Topdanmark's Interim Report for January March 2005

Transcription

1 18 May 2005 Announcement No. 06/2005 Topdanmark's Board of Directors has today adopted the unaudited interim report for the first three months to 31 March Key features: Topdanmark's post-tax profit was DKK 148m under the new IFRS accounting rules (Q1 2004: DKK 238m). This result was adversely affected by net storm expenses of DKK 178m (Q1 2004: DKK 9m). The profit represented a 4.4% post-tax return on shareholders' funds (18.9% annualised). Profit per share declined from DKK 10.6 to DKK 7.2 in Q Premium income increased 7.6% in non-life insurance and 11.5% in regular premiums in life insurance. It is recommended that this interim report be read together with which contains detailed and supplementary information. On Presentations a webcast is available in which Topdanmark's CEO, Michael Pram Rasmussen, presents the financial highlights and comments on the forecast. Based on the interim report and the webcast, a conference call will be held today at 15:30 (CET) when Michael Pram Rasmussen and Poul Almlund, Deputy CEO, will be available for questions. The call will be conducted in English. In order to access the conference call, please phone: UK dial in number: US dial in number: minutes before the conference asking the operator to connect you to the Topdanmark conference call. The expense ratio declined from 16.5% to 15.1%. The combined ratio increased from 92.8% to 99.0% with storm expenses accounting for an 8.7 percentage point negative impact. Eliminating this, the combined ratio would have been 90.3%. Topdanmark continues to expect the combined ratio to be just under 93% for the full year. This quarter's investment return before PAL-tax (pension return tax) on funds owned by customers was 3.3% (13.9% annualised) in Liv I, the company in the Topdanmark Group selling new life insurance schemes. Please direct any queries to: Michael Pram Rasmussen, Chief Executive Officer Tel Poul Almlund, Deputy Chief Executive Officer Tel Steffen Heegaard, Communication and IR Manager Tel / Topdanmark continues to expect a post-tax profit of DKK m for The share buy-back programme is also expected to remain unchanged at DKK m for Page 1 of 18

2 Topdanmark's Annual Report 2001 Contents 1 Summary 3 Financial highlights 4 Q in brief 4 Movements in shareholders' funds 4 Non-life insurance 6 Life insurance 8 Investment activities 8 Taxation 8 Risk factors 8 Prospects 8 Share buy-back 9 Employee shares 9 Promotion of general managers 9 Accounting policies 11 Financial calendar 11 Disclaimer 12 Signatures 13 Profit and loss account Group 15 Assets Group 16 Liabilities Group 17 Profit and loss account Parent company 18 Balance sheet Parent company Topdanmark A/S Borupvang 4 DK Ballerup Tel Fax Reg.No topdanmark@topdanmark.dk Web: Page 2 of 18

3 Financial highlights Full year 3 months 3 months 3 months (DKKm) (EURm) * Premiums earned: Non-life insurance 7,894 1,911 2, Life insurance 2, ,179 2,728 2, Results: Non-life insurance Life insurance Parent company etc. 53 (3) (8) (1) Pre-tax profit 1, Tax (299) (74) (21) (2) Profit Shareholders' funds parent company 1 January 3,304 3,304 3, Profit Share buy-back (803) (202) (254) (34) Share-based payment Other movements in shareholders' funds (2) (0) Shareholders' funds parent company end of period 3,367 3,411 3, Deferred tax on security funds (417) (417) (417) (56) Shareholders' funds Group end of period 2,950 2,994 2, Profit as a percentage of shareholders' funds** Profit per share (DKK) Profit per share (DKK), diluted Net assets per share (DKK)** Share buy-back per share Share price end of period (DKK) Average number of shares ('000) 21,144 21,888 19,981 Average number of shares ('000), diluted 21,681 22,438 20,482 Number of shares end of period ('000) 20,297 21,754 19,892 Non-life insurance (%) Loss ratio Net reinsurance ratio Claims trend Expense ratio Combined ratio Operating ratio * Converted to EUR at the exchange rate as at 31 March 2005 (744.95) ** Calculated as a percentage of parent company's shareholders' funds The comparatives have been restated to comply with the new accounting policies Page 3 of 18

4 Q in brief Topdanmark's post-tax profit was DKK 148m in Q (Q1 2004: DKK 238m). will have no impact on Topdanmark's overall solvency. This decline was entirely due to DKK 178m of expenses arising from the storm on 8 January Despite this, the underlying trend in results continued to improve: after adjusting for storm claims, pre-tax profit increased 8%. The development in Q was in line with the 2005 profit forecast as set out in the 2004 Annual Report. The profit for Q represented a 4.4% post-tax return on shareholders' funds of the parent company (18.9% annualised). Profit per share declined from DKK 10.6 to DKK 7.2. Movements in shareholders' funds In Q shareholders' funds of the parent company declined DKK 47m to DKK 3,320m representing the net of DKK 148m profit for the period, share buy-backs of DKK 254m and other movements in shareholders' funds of DKK 59m. Since the announcement of Topdanmark's 2004 Annual Report the Danish Financial Supervisory Authority (DFSA) has deliberated the question of providing for deferred tax on security funds in the group accounts. Its interpretation of the IAS/IFRS is now that deferred tax should be fully provided on untaxed security funds in the group accounts. Consequently the Group's shareholders' funds were reduced by DKK 417m in the opening balance sheet, but no adjustment was made to shareholders funds in the parent company. The reduction will have no real financial impact, see "Accounting policies". The security funds will only be taxed if technical provisions were to decline more than 10% from the level at 31 December As technical provisions were DKK 2,443m at the end of 1994 as compared with DKK 6,425m at the end of 2004, a decline of 10% from the 1994 level would be purely theoretical. Therefore taxation will only be applicable if the insurance portfolio is transferred or if Topdanmark ceases to carry out insurance business. As the question of deferred tax on security funds applies only to the group accounts and not to the accounts of the parent company and subsidiaries, it Non-life insurance After expenses of DKK 178m on the storm on 8 January non-life insurance made a profit of DKK 144m in Q (Q1 2004: DKK 246m). The sale of insurance policies increased 7.6% to DKK 2,056m in Q Just over 3 percentage points of this growth was due to normal indexation while the remaining 4 percentage points came from new business from existing customers and a net increase in customers reflecting Topdanmark's continued gain in market share the year to date. Much of the growth arose in the personal customer market and from small and medium-sized businesses. However, Topdanmark did lose customers and experienced a decline in premium income in the large industrial business sector. However, as the combined ratio for the industrial area is higher than Topdanmark's general combined ratio, the quality of its customer portfolio improved in Q For the full year 2005 Topdanmark continues to expect premium income to grow by 6-7%. In Q claims paid out by Topdanmark exceeded premiums earned. Therefore the loss ratio increased from 74.6% to 122.6% primarily due to expenses of DKK 1bn on claims from the January storm. There were also a few large claims in marine insurance. However, thanks to Topdanmark's comprehensive reinsurance programme most of the storm and largescale claims were covered by reinsurers with net expenses on the storm expected to total DKK 178m. Due to reimbursement from the reinsurers the result from reinsurance was a profit representing 38.7% of premium income as compared with a loss representing 1.7% in Q The claims trend, comprising expenses on claims paid to customers and the result of reinsurance as a percentage of premiums earned, increased from 76.3% in Q to 83.9% in Q Page 4 of 18

5 The expense ratio declined from 16.5% to 15.1%. As in 2004, recognising the full annual cost of Topdanmark's warrant scheme in the Q1 results had a 0.7 percentage point detrimental effect on the expense ratio in the non-life insurance group. Due to the renewal of the distribution agreement with Danske Bank the commission paid to the Danske Bank Group has increased which will result in an adverse effect of about 0.4 percentage points on the expense ratio for the full year. The expense ratio will further suffer about 0.2 percentage points due to the cost of the issue of employee shares, see "Employee shares". Overall expenses on claims, reinsurance, sales and administration as a percentage of premiums earned (combined ratio) increased from 92.8% to 99.0% of which the effect of the storm expenses represented 8.7 percentage points. After adjusting for this the combined ratio was 90.3%. Topdanmark continues to expect the combined ratio to be just under 93% for the full year corresponding to an expected combined ratio of just under 91% for the last three quarters of As from 1 July 2005 Topdanmark will gradually transfer its remaining marine business of DKK 60m to Codan. Topdanmark's decision to fully withdraw from the market of marine insurance follows its decision not to renew its foreign marine business with effect from 1 July The sale of the marine business follows unsatisfactory earnings over a number of years. Codan will rewrite Topdanmark's marine business in step with the expiry of the contracts, typically on 31 December. Therefore the transfer to Codan will have practically no effect on premium income in All of Topdanmark's non-life insurance companies are in the DFSA's green classification implying they are able to withstand devastating market conditions including a 30% decline in the equity portfolio simultaneous with a one percentage point adverse change in interest rates and a 12% decline in property prices. Financial highlights - Non-life insurance Full year 3 months 3 months (DKKm) Gross premiums earned 7,894 1,911 2,056 Technical interest Claims incurred (5,907) (1,425) (2,521) Net reinsurance (161) (32) 797 Expenses (1,227) (315) (311) Technical result Investment income Profit on non-life insurance Loss ratio (%) Net reinsurance ratio (%) (38.7) Claims trend (%) Expense ratio (%) Combined ratio (%) Operating ratio (%) Ratios after elimination of rent Loss ratio (%) Net reinsurance ratio (%) (38.7) Claims trend (%) Expense ratio (%) Combined ratio (%) Operating ratio (%) The comparatives have been restated to comply with the new accounting policies Page 5 of 18

6 Life insurance Life insurance activities made a profit of DKK 33m in Q (Q1 2004: DKK 69m). With effect from 1 January 2004 the life insurance company was split into two corporate entities: Topdanmark Livsforsikring (Liv I) with customers' 1.5% and 2.5% guaranteed pension benefits and Topdanmark Livsforsikring V (Liv V) with customers' 4.5% guaranteed benefits. Both companies are subsidiaries of Topdanmark Liv Holding. The DFSA has approved the split intended to ensure both new and existing customers the best possible return on their pension savings. The funding goal for Topdanmark Liv Holding is for capital to represent 150% of the solvency margin of the life insurance group, corresponding to DKK 1.2bn, of which about 80% is intended to be shareholders' funds, in turn equating to a 120% of the solvency margin and the remainder to be covered by a subordinated loan. As a result, a further DKK 150m of capital was allocated to Topdanmark Liv Holding in Additionally, Topdanmark Liv Holding has a subordinated loan of DKK 300m with Topdanmark Forsikring. Profit in Topdanmark Liv Holding comprises the sum of the profits generated in Liv I and Liv V net of any financing costs. These profits were calculated in accordance with the stated policy on the calculation of profit for the life insurance companies, see Business base Life insurance Policy for the calculation of profit. In Q the profit calculated as defined above was subsequently reduced by DKK 3m to take into account the life insurance group's impact on Topdanmark's overall corporation tax position. At 31 March 2005 there was no surplus on the shadow account. Result of life insurance Full year 3 months 3 months (DKKm) Investment return on shareholders' funds Profit in Topdanmark Link Allowance for risk Taxation (18) (3) (3) Financing of Topdanmark Liv Holding (22) - (2) Profit on life insurance The Q result was affected by: The investment return before PAL-tax on funds owned by customers being 3.3% (13.9% annualised) in Liv I, the company in the Topdanmark Group selling new life insurance schemes, and 3.1% (13.0% annualised) in Liv V. The investment return on shareholders' funds being 1.7% (6.8% annualised) in Liv I and 1.4% (5.7% annualised) in Liv V due to the return not including any return on equities and instruments used to hedge the guarantee liabilities. The return on shareholders' funds being available to contribute to the full risk premium in Liv I and Liv V due to an "insurance technical profit before bonus contribution". The overall risk and administrative result after payment of bonus, which is included in the calculation of profit, being a loss in Q due to the negative impact from disability risks and acquisition costs on a continued high level of sales. The 3.3% investment return on Liv I's funds owned by customers was the result of a substantial rise in equity prices which given Liv I's relatively larger investment in equities further benefited the overall return. Page 6 of 18

7 At the end of Q the collective potential bonus reserve in Liv I had increased DKK 93m to DKK 636m representing a bonus ratio of 8.6%. In Liv V the 3.1% return on funds owned by customers was primarily due to gains on both bonds and the interest rate options used to hedge against the risk of declining interest rates on guaranteed benefits. At the end of Q the collective potential bonus reserve in Liv V had increased DKK 25m to DKK 525m representing a bonus ratio of 6.6%. Gross premiums declined 13.2% from DKK 817m in Q to DKK 709m in Q1 2005, however this was entirely due to a 53% fall in single premiums from DKK 311m in Q to DKK 145m in Q Topdanmark focuses on growth in regular premiums, where premiums are paid year on year, typically corporate pension schemes where a company regularly pays the premiums for its employees. Regular premiums increased 11.5% from DKK 506m in Q to DKK 564m in Q It was anticipated that there would be no repetition in 2005 of the large single premiums received at the beginning of 2004 following the transfer of a number of major corporate pension schemes to Topdanmark. Topdanmark is expecting regular premiums to increase about 10% in Taking these factors into account it is expected that overall gross premiums including single premiums will remain practically unchanged from 2004 to As a result of the change in the calculation of the life insurance provisions to the market value policy, the calculated potential bonus reserves could in the DFSA's stress tests improve the risk scenarios and create a better balance in the distribution of risk between funds owned by customers' and shareholders' funds. Accordingly, at 31 March 2005 the life insurance provisions included potential bonus reserves of about DKK 1.8bn on paid-up polices which to a large extent could be used to cover the customers share of any future losses on equities. All of Topdanmark's life insurance companies are in the Danish Financial Supervisory Authority's green classification implying they are able to withstand devastating market conditions including a 30% decline in equity prices simultaneous with a one percentage point adverse change in interest rates and a 12% decline in property prices. To supplement these financial stress tests further ratios have been included to clarify a company's exposure to given adverse changes in the insurance risks (for example, changes in the mortality and disability rates of the customers), and including the effect of such changes on shareholders' funds. These calculations show that Liv I and Liv V are able to withstand material adverse changes in all insurance risks. Financial highlights - Life insurance Full year 3 months 3 months (DKKm) Premiums 2, Allocated investment income on own account 1, Claims and benefits paid (978) (275) (355) Change in the life insurance provisions (1,971) (688) (648) Change in collective potential bonus reserve (286) (85) (116) Change in provisions for unit-linked policies (120) (88) 27 Expenses (224) (60) (59) Net reinsurance Technical profit / (loss) Other investment income etc Taxation (25) (21) (15) Profit on life insurance Page 7 of 18

8 Investment activities Profit on investment activities in Topdanmark excluding the Topdanmark Livsforsikring Group was DKK 181m in Q including income from associated companies and the value adjustment on technical provisions but before the transfer to the technical result (Q1 2004: DKK 160m). The return particularly benefited from the rise in Danish equities while the rise in foreign equities made a smaller contribution. As the interest rate exposure was kept low, the return on investments was only marginally affected by the price rise in equities due to a decline in long-term interest rates. The return for the period was 1.5% (6.1% annualised). At 31 March 2005 the Group, excluding life insurance, held interest bearing investment assets of DKK 11,610m comprising primarily convertible mortgage credit bonds, money market deposits and floating-rate foreign securities. At 13 May 2005 the interest rate exposure of the Topdanmark Group, excluding life insurance, was calculated at DKK 2.2m and the foreign exchange exposure at DKK 0.6m per day, both after taxation. At the end of Q the investment in Topdanmark Liv Holding was DKK 941m of the total equity investments of DKK 2,097m. Associated companies accounted for DKK 38m, while other equities were valued at DKK 1,118m. Including the effect of derivatives, overall equity exposure was DKK 1,206m. At 13 May 2005 total equity exposure was DKK 1,204m excluding the investment in life insurance and associated companies but including the impact of financial instruments. Most of this was in listed Danish equities. Taxation In Q there was a tax charge of DKK 21m of which DKK 16m was netted off against the tax asset. Risk factors There have been no material changes in the information on risk factors from that disclosed in the 2004 Annual Report, see Value creation Value creation through share price model Risk factors. Prospects In the 2004 Annual Report it was stated that assuming unchanged foreign exchange rates, stable interest rates and an annual 7.0% return on the equity portfolios given the level of equity prices on 4 March 2005, Topdanmark expected a post-tax profit of DKK m in Given the trend in 2005 to date, the post-tax profit forecast remains unchanged at DKK m for This is based on assumptions including unchanged foreign exchange rates, an annual 7.0% return on the equity portfolios given the level of equity prices on 13 May 2005 as well as a return on interestbearing investments of 2.96% (risk-free interest rate plus an allowance for risk of 0.75 percentage points). Share buy-back In the 2004 Annual Report it was stated that Topdanmark expected an ordinary share buy-back for 2005 of DKK m plus the remaining buy-back for 2004 of DKK 47m giving a total of DKK m. As reported in "Movements in shareholders' funds" the provisioning of deferred tax on security funds in the consolidated accounts will have no real financial impact and consequently cause no changes to Topdanmark's share buy-back policy, see Value creation Value creation through share price model Capital structure. Given the unchanged profit forecast Topdanmark continues to expect a share buy-back of DKK m for To date in 2005 Topdanmark has acquired own shares of DKK 270m. Since 1998 when Topdanmark started buying back own shares, it has made a decision to cancel DKK 4.3bn of shares representing 50% of the outstanding shares. The average price was DKK 220 on those shares on which the decision was made to cancel. Page 8 of 18

9 Topdanmark does not buy back own shares in those periods where the company would be considered as an insider and during the three weeks immediately preceding the release of interim and annual reports. Furthermore it does not buy back own shares during the period of eight banking days after the announcement of an interim report as this is the period in which the executives may exercise their share options or warrants. Below is a list of the periods where the share buyback is and is not allowable. Share buy-back allowable 31 May 1 August September 31 October December February 2006 Share buy-back not allowable 27 April 30 May August 2 September November 2 December 2005 Employee shares Due to the favourable trend in results in recent years and the considerable effort made by Topdanmark's employees, for example subsequent to the January storm, the Board of Directors has decided to issue employee shares. The issue will be made before the end of 2005 in a combination of free shares, subscription at a fixed price and a further issue by tender. The details of the issue will be published later. Up to now it has been Topdanmark's policy to issue employee shares every second or third year at the discretion of the Board of Directors. This policy has now been changed to the decision being made annually by the Board of Directors, after due consideration to the overall developments within the Group. The more frequent the issue the fewer the shares issued each time. Promotion of general managers The Board of Directors has decided to promote Bjørn Verwohlt and Søren Pahl to general managers with effect from 1 July Bjørn Verwohlt will continue with his existing responsibilities as marketing manager. To achieve a smooth generational hand over Søren Pahl, current head of staff development, will take on overall responsibility for Topdanmark's personnel department with effect from 1 July Topdanmark's existing personnel manager Erik Nielsen will carry out a number of tasks within HR and management of internal services with effect from 1 July 2005 until his retirement at the end of Accounting policies Group As from 2005 the accounting policies applied by the Topdanmark Group will comply with International Financial Reporting Standard (IFRS). Therefore the accounts for Q follow the recognition and measurement rules of IFRS. The Group's opening balance sheet at 1 January 2004, the result for 2004 and the balance sheet at 31 December 2004 have been recalculated and presented in accordance with the standard IFRS 1 First-time adoption of IFRS. All comparatives for 2004 have been restated to comply accordingly. The most material changes to Topdanmark's previous accounting policies on recognition and measurement were described in the 2004 Annual Report, refer for more details. As Topdanmark's 2005 Annual Report will be prepared in accordance with the accounting rules in force at 31 December 2005, and as the rules for the industry are continually being interpreted, the previously reported results and shareholders' funds may be changed. Accordingly, opening shareholders' funds have been reduced by DKK 25m (relating to the calculation of claims provisions) from the amount shown in the recalculated balance sheet as disclosed in the 2004 Annual Report. Page 9 of 18

10 Furthermore, since Topdanmark prepared its 2004 Annual Report the DFSA has deliberated on the concept of the provisioning of deferred tax on security funds and reached the interpretation of the IAS/IFRS that deferred tax should be fully provided on untaxed security funds. In their consideration they emphasised that although unlikely, there could be factors out of the company's control that would force it into a situation creating a tax liability and that IFRS specifically prohibits the discounting of tax assets and liabilities. Consequently, a provision of DKK 417m for deferred tax on untaxed security funds has been included in the opening balance sheet for the Topdanmark Group, disclosed in the balance sheet as a separate item "Deferred tax on security funds". Parent company As from 2005 the accounting policies applied by the parent company will also comply with the DFSA's new accounting orders which, with a few exceptions, are IFRS-compatible. Therefore Topdanmark (the parent company) has not provided deferred tax on security funds as they will only be taxed if technical provisions on own account decline more than 10% from the level at 31 December At 31 December 1994 technical provisions in Topdanmark Forsikring, in which the transfers were made, were DKK 2,443m. At 31 December 2004 they were DKK 6,425m. A decline of 10% from the 1994 level could only happen in a situation where the Company's insurance portfolio is sold or the Company ceases to carry out insurance business, both of which are considered to be unrealistic scenarios. Accordingly, the parent company's result and shareholders' funds are identical to those of the Group except for deferred tax on security funds. Effect on results and shareholders' funds The table below shows the effect of the changed rules on the results for Q and the full year 2004 as well as shareholders' funds at 1 January, 31 March and 31 December. The DFSA's accounting rules for insurance companies do not require a company to provide deferred tax on security funds unless it is in a situation where it is believed that a tax payment would be applicable Shareholders' funds Result Shareholders' funds Result Shareholders' funds (DKKm) 1 January 3 months 31 March December Previous policies 3, , ,568 Changes Own shares (437) (82) (430) (140) (437) Share-based payment Equalisation provisions excl. workers' compensation Discounting of claims provisions 190 (13) Claims handling expenses (204) 0 (204) (3) (208) Goodwill (48) 20 (28) Staff benefits (119) (1) (121) (6) (125) Deferred tax excl. security funds (13) (3) (16) (22) (35) Other 8 (8) 9 (8) 11 Tax effect of changes in policies (6) 0 (6) (4) (10) (308) (8) (262) 33 (201) Results and shareholders' funds parent company 3, , ,367 Deferred tax on security funds (417) 0 (417) 0 (417) Result and shareholders' funds Group 2, , ,950 Page 10 of 18

11 Financial ratios Due to the new accounting rules and the new definition of ratios issued by the Danish Society of Investment Professionals, the financial ratios have been changed. "Number of shares" has been reduced by the holding of own shares acquired to cover Management's share option scheme, which was previously recorded at market value. On the other hand, the effect of dilution has been increased because those options which are equity instruments have been included in the calculation of "Number of shares, diluted" if the average price of Topdanmark's shares for the period exceeded the strike price. Ratios in non-life insurance According to IFRS internal rent is to be eliminated in the group accounts and only actual expenditure, for example claims handling expenses, is to be recognised in total expenses. As Topdanmark believes the most true and fair view is achieved by including rent in expenses, it presents the combined ratio both before and after elimination of intra-group rent. It also presents the operating ratio (both before and after elimination of intra-group rent), which is calculated the same as the combined ratio but in the operating ratio technical interest is included in the numerator. Presentation The presentation of the Group's profit and loss account and balance sheet is based upon the DFSA's accounting forms with those changes deemed to be necessary to meet IFRS requirements. The format will be changed if the DFSA issues new rules for an IFRScompatible presentation. The most significant changes in the presentation are described on Reports Change to IFRS from Financial calendar Announcement of results for the first six months of 2005: 23 August 2005 Announcement of results for the first nine months of 2005: 22 November 2005 Annual Report / announcement of results for 2005: 14 March 2006 Annual General Meeting: 25 April 2006 Disclaimer This interim report includes statements relating to the future. Such statements are uncertain and involve both general and specific risks. Many factors may cause a significant deviation from the forecasts set out in the interim report. Such factors could be, for example, cyclical movements, changes in the financial markets, the financial effect of nonanticipated events like acts of terror or exceptional weather conditions, changes in Danish and EU rules, competitive factors in the insurance industry and trend in reinsurance market. Also see Risk factors on page 8 of this interim report and our website Value creation Value creation through share price model Risk factors. The above description of risk factors is not exhaustive. Investors and others who may base decisions relating to Topdanmark on statements relating to the future, should make their own careful considerations on these and other factors of uncertainty. Topdanmark s statements relating to the future are solely based on information known at the time of the preparation of this interim report. This publication is a translation. In case of any divergence, the original Danish text shall prevail. Page 11 of 18

12 Signatures The Board of Directors and the Board of Management have today considered and adopted the interim report for January March 2005 for Topdanmark A/S. The interim report has been prepared in accordance with the requirements of the Danish Financial Business Act and the Copenhagen Stock Exchange on the preparation of accounts by listed companies. Furthermore with respect to the Group, the interim report is in accordance with the recognition and measurement rules of the International Financial Reporting Standard (IFRS). We consider the chosen accounting policies to be appropriate such that the interim report gives a true and fair view of the Group s and the Company s assets, liabilities and financial position at 31 March 2005 and the result of the Group's and Company's activities for Q Ballerup, 18 May 2005 Board of Management Michael Pram Rasmussen Poul Almlund Leif Larsen /Niels Olesen Board of Directors Elvar Vinum Anders Knutsen Jørgen Ajslev (Chairman) (Deputy Chairman) Ole Døssing Christensen Luise Hanssing Jens Maaløe Peter Pryning Annette Sadolin Knud J. Vest Page 12 of 18

13 Topdanmark s Interim Report for January March 2005 PROFIT AND LOSS ACCOUNT GROUP Full year 3 months 3 months (DKKm) TOTAL PREMIUMS EARNED NON-LIFE AND LIFE INSURANCE 10,179 2,728 2,765 NON-LIFE INSURANCE Gross premiums written 8,156 3,662 3,907 Outward insurance premiums (806) (359) (373) Change in the provision for unearned premiums (199) (1,734) (1,823) Change in reinsurers' share of the provision for unearned premiums (9) Premiums earned on own account 7,142 1,730 1,842 Technical interest on own account Claims paid (4,847) (1,283) (1,462) Reinsurance cover received Change in the provision for claims (1,046) (138) (1,054) Change in reinsurers' share of the provision for claims Claims incurred on own account (5,312) (1,272) (1,497) Bonuses and rebates (63) (17) (28) Acquisition costs (721) (179) (189) Administrative expenses (467) (126) (113) Reinsurance commission and share of profits Total operating expenses on own account (1,116) (289) (282) TECHNICAL PROFIT ON NON-LIFE INSURANCE LIFE INSURANCE Gross premiums written 2, Outward reinsurance premiums (5) (1) (2) Premiums earned on own account 2, Allocated investment income on own account 1, Claims and benefits paid (975) (260) (361) Reinsurance cover received Change in the provision for claims and benefits (3) (15) 6 Claims and benefits paid on own account (972) (272) (354) Change in life insurance provisions (1,971) (688) (648) Change in reinsurers' share of life insurance provisions Change in the life insurance provisions on own account (1,971) (687) (646) Bonus (286) (85) (116) Change in provisions for unit-linked contracts on own account (120) (88) 27 Acquisition costs (112) (30) (27) Administrative expenses (107) (28) (31) Reinsurance commission and share of profits Total operating expenses on own account (217) (58) (58) TECHNICAL PROFIT ON LIFE INSURANCE The comparatives have been restated Page 13 of 18

14 Topdanmark s Interim Report for January March 2005 PROFIT AND LOSS ACCOUNT GROUP Full year 3 months 3 months (DKKm) Technical profit on non-life insurance Technical profit on life insurance NON-TECHNICAL ACTIVITIES Income from associated companies Income from investment properties Interest, dividends etc. 1, Value adjustments Interest charges (139) (34) (43) Investment management charges (33) (10) (9) Total investment income 2, Technical interest transferred to non-life insurance business (295) (76) (85) Pension return tax (202) (62) (74) Investment income transferred to life insurance business (1,364) (426) (459) Other income Other expenses (33) (9) (11) PRE-TAX PROFIT 1, Taxation (324) (95) (36) PROFIT FOR THE PERIOD Profit per share Profit per share, diluted The comparatives have been restated Page 14 of 18

15 Topdanmark s Interim Report for January March 2005 ASSETS GROUP 31 December 31 March 31 March (DKKm) Goodwill Other intangible assets INTANGIBLE ASSETS Machinery and equipment Owner-occupied properties TANGIBLE ASSETS Investment properties 2,185 2,170 2,268 Shares in associated companies Shares 3,650 3,342 4,070 Unit trusts Bonds 20,185 19,153 22,377 Loans guaranteed by mortgages Loans to associated companies Other loans Derivatives Total other financial investment assets 25,056 23,467 27,623 Deposits with ceding undertakings INVESTMENT ASSETS 27,412 25,780 30,064 INVESTMENT ASSETS RELATED TO UNIT-LINKED CONTRACTS Reinsurers' share of provision for unearned premiums Reinsurers' share of life insurance provisions Reinsurers' share of provision for claims and benefits ,462 Reinsurers' share of total technical provisions ,733 Amounts due from policyholders Amounts due from insurance companies Other debtors Accrued interest and rent Other prepayments and accrued income Other assets DEBTORS AND OTHER ASSETS 1,123 1,254 1,295 CASH AND CASH EQUIVALENTS 3,382 2,715 3,129 CURRENT TAX ASSETS DEFERRED TAX ASSETS TOTAL ASSETS 34,560 32,349 38,156 The comparatives have been restated Page 15 of 18

16 Topdanmark s Interim Report for January March 2005 LIABILITIES GROUP 31 December 31 March 31 March (DKKm) SHARE CAPITAL RESERVES 2,731 2,754 2,684 TOTAL SHAREHOLDERS' FUNDS 2,950 2,994 2,903 Provision for unearned premiums 2,388 3,909 4,211 Guaranteed pension benefits 9,035 7,746 9,739 Bonus potential on future premiums 5,322 5,323 5,232 Bonus potential on paid-up benefits 1,750 1,756 1,784 Total life insurance provisions 16,107 14,825 16,755 Provision for claims and benefits 8,176 7,020 9,332 Collective potential bonus reserve 1, ,162 Provision for bonuses and rebates Provision for unit-linked contracts TOTAL PROVISIONS FOR INSURANCE AND INVESTMENT CONTRACTS 28,264 27,051 31,988 Pension schemes and similar commitments Deferred tax on security funds TOTAL PROVISIONS FOR LIABILITIES DEPOSITS RECEIVED FROM REINSURERS Convertible instruments of debt Amounts due to credit institutions 1, ,265 Derivatives TOTAL FINANCIAL LIABILITIES 2, ,765 Creditors arising out of direct insurance operations Creditors arising out of reinsurance operations Other creditors Accruals and deferred income Total creditors 646 1, CURRENT TAX LIABILITIES TOTAL LIABILITIES 34,560 32,349 38,156 The comparatives have been restated Page 16 of 18

17 Topdanmark s Interim Report for January March 2005 PROFIT AND LOSS ACCOUNT PARENT COMPANY Full year 3 months 3 months (DKKm) Income from affiliated companies 1, Interest, dividends etc Value adjustments (1) (3) 0 Interest charges (19) (6) (7) Investment management charges (3) (1) (1) Total investment income 1, Other expenses (28) (9) (10) PRE-TAX PROFIT 1, Taxation (299) (74) (21) PROFIT FOR THE PERIOD The comparatives have been restated Page 17 of 18

18 Topdanmark s Interim Report for January March 2005 BALANCE SHEET PARENT COMPANY 31 December 31 March 31 March (DKKm) ASSETS Shares in affiliated companies 4,272 3,611 3,892 Bonds Derivatives Total other financial investment assets TOTAL INVESTMENT ASSETS 4,304 3,643 3,918 Amounts due from affiliated companies Machinery and equipment Cash at bank and in hand Current tax assets Deferred tax assets TOTAL OTHER ASSETS Accrued interest and rent TOTAL ASSETS 4,503 3,989 4,086 LIABILITIES Share capital Revaluation reserves Profit carried forward 2,439 2,561 2,187 TOTAL SHAREHOLDERS' FUNDS 3,367 3,411 3,320 Pension schemes and similar commitments Amounts due to credit institutions Amounts due to affiliated companies Derivatives Current tax liabilities Other creditors TOTAL CREDITORS 1, TOTAL LIABILITIES 4,503 3,989 4,086 The comparatives have been restated Page 18 of 18