Quarterly Report • Jul 15, 2022
Quarterly Report
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Half-year report for 2022
15 July 2022, Announcement No. 14/2022
Topdanmark A/S • Borupvang 4 • DK-2750 Ballerup • Tel +45 44 68 33 11 CVR no. 78040017 • [email protected] • www.topdanmark.com
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4 / 34 Announcement No. 14/2022 from Topdanmark A/S
A conference call will be held today at 13:00 (CEST) in which Peter Hermann, CEO, and Lars Kufall Beck, CFO, will be available for questions based on the results. The call will be conducted in English.
To participate in the conference call, please call: DK dial-in-number: +45 78 76 84 90 SE dial-in-number: +46 4 0682 0620 UK dial-in-number: +44 203 769 6819 US dial-in-number: +1 646 787 0157 (Pin code for all callers: 587062)
10-15 minutes before the conference and ask the operator to connect you to the Topdanmark conference call – or listen to the live transmission of the call.
Peter Hermann Chief Executive Officer
Lars Kufall Beck Chief Financial Officer
Robin Hjelgaard Løfgren Head of Investor Relations Direct tel.: +45 4474 4017 Mobile tel.: +45 2962 1691
| (DKKm) | Full year 2021 |
Q2 2021 |
Q2 2022 |
H1 2021 |
H1 2022 |
|---|---|---|---|---|---|
| Premiums earned, non-life insurance | 9,541 | 2,373 | 2,462 | 4,706 | 4,890 |
| 9,541 | 2,373 | 2,462 | 4,706 | 4,890 | |
| Results: | |||||
| Non-life insurance | 2,461 | 604 | 213 | 1,225 | 366 |
| Parent company etc. | (35) | 2 | (17) | (2) | (32) |
| Profit before tax, continuing operations | 2,426 | 606 | 196 | 1,223 | 334 |
| Tax, continuing operations | (537) | (127) | (38) | (266) | (71) |
| Profit after tax, continuing operations | 1,889 | 479 | 158 | 957 | 263 |
| Profit after tax, discontinued operations | 248 | 43 | 107 | 200 | 117 |
| Profit | 2,138 | 522 | 265 | 1,157 | 380 |
| Run-off profits, net of reinsurance | 255 | 51 | 42 | 107 | 89 |
| Shareholders' equity of parent company at 1 January | 7,185 | 6,107 | 4,836 | 7,185 | 7,705 |
| Profit | 2,138 | 522 | 265 | 1,157 | 380 |
| Dividend paid | (1,800) | 0 | 0 | (1,800) | (3,105) |
| Dividend own shares | 48 | 0 | 0 | 48 | 65 |
| Share-based payments | 133 | 30 | 36 | 70 | 92 |
| Other movements in shareholders' equity | 0 | 0 | (55) | (1) | 1 |
| Shareholders' equity of parent company end of period | 7,705 | 6,659 | 5,081 | 6,659 | 5,137 |
| Deferred tax on security funds | (306) | (306) | (362) | (306) | (362) |
| Shareholders' equity of Group end of period | 7,399 | 6,353 | 4,719 | 6,353 | 4,775 |
| Total assets, parent company | 8,233 | 7,394 | 5,706 | ||
| Total assets, Group | 120,368 | 115,683 | 109,937 | ||
| Provisions for insurance and investment contracts: | |||||
| Non-life insurance | 17,102 | 17,801 | 14,895 | ||
| Life insurance | 89,593 | 85,115 | 0 | ||
| Discontinued operations | 0 | 0 | 83,154 | ||
| Financial ratios (parent company) | |||||
| Post-tax profit as a percentage of shareholders' equity * | 30.5 | 32.7 | 21.2 | 33.5 | 11.9 |
| Post-tax EPS continuing operations (DKK) | 21.5 | 5.5 | 1.8 | 10.9 | 3.0 |
| Post-tax EPS continuing operations, diluted (DKK) | 21.5 | 5.5 | 1.8 | 10.9 | 3.0 |
| Post-tax EPS (DKK) | 24.4 | 6.0 | 3.0 | 13.2 | 4.3 |
| Post-tax EPS, diluted (DKK) | 24.3 | 5.9 | 3.0 | 13.2 | 4.3 |
| Dividend per share issued, proposed (DKK) | 34.5 | - | - | - | - |
| Net asset value per share, diluted (DKK) | 87.4 | 75.7 | 58.0 | ||
| Listed share price end of period | 367.0 | 326.4 | 369.4 | ||
| Number of shares end of period ('000) | 87,978 | 87,665 | 88,200 | ||
| Average number of shares ('000) | 87,703 | 87,631 | 88,162 | 87,587 | 88,107 |
| Average number of shares, diluted ('000) | 87,948 | 87,867 | 88,473 | 87,800 | 88,445 |
| Ratios non-life insurance ** | |||||
| Gross claims ratio | 62.9 | 62.9 | 61.5 | 63.9 | 65.1 |
| Net reinsurance ratio | 1.0 | 0.1 | 1.5 | 0.6 | 1.5 |
| Claims ratio, net of reinsurance | 63.9 | 63.0 | 63.0 | 64.5 | 66.6 |
| Gross expense ratio | 16.2 | 16.2 | 16.4 | 16.8 | 16.5 |
| Combined ratio | 80.1 | 79.3 | 79.4 | 81.3 | 83.1 |
| Combined ratio excl. run-off profits | 82.8 | 81.4 | 81.1 | 83.6 | 84.9 |
* Post-tax profit as a percentage of shareholders' equity has been annualised.
** Due to the divestment of Topdanmark Liv Holding, the non-life ratios have been restated to include only continuing operations.
| Trend in profit | Full year | Q2 | Q2 | H1 | H1 |
|---|---|---|---|---|---|
| (DKKm) | 2021 | 2021 | 2022 | 2021 | 2022 |
| Non-life insurance | |||||
| - Technical result | 1,897 | 492 | 507 | 879 | 825 |
| - Investment return after return and value adjustments | |||||
| of non-life insurance provisions | 564 | 113 | (292) | 346 | (432) |
| - Other items | 1 | (1) | (2) | 1 | (27) |
| Profit on non-life insurance | 2,461 | 604 | 213 | 1,225 | 366 |
| Parent company etc. | (35) | 2 | (17) | (2) | (32) |
| Profit before tax, continuing operations | 2,426 | 606 | 196 | 1,223 | 334 |
| Tax, continuing operations | (537) | (127) | (38) | (266) | (71) |
| Profit after tax, continuing operations | 1,889 | 479 | 158 | 957 | 263 |
| Profit after tax, discontinued operations | 248 | 43 | 107 | 200 | 117 |
| Profit | 2,138 | 522 | 265 | 1,157 | 380 |
Topdanmark's post-tax profit for H1 2022 was DKK 380m (H1 2021: DKK 1,157m).
The technical result decreased by DKK 54m to DKK 825m. The decrease was driven by higher weather-related claims in Q1 2022 mainly caused by the storms Malik and Nora. Furthermore, H1 2021 was positively impacted by COVID-19. The underlying technical result continued to improve as a result of the underlying growth, as well as continued progress on efficiencies and pricing initiatives.
Other items included a DKK 25m provision in Q1 2022 for a potential extraordinary contribution to the Danish Guarantee Fund for Non-life Insurers related to the bankruptcy of Gefion Insurance A/S.
The investment return adjusted for return and value adjustments on non-life insurance provisions decreased by DKK 778m to DKK 432m (loss). This development should be seen in the light of the volatility in the financial markets during H1 2022 caused in part by the war in Ukraine and rising inflation, whereas the investment return in H1 2021 was impacted by favourable market conditions, especially for equity investments and CLOs.
The profit from discontinued operations (encompassing the life operations held for sale) decreased by DKK 83m to DKK 117m after tax. H1 2022 was affected by the negative development mainly deriving from investment return on shareholders' equity as well as the negative result on illness and accident. In Q1 2021, the investment return was positively impacted by a valuation adjustment of the property portfolio.
The profit for Q2 2022 was DKK 265m (Q2 2021: DKK 522m).
The technical result increased by DKK 15m to DKK 507m. The increase was driven by higher premiums and improved underlying trends most notably within house and property insurance. These effects more than outweighed the impact of higher claims frequencies following the normalisation of COVID-19 impacts since last year.
After return on non-life insurance provisions, the investment return in non-life insurance decreased by DKK 405m to DKK 292m (loss).
The profit from discontinued operations increased by DKK 64m to DKK 107m due mainly to a one-off tax gain of approx. DKK 50m.
| Financial highlights – Non-life insurance (DKKm) |
Full year 2021 |
Q2 2021 |
Q2 2022 |
H1 2021 |
H1 2022 |
|---|---|---|---|---|---|
| Gross premiums earned | 9,541 | 2,373 | 2,462 | 4,706 | 4,890 |
| Claims incurred | (6,000) | (1,493) | (1,513) | (3,009) | (3,185) |
| Expenses | (1,545) | (385) | (404) | (793) | (808) |
| Net reinsurance | (99) | (3) | (38) | (26) | (72) |
| Technical result | 1,897 | 492 | 507 | 879 | 825 |
| Investment return after return and value adjustments of | |||||
| non-life insurance provisions | 564 | 113 | (292) | 346 | (432) |
| Other items | 1 | (1) | (2) | 1 | (27) |
| Profit on non-life insurance | 2,461 | 604 | 213 | 1,225 | 366 |
| Run-off profits, net of reinsurance | 255 | 51 | 42 | 107 | 89 |
| Gross claims ratio | 62.9 | 62.9 | 61.5 | 63.9 | 65.1 |
| Net reinsurance ratio | 1.0 | 0.1 | 1.5 | 0.6 | 1.5 |
| Claims ratio, net of reinsurance | 63.9 | 63.0 | 63.0 | 64.5 | 66.6 |
| Gross expense ratio | 16.2 | 16.2 | 16.4 | 16.8 | 16.5 |
| Combined ratio | 80.1 | 79.3 | 79.4 | 81.3 | 83.1 |
| Combined ratio excl. run-off profits | 82.8 | 81.4 | 81.1 | 83.6 | 84.9 |
Premiums earned increased by 3.9% to DKK 4,890m. The private segment accounted for a 2.7% increase, while the SME segment accounted for a 5.1% increase. for the outflow from the old agreement with Danske Bank in H1 2022. We expect the trend to continue throughout 2022.
The distribution agreement with Nordea continues to have good traction and more than compensated
| Claims ratio, net of reinsurance | Full year | Q2 | Q2 | H1 | H1 |
|---|---|---|---|---|---|
| 2021 | 2021 | 2022 | 2021 | 2022 | |
| Claims ratio, net of reinsurance | 63.9 | 63.0 | 63.0 | 64.5 | 66.6 |
| Run-off | 2.7 | 2.1 | 1.7 | 2.3 | 1.8 |
| Weather-related claims | (1.9) | (1.1) | (0.8) | (1.2) | (3.7) |
| Large-scale claims | (1.3) | (1.3) | (1.3) | (1.2) | (1.2) |
| Other | 0.2 | 0.5 | 0.6 | 0.4 | 0.0 |
| Claims before run-off, weather, | |||||
| large-scale claims and other | 63.6 | 63.3 | 63.2 | 64.8 | 63.5 |
| Discounting | 0.3 | 0.3 | 1.0 | 0.2 | 0.7 |
| COVID-19 | 1.3 | 1.5 | |||
| Underlying (undiscounted) | |||||
| claims ratio, net of reinsurance | 63.9 | 64.9 | 64.2 | 66.4 | 64.2 |
The claims ratio was 66.6 in H1 2022, up from 64.5 in H1 2021.
The run-off profit, net of reinsurance, was DKK 89m (H1 2021: DKK 107m), representing a 0.5pp negative effect on the claims ratio. Run-off was largely in line with preceding quarters following positive trends in house and property insurance since 2021. In addition, run-off profits were generated in workers' compensation.
Weather-related claims amounted to DKK 183m in H1 2022 (H1 2021: DKK 58m), representing a 2.5pp deterioration of the claims ratio. The level of weather-related claims was thus DKK 53m above the normalised modelled level of DKK 130m. This was mainly a result of the storms Malik and Nora in Q1 2022, while weather conditions in Q2 2022 were more benign. In comparison, H1 2021 saw no major weather-related events.
The level of large-scale claims (claims exceeding DKK 5m by event after refund of reinsurance) was almost unchanged at DKK 59m in H1 2022 (H1 2021: DKK 56m).
The claims ratio was positively impacted by the higher interest rates. The discounting effect was 0.5pp higher compared with H1 2021.
Inflation within construction materials continued to rise during the first half of 2022, most notably within energy-consuming materials such as tiles, cement and insulation. In the short term, we are in a good position to handle rising cost inflation through procurement, and our efforts within this area continue as part of the efficiency programme.
We take note of the current volatility, and we continue to closely monitor the market situation. To that end, we may proceed with pricing initiatives across different product lines and/or customer segments in the coming periods.
In general, and over time, we continue to see around 2-4% overall inflation in claim expenses, varying between different business lines. Over time, it is our target to maintain our profitability by pricing at least in line with inflation.
The claims ratio adjusted for run-off, weather-related claims, large-scale claims and other positions including change of risk margin improved by 1.3pp to 63.5 in H1 2022.
The underlying claims ratio, which is adjusted further for discounting and COVID-19 impact, improved by 2.2pp to 64.2.
The expense ratio was 16.5, down from 16.8 in H1 2021. The decrease in the expense ratio was driven by our continued efforts to realise our efficiency programme targets. Synergies between Non-life and Life (approx. DKK 80-100m p.a.) affect the expense ratio positively until closing of the sale of Topdanmark Liv Holding A/S in H2 2022.
The combined ratio was 83.1 in H1 2022 (H1 2021: 81.3). Excluding run-off, the combined ratio was 84.9 (H1 2021: 83.6).
The storm reinsurance programme has been renewed for one year as at 1 July 2022 and still covers claims up to DKK 5.1bn with retention of DKK 100m. The renewal was made within the framework of the assumptions made in the profit forecast model for 2022.
Premiums earned in Q2 2022 increased by 3.7% to DKK 2,462m. The growth in premiums was 2.7% and 4.7% in the private segment and the SME segment, respectively.
The claims ratio was 63.0 in Q2 2022, and thus unchanged from Q2 2021.
Weather conditions were benign and related claims amounted to DKK 20m, almost unchanged compared with the Q2 2021 level but somewhat below the normalised modelled level of DKK 45m.
Large-scale claims amounted to DKK 31m, largely in line with the level in Q2 2021 and the normalised modelled level of DKK 25m. Q2 2022 was predominantly affected by one large fire-related claim in the SME segment.
Increasing interest rates improved the claims trend by 0.7pp.
The run-off profit, net of reinsurance, was DKK 42m, largely in line with preceding quarters but slightly below the level from Q2 2021 (DKK 51m), representing a 0.4pp negative effect on the claims ratio.
The claims ratio adjusted for run-off, weather-related claims, large-scale claims and other positions including change of risk margin improved by 0.1pp to 63.2.
The underlying claims ratio, which is adjusted further for discounting and COVID-19 impact, improved by 0.7pp to 64.2.
The expense ratio was 16.4 (Q2 2021: 16.2).
The combined ratio was 79.4 (Q2 2021: 79.3). Excluding run-off, the combined ratio was 81.1 (Q2 2021: 81.4).
| Private (DKKm) |
Full year 2021 |
Q2 2021 |
Q2 2022 |
H1 2021 |
H1 2022 |
|---|---|---|---|---|---|
| Gross premiums earned | 4,674 | 1,154 | 1,185 | 2,317 | 2,379 |
| Claims incurred | (2,837) | (728) | (733) | (1,441) | (1,520) |
| Expenses | (730) | (183) | (188) | (375) | (378) |
| Net reinsurance | (60) | (9) | (12) | (30) | (20) |
| Technical result | 1,047 | 234 | 251 | 470 | 461 |
| Run-off profits, net of reinsurance | 123 | 25 | 23 | 57 | 52 |
| Gross claims ratio | 60.7 | 63.1 | 61.9 | 62.2 | 63.9 |
| Net reinsurance ratio | 1.3 | 0.8 | 1.0 | 1.3 | 0.8 |
| Claims ratio, net of reinsurance | 62.0 | 63.9 | 62.9 | 63.5 | 64.7 |
| Gross expense ratio | 15.6 | 15.9 | 15.9 | 16.2 | 15.9 |
| Combined ratio | 77.6 | 79.7 | 78.8 | 79.7 | 80.6 |
| Combined ratio excl. run-off profits | 80.2 | 81.9 | 80.7 | 82.2 | 82.8 |
The private segment offers policies to individual households in Denmark. This segment no longer includes illness and accident insurance offered through the life company which is now reported under discontinued operations.
Premiums earned increased by 2.7% to DKK 2,379m.
The technical result was DKK 461m in H1 2022, representing a decrease of DKK 9m compared with H1 2021.
The claims ratio increased by 1.2pp to 64.7 in H1 2022, mainly due to the two storms in Q1 2022. Weather-related claims amounted to DKK 75m in H1 2022 (H1 2021: DKK 31m), representing a 1.8pp deterioration of the claims ratio.
The claims ratio decreased by 1.0pp to 62.9 in Q2 2022.
Run-off of DKK 52m was DKK 5m lower than in H1 2021 corresponding to a negative impact of 0.2pp on the claims trend.
The underlying result improved due to activities for improvement of profitability and generally low levels of claims in most areas, mainly within house insurance and income protection insurance.
The expense ratio improved to 15.9 from 16.2 in H1 2021.
The combined ratio was 80.6 in H1 2022 (H1 2021: 79.7).
Excluding run-off, the combined ratio was 82.8 (H1 2021: 82.2).
| SME | Full year | Q2 | Q2 | H1 | H1 |
|---|---|---|---|---|---|
| (DKKm) | 2021 | 2021 | 2022 | 2021 | 2022 |
| Gross premiums earned | 4,878 | 1,222 | 1,280 | 2,395 | 2,517 |
| Claims incurred | (3,173) | (767) | (783) | (1,572) | (1,670) |
| Expenses | (817) | (203) | (216) | (418) | (430) |
| Net reinsurance | (39) | 6 | (25) | 4 | (52) |
| Technical result | 850 | 258 | 256 | 409 | 365 |
| Run-off profits, net of reinsurance | 132 | 25 | 18 | 50 | 36 |
| Gross claims ratio | 65.0 | 62.8 | 61.2 | 65.6 | 66.3 |
| Net reinsurance ratio | 0.8 | (0.5) | 2.0 | (0.2) | 2.1 |
| Claims ratio, net of reinsurance | 65.8 | 62.3 | 63.2 | 65.5 | 68.4 |
| Gross expense ratio | 16.7 | 16.6 | 16.9 | 17.5 | 17.1 |
| Combined ratio | 82.6 | 78.8 | 80.0 | 82.9 | 85.5 |
| Combined ratio excl. run-off profits | 85.3 | 80.9 | 81.5 | 85.0 | 86.9 |
The SME segment offers policies to Danish-based SMEs and agricultural businesses.
Premiums earned increased by 5.1% to DKK 2,517m.
The technical result in H1 2022 decreased by DKK 44m to DKK 365m primarily due to high weather-related claims in Q1 2022. The technical result in Q2 2022 was in line with Q2 2021. Weather-related claims amounted to DKK 108m in H1 2022 (H1 2021: DKK 27m), representing a 3.2pp deterioration of the claims ratio.
Run-off was DKK 36m in H1 2022 (H1 2021: DKK 50m). Run-off profits were driven mainly by workers' compensation.
The underlying result improved in H1 2022 due to activities for improvement of profitability and generally lower levels of claims in most areas. Workers' compensation was positively affected by increasing interest rate levels.
The expense ratio was 17.1 in H1 2022 which is 0.4pp below H1 2021.
The combined ratio increased to 85.5 in H1 2022 (H1 2021: 82.9).
Excluding run-off, the combined ratio was 86.9 in H1 2022 (H1 2021: 85.0).
| Discontinued operations (DKKm) |
Full year 2021 |
Q2 2021 |
Q2 2022 |
H1 2021 |
H1 2022 |
|---|---|---|---|---|---|
| Investment return on shareholders' equity | 318 | 25 | 60 | 174 | 96 |
| Sales and administration | 26 | 9 | 17 | 11 | 20 |
| Insurance risk | 4 | (4) | 6 | (5) | 6 |
| Risk return on shareholders' equity | 155 | 38 | 28 | 78 | 65 |
| Profit on life insurance | 502 | 68 | 111 | 258 | 186 |
| Illness and accident | (187) | (35) | (26) | (5) | (73) |
| Profit before tax, Topdanmark Liv Holding Group | 316 | 33 | 85 | 253 | 113 |
| Unwinding costs | - | - | (2) | - | (2) |
| Profit before tax, discontinued operations | 316 | 33 | 83 | 253 | 111 |
| Tax | (67) | 10 | 24 | (53) | 6 |
| Profit after tax, discontinued operations | 248 | 43 | 107 | 200 | 117 |
The result from life insurance was DKK 117m (H1 2021: DKK 200m).
Profit on life insurance activities comprises the profit on life insurance plus the investment return of Topdanmark Liv Holding. These profits are calculated in accordance with the stated policy for the calculation of profit for the life insurance company: see www.topdanmark.com → About Topdanmark → Business → Life insurance → Policy for the calculation of profit in life insurance.
The negative development derives mainly from investment return on shareholders' equity as well as the result of illness and accident.
The investment return on shareholders' equity was DKK 96m (H1 2021: DKK 174m), affected by the development in the financial markets including the increasing interest rate curve. In Q1 2021, the investment return was positively affected by a valuation adjustment of the property portfolio.
The illness and accident result was DKK 73m (loss) (H1 2021: DKK 5m (loss)), negatively impacted by the increasing inflation expectations and volatile financial markets. In addition, a one-off adjustment to liable pension yield tax relating to 2021 was made in Q1 2022.
The result of sales and administration increased by DKK 9m to DKK 20m, mainly as no amortisation on IT intangibles is carried out in the period between signing and closing of the divestment of Topdanmark Liv Holding A/S. This has no impact on the expected implied goodwill of the transaction as lower amortisations until closing will equally lower the gain
to be realised upon closing. Underlying, the result of sales and administration is negatively affected by lower AUM due to adverse market developments.
The insurance risk result has increased by DKK 11m to DKK 6m. The insurance risk result may fluctuate from one quarter to the next.
Finally, tax line showed an income of DKK 6m due to a one-off positive adjustment of approx. DKK 50m made in Q2 2022 stemming from an increased deferred tax asset related to Topdanmark Ejendom A/S, partly offset by the adjustment for the prior year made in Q1 2022. Please refer to the section Taxation on page 14.
Life insurance premiums (including investment contracts and illness and accident) increased by 6.3% to DKK 6,198m in H1 2022, of which life insurance premiums (including investment contracts) on unit-linked pension schemes were DKK 5,525m, representing a 7.6% increase compared with H1 2021.
Regular premiums (including investment contracts) increased by 4.2% to DKK 1,794m, and single premiums (including investment contracts) increased by 7.2% to DKK 4,038m.
The result from life insurance was DKK 107m (Q2 2021: DKK 43m).
The higher result in Q2 2022 compared with Q2 2021 was due to a higher result in investment return on shareholders' equity as well as the one-off adjustment to the tax line mentioned above. The risk return on shareholders' equity decreased by DKK 10m to DKK 28m as the collective bonus potential in one interest rate group was reduced to zero in Q2 2022 following weak financial markets.
Life insurance premiums (including investment contracts and illness and accident) increased by 1.7% to DKK 2,893m in Q2 2022 of which life insurance premiums (including investment contracts) on unit-linked pension schemes were DKK 2,584m, representing a 2.2% increase compared with Q2 2021.
Regular premiums (including investment contracts) increased by 4.8% to DKK 886m, and single premiums (including investment contracts) decreased by 0.1% to DKK 1,824m.
As stated in company announcement no. 07/2022 dated 18 March 2022, Topdanmark Forsikring A/S has signed an agreement to divest Topdanmark Liv Holding A/S and all subsidiaries hereof to Nordea Life Holding AB. Closing of the transaction is, among other things, subject to relevant regulatory approvals. The approval process is progressing according to plan, and we continue to expect the divestment to be completed in the second half of 2022.
| Investment return | Portfolio 30 June | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2022 | Return Q2 2021 | Return Q2 2022 | Return H1 2021 | Return H1 2022 | |||||
| (DKKbn) | (DKKm) | % | (DKKm) | % | (DKKm) | % | (DKKm) | % | ||
| Danish equities | 0.2 | 0.2 | 20 | 9.8 | (23) | (11.6) | 30 | 15.1 | (36) | (17.2) |
| Foreign equities | 0.8 | 0.7 | 47 | 5.8 | (109) | (13.9) | 111 | 13.6 | (172) | (20.3) |
| Unlisted equities and hedge funds | 0.4 | 0.4 | 21 | 6.1 | 11 | 2.9 | 35 | 10.3 | 6 | 1.5 |
| Government and mortgage bonds | 14.1 | 10.9 | (59) | (0.4) | (432) | (3.6) | (265) | (1.9) | (838) | (6.8) |
| Index linked bonds | 0.6 | 0.6 | (1) | 0.1 | 6 | 1.1 | (6) | (1.8) | 3 | 0.5 |
| CLOs | 0.7 | 0.4 | 43 | 6.8 | (84) | (13.0) | 109 | 19.2 | (112) | (16.3) |
| Properties | 1.2 | 0.8 | 12 | 1.0 | 9 | 1.0 | 45 | 3.8 | 13 | 1.5 |
| Expenses, money markets etc. | 1.6 | 4.1 | 6 | 0.3 | 3 | 0.1 | 6 | 0.3 | 11 | 0.3 |
| Subordinated loan capital | (1.7) | (1.9) | (10) | (0.6) | (7) | (0.4) | (20) | (1.1) | (14) | (0.7) |
| 17.7 | 16.2 | 79 | 0.5 | (627) | (3.6) | 44 | 0.3 | (1,140) | (6.3) | |
| Asset management (2021: 6 months) | 2 | 4 | ||||||||
| Investment return | 81 | (627) | 48 | (1,140) | ||||||
| Return and value adjustments of | ||||||||||
| non-life insurance provisions | 30 | 332 | 292 | 702 | ||||||
| Investment return after return on | ||||||||||
| non-life insurance provisions | 112 | (295) | 340 | (437) |
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.
In total, the return on investment after return and value adjustments of non-life insurance provisions in H1 2022 fell by DKK 777m to DKK 437m (loss). The lower return should be seen in the light of the continued rise in inflation rates and yield levels supplemented by increasing uncertainty as to the economic outlook and spread expansions on the financial markets.
Losses on equities and structured credits were the primary drivers of the investment return in Q2 2022. In Q2 2022, the Danish mortgage bond market, which is dominated by AAA bonds, was influenced by the sharp rise in yield levels, yield volatility and loan restructuring activity. The loss suffered on assets hedging the provisions due to these factors and the impact of a further widening between EUR and DKK swap yield curves exceeded the profit from revaluations of provisions in Q2 2022.
Topdanmark's policy is to accept a certain level of financial risk, given its strong liquidity and stable, high earnings from insurance operations.
The equity exposure was DKK 869m 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 approx. 20% of the portfolio by the end of Q2 2022, and the foreign portfolios are based on MSCI World DC in local currency for foreign equities.
The Group's investments have no significant concentration of credit risk except for investments in AAA-rated Danish mortgage bonds.
The class "Government and mortgage bonds" mainly consists of Danish government and mortgage bonds. The interest rate sensitivity of this asset class is to a significant extent equivalent to the total interest rate sensitivity of the technical provisions in Topdanmark Forsikring. Consequently, the return on "Government and mortgage bonds" and the return and value adjustments of non-life insurance provisions should be assessed on an aggregate level. However, as mentioned above during times of financial stress, proper interest risk management does not necessarily ensure that losses on liabilities are offset against gains on assets and vice versa.
The property portfolio only comprises owner-occupied property (DKK 810m). The properties are valued in accordance with the rules of the Danish FSA (Danish Financial Supervisory Authority), i.e. at market value taking into account the level of rent and the terms of the tenancy agreements. The property portfolio is currently fully let.
"Expenses, money markets etc." comprise in addition
to money market deposits and currency positions, other returns and expenses not included in specified classes.
We use the Solvency ll discounting 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 47bp at the beginning of the year and 33bp at the end of the second quarter.
| Solvency cover | 30 Jun | 31 Dec | 31 Mar | 30 Jun |
|---|---|---|---|---|
| (DKKm) | 2021 | 2021 | 2022 | 2022 |
| Shareholders´equity | 6,353 | 7,399 | 4,530 | 4,775 |
| Proposed dividend | 0 | (3,105) | 0 | 0 |
| Deferred tax on security funds | 306 | 306 | 306 | 362 |
| Profit margin | 2,616 | 2,761 | 2,632 | 2,356 |
| Intangible assets | (1,564) | (1,641) | (1,686) | (1,788) |
| Other | (163) | (189) | (158) | (143) |
| Tax effects | (293) | (302) | (271) | (191) |
| Subordinated loan tier 1 | 400 | 400 | 400 | 400 |
| Subordinated loans tier 2 | 500 | 1,500 | 1,500 | 1,408 |
| Own funds | 8,155 | 7,129 | 7,254 | 7,179 |
| Solvency requirement | 3,311 | 3,495 | 3,279 | 2,816 |
| Solvency cover (%) | 246 | 204 | 221 | 255 |
Potential dividend for the interim periods was not deducted.
Solvency II provides insurance companies with the opportunity to develop their own full or partial internal risk model for solvency calculation. We use such a partially internal model developed in-house to calculate the non-life risk.
This model, approved by the Danish FSA, provides the basis for including non-life risks in our solvency calculations while we use the standard model for life products.
The solvency cover for the Group increased to 255% end Q2 2022 from 221% at the end of Q1 2022, mainly due to a lower solvency requirement caused by significantly lower stress on equity exposure and rising interest rates. In addition, Topdanmark Forsikring A/S has lowered its exposure to CLOs in Q2 2022.
Topdanmark has an outstanding subordinated tier 1 loan (restricted tier 1 capital notes) of DKK 400m. This loan is perpetual, but includes an option enabling Topdanmark to redeem the loan as at 23 November 2022.
Topdanmark Forsikring has outstanding subordinated tier 2 notes in two tranches:
The parent company, Topdanmark, does not perform any independent activities. The profit of the parent company etc. includes the profits from subsidiaries not within the insurance business (primarily Topdanmark Asset Management up to and including Q2 2021), financial costs and other expenses.
The profit of the parent company decreased by DKK 30m to DKK 32m (loss) in H1 2022.
The tax charge on continuing operations was DKK 71m of the pre-tax profit of DKK 334m, corresponding to an effective tax rate of 21.2% (H1 2021: 21.8%).
On 9 June 2022, the Danish parliament passed legislation introducing a new special tax on the Danish financial sector to fund a previously passed early retirement scheme. Effectively, the new legislation raises the corporate tax rate for financial sector companies from 22% in 2022 to 25.2% in 2023 and 26% from 2024 onwards.
The higher corporate tax rate applies to financial institutions with a licence, while subsidiaries without a licence (such as real estate companies, IT companies, etc.) are not subject to the increased tax rate. As Topdanmark has both types of companies within its group structure, the 4pp increase in tax rate is considered a worst-case scenario in terms of potential impact on the Group net profit. For now, it is too early to assess the exact impact on net profit for the coming years.
The higher corporate tax rate caused two one-off adjustments in the Q2 2022 accounts. Other comprehensive income was affected by a one-off negative adjustment of approx. DKK 50m stemming from increased deferred tax liabilities relating to security funds. In addition, the financial statement is affected by a one-off positive adjustment of approx. DKK 50m on the line "Profit after tax, discontinued operations" stemming from an increased deferred tax asset relating to Topdanmark Ejendom A/S. In total, the impact on own funds is net neutral.
The main focus areas of the efficiency programme are:
The annual gross efficiency gains are targeted to be DKK 500m in 2025 of which DKK 260m in 2022. Please refer to the Annual Report 2021 for the full details of the programme.
Topdanmark's efforts to become more efficient are progressing according to plan.
Topdanmark has initiated the process of implementing the new IT system in non-life, and the implementation is progressing according to plan.
Please refer to the Annual Report 2021 for the full details of the implementation plan.
In June 2022, Topdanmark joined the Science Based Targets initiative (SBTi), an international alliance supported by the UN, which helps companies ensure that their climate goals live up to the Paris Agreement's goal of CO2 reduction. Topdanmark has committed itself to the most ambitious level which entails working towards a complete green transformation, a CO2 neutral world in 2050, and a temperature rise below 1.5 degrees.
By joining SBTi, we get a strategic engine which supports development within five areas in Topdanmark: products and services that help our customer reduce CO2 emissions, CO2 neutral technologies and initiatives in claims handling, dialogue and ambitious requirements for investments and commercial customers, prevention and climate adaptation as well as internal operations.
We are already well on track with our existing goal of becoming CO2 neutral in 2030 in terms of our operations, business travel and air travel. We have initiated a process in which we calculate total CO2 emissions in our entire value chain (baseline). In compliance with SBTi's requirements, the next step will be to define short-term goals (minimum five years) for scopes 1, 2 and 3 as defined by the Greenhouse Gas (GHG) Protocol. Furthermore, Topdanmark will set up voluntary goals for other scope 3 emissions e.g., claims handling through our suppliers. In May 2024, we will present our goals to SBTi for a validation of whether the goals live up to the Paris Agreement and a temperature rise below 1.5 degrees. Later we will define long-term goals in compliance with the criteria of a forthcoming standard for financial service companies acceding to 'net zero'.
| Current profit forecast model 2022 | Results Forecast 2022 |
Forecast 2022 | ||||||
|---|---|---|---|---|---|---|---|---|
| (DKKm) | 2021 | 31 March 2022 | 30 June 2022 | |||||
| Non-life insurance | ||||||||
| - Technical result | 1,897 | 1,425 | – | 1,675 | 1,525 | – | 1,750 | |
| - Investment return after return and value adjustments | ||||||||
| of non-life insurance provisions | 564 | (115) | – | (100) | (405) | – | (390) | |
| - Other items | 1 | (25) | – | (25) | (25) | – | (25) | |
| Profit on non-life insurance | 2,461 | 1,285 | – | 1,550 | 1,095 | – | 1,335 | |
| Parent company etc. | (35) | (65) | – | (55) | (65) | – | (55) | |
| Profit before tax, continuing operations | 2,426 | 1,220 | – | 1,495 | 1,030 | – | 1,280 | |
| Tax, continuing operations | (537) | (270) | – | (345) | (230) | – | (280) | |
| Profit after tax, continuing operations | 1,889 | 950 | – | 1,150 | 800 | – | 1,000 | |
| Profit after tax, discontinued operations | 248 | 1,300 | – | 1,350 | 1,300 | – | 1,350 | |
| Profit | 2,138 | 2,250 | – | 2,500 | 2,100 | – | 2,350 |
Traditionally, Topdanmark does not publish actual profit forecasts, but instead, the expected level of results provided that a number of assumptions about the return in the financial markets are met. The return on financial assets changes on a daily basis, and consequently Topdanmark's profit forecast model will already deviate from actual expectations by the time it is published. Therefore, as set out at www.topdanmark.com → Investors → Risk management, we provide additional information on how changes in the assumptions underlying the profit
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 regarding the return.
forecast model will affect the results.
In the interim report for Q1 2022, we assumed premium growth of 3-4.5% and a combined ratio of 83-86 for 2022. The underlying assumptions can be found in the interim report for Q1 2022. Since this report, the following major changes to assumptions have occurred:
As a result, the assumed combined ratio is improved to 82-84.5. This includes an expense ratio at approx. the same level as in 2021. Synergies between Non-life and Life (approx. DKK 80-100m p.a.) are included in the forecast until closing, which is assumed as at 31 December 2022.
The assumed premium growth is unchanged at 3-4.5% as the underlying business momentum remained solid in Q2 while the macroeconomic uncertainty remains at a historically high level.
The overall assumed pre-tax result for non-life insurance is DKK 1,095-1,335m excluding run-off in H2.
The profit forecast model for the parent company plus subsidiaries outside of the insurance group assumes an unchanged pre-tax profit of DKK 55-65m (loss).
Given a corporation tax rate of 22%, the tax charge on continuing operations is expected to be DKK 230-280m.
In the interim report for Q1 2022, Topdanmark assumed a profit after tax on discontinued operations of DKK 1,300-1,350m in 2022. The underlying assumptions can be found in the interim report for Q1 2022.
Topdanmark continues to assume an increase in regular premiums of between 0-5% in 2022. Assumptions about the level of single premiums are not disclosed.
Since the announcement of the interim report for Q1 2022, a one-off tax adjustment of approx. DKK 50m was made in Q2 2022 stemming from an increased deferred tax asset relating to Topdanmark Ejendom A/S. Offsetting this impact, risk return was impacted by lower collective bonus potentials in Q2 2022, which could also affect H2 2022 depending on financial market conditions. In addition, lower AUM caused by volatile financial markets affects the outlook for life insurance income negatively, while increasing inflation expectations affect the outlook for illness and accident insurance negatively.
As a result, the assumed profit after tax on discontinued operations is unchanged at DKK 1,300-1,350m. This expectation is still based on an assumed closing of the divestment of Topdanmark Liv Holding A/S as at 31 December 2022.
The result is very sensitive to fluctuations particularly in the investment return. The risk return will not be finally determined before the end of the year.
Topdanmark's overall post-tax profit according to the profit forecast model for 2022 is DKK 2,100-2,350m representing an EPS of DKK 23.8-26.7. The assumed profit is exclusive of run-off in H2.
The profit forecast model assumes an annual 7.0% return on equities, and unchanged foreign exchange rates from the level as at 30 June 2022.
Furthermore, it is assumed that the return on interest-bearing assets that hedge the discounted provisions exactly suffices to cover discounting and value adjustments of the provisions, while the return on the remaining interest-bearing assets is assumed to be 1.14% (risk-free interest rate plus 1.0pp).
| Q1-Q3 2022 Interim Report | 25 Oct 2022 |
|---|---|
| Announcement of 2022 Annual Results | 24 Jan 2023 |
| Deadline for submitting items for the AGM agenda |
8 Feb 2023 |
| 2022 Annual Report | 23 Feb 2023 |
| AGM | 23 Mar 2023 |
| Q1 2023 Interim Report | 25 Apr 2023 |
| 2023 Half-year Report | 14 July 2023 |
| Q1-Q3 2023 Interim Report | 24 Oct 2023 |
From 1 January 2023, Topdanmark will apply IFRS 17 and IFRS 9, including any consequential amendments to other standards.
These standards bring changes to the accounting for insurance and reinsurance contracts and financial instruments. As a result, Topdanmark will restate comparative figures and will present the effect of the standards in the opening equity in the statement of financial position as at 1 January 2022.
Topdanmark is currently performing an analysis of the financial effect from the initial application of the standards.
Z:\KONCREGN\2022_06 Regn\2.Tabeller\Finanskalender\Financial calendar 06 2022 01.07.2022.xlsxengelsk The continuing operations in Topdanmark Forsikring A/S consist of non-life insurance contracts. These contracts consist in all material aspects of short-term contracts eligible for the premium allocation approach (PAA) under IFRS 17. The simplification is broadly similar to current accounting.
Consequently, IFRS 17 is not expected to have a significant financial effect on the continuing operations in Topdanmark Forsikring. We expect:
Presentation of income statement and balance sheet will change following IFRS 17. As a consequence, the key ratios will change. We expect to disclose the effects in Q4 2022.
The discontinued operations in Topdanmark Livsforsikring A/S consist of the Group's life and savings contracts which by nature are long-term contracts, and a portfolio of short-term illness and accident contracts. Under IFRS 17, these contracts will be measured applying the general measurement model and variable fee approach as well as the simplifications from PAA.
For the discontinued operations the analysis is ongoing:
This interim 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 interim report.
Such factors could be, for example, cyclical movements, changes in the financial markets, the financial effect of unexpected events such as 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 interim report.
| (DKKm) | Note | Full year 2021 |
Q2 2021 |
Q2 2022 |
H1 2021 |
H1 2022 |
|---|---|---|---|---|---|---|
| NON-LIFE INSURANCE | ||||||
| Gross premiums written | 9,620 | 1,785 | 1,826 | 6,091 | 6,267 | |
| Ceded reinsurance premiums | (601) | (57) | (61) | (391) | (419) | |
| Change in the provisions for unearned premiums | 128 | 532 | 520 | (1,441) | (1,583) | |
| Change in profit margin and risk margin | (130) | 83 | 144 | 99 | 263 | |
| Change in the reinsurers' share of the provisions | ||||||
| for unearned premiums | 4 | (94) | (97) | 107 | 115 | |
| Premiums earned, net of reinsurance | 9,021 | 2,248 | 2,333 | 4,465 | 4,644 | |
| Claims paid | (5,629) | (1,371) | (1,505) | (2,887) | (3,008) | |
| Reinsurance cover received | 268 | 67 | 98 | 118 | 170 | |
| Change in the provisions for claims | (378) | (131) | (20) | (137) | (174) | |
| Change in risk margin | 17 | 12 | 14 | 21 | 2 | |
| Change in the reinsurers' share of the provisions for claims | 150 | 62 | 2 | 103 | 21 | |
| Claims incurred, net of reinsurance | 1 | (5,573) | (1,361) | (1,411) | (2,782) | (2,989) |
| Bonuses and rebates | (78) | (26) | (28) | (42) | (57) | |
| Acquisition costs | (985) | (265) | (263) | (528) | (523) | |
| Administrative expenses | (541) | (115) | (136) | (253) | (276) | |
| Reinsurance commission and share of profits | 81 | 19 | 20 | 37 | 40 | |
| Insurance operating expenses, net of reinsurance | (1,444) | (361) | (379) | (745) | (759) | |
| TECHNICAL RESULT FROM NON-LIFE INSURANCE | 1,926 | 500 | 514 | 895 | 839 | |
| Income from associates and joint ventures Income from investment properties |
4 16 |
0 4 |
(1) 1 |
2 8 |
0 1 |
|
| Interest income and dividends etc. | 368 | 74 | 102 | 207 | 179 | |
| Value adjustments | (113) | 20 | (714) | (135) | (1,290) | |
| Interest charges | (48) | (12) | (9) | (27) | (19) | |
| Expenses on investment activities | (49) | (12) | (13) | (23) | (25) | |
| Total investment return | 178 | 73 | (635) | 33 | (1,153) | |
| Return and value adjustments of non-life insurance provisions | 346 | 30 | 332 | 292 | 702 | |
| Other income | 108 | 36 | 21 | 67 | 40 | |
| Other expenses | (132) | (34) | (37) | (65) | (94) | |
| PROFIT BEFORE TAX, CONTINUING OPERATIONS | 2,426 | 606 | 196 | 1,223 | 334 | |
| Tax, continuing operations | (537) | (127) | (38) | (266) | (71) | |
| PROFIT AFTER TAX, CONTINUING OPERATIONS | 1,889 | 479 | 158 | 957 | 263 | |
| Profit after tax, discontinued operations | 4 | 248 | 43 | 107 | 200 | 117 |
| PROFIT | 2,138 | 522 | 265 | 1,157 | 380 | |
| EPS continuing operations (DKK) | 21.5 | 5.5 | 1.8 | 10.9 | 3.0 | |
| EPS continuing operations, diluted (DKK) | 21.5 | 5.5 | 1.8 | 10.9 | 3.0 | |
| EPS (DKK) | 24.4 | 6.0 | 3.0 | 13.2 | 4.3 | |
| EPS, diluted (DKK) | 24.3 | 5.9 | 3.0 | 13.2 | 4.3 |
| Profit | 2,138 | 522 | 265 | 1,157 | 380 |
|---|---|---|---|---|---|
| Items which cannot subsequently be reclassified as profit or loss: | |||||
| Deferred tax on security fund (change in the tax percentage) | 0 | 0 | (56) | 0 | (56) |
| Revaluation / Reversed revaluation owner-occupied properties | 0 | 0 | 0 | (2) | 1 |
| Taxation | (0) | 0 | 0 | 0 | (0) |
| Other comprehensive income | 0 | 0 | (55) | (1) | (55) |
| TOTAL COMPREHENSIVE INCOME | 2,138 | 522 | 209 | 1,156 | 325 |
| (DKKm) | Note | 31 December 2021 |
30 June 2021 |
30 June 2022 |
|---|---|---|---|---|
| INTANGIBLE ASSETS | 1,641 | 1,564 | 1,184 | |
| Operating equipment | 91 | 101 | 63 | |
| Owner-occupied properties | 810 | 832 | 810 | |
| TOTAL TANGIBLE ASSETS | 902 | 933 | 873 | |
| Investment properties | 2,927 | 3,679 | 0 | |
| Equity investments in associates and joint ventures | 2,324 | 2,013 | 57 | |
| Total investments in associates and joint ventures | 2,324 | 2,013 | 57 | |
| Equity investments | 5,085 | 4,719 | 1,075 | |
| Unit trusts | 16 | 2 | 0 | |
| Bonds | 32,995 | 37,104 | 11,841 | |
| Loans guaranteed by mortgages | 5 | 5 | 5 | |
| Deposits with credit institutions | 2,620 | 4,548 | 406 | |
| Derivatives | 127 | 252 | 0 | |
| Total other financial investment assets | 40,848 | 46,629 | 13,327 | |
| TOTAL INVESTMENT ASSETS | 46,099 | 52,321 | 13,384 | |
| INVESTMENT ASSETS RELATED TO UNIT-LINKED PRODUCTS | 68,149 | 58,115 | 0 | |
| Reinsurers' share of the provisions for unearned premiums | 99 | 181 | 191 | |
| Reinsurers' share of the life insurance provisions | 2 | 4 | 0 | |
| Reinsurers' share of the provisions for claims | 576 | 538 | 552 | |
| Total reinsurers' share of provisions | 677 | 723 | 743 | |
| Receivables from policyholders | 313 | 306 | 255 | |
| Receivables from insurance companies | 105 | 88 | 179 | |
| Receivables from associates and joint ventures | 227 | 243 | 0 | |
| Other receivables | 311 | 503 | 186 | |
| TOTAL RECEIVABLES | 1,633 | 1,862 | 1,362 | |
| Current tax assets | 0 | 0 | 42 | |
| Deferred tax assets | 86 | 57 | 72 | |
| Assets held for sale | 4 | - | - | 92,567 |
| Liquid funds | 1,136 | 178 | 36 | |
| Other | 79 | 26 | 116 | |
| TOTAL OTHER ASSETS | 1,302 | 261 | 92,833 | |
| Accrued interest and rent | 423 | 376 | 66 | |
| Other prepayments and accrued income | 218 | 251 | 235 | |
| TOTAL PREPAYMENTS AND ACCRUED INCOME | 641 | 627 | 301 | |
| TOTAL ASSETS | 120,368 | 115,683 | 109,937 |
| 31 December | 30 June | 30 June | ||
|---|---|---|---|---|
| (DKKm) | Note | 2021 | 2021 | 2022 |
| Share capital | 90 | 90 | 90 | |
| Revaluation reserve | 2 | (0) | 2 | |
| Security fund | 1,146 | 1,146 | 1,090 | |
| Other reserves | 83 | 81 | 84 | |
| Total reserves | 1,229 | 1,227 | 1,174 | |
| Profit carried forward | 2,973 | 5,035 | 3,509 | |
| Proposed dividend | 3,105 | 0 | 0 | |
| TOTAL SHAREHOLDERS' EQUITY | 7,399 | 6,353 | 4,775 | |
| OTHER SUBORDINATED LOAN CAPITAL | 1,900 | 1,749 | 1,900 | |
| Provisions for unearned premiums | 1,446 | 3,055 | 2,794 | |
| Profit margin, non-life insurance contracts | 1,316 | 1,065 | 1,101 | |
| With-profit products | 22,319 | 22,709 | 0 | |
| Unit-linked products | 65,749 | 60,789 | 0 | |
| Total life insurance provisions | 88,068 | 83,499 | 0 | |
| Profit margin, life insurance and investment contracts | 1,525 | 1,616 | 0 | |
| Provisions for claims | 13,994 | 13,348 | 10,698 | |
| Risk margin, non-life insurance contracts | 189 | 197 | 156 | |
| Provisions for bonuses and rebates | 157 | 136 | 147 | |
| TOTAL PROVISIONS FOR INSURANCE AND INVESTMENT CONTRACTS | 106,695 | 102,916 | 14,895 | |
| Pensions and similar commitments | 28 | 29 | 23 | |
| Deferred tax liabilities | 94 | 84 | 2 | |
| Deferred tax on security funds | 306 | 306 | 362 | |
| Other liabilities | 0 | 0 | 25 | |
| TOTAL PROVISIONS | 428 | 418 | 412 | |
| DEPOSITS RECEIVED FROM REINSURERS | 11 | 24 | 0 | |
| Debt relating to direct insurance operations | 180 | 175 | 19 | |
| Debt relating to reinsurance operations | 42 | 47 | 120 | |
| Amounts due to credit institutions | 451 | 982 | 305 | |
| Current tax liabilities | 84 | 288 | 0 | |
| Liabilities relating to assets held for sale | 4 | - | - | 86,566 |
| Derivatives | 605 | 676 | 303 | |
| Other debt | 2,468 | 1,993 | 631 | |
| TOTAL DEBT | 3,829 | 4,162 | 87,943 | |
| ACCRUALS AND DEFERRED INCOME | 108 | 60 | 12 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 120,368 | 115,683 | 109,937 | |
| Financial assets and liabilities | 2 |
| Financial assets and liabilities | 2 |
|---|---|
| Contingent liabilities | 3 |
| Discontinued operations | 4 |
| Related parties | 5 |
| Accounting policies | 6 |
| Full year | H1 | H1 | |
|---|---|---|---|
| (DKKm) | 2021 | 2021 | 2022 |
| Cash flow from operations | |||
| Gross premiums | 9,561 | 5,990 | 6,231 |
| Claims | (5,593) | (2,898) | (3,133) |
| Expenses | (1,440) | (700) | (780) |
| Reinsurance ceded | (261) | (201) | (63) |
| Cash flow from non-life insurance | 2,266 | 2,191 | 2,255 |
| Interest income etc. | 298 | 137 | 141 |
| Dividends | 78 | 63 | 32 |
| Interest charges etc. | (98) | (48) | (44) |
| Corporation tax | (529) | (46) | (252) |
| Other items | 231 | 63 | (61) |
| Cash flow from operations, continuing operations | 2,247 | 2,360 | 2,072 |
| Cash flow from operations, discontinued operations | 2,206 | 763 | 1,186 |
| Cash flow from operations | 4,453 | 3,123 | 3,258 |
| Cash flow from investments | |||
| Intangible assets, operating equipment | (255) | (129) | (173) |
| Properties | 16 | (1) | 438 |
| Dividends from associates and joint ventures | 0 | 0 | 19 |
| Equity investments | 174 | 194 | (60) |
| Bonds | 517 | (1,746) | 343 |
| Derivatives | 14 | 13 | (91) |
| Cash flow from investments, continuing operations | 467 | (1,668) | 476 |
| Cash flow from investments, discontinued operations | (4,577) | (502) | (2,655) |
| Cash flow from investments | (4,110) | (2,170) | (2,179) |
| Cash flow from financing | |||
| Dividend paid | (1,752) | (1,752) | (3,040) |
| Exercise of share options | 50 | 29 | 43 |
| Redemption of subordinated loan capital | (850) | 0 | 0 |
| Issue of subordinated loan capital | 1,000 | 0 | 0 |
| Amounts due to credit institutions | (58) | (233) | 35 |
| Cash flow from financing, continuing operations | (1,609) | (1,957) | (2,963) |
| Cash flow from financing, discontinued operations | (842) | (134) | 1,121 |
| Cash flow from financing | (2,451) | (2,091) | (1,842) |
| Change in cash and cash equivalents, continuing operations | 1,105 | (1,265) | (415) |
| Change in cash and cash equivalents, discontinued operations | (3,213) | 127 | (348) |
| Cash and cash equivalents at 1 January | 5,835 | 5,835 | 3,756 |
| Value adjustment of cash and cash equivalents | 29 | 29 | (3) |
| Cash and cash equivalents, discontinued operations | - | - | (2,549) |
| Cash and cash equivalents end of period | 3,756 | 4,726 | 442 |
| Cash and cash equivalents comprise: | |||
| Liquid funds | 1,136 | 178 | 36 |
| Deposits with credit institutions | 2,620 | 4,548 | 406 |
| 3,756 | 4,726 | 442 |
(DKKm)
| Revalu- | Profit | ||||||
|---|---|---|---|---|---|---|---|
| Share | ation | Security | Other | carried | Proposed | ||
| capital | reserve | fund | reserves | forward | dividend | Total | |
| 2021 | |||||||
| Shareholders' equity at 31 December previous year | 90 | 1 | 1,146 | 79 | 3,763 | 1,800 | 6,879 |
| Profit | 4 | (971) | 3,105 | 2,138 | |||
| Other comprehensive income | 0 | 0 | |||||
| Total comprehensive income | 0 | 4 | (971) | 3,105 | 2,138 | ||
| Dividend paid | (1,800) | (1,800) | |||||
| Dividend, own shares | 48 | 48 | |||||
| Share-based payments | 76 | 76 | |||||
| Exercise of share options | 50 | 50 | |||||
| Taxation | 7 | 7 | |||||
| Transactions with owners | 181 | (1,800) | (1,619) | ||||
| Shareholders' equity at 31 December 2021 | 90 | 2 | 1,146 | 83 | 2,973 | 3,105 | 7,399 |
| H1 2021 | |||||||
| Shareholders' equity at 31 December prior year | 90 | 1 | 1,146 | 79 | 3,763 | 1,800 | 6,879 |
| Profit | 2 | 1,155 | 1,157 | ||||
| Other comprehensive income | (1) | (1) | |||||
| Total comprehensive income | (1) | 2 | 1,155 | 1,156 | |||
| Dividend paid | (1,800) | (1,800) | |||||
| Dividend, own shares | 48 | 48 | |||||
| Share-based payments | 38 | 38 | |||||
| Exercise of share options | 29 | 29 | |||||
| Taxation | 3 | 3 | |||||
| Transactions with owners | 118 | (1,800) | (1,682) | ||||
| Shareholders' equity at 30 June 2021 | 90 | 0 | 1,146 | 81 | 5,035 | 0 | 6,353 |
| H1 2022 | |||||||
| Shareholders' equity at 31 December previous year | 90 | 2 | 1,146 | 83 | 2,973 | 3,105 | 7,399 |
| Profit | 0 | 380 | 380 | ||||
| Other comprehensive income | 1 | (56) | (55) | ||||
| Total comprehensive income | 1 | (56) | 0 | 380 | 325 | ||
| Dividend paid | (3,105) | (3,105) | |||||
| Dividend, own shares | 65 | 65 | |||||
| Share-based payments | 42 | 42 | |||||
| Exercise of share options | 43 | 43 | |||||
| Taxation | 7 | 7 | |||||
| Transactions with owners | 157 | (3,105) | (2,948) | ||||
| Shareholders' equity at 30 June 2022 | 90 | 2 | 1,090 | 84 | 3,509 | 0 | 4,775 |
| Elimin- | Parent | Elimin- | |||||
|---|---|---|---|---|---|---|---|
| (DKKm) | Private | SME | ated | Non-life | etc. | ated | Group |
| H1 2021 | |||||||
| Non-life insurance | |||||||
| Gross premiums earned | 2,317 | 2,395 | (5) | 4,706 | 4,706 | ||
| Claims incurred | (1,441) | (1,572) | 4 | (3,009) | 6 | (3,003) | |
| Expenses | (375) | (418) | 1 | (793) | 11 | (781) | |
| Net reinsurance | (30) | 4 | (0) | (26) | (26) | ||
| Technical result from non-life insurance | 470 | 409 | 0 | 879 | 17 | 895 | |
| Total investment return | 54 | (4) | (17) | 33 | |||
| Return and value adjustments of non-life insurance provisions | 292 | 292 | |||||
| Other items | 1 | 2 | 3 | ||||
| Profit before tax, continuing operations | 1,225 | (2) | 0 | 1,223 | |||
| Tax, continuing operations | (266) | ||||||
| Profit after tax, continuing operations | 957 | ||||||
| Profit after tax, discontinued operations | 200 | ||||||
| Profit | 1,157 | ||||||
| H1 2022 | |||||||
| Non-life insurance | |||||||
| Gross premiums earned | 2,379 | 2,517 | (6) | 4,890 | 4,890 | ||
| Claims incurred | (1,520) | (1,670) | 6 | (3,185) | 4 | (3,180) | |
| Expenses | (378) | (430) | 0 | (808) | 9 | (799) | |
| Net reinsurance | (20) | (52) | (0) | (72) | (72) | ||
| Technical result from non-life insurance | 461 | 365 | (0) | 825 | 13 | 839 | |
| Total investment return | (1,134) | (6) | (13) | (1,153) | |||
| Return and value adjustments of non-life insurance provisions | 702 | 702 | |||||
| Other items | (27) | (26) | (54) | ||||
| Profit before tax, continuing operations | 366 | (32) | 0 | 334 | |||
| Tax, continuing operations | (71) | ||||||
| Profit after tax, continuing operations | 263 | ||||||
| Profit after tax, discontinued operations | 117 | ||||||
| Profit | 380 |
| Full year | H1 | H1 | |
|---|---|---|---|
| (DKKm) | 2021 | 2021 | 2022 |
| Note 1. Claims incurred, net of reinsurance - Non-life insurance | |||
| Run-off result: | |||
| Gross business | 269 | 70 | 100 |
| Reinsurance ceded | (14) | 37 | (12) |
| Run-off result, net of reinsurance (profit) | 255 | 107 | 89 |
Fair value is the price which would be achieved on the sale of an asset or paid for the transfer of a liability in a normal transaction between the market players at the time of measurement.
The IFRS defines a hierarchy of three levels for 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 equity investments, bonds, derivatives etc., the measurement is generally based on the closing price end of year.
If there is no closing price, another public price is used, which is believed to be the most appropriate, in the form of indicative prices from banks/brokers. Assets of this type are, for example CLOs and CDOs. Valuation methods or other publicly available information is used to value listed securities, where the closing price does not reflect the fair value.
Valuation methods are based 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 cannot be based on publicly available market information alone. In these cases, valuation models that could imply the use of estimates of both the future and the nature of the current market situation are used.
In Q2 2021, management assessed that, in general, the markets for structured credit products (CLOs) could be defined as active again in accordance with the definition in IFRS 13. Therefore, according to the applied accounting policies, these assets were transferred back from level 3 to level 2.
| 31 December | 30 June | 30 June | |
|---|---|---|---|
| Financial assets recorded at fair value based on non-observable input (level 3): | 2021 | 2021 | 2022 |
| 1 January | 7,278 | 7,278 | 80 |
| Transferred to assets held for sale | - | - | (45) |
| Purchases | 664 | 664 | 0 |
| Value adjustments on assets transferred to level 2 | 270 | 0 | 0 |
| Transferred to level 2 | (7,463) | (7,463) | 0 |
| Repayments | (689) | (441) | 0 |
| Value adjustments | 21 | 287 | 3 |
| 80 | 324 | 38 |
The portfolio consists of bonds for which current return depends on payment on life annuity contracts. The fair value is generally equivalent to the cost price in the transaction currency.
The carrying value of financial assets and financial liabilities recorded at amortised cost corresponds approx. to fair value.
The accounting policies for financial assets and liabilities are stated in the latest Annual Report.
| Other liabilities | 1 | 2 | 0 |
|---|---|---|---|
| Capital commitments made to loan funds and private equity funds etc. | 112 | 120 | 116 |
All companies in the Topdanmark Group and other Danish companies and branches in the Sampo Group are jointly taxed with Topdanmark A/S being the management company. Pursuant to the specific rules on corporation taxes etc. in the Danish Companies Act, the companies are liable for the jointly taxed companies and for any obligations to withhold tax on interest, royalties and dividend for companies concerned.
In connection with the implementation of a new customer and core system, Topdanmark Forsikring A/S has undertaken to provide support to specific suppliers to fulfil Topdanmark EDB IV ApS' obligations in accordance with the contracts.
| Full year | H1 | H1 | |
|---|---|---|---|
| (DKKm) | 2021 | 2021 | 2022 |
| Note 4. Discontinued operations | |||
| LIFE INSURANCE | |||
| Premiums, net of reinsurance | 10,359 | 5,222 | 5,170 |
| Allocated investment return, net of reinsurance | 10,791 | 6,411 | (11,144) |
| Pension return tax | (1,521) | (926) | 553 |
| Claims and benefits paid, net of reinsurance | (8,951) | (4,666) | (4,049) |
| Change in the life insurance provisions, net of reinsurance | (9,114) | (4,587) | 9,503 |
| Change in profit margin | (1,158) | (1,249) | 215 |
| Insurance operating expenses, net of reinsurance | (585) | (297) | (264) |
| TECHNICAL RESULT FROM LIFE INSURANCE | (178) | (90) | (15) |
| NON-LIFE INSURANCE | |||
| Premiums earned, net of reinsurance | 626 | 343 | 366 |
| Claims incurred, net of reinsurance | (808) | (360) | (378) |
| Bonuses and rebates | (8) | (5) | (3) |
| Insurance operating expenses, net of reinsurance | (48) | (27) | (43) |
| TECHNICAL RESULT FROM NON-LIFE INSURANCE | (238) | (49) | (58) |
| Total investment return | 11,177 | 6,479 | (11,314) |
| Return and value adjustments of non-life insurance provisions | 157 | 138 | 356 |
| Investment return transferred to life insurance | (10,791) | (6,411) | 11,144 |
| Other income | 189 | 187 | 1 |
| PROFIT BEFORE TAX TOPDANMARK LIV HOLDING GROUP | 316 | 253 | 113 |
| Unwinding costs | - | - | (2) |
| Tax | (67) | (53) | 6 |
| PROFIT AFTER TAX, DISCONTINUED OPERATIONS | 248 | 200 | 117 |
Topdanmark Forsikring A/S has signed an agreement to divest of Topdanmark Liv Holding A/S and all subsidiaries thereof to Nordea Life Holding AB for a purchase price corresponding to a goodwill of DKK 1.5bn.
Consequently, according to IFRS 5, the result from the life insurance group has been presented as discontinued operations in the income statement. Comparatives have been restated.
| 31 December | 30 June | 30 June | |
|---|---|---|---|
| 2021 | 2021 | 2022 | |
| ASSETS HELD FOR SALE | |||
| Intangible assets | 588 | 614 | 603 |
| Tangible assets | 17 | 19 | 16 |
| Investment assets | 30,517 | 34,463 | 29,192 |
| Investment assets related to unit-linked products | 68,149 | 58,115 | 60,911 |
| Receivables | 443 | 499 | 582 |
| Other assets | 1,006 | 155 | 923 |
| Prepayments and accrued income | 409 | 354 | 404 |
| TOTAL ASSETS | 101,129 | 94,219 | 92,629 |
| LIABILITIES RELATING TO ASSETS HELD FOR SALE | |||
| Shareholders´equity | 1,588 | 2,535 | 1,711 |
| Other subordinated loan capital | 300 | 300 | 300 |
| Provisions for insurance and investment contracts | 92,717 | 88,055 | 83,154 |
| Other provisions | 59 | 59 | 445 |
| Deposits received from reinsurers | 11 | 24 | 5 |
| Debt | 6,411 | 3,197 | 6,950 |
| Accruals and deferred income | 44 | 49 | 64 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 101,129 | 94,219 | 92,629 |
| TOTAL LIABILITIES EXCL. GROUP INTERNAL ELIMINATIONS | 95,284 | 90,743 | 86,566 |
| (DKKm) | Full year 2021 |
H1 2021 |
H1 2022 |
|---|---|---|---|
| Note 4. Discontinued operations - continued | |||
| Gross premium income | |||
| Regular premiums | 3,450 | 1,712 | 1,787 |
| Single premiums | 6,910 | 3,511 | 3,383 |
| Gross premiums, insurance contracts | 10,360 | 5,222 | 5,170 |
| Investment contracts: | |||
| Regular premiums | 27 | 10 | 7 |
| Single premiums | 610 | 256 | 655 |
| Gross premiums, investment contracts | 636 | 266 | 662 |
| Gross premiums, insurance and investment contracts, Life and pension | 10,996 | 5,489 | 5,832 |
| Gross premium income, illness and accident | 621 | 339 | 366 |
| Gross premium income, discontinued operations | 11,618 | 5,828 | 6,198 |
| 30 June | |||
| Financial assets and liabilities | 2022 | ||
Fair value measurement for financial assets and liabilities is described in note 2, financial assets.
| Financial assets recorded at fair value based on non-observable input (level 3): | |
|---|---|
| Transferred from continuing operations | 45 |
| Repayments | (5) |
| Value adjustments | 4 |
| 44 |
The portfolio consists of bonds for which current return depends on payment on life annuity contracts. The fair value is generally equivalent to the cost price in the transaction currency.
The carrying value of financial assets and financial liabilities recorded at amortised cost corresponds approx. to fair value.
The accounting policies for financial assets and liabilities are stated in the latest Annual Report.
| Contingent liabilities | 31 December | 30 June | 30 June |
|---|---|---|---|
| 2021 | 2021 | 2022 | |
| Contract liabilities | 222 | 431 | 49 |
| Adjustments to VAT liabilities | 121 | 116 | 102 |
| Capital commitments made to loan funds and private equity funds etc. | 301 | 243 | 268 |
In 2022, Q1, Topdanmark A/S paid dividend of DKK 1,501m (Q1 2021: DKK 840m) to Sampo plc. and received dividend of DKK 3,100m (Q1 2021: DKK 1,800m) from Topdanmark Forsikring A/S.
In Q3 2021, Topdanmark Forsikring A/S redeemed subordinated notes of DKK 850m, of which DKK 270m was held by Sampo plc.
In Q4 2021, Topdanmark Forsikring A/S issued subordinated notes of DKK 1,000m subscribed by If P&C Insurance Ltd.
There have been no other material transactions with related parties except from ordinary commercial trade between the companies in the Topdanmark Group.
The announcement of the H1 2022 results has been prepared in accordance with IAS 34 on interim reports for listed companies and additional Danish disclosure requirements on interim report for listed financial services companies.
The results of the parent company have been prepared in accordance with the executive order on financial reports presented by insurance companies and lateral pension funds issued by the Danish FSA.
Topdanmark Group has implemented those IFRS standards and interpretations taking effect from 2022. None of these has affected recognition or measurement.
Topdanmark Forsikring A/S has signed an agreement to divest of Topdanmark Liv Holding A/S and all subsidiaries thereof.
Consequently, Topdanmark Liv Holding Group has been classified as discontinued operation with the effect, that profit from the life insurance group is presented in Topdanmark Group´s income statement in one line as Profit after tax, discontinued operations. Comparatives are restated.
Discontinued operations also include unwinding costs.
Assets and liabilities relating to the life insurance group are presented separately in the balance sheet of the Topdanmark Group as Assets held for sale, and Liabilities relating to assets held for sale, with no restatement of comparatives.
Investment assets are measured at fair value, while intangible and tangible assets are measured at the lowest carrying amount and fair value when classified as held for sale. Provisions for insurance and investment contracts are measured at fair value.
Due to the divestment of the life insurance group, the segmentation going forward consists of the two non-life segments, Private and SME, as well as the Parent company. The Private segment includes non-life insurance policies offered by Topdanmark Forsikring A/S to individual households in Denmark, whereas the result from Illness and Accident insurance policies sold through the life company has been included in discontinued operations. Comparatives are restated.
Apart form this, the accounting policies remain unchanged compared with 2021. Please refer to the Annual Report 2021 for the full accounting policies of the Group.
This announcement has not been audited nor subjected to review.
| Full year | Q2 | Q2 | H1 | H1 | |
|---|---|---|---|---|---|
| (DKKm) | 2021 | 2021 | 2022 | 2021 | 2022 |
| Income from subsidiaries | 2,197 | 535 | 279 | 1,184 | 406 |
| Value adjustments | (7) | 0 | (1) | (3) | (1) |
| Interest charges | (11) | (3) | (3) | (5) | (5) |
| Total investment return | 2,179 | 532 | 276 | 1,175 | 400 |
| Other expenses | (52) | (13) | (14) | (25) | (26) |
| PROFIT BEFORE TAX | 2,127 | 519 | 262 | 1,150 | 374 |
| Tax | 11 | 3 | 3 | 7 | 6 |
| PROFIT | 2,138 | 522 | 265 | 1,157 | 380 |
| Profit | 2,138 | 522 | 265 | 1,157 | 380 |
|---|---|---|---|---|---|
| Other comprehensive income from subsidiaries | 0 | 0 | (55) | (1) | (55) |
| Other comprehensive income | 0 | 0 | (55) | (1) | (55) |
| TOTAL COMPREHENSIVE INCOME | 2,138 | 522 | 209 | 1,156 | 325 |
| (DKKm) | 31 December 2021 |
30 June 2021 |
30 June 2022 |
|---|---|---|---|
| Assets | |||
| Operating equipment | 3 | 3 | 3 |
| TOTAL TANGIBLE ASSETS | 3 | 3 | 3 |
| Equity investments in subsidiaries | 7,169 | 6,116 | 4,518 |
| Total investment in subsidiaries | 7,169 | 6,116 | 4,518 |
| Equity investments | 1 | 1 | 1 |
| Total other financial investment assets | 1 | 1 | 1 |
| TOTAL INVESTMENT ASSETS | 7,170 | 6,117 | 4,519 |
| Receivables from subsidiaries | 998 | 1,243 | 1,141 |
| Other receivables | 62 | 30 | 0 |
| TOTAL RECEIVABLES | 1,059 | 1,273 | 1,141 |
| Current tax assets | 0 | 0 | 42 |
| Liquid funds | 1 | 1 | 1 |
| TOTAL OTHER ASSETS | 1 | 1 | 44 |
| TOTAL ASSETS | 8,233 | 7,394 | 5,706 |
| Shareholders' equity and liabilities | |||
| Share capital | 90 | 90 | 90 |
| Other reserves | 3,440 | 2,388 | 790 |
| Total reserves | 3,440 | 2,388 | 790 |
| Total reserves | 3,440 | 2,388 | 790 |
|---|---|---|---|
| Profit carried forward | 1,069 | 4,181 | 4,257 |
| Proposed dividend | 3,105 | 0 | 0 |
| TOTAL SHAREHOLDERS' EQUITY | 7,705 | 6,659 | 5,137 |
| OTHER SUBORDINATED LOAN CAPITAL | 400 | 399 | 400 |
| Amounts due to subsidiaries | 35 | 37 | 154 |
| Current tax liabilities | 83 | 288 | 0 |
| Other debt | 11 | 11 | 16 |
| TOTAL DEBT | 129 | 336 | 170 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 8,233 | 7,394 | 5,706 |
The Board of Directors and the Executive Board have today considered and adopted the half-year report for 2022 for Topdanmark A/S.
The consolidated financial statements are presented in accordance with International Financial Reporting Standards as adopted by the EU, and the interim financial statements for the parent company are presented in accordance with the Danish Financial Business Act. Further, the interim report is presented in accordance with additional Danish disclosure requirements on interim reports for listed financial services companies.
In our opinion, 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 as at
30 June 2022 as well as the result of the Group's and the parent company's activities and the Group's cash flows for the financial period from 1 January to 30 June 2022.
We believe that the management review contains a fair view of the development in the Group's and parent company's activities and financial position, together with a description of the most material risks and uncertainties by which the Group and the parent company can be affected.
There have been no events in the period from 30 June 2022 until the presentation of the consolidated financial statements which could change the assessment of the interim report for H1 2022.
(CEO) (CFO)
Peter Hermann Lars Kufall Beck
Ricard Wennerklint Jens Aaløse Elise Bundgaard (Chairman) (Deputy Chairman)
Maria Hjorth Mette Jensen Cristina Lage
Petri Niemisvirta Michael Noer Morten Thorsrud
Borupvang 4 • DK-2750 Ballerup Tel +45 44 68 33 11 • CVR no. 78040017 [email protected] • www.topdanmark.com
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