Tryg Forsikring A/S Half-year 2010 report

Tryg Forsikring's financial performance in first half of 2010

Premium growth of 5.5% in local currency (10.7% in DKK)
Premium growth in local currency was 10.7% (16.6 % in DKK) in Private Nordic
and 13.2% (9.1% in DKK) in Commercial Nordic. The Corporate business was
affected by lower volumes following lower economic activity and competition on
terms and price. Tryg Forsikring focuses on a long term and sustainable
relation between price and risk and therefore does not participate in
unprofitable competition as mentioned in the section on Corporate Nordic. 

The Group recorded gross earned premiums of DKK 9,540m in first half-year of
2010, which was equivalent to an increase of 5.5% in local currency (10.7% in
DKK). Premium growth was in line with expectations. The high growth in DKK was
due to increased exchange rates for NOK and SEK. The Norwegian and Swedish
activities weigh almost half of the Group's total earned premiums. Furthermore,
premiums were favourably impacted by ongoing premium increases in all four
Nordic countries implemented in 2008-2010. 

Positive claims development 
Claims expenses totalled DKK 7,708m, and the claims ratio was 80.8 against
71.2. Expenses for large claims were DKK 374m compared to DKK 269m, while
expenses for weather claims were DKK 5m compared to DKK 68m. 

Approximately 35% of the expenses for winter claims from the first quarter
2010, of which gross DKK 750m was put aside, had been paid out by the end of
the second quarter 2010. Tryg Forsikring estimates that the remaining part of
the claims provisions is adequate compared to the closed cases and the related
original pro-visions. 

Private Nordic reported a claims ratio net of ceded business (gross claims
ratio less reinsurance) of 83.3 and Corporate Nordic was 71.3 compared to 76.1
and 69.0 respectively in the same period 2009. The claims ratio net of ceded
business is still unsatisfactory in Commercial Nordic, where individual premium
increases have been implemented since the autumn 2009. Commercial Nordic will
implement further gen-eral premium increases in 2010 and 2011. The claims ratio
net of ceded business in Commercial Nordic was 96.3 in the first half-year of
2010 compared to 75.2 the year before. The planned premium initiatives in
Commercial Nordic have been moved forward to 1 October 2010. 

Focus on cost reduction 
Insurance operating expenses amounted to DKK 1,637m, and the expense ratio fell
from 17.4 to 17.2. The development was particularly positive in Private Nordic,
where the expense ratio fell from 17.1 to 15.9. As planned, the gross expense
ratio fell in Private Sweden and Private Finland, while the gross expense ratio
increased in Corporate Nordic due to reduced level of earned premiums. 

Tryg Forsikring continuously focuses on having an expense ratio at very
competitive levels especially to off-set that the reduced premium volume in
Corporate Nordic. Through 2009 and 2010, Tryg Forsikring has streamlined the
Group's distribution platform. In Denmark, several sales offices have been
closed and em-ployees have been transferred to larger sales offices/call
centres. In Norway, where Tryg Forsikring has more than 80 franchise offices,
the compensation system for the franchise businesses has been changed towards
greater focus on profitability in the portfolio bought into Tryg Forsikring.
Tryg Forsikring's own salesmen in Private Norway have been transferred to
customer service centres and thus only the franchise offices manage the direct
physical sales from now on. 

Another cost reducing activity is the implementation of digital and paperless
handling of in several in-house processes. 

Since the second half of 2008, Tryg Forsikring has focused on in-house rotation
of employees to fill vacant positions, which has enabled the Group to maintain
the number of employees at the same level to which is added employees to the
expansion in Sweden and Finland. 

The streamlining of operations and processes based on lean principles has also
contributed to maintaining employee costs at a continued low level in 2010.
This has happened without compromising quality towards customers and with a
higher employee satisfaction. As an example, the work load has been smoothed
be-tween the claims departments and employee involvement in the daily planning
of workflow has increased. Tryg Forsikring's effort to improve profitability
includes initiatives optimising product and service purchases, streamlining
in-house claims processes and the distribution platform as well as demands that
leaders reduce their direct costs by 2% per year. 

In addition to cost reduction, Tryg Forsikring invests in a multi-year
improvement of business processes and supporting IT systems as well as branding
activities. The branding activities aim to underline Tryg Forsikring as a
pan-Nordic peace-of-mind provider and increase the knowledge of Tryg Forsikring
- especially in Nor-way and Finland. The branding activities will be initiated
in the second half of 2010 and will increase costs. Finally, the preparation
and implementation of solvency II will also increase costs. 

The cost focus and investment in processes and market position create a solid
foundation and will secure Tryg Forsikring's growth and value creation in the
longer term. 

Technical result
The technical result was DKK 40m compared to DKK 848m in the same period last
year. The technical re-sult, especially the result of second quarter 2010,
indicates that the implemented premium increases and cost reducing activities
are starting to improve the Group's profitability. 

Combined ratio of 100.3 
Combined ratio was 100.3 compared to 91.2 the same period last year. Run-off
affected combined ratio by 3.4 percentage points. Private Finland had the best
development with a decrease from 110.1 to 96.5. 

The effect of several premium initiatives and continued focus on cost
contributes to this development as well. However, the current level is not
satisfactory in commercial, house and content insurances in Den-mark. In 2008
and 2009, we saw an unexpected increase in the claims expenses. The increase of
average claims in certain products has now begun to fade, but the level is
still high. The total effect of the imple-mented initiatives is expected to
improve profitability into the target area for combined ratio as indicated in
the annual report 2009. 

 
Gross return on investments
The total investment portfolio amounted to DKK 41.2bn at the end of the second
quarter 2010 and yielded a total gross return of DKK 992m. The result in second
quarter 2010 was negatively impacted by the develop-ment in equities with a
loss of DKK 157m. 

The investment result after transfer of technical interest and other financial
income and expenses was DKK 384m in first half-year 2010 compared with DKK
1,007m in first half-year 2009. 

As Tryg Forsikring discounts provisions for claims, capital gains resulting
from interest falls are offset by an almost identical change in the discounted
provisions for claims. 

Tryg Forsikring has divided the investment assets into a match portfolio of
discounted provisions for claims and a free investment portfolio, which
includes the Group's other bonds, equities and real estate. 

Profit before and after tax 
Profit before tax and discountinued business fell from DKK 1,410m to DKK 94m in
first half-year 2010. The tax charge of continued business was DKK 25m in first
half of 2010. Profit for the period after tax and dis-countinued business was
DKK 51m compared to DKK 1,064m. 

Discontinued and divested business
Tryg Forsikring sold the renewal rights for the Marine Hull portfolio to Codan
for DKK 50m, which is included in the income statement under ”Other income and
expences”. The Marine Hull business had an annual pre-mium income of
approximately DKK 400m in 2009 and a negative performance. The Marine Hull
business is extracted from historical figures and the one-time profit is
included in the income statement under ”Dis-countinued and divested business”. 

Events after end of reporting period
1 July 2010 Moderna Försäkringar has been converted to a branch. Tryg
Forsikring Group's result and bal-ance sheet will not be affected by the
change. 

Solvency
EU is preparing a new joint framework for the capital requirements for
insurance companies, the so-called solvency II requirements, which likely will
be effective from 1 January 2013. New requirements have been published in July
2010. Tryg Forsikring estimates that the coming solvency requirements are below
the cur-rent capital requirement for Tryg Forsikring that has an A- rating at
Standard & Poor's. 

Corporate Social Responsibility (CRS)
Read about Tryg Forsikring's ongoing development on the Group's corporate
social responsibility on tryg.com/CSR.

Read the full report on www.tryg.com.