Private & Commercial Denmark

Private & Commercial Denmark sells insurances to private households and small and medium-sized enterprises in Denmark under the Tryg brand name. Sales are handled by five customer centres, 16 local service centres, affinity groups, car dealers, real estate agents and Nordea’s branches. Private & Commercial Denmark has around 1,400 employees, and contributes some 40% of total earned premiums.

Performance improvement in 2007

Private & Commercial Denmark continued the positive performance in 2007, lifting the technical result by DKK 446m to DKK 1,440m. The improvement was attributable to a low level of claims, cost reductions and higher interest rates.

The renewal rate was 1 percentage point higher at 91, meaning that out of every 100 private customers, 91 elected to renew their policies with us in 2007. The high renewal rate also contributed to the positive results because it is important with respect to the performance of premiums and expenses: selling and administrative expenses are relatively lower when more customers renew their policies.

Earned premiums

Gross earned premiums at DKK 6,490m were 1.6% higher in 2007. Premium growth picked up in the fourth quarter of 2007, increasing at a rate of 2.4. Various premium reductions on motor insurance in the summer of 2006 continued to have an adverse effect on growth. Among other things, we reduced premiums for new cars by up to 15% because the improved safety equipment of new cars provides for a better risk profile. We also reduced motor premiums for women under 29 years, while we increased premiums for young men considerably. Implementing the reductions in our motor portfolio, which accounts for around 30% of the total portfolio of Private & Commercial Denmark, lasted a year and caused the average premium in motor insurance to drop by around 4%.

Industry agreements and workers’ compensation policies lifted premium growth. Sales of industry agreements, which are sold in the business-to-business market, increased by 16,8% in 2007. Our portfolio of workers’ compensation policies increased by more than 20%, mainly due to an extraordinary premium increase of 12.5% which took effect on 1 July 2007 as a result of new Danish workers’ compensation legislation. Workers’ compensation insurance increased by around 7% net of this extraordinary increase.

The number of private policies sold performed favourably in 2007. There was a net inflow of 38,000 new policies, 10,000 more than in 2006. The inflow was very much attributable to existing customers buying more policies. Each customer had an average of 2.3 policies in 2007.
 

Claims expenses

Total claims expenses fell by a nominal amount of DKK 174m to DKK 4,041m in 2007, improving the claims ratio by 3.7 percentage points to 62.3 in 2007. Weatherrelated claims had a negative impact of 3.7 percentage points and large claims had a negative impact of 1.2 percentage points compared with 1.7 and 1.4 percentage points in 2006. Weather-related claims were, among other factors, adversely affected by some 2,200 hailstorm claims reported on one single day in Denmark. Hailstorm claims cost a total of some DKK 42m or an average of some DKK 19,000 per claim. 

Run-off gains from prior-year losses were a gross amount of DKK 551m and had a positive impact of 8.5 percentage points on the claims ratio. Run-off gains were mainly attributable to our motor and accident lines in 2007, while workers’ compensation continued to require higher provisions for claims. In 2006, gross run-off gains amounted to DKK 206m with a positive impact of 3.2 percentage points on the claims ratio.

In order to secure the right balance between price and earnings we closely follow developments in average claims and claims frequencies in our large business areas such as building and motor. The average building claim in 2007 was largely unchanged from 2006. The average motor claim, on the other hand, increased by around 4%, among other things because more advanced cars with more expensive spare parts now form a greater part of the Danish car fleet. The hailstorm claims in the summer of 2007 also had a negative impact on the average motor claim. In order to counter the increasing average claim on motor policies, we arrange for as many repairs as possible to be performed by garages we cooperate with. Our size in the market allows us to provide a stable inflow of assignments to such garages, giving us advantages with respect to repairs which benefit both customers and TrygVesta.

The claims frequency on building policies was higher in 2007, mainly due to weather-related claims. Motor policies also recorded a higher claims frequency, primarily attributable to vandalism and a greater number of thefts of GPS and other equipment.

Historically low combined ratio

The combined ratio improved by 6.2 percentage points to 80.3 in 2007. Run-off gains had a favourable impact of 8.5 percentage points and the combined ratio was also favourably impacted by the expense ratio, which improved by 0.7 percentage point to 16.7 in 2007. The large number of water-damage claims had a negative impact of 3.7% on the combined ratio.
 

Focus areas in 2008

We began implementing the LEAN principle in parts of our organisation in 2007 with a view to making our processes even more efficient and create added value for customers and employees alike. We will continue to implement LEAN over the next few years.

We have defined ambitious growth targets, and we will focus strongly on sales in 2008. We intend to implement a range of sales activities in 2008, introduce customer benefits and relaunch several products in more attractive versions. Our focus in 2008 also includes sustaining the significant growth in Health Care, including launching new products.