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Topdanmark Interim / Quarterly Report 2016
3388_rns_2016-08-16_3dd1565e-522c-4268-9cca-20a3c1bf2a3a.pdf
Interim / Quarterly Report
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Announcement No. 44/2016 from Topdanmark A/S
Page 1 of 24
TOPDANMARK HALF-YEAR REPORT FOR 2016
16 August 2016 Announcement No. 44/2016
Key features
H1 2016
- Post-tax profit of DKK 594m (H1 2015: DKK 651m)
- EPS remained at DKK 6.3
- Combined ratio was 86.0% (H1 2015: 84.9%)
- Combined ratio excluding run-off profits was 90.1 (H1 2015: 88.8)
- Premiums declined 1.9% in non-life insurance and increased 30.5% in life insurance
- Profit on life insurance was DKK 66m (H1 2015: DKK 68m)
- After unwinding and revaluation of non-life insurance provisions, the investment return was DKK 107m (H1 2015: DKK 88m).
Q2 2016
- Post-tax profit: DKK 430m (Q2 2015: DKK 365m)
- EPS: DKK 4.6 (Q2 2015: DKK 3.6)
- Combined ratio: 86.2 (Q2 2015: 78.7)
- Combined ratio excluding run-off profits: 88.5 (Q2 2015: 84.4)
- Trend in premiums: 1.4% decline in non-life insurance, 28.8% increase in life insurance
- Profit on life insurance: DKK 58m (Q2 2015: DKK 34m)
- After unwinding and revaluation of non-life insurance provisions, the investment return was DKK 198m (Q2 2015: DKK 56m loss).
Profit forecast model for 2016
- The assumed combined ratio for 2016 remained around 89, excluding run-off in H2 2016
- Negative growth in non-life premiums in 2016 still assumed
- The post-tax profit forecast model for 2016 has been adjusted from DKK 900-1,000m to DKK 1,000-1,100m, excluding run-off in H2 2016, representing EPS of DKK 11.5.
Share buy-back
- The share buy-back programme for 2016, executed from 12 February 2016 until the announcement of the 2016 Annual report on 23 February 2017, has been adjusted by DKK 100m to DKK 1,450m, representing a buy-back yield of 9.0. The buy-back is subject to prior approval by the DFSA, cf. page 12.
Webcast
Topdanmark's CEO, Christian Sagild will present the financial highlights and comment on the forecast via a webcast.
Conference call
A conference call will be held today at 15:30 (CET) where CEO Christian Sagild and CFO Lars Thykier will be available for questions based on the half-year report and the webcast. The conference call will be conducted in English.
In order to participate in the conference call, please call one of the numbers below 10-15 minutes before the conference call:
UK dial-in number: +44 (0)20 7031 0088
US dial-in number: +1 646 851 2407
Please quote reference 959677 and ask 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
Group Communications and IR Director
Direct tel.: +45 4474 4017, mobile: +45 4025 3524
Announcement No. 44/2016 from Topdanmark A/S
Page 2 of 24
Contents
Management's review
- Key features
- Financial highlights
- Results for H1 2016
- Results for Q2 2016
- Non-life insurance
- Life insurance
- Investment activities
- Solvency calculation and capital requirements
- Parent company etc.
- Taxation
- Profit forecast model
- Share buy-back
- Financial calendar
- Disclaimer
- Accounting policies
Financial statements for H1 2016 – Group
- Income statement
- Statement of comprehensive income
- Assets
- Shareholders' equity and liabilities
- Cash flow statement
- Statement of changes in equity
- Segment information
- Notes to the financial statements
Financial statements for H1 2016 – Parent company
- Income statement
- Statement of comprehensive income
- Balance sheet
Statement by Management
Topdanmark A/S
Borupvang 4
DK-2750 Ballerup
Tel +45 44 68 33 11
Reg.No. 78040017
E-mail: [email protected]
Internet: www.topdanmark.com
Financial highlights
| (DKKm) | Full year 2015 | Q2 2015 | Q2 2016 | H1 2015 | H1 2016 |
|---|---|---|---|---|---|
| Premiums earned: | |||||
| Non-life insurance | 8,977 | 2,266 | 2,234 | 4,524 | 4,436 |
| Life insurance | 6,320 | 1,367 | 1,761 | 2,984 | 3,896 |
| 15,297 | 3,633 | 3,996 | 7,508 | 8,332 | |
| Results: | |||||
| Non-life insurance | 1,342 | 441 | 495 | 772 | 695 |
| Life insurance | 174 | 34 | 58 | 68 | 66 |
| Parent company etc. | 31 | 4 | 1 | 3 | 3 |
| Pre-tax profit | 1,547 | 479 | 554 | 842 | 763 |
| Tax | (364) | (114) | (124) | (191) | (169) |
| Profit | 1,183 | 365 | 430 | 651 | 594 |
| Run-off profits, net of reinsurance | 381 | 130 | 52 | 176 | 181 |
| Shareholders' equity of parent company at 1 January | 5,339 | 5,234 | 4,769 | 5,339 | 4,930 |
| Profit | 1,183 | 365 | 430 | 651 | 594 |
| Share buy-back | (1,667) | (412) | (430) | (866) | (767) |
| Share-based payments | 76 | 3 | 6 | 68 | 20 |
| Other movements in shareholders' equity | (3) | (3) | (0) | (5) | (2) |
| Shareholders' equity of parent company end of period | 4,927 | 5,188 | 4,775 | 5,188 | 4,775 |
| Deferred tax on security funds | (306) | (306) | (306) | (306) | (306) |
| Shareholders' equity of Group end of period | 4,621 | 4,882 | 4,469 | 4,882 | 4,469 |
| Total assets, parent company | 5,625 | 5,924 | 5,447 | 5,924 | 5,447 |
| Total assets, Group | 67,667 | 67,052 | 72,129 | 67,052 | 72,129 |
| Provisions for insurance and investment contracts: | |||||
| Non-life insurance | 16,310 | 17,617 | 17,624 | 17,617 | 17,624 |
| Life insurance | 40,537 | 38,902 | 43,186 | 38,902 | 43,186 |
| Financial ratios (parent company) | |||||
| Post-tax profit as a % of shareholders' equity | 22.6 | 6.9 | 8.9 | 12.2 | 12.1 |
| Post-tax EPS (DKK) | 11.8 | 3.6 | 4.7 | 6.4 | 6.4 |
| Post-tax EPS, diluted (DKK) | 11.8 | 3.6 | 4.6 | 6.3 | 6.3 |
| Net asset value per share, diluted (DKK) | 51.3 | 51.7 | 52.2 | 51.7 | 52.2 |
| Share buy-back per share, diluted (DKK) | 16.6 | 4.1 | 4.6 | 8.4 | 8.2 |
| Listed share price end of period | 196.0 | 179.4 | 158.5 | 179.4 | 158.5 |
| Average number of shares ('000) | 99,971 | 101,187 | 92,516 | 102,021 | 93,553 |
| Average number of shares, diluted ('000) | 100,461 | 101,649 | 92,709 | 102,581 | 93,819 |
| Number of shares end of period ('000) | 95,672 | 99,869 | 91,286 | 99,869 | 91,286 |
| Ratios non-life insurance (%) | |||||
| Gross loss ratio | 68.9 | 62.2 | 60.7 | 67.8 | 68.3 |
| Net reinsurance ratio | 1.9 | 1.0 | 8.9 | 1.2 | 0.8 |
| Claims trend | 70.8 | 63.3 | 69.6 | 69.0 | 69.1 |
| Gross expense ratio | 15.9 | 15.4 | 16.6 | 15.9 | 16.9 |
| Combined ratio | 86.7 | 78.7 | 86.2 | 84.9 | 86.0 |
| Combined ratio excl. run-off profits | 90.9 | 84.4 | 88.5 | 88.8 | 90.1 |
Comparative figures are adapted to the new Danish executive order on Financial Reports.
It has not been possible to prepare comparative figures for life insurance.
Net shareholders' equity effect for life insurance was calculated at DKK 3m at the beginning of 2016.
Thus, Group equity was DKK 4,621m at the end of 2015 and
Group equity was calculated at DKK 4,624m at the beginning of 2016.
Announcement No. 44/2016 from Topdanmark A/S
Page 3 of 24
Results for H1 2016
Topdanmark's post-tax profit for H1 2016 was DKK 594m (H1 2015: DKK 651m).
EPS was DKK 6.3 (H1 2015: DKK 6.3).
Pre-tax profit declined DKK 79m to DKK 763m.
The technical result declined DKK 60m to DKK 622m. The decline was primarily due to an increase in fire claims (DKK 37m).
After unwinding and revaluation of non-life insurance provisions, the investment return declined DKK 17m to DKK 73m.
Profit on life insurance declined DKK 2m to DKK 66m.
| Trend in profit (DKKm) | Full year 2015 | H1 2015 | H1 2016 |
|---|---|---|---|
| Non-life insurance | |||
| - Technical result | 1,195 | 682 | 622 |
| - Investment return etc. | 55 | (35) | 521 |
| - Unwinding and revaluations | |||
| non-life insurance provisions | 93 | 125 | (448) |
| Profit on non-life insurance | 1,342 | 772 | 695 |
| Life insurance | 174 | 68 | 66 |
| Parent company etc. | 31 | 3 | 3 |
| Pre-tax profit | 1,547 | 842 | 763 |
| Tax | (364) | (191) | (169) |
| Profit | 1,183 | 651 | 594 |
Results for Q2 2016
Profit for Q2 2016 increased to DKK 430m (Q2 2015: DKK 365m). EPS was DKK 4.6 (Q2 2015: DKK 3.6).
Pre-tax profit increased DKK 75m to DKK 554m.
The technical result declined DKK 174m to DKK 309m. The decline was due to lower run-off profits (DKK 78m), weather-related claims (DKK 34m) and an increase in claims, primarily fire and burst pipes claims, in the personal segment (DKK 33m).
After unwinding and revaluation of non-life insurance provisions, the investment return increased DKK 227m to DKK 185m.
Profit on life insurance increased DKK 24m to DKK 58m impacted by the improved investment return and the risk result.
| Trend in profit (DKKm) | Q2 2015 | Q2 2016 |
|---|---|---|
| Non-life insurance | ||
| - Technical result | 483 | 309 |
| - Investment return etc. | (472) | 330 |
| - Unwinding and revaluations | ||
| non-life insurance provisions | 430 | (145) |
| Profit on non-life insurance | 441 | 495 |
| Life insurance | 34 | 58 |
| Parent company etc. | 4 | 1 |
| Pre-tax profit | 479 | 554 |
| Tax | (114) | (124) |
| Profit | 365 | 430 |
Non-life insurance Premiums earned
Premiums earned declined 1.9% to DKK 4,436m.
The personal segment accounted for a 2.1% decline, and the SME and industrial segment accounted for a 1.7% decline.
Developments in motor insurance continue to reflect an increase in the sale of smaller and safer cars, which has resulted in a trend with declining risk premium and declining average premiums. The average premium for motor insurance declined 2.4% from H1 2015 to H1 2016, reducing the Topdanmark Group's total earned premiums by 1.1% in H1 2016, compared to H1 2015.
Topdanmark prioritizes profitability over growth. The focus on profitability-promoting initiatives for less profitable customers in the SME and industrial area, primarily in workers' compensation, generated a loss of major industrial customers that did not meet Topdanmark's ROI requirement.
This loss of customers had a 0.5% adverse effect on premiums earned for the Topdanmark Group.
Announcement No. 44/2016 from Topdanmark A/S
Page 4 of 24
Announcement No. 44/2016 from Topdanmark A/S
Page 5 of 24
Claims trend
The claims trend was 69.1% in H1 2016 (69.0% in H1 2015).
There was an increase in fire claims compared to H1 2015, primarily in the personal segment. The claims trend was adversely impacted by 0.8pp for the Topdanmark Group.
Gross claims were impacted by a large-scale claim at Fredericia Harbour. However, the bulk of the claim is covered by reinsurers. The claim at Fredericia Harbour impacted the claims trend adversely by 0.3pp.
Run-off profits, net of reinsurance, were DKK 181m (H1 2015: DKK 176m), representing a 0.1pp improvement of the claims trend. Motor insurance and illness/accident insurance primarily generated run-off profits in H1 2016. In H1 2015, motor insurance and worker's compensation primarily generated run-off profits.
The difference between the interest rate levels in H1 2016 and H1 2015 resulted in a 0.3pp improvement of the claims trend.
The positive trend in the level of theft claims continued in H1 2016, representing a 0.2pp improvement of the claims trend.
Weather-related claims were DKK 34m in H1 2016 (DKK 40m in H1 2015), representing a 0.1pp improvement of the claims trend.
Expense ratio
In H1 2016, the expense ratio was 16.9% (H1 2015: 15.9%).
The 1pp increase in the expense ratio was due to a number of factors such as the increase in the payroll tax imposed on Danish financial businesses, which increased from 12.2% in 2015 to 13.6% in 2016. Furthermore, the expenditure on wages was impacted by a 1.8% contractual increase.
The expense ratio was also adversely impacted by non-recurring expenses for managerial adjustments, including changes in the Executive Board, cf. company announcement no. 11/2016. The expense ratio was also adversely impacted by the lower level of premiums.
Combined ratio
The combined ratio was 86.0% in H1 2016 (H1 2015: 84.9%). Excluding run-off profits, the combined ratio was 90.1% (H1 2015: 88.8%).
Reinsurance
The storm reinsurance programme has been renewed for one year from 1 July and remains unchanged at DKK 5.1bn including a retention of DKK 100m.
The renewal was incurred within the expense limits assumed in the profit forecast model for 2016. Further information on the storm programme is available in Topdanmark's risk report (page 7: Disaster risks) on www.topdanmark.com → Investor → Risk management.
The claims trend was 69.6 in Q2 2016 (Q2 2015: 63.3), representing a 6.3pp increase due to, lower run-off profits (3.5pp), weather-related claims (1.5pp) and personal claims – fire and burst pipes claims (1.5pp).
The expense ratio was 16.6% (Q2 2015: 15.4%). As for H1 2016, the increase in the expense ratio was due to the increase in the payroll tax, the contractual wage increase, non-recurrent expenses for managerial adjustments, including the changes in the Executive Board and the lower level of premiums.
Developments in Q2 2016
Premiums earned declined 1.4% to DKK 2,234m.
Premiums declined 1.7% in the personal area and 1.0% in the SME and Industrial segment.
The combined ratio was 86.2 in Q2 2016 (Q2 2015: 78.7).
Excluding run-off profits, combined ratio was 88.5 in Q2 2016 (Q2 2015: 84.4).
| Financial highlights – Non-life insurance (DKKn) | Full year 2015 | Q2 2015 | Q2 2016 | H1 2015 | H1 2016 |
|---|---|---|---|---|---|
| Gross premiums earned | 8,977 | 2,266 | 2,234 | 4,524 | 4,436 |
| Claims incurred | (6,183) | (1,410) | (1,356) | (3,069) | (3,032) |
| Expenses | (1,426) | (348) | (370) | (720) | (748) |
| Net reinsurance | (173) | (24) | (199) | (53) | (35) |
| Technical result | 1,195 | 483 | 309 | 682 | 622 |
| Investment return | 15 | (481) | 322 | (53) | 506 |
| Unwinding and revaluations non-life insurance provisions | 93 | 430 | (145) | 125 | (448) |
| Other items | 39 | 9 | 9 | 18 | 16 |
| Profit on non-life insurance | 1,342 | 441 | 495 | 772 | 695 |
| Run-off profits, net of reinsurance | 381 | 130 | 52 | 176 | 181 |
| Gross loss ratio (%) | 68.9 | 62.2 | 60.7 | 67.8 | 68.3 |
| Net reinsurance ratio (%) | 1.9 | 1.0 | 8.9 | 1.2 | 0.8 |
| Claims trend (%) | 70.8 | 63.3 | 69.6 | 69.0 | 69.1 |
| Gross expense ratio (%) | 15.9 | 15.4 | 16.6 | 15.9 | 16.9 |
| Combined ratio (%) | 86.7 | 78.7 | 86.2 | 84.9 | 86.0 |
| Combined ratio excl. run-off profits (%) | 90.9 | 84.4 | 88.5 | 88.8 | 90.1 |
Announcement No. 44/2016 from Topdanmark A/S
Announcement No. 44/2016 from Topdanmark A/S
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Segment reporting
Personal
Personal offers policies to individual households in Denmark.
Compared to H1 2015, premiums earned declined 2.1% to DKK 2,474m in H1 2016. In Q2, premiums earned declined 1.7% to DKK 1,237m.
The decline in premiums in H1 2016 was primarily due to a 4.9% decline in motor insurance. The motor insurance premium is impacted by a declining average premium (2.3%), and a decline in the number of cars insured (1.8%). The premium on other personal insurance declined 0.9%.
The technical result declined DKK 32m to DKK 392m in H1 2016.
The claims trend increased 0.1pp to 67.1%. As compared to H1 2015, the claims trend was impacted by increased expenses for fire claims, burst pipes claims and other sudden damage (2.0pp) as well as higher expenses for weather-related claims (0.2pp). On the other hand, the claims trend benefited from higher run-off profits.
The expense ratio increased to 17.0% (H1 2015: 16.2%) due to an increase in the number of sales employees, increased payroll tax and the lower level of premiums.
The combined ratio was 84.2 in H1 2016 (H1 2015: 83.2). Excluding run-off profits, the combined ratio was 90.2% (H1 2015: 87.3).
| Personal (DKKm) | Full year 2015 | Q2 2015 | Q2 2016 | H1 2015 | H1 2016 |
|---|---|---|---|---|---|
| Gross premiums earned | 4,986 | 1,258 | 1,237 | 2,526 | 2,474 |
| Claims incurred | (3,413) | (745) | (808) | (1,665) | (1,628) |
| Expenses | (809) | (199) | (214) | (409) | (422) |
| Net reinsurance | (68) | (34) | (26) | (27) | (32) |
| Technical result | 696 | 279 | 190 | 424 | 392 |
| Run-off profits, net of reinsurance | 221 | 71 | 68 | 103 | 151 |
| Gross loss ratio (%) | 68.5 | 59.2 | 65.3 | 65.9 | 65.8 |
| Net reinsurance ratio (%) | 1.4 | 2.7 | 2.1 | 1.1 | 1.3 |
| Claims trend (%) | 69.8 | 62.0 | 67.4 | 67.0 | 67.1 |
| Gross expense ratio (%) | 16.2 | 15.8 | 17.3 | 16.2 | 17.0 |
| Combined ratio (%) | 86.0 | 77.8 | 84.7 | 83.2 | 84.2 |
| Combined ratio excl. run-off profits (%) | 90.5 | 83.5 | 90.2 | 87.3 | 90.2 |
SME and Industrial
The SME and Industrial segment offers policies to Danish-based SME, agricultural and industrial businesses.
Premiums earned declined 1.7% to DKK 1,972m in H1 2016. In Q2, premiums earned declined 1.0% to DKK 1,002m.
The technical result declined DKK 27m to DKK 231m in H1 2016.
The claims trend increased 0.1pp to 71.7%. The large-scale claim at Fredericia Harbour had adverse impact on the claims trend (0.8pp). In contrast, the claims trend was positively impacted by a general improvement of the claims trend, primarily within movables.
The expense ratio increased from 15.5% to 16.6% in H1 2016. Nominally, the expenses increased by DKK 16m due to increased person-related expenses, including higher payroll tax and expenses for the development of a new IT system for the agricultural area.
The combined ratio was 88.3% in H1 2016 (H1 2015: 87.1%). Excluding run-off profits, the combined ratio was 89.8% (H1 2015: 90.7%).
| SME and Industrial
(DKKm) | Full year
2015 | Q2
2015 | Q2
2016 | H1
2015 | H1
2016 |
| --- | --- | --- | --- | --- | --- |
| Gross premiums earned | 4,011 | 1,012 | 1,002 | 2,007 | 1,972 |
| Claims incurred | (2,783) | (667) | (553) | (1,412) | (1,412) |
| Expenses | (619) | (149) | (156) | (311) | (327) |
| Net reinsurance | (105) | 10 | (173) | (25) | (2) |
| Technical result | 505 | 206 | 120 | 258 | 231 |
| Run-off profits, net of reinsurance | 161 | 59 | (16) | 72 | 31 |
| Gross loss ratio (%) | 69.4 | 65.9 | 55.2 | 70.4 | 71.6 |
| Net reinsurance ratio (%) | 2.6 | (1.0) | 17.2 | 1.3 | 0.1 |
| Claims trend (%) | 72.0 | 65.0 | 72.4 | 71.6 | 71.7 |
| Gross expense ratio (%) | 15.4 | 14.7 | 15.6 | 15.5 | 16.6 |
| Combined ratio (%) | 87.4 | 79.7 | 88.0 | 87.1 | 88.3 |
| Combined ratio excl. run-off profits (%) | 91.4 | 85.5 | 86.4 | 90.7 | 89.8 |
Life insurance
The result from life insurance was a profit of DKK 66m in H1 2016 (H1 2015: DKK 68m).
Profit on life insurance activities comprises the profit on life insurance plus the investment return of Liv Holding (Life Holding). This profit was calculated in accordance with the stated policy on the calculation of profit for the life insurance company: see www.topdanmark.com → Investor → Business → Life insurance → Policy for the calculation of profit in life insurance.
| Result of life insurance
(DKKm) | Full year
2015 | Q2
2015 | Q2
2016 | H1
2015 | H1
2016 |
| --- | --- | --- | --- | --- | --- |
| Investment return on shareholders' equity | 57 | 1 | 25 | 5 | 14 |
| Sales and administration | (45) | (2) | (12) | (18) | (31) |
| Insurance risk | 19 | (10) | 10 | 5 | 11 |
| Risk return on shareholders' equity | 137 | 34 | 36 | 68 | 72 |
| Risk return transferred to (minus)/from shadow account | 7 | 12 | 0 | 7 | 0 |
| Profit on life insurance | 174 | 34 | 58 | 68 | 66 |
| Estimated value of shadow account end of period | 12 | | | 17 | 8 |
The DKK 2m decline in profit was due to a decline in the result of sales and administration (DKK 13m), among other things due to increased expenses for the development of a new administration system.
On the other hand, investment return on shareholders' equity increased (DKK 9m) and the result of insurance risk also increased (DKK 6m).
The shadow account was written down by DKK 12m in H1 2016, after which the shadow account was DKK 8m due to losses in the expense groups in H1 2016.
Trend in premiums
Gross premiums increased 30.5% to DKK 3,896m in H1 2016, of which premiums on unit-linked pension schemes were DKK 3,006m, a 40.7% increase compared to H1 2015.
Unit-linked pension schemes represented 92% of new pension schemes written in H1 2016.
Regular premiums increased by 5.7% to DKK 1,390m in H1 2016. Single premiums were DKK 2,505m in H1 2016, representing a 50.2% increase.
Announcement No. 44/2016 from Topdanmark A/S
Page 8 of 24
Q2 2016
The result of life insurance increased to DKK 58m in Q2 2016 from DKK 34m in Q2 2015 due to an increase in investment return on shareholders' equity (DKK 24m) and improved result for insurance risk (DKK 20m). However, the result for sales and administration declined (DKK 10m loss).
Gross premiums increased 28.8% to DKK 1,761m in Q2 2016, of which earned premiums on unit-linked pensions schemes were DKK 1,421m, which is a 32.8% increase compared to Q2 2015.
Regular premiums increased 4.1% to DKK 552m in Q2 2016.
Single premiums were DKK 1,210m in Q2 2016, representing a 44.5% increase.
Investment activities
Topdanmark Group excl. life insurance
The investment return in the Topdanmark Group excluding life insurance was DKK 555m in H1 2016 (H1 2015: DKK 37m loss).
Unwinding and revaluation of non-life insurance provisions were DKK 448 (loss) in H1 2016 (H1 2015: DKK 125m).
In H1 2016, the investment return after unwinding and revaluation of non-life insurance provisions was DKK 107m (H1 2015: DKK 88m).
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 other things, equities, properties and CDOs in order to improve the average investment return. The return on the most significant classes of assets in H1 2016 is disclosed in the following table:
| Investment return | Portfolio | Return Q2 2016 | Return H1 2016 | |||
|---|---|---|---|---|---|---|
| 30 June 2016 (DKKbn) | (DKKm) | % | (DKKm) | (DKKm) | % | |
| Danish equities | 0.3 | (7) | (2.0) | (13) | (3.9) | |
| Foreign equities | 0.6 | 5 | 0.9 | (10) | (1.8) | |
| Unlisted equities and hedge funds | 0.4 | 35 | 11.3 | 6 | 1.7 | |
| Government and mortgage bonds | 14.5 | 171 | 1.2 | 371 | 2.9 | |
| Credit bonds | 0.3 | 4 | 0.5 | 6 | 1.3 | |
| Index linked bonds | 0.5 | 8 | 1.7 | 9 | 2.0 | |
| CDOs | 0.6 | 49 | 9.1 | 28 | 4.9 | |
| Properties | 1.0 | 14 | 1.4 | 28 | 2.8 | |
| Assets related to I/A | 2.3 | 70 | 3.1 | 149 | 6.9 | |
| Money market etc. | 1.7 | (4) | (0.3) | (12) | (0.6) | |
| Subordinated loan capital | (1.8) | (18) | (0.9) | (36) | (1.7) | |
| Interest-bearing debt | (0.8) | 0 | 0.2 | (1) | (0.4) | |
| 19.5 | 327 | 1.8 | 524 | 2.9 | ||
| Asset management | 16 | 31 | ||||
| Investment return | 343 | 555 | ||||
| Unwinding and revaluations non-life insurance provisions | (145) | (448) | ||||
| Investment return after unwinding and revaluations non-life insurance provisions | 198 | 107 |
The exposure in foreign equities and credit bonds has been adjusted by the 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 properties includes revaluation of owner-occupied property, which has been included in other comprehensive income.
The investment return including unwinding and revaluation of non-life insurance provisions was higher than the assumed investment return for Q2 2016 in the profit forecast for 2016 in the interim report for Q1 2016. The higher investment return is attributed to the credit market, and a positive hedging result of insurance provisions.
The post-tax equity exposure was DKK 769m (pre-tax: DKK 986m) 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 on 30 June 2016) and MSCI World DC in the original currency for foreign equities.
Announcement No. 44/2016 from Topdanmark A/S
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The class "Unlisted equities and hedge funds" includes private equity positions (DKK 80m) and positions in hedge funds where the investment mandates aim at positioning in the credit market (DKK 218m).
The Group's investments have no significant concentration of credit risk except for AAA-rated Danish mortgage bonds. The class "Government and mortgage bonds" comprises primarily Danish government and mortgage bonds. In addition, there are foreign government bonds mainly from European core countries, covered bonds and derivatives. The assets of the class are interest-rate sensitive - to a significant extent equivalent to the interest-rate sensitivity of the non-life insurance provisions. Consequently, the return on "Government and mortgage bonds" should be assessed in connection with unwinding and revaluation of non-life insurance provisions.
Credit bonds are composed of a well-diversified portfolio, primarily exposed to businesses in Europe and in the US, predominantly in the investment grade segment.
The class "Index linked bonds" comprises bonds – primarily Danish mortgage bonds – for which the coupon and principal are index linked.
The underlying assets of CDOs are mostly senior secured bank loans, 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 mainly comprises owner-occupied property (DKK 857m). 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 overall occupancy rate is 98.0%.
The class "Assets related to I/A" (illness/accident) comprises the investments in Topdanmark Livsforsikring (the life insurance company) corresponding to the level of illness/accident provisions.
"Money market etc." comprises money market deposits, intra-group balances, the result of currency positions and other returns not included in the other classes.
"Subordinated loan capital" comprises hybrid capital issued by the parent company, and subordinated loans issued by Topdanmark Forsikring.
"Interest-bearing debt" comprises other debt.
Topdanmark uses the Solvency II discount curve with volatility adjustment (VA) for assessing insurance provisions. The VA component comprises a corrective element for the development in pricing of Danish mortgage bonds as well as a corrective element for the development in pricing of European business credits. The VA component was essentially unchanged in H1 2016.
Solvency calculation and capital requirements
Solvency II took effect on 1 January 2016.
Solvency II gives companies the opportunity to fully or partially develop their own internal risk model for solvency calculation. Topdanmark uses a partial internal model developed in-house to calculate the non-life insurance risk.
This model, approved by the DFSA, provides basis for including non-life insurance risks in Topdanmark's solvency calculations.
The DFSA has granted Topdanmark approval for using the volatility-adjusted Solvency II interest rate curve (see above).
Own funds
Principal elements of own funds:
Shareholders' equity
- Deferred tax on security funds
- Profit margin
- Intangible assets
- DFSA approved share buy-back programme
- Tax effect
- Usable share, hybrid capital (max. 20% of tier 1)
- Usable share, subordinated notes (Max. 50% of SCR)
Own funds
On 24 June 2011, Topdanmark Forsikring issued subordinated notes at a value of DKK 400m. These subordinated notes were redeemed on 24 June 2016, which was the first possible date of redemption: cf. company announcement of 21 June 2011 from Topdanmark Forsikring.
In December 2015, Topdanmark issued subordinated notes in two tranches, cf. company announcement of 2 December 2015:
- DKK 500m, call in 2020, expiry in 2025
- DKK 850m, call in 2021, expiry in 2026
The overall outstanding subordinated notes are DKK 1,350m.
Announcement No. 44/2016 from Topdanmark A/S
Page 10 of 24
At the end of Q2 2016, Topdanmark's own funds were DKK 5,896m (Q1 2016: DKK 6,903m).
Of the overall reduction of DKK 1,007m, DKK 400m were due to planned share buy-back in the period August to December 2016, approved by the DFSA in Q2 2016. Redemption of subordinated notes, cf. above, reduced own funds by another DKK 400m.
The solvency requirement (SCR) was DKK 3,868m (Q1: DKK 3,819m).
Due to lower own funds, the solvency rate was reduced to 152 at the end of 2016 (Q1 2016: 181).
Parent company etc.
The parent company, Topdanmark, does not perform any independent activities.
The result of the parent company etc. includes the results of subsidiaries, excluding the insurance business (primarily Topdanmark Kapitalforvaltning, the asset management company) and finance costs.
The result was a profit of DKK 3m in H1 2016 (H1 2015: DKK 3m).
Taxation
The tax charge was DKK 169m of the pre-tax profit of DKK 763m, corresponding to an effective tax rate of 22.2% (H1 2015: 22.7%).
Profit forecast model
Traditionally, Topdanmark does not publish actual profit forecasts, but instead the expected level of results if a number of assumptions about the return in the financial markets are met. The return in the financial markets changes on a daily basis, and Topdanmark's profit forecast model will already deviate from actual expectations by the time it is published.
Therefore, set out in www.topdanmark.com → Investor → Risk management 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 for return.
Non-life insurance
In the interim report for Q1 2016, Topdanmark assumed negative premium growth in 2016 and a combined ratio of around 89, excluding run-off for Q2-Q4 2016. Overall, the interim report for Q1 2016 assumed a pre-tax profit of DKK 1,000-1,100m for 2016. This was based on the following assumptions:
- A normal year for weather-related claims of DKK 120m in Q2-Q4 2016
- A level of interest rates corresponding to the interest rate curve on 29 April 2016
- An expense ratio of around 16%
- An annual 7.0% return on equities and unchanged foreign exchange rates at the level of 29 April 2016.
Since the most recent profit forecast model was published in the interim report for Q1 2016, the following assumptions have changed:
- Weather-related claims were DKK 34m in Q2 2016 – DKK 9m higher than assumed – corresponding to a 0.1pp increase of the combined ratio for 2016
- In Q2 2016, there were run-off profits of DKK 52m, corresponding to a 0.6pp improvement of the combined ratio
- The trend in the personal segment was worse than expected in Q2 2016, corresponding to a 0.5pp increase in combined ratio
- Interest rates have decreased, representing a 0.2pp increase of the combined ratio
- From 29 April until 5 August 2016, the trend in the pre-tax investment return was DKK 100m better than expected, due to a positive trend in credits and a positive result after hedging for insurance provisions.
The assumed combined ratio for 2016 remains around 89, excluding run-off in H2 2016.
Premiums earned were on par with the assumed level. Consequently, negative growth in premiums for 2016 is still assumed.
Overall, the assumed pre-tax profit on non-life insurance is DKK 1,100-1,200m.
Announcement No. 44/2016 from Topdanmark A/S
Page 11 of 24
Announcement No. 44/2016 from Topdanmark A/S
Page 12 of 24
Life insurance
In the Interim Report for Q1 2016, Topdanmark assumed a pre-tax profit on life insurance of DKK 110-140m, based on the following assumptions:
- Approximately 5% growth in regular premiums
- No profit from the shadow account
The following forecast assumptions have changed:
- The investment return on shareholders' equity and the result of insurance risk were higher than assumed
Overall, the assumed pre-tax profit on life insurance was DKK 160-190m.
The result is highly sensitive to fluctuations particularly in the investment return.
Parent company
The profit forecast model for the parent company plus subsidiaries outside the insurance group assumes a pre-tax profit of DKK 30-40m.
Taxation
Given a corporation tax rate of 22.0%, the tax charge is expected to be DKK 290-330m.
Total Group profit
Topdanmark's overall post-tax profit forecast model for 2016 has been uprated by DKK 100m to DKK 1,000-1,100m, representing EPS of DKK 11.5. The assumed profit is exclusive of run-off profits/losses in H2 2016.
This profit forecast model is based on the assumption of an annual 7.0% return on equities and unchanged foreign exchange rates from the level on 5 August 2016.
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 1.81% (risk-free interest rate plus 2.0pp).
| Profit forecast 2016 (DKKm) | Results 2015 | Forecast 2016 29 April 2016 | Forecast 2016 5 August 2016 | ||||
|---|---|---|---|---|---|---|---|
| Non-life insurance | |||||||
| - Technical result | 1,195 | 950 | - | 1,000 | 950 | - | 1,000 |
| - Investment return, unwinding and revaluations | |||||||
| non-life insurance provisions | 147 | 50 | - | 100 | 150 | - | 200 |
| Profit on non-life insurance | 1,342 | 1,000 | - | 1,100 | 1,100 | - | 1,200 |
| Life insurance | 174 | 110 | - | 140 | 160 | - | 190 |
| Parent company etc. | 31 | 30 | - | 40 | 30 | - | 40 |
| Pre-tax profit | 1,547 | 1,140 | - | 1,280 | 1,290 | - | 1,430 |
| Taxation | (364) | (240) | - | (280) | (290) | - | (330) |
| Profit for the year | 1,183 | 900 | - | 1,000 | 1,000 | - | 1,100 |
Share buy-back
The 2016 Q1 Interim Report stated that it was Topdanmark's intention to buy back Topdanmark shares at a value of DKK 1,350m. The buy-back will be executed from the time of the announcement of annual results, 11 February 2016 until the announcement of the Annual Report for 2016, 23 February 2017.
On the basis of the assumed result for 2016, the buy-back of Topdanmark shares is uprated DKK 100m, so that the intended buy-back for 2016 will be DKK 1,450m, representing a buy-back yield of 9.0 calculated on the basis of the price of the Topdanmark share on 5 August 2016.
In the years 2000-2015, the average annual buy-back yield was 9.4%.
At 12 August 2016, Topdanmark has bought back own shares of DKK 599m of the 2016 buy-back programme, corresponding to 3.522.600 shares, which leaves a balance of DKK 851m of the 2016 buy-back programme.
In H1 2016, share buy-back was DKK 767m, DKK 483m of which related to the 2016 buy-back programme and DKK 283 related to the 2015 buy-back programme.
The DFSA has approved a buy-back of DKK 1,000m for 2016. Topdanmark will apply for DFSA approval of share buy-back on a quarterly basis.
At Topdanmark's Annual General Meeting on 7 April 2016, the share capital was written down by 10,000,000 shares. On the expiry for filing objections, the number of shares will be 95,000,000. Subsequently, Topdanmark's holding of own shares will be 4,425,000, and consequently the number of voting shares will be 90,575,000.
Since 1998, when Topdanmark started buying back own shares, it has been decided to cancel DKK 16.8bn of own shares representing a 77.0% write-down of the share capital. The average price of the written-down shares is 53.0.
Topdanmark's buy-back programme is executed under the European Commission's Regulation No. 2273/2003 of 22 December 2003 (the "Safe Harbour" method). Topdanmark has made an agreement with Danske Bank, which is the lead manager for the share buy-back. The agreement with Danske Bank ensures that trade decisions and execution of the buy-back will be independent of and without influence from Topdanmark.
From 17 August 2016 to 14 November 2016, Danske Bank has been authorised to buy shares in Topdanmark up to a value of DKK 401m.
Until 14 November 2016, the maximum amount Topdanmark can pay for shares under the programme is DKK 401m, and a maximum of 5,000,000 shares can be bought, representing 5.3% of Topdanmark's share capital.
The buy-back must not be made at a price exceeding the higher of (1) the share price of the latest independent transaction and (2) the highest current independent offer price on Nasdaq Copenhagen on the day of trading.
The maximum number of shares in Topdanmark that may be bought on each trading day will represent 25% of the average daily trading volume of the Company's shares, traded on Nasdaq Copenhagen within the 20 trading days preceding the purchase date.
As long as the share buy-back programme runs, at the beginning of each week, Topdanmark will announce the number and the value of the shares bought back in a separate company announcement to Nasdaq Copenhagen.
Financial calendar
| Q1-Q3 2016 Interim Report | 15 Nov 2016 |
|---|---|
| Deadline for submitting items for AGM agenda | 20 Feb 2017 |
| 2016 Annual Report | 23 Feb 2017 |
| AGM | 4 Apr 2017 |
| Q1 2017 Interim Report | 23 May 2017 |
| 2017 Half-year Report | 15 Aug 2017 |
Disclaimer
This half-year report includes statements relating to the future. Such statements are uncertain and involve both general and specific risks.
Many factors may cause significant deviation from the forecasts and assumptions set out in the half-year report. Such factors could be, for example, cyclical movements, changes in the financial markets, the financial effect of unexpected events like acts of terror or exceptional weather conditions, changes in Danish and EU rules, competitive factors in the insurance industry and trends in the reinsurance market. See also: www.topdanmark.com → Investor → 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 give their own careful consideration to 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 half-year report.
This publication is a translation. In case of any divergence, the original Danish text shall prevail.
Accounting policies
The 2016 half-year report has been prepared in accordance with IAS 34 on interim reports for listed companies. Furthermore, the half-year report has been prepared in accordance with additional Danish disclosure requirements on interim reports for listed financial services companies.
Accounting policies have been adapted to the changed Danish Executive Order on Financial Statements that took effect on 1 January 2016.
Comparative figures for the Topdanmark Group excluding life insurance have been adapted with effect as from the 2015 opening balance, from which time EIOPA has published interest rate curves and the Topdanmark Group's models for calculation of premium provisions and profit margin have been established in accordance with the new accounting policies.
It has not been practicable to prepare comparative figures for life insurance.
Announcement No. 44/2016 from Topdanmark A/S
Page 13 of 24
Please see the Q1 Interim Report for further description of the changed accounting policies and the effect of the change in comparative figures.
The half-year report has not been audited or subjected to a review.
The effects of combined ratio on the financial ratios are shown in the table below:
| Combined ratio | Year 2015 | Q2 2015 | Ht 2015 | |||
|---|---|---|---|---|---|---|
| Accounts | New practice | Accounts | New practice | Accounts | New practice | |
| Claims incurred | 69.5 | 68.9 | 64.2 | 62.2 | 68.5 | 67.8 |
| Net reinsurance | 1.9 | 1.9 | 1.0 | 1.0 | 1.2 | 1.2 |
| Claims trend | 71.4 | 70.8 | 65.2 | 63.3 | 69.7 | 69.0 |
| Expense ratio | 15.9 | 15.9 | 15.5 | 15.4 | 16.1 | 15.9 |
| Combined ratio | 87.3 | 86.7 | 80.8 | 78.7 | 85.7 | 84.9 |
| Combined ratio excl. run-off | 91.6 | 90.9 | 86.6 | 84.4 | 89.6 | 88.8 |
Announcement No. 44/2016 from Topdanmark A/S
Page 14 of 24
Income statement • Group
| (DKKm) | Full year | Q2 | Q2 | H1 | H1 | |
|---|---|---|---|---|---|---|
| Note | 2015 | 2015 | 2016 | 2015 | 2016 | |
| NON-LIFE INSURANCE | ||||||
| Gross premiums written | 8,883 | 1,602 | 1,632 | 5,714 | 5,632 | |
| Reinsurance ceded | (671) | (48) | (56) | (449) | (436) | |
| Change in the provisions for unearned premiums | 51 | 587 | 545 | (1,313) | (1,268) | |
| Change in profit margin and risk margin | 105 | 90 | 75 | 149 | 100 | |
| Change in reinsurers' share of the provisions for unearned premiums | 3 | (117) | (96) | 104 | 122 | |
| Premiums earned, net of reinsurance | 8,371 | 2,114 | 2,100 | 4,206 | 4,150 | |
| Gross claims paid | (6,254) | (1,510) | (1,664) | (3,172) | (3,179) | |
| Reinsurance cover received | 476 | 151 | 133 | 269 | 181 | |
| Change in the provisions for claims | 71 | 81 | 304 | 117 | 175 | |
| Change in risk margin | 14 | 22 | 8 | (6) | (20) | |
| Change in reinsurers' share of the provisions for claims | (68) | (35) | (198) | (23) | 59 | |
| Claims incurred, net of reinsurance | 1 | (5,761) | (1,289) | (1,417) | (2,816) | (2,784) |
| Bonuses and rebates | (62) | (13) | (17) | (27) | (28) | |
| Acquisition costs | (920) | (235) | (253) | (475) | (488) | |
| Administrative expenses | (484) | (106) | (111) | (234) | (248) | |
| Reinsurance commission and share of profits | 86 | 24 | 17 | 46 | 39 | |
| Total operating expenses, net of reinsurance | (1,318) | (317) | (347) | (662) | (696) | |
| TECHNICAL PROFIT ON NON-LIFE INSURANCE | 1,231 | 494 | 319 | 701 | 642 | |
| LIFE INSURANCE | ||||||
| Gross premiums written | 2 | 6,320 | 1,367 | 1,761 | 2,984 | 3,896 |
| Reinsurance ceded | (10) | (3) | (1) | (5) | (3) | |
| Premiums, net of reinsurance | 6,309 | 1,365 | 1,760 | 2,979 | 3,893 | |
| Allocated investment return, net of reinsurance | 1,194 | (823) | 740 | 1,386 | 470 | |
| Pension return tax | (165) | 172 | (84) | (181) | (133) | |
| Claims and benefits paid | (3,240) | (896) | (914) | (1,680) | (1,767) | |
| Reinsurance cover received | 7 | 1 | 1 | 3 | 3 | |
| Claims and benefits paid, net of reinsurance | (3,233) | (895) | (913) | (1,678) | (1,764) | |
| Change in life insurance provisions | (3,680) | 295 | (1,384) | (2,296) | (2,247) | |
| Change in reinsurers' share | (1) | (3) | (3) | (1) | (2) | |
| Change in the life insurance provisions, net of reinsurance | (3,681) | 292 | (1,387) | (2,297) | (2,249) | |
| Change in profit margin | - | - | (3) | - | (12) | |
| Acquisition costs | (153) | (38) | (37) | (77) | (77) | |
| Administrative expenses | (253) | (60) | (72) | (127) | (141) | |
| Reinsurance commission and share of profits | 1 | 1 | 0 | 1 | 0 | |
| Total operating expenses, net of reinsurance | (405) | (97) | (109) | (204) | (218) | |
| TECHNICAL PROFIT / (LOSS) ON LIFE INSURANCE | 19 | 13 | 4 | 6 | (14) |
Announcement No. 44/2016 from Topdanmark A/S
Page 15 of 24
Announcement No. 44/2016 from Topdanmark A/S
Page 16 of 24
Income statement • Group
| (DKKm) | Full year 2015 | Q2 2015 | Q2 2016 | H1 2015 | H1 2016 |
|---|---|---|---|---|---|
| NON-TECHNICAL ACTIVITIES | |||||
| Technical profit on non-life insurance | 1,231 | 494 | 319 | 701 | 642 |
| Technical profit / (loss) on life insurance | 19 | 13 | 4 | 6 | (14) |
| Income from associated companies | 93 | 13 | 8 | 55 | 17 |
| Income from investment properties | 94 | 22 | 19 | 55 | 40 |
| Interest income and dividends etc. | 1,938 | 717 | 544 | 1,207 | 950 |
| Revaluations | (577) | (1,989) | 589 | 164 | 141 |
| Interest charges | (61) | (19) | (20) | (36) | (44) |
| Expenses on investment business | (66) | (18) | (13) | (33) | (29) |
| Total investment return | 1,421 | (1,273) | 1,127 | 1,412 | 1,074 |
| Unwinding and revaluations non-life insurance provisions | 93 | 430 | (145) | 125 | (448) |
| Investment return transferred to life insurance business | (1,194) | 823 | (740) | (1,386) | (470) |
| Other income | 20 | 4 | 5 | 9 | 10 |
| Other expenses | (42) | (13) | (16) | (25) | (31) |
| PRE-TAX PROFIT | 1,547 | 479 | 554 | 842 | 763 |
| Taxation | (364) | (114) | (124) | (191) | (169) |
| PROFIT FOR THE PERIOD | 1,183 | 365 | 430 | 651 | 594 |
| EPS (DKK) | 11.8 | 3.6 | 4.7 | 6.4 | 6.4 |
| EPS, diluted (DKK) | 11.8 | 3.6 | 4.6 | 6.3 | 6.3 |
Statement of comprehensive income • Group
| Profit for the period | 1,183 | 365 | 430 | 651 | 594 |
|---|---|---|---|---|---|
| Items which cannot subsequently be reclassified as profit or loss: | |||||
| Revaluation of owner-occupied properties | 1 | 0 | 0 | 1 | 1 |
| Other comprehensive income | 1 | 0 | 0 | 1 | 1 |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 1,184 | 366 | 430 | 652 | 595 |
Assets • Group
| (DKKm) | 31 December 2015 | 30 June 2015 | 30 June 2016 |
|---|---|---|---|
| INTANGIBLE ASSETS | 689 | 642 | 749 |
| Operating equipment | 127 | 127 | 138 |
| Owner-occupied properties | 857 | 857 | 857 |
| TOTAL TANGIBLE ASSETS | 984 | 984 | 995 |
| Investment properties | 3,868 | 4,092 | 3,964 |
| Shares in associated companies | 172 | 376 | 188 |
| Total investment in associated companies | 172 | 376 | 188 |
| Shares | 6,740 | 6,901 | 6,061 |
| Unit trusts | 0 | 50 | 0 |
| Bonds | 31,455 | 34,611 | 36,663 |
| Loans guaranteed by mortgages | 7 | 11 | 7 |
| Other loans | 32 | 0 | 121 |
| Deposits with credit institutions | 3,721 | 1,201 | 2,247 |
| Derivatives | 1,350 | 1,613 | 1,709 |
| Total other financial investment assets | 43,304 | 44,387 | 46,808 |
| TOTAL INVESTMENT ASSETS | 47,344 | 48,855 | 50,960 |
| INVESTMENT ASSETS RELATED TO MARKET INTEREST PRODUCTS | 15,645 | 13,399 | 16,523 |
| Reinsurers' share of provisions for unearned premiums | 71 | 157 | 176 |
| Reinsurers' share of life insurance provisions | 32 | 32 | 29 |
| Reinsurers' share of the provisions for claims and benefits | 582 | 623 | 643 |
| Total reinsurers' share of provisions | 684 | 812 | 849 |
| Amounts due from policyholders | 328 | 398 | 362 |
| Amounts due from insurance companies | 81 | 84 | 63 |
| Amounts due from associated companies | 353 | 358 | 353 |
| Other debtors | 259 | 160 | 321 |
| TOTAL DEBTORS | 1,706 | 1,813 | 1,949 |
| Assets held temporarily | 0 | 2 | 0 |
| Current tax assets | 47 | 0 | 0 |
| Deferred tax assets | 14 | 12 | 8 |
| Liquid funds | 640 | 759 | 359 |
| Other | 120 | 54 | 94 |
| TOTAL OTHER ASSETS | 821 | 828 | 462 |
| Accrued interest and rent | 285 | 284 | 264 |
| Other prepayments and accrued income | 193 | 248 | 226 |
| TOTAL PREPAYMENTS AND ACCRUED INCOME | 477 | 532 | 490 |
| TOTAL ASSETS | 67,667 | 67,052 | 72,129 |
Announcement No. 44/2016 from Topdanmark A/S
Shareholders' equity and liabilities • Group
| (DKKm) | Note | 31 December 2015 | 30 June 2015 | 30 June 2016 |
|---|---|---|---|---|
| Share capital | 105 | 115 | 105 | |
| Revaluation reserve | 11 | 11 | 12 | |
| Security fund | 1,146 | 1,146 | 1,146 | |
| Other reserves | 47 | 45 | 53 | |
| Total reserves | 1,193 | 1,191 | 1,199 | |
| Profit carried forward | 3,312 | 3,565 | 3,153 | |
| TOTAL SHAREHOLDERS' EQUITY | 4,621 | 4,882 | 4,469 | |
| SUBORDINATED LOAN CAPITAL | 2,154 | 808 | 1,754 | |
| Provisions for unearned premiums | 1,922 | 3,282 | 3,231 | |
| Profit margin, non-life insurance contracts | 817 | 767 | 700 | |
| Products with guarantees and profitsharing | 24,321 | 25,150 | 24,231 | |
| Unit Linked products | 16,216 | 13,751 | 18,781 | |
| Total life insurance provisions | 40,537 | 38,902 | 43,012 | |
| Profit margin, life insurance and investment contracts | - | - | 174 | |
| Provisions for claims and benefits | 13,121 | 13,120 | 13,218 | |
| Risk margin, non-life insurance contracts | 313 | 328 | 346 | |
| Provisions for bonuses and rebates | 137 | 120 | 130 | |
| TOTAL PROVISIONS FOR INSURANCE AND INVESTMENT CONTRACTS | 56,847 | 56,519 | 60,811 | |
| Pensions and similar commitments | 28 | 28 | 28 | |
| Deferred tax liabilities | 73 | 74 | 69 | |
| Deferred tax on security funds | 306 | 306 | 306 | |
| TOTAL LIABILITIES PROVIDED | 407 | 409 | 403 | |
| DEPOSITS RECEIVED FROM REINSURERS | 62 | 84 | 62 | |
| Creditors arising out of direct insurance operations | 394 | 341 | 300 | |
| Creditors arising out of reinsurance operations | 43 | 66 | 49 | |
| Amounts due to credit institutions | 1,346 | 1,650 | 2,565 | |
| Amounts due to associated companies | 0 | 4 | 0 | |
| Current tax liabilities | 9 | 97 | 19 | |
| Derivatives | 527 | 986 | 563 | |
| Other creditors | 1,133 | 1,115 | 1,050 | |
| TOTAL CREDITORS | 3,452 | 4,259 | 4,547 | |
| ACCRUALS AND DEFERRED INCOME | 123 | 92 | 83 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 67,667 | 67,052 | 72,129 |
Financial assets and liabilities 3
Contingent liabilities 4
Announcement No. 44/2016 from Topdanmark A/S
Cash flow statement • Group
| (DKKm) | Full year 2015 | H1 2015 | H1 2016 |
|---|---|---|---|
| Cash flow from operations | |||
| Gross premiums written | 8,827 | 5,643 | 5,571 |
| Claims paid | (6,182) | (3,153) | (3,149) |
| Expenses | (1,314) | (686) | (713) |
| Reinsurance ceded | (12) | (20) | (170) |
| Cash flow from non-life insurance | 1,319 | 1,784 | 1,539 |
| Gross premiums written | 6,398 | 2,992 | 3,802 |
| Claims and benefits | (3,365) | (1,798) | (1,569) |
| Pension return tax | (496) | (490) | (254) |
| Expenses | (385) | (192) | (219) |
| Reinsurance ceded | (52) | (29) | 1 |
| Cash flow from life insurance | 2,099 | 483 | 1,761 |
| Total cash flow from insurance business | 3,418 | 2,267 | 3,301 |
| Payments on investment contracts | 525 | 239 | 204 |
| Dividends from associated companies | 8 | 8 | 0 |
| Interest income and dividends etc. | 1,999 | 1,327 | 937 |
| Interest charges etc. | (131) | (88) | (79) |
| Corporation tax | (403) | (94) | (115) |
| Other items | (20) | (15) | (19) |
| Total cash flow from operations | 5,396 | 3,643 | 4,228 |
| Investments | |||
| Intangible assets, operating equipment | (200) | (93) | (111) |
| Properties | 48 | (154) | (96) |
| Shares in associated companies | 245 | (1) | (3) |
| Shares | 1,458 | 1,318 | 416 |
| Unit trust shares | 33 | (16) | (2) |
| Bonds | 1,974 | (966) | (4,840) |
| Loans | (28) | 1 | (88) |
| Derivatives | (970) | (560) | 6 |
| Investment activities related to market interest products | (5,107) | (2,499) | (1,335) |
| Balances with associated companies | 123 | 140 | 0 |
| Total investments | (2,424) | (2,830) | (6,052) |
| Financing | |||
| Shares bought back | (1,652) | (844) | (769) |
| Exercise of share options etc. | 50 | 44 | 14 |
| Sale of own shares | 16 | 18 | 0 |
| Redemption of subordinated loan capital | (350) | (350) | (400) |
| Issue of subordinated loan capital | 1,345 | 0 | 0 |
| Bond loans | (29) | (29) | 0 |
| Amounts due to credit institutions | (615) | (311) | 1,219 |
| Total financing | (1,235) | (1,473) | 64 |
| Change in cash and cash equivalents | 1,736 | (659) | (1,759) |
| Cash and cash equivalents at 1 January | 2,590 | 2,590 | 4,361 |
| Revaluation of cash and cash equivalents | 35 | 29 | 5 |
| Cash and cash equivalents at 31 December | 4,361 | 1,960 | 2,606 |
| Cash and cash equivalents comprise: | |||
| Liquid funds | 640 | 759 | 359 |
| Deposits with credit institutions | 3,721 | 1,201 | 2,247 |
| 4,361 | 1,960 | 2,606 |
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.
Announcement No. 44/2016 from Topdanmark A/S
Page 19 of 24
Statement of changes in equity • Group
(DKKm)
| Share capital | Revaluation reserve | Security fund | Other reserves | Profit carried forward | Total | |
|---|---|---|---|---|---|---|
| 2015 | ||||||
| Shareholders' equity at 31 December prior year | 115 | 10 | 1,146 | 39 | 3,825 | 5,135 |
| Effect of new Executive Order on Financial Statements | (103) | (103) | ||||
| Equity end of year 2015 according to new Executive Order on Financial Statements | 115 | 10 | 1,146 | 39 | 3,723 | 5,033 |
| Profit for the year | 8 | 1,175 | 1,183 | |||
| Other comprehensive income | 1 | 0 | 0 | 1 | ||
| Total comprehensive income for the year | 1 | 8 | 1,175 | 1,184 | ||
| Cancellation of own shares | (10) | 10 | 0 | |||
| Share buy-back | (1,667) | (1,667) | ||||
| Sale of own shares | 16 | 16 | ||||
| Issue of share options | 10 | 10 | ||||
| Exercise of share options | 50 | 50 | ||||
| Taxation | (4) | (4) | ||||
| Other transactions | (10) | (1,586) | (1,596) | |||
| Shareholders' equity at 31 December 2015 | 105 | 11 | 1,146 | 47 | 3,312 | 4,621 |
H1 2015
| Shareholders' equity at 31 December prior year | 115 | 10 | 1,146 | 39 | 3,825 | 5,135 |
|---|---|---|---|---|---|---|
| Effect of new Executive Order on Financial Statements | (103) | (103) | ||||
| Equity end of year 2015 according to new Executive Order on Financial Statements | 115 | 10 | 1,146 | 39 | 3,723 | 5,033 |
| Profit for the period | 6 | 645 | 651 | |||
| Other comprehensive income | 1 | 0 | 0 | 1 | ||
| Total comprehensive income for the period | 1 | 6 | 645 | 652 | ||
| Sale of own shares | (866) | (866) | ||||
| Share buy-back | 18 | 18 | ||||
| Issue of share options | 7 | 7 | ||||
| Exercise of share options | 44 | 44 | ||||
| Taxation | (5) | (5) | ||||
| Other transactions | (803) | (803) | ||||
| Shareholders' equity at 30 June 2015 | 115 | 11 | 1,146 | 45 | 3,565 | 4,882 |
H1 2016
| Shareholders' equity at 31 December prior year | 105 | 11 | 1,146 | 47 | 3,364 | 4,673 |
|---|---|---|---|---|---|---|
| Effect of new Executive Order on Financial Statements | (49) | (49) | ||||
| Equity end of year 2015 according to new Executive Order on Financial Statements | 105 | 11 | 1,146 | 47 | 3,315 | 4,624 |
| Profit for the period | 6 | 588 | 594 | |||
| Other comprehensive income | 1 | 0 | 0 | 1 | ||
| Total comprehensive income for the period | 1 | 6 | 588 | 595 | ||
| Share buy-back | (767) | (767) | ||||
| Issue of share options | 6 | 6 | ||||
| Exercise of share options | 14 | 14 | ||||
| Taxation | (3) | (3) | ||||
| Other transactions | (750) | (750) | ||||
| Shareholders' equity at 30 June 2016 | 105 | 12 | 1,146 | 53 | 3,153 | 4,469 |
Announcement No. 44/2016 from Topdanmark A/S
Page 20 of 24
Segment information • Group
Income statement
| (DKKm) | Per-sonal | SME and Industrial | Elimin-ated | Non-life | Life | Parent etc. | Elimin-ated | Group |
|---|---|---|---|---|---|---|---|---|
| H1 2015 | ||||||||
| Non-life insurance | ||||||||
| Gross premiums earned | 2,526 | 2,007 | (9) | 4,524 | 4,524 | |||
| Claims incurred | (1,665) | (1,412) | 8 | (3,069) | 8 | (3,061) | ||
| Expenses | (409) | (311) | 0 | (720) | 12 | (708) | ||
| Net reinsurance | (27) | (25) | 0 | (53) | (53) | |||
| Technical profit / (loss) on non-life insurance | 424 | 258 | (1) | 682 | 20 | 701 | ||
| Life insurance | ||||||||
| Gross premiums written | 2,984 | 2,984 | ||||||
| Allocated investment return | 1,386 | 1,386 | ||||||
| Pension return tax | (181) | (181) | ||||||
| Benefits and change in provisions | (3,977) | (3,977) | ||||||
| Expenses | (208) | 3 | (205) | |||||
| Net reinsurance | (2) | (2) | ||||||
| Technical profit on life insurance | 3 | 3 | 6 | |||||
| Total investment return | (60) | 1,420 | 23 | 29 | 1,412 | |||
| Pension return tax | 8 | (8) | 0 | |||||
| Unwinding and revaluations non-life insurance provisions | 125 | 125 | ||||||
| Transferred to technical result | (1,386) | (1,386) | ||||||
| Other items | 18 | 38 | (20) | (52) | (16) | |||
| Pre-tax profit | 772 | 68 | 3 | 0 | 842 | |||
| Taxation | (191) | |||||||
| Profit | 651 |
H1 2016
| Non-life insurance | |||||||
|---|---|---|---|---|---|---|---|
| Gross premiums earned | 2,474 | 1,972 | (10) | 4,436 | 4,436 | ||
| Claims incurred | (1,628) | (1,412) | 8 | (3,032) | 8 | (3,023) | |
| Expenses | (422) | (327) | 0 | (748) | 13 | (736) | |
| Net reinsurance | (32) | (2) | 0 | (35) | (35) | ||
| Technical profit / (loss) on non-life insurance | 392 | 231 | (2) | 622 | 21 | 642 | |
| Life insurance | |||||||
| Gross premiums written | 3,896 | 3,896 | |||||
| Allocated investment return | 470 | 470 | |||||
| Pension return tax | (133) | (133) | |||||
| Benefits and change in provisions | (4,026) | (4,026) | |||||
| Expenses | (222) | 3 | (219) | ||||
| Net reinsurance | (2) | (2) | |||||
| Technical profit / (loss) on life insurance | (17) | 3 | (14) | ||||
| Total investment return | 527 | 472 | 28 | 47 | |||
| Pension return tax | (21) | 21 | 0 | ||||
| Unwinding and revaluations non-life insurance provisions | (448) | (448) | |||||
| Transferred to technical result | (470) | (470) | |||||
| Other items | 16 | 59 | (25) | (71) | |||
| Pre-tax profit | 695 | 66 | 3 | 0 | |||
| Taxation | (169) | ||||||
| Profit | 594 |
Announcement No. 44/2016 from Topdanmark A/S
Notes to the financial statements • Group
| (DKKm) | Full year 2015 | H1 2015 | H1 2016 |
|---|---|---|---|
| Note 1. Claims incurred, net of reinsurance – Non-life insurance | |||
| Run-off profit: | |||
| Gross business | 387 | 145 | 171 |
| Reinsurance ceded | (5) | 31 | 10 |
| Run-off profit, net of reinsurance | 381 | 176 | 181 |
Note 2. Gross premiums written – Life insurance
| Individual policies | 330 | 137 | 133 |
|---|---|---|---|
| Policies which are part of a tenure | 1,650 | 791 | 874 |
| Group life | 533 | 388 | 383 |
| Regular premiums | 2,513 | 1,316 | 1,390 |
| Individual policies | 1,047 | 433 | 972 |
| Policies which are part of a tenure | 2,760 | 1,235 | 1,533 |
| Single premiums | 3,807 | 1,669 | 2,505 |
| Gross premiums | 6,320 | 2,984 | 3,896 |
| Note 3. Financial assets and liabilities | 31 December 2015 | 30 June 2015 | 30 June 2016 |
| --- | --- | --- | --- |
| The Group's holding of financial assets, which are recorded at fair value using valuation models based on non-observable inputs, was DKK 545m. Besides the project financing in Carlsberg Byen (DKK 307m), the item comprises primarily bonds of DKK 217m, the regular return on which depends on payment into annuity contracts. | |||
| The fair value is equivalent to the cost price in the transaction currency. | |||
| Bonds measured by reference to non-observable inputs - Level 3: | |||
| Portfolio at 1 January | 172 | 172 | 523 |
| Purchases | 97 | 61 | 43 |
| Transferred from level 2 | 254 | 0 | 0 |
| Repayments | 0 | 0 | (16) |
| Foreign exchange adjustment | 0 | 0 | (5) |
| Portfolio at 31 December | 523 | 233 | 545 |
There have been no changes to the classification of financial assets or financial liabilities in H1 2016.
The book value of financial assets and financial liabilities recorded at amortised cost corresponds approximately to fair value.
The accounting policies for financial assets and commitments are stated in the 2015 Annual Report.
Note 4. Contingent liabilities
| Contract liabilities | 121 | 210 | 34 |
|---|---|---|---|
| Adjustments to VAT liabilities | 39 | 25 | 44 |
| Other liabilities | 13 | 10 | 11 |
| Capital commitments to loan funds and private equity funds etc. | 1,254 | 1,285 | 1,200 |
The Group companies participate in technical insurance collaboration where they are jointly liable for the insurance liabilities.
Announcement No. 44/2016 from Topdanmark A/S
Page 22 of 24
Income statement • Parent company
| (DKKm) | Full year 2015 | Q2 2015 | Q2 2016 | H1 2015 | H1 2016 |
|---|---|---|---|---|---|
| Income from affiliated companies | 1,221 | 375 | 442 | 674 | 616 |
| Revaluations | (4) | 1 | 1 | (4) | 1 |
| Interest charges | (9) | (3) | (2) | (5) | (4) |
| Total investment return | 1,208 | 372 | 440 | 665 | 613 |
| Other expenses | (35) | (10) | (13) | (20) | (25) |
| PRE-TAX PROFIT | 1,172 | 363 | 427 | 645 | 588 |
| Taxation | 11 | 3 | 3 | 6 | 6 |
| PROFIT FOR THE PERIOD | 1,183 | 365 | 430 | 651 | 594 |
Statement of comprehensive income • Parent company
| Profit for the period | 1,183 | 365 | 430 | 651 | 594 |
|---|---|---|---|---|---|
| Other comprehensive income from affiliated companies | 1 | 0 | 0 | 1 | 1 |
| Other comprehensive income | 1 | 0 | 0 | 1 | 1 |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 1,184 | 366 | 430 | 652 | 595 |
Balance sheet • Parent company
| (DKKm) | 31 December 2015 | 30 June 2015 | 30 June 2016 |
|---|---|---|---|
| Assets | |||
| Machinery and equipment | 3 | 3 | 3 |
| TOTAL TANGIBLE ASSETS | 3 | 3 | 3 |
| Shares in affiliated companies | 5,093 | 5,544 | 5,147 |
| Total investment in affiliated companies | 5,093 | 5,544 | 5,147 |
| TOTAL INVESTMENT ASSETS | 5,093 | 5,544 | 5,147 |
| Amounts due from affiliated companies | 497 | 374 | 293 |
| Other debtors | 4 | 0 | 1 |
| TOTAL DEBTORS | 501 | 374 | 294 |
| Current tax assets | 25 | 0 | 0 |
| Deferred tax assets | 1 | 1 | 1 |
| Liquid funds | 2 | 3 | 2 |
| TOTAL OTHER ASSETS | 28 | 4 | 3 |
| TOTAL ASSETS | 5,625 | 5,924 | 5,447 |
Shareholders' equity and liabilities
| Share capital | 105 | 115 | 105 |
|---|---|---|---|
| Other reserves | 1,344 | 1,795 | 1,398 |
| Total reserves | 1,344 | 1,795 | 1,398 |
| Profit carried forward | 3,479 | 3,278 | 3,272 |
| TOTAL SHAREHOLDERS' EQUITY | 4,927 | 5,188 | 4,775 |
| SUBORDINATED LOAN CAPITAL | 409 | 408 | 408 |
| Amounts due to affiliated companies | 264 | 173 | 224 |
| Current tax liabilities | 0 | 124 | 17 |
| Other creditors | 24 | 31 | 23 |
| TOTAL CREDITORS | 289 | 328 | 264 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 5,625 | 5,924 | 5,447 |
Announcement No. 44/2016 from Topdanmark A/S
Page 23 of 24
Statement by Management
We have today considered and adopted the interim report for H1 2016 for Topdanmark A/S.
The consolidated financial statements have been prepared in accordance with IAS 34 on interim reports as adopted by the EU, and the interim financial statements for the parent company have been prepared in accordance with the Danish Financial Business Act. Furthermore, the half-year report has been prepared in accordance with the additional Danish disclosure requirements on interim reports for listed financial services companies.
We believe that the consolidated financial statements and the interim financial statements give a true and fair view of the Group's and the parent company's assets, liabilities and financial position at 30 June 2016 as well as the result of the Group's and the parent company's activities, and the Group's cash flows for the period 1 January to 30 June 2016.
We believe that the management's review includes a fair view of the development in the Group's and parent company's activities and financial matters as well as a description of the most significant risks and factors of uncertainty which can impact the Group and the parent company.
Ballerup, 16 August 2016
Executive Board:
Christian Sagild (CEO)
Brian Rothemejer Jacobsen
Lars Thykier
Marianne Wier
Board of Directors:
Søren Thorup Sørensen (Chairman)
Torbjörn Magnusson (Deputy Chairman)
Ann-Jeanette Bakbøl
Tina Møller Carlsson
Mette Jensen
Birgitte Nielsen
Lone Møller Olsen
Annette Sadolin
Jens Aaløse
Announcement No. 44/2016 from Topdanmark A/S