Outlook for 2008

TrygVesta is committed to providing the market with precise profit guidance. We attach great importance to using the very extensive records of previous performance which are very important when making financial forecasts.
 

Our outlook for 2008 is based on a normal performance for the year, but circumstances in the financial markets and, in particular, the equity markets at the beginning of 2008 have caused us to take the extraordinary step of expanding our comments on our outlook for the full-year 2008, see page 38. The table shows our outlook for 2008 based on developments up to 31 December 2007 and a proportion of equities of around 4%.

Higher premium growth expected for 2008

Earned premiums are expected to increase by some 5% in local currency terms, assuming no major changes in competitive conditions relative to 31 December 2007. We will continue our strategy of generating profitable growth. Earned premium growth of 5% will originate from organic growth in Finland and Sweden, which together are expected to contribute 1.5%, while Denmark and Norway contribute 3.5% equal to about 0.5% real growth.

Outlook at the beginning of January 2008

At the beginning of January 2008, assuming an equity proportion of around 4% of our investment portfolio, we expected profit before tax of DKK 2,500m compared with DKK 3,109m in 2007. This expectation corresponded to a return on equity of just over 26% before tax and around 20% after tax.

Combined ratio of 90 before run-off

The combined ratio for 2008 is estimated to be at the level of 89-91 with an expectation of 90 before run-off. The past three years have recorded run-off of 2.3-4.5% of gross earned premiums, for example, with a combined ratio in 2007 of 86.1 and 90.6 before run-off.

Continued decline in expense ratio

We expect to reduce the expense ratio slightly in 2008 relative to the expense ratio of 16.7 achieved for 2007, despite expansion in Finland and Sweden that is expected to have an adverse impact on the expense ratio in 2008 and the next few years. The Finnish and Swedish activities affected the expense ratio with 1.5%. In 2008, we expect an impact of 1 percentage point.