Profit distribution

Dividends in respect of the 2007 financial year are determined on the basis of the Group’s capitalisation strategy and profit distribution policy:

• TrygVesta distributes 50% of the profit for the year as ordinary cash dividends.
• Any excess capital after distribution of ordinary dividends and taking into consideration the minimum capital requirement, strategy and growth, will be returned to shareholders in the form of a share buyback programme.
• The dividend policy reflects our long-term earnings and cash flow potential, while maintaining an appropriate level of capitalisation.

In practice, we determine dividends by comparing the capital requirement of Standard & Poor’s capital model with our goal of a rating of A-. Any capital in excess of this amount will be distributed to shareholders in the form of cash dividends and share buybacks.

The proposed share buyback programme after ordinary dividends for 2007 will thus be determined by the earnings level and, extraordinarily, by two one-off effects relating to a new capital model and discounting method.

Standard & Poor’s implemented a new capital model in the autumn of 2007, redefining the measurement of capital. The main change is that investment risk is now included in the capital requirement rather than deducted in the calculation of capital. A number of other elements were also updated, including that the individual rating requirements are now based on risk allocation.

A cornerstone for TrygVesta’s risk management is to match the duration of the bond portfolio with that of the discount on technical provisions in order to minimise net interest rate risk. Standard & Poor’s applies a model-based discount approach, causing fluctuations relative to TrygVesta’s discounting model. During 2007, TrygVesta had contacts with Standard & Poor’s in this respect and has now adapted the capital model in accordance with the discounting method regulated and approved by the Danish Financial Supervisory Authority. The changed discounting  method results in capital being released while at the same time allowing TrygVesta to maintain its strong capital position and rating of A-. Read more about the capital model in Risk management and view a quarterly updated version of a simplified capital model at www.trygvesta.com.

Dividends for the 2007 financial year

Profit after tax amounted to DKK 2,266m in 2007. Pursuant to the profit distribution policy, this entails a cash distribution of dividends of DKK 17 per share, for a total amount of DKK 1,156m.

Share buybacks

In connection with the annual calibration of our capital requirement after payment of cash dividends we are able to return an additional DKK 660m to shareholders in the form of a share buyback. To this should be added the two one-off effects relating to Standard & Poor’s new capital model and changed discounting method, which increase the share buyback programme by DKK 745m.

The total share buyback thus amounts to DKK 1,405m. Together with ordinary dividends of DKK 1,156m, TrygVesta will thus return a total amount of DKK 2,561m to shareholders. The overall distribution corresponds to a buffer at the minimum level for an A rating, that is, 5%. This is more than the previous buffer which was around 2.5-3% of the minimum level.

The share buyback will be implemented pursuant to the safe harbour rules when approved by the shareholders at TrygVesta’s annual general meeting on 3 April 2008 and is expected to run over four quarters.