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Tryg Interim / Quarterly Report 2016
3389_rns_2016-10-11_26ecebba-99bd-4bda-8431-a9c0822e7fde.pdf
Interim / Quarterly Report
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Interim report Q1-Q3 2016
Tryg
Contents – Management’s review
| MANAGEMENT'S REVIEW | 10 | Commercial | FINANCIAL STATEMENTS |
|---|---|---|---|
| 3 Highlights | 11 | Corporate | 17 Financial statements |
| 4 Income overview | 12 | Sweden | |
| 5 Tryg’s results | 13 | Investment activities | |
| 7 Business initiatives | 15 | Capital | |
| 9 Private | 16 | Outlook | |
| Financial calendar 2017 | |||
| --- | --- | ||
| 20 Jan. 2017 | Annual report 2016 | ||
| 8 Mar. 2017 | Annual general meeting | ||
| 9 Mar. 2017 | Tryg shares are traded ex-dividend | ||
| 13 Mar. 2017 | Payment of dividend | ||
| 7 Apr. 2017 | Interim report Q1 2017 | ||
| 11 July 2017 | Interim report Q2 and H1 2017 | ||
| 12 July 2017 | Tryg shares are traded ex-dividend | ||
| 14 July 2017 | Payment of semi-annual dividend | ||
| 10 Oct. 2017 | Interim report Q1-Q3 2017 |
Teleconference
Tryg is hosting a teleconference on 11 October 2016 at 10.00 CET. View the audio webcast at tryg.com. Financial analysts and investors may participate on tel. +44 (0) 203 194 0545 or +45 35 44 55 83, where questions can be asked. The teleconference will be held in English and can subsequently be viewed at tryg.com.
Contact details
| Visit tryg.com
and follow us at
twitter.com/TrygIR | Tryg A/S
Klausdalsbrovej 601
2750 Ballerup, Denmark
+45 70 11 20 20
CVR no. 26460212 | Gianandrea Roberti
Investor Relations Officer
+45 20 18 82 67
[email protected] | Peter Brondt
Investor Relations Manager
+45 22 75 89 04
[email protected] | Kasper Riis
Head of Communications
+45 41 77 68 34
[email protected] |
| --- | --- | --- | --- | --- |
This report constitutes Tryg A/S' consolidated financial statements and has not been audited. Unless otherwise indicated, all comparisons are made to Q3 2015. Comparative figures for Q3 2015 are generally given in brackets.
Editor Investor Relations | Publication 11 October 2016 | Layout amo design
Interim report Q1-Q3 2016 | Tryg A/S | 2
Highlights
Solvency ratio of 217. Profit before tax improved significantly, driven primarily by a large swing in the investment return.
Financial highlights Q3 2016
- Solvency ratio of 217 including the Skandia child insurance portfolio consolidated from 1 September
- Profit before tax of DKK 923m (DKK 186m) and after tax DKK 732m (DKK 110m)
- Improved technical result of DKK 744m (DKK 647m), however, broadly in line with previous year when adjusted for one-off effects in Q3 2015
- Combined ratio of 83.7 (86.1) slightly higher than Q3 2015 adjusted for one-off effects
- Expense ratio of 14.5 (16.3) broadly in line with Q3 2015 adjusted for one-off effects
- Premium growth of 0.0% (0.6%) in local currencies with increase in Denmark and drop in Norway
- Investment result of DKK 191m (DKK -441m) boosted by a very strong return on the free portfolio, driven primarily by equity markets
Financial highlights Q1-Q3 2016
- Profit before tax of DKK 2,420m (DKK 1,565m) and after tax DKK 1,911 (DKK 1,215m)
- Technical result of DKK 2,076m (DKK 1,901m)
- Combined ratio of 84.4 (86.3) due to lower level of weather claims and large claims, slightly lower run-offs but also a higher underlying claims level
- Lower expense ratio of 14.9 (15.7) impacted by one-off effects in 2015
- Premiums declined by 0.4% (-0.5%) in local currencies
- Investment result of DKK 389m (DKK -264m)
Customer highlights Q3 2016
- NPS of 24 (20)
- Retention rate of 88.0 (88.1)
- Share of customers with three or more products 57.0% (56.7%)
New initiatives in Q3 2016
- Conversion of motor, accident and house insurance products for approximately 95,000 customers
- New digital claims solutions and functionalities for the 'My page' digital customer universe launched in Denmark as well as new self-service options and claims notification in Norway
- Next step of efficiency initiatives in the Norwegian organisation with partial integration of the car sales channel organisation into the Tryg organisation
- Cyber insurance developed in Commercial and Corporate in Denmark, Norway and Sweden – will be launched in Q4
Financial targets 2017
- Return on equity of ≥21% after tax
- Combined ratio ≤87
- Expense ratio ≤14
Customer targets 2017
- NPS +100% ~ 22
- Retention rate +1 pp ~ 88.9
- Customers ≥3 products +5 pp ~ 61.3%
Contents - Management's review
Interim report Q1-Q3 2016 | Tryg A/S
Income overview
| DKKm | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | 2015 |
|---|---|---|---|---|---|
| Gross premium income | 4,514 | 4,583 | 13,203 | 13,584 | 17,977 |
| Gross claims | -2,693 | -3,512 | -8,374 | -10,574 | -13,562 |
| Total insurance operating costs | -644 | -739 | -1,935 | -2,105 | -2,720 |
| Profit/loss on gross business | 1,177 | 332 | 2,894 | 905 | 1,695 |
| Profit/loss on ceded business | -430 | 310 | -811 | 982 | 710 |
| Insurance technical interest, net of reinsurance | -3 | 5 | -7 | 14 | 18 |
| Technical result | 744 | 647 | 2,076 | 1,901 | 2,423 |
| Investment return after insurance technical interest | 191 | -441 | 389 | -264 | -22 |
| Other income and costs | -12 | -20 | -45 | -72 | -91 |
| Profit/loss before tax | 923 | 186 | 2,420 | 1,565 | 2,310 |
| Tax | -190 | -76 | -508 | -393 | -390 |
| Profit/loss on continuing business | 733 | 110 | 1,912 | 1,172 | 1,920 |
| Profit/loss on discontinued and divested business after tax | -1 | 0 | -1 | 43 | 49 |
| Profit/loss a) | 732 | 110 | 1,911 | 1,215 | 1,969 |
| Run-off gains/losses, net of reinsurance | 289 | 403 | 938 | 971 | 1,212 |
| Key figures | |||||
| Total equity | 9,168 | 9,015 | 9,168 | 9,015 | 9,644 |
| Return on equity after tax (%) a) | 32.2 | 4.7 | 26.9 | 16.4 | 20.0 |
| Number of shares, end of period (1,000) | 277,008 | 284,490 | 277,008 | 284,490 | 282,316 |
| Earnings per share | 2.63 | 0.38 | 6.81 | 4.24 | 6.91 |
| Dividend per share | 2.60 | 2.50 | 6.00 | ||
| Premium growth in local currencies | 0.0 | 0.6 | -0.4 | -0.5 | -0.8 |
| Gross claims ratio | 59.7 | 76.6 | 63.4 | 77.8 | 75.4 |
| Net reinsurance ratio | 9.5 | -6.8 | 6.1 | -7.2 | -3.9 |
| Claims ratio, net of reinsurance | 69.2 | 69.8 | 69.5 | 70.6 | 71.5 |
| Gross expense ratio | 14.5 | 16.3 | 14.9 | 15.7 | 15.3 |
| Combined ratio | 83.7 | 86.1 | 84.4 | 86.3 | 86.8 |
| Run-off, net of reinsurance (%) | -6.4 | -8.8 | -7.1 | -7.1 | -6.7 |
| Large claims, net of reinsurance (%) | 0.9 | 4.3 | 1.5 | 3.5 | 3.4 |
| Weather claims, net of reinsurance (%) | 1.3 | 2.4 | 1.8 | 2.8 | 3.4 |
| Combined ratio on business areas | |||||
| Private | 79.6 | 82.1 | 83.9 | 84.9 | 85.4 |
| Commercial | 85.5 | 86.9 | 81.9 | 83.2 | 83.6 |
| Corporate | 88.0 | 80.4 | 85.3 | 87.8 | 90.7 |
| Sweden | 89.5 | 89.5 | 90.0 | 86.6 | 83.5 |
a) From 1 January 2016, Tryg has implemented the Executive Order on Financial Reports of Insurance Companies and Lateral Pension Funds issued by the Danish FSA, which prescribes applying a new yield curve and a new way of calculating return on equity after tax (%). Comparative figures have been restated accordingly. Please refer to details of the new yield curve in note 8 Accounting policies.
Combined ratio
Expense ratio
Return on equity
Contents - Management's review
Interim report Q1-Q3 2016 | Tryg A/S | 4
Tryg's results
Tryg realised a profit before tax of DKK 923m in Q3 2016 (DKK 186m), driven by a higher technical result (Q3 2015 was affected by one-off costs of DKK 120m related to the efficiency programme) and a substantially better investment return. The solvency ratio was 217, including the acquired Skandia child insurance portfolio.
The technical result was positively affected by the internal efficiency programme in the amount of DKK 55m, and negatively impacted by a slightly higher underlying claims level.
The investment return totalled DKK 191m (DKK -441m) and was at a much higher level than in Q3 2015, boosted by a strong return on the free portfolio (driven mainly by equity exposure), but also a good match portfolio performance (especially in comparison with Q3 2015). Equity markets experienced a very sharp correction in Q3 2015. This is the primary reason for the noticeable swing in the investment return.
The combined ratio was 83.7 (86.1), slightly higher than the prior-year period when adjusted for one-off effects of 2.6 percentage points in Q3 2015.
The combined ratio was impacted by a much lower level of large claims and weather claims with a total impact of 2.2% (6.7%), but also by a lower run-off level of 6.4% (8.8%). The run-off level was in line with previous communication and generally reflects Tryg's solid reserving position.
For Private, the underlying claims ratio was 0.6 percentage points higher than in Q3 2015. This development constituted a slight improvement from Q2 2016 and is in line with previous quarterly announcements. Price and claims initiatives have been implemented, but will be more visible towards the beginning of 2017.
The Net Promoter Score (NPS) improved from 20 in Q3 2015 to 24 in Q3 2016, a positive development driven by Tryg's strong customer focus. The share of private customers with three or more products went up from 56.7% to 57.0%.
On 1 June, TryghedsGruppen's member bonus (8% of premiums paid in 2015) was paid out to Tryg's Danish customers, and we believe that the bonus scheme will be a competitive advantage in the long term.
In the Private organisation in both Denmark and Norway, Tryg is in the process of integrating customer services with the handling of simple claims. We believe the potential is considerable, and based on the initial promising results, it has been decided to also include motor claims in the integrated units.
Premiums
Gross premium income amounted to DKK 4,514m, unchanged (0.6%) when measured in local currencies. Private realised premium growth of 0.7% (0.3%), comprised by a consistently very positive trend in Denmark in the form of growth of 2.2%, and a negative development in Norway. For Commercial, premiums fell by 3.4% (0.2%). The negative development is primarily explained by a positive regulation of a large account that boosted the top line by DKK 20m in Q3 2015. The underlying development was quite stable and premium income in line with Q2 2016. Corporate saw unchanged premium income (2.6%), with slightly higher premiums in Norway and a moderate drop in Denmark and Sweden, due to price hikes. In Sweden, premiums were up 4.5% (-1.4%), including the Skandia child insurance portfolio from September. Premium growth was 2.1% excluding Skandia and one-off effects, which shows that the Swedish Private business has been able to more than compensate for the loss of a number of major accounts through a focus on own sales, cross-selling and online solutions.
Claims
The claims ratio, net of ceded business, was 69.2 (69.8). The lower net claims ratio level was attributable to one-off effects of 0.8 percentage points in Q3 2015 and a higher underlying claims level of approximately 1.3 percentage points. The higher underlying claims level can be attributed to property and travel insurance claims and also to a higher level of claims for extended warranty insurance for consumer electronics, as mentioned in previous quarterly reports.
Tryg also has a strong focus on developments in motor claims frequency as a number of surveys have indicated that drivers tend to be less observant when driving. The Danish Insurance Association has conducted a survey among more than
| Customer targets | |||
|---|---|---|---|
| Q3 2016 | Q3 2015 | Target 2017 | |
| Net Promoter Score (NPS) | 24 | 20 | 22 |
| Retention rate | 88.0 | 88.1 | 88.9 |
| Customers with ≥3 products (%) | 57.0 | 56.7 | 61.3 |
Contents – Management's review
Interim report Q1-Q3 2016 | Tryg A/S | 5
1,000 drivers. Many drivers admit to texting on their mobiles while driving, which according to research by the Technical University of Denmark entails an approximately sixfold increase in the risk of being involved in an accident. Tryg will follow the development closely, as an insurer, but also as a concerned contributor to the general feeling of safety in the markets in which we operate.
The weather in Denmark, Norway and Sweden was generally benign in Q3, except for a cloudburst in Norway at the beginning of July, which was the main reason for weather claims of 1.3% (2.4%).
The claims level for travel and property insurance remained high in Q3. The initiatives which have been implemented are expected to impact mostly in 2017. In Sweden, the claims level for extended warranty insurance also remained high, and price hikes, claims initiatives and new tariffs have been introduced to compensate for the claims trend.
The claims-related part of the efficiency programme is progressing according to plan, and Q3 saw the realisation of DKK 38m of the target figure of DKK 150m for 2016. In Q3 2016, additional savings were achieved by the competence team in Norway charged with helping injured policyholders get back to work. In Sweden, average building insurance claims improved significantly based on improved internal processes and improved service level agreements with external suppliers.
Expenses
The expense ratio was 14.5 (16.3), or unchanged when adjusting for the one-off costs of DKK 80m in Q3 2015 related to the ongoing efficiency programme. The efficiency programme is progressing according to plan and improved results by DKK 17m in Q3 out of a target of DKK 75m for 2016.
Tryg is strongly focused on achieving the target of an expense ratio at or below 14 in 2017. Many initiatives are being planned and implemented to meet this target. As these initiatives will primarily have an effect in 2017, this does, however, also mean that the expense level for 2016 is not expected to be significantly lower than the level of 14.9% in 2015 (adjusted for one-off costs).
In Q2, a significant cost-cutting initiative was initiated in the Norwegian part of the business, an initiative that will reduce head counts by approximately 60. In Q3 2016, the Norwegian organisation continued its cost-cutting efforts. Enter, Tryg's sales channel organisation in Norway has for many years been an independent unit with its own customer services and claims handling functions. In Q3 2016, these functions were integrated into Tryg's organisation, resulting in the cutting of approximately 30 jobs. This initiative will lead to cost reductions, but also to investments designed to increase distribution power.
On 30 September 2016, the number of employees was 3,310, down 49 since 2015.
Investment return
Investment income was DKK 191m (DKK -441m) boosted primarily by a positive development in equity markets, especially in comparison with the large drop experienced in the corresponding period in 2015. The free portfolio also benefitted from good returns on properties and fixed-income securities with a short duration. The match portfolio was boosted by a strong performance component driven by a narrowing covered-bond spread versus the swap curve. The overall investment income was made up by a free portfolio return of DKK 211m, a match portfolio return of DKK 75m and other financial income and expenses of DKK -95m.
Profit before and after tax
The profit before tax was DKK 923m (DKK 186m). Profit for the period after tax and discontinued business totalled DKK 732m (DKK 110m). Tax on continuing business constituted an expense of DKK 190m (DKK 76m), corresponding to a tax rate of 21%.
Capital
In Q3 2016, own funds totalled DKK 11,053m, which translates into a solvency ratio of 217 based on Tryg's partial internal model, or 173 based on the standard formula.
On 6 April 2016, Tryg initiated a DKK 1bn share buy back programme, and by 30 September 2016 5,380,081 shares had been acquired for a total amount of DKK 682m. Tryg currently holds a total of 5,532,986 own shares corresponding to 1.9% of own capital.
Results Q1-Q3 2016
Profit after tax was DKK 1,911m (DKK 1,215m). The combined ratio was 84.4 (86.3), due primarily to a lower level of large claims and weather claims. The investment income amounted to DKK 389m (DKK -264m), due to a high return on both the free portfolio and the match portfolio. The claims ratio, net of ceded business, was 69.5 (70.6) due to the above-mentioned factors.
Contents - Management's review
Interim report Q1-Q3 2016 | Tryg A/S | 6
Business initiatives
Continued conversion to new products
The conversion of old products to Tryq's new, updated products is very important. In Q3, approximately 95,000 customers had their old motor, house and accident insurance products updated to the new products. Customers have generally been very satisfied with the new products, but, as expected, the retention rate for these products was slightly lower than for the portfolio as a whole.
In Norway, an updated Tryq Pluss benefits programme for private customers was launched. The programme offers three main benefits for customers:
- Tryq ID – Helping customers when they believe or know that their identity has been misused
- Tryq Care – Professional help from psychologists for customers experiencing a personal crisis
- Tryq House assistance – Advisory services and access to Tryq's network of building experts
New products
In Q3 2016, Commercial and Corporate developed a new Cyber insurance product in Denmark, Norway and Sweden, which will be launched in Q4.
IT-related risks are increasing in all parts of the world. Figures from Sweden show that more than 20% of all companies experience cyber-attacks. With its Cyber insurance product, Tryq can help customers manage cyber-attacks, while also covering any economic losses sustained as a result of such attacks.
Digitalisation
In Norway, many new solutions were introduced in Q3. A new claims notification system for health insurance and self-service options for several products were launched. In Denmark, improved online claims notifications were delivered for holiday house and travel for MasterCard customers. The new improved claims notifications now cover the needs of the majority of private customers, with the last products to be delivered in Q4. In addition, new functionalities for the 'My Page' digital customer universe were launched in Denmark, improving the digital customer experience and generating more sales leads.
It is Tryq's ambition to develop and improve customer experience by offering new and improved digital solutions for our customers, while at the same time improving efficiency.
This will be achieved by developing user-friendly self-service solutions and advancing the 'My Page' digital customer universe. As a result, it will become easier for our customers to report claims and change their insurance coverage online.
This will contribute to improving customer experience at all times of the day and night, and to establishing more efficient internal processes.
Good results have already been achieved, and the prospects for continuing that journey are promising:
- Tryq's target is for 90% of customers to be digital in 2017. In Denmark, 84% of our customers have accepted that all future communication will be digital, and in Norway 65% of Tryq's customers are digital.
- For 2017, Tryq wants to reach a total of 1,000,000 log-ins by customers to the 'My Page' digital insurance overview. From January-August 2015 to January-August 2016, the number of log-ins increased by 36% for private customers in Denmark.
Contents – Management's review
Interim report Q1-Q3 2016 | Tryq A/S | 7
Contents – Management's review
Interim report Q1-Q3 2016 | Tryg A/S
Integration of Skandia's child insurance portfolio in Private Sweden
Following the authorities' approval of the takeover of Skandia's child insurance portfolio, Tryg will start integrating the business in Private Sweden. Tryg sees considerable untapped potential in child insurance in the Nordics. As illustrated below, the child insurance product in Sweden offers broad cover.
The agreement with Skandia also includes a distribution agreement under which Skandia will continue to sell the child insurance product which will be included in Tryg's Swedish Private business.
Child insurance in Tryg/Moderna
| Denmark | Norway | Sweden | |
|---|---|---|---|
| Accident | Disability | ||
| Treatments | |||
| Death | Disability | ||
| Treatments | |||
| Unemployment benefit | |||
| Death | |||
| Aids and reconstruction | |||
| Personal care expenses | Disability | ||
| Treatments | |||
| Unemployment benefit | |||
| Death | |||
| Aids and reconstruction | |||
| Illness | Illness | ||
| Critical illness | Disability | ||
| Critical illness | |||
| Death | |||
| Aids and reconstruction | |||
| Unemployment benefit | |||
| Personal care expenses | Disability | ||
| Critical illness | |||
| Death | |||
| Aids and treatment | |||
| Unemployment benefit | |||
| Health | Examinations, treatments at private hospital/private clinic | Examinations, treatments at private hospital/private clinic | |
| Pension | Loss of ability to work | Loss of ability to work |
In Q3, Norway launched an updated Tryg Plus benefits programme for private customers. The programme offers three main benefits:
- Tryg A/S: Helping customers if they believe or know that their identity has been misused
- Tryg Care – Professional help from psychologists for customers experiencing a personal crisis
- Tryg News & Science – Advisory services and access to Tryg's network of building experts
Private
Financial highlights Q3 2016
- Technical result of DKK 447m (DKK 398m)
- Combined ratio of 79.6 (82.1)
- Premium growth of 0.7% (0.3%) in local currencies
Results
Private realised a technical result of DKK 447m (DKK 398m) and a combined ratio of 79.6 (82.1). The results were positively affected by Tryq's efficiency programme and a slightly higher underlying claims ratio of 0.6. The initiatives launched to improve profitability, especially for house and travel insurance, continue and have led to a slight underlying improvement compared to Q2 2016.
Premiums
Premiums grew by 0.7% (0.3%) in local currencies. The positive development continued in the Danish part of Private with premium growth of 2.2% based on a combination of consistently high sales levels and high retention rates. The member bonus paid to Danish customers on 1 June 2016 (8% of premiums paid in 2015) is expected to have a positive impact on both sales and retention. As expected, the conversion to new products has had a slightly negative impact on retention rates. In Private Norway, premiums were down 1.2%, which was due mainly to a higher level of bonus and premium rebates. The retention rate was 89.9 (89.8) for Private Denmark and 86.5 (86.3) for Norway.
Claims
The claims ratio, net of ceded business, totalled 65.3 (67.4) and was influenced by a lower level of weather claims and large claims. The underlying claims level was 0.6 percentage points higher in Q3 2016 compared to Q3 2015. The primary reason is a higher level of travel and house insurance claims, especially for Private Denmark. Minor price adjustments and claims initiatives have been introduced, which – together with the conversion to the new house insurance product – is expected to improve profitability.
Expenses
The expense ratio for Private was 14.3 (14.7), representing a satisfactory development in support of Tryq's target of an expense ratio at or below 14 in 2017. The establishment of a joint sales and claims handling function together with other significant restructuring initiatives in the Norwegian organisation will support a further reduction in expense levels. The number of employees totalled 913 at the end of Q3 against 933 at the end of 2015.
Results Q1-Q3 2016
The technical result totalled DKK 1,038m (DKK 1,013m). The combined ratio was 83.9 (84.9), due mainly to the lower expense levels. Premium growth in local currencies was 0.6 (0.1), which represented an improvement of 0.5 percentage points compared to Q1-Q3 2015, due primarily to the strong development in the Danish part of Private.
Private encompasses the sale of insurance products to private individuals in Denmark and Norway. Sales are effected via call centres, the Internet, Tryq's own agents, franchisees (Norway), interest organisations, car dealers, estate agents and Nordea branches. The business area accounts for 49% of the Group's total premium income.
The claims ratio, net of ceded business, was 69.5 (69.8), which represented a slightly higher underlying level of 0.7 percentage points, due primarily to developments in house and travel insurance.
Key figures – Private
| DKKm | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | 2015 |
|---|---|---|---|---|---|
| Gross premium income | 2,190 | 2,211 | 6,475 | 6,631 | 8,803 |
| Gross claims | -1,384 | -1,439 | -4,386 | -4,526 | -6,074 |
| Gross expenses | -313 | -326 | -930 | -1,001 | -1,291 |
| Profit/loss on gross business | 493 | 446 | 1,159 | 1,104 | 1,438 |
| Profit/loss on ceded business | -45 | -50 | -118 | -97 | -148 |
| Insurance technical interest, net of reinsurance | -1 | 2 | -3 | 6 | 8 |
| Technical result | 447 | 398 | 1,038 | 1,013 | 1,298 |
| Run-off gains/losses, net of reinsurance | 108 | 98 | 251 | 275 | 324 |
| Key ratios | |||||
| Premium growth in local currency (%) | 0.7 | 0.3 | 0.6 | 0.1 | 0.3 |
| Gross claims ratio | 63.2 | 65.1 | 67.7 | 68.3 | 69.0 |
| Net reinsurance ratio | 2.1 | 2.3 | 1.8 | 1.5 | 1.7 |
| Claims ratio, net of reinsurance | 65.3 | 67.4 | 69.5 | 69.8 | 70.7 |
| Gross expense ratio | 14.3 | 14.7 | 14.4 | 15.1 | 14.7 |
| Combined ratio | 79.6 | 82.1 | 83.9 | 84.9 | 85.4 |
| Combined ratio exclusive of run-off | 84.5 | 86.5 | 87.8 | 89.0 | 89.1 |
| Run-off, net of reinsurance (%) | -4.9 | -4.4 | -3.9 | -4.1 | -3.7 |
| Large claims, net of reinsurance (%) | -0.4 | 0.8 | 0.0 | 0.3 | 0.3 |
| Weather claims, net of reinsurance (%) | 1.3 | 2.5 | 2.4 | 3.5 | 4.5 |
Contents – Management's review
Interim report Q1-Q3 2016 | Tryq A/S | 9
Commercial
Financial highlights Q3 2016
- Technical result of DKK 142m (DKK 136m)
- Combined ratio of 85.5 (86.9)
- Premiums fell by 3.4% (0.2%) in local currencies
Results
The technical result amounted to DKK 142m (DKK 136m), and the combined ratio stood at 85.5 (86.9). The lower technical result is due primarily to the very high run-off level in Q3 2015.
Premiums
Gross premium income totalled DKK 977m (DKK 1,022m), representing a fall of 3.4% (0.2%) in local currencies. The premium income in Q3 2015 was impacted by the regulation of a large account, and adjusting for this, the drop in premium income was approximately 1.8%. The retention ratio was 86.8 (88.0) for Denmark, and 88.0 (87.5) for Norway. Developments in Denmark primarily reflect customer reactions to the price initiatives introduced to improve profitability. The member bonus for customers in Denmark is expected to
positively impact the retention rate going forward. In the Danish market, agreements related to Commercial customers have been signed with Nordea and ITD (International Transport Denmark). The agreements will impact premium developments positively.
In the Norwegian market, there is tendency for customers to move towards brokers, and Commercial Norway has thus taken steps to improve broker relations. Commercial Norway has entered into a strategic partnership with NOKAS – a leading security group offering security and cash-handling solutions.
Claims
The claims ratio, net of ceded business, was 68.9 (70.3). The development is attributable to a lower run-off level, a lower level of large claims and a slightly higher level of weather claims. Initiatives have been implemented to improve the claims level for property insurance, which will have a significant effect in 2017, but only limited impact in 2016.
Expenses
The expense ratio was 16.6 (16.6), reflecting a level which is still too high. In the Norwegian part of Commercial, a restructuring initiative was implemented in Q2 2016, which will lead to lower expense ratio levels
in 2017, but with only limited impact in 2016. At the end of Q3 2016, Commercial had 487 employees, down from 527 employees at the end of 2015.
Results Q1-Q3 2016
A technical result of DKK 529m (DKK 511m) was realised and combined ratio was 81.9 (83.2). The lower level was due primarily to a lower level of large claims.
Premiums fell by 1.5% (-2.2%) in local currencies, representing a slight improvement compared to Q1-Q3 2015. The claims ratio, net of ceded business, was 64.7 (66.1), which represented a slightly higher underlying level of 1.5 percentage points.
Commercial encompasses the sale of insurance products to small and medium-sized businesses in Denmark and Norway. Sales are effected via Tryg's own sales force, brokers, franchisees (Norway), customer centres as well as group agreements. The business area accounts for 22% of the Group's total premium income.
This was due partly to a higher level of property claims, which have been mitigated through profitability initiatives that will primarily impact results in 2017.
Key figures – Commercial
| DKKm | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | 2015 |
|---|---|---|---|---|---|
| Gross premium income | 977 | 1,022 | 2,921 | 3,022 | 3,992 |
| Gross claims | -640 | -788 | -1,813 | -2,008 | -2,612 |
| Gross expenses | -162 | -170 | -503 | -516 | -683 |
| Profit/loss on gross business | 175 | 64 | 605 | 498 | 697 |
| Profit/loss on ceded business | -33 | 70 | -76 | 9 | -44 |
| Insurance technical interest, net of reinsurance | 0 | 2 | 0 | 4 | 5 |
| Technical result | 142 | 136 | 529 | 511 | 658 |
| Run-off gains/losses, net of reinsurance | 71 | 120 | 213 | 327 | 388 |
| Key ratios | |||||
| Premium growth in local currency (%) | -3.4 | 0.2 | -1.5 | -2.2 | -2.9 |
| Gross claims ratio | 65.5 | 77.1 | 62.1 | 66.4 | 65.4 |
| Net reinsurance ratio | 3.4 | -6.8 | 2.6 | -0.3 | 1.1 |
| Claims ratio, net of reinsurance | 68.9 | 70.3 | 64.7 | 66.1 | 66.5 |
| Gross expense ratio | 16.6 | 16.6 | 17.2 | 17.1 | 17.1 |
| Combined ratio | 85.5 | 86.9 | 81.9 | 83.2 | 83.6 |
| Combined ratio exclusive of run-off | 92.8 | 98.6 | 89.2 | 94.0 | 93.3 |
| Run-off, net of reinsurance (%) | -7.3 | -11.7 | -7.3 | -10.8 | -9.7 |
| Large claims, net of reinsurance (%) | 2.3 | 8.7 | 2.1 | 8.3 | 6.7 |
| Weather claims, net of reinsurance (%) | 2.5 | 2.3 | 1.6 | 2.2 | 2.8 |
Contents – Management's review
Interim report Q1-Q3 2016 | Tryg A/S | 10
Corporate
Financial highlights Q3 2016
- Technical result of DKK 117m (DKK 195m)
- Combined ratio of 88.0 (80.4)
- Premium development flat in local currencies (2.6%)
Results
A technical result of DKK 117m (DKK 195m) was realised, with a combined ratio of 88.0 (80.4). The lower technical result is due primarily to the very high run-off level in Q3 2015.
Premiums
Gross premium income totalled DKK 968m (DKK 984m), a flat development (2.6%) when measured in local currencies. The development was characterised by a slight increase in the Norwegian part and a moderate drop in the Danish and Swedish businesses. The drop in the Swedish business was due to customer reaction to price hikes for some larger accounts. The corporate market is generally the most competitive market. In Norway, the market is challenged by an increasingly difficult macro-economic situation, while in Sweden price hikes for a number of large accounts have resulted in a slight drop in business. The situation is somewhat more positive in the Danish market as corporate customers also favour the new member bonus model.
Claims
The claims ratio, net of ceded business, was 76.9 (69.8). The very low gross claims level in Q3 2016 was due to run-off gains on a specific claim, but as this was covered by reinsurance, it also led to a higher reinsurance ratio as the reinsurers benefitted from the reduced claims level.
Expenses
The expense ratio was 11.1 (10.6), which is too high. Like the other business areas in Norway, Corporate also reduced the number of employees in Q2, which will have a positive impact on the expense ratio in 2017. In the Danish part of Corporate, structural changes in Q3 2016 led to a reduction in the number of sales units as well as greater centralisation of the administrative functions in Corporate. This will improve expense levels in Corporate.
The number of employees in Corporate stood at 260, down from 265 at the end of 2015.
Results Q1-Q3 2016
A technical result of DKK 412m (DKK 364m) was realised, with a combined ratio of 85.3 (87.8). The lower level was due primarily to a higher run-off level.
Premiums fell by 1.9% (0.7%) in local currencies, down 2.6 percentage points compared to Q1-Q3 2015, which was due mainly to the renewals on 1 January 2016 and the loss of a large account in the seismic industry in autumn 2015.
The claims ratio, net of ceded business, was 74.1 (76.7). As mentioned above, the lower level was due primarily to a higher run-off level.
Corporate sells insurance products to corporate customers under the brands 'Tryg' in Denmark and Norway, 'Moderna' in Sweden and 'Tryg Garanti'. Sales are effected both via Tryg's own sales force and via insurance brokers. Moreover, customers with international insurance needs are served by Corporate through its cooperation with the AXA Group. The business area accounts for 21% of the Group's total premium income.
Key figures – Corporate
| DKKm | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | 2015 |
|---|---|---|---|---|---|
| Gross premium income | 968 | 984 | 2,809 | 2,945 | 3,894 |
| Gross claims | -415 | -983 | -1,481 | -3,330 | -3,987 |
| Gross expenses | -107 | -104 | -314 | -328 | -420 |
| Profit/loss on gross business | 446 | -103 | 1,014 | -713 | -513 |
| Profit/loss on ceded business | -329 | 296 | -602 | 1,072 | 877 |
| Insurance technical interest, net of reinsurance | 0 | 2 | 0 | 5 | 5 |
| Technical result | 117 | 195 | 412 | 364 | 369 |
| Run-off gains/losses, net of reinsurance | 100 | 174 | 385 | 286 | 351 |
| Key ratios | |||||
| Premium growth in local currency (%) | 0.0 | 2.6 | -1.9 | 0.7 | 0.0 |
| Gross claims ratio | 42.9 | 99.9 | 52.7 | 113.1 | 102.4 |
| Net reinsurance ratio | 34.0 | -30.1 | 21.4 | -36.4 | -22.5 |
| Claims ratio, net of reinsurance | 76.9 | 69.8 | 74.1 | 76.7 | 79.9 |
| Gross expense ratio | 11.1 | 10.6 | 11.2 | 11.1 | 10.8 |
| Combined ratio | 88.0 | 80.4 | 85.3 | 87.8 | 90.7 |
| Combined ratio exclusive of run-off | 98.3 | 98.1 | 99.0 | 97.5 | 99.7 |
| Run-off, net of reinsurance (%) | -10.3 | -17.7 | -13.7 | -9.7 | -9.0 |
| Large claims, net of reinsurance (%) | 2.8 | 9.3 | 4.8 | 7.2 | 8.2 |
| Weather claims, net of reinsurance (%) | 0.5 | 3.0 | 1.0 | 2.2 | 2.2 |
Contents – Management's review
Interim report Q1-Q3 2016 | Tryg A/S | 11
Sweden
Financial highlights Q3 2016
- Technical result of DKK 38m (DKK 38m)
- Combined ratio of 89.5 (89.5)
- Premium growth of 4.5% (-1.4%) in local currencies
Results
Sweden posted a technical result of DKK 38m (DKK 38m) and a combined ratio of 89.5 (89.5). The relatively poor result is impacted by claims levels for the extended warranty insurance for consumer electronics remaining too high. As was the case in previous quarters, the technical result and premium income were impacted by profit-sharing based on previous years' results in the amount of approximately DKK 7m. The child insurance portfolio acquired from Skandia is included in the figures for September.
Premiums
Premium income totalled DKK 384m (DKK 373m). This is equivalent to growth of 4.5% (-1.4%) when measured in local currencies, to which the child insurance portfolio contributes 4.3 percentage points. Adjusting for the child insurance portfolio and the profit-sharing agreement, premium growth of approximately 2.1% was realised. The positive development in premium income is a sign that Private Sweden has been able to more than mitigate the cancellation of the affinity agreement with ICA through a strong focus on developing its own sales channels and on online solutions and insurance apps.
Claims
The gross claims ratio totalled 72.9 (73.2). The high claims level was attributable to the above-mentioned profit-sharing agreement and a higher level of extended warranty insurance claims. The initiatives implemented to mitigate the higher level of extended warranty insurance claims include price hikes, increased excess levels and the re-negotiation of repair workshop contracts.
Expenses
The expense ratio was 16.1 (15.8), which primarily reflects the development of the distribution channels in Sweden to compensate for the loss of big distribution agreements and the profit-sharing agreement. Following the integration of the Skandia child insurance portfolio in combination with a number of cost initiatives, the expense ratio will be reduced over time.
The number of employees was 349 at the end of the quarter, up 11 from 338 at the end of 2015 due to an increase of employees in Outbound Sales.
Results Q1-Q3 2016
A technical result of DKK 97m (DKK 133m) was realised, with a combined ratio of 90.0 (86.6). The higher level was due primarily to profit-sharing, fire claims and the development in extended warranty insurance claims for consumer electronics. Premium income in local currencies increased by 0.7% (-2.1%), the positive growth being ascribable to the acquisition of the Skandia child insurance portfolio. The claims ratio, net of ceded business, was 71.4 (68.7). As mentioned above, this was affected by a high claims level for extended warranty insurance for consumer electronics and profit sharing.
| DKKm | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | 2015 |
|---|---|---|---|---|---|
| Gross premium income | 384 | 373 | 1,011 | 1,004 | 1,317 |
| Gross claims | -280 | -273 | -719 | -690 | -852 |
| Gross expenses | -62 | -59 | -188 | -180 | -246 |
| Profit/loss on gross business | 42 | 41 | 104 | 134 | 219 |
| Profit/loss on ceded business | -2 | -2 | -3 | 0 | -1 |
| Insurance technical interest, net of reinsurance | -2 | -1 | -4 | -1 | 0 |
| Technical result | 38 | 38 | 97 | 133 | 218 |
| Run-off gains/losses, net of reinsurance | 10 | 11 | 89 | 83 | 149 |
| Key ratios | |||||
| Premium growth in local currency (%) | 4.5 | -1.4 | 0.7 | -2.1 | -3.1 |
| Gross claims ratio | 72.9 | 73.2 | 71.1 | 68.7 | 64.7 |
| Net reinsurance ratio | 0.5 | 0.5 | 0.3 | 0.0 | 0.1 |
| Claims ratio, net of reinsurance | 73.4 | 73.7 | 71.4 | 68.7 | 64.8 |
| Gross expense ratio | 16.1 | 15.8 | 18.6 | 17.9 | 18.7 |
| Combined ratio | 89.5 | 89.5 | 90.0 | 86.6 | 83.5 |
| Combined ratio exclusive of run-off | 92.1 | 92.4 | 98.8 | 94.9 | 94.8 |
| Run-off, net of reinsurance (%) | -2.6 | -2.9 | -8.8 | -8.3 | -11.3 |
| Weather claims, net of reinsurance (%) | 0.0 | 0.3 | 0.8 | 1.7 | 1.7 |
Contents – Management's review
Interim report Q1-Q3 2016 | Tryg A/S | 12
Investment activities
Financial highlights Q3 2016
- Strong investment return of DKK 191m (DKK -441m)
- Free portfolio benefitted from positive equity markets but also good returns on properties and fixed-income securities with a short duration
- Match portfolio result boosted by a good performance result driven by narrowing covered-bond spreads
Q3 2016 was a strong quarter for Tryg's investment activities. The investment result totalled DKK 191m (DKK -441m), which was generated by a return of DKK 211m on the free portfolio (DKK -292m), a return of DKK 75m on the match portfolio (DKK -102m) and other financial income and expenses of DKK -95m (DKK -47m).
The purpose of the investment strategy is primarily to support the insurance business by minimising the impact of interest and exchange rate fluctuations and by managing the investments in the best possible way while taking into account market risk and capital charges. Since 2010, this purpose has been supported by the strategic split of the investment portfolio into a match portfolio and a free portfolio.
The match portfolio is intended to lower the risk to the greatest possible extent on the assets matching the insurance provisions. The aim of the free portfolio is to maximise returns on a risk-adjusted basis and achieve an optimal and robust return on equity in the long-run, while taking account of risk, liquidity and use of capital.
Investment return Q3 2016
Match portfolio
The result of the match portfolio is the difference between the return of the match portfolio and the amount transferred to the insurance business. The result can be split into a 'regulatory deviation' and a 'performance result'.
The regulatory deviation contributes either positively or negatively to the investment result if changes in the FSA curves are not reflected in the market swap curves. In Q3, this component only impacted the investment result by DKK 9m, due to the fact that our hedge worked well and because the Credit Risk Adjustment in the FSA curves has not changed.
The performance component is the return of Tryg's bonds compared to the swap curve. The match portfolio is mostly invested in covered bonds in Denmark, Norway and Sweden with a short or medium-term duration. Covered-bond spreads (versus the swap curve) have narrowed, which boosted our performance by DKK 66m in Q3.
| Return – investments | |||||
|---|---|---|---|---|---|
| DKKm | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | 2015 |
| Free portfolio, gross return | 211 | -292 | 398 | 31 | 232 |
| Match portfolio, regulatory deviation and performance | 75 | -102 | 202 | -101 | -16 |
| Other financial income and expenses | -95 | -47 | -211 | -194 | -238 |
| Total investment return | 191 | -441 | 389 | -264 | -22 |
| Return – match portfolio | |||||
| --- | --- | --- | --- | --- | --- |
| DKKm | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | 2015 |
| Return, match portfolio | 118 | 132 | 822 | 77 | 140 |
| Value adjustments, changed discount rate | -14 | -163 | -511 | 17 | 103 |
| Transferred to insurance technical interest | -29 | -71 | -109 | -195 | -259 |
| Match, regulatory deviation and performance | 75 | -102 | 202 | -101 | -16 |
| Hereof: | |||||
| Match, regulatory deviation | 9 | -50 | 39 | -64 | 12 |
| Match, performance | 66 | -52 | 163 | -37 | -28 |
Contents – Management's review
Interim report Q1-Q3 2016 | Tryg A/S | 13
Free portfolio
In Q3, focus on the financial markets was primarily on central bank actions, key figures in general and more specifically the problems facing Deutsche Bank and the US presidential election. The nervousness spurred by the Brexit vote in late June disappeared in July and August, and equity markets gained strength. Tryg's equity portfolio provided a return of DKK 95m or 3.7%, while overall the free portfolio benefitted also from good returns on properties and fixed-income securities with a short duration.
European and global interest rates decreased to record low levels due to low inflation and concerns about low economic growth. Despite the negative yields in some asset classes, the free bond portfolio generated a positive return of DKK 89m or 1.3% in Q3.
The return of the investment property portfolio was DKK 27m or 1.3%. Tryg is currently looking into the possibilities of selling some of its large property investments to achieve a more diversified exposure to this asset class. Tryg is aiming to
achieve a similar exposure to the property asset class, but based on a more diversified portfolio. All in all, the return of the free portfolio was DKK 211m or 1.8% in Q3.
Other financial income and expenses
Other financial income and expenses totalled DKK -95m in Q3 2016. This item consists of a number of elements, the largest being the expenses from hedging the foreign currency exposure of Tryg's equity, as well as expenses regarding Tryg's subordinated loans.
Investment return in Q1-Q3 2016
The return of Tryg's investment activities totalled DKK 389m in Q1-Q3 2016 (DKK -264m).
The result is decomposed into a return of DKK 398m on the free portfolio (DKK 31m), a net return of DKK 202m on the match portfolio (DKK -101m) and other financial income and expenses of DKK -211m (DKK -194m).
Return – free portfolio
| DKKm | Q3 2016 | Q3 2016 (%) | Q3 2015 | Q3 2015 (%) | Q1-Q3 2016 | Q1-Q3 2016 (%) | Q1-Q3 2015 | Q1-Q3 2015 (%) | Investment assets | |
|---|---|---|---|---|---|---|---|---|---|---|
| 30.09.2016 | 31.12.2015 | |||||||||
| Government bonds | -1 | -0.5 | -2 | -0.6 | 1 | 0.4 | 0 | -0.2 | 268 | 265 |
| Covered bonds | 17 | 0.4 | 1 | 0.0 | 63 | 1.6 | -33 | -0.7 | 4,591 | 3,602 |
| Inflation-linked bonds | 22 | 4.0 | 1 | 0.2 | 61 | 11.6 | 3 | 1.0 | 559 | 484 |
| Investment-grade credit | 3 | 1.3 | 0 | 0.0 | 7 | 3.2 | 0 | 0.0 | 207 | 0 |
| Emerging-market bonds | 23 | 5.2 | -8 | -1.9 | 59 | 13.6 | -4 | -1.0 | 466 | 412 |
| High-yield bonds | 33 | 4.6 | -25 | -2.7 | 68 | 8.8 | -4 | -0.4 | 691 | 837 |
| Other a) | -8 | -24 | -21 | 9 | 0.9 | 278 | 712 | |||
| Interest-rate and credit exposure | 89 | 1.3 | -57 | -0.8 | 238 | 3.4 | -29 | -0.4 | 7,060 | 6,312 |
| Equity exposure | 95 | 3.7 | -262 | -10.3 | 79 | 3.1 | -20 | -0.7 | 2,371 | 2,374 |
| Investment property | 27 | 1.3 | 27 | 1.3 | 81 | 3.9 | 80 | 3.8 | 2,106 | 2,052 |
| Total gross return | 211 | 1.8 | -292 | -2.5 | 398 | 3.3 | 31 | 0.3 | 11,537 | 10,738 |
a) Bank deposits and derivative financial instruments hedging interest rate risk and credit risk.
Contents – Management's review
Interim report Q1-Q3 2016 | Tryg A/S | 14
Capital
The solvency ratio (based on Tryg's partial internal model) was 217 at the end of Q3, including the Skandia child insurance portfolio. The solvency ratio was primarily impacted by the reported net profit and the inclusion of the Skandia child insurance portfolio, which affects both the own funds and the solvency capital requirement (SCR).
Solvency capital requirement
Tryg calculates the individual solvency requirement based on a partial internal model in accordance with the Danish Financial Supervisory Authority's Executive Order on Solvency and Operating Plans for Insurance Companies. The model is based on the structure of the standard model, and Tryg is using an internal model to evaluate insurance risks, while other risks are calculated using the standard model components. The solvency capital requirement calculated using the partial internal model was DKK 5,092m in Q3 2016 against DKK 5,080m in Q2 2016. The solvency capital requirement based on the standard formula was DKK 6,396m in Q3 2016 against DKK 6,171m in Q2 2016.
Own funds
The transition to Solvency II on 1 January 2016 triggered a number of changes with regard to the capital eligible to cover the solvency capital requirement ('own funds'). The most significant changes are the inclusion of expected future profits and the potential for increased utilisation of non-equity instruments (ATier 1 and Tier 2 debt). On 6 April 2016, Tryg initiated a DKK 1bn share buy back programme, and by 30 September 2016 5,380,081 shares had been acquired for a total amount of DKK 682m. Tryg currently holds a total of 5,532,986 own shares corresponding to 1.9% of own capital.
On 19 May 2016, Tryg issued Solvency II-compliant Tier 2 capital in the form of a subordinated, call-able bond issue of SEK 1,000m. Tryg has now fully utilised its Tier 2 capacity considering the current (Q3) level of the SCR. Tryg has ATier 1 capacity of approximately DKK 1.3bn, but currently has no plans to issue such an instrument.
In Q3 2016, own funds totalled DKK 11,053m, which means that Tryg has a solvency ratio of 217 based on the partial internal model, or 173 based on the standard formula.
Rating
Tryg has an 'A2' (positive outlook) insurance financial strength rating (IFSR) from Moody's. Moody's highlights Tryg's strong position in the Nordic P&C market, strong profitability, very good asset quality and relatively low financial leverage.
It is Tryg's ambition to develop and improve customer experience by offering new and improved digital solutions for our customers, while at the same time improving efficiency. This will be achieved by developing user-friendly self-service solutions and advancing the 'My Page' digital customer universe.
Solvency ratio development
a) H1 dividend and FY DKK 1,000m buy backs deducted
Capital Tier
Contents - Management's review
Interim report Q3-Q2 2016 Tryg A/3
Outlook
The market situation in Denmark is more or less unchanged compared to the end of 2015. Unemployment in Denmark is expected to fall slightly in 2016 from 4.6% in 2015 to 4.2% in 2016, and car sales remain dominated by small cars. In Denmark, total car sales in Q3 were 2.6% higher than in the prior-year period. The Norwegian economy is still impacted by very low oil prices and a weakened Norwegian currency. Tryg is only to a very limited extent exposed to the oil industry – both directly and indirectly, but of course, Tryg has also seen some impact from companies related to the oil industry, for example in the seismic industry. Unemployment in Norway is expected to increase further from 4.4% in 2015 to 4.8% in 2016. In Q3, car sales in Norway were 1.8% higher than in the prior-year period.
For 2016, Tryg has communicated an expected growth in premium income of between 0% and 2%. Based on developments in Q3, following the inclusion of the Skandia child insurance portfolio from September 2016 and the renewals in Corporate, premium growth for 2016 will, as mentioned in the interim report for Q1 2016, probably be at the
low end of the previously communicated premium growth outlook. TryghedsGruppen's member bonus scheme is also expected to support the long-term development in premium income.
Tryg has a solid reserving position, and at the Capital Markets Day in November 2014, Tryg therefore announced that the run-off level was likely to be higher than the run-off level in the pre-2015 period. Tryg expects this to be the case until the end of 2017, after which we expect a long-term run-off level of 2.5-3%.
In 2016, weather claims and large claims, net of reinsurance, are expected to be DKK 500m and DKK 550m, respectively, which is unchanged relative to 2015.
The interest rate used to discount Tryg's technical provisions is historically low. An interest rate increase will have a positive effect on Tryg's results. Generally speaking, an interest rate increase of 1 percentage point will increase the pre-tax result by around DKK 300m and vice versa.
For the purpose of realising the financial targets, Tryg launched an efficiency programme aimed at realising savings of DKK 750m, with DKK 500m relating to the procurement of claims services and administration, and DKK 250m relating to expenses. The target is DKK 225m for 2016 and DKK 375m for 2017.
The investment portfolio is divided into a match portfolio corresponding to the technical provisions, and a free portfolio. The objective is for the return on the match portfolio and changes in the technical provisions due to interest rate changes to be neutral when taken together.
The curve used to discount technical provisions has changed due to the implementation of the Solvency II directive, and this might result in slightly more volatile match portfolio net results. The new curve increases the interest rate risk of the technical provisions, thereby introducing a bigger difference between the match return and the changes in the technical provisions. Moreover, the curve introduces a component, 'Credit Risk Adjustment – or CRA', which cannot be hedged, and the impact from this component can only be negative.
The return on bonds in the free portfolio will vary, but given current interest rate levels, a low return is expected. For shares, the expected return is around 7% with the MSCI world index as the benchmark, while the expected return for property is around 6%. Investment activities also include other types
of investment income and expenses, especially the cost of managing investments, the cost of currency hedges and interest paid on loans.
There has been a gradual lowering of tax rates in Denmark, Norway and Sweden in recent years. In Denmark, the tax rate was 23.5% in 2015 and will be reduced to 22% in 2016. The Norwegian tax rate was 27% in 2015 and will be reduced to 25% in 2016, while the Swedish rate was 22%. When calculating the total tax payable, account should also be taken of the fact that gains and losses on shareholdings are not taxed in Norway. All in all, this causes the expected tax payable for an average year to be reduced from around 22-23% to around 21% in 2016.
The share of equity held in NOK and SEK is continuously hedged in the financial markets.
Financial targets 2017
- Return on equity of ≥21% after tax
- Combined ratio ≤87
- Expense ratio ≤14
Contents – Management's review
Interim report Q1-Q3 2016 | Tryg A/S | 16
Contents – Financial statements Q1-Q3 2016
| FINANCIAL STATEMENTS | 20 Income statement | 25 Cash flow statement |
|---|---|---|
| 18 Statement by the Supervisory Board and the Executive Board | 21 Statement of comprehensive income | 26 Notes |
| 22 Statement of financial position | 33 Quarterly outline | |
| 19 Financial highlights | 23 Statement of changes in equity |
Tryg's Group consolidated financial statements are prepared in accordance with IFRS.
Contents – Financial statements Q1-Q3 2016
Interim report Q1-Q3 2016 | Tryg A/S | 17
Statement by the Supervisory Board and the Executive Board
The Supervisory Board and the Executive Board have today considered and adopted the interim report for Q1-Q3 2016 for Tryq A/S.
The report, which is unaudited and has not been reviewed by the company's auditors, is presented in accordance with IAS 34 Interim Financial Reporting, the Danish Financial Business Act and the requirements of the NASDAQ Copenhagen for the presentation of financial statements of listed companies.
In our opinion, the report gives a true and fair view of the Group's assets, liabilities and financial position at 30 September 2016 and of the results of the Group's activities and cash flows for the period for the Group.
We are furthermore of the opinion that the management's report includes a fair review of the developments in the activities and financial position of the Group, the results for the period and of the Group's financial position in general and describes the principal risks and uncertainties that the Group faces.
Ballerup, 11 October 2016
Executive Board
Morten Hübbe
Group CEO
Christian Baltzer
Group CFO
Lars Bonde
Group COO
Supervisory Board
Jørgen Huno Rasmussen
Chairman
Torben Nielsen
Deputy Chairman
Tom Eileng
Lone Hansen
Anders Hjulmand
Jesper Hjulmand
Ida Sofie Jensen
Bill-Owe Johansson
Lene Skole
Tina Snejbjerg
Mari Thjømøe
Carl-Viggo Östlund
Contents – Financial statements
Interim report Q1-Q3 2016 | Tryq A/S | 18
Financial highlights
| DKKm | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | 2015 |
|---|---|---|---|---|---|
| NOK/DKK, average rate for the period | 79.51 | 82.50 | 79.23 | 84.82 | 83.52 |
| SEK/DKK, average rate for the period | 78.31 | 79.45 | 79.78 | 79.61 | 79.69 |
| Gross premium income | 4,514 | 4,583 | 13,203 | 13,584 | 17,977 |
| Gross claims | -2,693 | -3,512 | -8,374 | -10,574 | -13,562 |
| Total insurance operating costs | -644 | -739 | -1,935 | -2,105 | -2,720 |
| Profit/loss on gross business | 1,177 | 332 | 2,894 | 905 | 1,695 |
| Profit/loss on ceded business | -430 | 310 | -811 | 982 | 710 |
| Insurance technical interest, net of reinsurance | -3 | 5 | -7 | 14 | 18 |
| Technical result | 744 | 647 | 2,076 | 1,901 | 2,423 |
| Investment return after insurance technical interest | 191 | -441 | 389 | -264 | -22 |
| Other income and costs | -12 | -20 | -45 | -72 | -91 |
| Profit/loss before tax | 923 | 186 | 2,420 | 1,565 | 2,310 |
| Tax | -190 | -76 | -508 | -393 | -390 |
| Profit/loss, continuing business | 733 | 110 | 1,912 | 1,172 | 1,920 |
| Profit/loss on discontinued and divested business after tax | -1 | 0 | -1 | 43 | 49 |
| Profit/loss for the period | 732 | 110 | 1,911 | 1,215 | 1,969 |
| Other comprehensive income | |||||
| Other comprehensive income which cannot subsequently be reclassified as profit or loss | -34 | -39 | -17 | -175 | -16 |
| Other comprehensive income which can subsequently be reclassified as profit or loss | 17 | -27 | 22 | -18 | -24 |
| Other comprehensive income | -17 | -66 | 5 | -193 | -40 |
| Comprehensive income | 715 | 44 | 1,916 | 1,022 | 1,929 |
| Run-off gains/losses, net of reinsurance | 289 | 403 | 938 | 971 | 1,212 |
| Statement of financial position | |||||
| Total provisions for insurance contracts | 33,444 | 32,991 | 33,444 | 32,991 | 31,814 |
| Total reinsurers' share of provisions for insurance contracts | 2,234 | 3,334 | 2,234 | 3,334 | 3,176 |
| Total equity | 9,168 | 9,015 | 9,168 | 9,015 | 9,644 |
| Total assets | 51,656 | 52,520 | 51,656 | 52,520 | 51,281 |
| Key ratios | |||||
| Gross claims ratio | 59.7 | 76.6 | 63.4 | 77.8 | 75.4 |
| Net reinsurance ratio | 9.5 | -6.8 | 6.1 | -7.2 | -3.9 |
| Claims ratio, net of reinsurance | 69.2 | 69.8 | 69.5 | 70.6 | 71.5 |
| Gross expense ratio | 14.5 | 16.3 | 14.9 | 15.7 | 15.3 |
| Combined ratio | 83.7 | 86.1 | 84.4 | 86.3 | 86.8 |
| Gross expense ratio without adjustment* | 14.3 | 16.1 | 14.7 | 15.5 | 15.1 |
| Operating ratio | 83.5 | 85.9 | 84.3 | 86.0 | 86.5 |
*) The gross expense ratio without adjustment is calculated as the ratio of actual gross insurance operating costs to gross premium income. The adjustment, which is made pursuant to the Danish Financial Supervisory Authority's and the Danish Society of Financial Analysts' definitions of expense ratio and combined ratio, involves the addition of a calculated expense (rent) in respect of owner-occupied property based on a calculated market rent and the deduction of actual depreciation and operating costs on owner-occupied property.
Other key ratios are calculated in accordance with 'Recommendations & Financial Ratios 2015' issued by the Danish Society of Financial Analysts.
Contents - Financial statements
Interim report Q1-Q3 2016 | Tryg A/S
Income statement
| DKKm | Q1-Q3 | Q1-Q3 | ||
|---|---|---|---|---|
| 2016 | 2015 | 2015 | ||
| Notes | General insurance | |||
| Gross premiums written | 14,000 | 14,492 | 18,150 | |
| Ceded insurance premiums | -899 | -965 | -1,165 | |
| Change in premium provisions | -572 | -726 | 61 | |
| Change in reinsurers' share of premium provisions | 94 | 83 | 1 | |
| 2 | Premium income, net of reinsurance | 12,623 | 12,884 | 17,047 |
| 3 | Insurance technical interest, net of reinsurance | -7 | 14 | 18 |
| Claims paid | -8,508 | -9,762 | -13,095 | |
| Reinsurance cover received | 951 | 438 | 471 | |
| Change in claims provisions | 134 | -812 | -467 | |
| Change in the reinsurers' share of claims provisions | -1,038 | 1,351 | 1,301 | |
| 4 | Claims, net of reinsurance | -8,461 | -8,785 | -11,790 |
| Bonus and premium discounts | -225 | -182 | -234 | |
| Acquisition costs | -1,450 | -1,590 | -2,042 | |
| Administration expenses | -485 | -515 | -678 | |
| Acquisition costs and administration expenses | -1,935 | -2,105 | -2,720 | |
| Reinsurance commissions and profit participation from reinsurers | 81 | 75 | 102 | |
| Insurance operating costs, net of reinsurance | -1,854 | -2,030 | -2,618 | |
| 1 | Technical result | 2,076 | 1,901 | 2,423 |
| DKKm | Q1-Q3 | Q1-Q3 | ||
| --- | --- | --- | --- | --- |
| 2016 | 2015 | 2015 | ||
| Notes | Investment activities | |||
| Income from associates | 38 | 5 | 42 | |
| Income from investment property | 72 | 71 | 94 | |
| Interest income and dividends | 513 | 615 | 794 | |
| 5 | Value adjustments | 23 | -633 | -510 |
| Interest expenses | -85 | -73 | -95 | |
| Administration expenses in connection with investment activities | -63 | -54 | -88 | |
| Total investment return | 498 | -69 | 237 | |
| 3 | Return on insurance provisions | -109 | -195 | -259 |
| Total Investment return after insurance technical interest | 389 | -264 | -22 | |
| Other income | 75 | 59 | 81 | |
| Other costs | -120 | -131 | -172 | |
| Profit/loss before tax | 2,420 | 1,565 | 2,310 | |
| Tax | -508 | -393 | -390 | |
| Profit/loss on continuing business | 1,912 | 1,172 | 1,920 | |
| Profit/loss on discontinued and divested business | -1 | 43 | 49 | |
| Profit/loss for the period | 1,911 | 1,215 | 1,969 | |
| Earnings per share - continuing business | 6.81 | 4.09 | 6.74 | |
| Diluted earnings per share - continuing business | 6.81 | 4.09 | 6.73 | |
| Earnings per share | 6.81 | 4.24 | 6.91 | |
| Diluted earnings per share | 6.81 | 4.24 | 6.91 |
Contents – Financial statements
Interim report Q1-Q3 2016 | Tryg A/S | 20
Statement of comprehensive income
| DKKm | Q1-Q3 2016 | Q1-Q3 2015 | 2015 |
|---|---|---|---|
| Profit/loss for the period | 1,911 | 1,215 | 1,969 |
| Other comprehensive income | |||
| Other comprehensive income which cannot subsequently be reclassified as profit or loss | |||
| Adjustment to equity 1.1.2015 * | 0 | -175 | -175 |
| Change in equalisation reserve | 15 | 0 | 21 |
| Change in tax rates on security provisions | 0 | 0 | 141 |
| Revaluation of owner-occupied property | 3 | 0 | 4 |
| Tax on revaluation of owner-occupied property | 0 | 0 | 2 |
| Actuarial gains/losses on defined-benefit pension plans | -48 | 0 | -12 |
| Tax on actuarial gains/losses on defined-benefit pension plans | 13 | 0 | 3 |
| -17 | -175 | -16 | |
| Other comprehensive income which can subsequently be reclassified as profit or loss | |||
| Exchange rate adjustments of foreign entities | 101 | -82 | -89 |
| Hedging of currency risk in foreign entities | -101 | 83 | 86 |
| Tax on hedging of currency risk in foreign entities | 22 | -19 | -21 |
| 22 | -18 | -24 | |
| Total other comprehensive income | 5 | -193 | -40 |
| Comprehensive income | 1,916 | 1,022 | 1,929 |
*) New executive order from the Danish FSA on yield curves. Please refer to note 8 Accounting policies.
Contents – Financial statements
Interim report Q1-Q3 2016 | Tryg A/S | 21
Statement of financial position
| DKKm | 30.09.2016 | 30.09.2015 | 31.12.2015 |
|---|---|---|---|
| Notes | |||
| Assets | |||
| Intangible assets | 1,157 | 988 | 1,038 |
| Operating equipment | 55 | 70 | 62 |
| Owner-occupied property | 1,170 | 1,127 | 1,144 |
| Assets under construction | 1 | 20 | 2 |
| Total property, plant and equipment | 1,226 | 1,217 | 1,208 |
| Investment property | 1,882 | 1,830 | 1,838 |
| Equity investments in associates | 225 | 226 | 229 |
| Total investments in associates | 225 | 226 | 229 |
| Equity investments | 102 | 146 | 138 |
| Unit trust units | 3,591 | 3,572 | 3,589 |
| Bonds | 36,351 | 36,651 | 35,705 |
| Deposits with credit institutions | 60 | 368 | 0 |
| Derivative financial instruments | 1,558 | 977 | 843 |
| Total other financial investment assets | 41,662 | 41,714 | 40,275 |
| Total investment assets | 43,769 | 43,770 | 42,342 |
| Reinsurers' share of premium provisions | 272 | 265 | 173 |
| Reinsurers' share of claims provisions | 1,962 | 3,069 | 3,003 |
| Total reinsurers' share of provisions for insurance contracts | 2,234 | 3,334 | 3,176 |
| Receivables from policyholders | 1,545 | 1,367 | 1,261 |
| Total receivables in connection with direct insurance contracts | 1,545 | 1,367 | 1,261 |
| Receivables from insurance enterprises | 291 | 406 | 199 |
| Other receivables | 515 | 593 | 871 |
| Total receivables | 2,351 | 2,366 | 2,331 |
| Current tax assets | 0 | 0 | 118 |
| Cash at bank and in hand | 434 | 228 | 471 |
| Total other assets | 434 | 228 | 589 |
| Interest and rent receivable | 217 | 293 | 281 |
| Other prepayments and accrued income | 268 | 324 | 316 |
| Total prepayments and accrued income | 485 | 617 | 597 |
| Total assets | 51,656 | 52,520 | 51,281 |
| DKKm | 30.09.2016 | 30.09.2015 | 31.12.2015 |
| --- | --- | --- | --- |
| Notes | |||
| Equity and liabilities | |||
| Equity | 9,168 | 9,015 | 9,644 |
| Subordinated loan capital | 2,590 | 1,741 | 1,698 |
| Premium provisions | 6,226 | 6,356 | 5,571 |
| Claims provisions | 26,666 | 26,100 | 25,670 |
| Provisions for bonuses and premium discounts | 552 | 535 | 573 |
| Total provisions for insurance contracts | 33,444 | 32,991 | 31,814 |
| Pensions and similar liabilities | 297 | 266 | 264 |
| Deferred tax liability | 569 | 926 | 645 |
| Other provisions | 93 | 154 | 132 |
| Total provisions | 959 | 1,346 | 1,041 |
| Debt relating to direct insurance | 481 | 483 | 603 |
| Debt relating to reinsurance | 248 | 454 | 330 |
| Amounts owed to credit institutions | 163 | 8 | 64 |
| Debt relating to unsettled funds transactions and repos | 2,141 | 4,318 | 4,074 |
| Derivative financial instruments | 847 | 633 | 612 |
| Current tax liabilities | 401 | 458 | 357 |
| Other debt | 1,185 | 1,047 | 1,001 |
| Total debt | 5,466 | 7,401 | 7,041 |
| Accruals and deferred income | 29 | 26 | 43 |
| Total equity and liabilities | 51,656 | 52,520 | 51,281 |
6 Acquisition of activities
7 Related parties
8 Accounting policies
Contents - Financial statements
Interim report Q1-Q3 2016 | Tryq A/S
Statement of changes in equity
| DKKm | Share capital | Revaluation reserves | Reserve for exchange rate adjustment | Equalisation reserve | Other reserves | Retained earnings | Proposed dividend | Total |
|---|---|---|---|---|---|---|---|---|
| Equity at 31 December 2015 | 1,448 | 86 | -9 | 127 | 766 | 6,213 | 1,013 | 9,644 |
| Q1-Q3 2016 | ||||||||
| Adjustment 1.1.2016 * | -127 | 127 | 0 | |||||
| Profit/loss for the period | 54 | 1,104 | 753 | 1,911 | ||||
| Other comprehensive income | 3 | 22 | -20 | 5 | ||||
| Total comprehensive income | 0 | 3 | 22 | -127 | 54 | 1,211 | 753 | 1,916 |
| Nullification of treasury shares | -35 | 35 | 0 | |||||
| Dividend paid | -1,766 | -1,766 | ||||||
| Dividend, treasury shares | 52 | 52 | ||||||
| Purchase and sale of treasury shares | -682 | -682 | ||||||
| Exercise of share options | 1 | 1 | ||||||
| Issue of share options and matching shares | 3 | 3 | ||||||
| Total changes in equity in Q1-Q3 2016 | -35 | 3 | 22 | -127 | 54 | 620 | -1,013 | -476 |
| Equity at 30 September 2016 | 1,413 | 89 | 13 | 0 | 820 | 6,833 | 0 | 9,168 |
*) A new executive order from the Danish FSA from 1 January 2016 has abolished the requirements of equalisation reserves in credit and guarantee insurance.
The possible payment of dividend from Tryg Forsikring A/S to Tryg A/S is influenced by contingency fund provisions of DKK 1,771m (DKK 2,516m as at 31 December 2015). The contingency fund provisions can be used to cover losses in connection with the settlement of insurance provisions or otherwise for the benefit of the insured.
| Equity at 31 December 2014 | 1,492 | 80 | 15 | 106 | 848 | 6,847 | 1,731 | 11,119 |
|---|---|---|---|---|---|---|---|---|
| Q1-Q3 2015 | ||||||||
| Adjustment 1.1.2015 ** | -175 | -175 | ||||||
| Profit/loss for the period | -107 | 576 | 746 | 1,215 | ||||
| Other comprehensive income | -18 | 0 | -18 | |||||
| Total comprehensive income | 0 | 0 | -18 | 0 | -107 | 401 | 746 | 1,022 |
| Nullification of treasury shares | -44 | 44 | 0 | |||||
| Dividend paid | -2,477 | -2,477 | ||||||
| Dividend, treasury shares | 97 | 97 | ||||||
| Purchase and sale of treasury shares | -763 | -763 | ||||||
| Exercise of share options | 13 | 13 | ||||||
| Issue of employee shares | 2 | 2 | ||||||
| Issue of share options and matching shares | 2 | 2 | ||||||
| Total changes in equity in Q1-Q3 2015 | -44 | 0 | -18 | 0 | -107 | -204 | -1,731 | -2,104 |
| Equity at 30 September 2015 | 1,448 | 80 | -3 | 106 | 741 | 6,643 | 0 | 9,015 |
**) New executive order from the Danish FSA on yield curves. Please refer to note 8 Accounting policies.
Contents – Financial statements
Interim report Q1-Q3 2016 | Tryg A/S | 23
Statement of changes in equity
| DKKm | Share capital | Revaluation reserves | Reserve for exchange rate adjustment | Equalisation reserve | Other reserves | Retained earnings | Proposed dividend | Total |
|---|---|---|---|---|---|---|---|---|
| Equity at 31 December 2014 | 1,492 | 80 | 15 | 106 | 848 | 6,847 | 1,731 | 11,119 |
| 2015 | ||||||||
| Adjustment 1.1.2015 ** | -175 | -175 | ||||||
| Profit/loss for the year | 22 | -104 | 292 | 1,759 | 1,969 | |||
| Other comprehensive income | 6 | -24 | -1 | 22 | 132 | 135 | ||
| Total comprehensive income | 0 | 6 | -24 | 21 | -82 | 249 | 1,759 | 1,929 |
| Nullification of treasury shares | -44 | 44 | 0 | |||||
| Dividend paid | -2,477 | -2,477 | ||||||
| Dividend, treasury shares | 97 | 97 | ||||||
| Purchase and sale of treasury shares | -1,044 | -1,044 | ||||||
| Exercise of share options | 13 | 13 | ||||||
| Issue of employee shares | 2 | 2 | ||||||
| Issue of share options and matching shares | 5 | 5 | ||||||
| Total changes in equity in 2015 | -44 | 6 | -24 | 21 | -82 | -634 | -718 | -1,475 |
| Equity at 31 December 2015 | 1,448 | 86 | -9 | 127 | 766 | 6,213 | 1,013 | 9,644 |
**) New executive order from the Danish FSA on yield curves. Please refer to note 8 Accounting policies.
Contents – Financial statements
Interim report Q1-Q3 2016 | Tryg A/S | 24
Cash flow statement
| Q1-Q3 | Q1-Q3 | ||
|---|---|---|---|
| DKKm | 2016 | 2015 | 2015 |
| Cash from operating activities | |||
| Premiums | 13,489 | 13,593 | 17,721 |
| Claims | -9,455 | -9,407 | -13,040 |
| Ceded business | -21 | -383 | -412 |
| Costs | -1,930 | -2,107 | -2,771 |
| Change in other debt and other amounts receivable | -67 | -212 | -158 |
| Cash flow from insurance activities | 2,016 | 1,484 | 1,340 |
| Interest income | 564 | 629 | 807 |
| Interest expenses | -85 | -73 | -95 |
| Dividend received | 22 | 44 | 47 |
| Taxes | -450 | -210 | -765 |
| Other income and costs | -46 | -72 | -91 |
| Cash from operating activities, continuing business | 2,021 | 1,802 | 1,243 |
| Cash from operating activities, discontinued and divested business | -1 | -24 | -32 |
| Total cash flow from operating activities | 2,020 | 1,778 | 1,211 |
| Investments | |||
| Acquisition and refurbishment of real property | -21 | -10 | -46 |
| Sale of real property | 0 | 0 | 10 |
| Acquisition and sale of equity investments and unit trust units (net) | 242 | 330 | 480 |
| Purchase/sale of bonds (net) | -480 | 546 | 1,070 |
| Deposits with credit institutions | -60 | 278 | 641 |
| Purchase/sale of operating equipment (net) | -5 | -4 | 0 |
| Acquisition of intangible assets | -135 | 0 | 0 |
| Hedging of currency risk | -101 | 83 | 86 |
| Investments, continuing business | -560 | 1,223 | 2,241 |
| Investments, discontinued and divested business | 0 | -37 | -37 |
| Total investments | -560 | 1,186 | 2,204 |
| Q1-Q3 | Q1-Q3 | ||
| --- | --- | --- | --- |
| DKKm | 2016 | 2015 | 2015 |
| Financing | |||
| Exercise of share options/purchase of treasury shares (net) | -681 | -750 | -1,031 |
| Subordinated loan capital | 800 | 0 | 12 |
| Dividend paid | -1,714 | -2,380 | -2,380 |
| Change in amounts owed to credit institutions | 100 | -109 | -53 |
| Financing, continuing business | -1,495 | -3,239 | -3,452 |
| Total financing | -1,495 | -3,239 | -3,452 |
| Change in cash and cash equivalents, net | -35 | -275 | -37 |
| Exchange rate adjustment of cash and cash equivalents beginning of year | -2 | -2 | 3 |
| Change in cash and cash equivalents, gross | -37 | -277 | -34 |
| Cash and cash equivalents, beginning of year | 471 | 505 | 505 |
| Cash and cash equivalents, end of period | 434 | 228 | 471 |
Contents – Financial statements
Interim report Q1-Q3 2016 | Tryg A/S | 25
Notes
| DKKm | Private | Commercial | Corporate | Sweden | Other | Group |
|---|---|---|---|---|---|---|
| 1 Operating segments | ||||||
| Q1-Q3 2016 | ||||||
| Gross premium income | 6,475 | 2,921 | 2,809 | 1,011 | -13 | 13,203 |
| Gross claims | -4,386 | -1,813 | -1,481 | -719 | 25 | -8,374 |
| Gross operating expenses | -930 | -503 | -314 | -188 | -1,935 | |
| Profit/loss on ceded business | -118 | -76 | -602 | -3 | -12 | -811 |
| Insurance technical interest, net of reinsurance | -3 | 0 | 0 | -4 | -7 | |
| Technical result | 1,038 | 529 | 412 | 97 | 0 | 2,076 |
| Other items | -165 | |||||
| Profit | 1,911 | |||||
| Run-off gains/losses, net of reinsurance | 251 | 213 | 385 | 89 | 938 | |
| Intangible assets | 30 | 699 | 428 | 1,157 | ||
| Equity investments in associates | 225 | 225 | ||||
| Reinsurers' share of premium provisions | 51 | 48 | 172 | 1 | 272 | |
| Reinsurers' share of claims provisions | 71 | 370 | 1,490 | 31 | 1,962 | |
| Other assets | 48,040 | 48,040 | ||||
| Total assets | 51,656 | |||||
| Premium provisions | 2,424 | 1,529 | 1,396 | 877 | 6,226 | |
| Claims provisions | 5,738 | 6,870 | 11,026 | 3,032 | 26,666 | |
| Provisions for bonuses and premium discounts | 438 | 52 | 53 | 9 | 552 | |
| Other liabilities | 9,044 | 9,044 | ||||
| Total liabilities | 42,488 |
Amounts relating to eliminations are included under 'Other'. Other assets and liabilities are managed at Group level and are not allocated to the individual segments but are included under 'Other'.
Costs are allocated according to specific keys, which are believed to provide the best estimate of assessed resource consumption.
Contents - Financial statements
Interim report Q1-Q3 2016 | Tryg A/S
Notes
| DKKm | Private | Commercial | Corporate | Sweden | Other* | Group |
|---|---|---|---|---|---|---|
| 1 Operating segments | ||||||
| Q1-Q3 2015 | ||||||
| Gross premium income | 6,631 | 3,022 | 2,945 | 1,004 | -18 | 13,584 |
| Gross claims | -4,526 | -2,008 | -3,330 | -690 | -20 | -10,574 |
| Gross operating expenses | -1,001 | -516 | -328 | -180 | -80 | -2,105 |
| Profit/loss on ceded business | -97 | 9 | 1,072 | 0 | -2 | 982 |
| Insurance technical interest, net of reinsurance | 6 | 4 | 5 | -1 | 14 | |
| Technical result | 1,013 | 511 | 364 | 133 | -120 | 1,901 |
| Other items | -686 | |||||
| Profit | 1,215 | |||||
| Run-off gains/losses, net of reinsurance | 275 | 327 | 286 | 83 | 971 | |
| Intangible assets | 34 | 591 | 363 | 988 | ||
| Equity investments in associates | 226 | 226 | ||||
| Reinsurers' share of premium provisions | 56 | 54 | 155 | 265 | ||
| Reinsurers' share of claims provisions | 149 | 423 | 2,461 | 36 | 3,069 | |
| Other assets | 47,972 | 47,972 | ||||
| Total assets | 52,520 | |||||
| Premium provisions | 2,544 | 1,532 | 1,417 | 863 | 6,356 | |
| Claims provisions | 5,820 | 6,746 | 11,774 | 1,760 | 26,100 | |
| Provisions for bonuses and premium discounts | 432 | 46 | 46 | 11 | 535 | |
| Other liabilities | 10,514 | 10,514 | ||||
| Total liabilities | 43,505 |
*) In 2015 costs and claims were negatively effected by DKK 80m and DKK 40m respectively due to provisioning for the efficiency programme.
Contents – Financial statements
Interim report Q1-Q3 2016 | Tryg A/S | 27
Notes
| DKKm | Private | Commercial | Corporate | Sweden | Other * | Group |
|---|---|---|---|---|---|---|
| 1 Operating segments | ||||||
| 2015 | ||||||
| Gross premium income | 8,803 | 3,992 | 3,894 | 1,317 | -29 | 17,977 |
| Gross claims | -6,074 | -2,612 | -3,987 | -852 | -37 | -13,562 |
| Gross operating expenses | -1,291 | -683 | -420 | -246 | -80 | -2,720 |
| Profit/loss on ceded business | -148 | -44 | 877 | -1 | 26 | 710 |
| Insurance technical interest, net of reinsurance | 8 | 5 | 5 | 0 | 18 | |
| Technical result | 1,298 | 658 | 369 | 218 | -120 | 2,423 |
| Other items | -454 | |||||
| Profit | 1,969 | |||||
| Run-off gains/losses, net of reinsurance | 324 | 388 | 351 | 149 | 1,212 | |
| Intangible assets | 33 | 597 | 408 | 1,038 | ||
| Equity investments in associates | 229 | 229 | ||||
| Reinsurers' share of premium provisions | 17 | 16 | 140 | 0 | 173 | |
| Reinsurers' share of claims provisions | 141 | 408 | 2,422 | 32 | 3,003 | |
| Other assets | 46,838 | 46,838 | ||||
| Total assets | 51,281 | |||||
| Premium provisions | 2,342 | 1,318 | 1,062 | 849 | 5,571 | |
| Claims provisions | 5,827 | 6,688 | 11,505 | 1,650 | 25,670 | |
| Provisions for bonuses and premium discounts | 457 | 54 | 50 | 12 | 573 | |
| Other liabilities | 9,823 | 9,823 | ||||
| Total liabilities | 41,637 |
*) In 2015 costs and claims were negatively effected by DKK 80m and DKK 40m respectively due to provisioning for the efficiency programme.
Contents – Financial statements
Interim report Q1-Q3 2016 | Tryg A/S | 28
Notes
| DKKm | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | 2015 |
|---|---|---|---|---|---|
| 1 Geographical segments | |||||
| Danish general insurance * | |||||
| Gross premium income | 2,389 | 2,386 | 7,060 | 7,016 | 9,346 |
| Technical result | 366 | 449 | 1,146 | 1,082 | 1,371 |
| Run-off gains/losses, net of reinsurance | 116 | 165 | 365 | 396 | 512 |
| Key ratios | |||||
| Gross claims ratio | 57.9 | 81.0 | 62.7 | 85.6 | 80.5 |
| Net reinsurance ratio | 12.9 | -13.6 | 7.1 | -15.3 | -9.2 |
| Claims ratio, net of reinsurance | 70.8 | 67.4 | 69.8 | 70.3 | 71.3 |
| Gross expense ratio | 13.7 | 13.8 | 13.7 | 14.2 | 13.9 |
| Combined ratio | 84.5 | 81.2 | 83.5 | 84.5 | 85.2 |
| Number of full-time employees, end of period | 1,841 | 1,903 | 1,841 | 1,903 | 1,859 |
| Norwegian general insurance | |||||
| Gross premium income | 1,612 | 1,687 | 4,731 | 5,155 | 6,766 |
| Technical result | 357 | 262 | 864 | 720 | 844 |
| Run-off gains/losses, net of reinsurance | 188 | 219 | 514 | 448 | 492 |
| Key ratios | |||||
| Gross claims ratio | 58.7 | 69.9 | 61.8 | 69.8 | 70.9 |
| Net reinsurance ratio | 4.7 | 0.1 | 5.0 | 1.4 | 2.1 |
| Claims ratio, net of reinsurance | 63.4 | 70.0 | 66.8 | 71.2 | 73.0 |
| Gross expense ratio | 14.7 | 14.8 | 15.2 | 15.2 | 14.9 |
| Combined ratio | 78.1 | 84.8 | 82.0 | 86.4 | 87.9 |
| Number of full-time employees, end of period | 1,073 | 1,131 | 1,073 | 1,131 | 1,113 |
*) Comprises Danish general insurance and Finnish guarantee insurance.
Contents – Financial statements
Interim report Q1-Q3 2016 | Tryg A/S | 29
Notes
| DKKm | Q3 2016 | Q3 2015 | Q1-Q3 2016 | Q1-Q3 2015 | 2015 |
|---|---|---|---|---|---|
| 1 Geographical segments | |||||
| Swedish general insurance | |||||
| Gross premium income | 518 | 517 | 1,425 | 1,431 | 1,894 |
| Technical result | 21 | 56 | 66 | 219 | 328 |
| Run-off gains/losses, net of reinsurance | -15 | 19 | 59 | 127 | 208 |
| Key ratios | |||||
| Gross claims ratio | 75.1 | 72.0 | 73.3 | 66.4 | 63.5 |
| Net reinsurance ratio | 5.2 | 1.5 | 4.1 | 1.3 | 1.7 |
| Claims ratio, net of reinsurance | 80.3 | 73.5 | 77.4 | 67.7 | 65.2 |
| Gross expense ratio | 15.3 | 15.5 | 17.5 | 17.0 | 17.5 |
| Combined ratio | 95.6 | 89.0 | 94.9 | 84.7 | 82.7 |
| Number of full-time employees, end of period | 396 | 391 | 396 | 391 | 387 |
| Other** | |||||
| Gross premium income | -5 | -7 | -13 | -18 | -29 |
| Technical result | 0 | -120 | 0 | -120 | -120 |
| Tryg | |||||
| Gross premium income | 4,514 | 4,583 | 13,203 | 13,584 | 17,977 |
| Technical result | 744 | 647 | 2,076 | 1,901 | 2,423 |
| Investment return activities | 191 | -441 | 389 | -264 | -22 |
| Other income and costs | -12 | -20 | -45 | -72 | -91 |
| Profit/loss before tax | 923 | 186 | 2,420 | 1,565 | 2,310 |
| Run-off gains/losses, net of reinsurance | 289 | 403 | 938 | 971 | 1,212 |
| Key ratios | |||||
| Gross claims ratio | 59.7 | 76.6 | 63.4 | 77.8 | 75.4 |
| Net reinsurance ratio | 9.5 | -6.8 | 6.1 | -7.2 | -3.9 |
| Claims ratio, net of reinsurance | 69.2 | 69.8 | 69.5 | 70.6 | 71.5 |
| Gross expense ratio*** | 14.5 | 16.3 | 14.9 | 15.7 | 15.3 |
| Combined ratio | 83.7 | 86.1 | 84.4 | 86.3 | 86.8 |
| Number of full-time employees, end of period | 3,310 | 3,425 | 3,310 | 3,425 | 3,359 |
**) Amounts relating to eliminations are included under 'Other'.
In 2015 costs and claims were negatively effected by DKK 80m and DKK 40m respectively due to provisioning for the efficiency programme.
*** Adjustment of gross expense ratio included only in 'Tryg'.
Contents – Financial statements
Interim report Q1-Q3 2016 | Tryg A/S | 30
Notes
| DKKm | Q1-Q3 2016 | Q1-Q3 2015 | 2015 |
|---|---|---|---|
| 2 Premium income, net of reinsurance | |||
| Direct insurance | 13,395 | 13,734 | 18,166 |
| Indirect insurance | 32 | 33 | 44 |
| 13,427 | 13,767 | 18,210 | |
| Unexpired risk provision | 1 | -1 | 1 |
| 13,428 | 13,766 | 18,211 | |
| Ceded direct insurance | -791 | -836 | -1,103 |
| Ceded indirect insurance | -14 | -46 | -61 |
| 12,623 | 12,884 | 17,047 | |
| 3 Insurance technical interest, net of reinsurance | |||
| Return on insurance provisions | 109 | 195 | 259 |
| Discounting transferred from claims provisions | -116 | -181 | -241 |
| -7 | 14 | 18 | |
| 4 Claims, net of reinsurance | |||
| Claims | -9,454 | -11,697 | -15,063 |
| Run-off gains/losses, gross | 1,080 | 1,123 | 1,500 |
| -8,374 | -10,574 | -13,563 | |
| Reinsurance cover received | 55 | 1,941 | 2,061 |
| Run-off gains/losses, reinsurers' share | -142 | -152 | -288 |
| -8,461 | -8,785 | -11,790 | |
| DKKm | Q1-Q3 2016 | Q1-Q3 2015 | 2015 |
| --- | --- | --- | --- |
| 5 Value adjustments | |||
| Value adjustments concerning financial assets or liabilities at fair value with value adjustment in the income statement: | |||
| Equity investments | 24 | 16 | 13 |
| Unit trust units | 146 | -53 | 57 |
| Share derivatives | -27 | 28 | 14 |
| Bonds | 88 | -555 | -608 |
| Interest derivatives | 366 | -26 | -42 |
| 597 | -590 | -566 | |
| Value adjustments concerning assets or liabilities that cannot be attributed to IAS 39: | |||
| Investment property | 0 | 10 | 17 |
| Discounting | -511 | 17 | 103 |
| Other statement of financial position items | -63 | -70 | -64 |
| -574 | -43 | 56 | |
| 23 | -633 | -510 | |
| 6 Acquisition of activities | |||
| In august 2015 Tryg and Skandia signed an agreement whereby Tryg acquires Skandia's activities within child and adult accident insurance and integrates them into its Swedish business, Moderna Forsakringar. The transaction was approved by the Danish FSA and implemented 1 September 2016. The acquisition affects the Financial statement from 1 September 2016: | |||
| Net assets acquired | |||
| Intangible assets | 58 | ||
| Cash and cash equivalents | 1,471 | ||
| Total provisions for insurance contracts | -1,389 | ||
| Net assets acquired | 140 | ||
| Goodwill | 77 | ||
| Purchase price | 217 |
Contents – Financial statements
Interim report Q1-Q3 2016 | Tryg A/S | 31
Notes
7 Related parties
In Q1-Q3 2016 Tryq Forsikring A/S paid Tryq A/S DKK 1,450m and Tryq A/S paid TryqhedsGruppen smba DKK 1,029m in dividends (in Q1-Q3 2015 Tryq Forsikring A/S paid Tryq A/S DKK 3,700m and Tryq A/S paid TryqhedsGruppen smba DKK 1,430m in dividends).
There have been no other material transactions with related parties.
8 Accounting policies
Tryq's interim report for Q1-Q3 2016 report is presented in accordance with IAS 34 Interim Financial Reporting and the requirements of the NASDAQ Copenhagen for the presentation of financial statements of listed companies.
The application of IAS 34 means that the report is limited relative to the presentation of a full annual report and that the valuation principles are in accordance with International Financial Reporting Standards (IFRS).
8 Accounting policies (continued)
Change in accounting policies
Tryq has implemented the amendments which prescribes applying a new yield curve from the Executive order on financial reports by insurance companies and lateral pension funds issued by the Danish FSA from 1 January 2016. The executive order prescribes a change from applying a yield curve issued by the Danish Financial Supervisory Authority to applying a new yield curve published by EIOPA.
For Tryq, this means applying a yield curve at a lower level. The comparative figures for 2015 are restated accordingly. Figures for previous years have not been restated as this is impracticable due to the non existence of the new yield curve published by EIOPA before 01.01.2015. Q1 2015 and Q2 2015 are only affected with the changes as of 01.01.2015 regarding equity and insurance provisions due to insignificant changes to the income statement.
The comparative figures have been restated for 2015 with the following amounts:
| Income statement | Q1-Q3 2015 | 2015 |
|---|---|---|
| Total Investment return after insurance technical interest | -58 | -17 |
| Tax | 13 | 5 |
| Profit and loss for the period | -45 | -12 |
| Statement of financial position | 1.1.2015 | 30.09.15 |
| Equity | -175 | -220 |
| Insurance provisions | 226 | 283 |
| Deferred tax liabilities | -51 | -63 |
It is Tryq's assessment that the amendments to the Executive Order from 2016 can be accommodated within IFRS. Except as noted above, the accounting policies have been applied consistently with last year. For a full description of the accounting policies, please refer to the annual accounts of the Tryq Group 2015.
Changes in accounting estimates
There have been no changes to the accounting estimates in Q1-Q3 2016.
Contents – Financial statements
Interim report Q1-Q3 2016 | Tryq A/S | 32
Quarterly outline
A further detailed version of the presentation can be downloaded from tryq.com/uk=investor>Downloads>tables
| DKKm | Q3 2016 | Q2 2016 | Q1 2016 | Q4 2015 | Q3 2015 | Q2 2015 | Q1 2015 | Q4 2014 | Q3 2014 |
|---|---|---|---|---|---|---|---|---|---|
| Private | |||||||||
| Gross premium income | 2,190 | 2,148 | 2,137 | 2,172 | 2,211 | 2,226 | 2,194 | 2,249 | 2,289 |
| Technical result | 447 | 393 | 198 | 285 | 398 | 434 | 181 | 400 | 445 |
| Key ratios | |||||||||
| Gross claims ratio | 63.2 | 65.9 | 74.2 | 71.3 | 65.1 | 63.3 | 76.5 | 65.3 | 64.6 |
| Net reinsurance ratio | 2.1 | 1.2 | 2.2 | 2.3 | 2.3 | 2.1 | 0.0 | 2.1 | 1.1 |
| Claims ratio, net of reinsurance | 65.3 | 67.1 | 76.4 | 73.6 | 67.4 | 65.4 | 76.5 | 67.4 | 65.7 |
| Gross expense ratio | 14.3 | 14.5 | 14.3 | 13.4 | 14.7 | 15.3 | 15.3 | 15.0 | 15.1 |
| Combined ratio | 79.6 | 81.6 | 90.7 | 87.0 | 82.1 | 80.7 | 91.8 | 82.4 | 80.8 |
| Combined ratio exclusive of run-off | 84.5 | 84.9 | 94.1 | 89.3 | 86.5 | 83.7 | 96.8 | 84.5 | 85.3 |
| Commercial | |||||||||
| Gross premium income | 977 | 977 | 967 | 970 | 1,022 | 997 | 1,003 | 1,050 | 1,045 |
| Technical result | 142 | 172 | 215 | 147 | 136 | 220 | 155 | 270 | 188 |
| Key ratios | |||||||||
| Gross claims ratio | 65.5 | 64.1 | 56.6 | 62.3 | 77.1 | 55.7 | 66.3 | 55.2 | 63.9 |
| Net reinsurance ratio | 3.4 | 0.7 | 3.7 | 5.5 | -6.8 | 5.2 | 0.9 | 3.7 | 0.9 |
| Claims ratio, net of reinsurance | 68.9 | 64.8 | 60.3 | 67.8 | 70.3 | 60.9 | 67.2 | 58.9 | 64.8 |
| Gross expense ratio | 16.6 | 17.6 | 17.5 | 17.2 | 16.6 | 17.2 | 17.4 | 15.6 | 17.5 |
| Combined ratio | 85.5 | 82.4 | 77.8 | 85.0 | 86.9 | 78.1 | 84.6 | 74.5 | 82.3 |
| Combined ratio exclusive of run-off | 92.8 | 84.7 | 90.2 | 91.3 | 98.6 | 84.5 | 98.9 | 86.5 | 92.1 |
| Corporate | |||||||||
| Gross premium income | 968 | 921 | 920 | 949 | 984 | 993 | 968 | 1,015 | 999 |
| Technical result | 117 | 156 | 139 | 5 | 195 | 99 | 70 | 98 | 130 |
| Key ratios | |||||||||
| Gross claims ratio | 42.9 | 60.6 | 55.2 | 69.2 | 99.9 | 170.5 | 67.6 | 67.2 | 63.0 |
| Net reinsurance ratio | 34.0 | 11.6 | 18.0 | 20.5 | -30.1 | -91.2 | 13.4 | 12.6 | 13.0 |
| Claims ratio, net of reinsurance | 76.9 | 72.2 | 73.2 | 89.7 | 69.8 | 79.3 | 81.0 | 79.8 | 76.0 |
| Gross expense ratio | 11.1 | 10.9 | 11.6 | 9.7 | 10.6 | 11.0 | 11.9 | 10.6 | 11.5 |
| Combined ratio | 88.0 | 83.1 | 84.8 | 99.4 | 80.4 | 90.3 | 92.9 | 90.4 | 87.5 |
| Combined ratio exclusive of run-off | 98.3 | 98.0 | 100.9 | 106.2 | 98.1 | 94.5 | 100.1 | 106.4 | 94.9 |
Contents – Financial statements
Interim report Q1-Q3 2016 | Tryq A/S | 33
Quarterly outline
| DKKm | Q3 2016 | Q2 2016 | Q1 2016 | Q4 2015 | Q3 2015 | Q2 2015 | Q1 2015 | Q4 2014 | Q3 2014 |
|---|---|---|---|---|---|---|---|---|---|
| Sweden | |||||||||
| Gross premium income | 384 | 338 | 289 | 313 | 373 | 342 | 289 | 338 | 386 |
| Technical result | 38 | 49 | 10 | 85 | 38 | 72 | 23 | 7 | 30 |
| Key ratios | |||||||||
| Gross claims ratio | 72.9 | 65.7 | 75.1 | 51.8 | 73.2 | 61.1 | 72.0 | 74.6 | 76.2 |
| Net reinsurance ratio | 0.5 | 0.3 | 0.0 | 0.3 | 0.5 | 0.0 | -0.7 | 1.5 | 0.8 |
| Claims ratio, net of reinsurance | 73.4 | 66.0 | 75.1 | 52.1 | 73.7 | 61.1 | 71.3 | 76.1 | 77.0 |
| Gross expense ratio | 16.1 | 19.2 | 21.1 | 21.1 | 15.8 | 17.8 | 20.8 | 22.2 | 15.5 |
| Combined ratio | 89.5 | 85.2 | 96.2 | 73.2 | 89.5 | 78.9 | 92.1 | 98.3 | 92.5 |
| Combined ratio exclusive of run-off | 92.1 | 100.3 | 105.9 | 94.3 | 92.4 | 93.2 | 100.1 | 99.2 | 97.7 |
| Other* | |||||||||
| Gross premium income | -5 | -5 | -3 | -11 | -7 | -8 | -3 | -6 | -7 |
| Technical result | 0 | 0 | 0 | 0 | -120 | 0 | 0 | 0 | 0 |
| Tryg | |||||||||
| Gross premium income | 4,514 | 4,379 | 4,310 | 4,393 | 4,583 | 4,550 | 4,451 | 4,646 | 4,712 |
| Technical result | 744 | 770 | 562 | 522 | 647 | 825 | 429 | 775 | 793 |
| Investment return | 191 | 181 | 17 | 242 | -441 | -84 | 261 | 13 | -1 |
| Profit/loss before tax | 923 | 934 | 563 | 745 | 186 | 714 | 665 | 768 | 782 |
| Profit/loss | 732 | 734 | 445 | 754 | 110 | 580 | 525 | 640 | 593 |
| Key ratios | |||||||||
| Gross claims ratio | 59.7 | 64.5 | 66.3 | 68.0 | 76.6 | 84.8 | 72.0 | 64.1 | 64.9 |
| Net reinsurance ratio | 9.5 | 3.1 | 5.7 | 6.2 | -6.8 | -17.8 | 3.1 | 4.7 | 3.7 |
| Claims ratio, net of reinsurance | 69.2 | 67.6 | 72.0 | 74.2 | 69.8 | 67.0 | 75.1 | 68.8 | 68.6 |
| Gross expense ratio | 14.5 | 15.0 | 15.1 | 14.2 | 16.3 | 15.2 | 15.6 | 14.9 | 15.1 |
| Combined ratio | 83.7 | 82.6 | 87.1 | 88.4 | 86.1 | 82.2 | 90.7 | 83.7 | 83.7 |
| Combined ratio exclusive of run-off | 90.1 | 89.0 | 95.7 | 93.9 | 94.9 | 87.1 | 98.5 | 91.0 | 90.0 |
- Amounts relating to eliminations are included under 'Other'
Contents - Financial statements
Interim report Q1-Q3 2016 | Tryg A/S
Disclaimer
Certain statements in this report are based on the beliefs of our management as well as assumptions made by and information currently available to management. Statements regarding Tryg's future operating results, financial position, cash flows, business strategy, plans and future objectives other than statements of historical fact can generally be identified by the use of words such as 'targets', 'believes', 'expects', 'aims', 'intends', 'plans', 'seeks', 'will', 'may', 'anticipates', 'would', 'could', 'continues' or similar expressions.
A number of different factors may cause the actual performance to deviate significantly from the forward-looking statements in this report, including but not limited to general economic developments, changes in the competitive environment, developments in the financial markets, extraordinary events such as natural disasters or terrorist attacks, changes in legislation or case law and reinsurance. Should one or more of these risks or uncertainties materialise, or should any underlying assumptions prove to be incorrect, Tryg's actual financial condition or results of operations could materially differ from that described herein as anticipated, believed, estimated or expected. Tryg is not under any duty to update any of the forward-looking statements or to conform such statements to actual results, except as may be required by law. Read more in the chapter Capital and risk management in the annual report on page 24-25, and in Note 1 on page 46, for a description of some of the factors which may affect the Group's performance or the insurance industry.
Contents - Management's review
Interim report Q1-Q3 2016 | Tryg A/S