Topdanmark Forsikring 72 Five-year summary 73 Profit and loss account 74 Balance sheet 76 Notes

Transcription

1 Contents Topdanmark in brief 2 Topdanmark in brief 3 Organisational structure summary 5 Financial highlights 6 Directors and Management s report 9 Goals and strategies 12 Prospects 13 Risk factors 14 Investment policy and funding 18 Non-life insurance activities 24 Life assurance activities 28 Other activities 29 Alliance partners 31 Shareholders 35 Employees 36 Information technology 38 Accounting policies 43 Financial review 46 Signatures 47 Auditors reports 49 Five-year summary 50 Profit and loss account 52 Balance sheet 54 Cash flow analysis 55 Notes 69 Yield and assets at market value, life assurance 70 Technical result non-life insurance Topdanmark Forsikring 72 Five-year summary 73 Profit and loss account 74 Balance sheet 76 Notes 82 Representative Assembly 83 Board of Directors 84 Senior Management 85 Topdanmark in Denmark 86 Addresses 87 Financial calendar Topdanmark carries out non-life and life insurance and pension fund business across Denmark. About every fifth person in Denmark, just over every tenth Danish company and every second Danish farm is insured with Topdanmark. One of Topdanmark s goals is to be an independent and preeminent insurance group within the Danish market and to ensure that its shareholders achieve a long-term, competitive and stable return. It is endeavouring to achieve these goals through continued improvement of its position in the Danish market and controlled growth in profit. Topdanmark bases its profitability on an efficient organisation and high quality customer services. Personal customers and small businesses are offered simple and uncomplicated insurance products, while larger corporate and industrial concerns and farms are offered more individually tailored insurance policies. Insurance is sold primarily through Topdanmark s own nationwide distribution network comprising sales centres and certified insurance sales representatives. In the Danish market Topdanmark s own sales organisation is supplemented by a distribution agreement with BG Bank. Internationally, Topdanmark is a partner of the European insurance alliance, Eureko. Topdanmark has 1,801 employees and one of its goals is to keep and attract qualified staff. Highly qualified and motivated employees form the necessary core of an efficient organisation and they provide the high quality required for customer services. Topdanmark s slogan is Easy to do business with, meaning that it tries to be accessible in all respects: for example, that customers can easily and quickly get in contact with the right person in Topdanmark. An increasing number of customers now use the facility of notifying claims by telephone or via the Internet to avoid making a more time-consuming written claim. The overall theme of this Annual Report is therefore Claims handling illustrated by comments from employees, customers and suppliers. 2

2 Organisational structure Legal structure Topdanmark A/S Topdanmark Invest A/S Non-life insurance Topdanmark Forsikring A/S Topdanmark Arbejdsskadeforsikring A/S Life assurance Topdanmark Livsforsikring A/S BG Pension, Livsforsikringsaktieselskab Topdanmark Livsforsikring II A/S Topdanmark Ejendom A/S Business structure Management Administrative departments Services Personal Partners Agricultural Commercial Industrial & Marine Life and pensions Reinsurance Treasury 3

3 1997 summary With a profit of DKK 411m after transferring DKK 40m to the equalisation provisions, 1997 was a satisfactory year for Topdanmark. The result for 1996 was a profit of DKK 272m with no transfer to the equalisation provisions. The result represents a 13.1% return on shareholders funds. After adjusting for extraordinary gains of DKK 44m, the result improved from DKK 273m in 1996 to DKK 367m in Results improved in all Topdanmark s principal business sectors. It is particularly encouraging that the recent years positive results trend continued in the core sectors of life and non-life insurance. Premium income continued its increase by 9.9% in non-life insurance and 16.8% in life assurance. The net combined ratio of the non-life insurance company declined from 104.5% to 100.8% and thus the goal of reducing the net combined ratio to a level of around 100% was achieved. For 1997 the Board of Directors will recommend to the general meeting a distribution of DKK 118m, equivalent to DKK 30 per share. This represents 29% of the profit for the year. It is intended that the distribution will be in the form of a share buy-back. It is expected that the1998 result will not be affected by extraordinary gains. Subject to unchanged foreign exchange and security prices, the profit for 1998 is expected to be DKK 340m to 390m. 4

4 (DKKm) Key figures Premiums earned: Non-life insurance 3,735 3,398 3,064 2,867 2,679 Life assurance 1, , ,040 4,393 4,069 3,444 3,367 Profit / loss on insurance Topdanmark Forsikring excl. life Topdanmark Livsforsikring Other companies 0 0 (6) 4 22 Total profit / loss on insurance Result from other activities 11 (12) (67) (376) (142) Profit / loss of parent company (111) (212) (131) Profit / loss for the year (453) 121 Result before extraordinary factors (437) 103 Extraordinary factors 44 (1) (104) (16) 18 Profit / loss for the year (453) 121 Shareholders funds 3,338 2,917 2,645 2,252 2,535 Ratios Return on shareholders funds (%) (19) 5 Earnings per share (DKK) (157) 42 Net assets per share (DKK) Distribution per share (DKK) 30* Share price at 31 December (DKK) 1, ,030 * In the form of share buy-back.

5 Directors and Management s report Topdanmark on the right track. Profit of DKK 411m and improvement in all principal areas The result for Topdanmark for 1997 was a profit of DKK 411m after a transfer of DKK 40m to build up the equalisation provisions in Topdanmark Forsikring and Topdanmark Arbejdsskadeforsikring. The result for 1996 was DKK 272m with no transfers to the equalisation provisions. After adjusting for extraordinary gains of DKK 44m the result increased from DKK 273m in 1996 to DKK 367m in Both the improvement in and the actual level of the profit of ordinary activities are considered to be satisfactory. The result of DKK 411m is equivalent to a return on shareholders funds of 13.1% which is at the level of the upgraded forecast announced at the half year of between DKK 375 to 425m. Results (DKKm) Non-life insurance Life assurance Other activities 11 (12) Parent company Profit for the year In 1997 Topdanmark increased its stake in BG Bank from just over 5% to 10%. In accordance with Topdanmark s accounting policies the investment in BG Bank is recorded at net asset value. On 31 December 1997 the market value of Topdanmark s stake in BG Bank exceeded the book value by DKK 489m. Results improved in all of Topdanmark s principal business sectors. It is particularly encouraging that the positive results trend continued in the core sectors of non-life and life insurance. Simultaneous with the improvement in results, Topdanmark s increase in premium income in both non-life and life insurance exceeded the growth achieved in the market implying that Topdanmark has continued its recent years rise in market share. Shareholders funds increased from DKK 2,917m to DKK 3,338m, corresponding to the result for the year plus proceeds of DKK 10m arising from the issue of employee shares. Distribution policy As a consequence of the satisfactory results trend, in 1997 the Board of Directors discussed Topdanmark s distribution policy with the intention of resuming the distribution to shareholders for that year. In the coming years the Board of Directors intends to propose distributing 25% to 40% of the profit having given due consideration to the Company s results trend and financing requirements. For 1997 the Board of Directors will recommend to the general meeting a distribution of DKK 118m, equivalent to DKK 30 per share. This represents 29% of the profit for the year. To allow shareholders to decide for themselves the timing of receipt of the distribution, it is intended that it will be in the form of a share buy-back. In 1998 the share buy-back will be in two equal stages via the share market. The first will start in week 17 after the announcement of the annual results on 1 April 1998 followed by a further share buy-back to start in week 37 after the announcement of the half-yearly results on 31 August Further, the Board of Directors intends to recommend to the first subsequent general meeting a write-down in the share capital by an amount corresponding to the number of shares bought back. Key features Since its refinancing in 1994/95 Topdanmark has had two overall goals: to re-establish the Company s financial freedom to act and to concentrate its activities on the core business sectors of non-life and life insurance and pension fund business. In order to achieve the goal of re-establishing its financial freedom a number of measures were taken in In February the parent company, Topdanmark, prepaid a loan of DKK 800m due to expire in August This was the last stage of the refinancing plan implemented in 1994/95. 6

6 Anne Friland, marketing consultant, and Arne Kemmer, copywriter, Topdanmark s marketing department in Ballerup Claims handling is an important feature of Topdanmark s image. Therefore, in 1997 several large campaigns concentrated on this. The early repayment was in part made possible by Topdanmark reducing its shareholding in Sydbank from just under 23% to just over 5% generating proceeds of DKK 458m for the parent company. Later in 1997 Topdanmark Bank was liquidated after going into voluntary solvent liquidation in As a result DKK 301m was allotted to the parent company. Topdanmark s management believes that given the last years positive results trend combined with the measures taken to improve the Company s financial position, Topdanmark has now re-established a satisfactory earnings base with a sound and flexible balance sheet structure. Accordingly, Topdanmark has fully restored its financial freedom and is ready to meet the challenges and seize the opportunities that might arise in developing the core business in the coming years. Management expects that the Danish insurance market will be increasingly dominated by those suppliers who are able to serve customers by the most efficient and relevant sales channels and the lowest expense ratios. 7

7 Directors and Management s report In order to enhance its core business Topdanmark initiated close business ties with BG Bank and Nykredit in Topdanmark intended this relationship to supplement its existing distribution channels by selling insurance policies through its alliance partners sales networks. As the products offered are based on Topdanmark s existing product range, and claims can be handled within the framework of the existing claim administration, the relationship will result in improved distribution efficiency with no impact on fixed costs. However, in 1997 BG Bank and Nykredit wanted to terminate their mutual co-operation agreement. Following the positive experience in selling both life and non-life insurance products through BG Bank s branches, Topdanmark continued with BG Bank as its strategic partner in the Danish market. After the strategic alliance with Nykredit was terminated, Nykredit reduced its shareholding in Topdanmark from 14% to under 5%. At the same time, in order to support the relationship between Topdanmark and BG Bank, Topdanmark increased its shareholding in BG Bank from just over 5% to 10%, while BG Bank increased its holding in Topdanmark from 10% to 15%. Topdanmark s business relationship with BG Bank was enhanced in For example, within non-life insurance Topdanmark established a business unit called BG Non-life, training and providing services to BG Bank s branch network. In 1996 Topdanmark acquired the non-life insurance portfolio written by BG Bank. Correspondingly BG Bank took over the personal customer activities from Topdanmark Bank. The transfer of activities, the operation of which would be more advantageous to the other partner, continued in At the beginning of the year the guarantee insurance company, Topdanmark Garanti, was transferred to BG Bank and changed its name to BG Garanti due to guarantee insurance not being naturally related to non-life and life insurance. On the contrary, it is useful for a bank to have guarantee insurance as part of its corporate product range. agreed that BG Bank may re-enter as a 50% shareholder at a later date. In 1997 Topdanmark reduced its stake in Eureko B.V. from 6.9% to 3.6% providing Topdanmark Forsikring with proceeds of DKK 243m. The reduction will not affect Topdanmark s business relationship with the Eureko Alliance which remains unchanged. As part of concentrating its activities on the core business, Topdanmark has been phasing out all nonstrategic activities in a controlled process since 1994/95. Most of the phase-out activities have been accumulated in the subsidiary Topdanmark Invest. In 1997 the phase-out portfolio was reduced by 19% and at the end of the year it represented about 2% of the Group s total assets. Management considers the phase-out business has been fully provided for. In 1997 the Board of Management of Topdanmark Forsikring was enhanced by Poul Almlund, who has worked for the Topdanmark Group since 1979, most recently as General Manager. He took over the managerial responsibility for finance, treasury, actuarial services and reinsurance. The Board of Management of Topdanmark continues to be Michael Pram Rasmussen as CEO, while the Board of Management of Topdanmark Forsikring comprises Michael Pram Rasmussen (CEO), Leif Larsen (Managing Director) and Poul Almlund (Managing Director). In general, Management believes that numerous steps in the right direction were taken in Topdanmark has a distinct and simple development strategy. The organisation is motivated and has the will to achieve the Company s goals and continue its positive development as an independent, pre-eminent and value-generating company. Now the challenge is to maintain this trend to the benefit of Topdanmark s shareholders, customers and employees. At the end of 1997 Topdanmark took over from BG Bank the remaining 50% of the share capital in BG Pension. This was a practical measure as it offered a number of administrative and cost savings. It was 8

8 Henrik Werenberg, market analyst, Topdanmark s marketing department in Ballerup We know from our research that Topdanmark s most satisfied customers are those who have notified claims. Goals and strategies Topdanmark wants to ensure that the Company s shareholders achieve added value through an increase in business volume and a lower expense ratio Goals Topdanmark s goals are: * to be attractive to customers by being an independent and pre-eminent insurance group within the Danish market; * to carry out, nation-wide, Danish non-life and life insurance and pension fund business; * to ensure that shareholders achieve a long-term, competitive, stable return which will secure a share which is both attractive and liquid; and * to be able to keep and attract qualified employees. Strategy It is Topdanmark s strategy: * to improve its position in the Danish insurance market primarily by organic growth, including close co-operation with BG Bank; * to create value for shareholders through long-term, controlled earnings growth; * to participate in international insurance business through the Eureko Alliance; and * to phase out all non-strategic investments and other activities which do not support the direct core business. Topdanmark s development strategy To improve its position in the Danish insurance market primarily by organic growth, including close co-operation with BG Bank Topdanmark s strategy is based on it being a dynamic company, which re-organises its operations on a continuous basis and has a flexible structure ready for change. This provides a basis to take advantage of any opportunities which might arise to improve the Company s position in the Danish market either organically or by co-operation with other organisations. The Company is endeavouring to achieve continued growth through improving its distribution efficiency and reducing its expense ratio. Therefore, the Company s expense ratio should continue to be lower than the level in the Danish market. In order to strengthen distribution efficiency Topdanmark will continue to improve on the proficiency of its personal sales force by training and by increasing the use of PC-based sales tools. In 1997 and to date 1998 the sales network has been expanded to 38 sales centres by opening a further three offices. * to optimise shareholders risk/return by ensuring that shareholders funds continue to reflect the volume of business transacted and the corresponding investment policy pursued; 9

9 To supplement the Company s own sales channels both non-life and life insurance products are sold through the branches of its alliance partner BG Bank. Moreover, the life assurance products are being sold through a number of regional banks. Topdanmark believes that the distribution efficiency obtained from its own sales channels and those of the alliance partners will be sufficient to continue the improvement in premium income, within both non-life and life insurance business, at a level higher than the general market growth. In 1997 premium income in non-life and life insurance increased by 9.9% and 16.8% respectively, both significantly higher than that achieved in the market in general. Topdanmark s competitiveness is based on a gradual reduction of the expense ratio. In 1997 it was reduced from 24.6% to 24.0% as compared with a market level of about 30%. Restrictive cost-control combined with the increased use of technology will keep the cost trend steady. For example, administrative expenses will be reduced by the use of automated data retrieval, being one of the advantages of Topdanmark s PC-based sales tools. To create value for shareholders through longterm, controlled earnings growth Topdanmark will create value for its shareholders by: * an increase in premium income higher than that of the market; * a declining expense ratio lower than the general market level; * a reduced level of expenditure for reinsurance cover; and * a net combined ratio of around 100%. Besides a declining expense ratio, Topdanmark also wants to reduce the costs of reinsurance cover. In order to level out fluctuations arising from major isolated claims or a series of claims Topdanmark has relatively high reinsurance cover. Thus in 1997, premiums paid for reinsurance cover represented 9.2% of gross premium income in non-life insurance. As part of a gradual reduction in reinsurance cover, DKK 40m was transferred to the equalisation provisions in 1997, and it is the intention to continue to build up these equalisation provisions in the future. As long as the excess capacity continues in the reinsurance market, Topdanmark will continue with its relatively high cover. Purchase of reinsurance was amalgamated in a separate business sector in 1997 in order to improve the Group s overall utilisation. It is Topdanmark s philosophy that not only shareholders, but also customers should benefit from the reduced expense and reinsurance ratios. As a result of its level of expenditure being relatively lower than that of the market, Topdanmark does not need to increase its premiums like the rest of the market, enabling it to offer customers increasingly more competitive prices in the form of lower premiums. Given this philosophy, Topdanmark can allow a slightly increasing loss ratio while continuing an increasing market share and a net combined ratio of around 100%. Based on the existing level of interest rates it is the Company s goal to have a net combined ratio of around 100%. This means that total expenses on claims, acquisition of new customers and administration as well as the purchase of reinsurance cover should not exceed premium income. In 1997 net combined ratio was reduced from 104.5% to 100.8%. Apart from this, Topdanmark has no specific goal on return because the Company includes both realised and unrealised capital gains in its profit and loss June Worre, claims manager, Topdanmark s claims department in Ballerup We have abolished bureaucracy in our claims handling we should be easy to do business with. Our goal is that the employee who is first in touch with the customer should also finish the claim and preferably immediately. This provides quick claims handling, satisfied customers and lower administration expenses. 10

10 Goals and strategies account, which leads to fluctuations in the net result. Topdanmark has no desire to take inappropriate decisions that would only satisfy a short-term return requirement. On the contrary, Topdanmark wishes to assure its shareholders a long-term, stable return in level with that offered by the best, comparable financial institutions in Scandinavia. To optimise shareholders risk/return by ensuring that shareholders funds continue to reflect the volume of business transacted and the corresponding investment policy pursued Historically, Topdanmark s risk exposure has been relatively low. The financial risk chosen by the Company has been modest and the reinsurance cover high. This low risk exposure was pursued as there were not always adequate funds to provide a comfortable base upon which exposure could be increased. Topdanmark believes that at the end of 1997 its funds had reached a level where distribution to shareholders could be resumed - at a level equivalent to 25% to 40% of the profit for the year - and at the same time the operational risk in particular accepted by the Company could be gradually increased. Value added to the Topdanmark share should be achieved through an increase in business volume and larger retention. A higher risk profile of the portfolio assets in itself is considered to have no significant influence on the value of the Topdanmark share since an increase in the investment risk would only lead to shareholders demanding a higher return. At the same time an increase in the financial exposure would lead to higher correlation between the return on Topdanmark s share and the return on shareholders other investments. To participate in international insurance business through the Eureko Alliance Topdanmark is a member of the European insurance alliance Eureko. As a result of this membership Topdanmark s international insurance activities are primarily carried out through the other partners of the Eureko Alliance. Topdanmark s participation in the Eureko Alliance allows its management to concentrate on the Danish market while allowing it access to know-how from the other Eureko partners in development projects. To phase out all non-strategic investments and other activities which do not support the direct core business Since 1994 Topdanmark has had a focused strategy concentrating on carrying out Danish insurance business. Since then all activities not included in this business have been in the process of being phased out. The size of non-strategic activities is now relatively modest, namely DKK 405m at the end of 1997, equivalent to 2% of the Group s total assets. It is intended to continue phasing out these activities at a controlled pace, and it is estimated that provisions on the run-off are sufficient. Topdanmark s development strategy is based on the philosophy that satisfied customers and qualified employees are the key to creating satisfied shareholders with a long-term, competitive and stable return. Therefore, a central element of the development strategy is to build up and maintain a virtuous circle which unites consideration for shareholders, customers and employees. Topdanmark endeavours to create value for its shareholders through long-term, controlled earnings growth combined with a shareholder-friendly distribution policy. Customers are assured of value for money because proficient employees provide qualified services. Topdanmark can offer more competitive prices due to it being able to allow a slightly higher loss ratio as a result of a relatively low expense ratio. Finally, Topdanmark wishes to continue to provide a motivated workplace for qualified and satisfied employees through dynamism and growth. Moreover, satisfied shareholders will create a fair share price, which is the best protection of the employees work place. 11

11 Prospects Expected profit of DKK 340m to DKK 390m in was the year when the Topdanmark Group s turn-around was completed and the Group again showed a normal underlying operating profit. However, the profit for the year of DKK 411m was affected by extraordinary gains of DKK 44m and consequently the underlying operating profit was DKK 367m. It is expected that the result for 1998 will not be affected by such gains. The earnings base of the Group increased in 1997 as a result of an increase in gross premium income of 9.9% in the non-life insurance business and an increase in shareholders funds by 14.4%. The return on investments was 7.7% in 1997 partly due to gains on the share portfolio. In 1998 the result from investments will be affected by an increase in short-term interest rates, while similar capital gains are not expected on shares. Therefore, total investment income is expected to be somewhat lower in 1998 than There will be no exceptional premium increases in non-life insurance in As a result of this, the loss ratio after reinsurance is expected to increase slightly. It is expected that the improvement in gross premium income for non-life insurance will continue to be higher than the market growth of 4% to 5% in However, the improvement will be more moderate than in The expense ratio fell from 24.6% to 24.0% in It is expected that it will fall slightly in 1998, neutralising part of the effect of an increasing loss ratio. The continued fall in the expense ratio is due to sustained strict cost-control and an improvement in gross premium income. The investment in BG Bank represents 18% of the investment assets of the non-life insurance company. Therefore, the result achieved by the insurance group will be affected by the results trend in BG Bank given that Topdanmark s result includes a 10% share of BG Bank s result. In Topdanmark s forecast for 1998 it is assumed that the return after tax on BG Bank s shareholders funds will be 6%, equivalent to DKK 54m of Topdanmark s result. It is solely a budgetary assumption and not an estimate. The Danish Financial Supervisory Authority has ordered the workers compensation insurance companies to build up equalisation provisions in Normally, such equalisation provisions would be distributed between the workers compensation insurance companies through the so-called wage index pool in order to avoid distortion of competition. The Danish Financial Supervisory Authority has advised the companies that this will not be the case for these particular provisions, which will result in Topdanmark s workers compensation insurance company incurring additional expenses of DKK 30m to 35m. According to the guidelines issued by the Danish Financial Supervisory Authority, the maximum return on shareholders funds in Topdanmark Livsforsikring must not exceed the customers bonus rate net of real interest rate duty plus three percentage points, plus the result from health and accident insurance. For 1998 the result of life assurance activities is expected to be DKK 75m to 95m. Accordingly, the profit for 1998 for the insurance group is expected to be about DKK 330m to 370m. The result from the phase-out activities is expected to be close to break-even in In 1998 the parent company intends to distribute for 1997 DKK 118m to shareholders in the form of a share buy-back. At the same time administrative expenses are expected to decline slightly. The profit for the parent company is expected to be DKK 10m to 20m. Accordingly, the overall result for the Topdanmark Group is expected to be a profit of between DKK 340m and 390m for 1998 subject to unchanged foreign exchange and security prices. Expected results for 1998 as compared with the 1997 actual results (DKKm): Non-life insurance Life assurance Other activities 0 11 Parent company Profit for the year Michael Hansen, group supervisor of Topdanmark s claims department in Ballerup Every third claim notified by customers calling the claims department is settled immediately when the customers first call. If a claims assessor is required, he will visit the customer the next day, at the latest. 12

12 Risk factors Conservative risk profile under which a coincidence of events would have no material effect on the Group s financial position The Group s risk factors are shown by way of different risk scenarios. These risk scenarios show the effect of different events in both the life assurance group, the remaining group and the entire Topdanmark Group. Generally, even quite dramatic negative fluctuations in the life assurance group will have no effect on shareholders funds, nor on the result of the entire Topdanmark Group or the net asset value of the Topdanmark share. This is because the life assurance group predominantly administers policyholders savings and both positive and negative factors will affect primarily those savings. Furthermore, at the end of 1997 nonallocated bonus reserves and the difference between market value and book value of securities and properties in the life assurance group totalled DKK 974m. Consequently, only highly unusual losses will affect the result of the Topdanmark Group. At the end of 1997 the ratio of the life assurance group s shareholders funds to policyholders savings was 1:12.7, i.e. the Topdanmark Group s shareholders funds could only be affected by 7.9% of fluctuations in the life assurance group. There is also the buffer of DKK 974m of non-allocated bonus reserves etc. previously mentioned which will be affected first. Part of the interest rate exposure in the life assurance group will be covered by real interest rate duty because losses on fixed-interest rate investment assets are deductible. The risks stated below make allowance for these factors. The investment in Sydbank has been significantly reduced from just under 23% at the end of 1996 to just over 5% in About half of this investment is held by the life assurance group and consequently its effect on the overall result is only limited. The risks stated in the table below are considered to be those which are the most significant. In addition Topdanmark has share investments in Eureko B.V. and BG Bank. The investment in Eureko was reduced from 6.9% to 3.6% in Accordingly, as Eureko B.V. is now considered to be an unlisted portfolio share, it will be recorded at a cautiously estimated market value which, at the end of 1997, was DKK 197m. The investment in BG Bank was increased so that it was 10% at the end of the year against just over 5% in It has been recorded at net asset value and on 31 December 1997 the market value of Topdanmark s shareholding exceeded the net asset value by DKK 489m. This investment, the book value of which was DKK 823m, is Topdanmark s largest isolated asset, and therefore a change in the value of this asset would have a greater effect than a change in the value of any other asset in the Group. It is Topdanmark s general view that the Group s risk profile is conservative and even a coincidence of events would have no material effect on Topdanmark s financial position. The realisation of all the risk scenarios would result in a total loss of DKK 254m equivalent to 7.6% of shareholders funds and DKK 65 per share. Risk factors in the event of realisation of different risk scenarios as at 1 March 1998 Risk Life assurance Remaining Change in parent Change in net asset scenario group Topdanmark Group company s shareholders value (DKK) DKKm DKKm funds (%) Interest-bearing investment assets a (94.9) (77.4) (2.3) (20) Index-linked bonds b (55.2) Foreign exchange c (9.3) (22.7) (0.7) (6) Shares d (270.7) (37.1) (1.1) (9) Loans e (12.0) (6.7) (0.2) (2) Properties f (147.2) Phase-out activities g 0 (43.2) (1.3) (11) Expenses h (1.8) (9.4) (0.3) (2) Claims on own account i 0 (27.1) (0.8) (7) Storm catastrophes j 0 (22.2) (0.7) (6) Loan guarantees k 0 (8.0) (0.2) (2) a: 1 percentage point increase in effective interest rate b: 5% decline in market price c: Maximum annual loss on foreign exchange, with a 2.5% probability or less d: 10% loss on share portfolios e: 5% loss on loans f: 10% decline in market value of properties g: 10% loss on phase-out activities h: 1% increase in expenditure i: 1% increase in claims j: Storm catastrophe like the storm of the century in 1981 calculated at present value k: 10% loss on loan guarantees which are being phased out 13

13 Morten Hatting, operator, Top House in Ballerup Topdanmark paid claims of DKK 2.5bn to its customers in This equals more than 2,500 cheques per day which are inserted in envelopes and mailed the day after the claims handling has been finished Investment policy and funding Decline in investment income arising from, inter alia, deteriorated results from associated companies. Financial risk will be increased Generally, the Group only accepts financial risks within relatively restrictive limits. This basic attitude is reflected in the choice of portfolios in both the life assurance group and the remaining group, although the cautiousness leads to totally different portfolio choices because of the difference between the two units in respect of investment horizon, regulation, tax conditions and owner interest. The same tools are used for risk management of both portfolios. The continuous monitoring of the overall position is achieved through the daily assessment of financial results as well as all relevant exposures and their influence on the total exposure. The market exposures of the portfolios are in interest rate, foreign exchange, shares, index-linked bonds and properties. Assets, liabilities and exposures in off-balance instruments are all included in order to assess the total interest rate exposure. The total interest rate exposure reflects the loss incurred in the event of a one percentage point increase in interest rates. When assessing the overall foreign exchange exposure Topdanmark uses a method which takes into account not only the volatility of each currency but also the correlation between them. On the basis of the historical movements in the market, an estimate is made of the probability distribution of a profit or a loss as a result of changes in the value of each currency. As a result, the foreign exchange exposure is defined as the maximum loss incurred which, with a 97.5% probability, will not be exceeded. In recent years this method has become a generally acknowledged measure of financial risk under the name of Value at Risk. The exposures in shares, index-linked bonds and properties are accepted in accordance with Board decisions on the size of the exposures. Topdanmark Group excluding Topdanmark Livsforsikring During most of 1997 Topdanmark s investments were influenced by the expectation of stable or slightly increasing long-term interest rates. In the light of this, Topdanmark s interest rate exposure was kept at a low level - averaging DKK 15m to 20m until the beginning of December 1997, after which the interest rate exposure was increased gradually to a little over DKK 50m. Total investment income before the transfer to the technical result was DKK 382m in 1997 as compared with DKK 431m in The decline was primarily 14

14 due to the return on investments in associated companies (BG Bank, Eureko B.V. and Sydbank), which fell from DKK 154m in 1996 to DKK 101m in However, to some extent this was offset by the return on the liquidity arising from the sale of Sydbank shares after the first quarter. The return on net portfolio assets after management costs declined from DKK 289m in 1996 to DKK 271m in The return in 1997 was 9.2% before internal financing and 7.7% after including intra-group interest. The market value of interest-bearing investment assets owned by the Group excluding life assurance was DKK 3,594m at 31 December 1997, equivalent to 61% of total investment assets. The portfolio comprises primarily floating rate bonds, money market deposits and hedged fixed-interest securities. The limit of the interest rate exposure has been fixed at DKK 80m, and that of foreign exchange exposure at DKK 5.2m per day. At 31 December 1997 the actual interest rate exposure was DKK 51m and the foreign exchange exposure DKK 2.0m per day. Total share investments of DKK 2,302m comprised primarily the investments in BG Bank (DKK 823m), Eureko B.V. (DKK 197m) and Topdanmark Livsforsikring (DKK 805m). Other share investments totalled about DKK 477m, mostly relating to principal activities. The value of actual portfolio shares was DKK 338m, primarily placed in Danish listed shares. Hedging with financial instruments results in a shift in accounting recognition between interest and capital gains. When the yield structure is steep, as it has been during the past year, hedging of bond positions would result in accounting capital losses offset by an increase in interest income. Correspondingly, the hedging of assets in high-interest currencies and liabilities in low-interest currencies would result in an increase in interest income combined with accounting capital losses. Consequently, the allocation of investment income between interest and capital gains is related to accounting technicalities rather than reality. Topdanmark has therefore decided not to show this split in its financial highlights. Life assurance group At 31 December 1997 the market value of the life assurance group s investment assets was DKK 12,509m. The majority was placed in Danish nominal bonds (DKK 4,542m), while the investment in foreign bonds was DKK 2,334m. DKK 250m was invested in mortgage deeds, nearly 90% of which were guaranteed. At 31 December 1997 the interest rate exposure after real interest rate duty was DKK 106m in the life assurance group and the foreign exchange exposure after real interest rate duty was DKK 0.5m per day. Investment in index-linked bonds was DKK 1,136m, the majority expiring in 2026 or before. The investment in shares was DKK 2,360m, comprising DKK 1,641m in Danish listed shares, DKK 704m in foreign listed shares and DKK 15m in unlisted Investment assets at market value DKKm Group excl. life assurance Life assurance Interest-bearing investment assets 3,594 7,510 Shares 619 2,360 Index-linked bonds 0 1,136 Land and buildings 0 1,503 Non-consolidated subsidiaries 29 0 Associated companies ,091 12,509 Shares in Topdanmark Livsforsikring Total investment assets 5,896 12,509 15

15 Investment policy and funding shares. The largest single investment was DKK 119m and the total value of the five largest investments was DKK 481m. The life assurance group s property investments have been accumulated in the Topdanmark Ejendom Group, whose assets comprise properties at a book value of DKK 1,472m, just under one third of which is used by the Group. The market value of the property portfolio represented a DKK 229m increase on The return generated by the life assurance group after real interest rate duty, calculated at market value, was 10.6% in 1997 against 10.5% in Funding It is part of Topdanmark s funding strategy to achieve a capital structure which reflects the liquidity of its investments. The Group therefore endeavours to finance investments in subsidiaries by shareholders funds, while portfolio assets are financed by raising loans of sufficient maturity to secure a comfortable future liquidity base. At the end of 1997 Topdanmark s shareholders funds were DKK 3,338m and investments in subsidiaries totalled DKK 2,490m. Repayment of loans On 10 February 1997 Topdanmark prepaid a loan of DKK 800m. The loan was raised in 1995 and was due to expire in August It was secured upon the parent company s shares in Topdanmark Forsikring. Accordingly, this provision of security terminated on 10 February The loan of DKK 800m was immediately replaced by another loan of DKK 450m expiring in August 1998, but thanks to an unexpected improvement in liquidity following the sale of a 17% shareholding in Sydbank and the liquidation of Topdanmark Bank, this loan was repaid as early as 1 April After these transactions Topdanmark has no longterm debt. Ratings Topdanmark has not issued any rated debt. The level of financial risks Topdanmark considers that an investment in the Company s shares should be regarded as an investment in an insurance company rather than in an investment company, whose result is primarily dependent on movement in the financial markets. Topdanmark believes that the Company s share would be attractive to those investors who want to spread their risk. This could be achieved if the share is significantly exposed to insurance risk, but not if the share primarily coincides with the rest of the financial market. Accounting investment income Group excl. life assurance Life assurance DKKm Income from affiliated companies 10 (12) 0 0 Income from associated companies Income from land and buildings Interest and dividend etc., net Realised gains and losses, net (70) (39) Unrealised gains and losses, net Administrative expenses (10) (15) (10) (6) Exchange rate adjustments (35) (17) (99) 25 Real interest rate duty 0 0 (16) (38) Income from net portfolio assets , Total investment income ,

16 Laus Mikkelsen, senior manager, Topdanmark s claims department in Ballerup Sometimes we have doubts about a document relating to a claim. We have therefore bought a Docu Box which reveals if the amount of an invoice has been changed. It is also a help for reading indistinct text and figures. This facilitates the claims handling for the benefit of both customers and administration. It is Topdanmark s opinion that principally it would serve shareholders interests best to primarily utilise the Company s capital base for acceptance of insurance risks. However, Topdanmark is aware that a large part of the Company s shareholders are subject to restrictions preventing them from increasing the financial risk chosen by Topdanmark. Therefore a certain increase in the financial risk has been decided. The decision to increase the financial risk should be viewed in the light of the correlation between the return on the pure insurance business and the return on financial investments being close to break-even, e.g. in the event that one exposure would record a result above average, the other would record a result below average. The increase in the overall exposure as a result of raising the financial risk would therefore be smaller than the increase in the financial risk alone. Furthermore, it is estimated that the capital base was sufficient for bearing this increase in risks at the end of In practical terms, the limit of the interest rate exposure for the Group excluding life assurance was increased from DKK 50m to DKK 80m as from 4 September Additionally, it has been decided to increase the exposure in portfolio shares from DKK 338 at the end of 1997 to DKK 500m during There have also been investments totalling about DKK 300m in Eureko, Forsikringsselskabet for Erhvervssygdomme (insurance company for occupational diseases) etc. 17

17 Non-life insurance activities Net combined ratio of 100.8% and improvement in premium income in all business sectors Following the disposal of the guarantee insurance company on 1 January 1997, the non-life insurance activities comprise only Topdanmark Forsikring, Topdanmark Arbejdsskadeforsikring (workers compensation insurance) and the health and accident insurance business in the life assurance group. Practically all inward reinsurance was wound up in The result recorded by Topdanmark Forsikring in 1997 was a DKK 309m profit (1996: DKK 265m). The life assurance subsidiary, Topdanmark Livsforsikring, contributed DKK 50m in 1997 (1996: DKK 36m). The result achieved by Topdanmark Forsikring, the non-life insurance company, represented a 13.7% return on shareholders funds. Gross premium income in the Topdanmark Group increased from DKK 3,398m in 1996 to DKK 3,735m in This included gross premium income of DKK 3,510m in Topdanmark Forsikring, as compared with DKK 3,198m in Accordingly, the improvement in premium income was 9.9% for the Topdanmark Group and 9.8% for Topdanmark Forsikring alone. After adjusting for indexation and premium increases, the underlying improvement in income was about 6%, indicating a continuation of the upward trend and an improvement in market share, which, in 1996, was just over 13%. Furthermore, as a result of this improvement in premium income, in 1997 Topdanmark Forsikring took over the position as the second largest non-life insurance company in the Danish market. Improvements were recorded in each of the company s business sectors. The sale of non-life insurance products through BG Bank had a full year s impact in 1997, representing 1.7 percentage points of the overall 9.8% improvement in premium income in Topdanmark Forsikring. It is expected that the total improvement in premium income will be more moderate for Topdanmark Forsikring in 1998 partly because there will be no extraordinary premium increases for that year. The loss ratio was reduced from 75.4% in 1996 to 74.7% in This came about from two opposing factors. On the one hand the loss ratio declined as a result of a reduction in run-off losses - the loss was DKK 27m in 1997 equivalent to 0.8 percentage points of the loss ratio. On the other hand 1997 saw an increase in the number of large claims and expenses from cloudbursts. To a large extent, the large claims were covered by Topdanmark s reinsurance programme. As no extraordinary premium increases are intended for 1998, the loss ratio after reinsurance is expected to increase slightly. The expense ratio was reduced from 24.6% in 1996 to 24.0% in 1997 showing a continuation of the recent years positive trend. It resulted from a combination of restrictive cost controls and the growth in gross premium income. It is expected that the expense ratio will decline slightly in The gross combined ratio representing expenses on Søren Ø. Nielsen, motor claims assessor, visiting Toyota in Kolding I always go to the garage within 24 hours from delivery of the damaged car sometimes within only a few hours. Our customers can deliver their damaged cars to the garage and complete the claims form on location. It s as easy as that. 18

18 claims, sales and administration as a percentage of gross premium income, was 98.7% in 1997 as compared with 100.0% in Net expenses on reinsurance equalled 2.1% of gross premium income in 1997 as compared with 4.5% in 1996 with the reduction being the result of the reinsurance programme s cover of a number of large claims and an improvement in reinsurance conditions generally. As a result, total expenses on claims, sales, administration and reinsurance as a percentage of gross premium income (net combined ratio) declined from 104.5% in 1996 to 100.8% in A net combined ratio at a level of around 100% is satisfactory and is expected to continue into The positive trend in the net combined ratio was the main cause of the improvement in the technical result of Topdanmark Forsikring from a DKK 30m loss in 1996 to a DKK 61m profit in 1997, an increase of DKK 91m. Additionally, in Topdanmark Forsikring DKK 30m was transferred to the equalisation provisions. Accordingly, the total improvement in the actual technical result was DKK 121m. Personal Personal lines serve the personal customer market and small businesses. Financial highlights - Topdanmark Forsikring DKKm Key figures Premiums earned 3,510 3,198 2,908 Technical interest on own account Claims incurred (2,622) (2,410) (2,169) Expenses (843) (785) (734) Reinsurance ceded (72) (145) (89) Change in equalisation provision (30) 0 0 Profit/loss on insurance 61 (30) 50 Other investment income Profit on ordinary activities Extraordinary items Profit for the year Shareholders funds 2,408 2,099 2,034 Technical provisions on own account 2,482 2,261 1,918 Total assets 5,567 5,089 4,641 Ratios (%) Loss ratio Expense ratio Gross combined ratio Reinsurance ceded Net combined ratio Return on shareholders funds (%) Sales and services are provided by Personal lines just over 90 certified insurance sales representatives, 38 sales centres and telephone sales. DKKm Pers. Contents Buildings Accident 1: Personal 43% 2: Agricultural 23% 3: Commercial 17% 4: Industrial 14% 5: Partners 3% 19

19 Non-life insurance activities In 1997 the sales organisation was expanded by several certified insurance sales representatives and two sales centres in Fredericia and Hvidovre. In the spring of 1998 the 38th sales centre will be opened in Skive. At the end of 1997 the sales organisation in the personal customer market was changed so that most of the administration has now been centralised in the main office. At the same time the personal customer market was divided into seven decentralised sectors with responsibility for sales alone. Gross premium income in Personal lines increased from DKK 1,398m to DKK 1,515m in 1997, equivalent to 8.3%. This was achieved in all personal insurance areas in spite of intense competition. The trend in both the loss ratio and the overall financial result was satisfactory. Motor insurance premiums in the entire Topdanmark Group rose by 12.6% in 1997, partly due to 8% premium increases, on average, given to about one third of the motor insurance customers with effect from 1 March At the same time a further grouping of customers owning particularly theftcoveted cars were required to install engine immobilisers. Although the number of car thefts stood at a very high level nationally, the requirement for installing immobilisers was one of the factors leading to the 16% reduction in theft of those cars insured with Topdanmark. Motor insurance benefited from a relatively mild winter, but it was also affected by a continued unsatisfactory trend in payment on personal injury claims. However, the overall result from motor insurance improved slightly on the previous year. With an overall increase of 11.1%, premium income in other personal insurance lines also showed an upward trend was affected by higher claims expenditure than the previous year, partly due to claims arising from storms and cloudbursts, particularly those at the beginning of the summer of 1997 which resulted in additional expenses of just under DKK 20m. Furthermore the year was affected by more as well as more expensive burglary claims and by an increase in the number of large accident insurance claims. The overall result for the remaining personal insurance lines was slightly lower than that for Peder Hansen, builder, Holbæk If a builder is needed to repair some damage I can come the same day if necessary. Sometimes, I can make the repairs immediately. Partners Topdanmark s business sector Partners is responsible for development and establishment of the sale of insurance policies through new sales channels in the personal customer market. In 1997 Partners sales were made exclusively through the alliance partner, BG Bank, namely its 256 branches and 14 post offices was the first year when sales through BG Bank had full effect. In 1997 Partners premium income was DKK 92m, equivalent to an increase of 144.8% as compared with The improvement represented about 17.5% of the total improvement in premium income in Topdanmark Forsikring. The introduction of a new separate BG Bank product line at the beginning of 1997 was partly responsible for this trend. So far the trend in claims experience for policies written via BG Bank is at the same satisfactory level as for Topdanmark s other personal insurance customers. In January 1998 the relationship between BG Bank and Topdanmark was further improved by the establishment of a special unit, BG Non-life, in the business sector Partners. BG Non-life is responsible 20

20 for providing insurance support to BG Bank s employees. It is expected that the improvement in premium income generated by BG Bank will continue and in 1998, it should represent about 20% of the Group s improvement in premium income. Partners other principal business source is the Internet. Topdanmark has been on the Internet since Initially it has chosen to offer its existing customers a number of extra services like the facility of claims notification via the Internet. In the course of 1998 these services will be supplemented by the sale of simple insurance products, for example for young people between the age of 18 and 27 years. Agriculture Agricultural lines serve all types of farms as well as private households and small businesses in rural areas. Sales and services are provided by Agricultural lines 160 certified insurance sales representatives supported by five customer service centres in Aalborg, Herning, Aabenraa, Næstved and Ballerup. The certified insurance sales representatives work from their home address, which makes it easy for customers to contact Topdanmark to receive qualified and personal service. These factors are key in Topdanmark s desire to be a decentralised, locally based organisation deeply rooted in agricultural and local communities. Agricultural lines provision of sales and services is supported by a highly customer-oriented PC-based sales and administration system. Combined with a flat and customer-oriented organisation this system has been one of the factors enabling Topdanmark to continue its growth in the agricultural market. Total gross premium income for Agricultural lines increased in 1997 by 7.6% to DKK 820m. The increase in premium income in the agricultural market was achieved in spite of an overall declining market for agricultural insurance. Claims expenditure in 1997 was affected by storms and other weather-related claims like those arising from lightning and flooding. However, with the decline in the number of large fires, Agricultural lines achieved, again in 1997, a satisfactory result. Commercial Commercial lines serve small and medium-sized businesses with three to 50 employees. Sales are made by Commercial lines 60 certified insurance sales representatives supported by two support centres in Copenhagen and Herning. Ole Bjørn Hansen, large claims assessor, on a claims visit to Fredensborg I will come to inspect a large claim two or three hours after the customer has notified the claim or we have been advised by the police or fire service. For instance, it could be a large fire requiring re-housing of the family or a herd of cattle which need a new roof over their heads. DKKm Pers. Acc. Liability Contents Buildings DKKm Liability Buildings Contents DKKm Liability Buildings Contents Marine hull 21

21 Non-life insurance activities In 1997 Commercial lines recorded a gross premium income of DKK 581m as compared with DKK 533m in 1996, an increase of 9.1%. In 1997 a larger share of the increase arose in direct commercial insurance than in previous years, when the growth was primarily generated in motor insurance. Also in 1997 the market for commercial insurance was affected by intense competition and viewed in this light, the increase is considered to be satisfactory. The claims trend was affected by an unsatisfactory trend in accident and professional liability insurance in 1997 as well as a significant increase in the scale of computer thefts. However, the trend in the expense ratio continued to be satisfactory. The overall result for 1997 was in line with that for 1996 and was therefore considered to be less than satisfactory. At the end of 1997 Commercial lines changed its management team and steps have been taken to improve the efficiency of the organisation was the first year in which the PC-based sales and administration system Top Commercial had full effect. The system was well received by both customers and sales staff. The intensive concentration on loss prevention and risk management advice continues to contribute to improving Industrial & Marine s competitive position. Major industrial and commercial customers pay much attention to potential large losses and systematic risk management as well as the productive advantages and results benefits gained from this. As in 1996 Industrial & Marine gained market share again in Gross premium income increased from DKK 403m in 1996 to DKK 484m in 1997, equivalent to a growth of 20.1%. However, development in earnings was less than satisfactory in This was partly due to unsatisfactory results from insurance trades where Topdanmark has a high retention. Significant run-off losses were incurred on the liability trades and their claims trends for 1997 were also unsatisfactory. Measures have already been taken to improve this unfortunate trend. Additionally a few customer Niels Erhardsen, building claims assessor, Hedensted Today we are able to close a claims case immediately in the customer s home. Therefore it is also possible to send the cheque for the claim the same day. This provides quick claims handling and satisfied customers. Top Commercial meets customers need for the quick and efficient provision of advice and policy offers. The system enables the certified insurance sales representatives to check the customer s insurance needs, collect the relevant data and print an offer, all of it in dialogue with the customer. This has resulted in improved efficiency in the issue of policies and improved sales results. Industrial & Marine The Industrial & Marine Division serves major industrial and commercial customers in Denmark and Greenland. It is also responsible for the marine sector. Industrial and commercial customers are served by 16 industrial consultants from the industrial centres in Ballerup and Århus, while marine customers are served from the Taastrup office in the neighbourhood of Copenhagen. Industrial & Marine s customer-oriented activities focus on active loss prevention and risk management advice. The loss prevention centre in Ballerup, the only one of its type in Denmark, provides the base for these services and is used for demonstrations and training. 22

22 relationships produced poor results in general in 1997 and loss prevention measures have therefore been taken to improve the claims trends. Furthermore, the result for 1997 was affected by a number of non-recurring expenses. Similar run-off losses and non-recurring expenditure are not expected for 1998, and consequently an improvement in result is expected. Workers Compensation Insurance Workers Compensation Insurance (Topdanmark Arbejdsskadeforsikring) is an independent legal entity, but in practice it functions as an integral part of Topdanmark s Agricultural and Commercial lines and its Industrial & Marine Division. Gross premium income for Workers Compensation Insurance increased by 22.5% from 1996 to 1997, arising primarily from an extraordinary premium increase of just over 14% at the beginning of the year. This was a consequence of the Danish Financial Supervisory Authority s requirement to reduce from 4% to 3% the basic interest rate for provision for annuities, i.e. the discount rate used for the calculation of the present value of future payments. The 1997 result was a profit of DKK 26m as compared with DKK 19m in At the end of 1997 the basic interest rate was further reduced to 2.75%. Furthermore, the Danish Financial Supervisory Authority has required that all workers compensation insurance companies build up equalisation provisions equivalent to a 2% basic interest rate. Normally, such an expense would be distributed on the companies according to market share, but the Danish Financial Supervisory has required that it should not be done in this case. As a result, Topdanmark Arbejdsskadeforsikring is required to build up equalisation provisions of about DKK 60m, which, due to the non-distribution, will result in extraordinary charges of DKK 30m to 35m in As no extraordinary increases in the premiums are expected for 1998, the result recorded by Workers Compensation Insurance will be close to break-even in Reinsurance Topdanmark has established a comprehensive reinsurance programme as this increases the Company s opportunity to take over large risks. Additionally, it is Topdanmark s policy to limit the size of losses arising from isolated events or from a series of events. The reinsurance programme is placed with leading, well-established West European and American reinsurance companies. The reinsurance programmes are continuously realigned to match the Company s current requirements, and prices differ from year to year dependent on both market conditions and the earlier results of the programmes. In 1997 DKK 321m, equivalent to 9.1% of gross premium income, was applied to purchasing reinsurance protection. Correspondingly, DKK 327m was applied in The 2% decline from 1996 to 1997 reflected a declining level of reinsurance market prices. In order to secure more appropriate purchasing of reinsurance protection at group level and not at business sector level, reinsurance was established as an independent business sector in In the future Topdanmark will, to a higher degree, attempt to optimise its reinsurance cover given due regard to the Group s overall risk profile. Financial highlights - Topdanmark Arbejdsskadeforsikring DKKm Key figures Premiums earned Technical interest on own account Claims incurred (120) (107) (136) Expenses (39) (35) (38) Reinsurance ceded Change in equalisation provision (10) 0 0 Profit/loss on insurance 23 9 (28) Other investment income Profit for the year Shareholders funds Technical provisions on own account 1, Total assets 1,171 1,116 1,039 Ratios (%) Loss ratio Expense ratio Gross combined ratio Reinsurance ceded (4.7) (1.8) (10.3) Net combined ratio Return on shareholders funds (%)

23 Life assurance activities Continued increase in premium income for both Topdanmark Livsforsikring and BG Pension. BG Pension included as a 100% owned subsidiary from the end of 1997 The constituents of Topdanmark Livsforsikring Group are the parent company Topdanmark Livsforsikring, BG Pension and Topdanmark Livsforsikring II which manages a portfolio of annuities not entitled to bonus. It also includes the property company Topdanmark Ejendom. Topdanmark Livsforsikring Group In 1997 Topdanmark Livsforsikring owned 50% of BG Pension while BG Bank owned the other 50%. At the end of 1997 BG Bank transferred its shareholding in BG Pension to Topdanmark Livsforsikring. Following the transfer BG Pension became a 100% owned subsidiary of the Topdanmark Livsforsikring Group. It has been agreed that BG Bank may later re-enter as a shareholder. It is intended to keep BG Pension and Topdanmark Livsforsikring as two separate legal entities each marketed under its own name and logo. However, the two companies are being operated as a group with joint management, administration and location. Topdanmark Livsforsikring sells life assurance policies and pension schemes via its primary sales channel of Topdanmark Forsikring s sales team. In recent years the company has significantly increased the sale of corporate pension schemes with much of it being done by insurance brokers. BG Pension sells life assurance policies into the personal customer market through BG Bank. Corporate pension schemes are sold to BG Bank s commercial customers by Topdanmark Livsforsikring. The life assurance group s goal is to enhance further its position in both the individual and corporate pension markets by capitalising on its reputation of offering a variety of sales channels, flexible products and advanced advisory tools. In addition, products are being developed in a number of areas, for example, the group has created new health and accident insurance policies based on group cover, critical health insurance and new labour market pensions. As a result of the significant growth in each of Topdanmark Livsforsikring and BG Pension and the take-over of the remaining 50% shareholding in BG Pension requiring greater solvency, both companies strengthened their capital bases at the end of Topdanmark Forsikring subscribed for DKK 300m of new equity in Topdanmark Livsforsikring. Topdanmark Livsforsikring raised a subordinated loan of DKK 200m and at the end of 1997 BG Pension raised a subordinated loan of DKK 100m. Gross premium income in the Topdanmark Livsforsikring Group was DKK 1,305m in 1997 including 50% of BG Pension s gross premium income for the year. In comparison, gross premium income was DKK 995m in 1996 including 50% of BG Pension s gross premium income just for the second half of the year. Having adjusted for the change in the ownership of BG Pension, premium income increased by 16.8% in Topdanmark Livsforsikring In the parent company Topdanmark Livsforsikring gross premium income increased 15% from DKK 768m in 1996 to DKK 883m in In addition, gross premium income from health and accident insurance was DKK 24m in 1997 as compared with DKK 16m in Accordingly, Topdanmark Livsforsikring continued the recent years favourable improvement in premium income. Topdanmark Livsforsikring enjoyed growth in all of its main businesses in Individual schemes increased by 13%, corporate pension schemes by 12% and group life schemes by 49%. The guidelines laid down by The Danish Financial Supervisory Authority provide limitations on the profit of Topdanmark Livsforsikring. The average maximum return on shareholders funds must not exceed the customers bonus rate after real interest rate duty plus three percentage points, plus the result from health and accident insurance. Any excess profit is to be transferred to the bonus equalisation provisions for the benefit of customers. Topdanmark Livsforsikring achieved a profit of DKK 50m in 1997 after a transfer of DKK 326m to the bonus equalisation provisions. The result for 1997 represents a 10.4% return on shareholders funds. The 1996 result was a DKK 36m profit after a transfer of DKK 162m to the bonus equalisation provisions. 24

24 Michael Svendsen, head of payments, Topdanmark Livsforsikring in Albertslund Although claims handling is often complicated in life assurance, the bereaved receive the payment from the life assurance insurance policy in less than two weeks. The profit of DKK 50m for 1997 included DKK 9m from health and accident insurance. Topdanmark Livsforsikring s net income liable to real interest rate duty was in fact a small loss primarily due to large hedging losses being incurred. Exchange gains on a share portfolio are not liable to real interest rate duty while losses on the foreign exchange hedging of foreign shares and convertible bonds are deductible. Topdanmark Livsforsikring s intention is to have controlled growth in expenditure achieved by strict cost controls and the increased use of technology. In 1997 expenditure increased by only 6% as compared with the 15% improvement in premium income. Financial highlights - Topdanmark Livsforsikring DKKm Premiums ,005 Allocated investment income on own account Claims paid (354) (331) (309) Change in the life assurance provisions (811) (641) (856) Change in the bonus equalisation provision (326) (162) (128) Expenses (144) (93) (58) Reinsurance ceded 9 (3) (7) Technical profit/loss on life assurance (9) 18 2 Technical profit/loss on health and accident insurance Other investment income Profit om ordinary activities Extraordinary items 0 (17) 0 Profit Shareholders funds Technical provisions on own account 7,585 6,437 5,636 Total assets 8,848 6,992 6,115 Return on shareholders funds (%) Topdanmark has chosen to change the method of calculating the size of the share of acquisition costs to be capitalised. In 1997, no such costs were capitalised and the amount to be amortised in future years was reduced. As a result of this change, acquisition costs rose by DKK 80m representing an extraordinary deterioration of 1.23 percentage points in the expense result ratio. Consequently, the expense result ratio, being the net of customer recharges and expenses incurred over the life assurance provisions, declined from (0.21%) in 1996 to (0.90%) in Excluding the extraordinary increase in acquisition costs, the expense result would have been positive in Topdanmark Livsforsikring s financial health can be calculated as the sum of the bonus equalisation provisions, the difference between the book value and market value of the bond portfolio etc. net of real interest rate duty, and the shareholders funds reserve, being the total capital base less an amount required for solvency. The proportion of the bonus reserve and shareholders funds reserve to customers savings (the life assurance provisions) shows both the future bonus ability and the financial strength needed to resist future fluctuations in prices on the capital markets. Bonus equalisation provisions totalled DKK 616m at the end of After adding the difference between market value and book value of the portfolios of bonds and properties the bonus reserve was 10.9%, an increase of 3.5 percentage points on The shareholders funds reserve was 6.5%, an increase of 25

25 Life assurance activities 4.6 percentage points on Accordingly, the total net financial reserves were equivalent to 17.4% of total life assurance provisions. It is Topdanmark s policy to secure a stable and competitive return on customers savings. In the period from 1991 to 1997 in which official calculations of the return have been made, the average return has been 9.2% after real interest rate duty. This is estimated to be one of the best returns in the industry. Calculated at market value, the return was 10.4% after real interest rate duty in In the light of the favourable result from investments in 1997 Topdanmark Livsforsikring has raised bonus rates after real interest rate duty by 2.0 percentage points for 1998 up from the forecast previously announced. Accordingly, the bonus rate has been fixed at 7.6% for corporate pension schemes and 7.4% for private schemes. Bonus rates in both Topdanmark Livsforsikring and BG Pension have been based on a realistic assessment of the companies future returns and the size of the bonus equalisation provisions. If the current low level of interest rates is continued, the bonus rates set for 1998 will result in a transfer to customers of part of the previous years positive returns on investments, which had been saved as bonus equalisation provisions. BG Pension BG Pension is a subsidiary of Topdanmark Livsforsikring. Topdanmark Livsforsikring s share of BG Pension s result is included as part of the return on investments in the parent company. Gross premium income in BG Pension was DKK 842m in 1997 as compared with DKK 699m in 1996, equivalent to an increase of 21%. Gross premium income from health and accident insurance was DKK 69m in 1997 against DKK 56m in Accordingly, both Topdanmark Livsforsikring and BG Pension continued their rapid growth and, once again in 1997, were among Denmark s most rapidly growing life assurance and pension fund companies. The life assurance group s market share of just under 5% in 1996 is therefore expected to have increased in The increase in BG Pension s gross premium income comprised a 28% increase in regular premium policies and a 16% increase in single premium policies. At the end of 1997 technical provisions were DKK 2,514m as compared with DKK 1,729m at the end of 1996 representing a 45% increase. Topdanmark Livsforsikring Group Ratios Yield ratios (%) Yield before real interest rate duty 10.8% 11.1% 12.2% 0.0% 17.9% Yield after real interest rate duty 10.6% 10.5% 11.0% (1.3%) 17.1% Yield after adjusted real interest rate duty 9.7% 9.5% 9.5% (1.0%) 14.2% Expense ratios (%) Expense ratio 11.1% 11.8% 10.7% 17.0% 12.9% Expenses calculated as interest margin 1.7% 1.6% 1.8% 1.8% 1.8% Expenses per policyholder (DKK) 1,189 1,091 1,175 1,137 1,071 Expense result (0.72%) (0.23%) 0.32% 0.13% 0.04% Risk ratios (%) Risk result 0.36% 0.48% 0.37% 0.13% (0.17%) Consolidation ratios (%) Bonus reserve 9.3% 6.8% 2.7% (0.5%) 4.7% Shareholders funds reserve 5.2% 1.4% 1.6% 2.1% 2.0% Solvency ratio 202% 133% 134% 143% 138% Health an accident insurance Loss ratio on own account 57.8% 78.3% Expense ratio on own account 15.4% 23.0% 26

26 Johnny Nielsen, internal mail department, Top House in Ballerup Every day Topdanmark receives more than 4,000 letters and packets in the post. 1,000 of them are claims. They must be delivered quickly to the right claims handler for further attention. The result for 1997 was a DKK 32m profit after transferring DKK 76m to the bonus equalisation provisions. The result for 1996 was a DKK 19m profit after transferring DKK 39m to the bonus equalisation provisions. Bonus equalisation provisions totalled DKK 116m at the end of After adding the difference between market value and book value of the portfolios of bonds and properties the bonus reserve was 8.0%, an improvement of 3.0 percentage points on The shareholders funds reserve was 5.3% equivalent to an increase of 2.3 percentage points. Accordingly the total net financial reserves were equivalent to 13.3% of life assurance provisions. BG Pension s bonus rate after real interest rate duty for private schemes has been fixed at 7.2% for 1998, an increase of 2.0 percentage points from the forecast previously announced. Topdanmark Ejendom In 1997 Topdanmark Ejendom achieved a profit of DKK 216m as compared with DKK 95m in The DKK 121m improvement in the result included a value adjustment of DKK 90m on the property portfolio. At the end of 1997 the company s property portfolio including properties owned by subsidiaries totalled DKK 1,472m, an increase of DKK 268m or 22% since the beginning of the year. The property portfolio represented 11.5% of the life assurance group s balance sheet total. The estimated return for 1998 is 7.6%, and 99% of the properties continued to be let. DKKm 27

27 Other activities 19% reduction of the phase-out activities of Topdanmark Invest in 1997 Other activities comprise activities which are not included in Topdanmark s core business and are therefore being phased out. The overall result from other activities was a DKK 11m profit as compared with a DKK 12m loss in Most of the phase-out activities have been placed in Topdanmark Invest. Topdanmark Invest In 1997 Topdanmark Invest recorded a profit of DKK 1m as compared with a DKK 9m loss in The phase-out activities were reduced by 19% in 1997 and totalled DKK 432m at the end of 1997 representing 2% of the Topdanmark Group s total assets. The foreign phase-out activities, which were reduced by 10%, were affected by the increase in the rate of USD during With unchanged foreign exchange prices the foreign phase-out activities would have been reduced by 21%. The domestic phase-out activities are mainly managing and phasing out a property and loan portfolio. The property portfolio mostly consists of properties previously taken over by the former Aktivbanken in connection with breach of loan agreements. The foreign phase-out activities comprise a loan and property portfolio in the USA and Germany. Both were taken over from Topdanmark Bank and were those of Aktivbanken s activities which were not sold in The phase-out will continue to be conducted in a controlled process. Topdanmark considers the portfolio has been fully provided for. Other companies Those of the phase-out activities which are not included in Topdanmark Invest contributed a DKK 10m profit to the Group result in 1997 as compared with a DKK 3m loss in The profit of DKK 10m in 1997 was due to a DKK 7m profit arising from Topdanmark Teknologi s sale of a computer system and a DKK 3m profit recorded by Topdanmark Bank until its liquidation in April Phase-out portfolio in Topdanmark Invest Kirsten Hansson, clerk, Top- Alarm and Topdanmark s switchboard in Ballerup If the customer has trouble with his car, we send for Tophjælp (Topdanmark s rescue service), which comes within one hour. In case of other claims we put him through to the claims department. This happens just over 2,000 times a day. DKKm Change in the year Domestic phase-out activities % Foreign phase-out activities % Total phase-out activities % 28

28 Alliance partners Improvement in the sale of life and non-life insurance through BG Bank. Shareholding in Eureko reduced In order to improve its sales potential in the Danish market, in 1996 Topdanmark initiated close business ties with BG Bank and Nykredit. Topdanmark intended the relationship to supplement its existing distribution channels by selling insurance products through the alliance partners sales channels. The products are based on Topdanmark s existing product range. As claims can be handled within the framework of the existing claim administration, sales through the partners will improve distribution efficiency with no impact on fixed costs. In 1997 BG Bank and Nykredit wanted to terminate their mutual co-operation agreement. As a consequence of the positive experience in selling both life and non-life insurance products through BG Bank s branches, Topdanmark chose to continue with BG Bank as its strategic partner in the Danish market. As part of the termination of the strategic alliance with Nykredit, its shareholding in Topdanmark was reduced from 14% to under 5%. At the same time to support the relationship with BG Bank, Topdanmark increased its shareholding from just over 5% to 10%, while BG Bank increased its holding in Topdanmark from 10% to 15%. BG Bank BG Bank is Denmark s third largest bank with a 15% market share. The bank has 256 branches, and it has established a sales link with Post Danmark s 1,141 post offices, fourteen of which have a banking department. BG Bank has established a sales link with Post Danmark, which also covers insurance policies. As part of the agreement Post Danmark will refer interested potential customers from the post offices to BG Bank s branches. Advice given and sales made to these customers will follow that provided to BG Bank s other customers. Topdanmark s shareholding in BG Bank is held by Topdanmark Forsikring and has been recorded at net asset value. At the end of 1997 the book value was DKK 823m, while the market value of Topdanmark s 10% holding was DKK 1,370m. Topdanmark s share of BG Bank s result was DKK 45m in 1997, representing a return on the average book investment of 7%. Non-life insurance Topdanmark has established a separate business sector, Partners, which co-ordinates co-operation in non-life insurance and is also responsible for the sale of non-life insurance policies to the personal customer market through BG Bank s branch network. A separate BG Bank product line is being marketed to BG Banks customers, comprising a standardised product range covering about 80% of the personal customer market s insurance needs. In 1997 the premium income from sales through BG Bank was DKK 92m representing 17.5% of the increase in premium income in Topdanmark Forsikring. In order to improve sales through BG Bank the training of BG Bank s employees in selling non-life insurance policies has been intensified. Furthermore, a special unit, BG Non-life, has been established in the business sector Partners to support BG Bank s sales organisation. Special referral criteria have been established for the commercial and agricultural markets. Accordingly, prospective customers are referred to Topdanmark s certified insurance sales representatives by BG Bank. In 1997 special referral criteria were also established for interested commercial and agricultural customers from Topdanmark to BG Bank. Life assurance The sale of life assurance products through BG Bank s branch network is made by the subsidiary BG Pension. BG Pension was a 50% owned company in the Topdanmark Livsforsikring Group until the end of At the end of 1997 Topdanmark took over from BG Bank the remaining 50% of the shares in BG Pension and consequently the company is now a 100% owned subsidiary. Eureko Topdanmark has been a member of the European insurance alliance Eureko since it was established in Besides Topdanmark the alliance comprises Achmea (Holland), BCP/Atlântico (Portugal), Friends 29

29 Alliance partners Provident (UK), Parion (Germany) and WASA (Sweden). Additionally, Swiss Mobiliar (Switzerland) is expected to join the alliance in The Eureko Alliance is based upon a jointly owned holding company, Eureko B.V., based in Amsterdam. Each partner of the alliance is responsible for its own domestic market, while Eureko B.V. is responsible for operating a number of foreign subsidiaries. The Eureko Alliance is based on business relationships between the partners, including the exchange of know-how on development projects and international customer leads. The relationship is anchored in cross-holdings established between Eureko B.V. and those of the partners who have a company structure limited by shares. Reduction of Topdanmark s exposure in Eureko B.V. Topdanmark has continued to consider the size of its investment in Eureko B.V. Topdanmark reduced its stake in Eureko B.V. from 6.9% to 3.6% at the end of the third quarter of 1997, generating an extraordinary profit of DKK 47m. Up to and including the third quarter of 1997, the Eureko investment was included in Topdanmark s accounts as an associated company. From the fourth quarter of 1997 the Eureko investment has been included as an ordinary investment asset valued at a cautiously estimated market value. At the end of 1997 the investment in Eureko B.V. was DKK 197m against DKK 351m at the beginning of the year. Results The return on the Eureko investment comprises Topdanmark s direct proportionate share of Eureko B.V. s result and the benefits derived from cooperating with the other partners of the Eureko Alliance. Restated to comply with Topdanmark s accounting policies, Topdanmark achieved a profit of DKK 46m on its stake in Eureko for the first nine months of 1997 as compared with DKK 51m for the full year Achmea Friends Provident BCP/ Atlântico Topdanmark WASA Parion 10% 5.8% 50.1% 19.8% 49.9% Seguros e Pensóes 95% WASA 9.9% U/L 90.1% 75.3% Parion Finanzholding Seguros e Pensóes int. 9.9% WASA Non-life 90.1% 14.7% 34.5% 21.4% 15.2% 3.6% 12.0% 13.3% EUREKO B.V. 30

30 Lene Storm, claims handler, Topdanmark s claims department in Ballerup Shareholders More and more customers notify their claims via the Internet. The customer completes the claims form on our homepage, presses Send, and then we can start the claims handling. The other day the theft of a bicycle was notified in the afternoon. The customer sent the claims form in the evening, and the next morning she received my reply by . 91% rise in share price and significant reduction in the number of shareholders Distribution of DKK 30 per share in the form of share buy-back It is Topdanmark s goal to ensure that its shareholders achieve a long-term, competitive, stable return which will secure a share which is both attractive and liquid. Shares Topdanmark s share price increased from DKK 678 to DKK 1,295 in 1997, equivalent to an increase of 91%. During the same period the all-share index of the Copenhagen Stock Exchange increased by 54% and the European insurance index by 33%. In m Topdanmark shares were traded at a market value of DKK 2,423m. The daily average trade amounted to about 11,000 shares equivalent to a 25% increase on At 31 December 1996 Topdanmark had 236,000 registered shareholders. This significant number of shareholders has arisen from the allotment of the share capital to customers in 1985 when the Company was demutualised to a limited company. About 221,000 shareholders, representing 13% of the share capital, had deposited their Topdanmark shares in the Company s own share inscription system at 31 December In the second half of 1997 Topdanmark began a process of offering shareholders included in the share inscription system the opportunity to sell up to ten Topdanmark shares free of charge. Topdanmark intends this offer to both increase the liquidity of the share and reduce the costs incurred in administering this very considerable number of small, private shareholders. Development in share price Policy Topdanmark wishes to continue the increase in liquidity of the Topdanmark share. The Company will try to achieve this by living up to the goal of ensuring its shareholders a competitive return, by continuing the development of the investor relations programme directed at both Danish and foreign institutional investors and analysts, and by reducing the number of small, private shareholders in Topdanmark s own share inscription system. 31

31 Shareholders The offer was well received and it is expected that the total number of shareholders will be reduced to about 90,000 when all of them registered in Topdanmark s own share inscription system have received the offer in the course of This will make about 6% of the share capital available. Topdanmark wishes to create a higher degree of consistency between its employees performance record and its shareholders demand for added value. Furthermore, as the Company strives to keep and attract qualified employees, it issued employee shares in Distribution Due to a continuation of the results trend the Board of Directors wishes to resume a distribution to shareholders for In the coming years it is intended to propose a distribution to shareholders of 25% to 40% of the profit for the year having taken due consideration of the Company s results trend and financing requirements. For 1997 the Board of Directors will recommend to the general meeting a distribution of DKK 118m, equivalent to DKK 30 per share. This distribution represents 29% of the profit for the year. To allow shareholders to decide for themselves the timing of receipt of the distribution, it is intended that it will be in the form of a share buy-back. The share-buy-back in 1998 will be in two equal stages via the share market. The first will start in week 17 after the announcement of the annual results on 1 April 1998 followed by a further share buy-back to start in week 37 after the announcement of the half-yearly results on 31 August Further, the Board of Directors intends to recommend to the first subsequent general meeting a write-down in the share capital by an amount corresponding to the number of shares bought back. It has been agreed with the two largest shareholders, Eureko B.V. and BG Bank, that as part of the share buy-back they will reduce their shareholdings in Topdanmark to retain their relative stakes of 20% and 15% respectively. Shareholder base As a result of the discontinued strategic alliance with Nykredit in 1997, Nykredit reduced its shareholding in Topdanmark from 14% to under 5%. In order to support the business relationship with Topdanmark, BG Bank, which continues as Topdanmark s strategic partner in the Danish market, increased its shareholding from 10% to 15%. The following three shareholders have informed Topdanmark that they hold more than 5% of the share capital (cf. Section 28(a) of the Danish Companies Act): Eureko B.V. Entrada 111 P.O. Box GE Amsterdam The Netherlands BG Bank Højbro Plads Copenhagen K Denmark Lønmodtagernes Dyrtidsfond (Danish Employees Capital Pension Fund) Vendersgade 28, Copenhagen K Denmark Share key figures Shareholder groupings at 1 March Share price at 31 Dec. 1, Earnings per share (DKK) P/E Net asset value Price/net asset value Distribution per share 30* 0 0 * In the form of share buy-back Eureko B.V. 20% BG Bank 15% Danish Employees Captal Pension Fund 6% Danish institutional investors 15% Other financial services companies 8% Private shareholders, foundations etc. 17% Employees 1% Nominee holdings 4% State Street Bank (nominee safe custody) 6% Foreign portfolio shareholders 8% 32

32 During 1997 foreign portfolio investors stakes increased from 7% to 14%. As part of increasing the liquidity in Topdanmark s share, the Company continues to look to increase foreign shareholders stakes. Share capital In December 1997 Topdanmark issued 42,000 employee shares at an average price of DKK 256 per share. 99% of the employees entitled to subscribe for shares participated in the subscription. Owing to the Danish tax rules, the employee shares will be held in trust up to and including Following the issue of employee shares there were 3,962,125 shares in issue. Topdanmark has one class of shares and no share confers any special rights upon the holder. The shares are negotiable instruments with no restrictions on their transferability. The shares are registered in the name of the holder in Topdanmark s register of shareholders or inscribed in the Company s own share inscription system. No shareholder may exercise the voting rights for an amount exceeding 25% of the share capital, neither by proxy nor on own shares. Per Røhl, deputy general manager, Topdanmark Industrial & Marine West, Århus The best claims handling is good loss prevention, but it is not possible to completely avoid losses. Therefore we train our customers in loss prevention, for example in fire fighting. Number of shareholders and their holdings at 1 March 1998 Holding interval Number of As a percentage Number of As a percentage Accumulated shareholders of total number shares held of share capital Holding of shareholders 1 share 80, , shares 53, , shares 6, , shares , shares , shares , shares , shares , more than shares ,152, Nominee holding 333, Total 141, , Topdanmark s shares are listed on the Copenhagen Stock Exchange. In order to concentrate the trade in the share on the Copenhagen Stock Exchange, Topdanmark decided to delist the Topdanmark share from the London Stock Exchange in Investor relations Topdanmark considers it vital to establish and maintain continuous contact with existing and potential institutional, Danish and foreign investors. Topdanmark keeps in contact with these investors through written communication, presentations following the announcement of results and meetings or discussions with investors and share analysts, individually or in groups. Furthermore, there is communication via the Internet. The address of Topdanmark s homepage is: The information available on the Internet includes stock exchange announcements and analyses of the Topdanmark share. The annual accounts and the announcements of results can also be downloaded. Topdanmark keeps in contact with its small, private shareholders through its share administration department. Until May 1998 the Company will hold shareholders meetings in the districts into which the 33

33 Shareholders country is divided according to Topdanmark s Articles of Association. A shareholders meeting is held in each district every three years in conjunction with the election of a member to Topdanmark s representative Assembly. As a result of a relatively limited attendance at the shareholders meetings combined with an expected reduction to about 90,000 shareholders in 1998, these meetings will not be held as from Instead, for the first time in April 1998, all shareholders will receive a shareholder magazine. This provides the opportunity to impart information about developments in the Company to each shareholder who wants to receive it, and not only to those attending the shareholders meetings. Furthermore, the Board of Directors will recommend to the Annual General Meeting in May 1998 to change the structure of elections to the Representative Assembly such that all members of the Representative Assembly are elected at the annual general meeting as from Stock exchange announcements published in Joint announcement from BG Bank and Topdanmark Topdanmark Livsforsikring and BG Bank strengthen their capital bases /1997 Issue of employee shares /1997 Topdanmark has reduced its investment in Eureko B.V /1997 Distribution policy/employee shares /1997 Appointments / Announcement of halfyearly results /1997 Holding in BG Bank increased to 10% Joint announcement from BG Bank, Nykredit and Topdanmark Nykredit withdraws from strategic alliance /1997 Result of Annual General Meeting /1997 Notice convening Annual General Meeting /1997 Topdanmark Bank finally liquidated /1997 Announcement of annual results /1997 Topdanmark reduces shareholding in Sydbank /1997 Topdanmark A/S early repayment of DKK 800m loan /1997 Topdanmark s holding in Møns Bank reduced to 12.5% Joint announcement from BG Bank and Topdanmark Transfer of Topdanmark Garanti to BG Bank 34

34 Employees Dorthe Lykke Iversen, insurance apprentice, Topdanmark Commercial lines in Ballerup Our schedule is full of insurance from every possible angle. Our two years training includes a large chapter about claims handling. Increase in focus on training and employment of apprentices and trainees At the end of 1997 the number of full-time equivalent employees was 1,801. In spite of the employment of 31 new apprentices and 12 IT trainees the net increase of new employees was only 21 in Payroll costs stood at DKK 744m in 1997 as compared with DKK 730m in 1996, equivalent to a 2% increase. The number of employees is continuously being realigned to match changes in technology and business is also expected to show a lower rate of increase in payroll costs than the increase in premium income. To a service company like Topdanmark one of the most important competitive parameters in order to create value to customers and shareholders is to have motivated and proficient employees. One of Topdanmark s overall goals is therefore to be able to keep and attract qualified staff. Increased competition and consumer awareness increase demands on the quality and efficiency of the services provided to customers. While previously, customers were primarily offered standard products, today they attach increasingly greater importance to individual insurance products tailored to meet their needs. Topdanmark also attaches great importance to a personal sales service with individual customer attention. This is founded upon PC-based sales and administration systems enabling the employee to serve customers fully on a first inquiry. For example, the certified insurance sales staff can collect data directly in the customer s home or company as well as calculate and print an exact insurance offer. The increased use of technology leads to automation of policy administration. This will allow for a number of administrative employees being made available for retraining in more customer-oriented positions. It is still intended to rationalise administrative work processes. In 1997 there was an even distribution between administrative and customer-service staff. It is expected that the proportion of customer-oriented employees will be increased in the coming years. Topdanmark chose to increase training expenses by 30% in 1997 following an increased demand for employees to respond to specialist questions, use the most modern technological aids and continue to keep customer focus. In 1997, 1,100 employees (equivalent to 61% of the workforce) attended courses of both a long and short duration. These totalled 7,423 course days, equivalent to 6.7 course days per employee in training. Most of the new courses were internal, focusing on supporting jobs in sales and IT. 1: < 25 years 2: : : : : : : : > 60 years 35

35 Information technology Increase in IT investments No millennium problems expected By increasing the use of technology Topdanmark is looking to combine an increase in accessibility and the quality of customer services with a reduction in administrative expenditure. Customers are in the focus of IT development An important element of Topdanmark s business philosophy is that customers in the personal, commercial and agricultural markets will benefit from accumulating all their insurance policies in total customer agreements. In order to support these relatively complex products the Group stores its information on established customers in central databases. Topdanmark has now completed a five-year long major restructuring of the processes relating to sales and services. All of its certified insurance sales representatives are now using portable PC s in providing services to customers. The PC-based sales systems allow registration of relevant information as early as during the first visit to the customer. As soon as the data has been collected, it is possible to print an offer, which can be changed immediately in the customer s home or company by adding or omitting certain types of insurance cover. When the customer has accepted an insurance offer, the information is saved on the PC and later automatically transferred via the sales person s ISDN data connection to Topdanmark s main system. This procedure allows Topdanmark to combine a reduction in administrative expenses with an increase in the quality of customer services. Sales efficiency is improved at the same time because the PC-based sales system ensures that the customer s total insurance needs are considered. Data capture from the source and increased integration of the sales and administration systems continue to be the motivating force behind Topdanmark s IT development strategy. Data capture has also been decentralised within claims handling. During the entire process each Topdanmark claims assessor uses his PC, thereby securing a uniform and thorough procedure. IT systems The systems used for managing information on Topdanmark s customers, their insurance policies and claims have been developed by the Company s own IT department. These are being continuously adapted to reflect the business they support. Most of Topdanmark s main systems are third generation systems. Typically they are real time, online systems using relational databases. Besides its administrative systems, Topdanmark has built up a large system complex over the last years. It makes information from many levels and many dimensions available to decision makers. The system contains many years accumulated knowledge of products, customers and claims trends. This enables those responsible for Topdanmark s businesses to price each product correctly, allowing concentration on profitability, not only at product level but also at customer level. IT finance Topdanmark s IT expenses totalled DKK 183m in 1997, of which staff costs amounted to DKK 96m. Topdanmark has chosen to increase its investment in technology and it is expected that IT expenses will rise by 10% in 1998, exceeding the expected rate of increase in overall administrative expenses. While previously most of the expenses for hardware were concentrated on the central mainframe, they are now concentrated on PC s, servers and telephone and data networks. Internet/Intranet Topdanmark improved its homepage on the Internet in 1997 and considers the medium to be an important means of increasing the Company s accessibility to range of interested parties. The address of Topdanmark s home page is Via the Internet Topdanmark offers its existing customers a number of supplementary services, including the facility of making claims around the clock. Other interested parties such as shareholders, journalists etc., are offered topical information about the Company via the Internet. 36

36 Additionally, people visiting Topdanmark s homepage can read about the Company s organisation and products and request visits by a certified insurance sales representative. Since 1993 all of Topdanmark s employees have used electronic mail as a daily communication tool, primarily for intra-group communication. Peter Olsen, engineer, Topdanmark s agricultural department in Ballerup Easy and flexible claims handling also requires the right technical solutions. We have just developed a programme for easy assessment of large agricultural claims. In the course of 1998 it is intended to enhance the electronic mailing system into an actual intranet, thereby improving the efficiency of communication within the Topdanmark Group. More employees will receive updated and relevant information which will enable them to provide more professional services to both internal and external customers. Year 2000 In the middle of 1996 Topdanmark set up a project group to solve the year 2000 problem. The research phase showed that the greatest problems relate to systems more than ten years old and that the overall project to solve the year 2000 problem will not exceed 50 man-years, equivalent to a maximum cost of DKK 30m. The greatest activity of the project is testing whether dates are correctly processed both in this and in the next millennium. Topdanmark is well aware of the project s importance to the stability of the Company s production facilities and the project is an IT top priority. It is has been planned that most of Topdanmark s systems will be corrected and tested by the end of Considering the progress of the project so far, it is not expected that the millennial change will cause Topdanmark any problems. It is also believed that Topdanmark s production facilities will not be sensitive to any of its subsuppliers millennial problems. 37

37 Accounting policies General Topdanmark s accounts have been prepared in accordance with the Danish Insurance Act, including the orders issued by the Danish Financial Supervisory Authority on the preparation of consolidated accounts and annual accounts for insurance companies. Furthermore, Topdanmark s accounts have been prepared in accordance with the requirements of the Copenhagen Stock Exchange on the preparation of accounts by listed companies, including the relevant Danish accounting directives. There have been no changes in accounting policies from those adopted in the 1996 accounts. At the end of 1997 Topdanmark Livsforsikring acquired a further 50% of BG Pension and consequently it is now a 100% owned subsidiary. In accordance with the Group s accounting policies BG Pension s assets and liabilities have been fully consolidated in the group accounts for 1997, as opposed to a 50% share being taken in previously. BG Pension s profit and loss account continued to be included on a pro rata basis in 1997 but it will be fully consolidated as from Consolidated companies Besides the parent company Topdanmark, the consolidation includes the subsidiary Topdanmark Forsikring A/S and that company s subsidiaries. Additionally, it includes those of Topdanmark s other subsidiaries whose results are mainly derived from investing the value of shareholders funds. The consolidation excludes the Topdanmark Invest Group whose activities are primarily the phasing out of commitments taken over from Topdanmark s banking activities. The consolidation also excludes other companies whose activities deviate so significantly from insurance business that their consolidation would not give a true and fair view. Subsidiaries are companies in which Topdanmark Group has a shareholding exceeding 50% of the voting rights or in which Topdanmark has otherwise achieved effective control. Companies acquired during the year have been included in the profit and loss account from the date of acquisition; companies sold have been included until the date of disposal. The comparatives have not been restated to take into account any acquisition or disposal of companies, unless the acquisition or disposal would have resulted in substantial changes in those comparatives. In those cases the restated principal items have been disclosed in a note to the accounts. Consolidation The consolidated profit and loss account, which has been analysed into sector accounts for non-life insurance, life assurance and non-technical activities, has been prepared by combining items on a line by line basis within the individual sector accounts. Accounting policies differ for non-life and life insurance companies. In accordance with the Group s accounting policies and the order on the preparation of accounts, no restatement has been made on consolidation. The accounts for subsidiaries of non-life or life insurance companies whose accounts are prepared under other legislations are restated to comply with the accounting policies of the companies immediate insurance parent. The accounts for Topdanmark s other subsidiaries have been restated to comply with the accounting policies governing non-life insurance companies unless the effect of the restatement would be immaterial when considering the overall true and fair view. In the life assurance companies the technical result from health and accident insurance has been recorded as a separate line in the profit and loss account. In the consolidated accounts this item has been broken down and transferred to the relevant items of the sector accounts for non-life insurance. In order to achieve a true and fair view of the activity of the individual sector accounts only operating profit relating to the Group s internal EDP-company has been eliminated. Furthermore, premiums and claims which are settled as part of ordinary insurance protection in group companies have not been eliminated. Apart from this, all intra-group transactions have been eliminated within the sector accounts. 38

38 The consolidated balance sheet has been prepared by combining items on a line by line basis. Investment assets of the same type which are valued under different accounting policies have been shown as separate items. Intra-group shareholdings and balances have been eliminated in the balance sheet. In the consolidated accounts the parent company s book value of the shares in subsidiaries and the subsidiaries shareholders funds have been eliminated from the date the subsidiary became part of the Group. Differences arising on consolidation have been recognised in the profit and loss account as income or expenses. Profits or losses arising on disposal of subsidiaries have been included in the profit and loss account. Translation of foreign currencies Income and expenses in foreign companies have been translated at periodical average exchange rates. In domestic companies income and expenses in foreign currencies have been recorded at the exchange rates on the date of the transactions. Assets and liabilities have been translated at the exchange rates on 31 December All exchange rate gains and losses are included in the profit and loss account under the item exchange rate adjustments. Intra-group transactions Intra-group services are charged at cost with the exception that rent paid for properties occupied by the Group and internal insurance premiums are set at market rates. Intra-group trading in securities and other investment assets are settled at market prices. Profit and loss account Premiums Premiums earned on own account in non-life insurance comprise premiums due during the year adjusted for changes in the provision for unearned premiums, net of reinsurance. In life assurance, premiums on own account comprise premiums, including single premiums, receivable within the year, net of reinsurance. Technical interest in non-life insurance In non-life insurance, technical interest on own account is a calculated figure included in the technical result. It is calculated by taking the average of the technical provisions multiplied by a rate equivalent to the average interest rate for the year on short-term bonds. The technical provisions include the Group s share of the total provisions in the annuity pool for workers compensation insurance. The interest calculation on these provisions is shown net of discount and the interest calculation on the other discounted technical provisions is also shown net of discount. Allocated investment income in life assurance In life assurance, allocated investment income on own account comprises the proportion of investment income relating to the technical result on life assurance calculated in the ratio of average consolidated technical provisions to average consolidated shareholders funds. Claims incurred and claims paid In non-life insurance, claims incurred on own account comprise claims paid during the year adjusted for changes in the provisions for outstanding claims and net of the reinsurers share. In workers compensation insurance, claims have been calculated net of discount and repayments from the annuity pool. Accordingly, claims incurred comprise known and expected claims relating to the year as well as any adjustments to the provisions made in previous years. In life assurance, claims paid on own account comprise payments relating to claims, surrenders and cash bonuses. Operating expenses Technical operating expenses which relate to acquisition and renewal of the portfolio are included in acquisition costs. Generally in non-life insurance, acquisition costs are charged in the accounts on the date the insurance takes effect. In Topdanmark Livsforsikring (life assurance), acquisition costs are capitalised and set off against technical provisions in accordance with the relevant legislation. 39

39 Accounting policies Administrative expenses comprise other operating expenses which relate to the financial year and which have been accounted for on an accruals basis. Commission received on reinsurance ceded has been accounted for on an accruals basis over the policies period of cover. Investment activities Income from affiliated and associated companies comprises the combined results of the subsidiaries and the share of the results of other affiliated and associated companies. Income from land and buildings comprises the operating results on the properties excluding interest charges and value adjustments which have been disclosed separately in the accounts. Interest, dividends etc. comprise interest income and redemption gains and losses on securities during the financial year, including gains and losses on the sale of bonds drawn as well as mathematical value adjustments of fixed-rate securities in life assurance. Realised and unrealised gains and losses on investment assets are disclosed in the profit and loss account. Administrative expenses on investment activities comprise all expenses on asset management including transaction expenses, administrative expenses and share issue expenses in investment subsidiaries. Real interest rate duty is the calculated duty on all income and expenses liable to the duty and is included in the profit and loss accounts of the life assurance companies and their subsidiaries. Administrative expenses in parent company Administrative expenses in the parent company are disclosed in the profit and loss account as a separate item which, besides emoluments paid to the company s management, mainly includes expenses for operating the company s share administration system. Extraordinary items These items comprise amounts which by their nature are unusual for the Company. For example, they include goodwill and the difference between original cost and net asset value on the purchase of shares in associated companies. Taxation Generally, Topdanmark is taxed jointly with its wholly owned subsidiaries. Current and deferred tax arising in the jointly taxed Danish subsidiaries is charged in the accounts of the parent company. Current and deferred tax in subsidiaries which are not jointly taxed and tax in foreign companies has been charged in the relevant subsidiaries accounts. Taxation has been charged in the profit and loss account on the basis of expected taxable income for the financial year adjusted for the change in the deferred tax provision for the year. Deferred tax has been provided on all timing differences. However, deferred tax has not been provided on the untaxed proportion of amounts transferred to the security funds, up to and including 1989, as there will be no liability if the funds are used for their intended purposes as described in the Articles of Association provided the companies continue operations at their existing level. The funds can only be used to improve the technical provisions or otherwise for the benefit of policyholders, and only with the consent of the Danish Financial Supervisory Authority. Balance sheet Intangible assets Leasehold improvements are recorded at original cost less amortisation charged on a straight line basis over a maximum of five years. Investment assets Land and buildings in the life assurance group are recorded at original cost adjusted for the cost of improvements. A cautious assessment of the value is made and any movement in the value, perceived as permanent, is shown as a revaluation. Shares held in affiliated companies are valued at net asset value under the Group s accounting policies. Shares held in associated companies are valued at their net asset value according to the companies most recently available accounts. 40

40 Associated companies are companies in which the Topdanmark Group has substantial influence, generally between 20% and 50% of the voting rights. Substantial influence can also be achieved through representation on the board of the company or other participation in the company s decision-making processes. Other shares: Listed shares, including own shares, are valued at the most recently quoted price at 31 December. Unlisted shares are valued at estimated market value. Fixed-interest rate advances and securities in non-life insurance: Listed bonds, including index-linked bonds, are valued at the most recently quoted price near to 31 December. Unlisted advances and securities are valued at estimated market value. Secured advances are valued on the basis of a cautious assessment of their true yield. Fixed-interest rate advances and securities in life assurance: Fixed-interest rate bonds and advances are valued at acquisition cost, plus the annual amortisation of the gain to maturity. Index-linked bonds are valued at acquisition cost, plus indexing and the annual amortisation of the gain to maturity. Convertible bonds: Listed convertible bonds are valued at the most recently quoted price near to 31 December. Unlisted convertible bonds are valued at estimated market value. Financial instruments: Listed financial instruments are valued at the most recently quoted price near to 31 December. Unlisted financial instruments are valued at estimated market value. Debtors Debtors are valued at nominal value less a provision made for expected losses. Recoverable payments relating to claims represent assets taken over in the event of a damage/loss. These payments are valued less a provision made for expected losses. Other assets Equipment, computer systems, motor vehicles etc. are recorded at original cost less depreciation charged on a straight line basis over the expected useful life of each asset: computer hardware & software - maximum three years; equipment etc. - maximum five years; and motor vehicles - maximum seven years. Net revaluation reserve at net asset value The share of the results for each affiliated and associated company not allocated as dividend and exceeding the greater value of either original cost or book value at 31 December 1994 is transferred to the reserve. Subordinated capital Subordinated capital includes loans whose creditors claims are subordinate to any other creditor claims. Technical provisions The provision for unearned premiums is the proportion of premiums collected which relate to the period after the end of the financial year. If it is estimated that the calculated provision per industry is not sufficient to cover the related claims because the risk does not run off proportionately with time during the insurance period, the provision is increased by an appropriate amount to cover such claims. Life assurance provisions are calculated as the difference between the capitalised value of liabilities assumed, including any allocated bonus, according to the insurance contracts concluded and the capitalised value of the future premiums to be paid by policyholders. Provisions for claims incurred but not reported have also been included. Capitalised acquisition costs in Topdanmark Livsforsikring are set off against technical provisions. Provisions for outstanding claims are calculated using statistical methods developed for each class of business. These methods take into consideration the Group s past claims experience and the inflation rate. Provisions for claims incurred but not reported have also been estimated. 41

41 Accounting policies The values of assets which have been taken over or are expected to be taken over on payment of the claims have been set off against the provisions. Provision for annuities within workers compensation insurance is equal to the capitalised value of the annuities. The provisions have been calculated using the capitalisation rate of 2.75% fixed by the Danish Financial Supervisory Authority. Provision for bonuses and rebates is an amount payable to policyholders as the result of a favourable claims trend. Equalisation provisions are amounts provided for equalisation of claims incurred on own account over a number of years in the event that experience shows fluctuations in the claims incurred. The bonus equalisation provision includes amounts allocated for equalisation of future bonus payments. Provisions for other risks and expenses Provisions for deferred real interest rate duty have been calculated as the present value of the duty payable on capital gains in life assurance, which have already been included in the profit and loss account but which, according to the provisions of the Danish Act on real interest rate duty, will not be included in the amount liable to duty until future years. Other provisions include those created to cover the share of shareholders funds in a subsidiary going to the creditor in the event of debt being converted into share capital. Creditors Loans are recorded at their nominal value. Cash flow analysis The cash flow analysis shows payments received and made during the year relating to the company s operations, investments and funding. Other technical provisions include a provision for increasing age relating to the increase in the risk due to the policyholders age which is not covered by a corresponding increase in premium during the policy period. 42

42 Financial review Topdanmark Group According to the guidelines laid down by the Danish Financial Supervisory Authority, the Topdanmark Group s accounts for 1997 have been prepared in accordance with the provisions of the Danish order on the preparation of the consolidated accounts for insurance companies and pension funds. There have been no changes in accounting policies from those adopted in the 1996 accounts. Topdanmark achieved a profit of DKK 411m in 1997 as compared with a DKK 272m profit in After adjusting for extraordinary factors, operating profit increased from DKK 273m in 1996 to DKK 367m in Consolidated profit and loss account Non-life insurance As Topdanmark Garanti was transferred to BG Bank at the beginning of 1997, it has not been included in the consolidated profit and loss accounts for BG Pension, 50% of which was acquired on 1 July 1996, has been included in the consolidated profit and loss account for all of 1997 (pro rata as to the 50% holding), while the 1996 accounts included the 50% proportion from 1 July only. The Group s premium income from non-life insurance increased from DKK 3,398m in 1996 to DKK 3,735m in 1997, a 9.9% increase. In spite of the transfers to the equalisation provisions of DKK 40m the technical result from non-life insurance was turned around from a DKK 27m loss to a DKK 95m profit arising from improved technical results in both Topdanmark Forsikring and Topdanmark Arbejdsskadeforsikring as well as the health/accident insurance business of the life assurance group. Life assurance Premium income increased 31% from DKK 995m to DKK 1,305m. After adjusting for premium income in BG Pension being included in the results for the second half of 1996 only, the increase was 16.8%. Technical operating expenses increased from DKK 106m in 1996 to DKK 167m in 1997 due to Topdanmark Livsforsikring having changed the method of calculating the size of the share of acquisition costs to be capitalised. As a result, there was an extraordinary increase of DKK 80m in acquisition costs. Investment activities Overall investment income increased from DKK 1,039m to DKK 1,399m. Investment income from life assurance and the Topdanmark Group excluding life assurance has been detailed on page 16. Income from affiliated companies primarily comprised a profit of DKK 7m in Topdanmark Teknologi, while the phase-out company Topdanmark Invest achieved a profit of DKK 1m. This item has been specified in note 10 of the accounts. Income from the Group s associated companies was DKK 101m in 1997 (1996: DKK 154m). The result for 1997 comprised the Group s share of the results of BG Bank, Sydbank and Eureko B.V. of DKK 45m, DKK 7m and DKK 46m respectively as well as the share of the result of Bornholms Brandforsikring. The result of DKK 45m from BG Bank included Topdanmark s just over 5% share of BG Bank s result for the first half of 1997 and the 10% share of the bank s result for the second half of the year. The shares of the results from Sydbank and Eureko B.V. comprised only three and nine months respectively because, following the disposals of the significant stakes, the holdings have no longer been classified as associated companies, but as shares. Real interest rate duty declined from DKK 38m in 1996 to DKK 16m in 1997 due to Topdanmark Livsforsikring s net income liable to real interest rate duty being in fact a small loss in 1997 mostly due to large hedging losses being incurred on foreign shares and convertible bonds. Exchange gains on a share portfolio are not liable to real interest rate duty while losses on the foreign exchange hedging are deductible. Extraordinary factors of the financial highlights comprised: Extraordinary factors DKKm 1997 Extraordinary items, see the profit and loss account 83 Included in the accounts in income from associated companies: Share of goodwill amount in Eureko (4) Share of extraordinary items etc. in BG Bank (35) Total extraordinary gains 44 43

43 Financial review Consolidated balance sheet At the end of 1997 Topdanmark Livsforsikring took over a further 50% of BG Pension, which made it a 100% owned group subsidiary at 31 December Consequently, BG Pension was fully included in the consolidated balance sheet for 1997, while it was included on a 50% pro rata basis at 31 December At the beginning of 1997 Topdanmark Garanti was transferred to BG Bank and was therefore not included in the 1997 consolidated balance sheet. Shares in affiliated companies were reduced from DKK 339m to DKK 29m primarily due to the liquidation of Topdanmark Bank in April Shares in associated companies totalled DKK 849m at 31 December 1997 (1996: DKK 1,326m). The change was due to disposals, changing the classification of the investments in Eureko B.V. and Sydbank and an increase in the investment in BG Bank from just over 5% to 10%. Changes during the year have been disclosed in note 22 of the accounts. At 31 December 1997 the market price of the BG Bank share was DKK 468 and therefore the market value of Topdanmark s total shareholding in BG Bank exceeded the book value by DKK 489m at 31 December The life assurance group raised subordinated loans of DKK 300m, of which DKK 200m was taken over by Topdanmark Forsikring in As a result of the growth in the year and the full consolidation of BG Pension, this was the first time that the Group s life assurance provisions exceeded DKK 10bn. Parent company Topdanmark Profit and loss account The improvement in result in the parent company Topdanmark was due to improved results in its subsidiaries and an improved result on investments. Details of the changes in the subsidiaries operations are shown on pages 18 to 28. The overall result of the subsidiaries (affiliated companies) improved from DKK 253m in 1996 to DKK 320m in The result recorded by each subsidiary has been disclosed in note 10. Income from associated companies represents income generated by the parent company s share of just under 23% of the result recorded by Sydbank in the first quarter of Investment income increased from DKK 8m in 1996 to DKK 51m in 1997 as a result of a capital gain on the parent company s just over 5% shareholding in Sydbank and an improvement in liquidity due to a dividend for 1996 paid by Topdanmark Forsikring, the liquidation of Topdanmark Bank and the sale of a 17% shareholding in Sydbank. The parent company incurred expenditure of DKK 24m in 1997, the same level as in The sale of a 17% shareholding in Sydbank and the write-up of the remaining just of 5% shareholding in Sydbank to market value generated an extraordinary gain of DKK 57m in No corporation tax was paid or provided for in Topdanmark has had a tax deficit in previous years and only made minimal tax depreciation, and consequently the Topdanmark Group had a significant tax asset at the end of It is therefore expected that no corporation tax will be payable over the next few years. Appropriation of the result DKK 159m of the DKK 411m profit for the year will be transferred to the net revaluation reserve at net asset value and DKK 252m will be transferred to profit carried forward. 44

44 Balance sheet Shareholdings in affiliated companies increased from DKK 2,471m at 31 December 1996 to DKK 2,490m at 31 December This slight change arose primarily from a DKK 300m decline on the liquidation of Topdanmark Bank and a DKK 309m increase on the result in Topdanmark Forsikring. Shareholdings in associated companies were reduced as a result of the sale of a 17% shareholding in Sydbank. The remaining 5% shareholding was moved from associated companies to shares. On the liability side, shareholders funds increased from DKK 2,917m in 1996 to DKK 3,338m in 1997 as a result of the profit for the year and proceeds of DKK 10m generated by the issue of employee shares. Cash flow analysis Topdanmark s liquidity was positively affected by dividends paid by affiliated and associated companies totalling DKK 212m. After interest and expenditure, cash generated from operations was DKK 183m. The liquidation of Topdanmark Bank and the sale of shares in Sydbank generated cash of DKK 300m and DKK 458m respectively, while the issue of employee shares generated DKK 10m. The improvement in the Company s liquidity was used for the early repayment of a long-term loan of DKK 800m. Additionally, the short-term debt was reduced by DKK 193m. The cash flow analysis for 1997 for the parent company and the Group has been shown on page 54. In 1997 external funding was reduced from DKK 1,074m to DKK 61m primarily due to the early repayment of a DKK 800m loan in February Result parent company Topdanmark DKKm Result from affiliated companies Result from associated companies 7 35 (12) Net investment income 51 8 (42) Expenses (24) (24) (57) Extraordinary items (111) Profit for the year

45 Signatures Company In our opinion the report and annual accounts with notes thereto provide all the information for the financial year and for the subsequent period necessary to evaluate the Group s and parent company s financial position. Ballerup, 1 April 1998 Board of Management Michael Pram Rasmussen /Niels Olesen Board of Directors Klaus Bonde Larsen (Chairman) Jørgen Ajslev Jens Lundø Knud J. Vest Hans Chr. Nielsen (Vice Chairman) Alice Vandet Kristensen Poul Erik Madsen Elvar Vinum Henning Laursen Lars-Gunnar Mattsson Arne Wassermann 46

46 Auditors reports Internal auditors As internal auditors we have audited the consolidated accounts and the annual accounts presented by Management for 1997 of Topdanmark A/S. Basis of opinion In accordance with generally accepted auditing standards as applied in Denmark we have, as internal auditors, planned and conducted our audit to obtain reasonable assurance that the annual accounts are free from any material misstatement. Based on an evaluation of materiality and risk we have tested the basis and documentation for the amounts and other information disclosed in the annual accounts. Our audit included an assessment of the accounting policies applied and the accounting estimates made by Management. In addition we have evaluated the overall adequacy of the presentation in the annual accounts. Our audit did not give rise to any qualifications. Opinion In our opinion the consolidated accounts and the annual accounts were presented in accordance with the accounting provisions of Danish legislation and give a true and fair view of the Group s and the parent company s assets and liabilities, financial position and result. Ballerup, 1 April 1998 Jørn Sønderup Audit Manager Ulla Hansen Deputy Audit Manager Auditors elected by the annual general meeting As external auditors we have audited the consolidated accounts and the annual accounts presented by Management for 1997 of Topdanmark A/S. Basis of opinion In accordance with generally accepted auditing standards as applied in Denmark we have planned and conducted our audit to obtain reasonable assurance that the annual accounts are free from any material misstatement. Based on an evaluation of materiality and risk we have tested the basis and documentation for the amounts and other information disclosed in the annual accounts. Our audit included an assessment of the accounting policies applied and the accounting estimates made by Management. In addition we have evaluated the overall adequacy of the presentation in the annual accounts. Our audit did not give rise to any qualifications. Opinion In our opinion the consolidated accounts and the annual accounts were presented in accordance with the accounting provisions of Danish legislation and give a true and fair view of the Group s and the parent company s assets and liabilities, financial position and result. Copenhagen, 1 April 1998 Deloitte & Touche Statsautoriseret Revisionsaktieselskab KPMG C. Jespersen Henning Møller Leif Zilmer State Authorised Public Accountants (Denmark) Bjarne Fabienke State Authorised Public Accountant (Denmark) 47

47 Five-year summary (DKKm) On own account Non-life insurance Premiums earned 3,408 3,038 2,725 2,519 2,349 Claims incurred (2,543) (2,384) (2,115) (1,862) (1,913) Operating expenses (840) (784) (743) (706) (667) Change in the equalisation provisions (40) Technical interest Technical profit / loss on non-life insurance 95 (27) (91) Life assurance Premiums 1, Claims paid (558) (485) (405) (358) (318) Change in the life assurance provisions (1,164) (761) (932) (310) (811) Operating expenses (167) (106) (62) (58) (54) Change in the bonus equalisation provisions (364) (175) (128) 18 (18) Allocated investment income Technical profit / loss on life assurance (17) 16 (6) Profit / loss on investment activities net of allocation to technical result (498) 242 Profit / loss for the year (453) 121 Run-off profit / loss Direct insurance (37) (39) (13) 23 (16) Indirect insurance 28 (56) (24) 2 (68) Run-off profit / loss on own account (9) (95) (37) 25 (84) Technical provisions Non-life insurance 3,637 3,275 2,847 2,579 2,478 Life assurance 10,944 8,227 6,637 5,624 5,376 Technical provisions on own account 14,581 11,502 9,484 8,203 7,854 Total shareholders funds 3,338 2,917 2,645 2,252 2,535 Total assets 19,098 16,213 13,953 12,764 12,187 Ratios Loss ratio on own account Expense ratio on own account Return on shareholders funds (%) (18.8) 4.9

48 Profit and loss account Group Parent company (DKKm) Note NON-LIFE INSURANCE Premiums earned Gross premiums written 1 3,818 3, Outward reinsurance premiums (345) (399) 0 0 Change in the provision for unearned premiums, gross 1 (67) (181) 0 0 Change in reinsurers share of the provision for unearned premiums Premiums earned on own account 3,408 3, Technical interest on own account Claims incurred Gross claims paid (2,580) (2,388) 0 0 Reinsurance cover received Change in the provision for claims, gross (189) (174) 0 0 Change in reinsurers share of the provision for claims 42 (56) 0 0 Claims incurred on own account 3 (2,543) (2,384) 0 0 Change in other technical provisions on own account (9) (5) 0 0 Bonuses and rebates (16) (16) 0 0 Operating expenses Acquisition costs 4 (359) (329) 0 0 Administrative expenses (535) (512) 0 0 Reinsurance commission and share of profits Total operating expenses on own account (840) (784) 0 0 Change in the equalisation provision (40) Technical profit / loss on non-life insurance 95 (27) 0 0 LIFE ASSURANCE Premiums Gross premiums written 5 1, Outward reinsurance premiums 6 (28) (23) 0 0 Premiums on own account 1, Allocated investment income on own account Claims paid Claims paid 7 (568) (501) 0 0 Reinsurance cover received Change in the provision for claims (1) Claims paid on own account (558) (485) 0 0 Change in the life assurance provisions Change in the life assurance provisions, gross 8 (1,190) (766) 0 0 Change in reinsurers share of life assurance provisions Change in the life assurance provisions on own account (1,164) (761) 0 0 Bonus Change in the bonus equalisation provision (364) (175) 0 0 Operating expenses Acquisition costs 9 (96) (42) 0 0 Administrative expenses (71) (64) 0 0 Total operating expenses on own account (167) (106) 0 0 Technical profit / loss on life assurance (17)

49 Group Parent company (DKKm) Note Technical profit / loss on non-life insurance 95 (27) 0 0 Technical profit / loss on life assurance (17) NON-TECHNICAL ACTIVITIES Income from investment assets Income from affiliated companies (12) Income from associated companies Income from land and buildings Interest, dividends etc Realised gains on investment assets Total income from investment assets 1,159 1, Unrealised gains on investment assets Investment charges Administrative expenses (20) (21) (2) (5) Interest charges (122) (199) (17) (81) Realised losses on investment assets 12 0 (31) 0 0 Total investment charges (142) (251) (19) (86) Unrealised losses on investment assets (2) Exchange rate adjustments (134) 8 (5) 19 Real interest rate duty 13 (16) (38) 0 0 Total investment income 1,399 1, Technical interest transferred to non-life insurance business 14 (167) (168) 0 0 Investment income transferred to life assurance business (959) (571) 0 0 Other ordinary income Other ordinary expenses (2) (4) 0 0 Expenses in parent company 15 (24) (24) (24) (24) Profit / loss on ordinary activites before taxation Extraordinary income Extraordinary expenses 17 (46) (50) 0 0 Profit / loss before taxation Taxation Profit / loss for the year

50 Balance sheet Group Parent company (DKKm) Note ASSETS Intangible assets Investments Land and buildings 20 1,472 1, Investment in affiliated and associated companies Shares in affiliated companies ,490 2,471 Shares in associated companies , Total investment in affiliated and associated companies 878 1,665 2,490 3,016 Other financial investment assets 23 Shares 24 2,934 1, Unit trust shares Bonds at market value 4,905 5, Bonds valued at acquisition cost incl. gains to maturity 5,901 4, Loans guaranteed by mortgages at market value Loans guaranteed by mortgages at acquisition cost incl. gains to maturity Other loans Deposits with credit institutions Financial instruments Total other financial investment assets 14,984 11, Deposits with ceding undertakings Total investment assets 17,358 14,451 2,749 3,229 Debtors Policyholders Recoverable payments relating to claims Total debtors arising out of direct insurance operations Amounts due from insurance companies Amounts due from affiliated companies Amounts due from associated companies Other debtors Total debtors 1,118 1, Other assets Equipment, computer systems, motor vehicles etc Cash at bank and in hand Other Total other assets Prepayments and accrued income Accrued interest and rent Other prepayments and accrued income Total prepayments and accrued income Total assets 19,098 16,213 3,405 3,999

51 Group Parent company (DKKm) Note LIABILITIES Shareholders funds 29 Share capital Share premium account 1,092 1,086 1,092 1,086 Reserves Reserve for own shares Net revaluation reserve at net asset value Other reserves Total reserves 1,231 1,072 1,231 1,072 Profit carried forward Total shareholders funds 3,338 2,917 3,338 2,917 Subordinated capital Technical provisions Provision for unearned premiums Gross provision 1,080 1, Reinsurers share (75) (74) 0 0 Provision for unearned premiums on own account 1, Life assurance provisions Gross provision 10,245 7, Reinsurers share (47) (20) 0 0 Life assurance provisions on own account 32 10,198 7, Outstanding claims Gross outstanding claims 33 2,789 2, Reinsurers share (297) (259) 0 0 Outstanding claims on own account 2,492 2, Provision for bonuses and rebates Equalisation provision Bonus equalisation provision Other tecnical provisions Total technical provisions on own account 14,581 11, Provisions for other risks and expenses Deferred real interest rate duty Provision for pension schemes and similar commitments Other provisions Total provisions for other risks and expenses Deposits received from reinsurers Creditors Creditors arising out of direct insurance operations Creditors arising out of reinsurance operations Amounts due to credit institutions , Amounts due to affiliated companies Amounts due to associated companies Financial instruments Other creditors Total creditors 790 1, ,074 Total liabilities 19,098 16,213 3,405 3,999 Own shares 37 Staff 38 Companies 39 Provision of security and contingent liabilities 40 Cash flow analysis 41

52 Cash flow analysis Group Parent company (DKKm) Cash flow from operations Premiums received 5,147 4, Claims paid (3,221) (2,858) 0 0 Reinsurance ceded (103) (85) 0 0 Expenses paid (1,089) (963) 0 0 Purchase of equipment, computer systems, motor vehicles etc. (18) (23) 0 0 Cash flow from insurance Dividends from affiliated and associated companies Interest, dividends etc. (net) (7) 14 Disposal of equipment, vehicles etc Real interest rate duty 1 (50) 0 0 Expenses in parent company etc. (22) (25) (22) (34) Extraordinary expenses 0 (33) 0 0 Total cash flow from operations 1,551 1, Investments Properties (180) (289) 0 0 Portfolio assets (823) (2,439) Balances with affiliated and associated companies 100 (181) (69) 115 Increase in capital in affiliated companies (50) Proceeds on liquidation of affiliated companies Purchase of affiliated companies (93) Disposal of affiliated companies Purchase of associated companies (475) (396) 0 (148) Disposal of associated companies Total investments (316) (3,041) Financing Injection of subordinated capital Sale of rights to subscribe for convertible debt Sale of own shares Shares issued Reduction of loans from credit institutions (1,014) (120) (993) (200) Total financing (661) (115) (983) (195) Change in liquid funds, gross 574 (1,993) 20 (1) Decrease on disposal of Topdanmark Garanti (6) Increase on purchase of 50% of BG Pension Change in liquid funds, net 697 (1,975) 20 (1) Liquid funds at 1 January 438 2, Liquid funds at 31 December 1, Liquid funds comprise: Cash in hand and at banks Deposits with credit institutions The majority of the Group s companies are subject to the relevant legislation on insurance business. Consequently, there are certain restrictions on lending and placement of money. Companies subject to the legislation referred to above, are not allowed to lend money to or place it in Topdanmark or other Group companies which are not governed by this legislation. 1,

53 Notes to the accounts (DKKm) Group Gross premiums written 3,818 3,595 Change in the gross provision for unearned premiums (67) (181) Gross premiums earned 3,751 3,414 Note 1. Gross premiums earned Direct business 3,740 3,373 Indirect business ,751 3,414 Gross premiums earned on direct business solely relate to risks within Denmark. Technical interest Discount expenses on provisions calculated on a discount basis (12) (13) Technical interest on own account Note 2. Technical interest on own account Run-off profit / loss Gross business (36) (90) Reinsurance ceded 27 (5) Run-off loss on own account (9) (95) Note 3. Claims incurred on own account Direct business (37) (39) Indirect business 28 (56) Run-off loss on own account (9) (95) Commission on direct insurance Other acquisition costs Acquisition costs Note 4. Acquisition costs Regular premiums Single premiums Direct business 1, Indirect business 8 7 Gross premiums 1, Note 5. Gross premiums Gross premiums, direct business Individual policies Policies which are part of a tenure Group life , Gross premiums written, direct business, broken down by the policyholders location: Denmark 1, Other EU-countries 1 2 Other countries 1 0 1,

54 Notes to the accounts (DKKm) Group Note 5. Gross premiums (continued) Number of policyholders at the end of the year ( 000) Individual policies Policies which are part of a tenure Group life For 1997 the number of policyholders of BG Pension has been fully included, while only 50% was included for All the policies include bonus contracts. Note 6. Reinsurance ceded Life assurance Premiums (28) (23) Claims and surrenders Change in the life assurance provisions 26 5 Reinsurance ceded 9 (3) Note 7. Claims paid Claims payable on death Claims payable on disability 5 4 Claims payable on maturity Pension and annuity payments Surrenders Cash payments of bonuses Premium waiver Indirect business 1 2 Claims paid Note 8. Change in the life assurance provisions Gross premiums 1, Interest income Claims paid (568) (497) Expenses after addition of expense bonus (117) (98) Risk result after addition of risk bonus (30) (35) Provision for future administration 11 8 Change in provisions due to changes in interest rates and a strengthened basis of calculation 76 (11) Change in the life assurance provisions, direct business 1, Change in the life assurance provisions, indirect business 6 4 Change in the life assurance provisions 1, Note 9. Acquisition costs Commission on direct business Other acquisition costs Transferred from life assurance provisions 22 (11) Acquisition costs 96 42

55 (DKKm) Profit / loss Group Parent company for the year Topdanmark Forsikring Top-Center Domestic Tankers 0 - (1) 0 (1) Topdanmark Bank in liquidation Topdanmark Invest 1 1 (9) 1 (9) Topdanmark Teknologi 7 7 (3) 7 (3) Overseas Tankers 2 (1) (1) (10) (1) (10) Income from affiliated companies 10 (12) Note 10. Income from affiliated companies The result for Topdanmark Bank in liquidation is for the period until its final liquidation i April Eureko B.V.,The Netherlands BG Bank, Copenhagen Sydbank, Aabenraa Bornholms Brandforsikring, Rønne Captive companies Income from associated companies Note 11. Income from associated companies The shares of the results from Eureko B.V. and Sydbank are for nine and three months respectively. Shares Unit trust shares Bonds (4) Properties Financial instruments (167) (185) (10) 2 Gains and losses on investments (1) Note 12. Gains and losses on investments Realised gains on investment assets Unrealised gains on investment assets Realised losses on investment assets 0 (31) 0 0 Unrealised losses on investment assets (2) (1) Current real interest rate duty Change in deferred real interest rate duty (6) 5 Real rate interest duty Note 13. Real rate interest duty Technical interest on insurance provisions (147) (137) Interest income paid to the annuity pool (20) (31) Technical interest transferred (167) (168) Note 14. Technical interest transferred to non-life insurance business

56 Notes to the accounts Note 15. Expenses (DKKm) Group Parent company Emoluments paid to the auditors elected at the Annual General Meeting: Deloitte & Touche: Audit work Other services KPMG C. Jespersen: Audit work Group emoluments are included in several separate items in the profit and loss account. The Group has an internal audit department which carries out most of the audit work. Note 16. Extraordinary income Goodwill on the disposal of BG Garanti Gain on the disposal of Sydbank shares Revaluation of remaining Sydbank shares to market value Gain on the disposal of shares in Eureko Revaluation of shares acquired in BG bank to net asset value Other Extraordinary income Note 17. Extraordinary expenses Write-down of shares acquired in BG Bank to net asset value (46) 0 Goodwill on take-over of an insurance portfolio 0 (33) Goodwill on acquisition of 50% of BG Pension 0 (17) Extraordinary expenses (46) (50) Note 18. Taxation A non-jointly taxed subsidiary paid DKK 20,000 corporate tax in Note 19. Intangible assats Leasehold improvements Cost/valuation at 1 January Additions 3 1 Disposals (9) (1) Cost/valuation at 31 December 6 12 Depreciation and write-downs at 1 January (11) (10) Depreciation and write-downs for the year (1) (1) Disposal for the year 9 0 Depreciation and write-downs at 31 December (3) (11) Book value at 31 December 3 1

57 (DKKm) Group Cost/valuation at 1 January 1, Additions Disposals (36) (4) Cost/valuation at 31 December 1,359 1,186 Note 20. Land and buildings Revaluation at 1 January Revaluation for the year Revaluation at 31 December Depreciation and write-downs at 1 January (16) (16) Disposals 5 0 Depreciation and write-downs for the year (31) 0 Depreciation and write-downs at 31 December (42) (16) Book value at 31 December 1,472 1,204 The property portfolio comprises: Properties occupied by the Group Non-residential (including those partly non-residential) Residential properties Properties under construction Land and buildings, life assurance 1,472 1,204 Market value of all properties 1,503 1,274 Assessment value at 1 January 1997 of properties which have been assessed Cost / valuation of properties which have not been assessed Estimated return(%) Average return Maximum return Minimum return

58 Notes to the accounts (DKKm) Group Parent company Note 21. Shares in affiliated companies Cost/valuation at 1 January 2,070 2,020 3,237 3,207 Additions Transferred to consolidation (33) Disposals (1,870) 0 (1,822) (20) Cost/valuation at 31 December 167 2,070 1,415 3,237 Revaluation at 1 January (1,257) (1,217) (279) (315) Profit / loss for the year 10 (12) Dividend (1) 0 (1) (200) Transferred to other items 0 (28) 0 (28) Transferred to consolidation Disposals 1, , Revaluation at 31 December (127) (1,257) 1,112 (279) Depreciation and write-downs at 1 January (474) (474) (487) (496) Transferred to consolidation Disposals Depreciation and write-downs at 31 December (11) (474) (37) (487) Book value at 31 December ,490 2,471 Non-life insurance 0 18 Parent company Shareholders funds Topdanmark Forsikring 2,408 2,408 2,099 Top-Center TDB TDB Topdanmark EDB Other Domestic Tankers Topdanmark Bank in liquidation Topdanmark Invest Topdanmark Teknologi 1 1 (5) 1 (5) Overseas Tankers Shares in affiliated companies ,490 2,471

59 (DKKm) Group Parent company Cost/valuation at 1 January 1,258 1, Transferred to shares (346) 0 (102) 0 Additions Disposals (590) (322) (305) 0 Cost/valuation at 31 December 798 1, Note 22. Shares in associated companies Revaluation at 1 January Transferred to shares (37) 0 (36) 0 Transferred from other items Exchange rate adjustment (3) (9) 0 0 Result Dividend (59) (29) 0 (12) Disposals (70) (27) (109) (6) Adjustments to net asset value (46) Revaluation at 31 December Depreciation and write-downs at 1 January (97) (164) 0 0 Transferred to shares Disposals Depreciation and write-downs at 31 December 0 (97) 0 0 Book value at 31 December 849 1, Non-life insurance Parent company ,326 Shareholders funds BG Bank (10 % shareholding) 8, Bornholms Brandforsikring (27 % shareholding) Sydbank Eureko B.V Captive companies Shares in associated companies 849 1,

60 Notes to the accounts Group Parent company Note 23. Other financial investment assets Cost/valuation of assets valued at market value: Shares 1, Unit trust shares Bonds 4,692 5, Loans guaranteed by mortgages Other loans Market value of assets valued at acquisition cost incl. gains to maturity: Bonds 6,101 4,315 Loans guaranteed by mortgages Parent Book values: Non-life Life company Total Shares 503 2, ,934 Unit trust shares Bonds at market value 2,858 2, ,905 Bonds valued at acquisition cost incl. gains to maturity 0 5, ,901 Loans guaranteed by mortgages at market value Loans guaranteed by mortgages valued at acquisition cost incl. gains to maturity Other loans Deposits with credit institutions Other financial investments 3,858 10, ,984 Note 24. Shares Note 25. Deposits with credit institutions Companies in which a 5% or greater shareholding Share- Percentis held directly or indirectly: holders age funds share Forsikringsselskabet for Erhvervssygdomme A/S, Copenhagen Sydbank A/S, Aabenraa 2, Møns Bank A/S, Stege DPL Invest, Silkeborg Rungstedgaard, Hørsholm Assurandørernes Hus, Copenhagen CUBIC-Modelsystem A/S, Brønderslev Cederholm & Voss International A/S, Copenhagen Group Parent company Associated banks Other Deposits with credit institutions Note 26. Deposits with ceding undertakings Non-life insurance Life assurance Deposits with ceding undertakings

61 Group Parent company Cost/valuation at 1 January Additions on acquisition Additions Disposals (17) (54) 0 (5) Cost/valuation at 31 December Note 27. Equipment, computers and vehicles etc. Depreciation and write-downs at 1 January (208) (232) 0 (1) Additions on acquisition (1) (1) 0 0 Disposals Depreciation and write-downs for the year (18) (24) 0 0 Depreciation and write-downs at 31 December (217) (208) 0 0 Book value at 31 December Deposits with associated banks Deposits with Topdanmark Bank in liquidation Other Cash at bank and in hand Note 28. Cash at bank and in hand Share capital at 1 January Shares issued 4 0 Share capital at 31 December Note 29. Shareholders funds Share premium at 1 January 1,086 1,086 Shares issued 6 0 Share premium at 31 December 1,092 1,086 Reserve for own shares at 1 January 0 5 Transferred to extra reserve 0 (5) Reserve for own shares at 31 December 0 0 Net revaluation reserve at net asset value at 1 January Transferred from allocation of profit Net revaluation reserve at net asset value at 31 December Extra reserve at 1 January Transferred from reserve for own shares 0 5 Extra reserve at 31 December Profit carried forward at 1 January Transferred from allocation of profit Profit carried forward at 31 December Shareholders funds at 31 December 3,338 2,917 The Group s security fund reserves total DKK 1,574m of which DKK 1,480m are untaxed.

62 Notes to the accounts (DKKm) Group Note 30. Share capital Each of Topdanmark A/S s 3,962,125 shares has a nominal value of DKK 100. No shares enjoy special rights. The shares are freely negotiable. Each share has one vote. However, there are limitations on voting rights laid down by the Articles of Association. Note 31. Subordinated capital Subordinated capital has been invested in Topdanmark Livsforsikring (DKK 200m) and BG Pension (DKK 100m). The DKK 100m investment in BG Pension of subordinated loan capital is secured upon the issue of convertible debt. It is possible to convert the debt up and until its due date of 2017 at par. Interest on the loan is payable at a rate equivalent to the dividend rate in BG Pension divided by (1 minus the rate of corporate taxation from time to time). The Groups total subordinated capital of DKK 300m has been invested by other than the Group companies. Note 32. Life assurance provisions Gross provisions before deductions, direct business 10,464 8,149 Acquisition costs, transferred (241) (263) 10,223 7,886 Gross provisions, indirect business Gross life assurance provisions 10,245 7,903 Gross life assurance provisions at 1 January 7,903 6,510 Change in gross provisions, see profit and loss account 1, Acquisition costs, transferred 22 (11) Adjustment on quota share etc. (1) 12 Share of provisions taken over from BG Pension 1, Gross life assurance provisions at 31 December 10,245 7,903 Reinsurers share (47) (20) Life assurance provisions on own account 10,198 7,883 Note 33. Provisions for claims Provisions for annuities in workers compensation insurance Average payment period (years) Discount rate used (%) Inflation rate (%) Note 34. Equalisation provision Commercial insurance: Building 24 0 Contents 6 0 Workers compensation insurance 10 0 Guarantees 0 9 Equalisation provision 40 9

63 (DKKm) Group Parent company Provision for increase in age Other technical provisions Note 35. Other technical provisions Associated banks Other Amounts due to credit institutions 83 1, Note 36. Amounts due to credit institutions As a part of Topdanmark s efforts to reduce the number of small individual shareholders in its share inscription system a subsidiary has acquired and sold 61,841 shares representing 1.6% of Topdanmark s share capital. Note 37. Own shares The nominal value was DKK 6,184,100. The purchase price was DKK 69.1m and the sales price DKK 69.3m. Additionally Topdanmark has assisted shareholders whose shares are registered in its share inscription system by effecting transactions in those shares. Salaries Pensions and social security costs Payroll tax Note 38. Staff Average number of full-time employees 1,766 1, This includes 50% of the 33 employees of BG Pension for 1996 and the 27 employees for Emoluments paid to the Board of Management (DKK 000) 4,787 3, ,883 Emoluments paid to the Board of Directors (DKK 000) 1,741 1,806 1,741 1,806 Emoluments paid to the Representative Assembly (DKK 000)

64 Notes to the accounts Note 39. Companies Consolidated companies Name Registered office Activity Topdanmark A/S Ballerup Holding Non-life Topdanmark Forsikring A/S Ballerup Insurance Topdanmark Arbejdsskadeforsikring A/S Ballerup Insurance Topdanmark EDB A/S Ballerup Internal computer services Topdanmark Holding S.A. Luxembourg Holding E. & G. Business Holding A/S Ballerup Holding Risk & Insurance Services ApS Ballerup Administration Topdanmark Kapital nr. 001 ApS Ballerup Investment Topdanmark Kapital nr. 002 ApS Ballerup Investment Topdanmark Kapital nr. 003 ApS Ballerup Investment I.T.H. Invest ApS Ballerup Investment Life Topdanmark Livsforsikring A/S Albertslund Insurance Topdanmark Livsforsikring II A/S Albertslund Insurance BG Pension, Livsforsikringsaktieselskab Albertslund Insurance Ejendomsselskabet BGP ApS Albertslund Property Topdanmark Ejendom A/S Ballerup Property TDE.100 ApS Ballerup Property TDE.200 ApS Ballerup Property TDE.300 ApS Ballerup Property Topdanmark B.V. Holland Investment Topliv Kapital ApS Ballerup Investment Topliv Kapital II ApS Ballerup Investment Topliv Kapital III ApS Ballerup Investment FFI I ApS Ballerup Investment TDL.003 ApS - TDL.010 ApS Ballerup Investment TDLII.002 ApS - TDLII.004 ApS Ballerup Investment Topliv Kapital 31 ApS Ballerup Investment Topliv Kapital 32 ApS Ballerup Investment Topliv Kapital 41 ApS Ballerup Investment Other companies, non-trading Top-Center A/S Topdanmark Kapital nr. 004 ApS TDB.01 A/S Top-UK Travel Ltd. in liquidation TDB.02 A/S Dantop AB in liquidation Domestic Tankers A/S Ballerup Ballerup Ballerup UK Ballerup Sweden Ballerup All of the companies are 100% owned except Risk & Insurance Services ApS, which is 60% owned.

65 Non-consolidated companies Share- Profit/ holders loss for Total Name funds the year assets Note 39. Companies (continued) Banking Topdanmark Bank A/S in liquidation Phase-out of banking activities Topdanmark Invest A/S (9) 453 A/S PSE 10 nr (3) 1 Hotel Kongens Ege ApS RGP ApS af Topdanmark Ejendomsadministration A/S Topdanmark (California) Inc (4) 285 TDB.100 A/S (6) 17 TDB.200 A/S in liquidation TDB.400 A/S (5) (5) 68 INV ApS Shipping Overseas Tankers 2 A/S (1) (10) 8 Domestic Tankers A/S transferred to consolidation in (1) 1 External computer services Topdanmark Teknologi A/S (5) (3) 4 Topdanmark (California) Inc. is domiciled in the USA. All other companies are domiciled in Ballerup. All of the companies are 100% owned.

66 Notes to the accounts Beløb i mio. kr. Group Parent company Note 40. Provision of security and contingent liabilities Pension commitments Property lease commitments Provision of security Leasing commitments VAT adjustment commitment Other Forward contracts Purchased forward contracts 11,289 8,508 1,838 1,123 Sold forward contracts 10,036 10,722 1,417 1,412 Assets at book value of are registrered in favour of the policyholders This includes shares in and loans provided to subsidiaries which have been eliminated in the consolidated accounts. Legal and arbitration proceedings Topdanmark Forsikring is a party to an arbitration in which Scan RE has made a claim of GBP 4.6m. Topdanmark Forsikring disputes the claim and has made a counterclaim of GBP 1m. The arbitration takes place in Stockholm under the jurisdiction of Swedish law. One company has filed a suit relating to inward reinsurance in Topdanmark Forsikring. The policy does not cover the claim. However, if the case is lost, the maximum claim to be paid will total DKK 17m. The trustees of Reassuranceafviklingsaktieselskabet (RAAS) in bankruptcy may claim that certain transactions concluded with Topdanmark Forsikring before the company suspended payments should not have been made. If the trustees raise such a claim and the transactions should have been avoided, the loss is not expected to have any material effect on the result. In a suit filed by Scandic Hotel and PriFast, the Topdanmark Invest Group has appealed the judgement to the Danish Supreme Court. Scandic Hotel and PriFast have claimed reduction of the rents under the lease agreements for the three hotels owned by the Topdanmark Invest Group, on the grounds that the three lease agreements are in fact rental agreements and as such are covered by Section 5 of the Danish Commercial Tenancies Regulation Act. Topdanmark is of the opinion that this act is not applicable to the lease agreements in question. Topdanmark Invest has taken over from Global Finans a number of loans granted for investments in diamonds. Since they were taken over, doubts have been raised about the actual value of the diamonds, and therefore the investors have filed a suit against Topdanmark Invest A/S. The company intends to make a settlement. Note 41. Cash flow analysis Topdanmark Garanti was sold on 1 January 1997 and a further 50% of BG Pension was acquired at 31 December. Allocation of net assets per the transfer dates and the amounts transferred are detailed below: Topdanmark Garanti BG Pension Portfolio assets 111 1,182 Other assets Liquid funds Technical provisions (17) (1,257) Other liabilities (85) (48) Net assets Goodwill 25 0 Cash transfer amount

67 Assets and yield at market value Life assurance (DKKm) Book value Market value 1 Jan. 31 Dec. 1 Jan. 31 Dec. Yield* Land and buildings 1,204 1,473 1,275 1, Danish shares 886 1, , Foreign shares Total other shares 1,220 2,373 1,220 2,373 Nominal bonds in DKK 3,173 4,418 3,295 4, Index-linked bonds in DKK 581 1, , Bonds in foreign currency 2,066 2,235 2,074 2, Total bonds 5,820 7,788 5,961 7,988 Loans guaranteed by mortgages Other financial investment assets (6.3) Total investment assets 8,766 12,360 8,998 12,602 Other assets Total assets 8,897 12,532 9,129 12,774 Total creditors etc. (176) (879) (176) (879) 3.6 Total net assets 8,721 11,653 8,953 11, * Yield as an annual percentage before real interest rate duty and corporation tax. The analysis has been prepared in accordance with the requirements of Section 67(1) of the order on the preparation of accounts for life assurance companies. The detailed assets and the return included in the calculation of the yield percentages include amounts eliminated in Topdanmark s consolidated accounts. Consequently, there is no obvious correlation with the relevant items in the consolidated accounts.

68 Technical result non-life insurance Accident and health Workers compensation Gross premiums written Gross premiums earned Gross claims incurred (249) (198) (120) (107) Change in other technical provisions (9) (5) 0 0 Bonuses and rebates Gross operating expenses (71) (58) (39) (35) Profit / loss on reinsurance ceded 1 (3) 8 2 Change in the equalisation provision 0 0 (10) 0 Technical interest on own account Technical profit / loss Loss ratio Motor third-party liability Motor own damage Gross premiums written Gross premiums earned Gross claims incurred (420) (442) (674) (610) Change in other technical provisions Bonuses and rebates Gross operating expenses (81) (71) (187) (168) Profit / loss on reinsurance ceded (2) (2) (1) (2) Change in the equalisation provision Technical interest on own account Technical profit / loss 4 (72) (12) (10) Loss ratio Marine, aviation and transport Fire and contents personal Gross premiums written Gross premiums earned Gross claims incurred (76) (31) (461) (383) Change in other technical provisions Bonuses and rebates 0 0 (4) (3) Gross operating expenses (21) (16) (195) (179) Profit / loss on reinsurance ceded (3) (27) 5 (4) Change in the equalisation provision Technical interest on own account Technical profit / loss (2) Loss ratio

69 Fire and contents commercial Third-party liability Gross premiums written Gross premiums earned Gross claims incurred (577) (543) (155) (73) Change in other technical provisions Bonuses and rebates (12) (13) 0 0 Gross operating expenses (244) (240) (35) (36) Profit / loss on reinsurance ceded (59) (67) (13) (36) Change in the equalisation provision (30) Technical interest on own account Technical profit / loss 3 (6) (16) 30 Loss ratio Guarantee BG Garanti Other direct insurance Gross premiums written Gross premiums earned Gross claims incurred 0 (29) (58) (53) Change in other technical provisions Bonuses and rebates Gross operating expenses 0 (13) (16) (14) Profit / loss on reinsurance ceded 0 (2) (1) (1) Change in the equalisation provision Technical interest on own account Technical profit / loss 0 (4) (14) (9) Loss ratio Indirect insurance Total group Gross premiums written ,818 3,595 Gross premiums earned ,751 3,414 Gross claims incurred 21 (93) (2,769) (2,562) Change in other technical provisions 0 0 (9) (5) Bonuses and rebates 0 0 (16) (16) Gross operating expenses (5) (11) (894) (841) Profit / loss on reinsurance ceded 2 1 (63) (141) Change in the equalisation provision 0 0 (40) 0 Technical interest on own account Technical profit / loss 33 (54) 95 (27) Loss ratio

70 Five-year summary Topdanmark Forsikring A/S (DKKm) Gross Premiums earned 3,526 3,213 2,916 2,749 2,557 Claims incurred (2,622) (2,410) (2,169) (2,097) (2,026) Operating expenses (843) (785) (734) (711) (660) On own account Premiums earned 3,205 2,886 2,614 2,435 2,257 Claims incurred (2,424) (2,274) (1,997) (1,841) (1,799) Operating expenses (792) (739) (693) (679) (624) Technical interest on own account Bonuses and rebates (16) (15) (8) (7) (7) Change in the equalisation provision (30) Technical profit / loss 61 (30) (49) Profit / loss on investment activities net of allocation of technical interest Extraordinary items (8) 0 Profit / loss for the year Run-off profit / loss on own account: Direct business (55) (34) (12) (24) (17) Indirect business 28 (56) (27) 6 (71) Total run-off profit / loss on own account (27) (90) (39) (18) (88) Total technical provisions on own account 2,482 2,262 1,918 1,602 1,384 Total shareholders funds 2,408 2,099 2,034 1,651 1,872 Total assets 5,567 5,089 4,641 4,097 4,241 Gross loss ratio (%) Gross expense ratio (%) Gross combined ratio (%) Reinsurance ceded (%) Net combined ratio (%) Loss ratio on own account (%) Expense ratio on own account (%) Return on shareholders funds (%) Solvency: number of times requirement covered

71 Profit and loss account Topdanmark Forsikring A/S (DKKm) Note Premiums earned Gross premiums written 1 3,591 3,387 Outward reinsurance premiums (323) (352) Change in the provision for unearned premiums, gross 1 (65) (174) Change in reinsurers share of the provision for unearned premiums 2 25 Premiums earned on own account 3,205 2,886 Technical interest on own account Claims incurred 3 Gross claims paid (2,477) (2,278) Reinsurance cover received Change in the provision for claims, gross (145) (132) Change in reinsurers share of the provision for claims 41 (49) Claims incurred on own account (2,424) (2,274) Bonuses and rebates (16) (15) Operating expenses 4 Acquisition costs (339) (305) Administrative expenses (504) (480) Reinsurance commission and share of profits Total operating expenses on own account (792) (739) Change in the equalisation provisions (30) 0 Technical profit / loss 61 (30) Income from investment assets Income from affiliated companies Income from associated companies Interest, dividends etc Total income from investments Unrealised gains on investments Investment charges Administrative expenses (6) (7) Interest charges (17) (16) Realised losses on investment assets 7 (43) (8) Total investment charges (66) (31) Exchange rate adjustments (30) (36) Transferred to technical interest (118) (112) Total profit / loss on investments Profit / loss on ordinary activities before taxation Extraordinary income Extraordinary expenses 9 (47) (33) Profit / loss before taxation Taxation Profit / loss for the year Appropriated as follows: Dividend Transferred to the net revaluation reserve at net asset value Transferred to profit carried forward 276 (84) Transferred from other reserves 0 (37)

72 Balance sheet Topdanmark Forsikring A/S (DKKm) Note ASSETS Intangible assets Investments Investment in affiliated and assoicated companies Shares in affiliated companies 12 1, Shares in associated companies Total investment in affiliated and associated companies 1,929 1,617 Other financial investment assets 14 Shares Bonds 1,869 2,441 Loans guaranteed by mortgages Other loans Deposits with credit institutions Total other financial investment assets 2,768 2,715 Deposits with ceding undertakings 3 5 Total investments 4,700 4,337 Debtors Amount due from policyholders Amount due from insurance companies Amount due from affiliated companies Amount due from associated companies Other debtors 17 7 Total debtors Other assets Equipment and motor vehicles Cash at bank and in hand Other 12 9 Total other assets Prepayments and accrued income Accrued interest and rent Other prepayments and accrued income Total prepayments and accrued income Total assets 5,567 5,089

73 (DKKm) Note LIABILITIES Shareholders funds 17 Share capital Share premium account 0 0 Reserves Security fund 19 1,423 1,423 Net revaluation reserve at net asset value Other reserves Total reserves 2,032 1,999 Profit carried forward Total shareholders funds 2,408 2,099 Technical provisions Provision for unearned premiums Gross provision 1, Reinsurers share (75) (73) Provision for unearned premiums on own account Outstanding claims Gross outstanding claims 1,686 1,526 Reinsurers share (247) (206) Outstanding claims on own account 1,439 1,320 Provision for bonuses and rebates Equalisation provision Total technical provisions on own account 2,482 2,262 Provisions for other risks and expenses Provisions for pensions and similar commitments 4 5 Creditors Creditors arising out of reinsurance operations Amounts due to credit institutions Amounts due to affiliated companies Amounts due to associated companies 0 8 Financial instruments 13 4 Other creditors Dividend payable for the financial year Total creditors Total liabilities 5,567 5,089 Staff 21 Intra-group transactions 22 Group relationships 23 Provision of security and contingent liabilities 24

74 Notes to the accounts Topdanmark Forsikring A/S (DKKm) Note 1. Gross premiums earned Gross premiums written 3,591 3,387 Change in the gross provision for unearned premiums (65) (174) Gross premiums earned 3,526 3,213 Direct business 3,515 3,167 Indirect business ,526 3,213 Gross premiums earned on direct business solely relate to risks within Denmark Note 2. Technical interest on own account Technical interest Technical interest on own account Note 3. Claims incurred on own account Run-off profit / loss Gross business (45) (73) Reinsurance ceded 18 (17) Run-off loss on own account (27) (90) Direct business (55) (34) Indirect business 28 (56) Run-off loss on own account (27) (90) Note 4. Operating expenses on own account Commission on direct insurance Other acquisition costs Reimbursed from affiliated companies (35) (31) Acquisition costs Administrative expenses Reimbursed from affiliated companies (76) (69) Administrative expenses Reinsurance commission and share of profits (51) (46) Operating expenses on own account Emoluments paid to the auditors elected at the Annual General Meeting: Deloitte & Touche: Audit work Other services KPMG C. Jespersen: Audit work The Group has an internal audit department which carries out most of the audit work.

75 Notes to the accounts Topdanmark Forsikring A/S (DKKm) Profit / loss for the year Topdanmark Livsforsikring A/S, Albertslund Topdanmark Arbejdsskadeforsikring A/S, Ballerup BG Garanti Forsikringsselskab A/S, Copenhagen Topdanmark EDB A/S, Ballerup E. & G. Business Holding A/S, Ballerup Topdanmark Holding S.A., Luxembourg Topdanmark Kapital 001 ApS, Ballerup Topdanmark Kapital 002 ApS, Ballerup Topdanmark Kapital 003 ApS, Ballerup Topdanmark Bank A/S in liquidation, Ballerup Income from affiliated companies Note 5. Income from affiliated companies The profit for the year for Topdanmark Bank in liquidation is for the period until its final liquidation in April Eureko B.V., the Netherlands BG Bank, Copenhagen Bornholms Brandforsikring, Rønne Income from associated companies Note 6. Income from associated companies The share of the result from Eureko B.V. is for nine months. Shares Bonds (3) 66 Financial instruments (61) (41) Gains / losses on investment assets (8) 52 Note 7. Gains/losses on investment assets Unrealised gains on investment assets Realised losses on investment assets (43) (8) (8) 52 Goodwill on sale of BG Garanti 25 0 Gain on sales of shares in Eureko B.V Revaluation of shares acquired in BG Bank to net asset value 0 53 Other 0 2 Extraordinary income Note 8. Extraordinary income

76 Notes to the accounts Topdanmark Forsikring A/S (DKKm) Note 9. Extraordinary expenses Write-down to net asset value of shares acquired in BG Bank (46) 0 Other (1) 0 Purchased goodwill on take-over of insurance portfolio 0 (33) Extraordinary expenses (47) (33) Note 10. Taxation Note 11. Intangible assets Note 12. Shares in affiliated companies Current and deferred tax is charged in the annual accounts of Topdanmark. Leasehold improvements Cost/valuation Additions 2 0 Cost/valuation at 31 December 2 0 Depreciation and write-downs Depreciation and write-downs for the year 0 0 Depreciation and write-downs at 31 December 0 0 Book value at 31 December 2 0 Cost/valuation at 1 January Additions Disposals (152) 0 Cost/valuation at 31 December Revaluation at 1 January Profit / loss for the year Dividend (13) (13) Disposals 21 0 Revaluation at 31 December Depreciation and write-downs at 1 January (12) (12) Disposals 10 0 Depreciation and write-downs at 31 December (2) (12) Book value at 31 December 1, Share- holders funds Percentage share Topdanmark Livsforsikring A/S Topdanmark Arbejdsskadeforsikring A/S BG Garanti Forsikringsselskab A/S Topdanmark EDB A/S E. & G. Business Holding A/S 100 (8) (8) (9) Topdanmark Kapital 001 ApS Topdanmark Kapital 002 ApS Topdanmark Kapital 003 ApS Topdanmark Holding S.A Risk & Insurance Services ApS Topdanmark Bank A/S in liquidation Shares in affiliated companies 1,

77 Notes to the accounts Topdanmark Forsikring A/S (DKKm) Cost/valuation at 1 January Transferred to shares (163) 0 Additions Disposals (163) (274) Cost/valuation at 31 December Note 13. Shares in associated companies Revaluation at 1 January 127 (26) Transferred to shares (33) 0 Exchange rate adjustments (3) (9) Profit / loss for the year Dividend (59) (18) Disposals (33) 10 Adjustment to net asset value (46) 53 Revaluation at 31 December Book value at 31 December Share- holders funds Percentage share BG Bank 10 8, Bornholms Brandforsikring Eureko B.V Shares in associated companies Original cost: Shares Bonds 1,815 2,398 Loans guaranteed by mortgages Other loans Note 14. Other financial investment assets Companies in which a 5% or greater shareholding is held directly or indirectly: Forsikringsselskabet for Erhvervssygdomme A/S, Copenhagen DPL Invest, Silkeborg Rungstedgaard, Hørsholm Assurandørernes Hus, Copenhagen CUBIC-Modulsystem A/S, Brønderslev Cederholm & Voss International A/S, Copenhagen Deposit with BG Bank Other Deposits with credit institutions Note 15. Deposits with credit institutions Deposit with BG Bank Deposit with Topdanmark Bank in liquidation - 6 Other Cash at bank and in hand Note 16. Cash at bank and in hand

78 Notes to the accounts Topdanmark Forsikring A/S (DKKm) Note 17. Shareholders funds Share capital Share premium at 1 January Transferred to other reserves 0 (383) Share premium at 31 December 0 0 Security fund 1,423 1,423 Net revaluation reserve at net asset value at 1 January Transferred from allocation of profit Net revaluation reserve at net asset value at 31 December Other reserves at 1 January Transferred from share premium Transferred from allocation of profit 0 (37) Other reserves at 31 December Profit carried forward at 1 January 0 84 Transferred from allocation of profit 276 (84) Profit carried forward at 31 December Shareholders funds at 31 December 2,408 2,099 Deduction for solvency requirement in subsidiaries (543) (369) Other deductions (2) 0 Capital base at 31 December 1,863 1,730 Solvency margin Note 18. Share capital Note 19. Security fund The share capital is divided into three share certificates of DKK 91,000,000, 9,000,000 and 100,000 in denominations of DKK 100,000. DKKm 1,362 of the security fund is untaxed Note 20. Equalisation provision Commercial insurance: Building 24 0 Contents 6 0 Equalisation provision 30 0

79 Notes to the accounts Topdanmark Forsikring A/S (DKKm) Salaries Pensions and social security costs Payroll tax Note 21. Staff The average number of full-time employees 1,633 1,610 Emoluments paid to Board of Management (DKK 000) 3,847 3,317 Emoluments paid to Board of Directors (DKK 000) Current intra-group agreements: At market value Rent and property administration Note 22. Intra-group transactions Reimbursement of expenses EDP etc Other 3 4 The accounts for Topdanmark Forsikring A/S are included in the consolidated accounts for Topdanmark A/S as this is the ultimate holding company. Note 23. Group relationships Pension commitments 6 6 Provision of security Forward contracts Note 24. Provision of security and contingent liabilities Purchased forward contracts 3,068 3,668 Sold forward contracts 2,795 4,084 The company is jointly liable for the current The company is liable for a long-term property corporation tax charged in the accounts of the lease commitment to Topdanmark Ejendom. parent company Topdanmark A/S. The company is The yearly lease payment is DKK 66m. also jointly liable for the A-tax, income tax deducted from source, and payroll tax etc. payable by the jointly registered companies in Topdanmark Group. Legal proceedings Topdanmark Forsikring is a party to an arbitration The trustees of Reassuranceafviklingsaktieselskabet in which Scan RE has made a claim of GBP 4.6m. (RAAS) in bankruptcy may claim that certain Topdanmark Forsikring disputes the claim and has transactions concluded with Topdanmark Forsikring made a counterclaim of GBP 1m. The arbitration before the company suspended payments should takes place in Stockholm under the jurisdiction not have been made. If the trustees raise such a of Swedish law. claim and the transactions should have been avoided, the loss is not expected to have any One company has filed a suit relating to inward material effect on the result. reinsurance. The policy does not cover the claim. However, if the case is lost, the maximum claim to be paid will total DKK 17m.

80 Representative Assembly Jørgen Adamsen Erik Andersen Henning Bastrup Erik Bisgaard Niels Boserup Kirsten Carmel Holger Christensen Ernst Clausen Chr. Dohn Jørgen Halkjær Flemming Hansen Egon Henriksen Jens Jakob Jakobsen Egon Jensen Finn Jensen Otto Jensen H.C. Jørgensen Arne Kindberg Anders Kirkegaard Jens Krogh Erik Larsen Mogens Lund Poul Luxhøj Søren Madsen Jørgen Mark Martin Merrild M.H. Merrild Henry Mikkelsen Ingemarie Nielsen Kr. Nielsen Svend-Aage Nielsen Knud Erik Nissen Tulle Olsen Erling Oxdam Jørgen Dalgaard Petersen Vagn Vejen Petersen I.C. Pontoppidan Leon Sørensen Axel Teik Bruno Thaibert Aage Thomsen Henning Urup Preben Dahl Vestergaard Bent Vistisen Jørgen Vorsholt Tommy Østerlund 82

81 Board of Directors Klaus Bonde Larsen, Chairman** Managing Director of V.S. Larsen Holding A/S. Member of the Boards of Directors of V.S. Larsen Holding A/S, Ejendomsselskabet V.S. Larsen A/S, Protektas A/S, Stryn Rasmussen Holding A/S, BG Bank A/S and Friends Provident Lars-Gunnar Mattsson** Member of the Board of Directors of Wasa Liv Hans Chr. Nielsen, Vice Chairman* Poul Erik Madsen*** Jørgen Ajslev* Group Managing Director of F. Schur & Co. A/S. Member of the Boards of Directors of Fritz Schur Teknik A/S, ADK Holding A/S, AEG Industri A/S, Beatech A/S, Flender A/S and Hans Buch + Co. A/S Knud J. Vest* Member of the Boards of Directors of Dansk Pelsdyravlerforening/Danske Pelsauktioner, Danske Andelsselskaber and Roskilde Andelsgrovvareforening Alice Vandet Kristensen*** Elvar Vinum** Vice Chief Executive Officer of Danisco A/S. Vice Chairman of the Board of Directors of BG Bank A/S. Member of the Boards of Directors of investeringsforeningen dk-invest and dk-invest management a/s, NCC Rasmussen & Schiøtz A/S Henning Laursen* Chairman of the Board of Directors of E.L.M. Kragelund A/S. Member of the Board of Directors of Sydbank A/S and Chief Executive Officer of A.P. Laursen A/S Arne Wassermann*** Jens Lundø,*** * Has withdrawn from the Representative Assembly to join the Board of Directors in Topdanmark ** Elected by shareholders in general meeting *** Elected by employees 83

82 Management Board of Management Michael Pram Rasmussen, D.O.B Chief Executive Officer Topdanmark and Topdanmark Forsikring Vice Chairman of the Boards of Directors of SOS International A/S and Bornholms Brandforsikring A/S Member of the Board of Directors of the Danish Assurance Association Member of the Supervisory Board of Eureko B.V. Poul Almlund, D.O.B Managing Director Topdanmark Forsikring Vice Chairman of the Boards of Directors of the Insurance Company for Occupational Diseases Member of the Board of Directors of BG Garanti Forsikringsselskab A/S Leif Larsen, D.O.B Managing Director Topdanmark Forsikring Vice Chairman of the Boards of Directors of the Danish Insurance Institute Rungstedgaard A/S and Danish Employers Association for the Financial Sector Member of the Board of Directors of Bornholms Brandforsikring A/S Senior Management Erik Adrian, D.O.B. 1958, Deputy General Manager Partners Niels Lillemose, D.O.B. 1946, General Manager IT Kim Bruhn-Petersen, D.O.B. 1956, General Manager Commercial Bjarne Skou Mortensen, D.O.B. 1959, General Manager Agricultural Birger Grubbe, D.O.B. 1949, Managing Director Property Investment Company Erik Nielsen, D.O.B. 1944, General Manager Personnel Jan Hoffmann, D.O.B. 1952, Managing Director Topdanmark Livsforsikring/BG Pension Christian Sagild, D.O.B. 1959, Chief Executive Officer Topdanmark Livsforsikring/BG Pension Steffen Heegaard, D.O.B. 1959, Deputy General Manager Communication/Investor Relations Birgit Sevel, D.O.B. 1948, Deputy General Manager Group Secretariat Brian Rothemejer Jacobsen, D.O.B. 1963, Deputy General Manager Board of Management Secretariat/Eureko Jørn Sønderup, D.O.B. 1949, Deputy General Manager Group Audit Mogens Kjær, D.O.B. 1943, Managing Director Reinsurance, Internal Services Lars Thykier, D.O.B. 1955, General Manager Treasury Frits Klingenberg, D.O.B. 1944, General Manager Personal Bjørn Verwohlt, D.O.B. 1957, Deputy General Manager Marketing John Kristensen, D.O.B. 1946, General Manager Industrial & Marine June Worre, D.O.B. 1957, Deputy General Manager Claims Administration 84

83 Topdanmark in Denmark 85

84 Main office Ballerup Borupvang Ballerup Tel Fax Regional offices Commercial Herning Østergade Herning Tel Fax Taastrup Helgeshøj Alle Taastrup Tel Fax Industrial & Marine Top-Center Borupvang Ballerup Tel Fax Topdanmark Livsforsikring Viby Albertslund Kongsgårdsvej 28 Roskildevej Viby J Albertslund Tel Tel Fax Fax Agricultural Aalborg Østerågade Aalborg Tel Fax Aabenraa Rådhusgade Aabenraa Tel Fax Herning Østergade Herning Tel Fax Næstved Handelsskolevej Næstved Tel Fax BG Pension Albertslund Roskildevej Albertslund Tel Fax Sales areas Personal Aalborg Østerågade Aalborg Tel Fax Aabenraa Rådhusgade Aabenraa Tel Fax Hillerød Sdr. Jernbanevej Hillerød Tel Fax Hvidovre Hvidovrevej 110A 2650 Hvidovre Tel Fax Næstved Handelsskolevej Næstved Tel Fax Odense C Vestergade Odense C Tel Fax Århus Åboulevarden Århus C Tel Fax Sales centres Aabenraa Rådhusgade Aabenraa Tel Fax Aalborg Østerågade Aalborg Tel Fax Ballerup Borupvang Ballerup Tel Fax Esbjerg Skolegade Esbjerg Tel Fax Fredericia Købmagergade 51A 7000 Fredericia Tel Fax Frederikshavn Danmarksgade Frederikshavn Tel Fax Haderslev Nørregade Haderslev Tel Fax Helsingør Stengade Helsingør Tel Fax Herning Østergade Herning Tel Fax Hillerød Sdr. Jernbanevej Hillerød Tel Fax Hjørring Vendelbopladsen Hjørring Tel Fax Holbæk Smedelundsgade 22D 4300 Holbæk Tel Fax Holstebro Nørregade Holstebro Tel Fax Horsens Rådhustorvet Horsens Tel Fax Hvidovre Hvidovrevej 110A 2650 Hvidovre Tel Fax Kolding Jernbanegade Kolding Tel Fax København NV Frederiksborgvej Kbh. NV Tel Fax København S Amagerbrogade Kbh. S Tel Fax København V Ved Vesterport Kbh. V Tel Fax Køge Stationspladsen Køge Tel Fax Lyngby Lyngby Hovedgade 9A 2800 Lyngby Tel Fax Middelfart Torvet Middelfart Tel Fax Nykøbing F Slotsgade Nykøbing F Tel Fax Næstved Handelsskolevej Næstved Tel Fax Odense Vestergade Odense C Tel Fax Randers Østervold Randers Tel Fax Roskilde Bredgade Roskilde Tel Fax Silkeborg Østergade Silkeborg Tel Fax Skive Østertorv 8A 7800 Skive Will open in the spring of 1998 Slagelse Rådhuspladsen Slagelse Tel Fax Svendborg Møllergade Svendborg Tel Fax Sønderborg Kastanie Alle Sønderborg Tel Fax Thisted Vestergade Thisted Tel Fax Taastrup Køgevej Taastrup Tel Fax Vejen Nørregade Vejen Tel Fax Vejle Flegborg Vejle Tel Fax Viborg Fælledvej Viborg Tel Fax Århus Åboulevarden Århus C Tel Fax

85 Financial calendar 1998 Announcement of annual results for 1997 Four shareholders meetings 1 April 20 to 28 April Annual General Meeting at Radisson SAS Scandinavia Hotel Amager Boulevard Copenhagen S 14 May at 2 p.m. Announcement of half-yearly results for August Communications relating to this annual report should be sent to Topdanmark s Communication Department Tel Fax hnb@topdanmark.dk Topdanmark Annual Report and Accounts 1997 Concept, arrangement and production: Topdanmark Photos: Claus Boesen/Media Press Issue: 6,500 Printed by: Formula Graphic AS 87

86 97 Topdanmark Table of Contents Overview Summary 1997 Key figures Report of the Board of Directors Income Statement Balance Sheet Cash Flow Analysis Notes Shareholders Policy Annual Report and Accounts All rights reserved. Main menu