	March 2013 - March 2015	776	0	37	106	5	149
2011	March 2014 - March 2016	808	0	13	49	0	62
	Outstanding at 31 December 2011		0	137	409	100	646
	Average price exercised option 2010	518	608	478	503	522
	Average price exercised option 2011	622	0	608	641	608
Fair value of granting 2010				4	12		16
Fair value of granting 2011				1	6		7
Fair value at 31 December 2010			0	12	31	11	54
Fair value at 31 December 2011			0	18	54	9	81

The fair value of the granting for the year has been calculated using the Black and Scholes model assuming a price of DKK 734.73 (2010: DKK 705.72) per share, an interest rate corresponding to the zero coupon rate based on the swap curve on 31 December the previous year, future volatility of 22% (2010: 22%) p.a., corporate tax rate of 25% (2010: 25%) and a pattern of exercise similar to Topdanmark's previous granting of share options. The volatility has been calculated on the basis of previous years' volatility, which continues to be Management's best estimate of future volatility.

Employee shares

In 2011 Topdanmark issued 68,501 (2010: 83,798) employee shares offset by a reduction in their respective cash salaries. The costs have been calculated to be DKK 46m (2010: DKK 46m) in accordance with IFRS 2.

Severance pa y

Severance pay is described in Management's Review in "Remunerations structure".

(DKKm)		2010	2011
Note 35. Related parties
The Group has no related parties who hold a controlling influence.
Related parties with substantial influence comprise the Board of Directors, the Board of Management and their families.
Remuneration of the Board of Directors Directors' fees were DKK 4,275,000 (2010: DKK 4,275,000) of which DKK 225,000 (2010: 225,000) related to Topdanmark Forsikring A/S.
Fees for 2011 (DKK '000):
Michael Pram Rasmussen Anders Knutsen	1,200 725
Charlotte Hougaard	300
Jens Maaløe	300
Annette Sadolin	450
Søren Thorup Sørensen	400
Knud J. Vest	300
Desiree Schultz	217
Trine Zappe	217
Ole Døssing Christensen	83
Per Krogsgaard Mathiesen	83
Total fee paid to nine Board members	4,275
The Board of Directors receive only a fixed remuneration.
Remuneration of the Board of Management
Salaries etc.		11	16
Employee shares		1	1
Share options		4	1
Total remuneration to three members of the Board of Management		16	18

Remuneration paid to the Board of Management for 2011:
Christian Sagild	7.8
Kim Bruhn-Petersen	5.2
Lars Thykier	5.5
	18.6

From 2011, 10% of the fixed salaries etc. paid to the Board of Management is paid as share options. The share option scheme is disclosed in Note 34. The Board of Management receive only a fixed remuneration.

The Group has no unhedged pension commitments.

Significant risk taker

Besides the Board of Management one employee of the Group has significant influence on its risk profile. In accordance with an exemption clause this remuneration is not disclosed.

Shares, bonds and subordinated notes held by the Board of Directors
and Board of Management
Board of Directors
Number of shares	6,251	2,908
Bonds, nominal value DKK '000	254	128
Subordinated notes (subordinated loan capital) Topdanmark Forsikring,
nominal value DKK '000	10,400	19,610
Board of Management
Number of shares	37,691	35,630
Bonds, nominal value DKK '000	1,364	1,364
Subordinated notes (subordinated loan capital) Topdanmark Forsikring,
nominal value DKK '000	-	3,850

(DKKm)	2010	2011
Note 35. Related parties - continued
Associated companies
Premiums ceded	145	146
Commission received	(6)	(6)
Reimbursed claims	(76)	(58)

Trading takes place under normal market conditions.

Shares are disclosed in the balance sheet and specified in the note on shares in associated companies. Balances are disclosed in the balance sheet.

Note 36. Financial assets
Financial assets at fair value where the revaluation is taken to profit and loss account Held for trading:
Shares	6,309	5,593
Bonds	36,833	39,070
Loans guaranteed by mortgages and other loans	13	10
Derivatives	785	1,342
	43,939	46,015
Designated at fair value:
Deposits with credit institutions	1,011	2,025
Investment assets related to unit-linked contracts	3,264	3,283
	4,276	5,308
Total financial assets at fair value where the revaluation
is taken to profit and loss account	48,215	51,323
Loans and receivables at amortised cost
Loans to associated companies	762	707
Amounts due from policyholders	417	379
Amounts due from insurance companies	184	79
Other debtors	101	128
Liquid funds	194	241
Other	67	170
	1,725	1,704
Total financial assets	49,940	53,027

The book value of loans and receivables at amortised cost approximately corresponds to fair value.

(DKKbn)
2010		Inputs based Quoted on observable	Inputs not based on observable
Financial assets recorded at fair value	prices	market data	market data	Total
Held for trading: Non-life insurance:
Shares	0.8	0.3		1.1
Government bonds	0.5			0.5
Mortgage bonds	9.6	2.2		11.9
CDOs		0.6	0.2	0.7
Credits*	0.3	0.2	0.0	0.5
Other		0.1		0.1
Bonds	10.4	3.1	0.2	13.7
Loans guaranteed by mortgages and other loans		0.0		0.0
Derivatives		0.0		0.0
Life insurance:
Shares	4.2	1.0		5.2
Government bonds	0.5	0.0		0.5
Mortgage bonds	14.8	4.3		19.2
CDOs		0.9	0.3	1.2
Credits*	1.1	1.2	0.0	2.2
Other		0.1		0.1
Bonds	16.4	6.5	0.3	23.2
Derivatives		0.8		0.8

(DKKbn)

Note 36. Financial assets - continued

		Inputs based	Inputs not based
2010 Financial assets recorded at fair value	prices	Quoted on observable market data	on observable market data	Total
Designated at fair value:
Non-life insurance:
Deposits with credit institutions		0.4		0.4
Life insurance: Deposits with credit institutions		0.6		0.6
Shares	1.6	0.0	0.0	1.6
Unit trusts	0.8	0.0	0.0	0.8
Bonds	0.4	0.3	0.1	0.8
Derivatives	0.0	0.0	0.0	0.0
Investment assets related to unit-linked contracts Total financial assets at fair value	2.8 34.6	0.4 13.0	0.1 0.6	3.3 48.2
2011
Financial assets recorded at fair value
Held for trading: Non-life insurance:
Shares	0.7	0.3		1.0
Government bonds	1.4	0.0		1.5
Mortgage bonds	9.1	2.2		11.3
CDOs		0.7		0.7
Credits*	0.2	0.2		0.4
Other Bonds	10.7	0.0 3.2	0.0	0.0 13.9
Loans guaranteed by mortgages and other loans Derivatives		0.0 0.0		0.0 0.0
Life insurance:
Shares	3.8	0.8		4.6
Government bonds	1.2	0.2		1.4
Mortgage bonds	15.5	4.1		19.7
CDOs		1.5		1.5
Credits*	1.7	1.0		2.6
Other Bonds	18.4	0.0 6.8	0.0	0.0 25.2
Loans guaranteed by mortgages and other loans Derivatives		0.0 1.3		0.0 1.3
Designated at fair value:
Non-life insurance:
Deposits with credit institutions		0.4		0.4
Life insurance:
Deposits with credit institutions		1.6		1.6
Shares	1.5	0.0		1.5
Unit trusts	0.7	0.0		0.7
Bonds	0.6	0.5		1.1
Derivatives	0.0	0.0		0.0
Investment assets related to unit-linked contracts Total financial assets at fair value	2.8 36.4	0.5 14.9	0.0 0.0	3.3 51.3

*) Assets valued in life insurance by reference to inputs not based on observable market data include an exposure of DKK 0.1bn (2010: DKK 0.2bn) hedged by a total return swap with non-life insurance.

(DKKm)

Note 36. Financial assets - continued

Measurement of fair value

In the years 2008-2010 the Group considered that the markets of structured credit products, including CDOs, could not be defined as being active, according to the definition in IAS 39.

In this light the portfolio of CDOs was valued using valuation methods where the input was based on observable market data such as interest and foreign exchange rates, volatility or comparison with the market prices of corresponding instruments.

In those cases where it was not possible to estimate a value based on observable market data, the value was calculated on the basis of the assumptions which basically are the same for loan and credit bonds whether they are owned directly or as an underlying asset in CDOs (model prices).

From 31 March 2011 market pricing was so strong that it was no longer necessary to record investment assets at model prices and therefore all these investment assets have since been recorded at an observable value.

(DKKbn)	2010	2011
Bonds measured by reference to inputs not based on observable market data
Portfolio at 1 January	1.6	0.6
Gains and losses	0.3	0.0
Transfers to another category	(1.3)	(0.6)
Portfolio at 31 December	0.6	0.0
Gains and losses on bonds included in revaluations held at 31 December	0.0	0.0
(DKKm)
Group companies have agreed to lend equities against security.
Book value of equities loaned	2,014	1,591
Fair value of bonds received as security for the loan	3,097	2,881
Note 37. Financial liabilities
Financial liabilities measured at fair value through profit and loss
Held for trading:
Derivatives	167	537
Designated at fair value:
Amounts due to credit institutions	3,840	5,997
Total financial liabilities measured at fair value through profit and loss	4,007	6,534
Financial liabilities measured at amortised cost
Subordinated loan capital	752	1,150
Deposits with ceding undertakings	90	116
Creditors arising out of direct insurance operations	69	89
Creditors arising out of reinsurance operations	59	61
Bond loans	71	72
Amounts due to associated companies	11	0
Current tax liabilities	5	3 0
Other creditors		952
	1,052
Total financial liabilities measured at amortised cost	2,108	2,471
Total financial liabilities	6,115	9,005

Book value of financial liabilities at amortised cost approximately corresponds to fair value, except for hybrid core capital (DKK 404m) with an assumed value significantly lower than nominal value.

Financial liabilities payable after five years or more: Subordinated loan capital 404 404 Amounts due to credit institutions 6 5

(DKKm)	2010	2011
Note 37. Financial liabilities - continued
Financial liabilities recorded at fair value		Observable inputs
Held for trading:
Derivatives:
Group excl. life	78	101
Life insurance	89	436
Total derivatives	167	537
Designated at fair value:
Amounts due to credit institutions:
Group excl. life	1,413	2,708
Life insurance	2,427	3,289
Total amounts due to credit institutions	3,840	5,997
Total financial liabilities recorded at fair value	4,007	6,534

Note 38. Settlement of assets and liabilities

Except for tangible and intangible assets, investment properties, investments in associated companies and CDOs most other assets are expected to be settled within a year.

It is expected that the following significant liabilities will be settled 12 months or more after the balance sheet date:

Subordinated loan capital	752	1,150
Provisions for unearned premiums	157	174
Guaranteed benefits	14,870	18,121
Bonus potential on future premiums	5,244	3,345
Bonus potential on paid-up benefits	3,830	2,033
Provisions for claims and benefits	9,334	9,564
Collective bonus potential	554	513
Provisions for unit-linked contracts	3,426	3,162
Deferred tax on security funds	348	348
	38,516	38,410

Note 39. Analysis of assets and their return - life insurance

	Book value		Net	Return
		1 January 31 December	investment	(%)*
Land and buildings, directly owned	3,487	3,522	29	5.3
Limited property companies	1,087	1,038	(73)	2.5
Total land and buildings	4,574	4,560	(45)	4.6
Listed Danish shares	1,554	1,208	(26)	(22.4)
Unlisted Danish shares	63	68	(9)	29.4
Listed foreign shares	2,938	2,686	59	(8.0)
Unlisted foreign shares	608	606	(18)	2.4
Total other shares	5,162	4,568	6	(10.5)
Government bonds (Zone A)	520	1,335	899	(2.2)
Mortgage bonds	17,819	18,156	351	4.5
Index-linked bonds	1,328	1,622	128	14.5
Credit bonds investment grade	1,290	1,841	443	3.4
Credit bonds non-investment grade
and emerging market bonds	2,211	2,239	6	11.5
Other bonds	0	8	8	(0.1)
Total bonds	23,168	25,201	1,837	5.0
Other financial investment assets	727	1,541	1,010	0.9
Derivatives to hedge against
the net change in assets and liabilities**	720	1,218	0

(DKKm)

Note 39. Analysis of assets and their return - life insurance - continued

* Annual return as a percentage before pension return and corporation tax.

** Life V has invested in interest rate options - Euro-CMS-floors with a strike rate of 5% - to hedge the guaranteed benefits.

The return percentages on derivatives are calculated as the return on derivatives as a percentage of the size to the exposure of the underlying asset.

The exposure in foreign shares is adjusted by means of derivatives.

After including derivatives the exposure in foreign shares on 31 December 2011 was DKK 3,703m (2010: DKK 3,864m).

Note 40. Exposure information	2010	2011
Non-life insurance
Event	Effect on shareholders' equit	y
0.7-1.0 pp increase in interest rates	(86)	(35)
0.7-1.0 pp decline in interest rates	59	(3)
12% decline in equity prices	(140)	(122)
8% decline in property prices	(94)	(100)
Exchange rate exposure (VaR 99.0%)	(13)	(11)
Loss on counterparties of 8%	(197)	(180)

Life insurance

			Max. effect on bonus potential on benefits on
			paid-up policies	Max. effect on
		Max. effect on collective	before change in bonus poten-	bonus potential used for
2010	Min. effect on	bonus	tial used for	benefits on
Event	capital base	potential	such benefits	paid-up policies
0.7-1.0 pp increase in interest rates	(58)	(183)	1,072	(25)
0.7-1.0 pp decline in interest rates	57	174	(1,143)	0
12% decline in equity prices	(0)	(232)	0	(304)
8% decline in property prices	(51)	(195)	0	(52)
Exchange rate exposure (VaR 99.0%)	(2)	(9)	0	0
Loss on counterparties of 8%	(43)	(232)	0	(52)
10% decline in mortality intensity	(4)	(92)	(7)	0
10% increase in mortality intensity	3	(83)	6	0
10% increase in disability intensity	0	(17)	(7)	0
2011 Event
0.7-1.0 pp increase in interest rates	(127)	(48)	718	(26)
0.7-1.0 pp decline in interest rates	125	40	(910)	(95)
12% decline in equity prices	(7)	(96)	0	(366)
8% decline in property prices	(61)	(77)	0	(157)
Exchange rate exposure (VaR 99.0%)	(3)	(4)	0	(3)
Loss on counterparties of 8%	(86)	(108)	0	(185)
10% decline in mortality intensity	(6)	(83)	(10)	(22)
10% increase in mortality intensity	5	75	11	12
10% increase in disability intensity	0	(16)	(6)	4

(DKKm)

Note 41. Shares analysed by industry and region (%) - life insurance

2011	Denmark	Other Europe	North America	Japan	Other Far East	Other countries	Not analysed	Total
Energy	0	2	4	0	0	0	0	6
Materials	1	3	1	0	0	0	0	4
Industrial	7	2	3	1	0	0	0	13
Consumer durables	1	2	2	1	0	0	0	6
Consumer goods	2	2	4	0	0	0	0	9
Health care	7	3	3	0	0	0	0	13
Financial	6	4	3	0	0	0	0	13
IT	1	1	6	0	1	0	0	9
Tele-communication	1	2	1	0	0	0	0	3
Supply	0	1	0	0	0	0	0	1
Not analysed	2	0	5	0	0	3	14	23
Total	28	21	31	3	1	3	14	100

A list of the shares held by the companies can be ordered from the company.

Note 42. Leasing

Finance lease for mainframe CPU:	Minimum
	lease		Present	Book
2010	payment	Interest	value	liabilities
0-1 years	5	0	5
1-5 years	7	0	7
	12	0	12	11
2011
0-1 years	4	0	4
1-5 years	3	0	3
	7	0	7	7

Operational finance leases:

2010
0-1 years	55	0	54
1-5 years	34	1	33
	89	1	87
2011
0-1 years	58	0	58
1-5 years	10	0	10
	69	0	68

Note 43. Core capital and capital base	2010	2011
Shareholders' equity according to Danish rules *	4,900	4,915
Deferred tax assets	(1)	(0)
Hybrid core capital	404	404
Capital adequacy requirements for insurance companies – 50%	(1,549)	(1,540)
Core capital	3,754	3,779
Capital adequacy requirements for insurance companies – 50%	(1,549)	(1,540)
Capital base	2,205	2,240
Weighted items	2,935	3,689
Core capital as a percentage of weighted items	127.9	102.4
Solvency ratio	75.1	60.7
Solvency requirement (%)	8.0	8.0

* Before provisioning for deferred tax on security funds.

Solvency has been calculated according to the rules for financial services holding companies. See "Solvency" in Management's Review.

(DKKm)			2010	2011
Note 44. Number of shares
Reconciliation of the number of shares ('000)
Shares issued at 1 January Own shares at 1 January Number of shares at 1 January			16,907 (1,411) 15,496	17,087 (2,615) 14,472
Shares bought back Shares issued Shares sold			(1,288) 180 84	(1,360) 140 80
Shares issued at 31 December Own shares at 31 December Number of shares at 31 December			17,087 (2,615) 14,472	14,826 (1,494) 13,332
Note 45. Own shares
	Number of shares '000	value DKKm	Nominal Percentage of share capital	Bought /sold DKKm
Held at 1 January 2010 Bought back in 2010 Sold Held at 31 December 2010	1,411 1,288 (84) 2,615	14 13 (1) 26	8.3 7.5 0.5 15.3	891 (58)

	Number of shares '000	value DKKm	Nominal Percentage of share capital	Bought /sold DKKm
Held at 1 January 2010	1,411	14	8.3
Bought back in 2010	1,288	13	7.5	891
Sold	(84)	(1)	0.5	(58)
Held at 31 December 2010	2,615	26	15.3
Bought back in 2011	1,360	14	9.2	1,159
Sold	(80)	(1)	0.5	(69)
Written down	(2,401)	(24)	-
Held at 31 December 2011	1,494	15	10.1

Number of shares held to cover the granting of options: 498,000 (2010: 587,000)

Note 46. Credit risk

The Group has received cash margin payments securing unrealised gains on derivatives	675	937
Allowance account (policyholders and insurance companies):
1 January	69	74
Changes	5	7
31 December	74	81
See "Credit risk" in the report.

Note 47. Liquidity risk

Undiscounted expected cash flows for the Group's key liabilities:
	Book value	1 year	2-6 years	7-16 years	17-26 years	27-36 years	> 36 years
2010
Provisions for claims	12,459	3,938	5,980	3,093	1,296	584	102
Life insurance provisions	26,692	250	(1,213)	3,757	12,412	14,531	7,708
2011
Provisions for claims	13,545	4,094	6,087	3,331	1,427	631	118
Life insurance provisions	26,257	653	104	5,427	11,785	11,196	5,151

Future cash flows for life insurance will deviate from those expected due to observed insurance events, surrenders etc.

See "Liquidity risk" in the report.

(DKKm)	2010	2011
Note 48. Provision of securit y
The Group's insurance companies have registered the following assets as security for technical provisions:
Shares in associated companies	192	200
Loans to associated companies	688	707
Shares	5,398	4,390
Bonds	33,444	32,406
Deposits with credit institutions	122	1,641
Investment assets related to unit-linked contracts	3,248	3,282
Liquid funds	5	6 2
Accrued interest	457	408
Shares in and amounts due from affiliated companies
eliminated in the consolidated accounts	6,896	7,767
	50,449	50,862
Bonds provided as security for loans in accordance with standard
repo-contracts for Danish mortgage and government bonds	3,065	5,020
Other provision of security	18	18
Note 49. Contingent liabilities
Adjustments to VAT liabilities	47	37
Other liabilities	10	9
Capital commitments made to loan funds and private equity funds	250	215
The Group companies participate in technical insurance collaboration where they are jointly liable for the insurance liabilities.
The companies are also jointly liable for A-tax and payroll tax etc. and VAT chargeable to the jointly registered companies.

Note 50. Companies

Name	Registered office	Activity
Topdanmark A/S	Ballerup	Holding
Non-life:
Topdanmark Forsikring A/S	Ballerup	Insurance
Danske Forsikring A/S	Ballerup	Insurance
TDP.0007 A/S	Ballerup	Property
Topdanmark EDB A/S	Ballerup	Internal IT services
Komplementarselskabet TDE.700 ApS	Ballerup	Investment
E. & G. Business Holding A/S	Ballerup	Holding
Topdanmark Holding S.A.	Luxembourg	Holding
Risk & Insurance Services S.A.	Luxembourg	Administration
TDLII.0087 A/S	Ballerup	Investment
TDF.0141 ApS	Ballerup	Investment
Life:
Topdanmark Liv Holding A/S	Ballerup	Holding
Topdanmark Livsforsikring A/S	Ballerup	Insurance
Topdanmark Livsforsikring V A/S	Ballerup	Insurance
Topdanmark Link Livsforsikring A/S	Ballerup	Insurance
Topdanmark Livsforsikring II A/S	Ballerup	Insurance
Topdanmark Livsforsikring III A/S	Ballerup	Insurance
Nykredit Livsforsikring A/S	Ballerup	Insurance
TDLII.0018 ApS	Ballerup	Holding
Topdanmark Ejendom A/S	Ballerup	Property
TDE.200 ApS	Ballerup	Property
TDE.201 ApS	Ballerup	Property
TDE.700 P/S	Ballerup	Property
Other companies:
Topdanmark Kapitalforvaltning A/S	Ballerup	Asset management
Topdanmark Invest A/S	Ballerup	Investment
Hotel Kongens Ege ApS	Ballerup	Property
Topdanmark Ejendomsadministration A/S	Ballerup	Property
TD.0151 ApS	Ballerup	Investment
All of the companies are 100% owned.
A number of companies have been liquidated by submitting a statement to the authorities.

Note 51. Other disclosures

The five-year summary in accordance with Section 91(a) of the Danish executive order on financial reports for insurance companies and lateral pension funds is the last page of Management's review. For further details see "Risk management" and "Capital model" in Management's review".

Note 52. Accounting policies

Topdanmark Group's 2011 Annual Report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and the additional Danish disclosure requirements of NASDAQ OMX, Copenhagen and the Danish Financial Business Act on annual reports prepared by listed financial services companies. The Annual Report also meets the International Financial Reporting Standards issued by the International Accounting Standards Board (IASB).

For the financial year 2011 Topdanmark implemented a number of new standards and interpretations and revised others; the impact of this on the recognition and measurement was nil but there were minor clarifications to the notes.

During 2011 and in January 2012 the DFSA updated its Executive Order on financial reporting for insurance companies and lateral pension funds. The Group has implemented this revision which primarily related to disclosure requirements having no impact on recognition and measurement.

There have been no other changes in accounting policies from those adopted in the 2010 Annual Report.

Change in accounting estimates Expected life

A new mortality rate has been introduced in life insurance to calculate the life insurance provisions at market value. This new rate is calculated by considering the DFSA's population mortality rate, Topdanmark's own observed mortality rate and the DFSA's assessed improvement in future life expectancy.

For example, remaining life expectancy for a 60 year old man and a 60 year old woman is:

Remaining life expectancy	60 year old man	60 year old woman
Life I Life V DFSA's	24.2 25.1	26.9 27.6
benchmark	23.6	26.4

Adjusted interest rate curve

In December 2011 the DFSA allowed insurance companies and lateral pension funds to use a new interest rate curve adjusted for country spreads, where the inclusion of the interest rate spread between Danish and German zero coupon rates is based on a 12-month moving average.

The decision to use this interest rate curve is binding until Solvency II takes effect.

All the life insurance companies of the Topdanmark Group have decided to use the curve.

The use of the new interest rate curve and the change in life expectancy have together reduced overall life insurance provisions by DKK 354m.

Effect of changed estimates in life insurance
	Interest rate
DKKm	curve	Life	Total
Guaranteed pension benefits	(1,003)		(158) (1,161)
Bonus potential:
Future premiums	350	12	362
Paid-up benefits	438	7	445
Life insurance provisions	(215)	(139)	(354)

DKK 257m of the DKK 354m has been provided for the collective bonus potential while DKK 87m has reduced the use of bonus potential on paid-up benefits due to "an insurance technical loss before bonus contribution".

These amounts include the effect of the increased tax rate from 15.0% to 15.3% on policies subject to pension return tax.

Other matters

During the years 2008-2010 Topdanmark believed that parts of the markets of structured credit products (e.g. CDOs) could not be defined as being active, according to the definition in IAS 39, and therefore the valuation of these types of assets have been based on models that could imply the use of estimates of both the future and the nature of the current market situation.

Market pricing is now considered to be so strong that it is no longer necessary to record these investments assets at model prices based on estimates.

Future accounting regulation

The IASB has issued a number of new and changed standards and interpretations which have not yet taken effect.

Future changes to the rules are not expected to materially change Topdanmark Group's accounting policies.

Accounting estimates and judgements

In the preparation of Topdanmark's accounts, estimates and judgements have been used which affect the size of assets and liabilities and consequently the results in this and subsequent financial years.

Such estimates and judgements are most material to the following sections of the accounts:

• Provisions for outstanding claims
• Fair value of financial instruments

Provisions for outstanding claims

The provision risk is significant, in particular in lines with a long period of claims settlement such as workers' compensation, commercial liability, accident and motor liability insurance.

Over the period of settlement the levels of compensation could be significantly affected by any changes in legislation, case-law or the practice in the award of damages adopted by, for example, the Danish National Board of Industrial Injuries.

The five-year summary discloses the financial years' gains on / strengthening of provisions. The movement in the provisions for outstanding claims analysed by claims year is also shown in the notes to the accounts. For further details see Management's review.

Fair value of financial instruments

The calculation at fair value has been based on those quoted prices which are the result of the trading in active markets. If there is an active market for quoted shares, bonds, derivatives etc., generally they are measured at the closing price on 31 December.

If no closing price has been quoted, another public price is used which is believed to be the most appropriate. Valuation methods or other publicly available information are used to value quoted securities where the closing price does not reflect the fair value.

Valuation methods are based, as far as possible, on publicly available market data if there is no active market for the financial instrument. Depending on the nature of the asset or liability, the calculation is based on underlying parameters such as interest and foreign exchange rates, volatility or comparison with the market prices of corresponding instruments.

For further details see the note on financial assets and the note on financial liabilities measured at fair value.

General

Consolidated accounts

The consolidated accounts include the parent company Topdanmark A/S and all of the companies that are controlled by the parent company. The parent company is considered to control the companies through direct or indirect ownership of more than 50% of the voting rights or when it can have or has an otherwise controlling influence.

The profit and loss account and balance sheet are presented in accordance with the DFSA's IFRScompatible accounting order for insurance companies and lateral pension funds.

Consolidation

The consolidated accounts have been prepared by aggregating items within the accounts of the parent company and the subsidiaries on a line-by-line basis. The same accounting policies are applied by the subsidiaries as by the parent company.

Properties owned by the subsidiaries and used by the Group have been re-classified from investment properties to owner-occupied properties.

Intra-group income and expenses, shareholdings, balances and dividends as well as gains and losses on intra-group transactions have all been eliminated.

Companies acquired during the year have been included in the consolidation from the date of assumption of control and those companies sold during the year, until the date of relinquishment of control.

Recognition and measurement

Assets are recognised in the balance sheet when it is probable that future economic benefits will flow to the Group and where the asset has a value that can be measured reliably. Liabilities are recognised in the balance sheet when the Group has a legal or constructive obligation due to a previous event, when it is probable that future economic benefits will flow from the Group and where the value of the liability can be measured reliably. The recognition and measurement take into consideration predictable losses and risks which have occurred prior to the presentation of the Annual Report and which provide evidence of conditions that existed at the balance sheet date.

Income is recognised in the profit and loss account when earned. Similarly, all expenses are recognised which relate to the financial year, including amortisation and impairment.

The initial recognition of financial instruments is made at fair value on the date of settlement. Any changes in the value between the trade and settlement dates are included in the balance sheet under the heading of derivatives. Direct expenses on the acquisition or issue of financial instruments which are measured at fair value with any revaluation of the fair value taken to the profit and loss account are included in expenses on investment activities when incurred. However, financial instruments which, subsequent to the initial recognition, have been measured at amortised cost are recognised at fair value adjusted for direct expenses on the acquisition or issue of the financial instrument.

True sale and repurchase transactions and true purchase and resale transactions (repo / reverse transactions) are recognised and measured as secured loans.

Insurance and investment contracts – classification

The Topdanmark Group writes contracts which transfer insurance risk, investment risk or both.

An insurance contract is a contract under which the insurer accepts significant insurance risk from the policyholder by agreeing to compensation if a specified uncertain future event adversely affects the policyholder. Insurance risk is always considered to be material in nonlife insurance. In life insurance it is considered to be material when it covers the effect of disability (including

the effect of premiums waived) and mortality (where the benefit exceeds the total savings of the policy).

An investment contract is one where the amount of insurance risk is not sufficient for it to be classified as an insurance contract. However, if the investment contract entitles the policyholder to receive a bonus, it is treated as an insurance contract. Payments received and made on investment contracts where the policyholder is not entitled to a bonus have been taken directly to the balance sheet.

Currencies

As the predominant rule, DKK is the Group companies' functional currency and the presentation currency of the Annual Report.

The initial recognition of transactions in currencies other than DKK is made at the exchange rates prevailing at the date of the transactions. Debtors, creditors and other monetary items which have not been settled on 31 December are translated at the closing exchange rates on 31 December. Translation differences are disclosed in revaluations in the profit and loss account.

Income and expenses of foreign companies which prepare their accounts in functional currencies other than DKK are translated at average exchange rates for the year while balance sheet items are translated at the closing exchange rates on 31 December. Any translation differences are included in other comprehensive income.

Exchange rate differences on the translation of foreign associated companies are included in other comprehensive income.

Expenses

Expenses are recognised in the Group's profit and loss account and disclosed classified by function: Claims incurred (claims handling), acquisition and administrative expenses, investment return and other expenses. Expenses which do not directly relate to a function are allocated proportionally on the basis of the size of the direct expenses.

Share-based payments Share options/warrants

The Board of Management and Senior Management participate in a share option / warrant scheme. The fair value, on the date the option / warrant is granted less the subscription proceeds, is included in staff costs in the profit and loss account, with the relevant credit shown as

a movement in shareholders' equity. The fair value is calculated using the Black & Scholes model and in accordance with IFRS 2 on share-based payments.

The options are settled with own shares. Any strike amount received on the exercise of the options is taken to shareholders' equity.

Employee shares

The fair value, on the date the share is granted, is included as staff costs in the profit and loss account, with the relevant credit shown as a movement in shareholders' equity. The fair value is measured in accordance with IFRS 2 taking into account the specific conditions for the issue of employee shares.

Calculation of profit in life insurance

The calculation of profit for those life insurance companies with portfolios of bonus-participating policies (Topdanmark Livsforsikring and Topdanmark Livsforsikring V) is regulated by the Danish Financial Business Act. The definition of Topdanmark's policy on the calculation of the profit for the year has been reported to the DFSA.

The result of life insurance comprises unconditional and conditional profit elements.

The unconditional profit elements comprise the return on assets allocated to shareholders' equity including subsidiaries with unit-linked activities, acquisitions cost result and the profit on policies outside of contribution.

The conditional profit elements comprise the risk return which is calculated for each contribution group. The risk return for each contribution group (administration, cost, risk and interest rate groups) has been based on their estimated risk on shareholders' equity.

The risk return is only transferred to shareholders' equity where it can be covered by a sufficient "insurance technical profit before bonus contribution" for each contribution group. Any surplus risk return is transferred to a shadow account which will be included as income when the group returns to being in profit.

If there is an "insurance technical loss before bonus contribution", which exceeds the collective bonus potential and the individual bonus potential, the excess will be debited to shareholders' equity.

The result of life insurance is disclosed in a note.

Segment information

Topdanmark Forsikring has divided its non-life insurance business into the following two business segments:

Personal includes policies for individual households sold by Topdanmark's own sales channels and its distribution partners.

SME and Industrial include policies for agricultural, SME and industrial businesses, sold by Topdanmark's sales organisation and its distribution partners, as well as captive-based policies.

Management reporting at this segment level comprises only reporting on the technical result but no reporting on assets and liabilities.

Life insurance is considered to be a separate business segment.

The recognition and measurement of the information reported by each segment follow the same accounting policies as those applied by the Group.

Topdanmark carries out insurance business only in Denmark and therefore no specific geographical segmental information is provided.

Ratios

The financial ratios have been calculated in accordance with the definitions of ratios issued by the Danish Society of Investment Professionals in 2010, except for profit per share and diluted profit per share which have been calculated in accordance with IAS 33 Earnings per share. These calculations, which have been made before elimination of intra-group rent, are disclosed in segment information. Topdanmark has not calculated consolidated ratios for life insurance, as it does not believe that a true and fair view would be achieved by presenting ratios based on an accumulation of completely different portfolios. Recognising that the interests of different portfolios are different, Topdanmark has established a portfolio-based structure of life insurance companies offering, among other services, different investment strategies to different groups of customers. Each company presents its ratios in its own annual report where further details are available.

Cash flow analysis

The cash flow analysis for the Group has been prepared in accordance with the direct method disclosing cash flow from operations, investments and financing as well as the changes in the Group's liquid funds between the beginning and the end of the financial year. Investment activities also include amounts received and paid on the purchase and sale of investment, intangible and tangible assets. Cash flows from financing comprise changes in capital, including the purchase and sale of own shares. Furthermore it includes the raising of loans and repayments on interest-bearing debt. Cash and cash equivalents comprise liquid funds as well as deposits with credit institutions.

Profit and loss account Premiums earned

Gross premiums in non-life insurance comprise those premiums receivable during the year and an estimate of premiums on insurance contracts written, either directly or indirectly, for which the period of risk has commenced before the end of the financial year. They do not include own risks. Premiums earned net of reinsurance comprise gross premiums for the year adjusted for changes in the provisions for unearned premiums and net of reinsurance. Effectively, this means the premiums are being recognised in line with the distribution of risk over the period of cover.

In life insurance, premiums net of reinsurance comprise those premiums, including single premiums, which are receivable within the year, net of reinsurance, for all insurance contracts and bonus eligible investment contracts.

Technical interest net of reinsurance in non-life insurance

The technical result on non-life insurance includes a return on the technical provisions net of reinsurance. The interest on the provisions is calculated using the relevant interest rate corresponding to the expected date of settlement. The discount expense of the regular revaluation of the present value of the provisions until the expected time of settlement is offset against the interest income. The interest and discount expense on discounted provisions, primarily provisions for outstanding claims net of reinsurance, are calculated on the same basis. Accordingly the interest and discount expense on discounted provisions are exactly netted off each other. For non-discounted provisions, primarily provisions for unearned premiums net of reinsurance, the interest on the average value of the provisions is calculated using the relevant interest rate corresponding to the weighted average date of settlement.

Allocated investment return net of reinsurance in life insurance

The investment return is calculated as the overall investment return in the life insurance group net of the proportion of the investment return relating to illness and accident insurance and the proportion transferred to shareholders' equity in accordance with the definition of profit reported to the DFSA.

Claims incurred and benefits paid

In non-life insurance, claims incurred net of reinsurance comprise claims paid during the year adjusted for changes in the provisions for outstanding claims and net of the reinsurers' share. Accordingly, claims incurred comprise known and expected claims relating to the year as well as any adjustments to the provisions made in previous years. Furthermore they comprise direct and indirect expenses on claims handling. However, the proportion of the change in provisions for outstanding claims relating to changes in discounting and revaluation is included in technical interest net of reinsurance and revaluations respectively. Topdanmark has entered into swaps partially hedging the provisions for workers' compensation and annuities in illness and accident insurance against changes in future wage and price indexation provided that the growth in the real value of the payments on claims remains stable. The revaluation of these swaps is included in claims incurred.

In life insurance, claims and benefits paid net of reinsurance comprise payments relating to claims, surrenders and cash bonuses.

Bonuses and rebates

Bonuses and rebates include those premium amounts that have been or will be paid back to policyholders, on the basis that the amount of the repayment is calculated with reference to the claims trend of the financial year for each insurance contract or a portfolio of insurance contracts using criteria determined prior to the beginning of the financial year or when the insurance contracts were written.

Operating expenses

Technical operating expenses which relate, either directly or indirectly, to the acquisition and renewal of the portfolios are included in acquisition costs. New business commission is generally recorded in the profit and loss account on the date the insurance takes effect. Administrative expenses comprise other costs incurred in the administration of the portfolios which relate to the

financial year and which have been accounted for on an accruals basis. Commission received from reinsurers has been accounted for on an accruals basis over the policies' period of cover.

Investment activities

Income from associated companies comprises a share of the post-tax results of the associated companies calculated in accordance with the Group's accounting policies. Income from investment properties comprises the operating results excluding interest charges and revaluations that have been disclosed separately in the accounts. Interest, dividends etc. comprise all interest, dividends etc. earned in the financial year. Realised and unrealised gains and losses on investment assets and changes in the provisions for outstanding claims net of reinsurance due to changes in the interest rate structure are included in revaluations, which also includes exchange rate adjustments and realised gains and losses on owner-occupied properties. Administrative expenses on investment activities comprise the cost of asset management including transaction costs.

Pension return tax

Pension return tax includes the return tax that arises from the return in life insurance included in the profit and loss account, whether the tax is current or to be paid in subsequent periods.

Other income and expenses

Other income and expenses that do not relate to the administration of insurance portfolios or investment assets are included in other income and expenses.

Taxation

The tax charge for the year comprises the current corporation tax for the year and any changes in deferred tax. The share of the tax charge that relates to the profit for the year is included in the profit and loss account, the share that relates to other comprehensive income items is included in other comprehensive income and the share that relates to shareholders' equity items is taken to shareholders' equity. The current tax for the year is calculated using the tax rates and rules applicable on 31 December. Topdanmark A/S is jointly taxed with all the Danish companies of the Group. As the management company of the joint taxation Topdanmark A/S settles all corporation tax payments with the tax authorities.

The jointly taxed companies' joint tax contributions are settled by dividing the current Danish corporation tax

between them in proportion to their taxable income. Furthermore those companies with tax losses receive joint tax contributions from those companies which have been able to use this loss to reduce their own tax gain.

Assets Intangible assets

Goodwill relates to the acquisition of companies prior to 2004 and is included at the book value on the change to IFRS. Goodwill is not amortised but subjected to an impairment test at the end of the financial year and written down to its recoverable amount, as required.

Acquired software licences are measured at cost and amortised on a straight-line basis over the expected useful life of a maximum of three years. Development projects which are clearly defined and definable are measured at cost at the amount of external costs incurred and written off over the expected useful life of a maximum of five years. If there is an indication of impairment, the book value is written down to its recoverable amount.

Intangible assets under construction are subjected to an impairment test at the end of the financial year and written down to their recoverable amount, as required.

Tangible assets Machinery and equipment

Machinery and equipment is measured at cost less depreciation on a straight-line basis and net of any impairment. Depreciation on a straight-line basis is calculated on the basis of the expected useful life and the residual value, which is annually revalued. If there is an indication of impairment, the book value is written down to its recoverable amount.

Finance leases for machinery and equipment are those leases where the Company substantially bears all the risks and benefits of ownership: the relevant assets are shown in the balance sheet at the lower of their fair value and the present value of future lease payments. Once recognised as a finance lease, the assets are treated as any other type of machinery and equipment. IT equipment, other equipment and cars as well as improvements of rental properties are depreciated over their expected useful life of up to five years. Solar cell plants are depreciated over their expected useful life of up to 25 years.

Owner-occupied properties

Owner-occupied properties are those properties used for the Group's own operations. The properties are measured at a revalued amount being the fair value on the date of revaluation less accumulated depreciation. The properties are reviewed and assessed annually by the Group's own valuation experts. The buildings are depreciated on a straight-line basis over their expected life of 50 years, although land is not depreciated. The fair value of the revaluation of owner-occupied properties is assessed on the same basis as investment properties. Any revaluation surplus is included in other comprehensive income unless the revaluation is a reversal of a previous impairment. Impairments are included in the profit and loss account unless the impairment is a reversal of previous revaluation included in other comprehensive income.

Investment properties

The initial recognition of investment properties is made at cost and subsequent recognitions are made at fair value with revaluations in the profit and loss account. A value has been calculated for each property on the basis of an expected future return on its operations and a rate of return (required yield). This value is adjusted for any special conditions having a temporary effect on the earning capacity of the property as well as the level of maintenance required on each property. The yield has been fixed taking into account the relevant market conditions for each type of property, its position, use, tenure of lease etc. The properties are reviewed and assessed annually by the Group's own valuation experts.

Associated companies

Shares held in associated companies are measured at their net asset value, in accordance with the Group's accounting policies. Associated companies are companies which are not subsidiaries although the Group has substantial influence through a significant shareholding and representation on the board of the company.

Financial assets

Financial assets are classified at the time of their initial recognition as:

• Financial assets which are measured at fair value with any value adjustment taken to the profit and loss account or
• Loans and receivables which are measured at amortised cost

Financial assets at fair value with any value adjustment taken to the profit and loss account are financial assets which either are included in a trading portfolio, are derivatives or at the time of their first recognition are included in this classification because the assets are managed and measured on a fair value basis or because this eliminates or significantly reduces accounting inconsistency.

All financial assets included in "other financial investments assets" and "investment assets related to unit-linked contracts" are measured at fair value with any value adjustment taken to the profit and loss account.

Measurement of fair value

The calculation at fair value is based on the listed prices of transactions in active markets. If there is an active market for listed shares, bonds, derivatives etc., the measuring is generally based on the closing price on 31 December. If there is no closing price, another public price is used which is believed to be the most appropriate. Valuation methods or other publicly available information are used to value listed securities where the closing price does not reflect the fair value.

Valuation methods are based, as far as possible, on publicly available market data. If there is no active market for the financial instrument, depending on the nature of the asset or liability, the calculation is based on underlying parameters such as interest and foreign exchange rates, volatility or comparison with the market prices of corresponding instruments.

In certain cases the valuation could only be based on publicly available market data. In these cases the valuation models used could imply the use of estimates of both the future and the nature of the current market situation.

Debtors that are measured at amortised cost

The initial recognition of debtors is made at fair value and subsequent recognitions are made at amortised cost. Amounts due from finance leases are included at the net investment in the lease contract. The debtors are regularly assessed for impairment and written down to their recoverable amount, as required. Such impairments are generally made collectively on the basis of the debtor ageing analysis. When an individual debtor is considered irrevocable, the value of the impairment is transferred out of the account for collective allowances.

Reinsurers' share

Reinsurers' share of provisions for unearned premiums represents the proportion of reinsurance premiums paid which, net of commission received and based on the spread of risk during the period of cover, relate to the period after the end of the financial year.

Reinsurers' share of provisions for outstanding claims has been calculated as the amounts expected to be received from reinsurance companies according to the reinsurance contracts concluded. Expected future payments are discounted using a structure of interest rates. The reinsurers' share is regularly assessed for impairment and written down to its recoverable amount, as required.

Liabilities

Shareholders' equity

Revaluation reserves

Gains on the revaluation of owner-occupied properties are transferred to the revaluation reserves net of pension return tax, corporation tax and bonus. The reserve will be dissolved if the revaluation is reversed or if the property is sold.

Security fund reserves

The security funds are special funds under shareholders' equity. Prior to 1989 they were transferred to shareholders' equity for capital adequacy and were taxdeductible.

The security funds can only be used for strengthening the technical provisions or otherwise for the benefit of policyholders and only if permitted by the DFSA.

Other reserves

Other reserves comprise a reserve at net asset value relating to non-life insurance.

Subordinated loan capital

The initial recognition of subordinated loan capital is made at fair value less transaction costs and subsequently measured at amortised cost.

Provisions for insurance and investment contracts

Provisions for unearned premiums

These provisions represent the proportion of premiums collected which, based on the spread of risk during the period of cover, relates to the period after the end of the financial year. The provisions for unearned premiums cover future payments of claims not yet incurred in the

remaining period of risk as well as administration costs of the insurance contracts written. Therefore they are calculated per line of business at the present value of these amounts, as a minimum. The sufficiency of the provisions is regularly tested on the basis of the current expectations of future cash flow.

Life insurance provisions

Life insurance provisions are measured at fair value. Accordingly, the liabilities are calculated on the basis of the market value independent of the original technical base. The fair value of the life insurance provisions is based on the realistically expected future premiums to be received, benefit payments to be made and administrative expenses incurred on the contracts written.

The future payments to be received and made have been based on the assumed incidents of death, disability and resumption of work. The risk of death and disability is dependent on the age, sex and health of the policyholder and is based on the company's experience. This new rate is calculated by considering the DFSA's population mortality rate, Topdanmark's own observed mortality rate and the DFSA's assessed improvement in future life expectancy.

In Life I, for everyone aged up to 80, the mortality rate used is lower than the DFSA's population mortality rate plus the DFSA's assessed improvement in future life expectancy. After 80, it reverts to being at the same level. For example, remaining life expectancy for a 60 year old man is 24 years and for a 60 year old woman 27 years.

In Life V, for all ages, the mortality rate used is lower than the DFSA's population mortality rate plus the DFSA's assessed improvement in future life expectancy. For example, remaining life expectancy for a 60 year old man is 25 years and for a 60 year old woman 28 years.

For annuities in Life II, for all ages until 77, the mortality rate used for men is higher than the DFSA's population mortality rate plus the DFSA's assessed improvement in future life expectancy. After 77, it is lower than the DFSA's population mortality rate. The mortality rate used for women is identical with the rate used by the DFSA for all ages. For example, remaining life expectancy for a 70 year old man is 15 years and for a 70 year old woman 18 years. There are no men under the age of 77 in Life II.

The disability risk has been fixed at 90% of G82 allowing for both disability and resumption of work.

Provisions for claims incurred are calculated using an inhouse statistical model that is based on the relationship between the possibility of resumption of work and the period passed since the occurrence of the claim. The provisions include amounts to cover the expected expenses on the future administration of the insurance contracts written. These expenses have been calculated using an annual indexation of 2%.

The present value of the expected future payments has been calculated using an interest rate structure. The interest rate structure is published by the DFSA as the combined weighting of swap rates and option adjusted mortgage credit rates. It is published as the "interest rate curve adjusted for country spreads" on the DFSA's website. For policies subject to pension return tax each interest rate used is reduced by the tax rate of 15.3%.

The provisions include an allowance for risk corresponding to the percentage which would be demanded by an arms-length purchaser of the company's portfolio of life insurance policies to compensate for the risk of fluctuations in the expected payments. The overall allowance for risk is an estimate calculated as the interest rate used less 5%.

Guaranteed benefits have been calculated without taking into account the conversion of insurance contracts into paid-up policies and surrenders.

The liabilities are disclosed in the balance sheet as follows:

Guaranteed benefits

The sum of the company's liabilities for each individual policy, calculated on the basis of the agreed premiums and benefits plus an allowance for administration costs, is measured at present value under guaranteed benefits. Guaranteed benefits also include provisions for group life policies and provisions for claims incurred but not reported (IBNR).

Bonus potential on future premiums

Where a policy has been converted to a paid-up policy, the benefit guaranteed under the paid-up policy is the net present value of the company's liabilities. The bonus potential on future premiums is the amount for each policy by which the guaranteed paid-up benefits exceeds the guaranteed benefits.

Bonus potential on paid-up benefits

Where a policy's savings (retrospective provision) less the expected future expense result exceed the guaranteed paid-up benefits, the amount is measured under the bonus potential on paid-up benefits. The bonus potential on paid-up benefits can be used to cover the proportion of "insurance technical losses before bonus contribution" relating to bonus eligible insurance contracts that cannot be covered by the collective bonus potential.

Provisions for outstanding claims

Provisions for outstanding claims cover future payments of claims incurred and their administration.

Provisions for outstanding claims are assessed for each line of business either on a claim by claim basis (individual provisions) or by using statistical methods (collective as well as incurred but not reported (IBNR) and incurred but not enough reported (IBNER) provisions). Claims exceeding a fixed amount, dependent on the line of business, are assessed individually and provisions for smaller claims are assessed collectively. IBNR provisions cover expenses on post-notified large claims. IBNER provisions cover individually assessed claims which have been reported but which have been inadequately provided for. The collective provisions are calculated using de Vylder's credibility model adjusted for each line of business. The IBNR and IBNER provisions are calculated using in-house developed models. In agricultural and commercial lines claims are assessed individually. IBNR and IBNER provisions are also included in the total provision. In personal lines claims not exceeding DKK 100,000 are assessed collectively while larger claims and all claims on change of ownership policies are assessed individually. IBNR and IBNER provisions are also included in the total provision. All motor and accident claims are included in the collective provisions. Large claims and claims relating to previous years are individually assessed within personal liability in motor insurance.

Inflation is taken into account when calculating the value of the provisions. Future inflation is implicitly included in a number of the statistical models as the average of the actual inflation in the period of record used. Therefore, an expected higher future inflation rate would generally be included in the provisions with a specific time delay.

Provisions for outstanding claims in workers' compensation insurance comprise provisions for annuities and other provisions for outstanding claims. The assessment of the future annuities is based on the present annuities including the expected wage and salary indexation fixed as the forward inflation rates plus 1.16% p.a. and a rate of mortality corresponding to G82 with monthly age write-downs. Workers' compensation claims are often paid as the capitalised value of an annuity. The capitalisation rate at the time of capitalisation is to be calculated as a moving average of the most recent five years' interest rate on leading mortgage bonds less tax. The capitalisation rate is calculated as the forward swap rates plus 0.85% p.a. and less a deduction for tax corresponding to the base tax rate.

Due to the instability having surrounded payments on disability claims for a number of years, Topdanmark has used an in-house developed model, which takes into account the stage each claim has reached. The benefits are included with an allowance for the expected wage and salary indexation.

Topdanmark has entered into swaps partially hedging the provisions for workers' compensation and annuities in illness and accident insurance against changes in future wage and price indexation provided that the growth in the real value of the payments on claims remains stable. The revaluation of these swaps is included in claims incurred.

The provisions for outstanding claims include the amounts that are expected to be included to cover direct and indirect expenses on settlement of the liabilities.

All provisions have been measured at present value by discounting the expected future payments using the structure of interest rates. The proportion of the change in provisions for outstanding claims relating to changes in the interest rate structure is included in the profit and loss account under revaluations.

The interest rate structure is calculated as the combined weighting of swap rates and option adjusted mortgage credit rates. It is published as the "adjusted interest rate curve" on the DFSA's website.

The interest rate curve adjusted for country spreads is used in illness and accident insurance, which is administered by the life insurance companies. As illness and accident policies are subject to pension return tax, each interest rate used of the interest rate structure is reduced by the tax rate of 15.3%.

The sufficiency of the provisions is regularly tested on the basis of the current expectations of future cash flow.

Provisions for outstanding claims in life insurance comprise insurance benefits due but not yet paid.

Provisions for bonuses and rebates

Provisions for bonuses and rebates are the amounts payable to policyholders as the result of a favourable claims trend.

Collective bonus potential

The collective bonus potential is used to equalise the individual years' payments of bonus. Amounts will be provided for the collective bonus potential in years where the investment and technical results exceed the bonus promised, while amounts will be transferred from the reserve in years where the result is not sufficient to finance the bonus promised. The collective bonus potential can only be reduced by a transfer to another item under technical provisions or as a result of "insurance technical losses before bonus contribution" relating to bonus eligible insurance contracts.

Provisions for unit-linked contracts

Provisions for unit-linked schemes are measured at fair value in accordance with the value of the assets linked to the schemes, see the fair value option in IAS 39 on elimination or significant reduction of accounting inconsistency.

Other liabilities

Provisions for pensions and similar liabilities

Provisions for anniversary bonuses and retirement benefits are built up on an on-going basis over the period of employment. The liability is calculated taking into account the expected level of staff reduction based on the Company's experience. The liability is measured at present value by discounting the expected future payments using the structure of interest rates.

Corporation tax and deferred tax

Current tax liabilities and tax receivable, including joint tax contributions, are included in the balance sheet as calculated tax on taxable income for the year adjusted for tax on previous years' taxable income and prepaid tax on account. Deferred tax on temporary differences between the accounting and tax value of assets and liabilities is charged in accordance with the balance sheet liability method. Deferred tax on shares in subsidiaries and associated companies is not included where the Group

controls the timing of the reversal of the temporary difference and where it is probable that the temporary difference will not be reversed within the foreseeable future. The calculation of deferred tax is based on the planned use of each asset and the settlement of each liability using the tax rates expected to be in force when the deferred tax is expected to crystallise as current tax, based on the tax rates and rules in force on 31 December.

Deferred tax on security funds comprises deferred tax on untaxed amounts transferred to the security funds under shareholders' equity. The security funds will be taxed in the proportion of 10% for every 10pp decline in technical provisions net of reinsurance from the level at 31 December 1994. A decline of 10% from the 1994 level is considered improbable as long as Topdanmark Forsikring, in which the transfers were made, continues its current operations. Therefore the security funds will only be taxed if the insurance portfolio is transferred or the company ceases to carry out insurance business.

Deposits received from reinsurers

Deposits received from reinsurers represent amounts deposited to cover reinsurers' liabilities to the Company.

Creditors

Amounts due to credit institutions and derivatives are measured at fair value, see the fair value option in IAS 39 on elimination or significant reduction of accounting inconsistency. The fair value of amounts due to credit institutions usually corresponds to their nominal value. The fair value of derivatives is calculated on the same basis as financial assets.

Other loans, including employee bonds, are measured at their amortised cost.

Other matters

Generally all the amounts in the report are disclosed in whole numbers of DKKm. The amounts have been rounded and consequently the sum of the rounded amounts and totals may differ slightly.

Profit and loss account • Parent company

(DKKm)	Note	2010	2011
Income from affiliated companies	1	1,184	1,068
Interest income and dividends etc.		24	0
Revaluations	2	(1)	1
Interest charges		(19)	(27)
Total investment return		1,189	1,042
Other expenses	3	(32)	(33)
PRE-TAX PROFIT		1,157	1,009
Taxation	4	11	14
PROFIT FOR THE YEAR		1,168	1,023
Proposed appropriation of profit for the year:
Transfer to net revaluation reserve at net asset value		1,184	1,068
Transfer to profit carried forward		(16)	(45)
		1,168	1,023

Statement of comprehensive income

Profit for the year	1,168	1,023
Other comprehensive income in affiliated companies	1	1
Other comprehensive income	1	1
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	1,169	1,024

Balance sheet • Parent company

(DKKm)	Note	2010	2011
Assets
Machinery and equipment	5	4	4
TOTAL TANGIBLE ASSETS		4	4
Shares in affiliated companies	6	5,567	6,285
Total investment in affiliated companies		5,567	6,285
Bonds		2	1
Total other financial investment assets		2	1
TOTAL INVESTMENT ASSETS		5,568	6,286
Amounts due from affiliated companies		77	114
TOTAL DEBTORS		77	114
Current tax assets		58	0
Deferred tax assets	7	1	0
Liquid funds		3	4
TOTAL OTHER ASSETS		62	4
TOTAL ASSETS		5,712	6,408
Shareholders' equity and liabilities
Share capital	8	171
			148
Other reserves		1,845	2,563
Total reserves		1,845	2,563
Profit carried forward		2,884	2,204
TOTAL SHAREHOLDERS' EQUITY SUBORDINATED LOAN CAPITAL	9	4,900 404	4,915 404
Bond loans Amounts due to affiliated companies		71 327	72 985
Current tax liabilities		0	1 7
Other creditors		10	14
TOTAL CREDITORS		407	1,089
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES		5,712	6,408
Related parties	10
Core capital and capital base	11
Own shares Other note disclosures	12 13

Movements in shareholders' equity • Parent company

(DKKm)

	Share capital	Other reserves	Profit carried forward	Total
2010
Shareholders' equity prior year	169	1,411	2,885	4,465
Profit / (loss) for the year Other comprehensive income in affiliated companies		1,184 1	(16) 0	1,168 1
Total comprehensive income for the year		1,185	(16)	1,169
Dividends received from subsidiaries Other movements in capital of subsidiaries Share buy-back Sale of employee shares Issue of share options Exercise of share options / warrants	2	(740) (10)	740 14 (892) 46 16 92	0 3 (892) 46 16 94
Other transactions	2	(751)	16	(733)
Shareholders' equity at 31 December 2010	171	1,845	2,884	4,900
2011
Shareholders' equity prior year	171	1,845	2,884	4,900
Profit / (loss) for the year Other comprehensive income in affiliated companies Total comprehensive income for the year		1,068 1 1,069	(45) 0 (45)	1,023 1 1,024
Dividends received from subsidiaries Other movements in capital of subsidiaries Cancellation of own shares Share buy-back	(24)	(341) (10)	341 14 24 (1,159)	0 4 0 (1,159)
Sale of employee shares			46	46
Issue of share options			7	7
Exercise of share options / warrants	1		93	94
Other transactions	(23)	(351)	(635)	(1,009)
Shareholders' equity at 31 December 2011	148	2,562	2,204	4,915

(DKKm)	2010	2011
Note 1. Income from affiliated companies
Topdanmark Forsikring A/S	1,130	955
Adjustment	10	10
web-postkassen.dk ApS	(7)	(1)
Topdanmark Invest A/S	9	15
Topdanmark Kapitalforvaltning A/S	41	89
Income from affiliated companies	1,184	1,068
Note 2. Revaluations
Subordinated loan capital	(1)	1
Revaluations	(1)	1
Note 3. Other expenses
Holding expenses	32	33
Other expenses	32	33
Note 4. Taxation
Current tax	12	14
Change in deferred tax	0	(1)
Prior year adjustment Taxation	(1)	1
	11	14
Pre-tax loss excl. income from affiliated companies	27	59
Calculated tax (25%)	7	15
Adjusted for the tax effect of:
Non-deductible expenses / income not liable to ta x Prior year adjustment	6 (1)	(1) 0
	11	14
Effective rate of taxation	40.8	23.7
Note 5. Machinery and equipment
Cost at 1 January	5	5
Additions, including improvements	1	0
Disposals	(0)	(1)
Cost at 31 December	5	4
Impairment and amortisation at 1 January	(1)	(1)
Impairment and amortisation at 31 December Machinery and equipment	(1) 4	(0) 4
Note 6. Shares in affiliated companies
Topdanmark Forsikring A/S	5,308	5,964
Topdanmark Kapitalforvaltning A/S	52	99
TD.0151 ApS (Investment)	31	31
Topdanmark Invest A/S (investment)	175	190
Shares in affiliated companies	5,567	6,285
The affiliated companies are domiciled in Ballerup.

(DKKm)	2009	2010	20 11
Note 7. Deferred tax assets
Other	1	1	0
Deferred tax assets	1	1	0
Changes relating to the year		(0)	(1)

Note 8. Share capital

DKK
Share capital at 1 January	169,064,930	170,869,530
Reduction in capital	0	(24,008,570)
Increase in capital	1,804,600	1,398,000
Share capital	170,869,530	148,258,960
Each of Topdanmark's 14,825,896 (2010: 17,086,953) shares has a nominal value of DKK 10. No share enjoys any special rights. The shares are freely tradeable. Each share has one vote.

Note 9. Subordinated loan capital

In 2007 Topdanmark A/S issued EUR 55m of hybrid core capital.

This bullet loan has no final maturity date but if permitted by the DFSA, the debtor can give notice of termination as from 15 September 2017 at par. The loan carries a floating interest rate determined as EURIBOR 3 months + 1.90%. From 15 September 2017 increased to EURIBOR 3 months + 2.90%.

Share of loan included in capital base	404	404
Interest charges	11	13

Note 10. Related parties

Topdanmark A/S has no related parties who hold a controlling influence.

Related parties with substantial influence comprise the Board of Directors, the Board of Management and their families.

Remuneration of the Board of Directors

Directors' fees were DKK 4,275,000 (2010: 4,275,000) of which DKK 225,000 (2010: 225,000) related to Topdanmark Forsikring A/S.
Fees for 2011 (DKK '000):
Michael Pram Rasmussen	1,200
Anders Knutsen	725
Charlotte Hougaard	300
Jens Maaløe	300
Annette Sadolin	450
Søren Thorup Sørensen	400
Knud J. Vest	300
Desiree Schultz	217
Trine Zappe	217
Ole Døssing Christensen	83
Per Krogsgaard Mathiesen	83
Total fee paid to nine Board members	4,275

The Board of Directors receive only a fixed remuneration.

(DKKm)	2010	2011
Note 10. Related parties - continued
Remuneration of the Board of Management The Company has paid no remuneration to the Board of Management but an adminstration agreement provides that it pays a share of the overall remuneration paid to the Board of Management.
Salaries etc. Employee shares Share options Total remuneration to three members of the Board of Management	11 1 4 16	16 1 1 18
Remuneration paid to the Board of Management for 2011: Christian Sagild 7.8 Kim Bruhn-Petersen 5.2 Lars Thykier 5.5 18.6
From 2011, 10% of the fixed salaries etc. paid to the Board of Management is paid as share options. The Board of Management receive only a fixed remuneration. The Group has no unhedged pension commitments.
Significant risk taker Besides the Board of Management one employee of the Group has significant influence on its risk profile. In accordance with an exemption clause this remuneration is not disclosed.
Shares, bonds and subordinated notes held by the Board of Directors and Board of Management Board of Directors Number of shares Bonds, nominal vaule DKK '000 Subordinated notes (subordinated loan capital) Topdanmark forsikring,	6,251 254	2,908 128
nominal vaule DKK '000	10,400	19,610

Board of Management Number of shares 37,691 35,630 Bonds, nominal vaule DKK '000 1,364 1,364 Subordinated notes (subordinated loan capital) Topdanmark forsikring, nominal vaule DKK '000 - 3,850

Share options

Topdanmark's share option scheme is for its Board of Management and senior executives. The strike price has been fixed at 110% of the market price on 31 December the prior year. The options can be exercised 3-5 years subsequent to the granting.

The scheme is settled by shares (equity instruments).

The Group's overall option scheme is disclosed in the Group note on staff costs.

Affiliated companies:

Expenses charged	23	25
Dividends received	740	341
Capital injection	9	0
Interest charged	2	6

Expenses on investmentment business are settled at arm's length.

Other expenses are charged to cover costs incurred.

Average effective interest rate on balances is 0.90% (2010: 0.55%).

Shares are disclosed in the balance sheet and specified in the note on Shares in affiliated companies.

Balances are disclosed in the balance sheet.

(DKKm)	2010	2011
Note 11. Core capital and capital base
Shareholders' equity	4,900	4,915
Deferred tax assets	(1)	(0)
Hybrid core capital	404	404
Capital adequacy requirements for insurance companies – 50%	(1,549)	(1,540)
Core capital	3,754	3,779
Capital adequacy requirements for insurance companies – 50%	(1,549)	(1,540)
Capital base	2,205	2,240
Weighted items	3,025	3,846
Core capital as a percentage of weighted items	124.1	98.0
Solvency ratio	72.9	58.2
Solvency requirement (%)	8.0	8.0

Solvency has been calculated according to the rules for financial services holding companies.

Note 12. Own shares

Parent company	Number of shares '000	Nominal value DKKm	Percentage of share capital	Bought /sold DKKm
Held at 1 January 2010	1,411	14	8.3
Bought	1,288	13	7.5	892
Sold	(84)	(1)	0.5	(58)
Held at 31 December 2010	2,615	26	15.3
Bought	1,360	14	9.2	1,159
Sold	(80)	(1)	0.5	(69)
Written down	(2,401)	(24)	-
Held at 31 December 2011	1,494	15	10.1

Note 13. Other disclosures

The five-year summary in accordance with Section 91(a) of the Danish executive order on financial reports for insurance companies and lateral pension funds is included in financial highlights on page 3. Risk disclosures in accordance with Section 91(b) are included in Management's review for the Group in "Risk management".

Note 14. Accounting policies

The annual accounts for the parent company Topdanmark A/S have been prepared in accordance with the Danish Financial Business Act, including the executive order issued by the Danish Financial Supervisory Authority (DFSA) on financial reports for insurance companies and lateral pension funds (nationwide, occupational pension funds specific to Denmark).

During 2011 and in January 2012 the DFSA updated its Executive Order on financial reporting for insurance companies and lateral pension funds. The Group has implemented this revision which primarily related to disclosure requirements having no impact on recognition and measurement.

There have been no other changes in accounting policies from those adopted in the 2010 Annual Report.

Differences from the Group's accounting policies

The company's accounting policies for recognition and measurement is in accordance with the Group's accounting policies with the following exceptions:

Shares held in affiliated companies are recognised and measured at their net asset value. If the net asset value exceeds the recoverable amount, the investment is written down to this lower amount. The share of the posttax results of affiliated companies is included in the profit and loss account under income from affiliated companies less any write-downs. Where investments in affiliated companies are revalued to net asset value, the net revaluation reserve is included in shareholders' equity. The share of the movements in the shareholders' equity of affiliated companies is included directly in the shareholders' equity.

The net asset value of affiliated companies is calculated without providing for deferred tax on security funds unless it is probable that a situation creating such a tax liability will arise within the foreseeable future.

Other matters

Generally all the amounts in the report are disclosed in whole numbers of DKKm. The amounts have been rounded and consequently the sum of the rounded amounts and totals may differ slightly.

Disclaimer

This Annual Report includes statements relating to the future. Such statements are uncertain and involve both general and specific risks.

Many factors may cause a significant deviation from the forecasts and assumptions set out in the Annual Report. Such factors could be, for example, cyclical movements, changes in the financial markets, the financial effect of nonanticipated events like acts of terror or exceptional weather conditions, changes in Danish and EU rules, competitive factors in the insurance industry and the trend in reinsurance market. Also see Risk management.

The above description of risk factors is not exhaustive. Investors and others, who may base decisions relating to Topdanmark on statements relating to the future, should make their own careful considerations on these and other factors of uncertainty.

Topdanmark's statements relating to the future are solely based on information known at the time of the preparation of this Annual Report.

This publication is a translation. In case of any divergence, the original Danish text shall prevail.

Statement by Management on the Annual Report

We have today considered and approved the Annual Report of Topdanmark A/S for 2011.

The consolidated accounts are presented in accordance with International Financial Reporting Standards as adopted by the EU and the annual accounts for the Company are presented in accordance with the Danish Financial Business Act. Further, the Annual Report is presented in accordance with additional Danish disclosure requirements for listed financial services companies.

In our opinion, the consolidated accounts and annual accounts give a true and fair view of the Group's and the Company's assets, liabilities and financial position at 31 December 2011 as well as of the Group's and the Company's financial performance and the Group's cash flow for the financial year 1 January to 31 December 2011.

We believe that the management review contains a fair review of the development of the Group's and Company's activities and financial position, together with a description of the principal risks and uncertainties that the Group and the Company can be affected by.

We recommend the Annual Report for adoption at the Annual General Meeting.

Ballerup, 6 March 2012

Board of Management:

Christian Sagild Kim Bruhn-Petersen Lars Thykier (CEO) Board of Directors: Michael Pram Rasmussen Anders Knutsen Charlotte Hougaard (Chairman) (Deputy Chairman) Jens Maaløe Annette Sadolin Desirée Schultz Søren Thorup Sørensen Knud J. Vest Trine Zappe

Statements by the auditors

Internal audit's reports

Report on the consolidated accounts and annual accounts

We have audited the consolidated accounts and annual accounts of Topdanmark A/S for the financial year 1 January to 31 December 2011, which comprise the profit and loss account, statement of comprehensive income, balance sheet, statement of movements in shareholders' equity and notes, including the accounting policies, for the Group as well as the Company, and including cash flow statement for the Group. The consolidated accounts have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial services companies. The annual accounts have been prepared in accordance with the Danish Financial Business Act.

Management is responsible for the consolidated accounts and annual accounts. Our responsibility is to express an opinion on the consolidated accounts and annual accounts

Audit for the year

We conducted our audit on the basis of the Danish Financial Supervisory Authority's regulation on the preparation of the audit in financial services companies etc. and financial services groups and in accordance with International Standards on Auditing. This requires that we plan and perform the audit to obtain reasonable assurance about whether the consolidated accounts and annual accounts are free from material misstatement. We have participated in the audit of the material and risky areas.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated accounts and annual accounts. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatements of the consolidated accounts and annual accounts, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of consolidated accounts and annual accounts that give a true and fair view 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as the overall presentation of the consolidated accounts and annual accounts.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Our audit has not resulted in any qualification.

Opinion

In our opinion, the consolidated accounts give a true and fair view of the Group's assets, liabilities and financial position at 31 December 2011, and of the results of its activities and cash flows for the financial year 1 January to 31 December 2011 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial services companies.

Further, in our opinion, the annual accounts give a true and fair view of the Company's assets, liabilities and financial position at 31 December 2011, and of the results of its activities for the financial year 1 January to 31 December 2011 in accordance with the Danish Financial Business Act.

Statement on the management review

Pursuant to the Danish Financial Business Act, we have read the management review. We have not performed any further procedures in addition to the audit of the consolidated accounts and annual accounts.

On this basis, it is our opinion that the information provided in the management review is consistent with the consolidated accounts and annual accounts.

Ballerup, 6 March 2012

Leif Zilmer Head of Internal Audit

Independent auditor's report To the shareholders of Topdanmark A/S Report on the consolidated accounts and annual accounts

We have audited the consolidated accounts and annual accounts of Topdanmark A/S for the financial year 1 January to 31 December 2011, which comprise the profit and loss account, statement of comprehensive income, balance sheet, statement of movements in shareholders' equity and notes, including the accounting policies, for the Group as well as the Company, and including cash flow statement for the Group. The consolidated accounts have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial services companies. The annual accounts have been prepared in accordance with the Danish Financial Business Act.

Management's responsibility for the consolidated accounts and annual accounts

Management is responsible for the preparation of consolidated accounts that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial services companies as well as the preparation of annual accounts that give a true and fair view in accordance with the Danish Financial Business Act. Management is also responsible for such internal control as it determines is necessary to enable the preparation of consolidated accounts and annual accounts that are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on the consolidated accounts and annual accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated accounts and annual accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated accounts and annual accounts. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatements of the consolidated accounts and annual accounts, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of consolidated accounts and annual accounts that give a true and fair view 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as the overall presentation of the consolidated accounts and annual accounts

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Our audit has not resulted in any qualification.

Opinion

In our opinion, the consolidated accounts give a true and fair view of the Group's assets, liabilities and financial position at 31 December 2011, and of the results of its activities and cash flows for the financial year 1 January to 31 December 2011 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial services companies.

Further, in our opinion, the annual accounts give a true and fair view of the Company's assets, liabilities and financial position at 31 December 2011, and of the results of its activities for the financial year 1 January to 31 December 2011 in accordance with the Danish Financial Business Act.

Statement on the management review

Pursuant to the Danish Financial Business Act, we have read the management review. We have not performed any further procedures in addition to the audit of the consolidated accounts and annual accounts.

On this basis, it is our opinion that the information provided in the management review is consistent with the consolidated accounts and annual accounts.

Copenhagen, 6 March 2012

Deloitte

Statsautoriseret Revisionspartnerselskab

Erik Holst Jørgensen Martin Faarborg State Authorised Public Accountant State Authorised Public Accountant

Topdanmark A/S Borupvang 4 DK-2750 Ballerup Tel +45 44 68 33 11 Reg.No. 78040017

E-mail: topdanmark@topdanmark.dk Web: www.topdanmark.com