Topdanmark's half-yearly results 1998

Transcription

1 To the Copenhagen Stock Exchange Half-yearly results for Topdanmark Topdanmark s Board of Directors has today adopted the unaudited accounts for the first six months to 30 June Key features: Topdanmark realised a post-tax profit of DKK 343m after a transfer of DKK 50m to the equalisation provision. The result for the first half of 1997 was a profit of DKK 250m after DKK 24m was transferred to the equalisation provision. After adjusting for extraordinary factors of DKK 6m, the profit of DKK 337 was equivalent to a 9.9% post-tax return on shareholders funds calculated on a six-monthly basis. This result is considered to be satisfactory. For the 1997 half year, after adjusting for extraordinary factors of DKK 9m, the profit was DKK 241m. Premium income continued to grow in the first half of 1998 by 8.0% in non-life insurance and 21.3% in life assurance (regular premiums: 21.6%). The net combined ratio declined from 99.9% in the first half of 1997 to 96.2% in the first half of The second stage of Topdanmark s share buy-back programme will start in week 37, when Topdanmark will buy back shares for DKK 59m. Following the favourable result for the first half of 1998 Topdanmark has upgraded its forecast post-tax profit for 1998 from DKK 340m 390m to DKK 425m - 475m, assuming no change to the current foreign exchange and security prices. In addition the result may be favourably affected by the planned establishment of Kapital Holding. Please direct any queries to: Michael Pram Rasmussen, Chief Executive Officer, Phone Poul Almlund, Managing Director,Phone Steffen Heegaard, Communication and IR Manager, Phone Borupvang 4 Telephone Topdanmark A/S 2750 Ballerup Fax Reg.No Denmark

2 Page 2 of 22 Financial highlights DKKm Half year Half year Full year Key figures Premiums earned: Non-life insurance 1,975 1,829 3,735 Life asssurance ,305 2,869 2,378 5,040 Profit on insurance Topdanmark Forsikring excl. life Topdanmark Livsforsikring Other companies Total profit on insurance Profit/(loss) from other activities Profit/(loss) of parent company Profit for the period Profit before extraordinary factors Extraordinary factors Profit for the period Shareholders' funds 3,622 3,167 3,338 Ratios Return on shareholders' funds (%) 10 1) 8 1) 13 Earnings per share (DKK) 87 1) 64 1) 105 Net assets per share (DKK) Distribution per share (DKK) ) Share price at 30 June (DKK) 1, ,295 1) Calculated on a six-monthly basis 2) In the form of share buy-back

3 Page 3 of 22 Commentary on the half-yearly accounts The result for the Topdanmark Group for the first half of 1998 was a post-tax profit of DKK 343m after a transfer of DKK 50m to the equalisation provision in Topdanmark Arbejdsskadeforsikring (Workers Compensation Insurance). The half-yearly result for 1997 was DKK 250m after a transfer of DKK 24m to the equalisation provision. After adjusting for extraordinary factors of DKK 6m the profit increased from DKK 241m for the first half of 1997 to DKK 337m for the first half of This profit of DKK 337m on ordinary activities is the best result ever recorded by Topdanmark and represents a 9.9% post-tax return on shareholders funds calculated on a six-monthly basis. The Board of Directors considers the result to be satisfactory. The improvement in the result arose from improvements in Topdanmark s core business of non-life insurance and life assurance. Trend in results DKKm Half year 1998 Half year 1997 Full year 1997 Non-life insurance Life assurance Other activities Parent company Result

4 Page 4 of 22 In the first half of 1998 shareholders funds increased by DKK 284m from DKK 3,338m to DKK 3,622m being the profit for the period of DKK 343m less a write-down of DKK 59m following the share buy-back in April which was the first stage of the share buy-back programme for As a result the number of shares has been reduced by 44,100 to a total of 3,918,025 at 30 June The second stage of the share buy-back programme for 1998 will start in the week commencing 7 September 1998, when Topdanmark will buy back shares for a further DKK 59m. Non-life insurance The result for Topdanmark Forsikring for the first half of 1998 was a profit of DKK 325m (1997 half year: DKK 191m) which included the result of its subsidiary Topdanmark Livsforsikring (life assurance) of DKK 43m (1997 half year: DKK 28m). Gross premium income of the Topdanmark Group (including workers compensation insurance) increased from DKK 1,829m in the first half of 1997 to DK 1,975m in the first half of 1998 representing an improvement of 8.0%. This included premium income in the non-life insurance company Topdanmark Forsikring which improved by 6.4% from DKK 1,723m to DKK 1,833m. This improvement was achieved although there were no extraordinary premium increases. After adjusting for indexation the underlying improvement in premium income was 2-3% indicating a continuation of the recent years positive trend in market share. Compared to the first half of 1997, the loss ratio declined from 72.3% to 69.1%. This improvement of just over 3 percentage points was the result of a combination of several factors among which was a claims trend benefiting from a mild winter and the absence of severe storms. Additionally, during the trade union strike in the spring the density of traffic was lower than normal which resulted in a reduction of motor insurance claims. Finally unlike the corresponding period in 1997, the first half of 1998 was not affected by runoff losses and claims arising from cloudbursts.

5 Page 5 of 22 The claims trend for the first half of 1998 is considered to be exceptionally good and is not expected to continue. In spite of extra expenses arising from the year 2000 problem the expense ratio continued its positive trend declining from 24.6% to 24.2%. As a result of controlled cost focusing it is expected that the expense ratio for the full year 1998 will fall to a level just below 24.0%. The gross combined ratio representing expenses on claims, sales and administration as a percentage of gross premium income, was 93.3% (1997 half-year: 96.9%). Net expenses on reinsurance was 2.9% of gross premium income (1997 half year: 3.0%). As a result, total expenses on claims, sales, administration and reinsurance as a percentage of gross premium income (net combined ratio) declined from 99.9% in the first half of 1997 to 96.2% in the first half of Due to the exceptionally good loss ratio for the first half of 1998 it is not expected that this level of the combined ratio will continue. The positive trend in the net combined ratio was the main cause of the improvement in the technical result (adjusted for equalisation provisions) from DKK 62m in the first half of 1997 to DKK 139m in the first half of 1998.

6 Page 6 of 22 Financial highlights - Topdanmark Forsikring DKKm Half year Half year Full year Key figures Premiums earned 1,833 1,723 3,510 Technical interest on own account Claims incurred (1,266) (1,245) (2,622) Expenses (443) (424) (843) Reinsurance ceded (54) (52) (72) Change in equalisation provision 0 (24) (30) Profit/(loss) on insurance Other investment income Profit from ordinary activities Extraordinary items 7 (22) 25 Profit for the period Shareholders' funds 2,733 2,290 2,408 Technical provisions on own account 3,067 2,793 2,482 Total assets 6,662 5,957 5,567 Ratios (%) Loss ratio Expense ratio Gross combined ratio Reinsurance ceded Net combined ratio Return on shareholders' funds (%) ) 8.7 1) ) Calculated on a six-monthly basis

7 Page 7 of 22 Life assurance Topdanmark Livsforsikring Group s business activities comprise the parent company Topdanmark Livsforsikring and BG Pension. In the first half of 1997 BG Pension was a 50% owned company. At the end of 1997 BG Bank transferred its shareholding in BG Pension to Topdanmark Livsforsikring and consequently BG Pension was included as a wholly owned subsidiary in the first half The profit made by Topdanmark Livsforsikring for the first half of 1998 of DKK 43m was after a transfer of DKK 335m to the bonus equalisation provision. The profit for the first half of 1997 of DKK 28m was after a transfer of DKK 230m to the bonus equalisation provision. The profit of DKK 43m (1997 half year: DKK 28m) included DKK 1m from health and accident insurance (1997 half year: DKK 3m). According to the guidelines laid down by the Danish Financial Supervisory Authority, the maximum return on shareholders funds in Topdanmark Livsforsikring must not exceed the customers bonus rate net of the real interest rate duty plus three percentage points, plus the profit from health and accident insurance. Consequently, the improvement in the profit was due to Topdanmark Livsforsikring strengthening its capital base by DKK 300m at the end of Gross premium income in Topdanmark Livsforsikring Group was DKK 894m as compared with DKK 549m for the first half of 1997 when only 50% of BG Pension s gross premium income was included. After adjusting for the difference in shareholding the increase was 21.3%. The increase in premium income in Topdanmark Livsforsikring Group was made up of a 21.6% increase in regular premium polices and a 19.3% increase in single premium polices. In the parent company Topdanmark Livsforsikring the gross premium in the first half of 1998 was DKK 432m, an increase of 19.2% compared to the first half figure for 1997 of DKK 362m.

8 Page 8 of 22 The profit achieved by BG Pension for the first half of 1998 of DKK 3m included DKK 7m from health and accident insurance and was after a transfer of DKK 56m to the bonus equalisation provision. The profit for the first half of 1997 of DKK 13m included DKK 6m from health and accident insurance and was after a transfer of DKK 57m to the bonus equalisation provision. Gross premium income in BG Pension increased in the first half of 1998 by 23.3% from DKK 375m to DKK 462m. Both Topdanmark Livsforsikring and BG Pension continued the positive trend in market share in the first half of Financial highlights - Topdanmark Livsforsikring Half year Half year Full year DKKm Key figures Premiums Allocated investment income on own account Claims paid (203) (159) (354) Change in the life assurance provisions (430) (364) (811) Change in the bonus equalisation provision (335) (230) (326) Expenses (56) (44) (144) Reinsurance ceded (23) 0 9 Technical profit/(loss) on life assurance (19) (5) (9) Technical profit/(loss) on health and accident insurance Other investment income Profit for the period Shareholders' funds Technical provisions on own account 8,372 7,021 7,585 Total assets 10,410 8,773 8,848 Ratios Return on shareholders' funds (%) 5.2 1) 5.9 1) ) Calculated on a six-monthly basis

9 Page 9 of 22 Financial highlights - BG Pension, Livsforsikringsaktieselskab DKKm Half year Half year Full year Key figures Premiums Allocated investment income on own account Claims paid (146) (107) (225) Change in the life assurance provisions (372) (291) (669) Change in the bonus equalisation provision (56) (57) (76) Expenses (21) (17) (37) Reinsurance ceded Technical profit/(loss) on life assurance (10) (2) 5 Technical profit/(loss) on health and accident insurance Other investment income Other ordinary income Profit on ordinary activities Tax (4) 0 0 Profit for the period Shareholders' funds Technical provisions on own account 2,955 2,090 2,514 Total assets 3,498 2,347 2,895 Ratios Return on shareholders' funds (%) 1.4 1) 8.1 1) ) Calculated on a six-monthly basis.

10 Page 10 of 22 Other activities Other activities comprise activities which are not included in Topdanmark s core business of non-life insurance, life assurance and pension funds and which are therefore being phased out. The overall result of other activities was a DKK 2m profit as compared with DKK 4m for the first half of Most of the phase-out activities have been placed in Topdanmark Invest, which recorded a profit of DKK 1m (1997 half year: DKK 1m). The phase-out activities continue to be reduced in a controlled process. Parent company The profit of the parent company Topdanmark, excluding the results recorded by its subsidiaries, declined from DKK 55m in the first half of 1997 to DKK 16m in the first half of Parent company DKKm Half year 1998 Half year 1997 Full year 1997 Result of affiliated companies Result of associated companies Net investment income Expenses (16) (13) (24) Extraordinary items Total profit The decline was largely because the first half of 1997 included an extraordinary income of DKK 57m from the sale of a 17% shareholding in Sydbank. The profit for the first half of 1998 included no extraordinary income. However, the proceeds arising from the sale of the Sydbank-shares

11 Page 11 of 22 contributed to an increase in investment income from DKK 4m in the first half of 1997 to DKK 32m in the first half of Investment and funding During the first half of 1998 the investment policy of the Topdanmark Group excluding Topdanmark Livsforsikring was influenced by the expectation of stable, or slightly declining, long-term interest rates. In the light of this, Topdanmark s interest rate exposure was kept at the upper end of the fixed limit of interest rate exposure of DKK 80m. This investment policy has been continued into the second half of 1998, and at the end of August 1998 the interest rate exposure was DK 62m and the foreign exchange exposure DKK 3.1m per day. The result from investment activities in the Topdanmark Group, excluding Topdanmark Livsforsikring, before the transfer to the technical result, was DKK 289m in the first half of 1998 as compared with DKK 252m in the first half of This result was positively affected by the growth in the investment portfolio which increased from DKK 5,091m at the beginning of the half-year to DKK 5,662m at the end of the half-year. The result from associated companies was unchanged as compared to the first half of The return on the investment in BG Bank increased from DKK 27m in the first half of 1997 to DKK 77m in the first half of The increase reflected the increase in Topdanmark s shareholding in BG Bank from just over 5% in 1997 to 10% in The increase in BG Bank was offset by Topdanmark s sale of a 17% shareholding in Sydbank in 1997 and therefore Sydbank was not included as an associated company in the first half of The overall return in the Topdanmark group excluding Topdanmark Livsforsikring was 4.9% calculated on a six-monthly basis. The market value of interest-bearing investment assets owned by the Group, excluding life assurance, was DKK 4,021m at 30 June The portfolio comprises primarily convertible mortgage credit bonds, money market

12 Page 12 of 22 deposits and short-term foreign securities. Topdanmark shares 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 the very considerable number of small, private shareholders. As a result the number of shareholders has been reduced from 229,000 to 87,000 since the end of the first half of 1997 and it is expected that it will further reduce to 75,000 during the second half of Totally the reduction will make 8% of the share capital available. Prospects In the announcement of Topdanmark s results for 1997 the result for 1998 was expected to be between DKK 340m and DKK 390m. However, the result for the first half of 1998 benefited from an exceptionally good claims record and a higher than expected investment income, particularly from the shareholding in BG Bank. Although it is not expected that the favourable claims trend will continue and in spite of significant capital losses since the end of the first half of 1998, the good result in the first half of 1998 has given rise to an upgrading of the forecast for Assuming no change to the current foreign exchange and security prices, the post-tax profit for 1998 is now expected to be DKK 425m 475m. In addition, the result may be favourably affected by the planned establishment of Kapital Holding.

13 Page 13 of 22 Forecast 1998 DKKm. Forecast 1998 Half year 1998 Half year 1997 Full year 1997 Non-life insurance Life assurance Other activities Parent company Profit for the period It is planned to establish Kapital Holding in connection with the planned merger between BG Bank and Realkredit Danmark. In accordance with Topdanmark s accounting policies, its 10% shareholding in BG Bank is recorded at net asset value. At the end of the first half of 1998 the market value of the shareholding in BG Bank exceeded the book value by DKK 340m. The conversion from BG Bank shares into Kapital Holding shares will take into account the difference between the book value and market value of BG Bank. If Kapital Holding had been established at 31 December 1997, the net asset value would have been DKK 378 per share compared to the net asset value of BG Bank of DKK 281 per share. At 31 December the difference in net asset value would have been DKK 279m. As a consequence of the expected increase in the net asset value of Topdanmark s shareholding following the establishment of Kapital Holding, a significant share of the existing difference between the market value and the book value of Topdanmark s shareholding in BG Bank will be included as accounting income in the second half of It should be noted that Topdanmark s 10% shareholding in BG Bank is equivalent to 2,927,767 shares including 50,000 shares held by the life assurance companies.

14 Page 14 of 22 However, as Topdanmark s result includes a 10% share of BG Bank s result equivalent to the 10% shareholding, the accounting income stated above should be adjusted for Topdanmark s share of the 1998 result recorded by BG Bank/Kapital Holding. For the second half of 1998 Topdanmark assumes a return of 6% on shareholders funds in BG Bank/Kapital Holding equivalent to DKK 27m of Topdanmark s result. It is solely a budgetary assumption and not an estimate of BG Bank/Kapital Holding s result. This spring the Danish Parliament adopted two laws affecting the taxation of Danish insurance companies. Topdanmark has accumulated quite a large tax asset as a result, among other things, of losses in the first half of the 1990 s and therefore does not expect to pay any significant amount of corporation tax for the next few years. Accounting policies The Topdanmark Group s accounts have been prepared in accordance with the Danish Insurance Act including the order issued by the Danish Financial Supervisory Authority on the preparation of the consolidated accounts for insurance companies and pension funds. The accounts for the parent company have been adjusted to comply with the Group s accounting policies. There have been no changes in accounting policies from those adopted in the 1997 annual accounts. Appendix 8 pages accounts. Financial calendar It is expected that the 1998 annual result will be announced on 23 March Internet The announcement is available on and the half-yearly accounts can be downloaded from our homepage.

15 Page 15 of 22 Topdanmark Group Consolidated profit and loss account Half year Half year Full year DKKm NON-LIFE INSURANCE Premiums earned Gross premiums written 2,560 2,379 3,818 Outward reinsurance premiums (213) (195) (345) Change in the provision for unearned premiums, gross (574) (542) (67) Change in reinsurers' share of the provision for unearned premiums Premiums earned on own account 1,806 1,671 3,408 Technical interest on own account Claims incurred Gross claims paid (1,260) (1,218) (2,580) Reinsurance cover received Change in the provisions for claims, gross (103) (111) (189) Change in reinsurers' share of the provision for claims Claims incurred on own account (1,243) (1,237) (2,543) Change in other technical provisions on own account (8) (5) (9) Bonuses and rebates (11) (8) (16) Operating expenses Acquisition costs (176) (184) (359) Administrative expenses (298) (266) (535) Reinsurance commission and share of profits Total operating expenses on own account (452) (425) (840) Change in the equalisation provision (50) (24) (40) Technical profit/(loss) on non-life insurance

16 Page 16 of 22 Topdanmark Group Consolidated profit and loss account Half year Half year Full year DKKm LIFE ASSURANCE Premiums Gross premiums written ,305 Outward reinsurance premiums (29) (13) (28) Premiums on own account ,277 Allocated investment income on own account Claims paid Claims paid (400) (266) (568) Reinsurance cover received Change in the provisions for claims 0 3 (1) Claims paid on own account (386) (261) (558) Change in the life assurance provisions Change in the life assurance provisions,gross (857) (555) (1,190) Change in reinsurers' share (8) Change in the life assurance provisions on own account (865) (544) (1,164) Bonus Change in the bonus equalisation provision (391) (259) (364) Operating expenses Acquisition costs (36) (22) (96) Administrative expenses (43) (33) (71) Total operating expenses on own account (79) (55) (167) Technical profit/(loss) on life assurance (22) (11) (17)

17 Page 17 of 22 Topdanmark Group Consolidated profit and loss account Half year Half year Full year DKKm Technical profit/(loss) on non-life insurance Technical profit/(loss) on life assurance (22) (11) (17) NON-TECHNICAL ACTIVITIES Income from investment assets Income from affiliated companies Income from associated companies Income from land and buildings Interest, dividends etc Realised gains on investment assets Total income from investment assets ,159 Unrealised gains on investment assets Investment charges Administrative expenses (13) (10) (20) Interest charges (47) (105) (122) Total investment charges (60) (115) (142) Exchange rate adjustments (14) (45) (134) Real interest rate duty (23) (3) (16) Total investment income 1, ,399 Technical interest transferred to non-life insurance business (105) (90) (167) Investment income transferred to life assurance business (834) (572) (959) Other ordinary income Other ordinary expenses (1) (1) (2) Expenses in parent company (16) (13) (24) Profit/(loss) on ordinary activities before taxation Extraordinary income Extraordinary expenses 0 (47) (46) Profit/(loss) before taxation Taxation (4) 0 0 Profit for the period

18 Page 18 of 22 Topdanmark Group - Balance sheet DKKm 30 June 30 June 31 Dec Assets Intangible assets Investments Land and buildings 1,566 1,291 1,472 Investment in affiliated and associated companies Shares in affiliated companies Shares in associated companies 913 1, Total investment in affiliated and associated companies 943 1, Other financial investment assets Shares 3,469 2,221 2,934 Unit trust shares Bonds at market value 5,721 5,702 4,905 Bonds valued at acquisition cost incl. gains to maturity 6,944 5,013 5,901 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 17,161 14,101 14,984 Deposits with ceding undertakings Total investment assets 19,673 16,530 17,358 Debtors Policyholders 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 ,118 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 21,382 18,023 19,098

19 Page 19 of 22 Topdanmark Group - Balance sheet DKKm 30 June 30 June 31 Dec Liabilities Shareholders' funds Share capital Share premium account 1,092 1,086 1,092 Reserves Net revaluation reserve at net asset value Other reserves Total reserves 1,501 1,113 1,231 Profit carried forward Total shareholders' funds 3,622 3,167 3,338 Subordinated capital Technical provisions Provision for unearned premiums Gross provision 1,655 1,549 1,080 Reinsurers' share (108) (103) (75) Provision for unearned premiums on own account 1,547 1,446 1,005 Life assurance provisions Gross provision 11,055 8,443 10,245 Reinsurers' share (7) (31) (47) Life assurance provisions on own account 11,048 8,412 10,198 Outstanding claims Gross outstanding claims 2,900 2,669 2,789 Reinsurers' share (304) (268) (297) Outstanding claims on own account 2,596 2,401 2,492 Provision for bonuses and rebates Equalisation provision Bonus equalisation provision 1, Other technical provisions Total technical provisions on own account 16,530 12,915 14,581 Provision for other risks and expenses Deferred real interest rate duty Provision for pension schemes and similar obligations 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 399 1, Amounts due to affiliated companies Financial instruments Corporation tax Other creditors Total creditors 1,058 1, Total liabilities 21,382 18,023 19,098

20 Page 20 of 22 Topdanmark A/S Profit and loss account Half year Half year Full year DKKm Income from investment assets Income from affiliated companies Income from associated companies Interest, dividends etc Realised gains on investment assets Total income from investment assets Unrealised gains on investment assets Investment charges Administrative expenses (1) (1) (2) Interest charges (3) (17) (17) Realised losses on investments (2) (5) 0 Total investment charges (6) (23) (19) Unrealised losses on investments (2) (1) 0 Exchange rate adjustments 17 3 (5) Total investment income Expenses of parent company (16) (13) (24) Profit on ordinary activities before taxation Extraordinary income Profit before taxation Taxation Profit for the period

21 Page 21 of 22 Topdanmark A/S Balance sheet as at 30 June June 30 June 31 Dec. DKKm Assets Investments Shares in affiliated companies 2,816 2,365 2,490 Total investment in affiliated and associated companies 2,816 2,365 2,490 Other financial investment assets Shares Bonds at market value Other loans Financial instruments Total other financial investment assets Total investment assets 3,148 2,790 2,749 Debtors Amounts due from affiliated companies Other debtors Total debtors Other assets Cash at bank and in hand Other Total other assets Prepayments and accrued income Accrued interest and rent Total prepayments and accrued income Total assets 3,696 3,526 3,405

22 Page 22 of 22 Topdanmark A/S Balance sheet as at 30 June June 30 June 31 Dec. DKKm Liabilities Shareholders' funds Share capital Share premium account 1,092 1,086 1,092 Reserves Net revaluation reserve at net asset value Other reserves Total reserves 1,501 1,113 1,231 Profit carried forward Total shareholders' funds 3,622 3,167 3,338 Provision for other risks and expenses Provision for pension schemes and similar obligations Total provision for other risks and expenses Creditors Amounts due to credit institutions Amounts due to affiliated companies Financial instruments Other creditors Total creditors Total liabilities 3,696 3,526 3,405