Topdanmark's Annual Report for 2012ar2012.sampo.com/.../Topdanmark_annual_report_2012.pdf · Topdanmark's Annual Report 2012 Announcement No. 03/2013 from Topdanmark A/S Page 5 of

Topdanmark A/S

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ShAre profileThe Topdanmark share is a value case – not a growth case

Focused strategy

} danish player

} Stable insurance risks

} low expense ratio

} limited financial risk

} efficient capital management

} limited top line growth

} profitable growth - in that order

} High net result

} large share buy-back programme

} no protection against a take-over in the articles of association

read more about Topdanmark’s equity story on www.topdanmark.com ¬ Share profile.

Topdanmark's Annual Report 2012

Announcement No. 03/2013 from Topdanmark A/S Page 1 of 101

Topdanmark Annual Report 2012 5 March 2013 Announcement No. 03/2013

Key features of Annual Report 2012 • Post-tax profit of DKK 1,823m (2011: DKK 1,023m) −

78.2% increase • Better than assumed result in Q1-Q3 2012 interim

report • Profit per share increase 91.0% to DKK 142.1 • Combined ratio improved to 88.0% (2011: 90.3%)

primarily due to lower weather-related claims • Combined ratio excluding run-off profits improved to

90.3% (2011: 92.0%) • Premiums increased 1.1% in non-life insurance and

declined 4.3% in life insurance • Investment return increased to DKK 1,336m (2011:

DKK 652m) • Result of life insurance increased to DKK 210m

(2011: DKK 187m) • Topdanmark bought back own shares of DKK

1,200m, which was in line with the buy-back assumed in the Q1-Q3 2012 interim report.

Q4 2012 • Post-tax profit increased to DKK 453m (Q4 2011:

DKK 350m) • Combined ratio improved to 88.2% (Q4 2011: 89.6%) • Combined ratio excluding run-off profits was 91.7%

(Q4 2011: 91.5%) • Premiums increased 0.3% in non-life insurance and

declined 21.7% in life insurance • Investment return increased to DKK 343m (Q4 2011:

DKK 233m). Profit forecast model for 2013 • Assumed combined ratio for 2013 has been

increased from around 91% to 91-92%, excluding run-off profits / losses due to reforms affecting the level of compensation for loss of earnings potential

• Assumed premium growth in non-life insurance continues at 1-2%

• Post-tax profit forecast model is DKK 1,050-1,150m, excluding run-off profits / losses, being DKK 95 profit per share.

Share buy-back • In its Q1-Q3 2012 interim report Topdanmark

announced that DKK 500m of the share buy-back programme had been postponed because it wanted to develop a new model for calculation of individual solvency in life insurance before the amount was paid out.

• As this model is now in place, the DKK 500m from

2012 has been included in the share buy-back programme for 2013

• Consequently, the share buy-back programme for 2013 is now DKK 2,000m including the DKK 500m transferred from the 2012 buy-back programme. The buy-back of DKK 2,000m represents a yield of 12.4%.

In a webcast today Topdanmark's CEO, Christian Sagild, will present the financial highlights and comment on the forecast. A conference call will be held today at 15:30 (CET) when Christian Sagild, CEO, and Lars Thykier, CFO, will be available for questions based on the Annual Report and the webcast. The call will be conducted in English. In order to participate in the conference call, please phone: UK dial in number: +44 (0)20 7162 0125 US dial in number: +1 866 803 8344 quoting reference 929302 10-15 minutes before the conference asking the operator to connect you to the Topdanmark conference call – or listen to the live transmission of the call. Please direct any queries to: Christian Sagild Chief Executive Officer Direct tel.: +45 4474 4450 Lars Thykier Chief Financial Officer Direct tel.: +45 4474 3714 Steffen Heegaard Group Communications and IR Director Direct tel.: +45 4474 4017, mobile: +45 4025 3524

http://presenter.qbrick.com/?pguid=ea72cf8f-db42-43a4-99f1-a63a351371c3

http://webeventservices.reg.meeting-stream.com/75381_topdanmark/



Contents Management’s review 1 Key features of Annual report 3 Financial highlights 4 Profit of DKK 1,823m in 2012 4 Profit of DKK 453m in Q4 2012 5 Non-life insurance 11 Life insurance 13 Investment activities 16 Parent company etc. 16 Taxation 16 Prospects for 2013 19 Share buy-back 20 Share split 20 Value creation in Topdanmark 22 Risk management 25 Solvency 27 Capital model 28 Board of Directors and Articles of Association 29 Severance pay 29 Remuneration structure 30 Corporate Governance 30 CSR 30 Investor Relations 32 Annual General Meeting 32 Financial calendar 33 List of company announcements and trading reports 34 Board of Directors and Executive Board 39 Five-year summary - Group Annual financial statements - Group 40 Income statement 41 Statement of comprehensive income 42 Assets 43 Shareholders' equity and liabilities 44 Cash flow statement 45 Statement of changes in equity 46 Notes to the financial statements 79 Accounting policies

89 Annual financial statements - Parent company

97 Disclaimer 98 Statement by Management on the Annual Report Auditors' reports 99 Internal audit's reports 100 Independent auditor's reports 101 Group Structure



Financial highlightsQ4 Q4

(DKKm) 2008 2009 2010 2011 2012 2011 2012

Premiums earned:Non-life insurance 8,952 8,665 8,548 8,668 8,759 2,201 2,209Life insurance 3,980 3,208 3,395 3,303 3,161 968 757

12,932 11,873 11,943 11,971 11,920 3,169 2,966

Results:Non-life insurance 91 1,592 1,092 1,086 2,103 374 529Life insurance (57) 292 384 187 210 69 46Parent company etc. (58) (21) 31 76 22 13 18Pre-tax profit / (loss) (24) 1,863 1,506 1,349 2,335 457 593Tax (165) (417) (338) (326) (512) (106) (140)Profit / (loss) (189) 1,446 1,168 1,023 1,823 350 453

Run-off profits, net of reinsurance 506 214 204 148 201 41 77

Shareholders' equity of parent companyat 1 January 3,716 3,243 4,465 4,900 4,915 4,738 5,489Profit / (loss) (189) 1,446 1,168 1,023 1,823 350 453Share buy-back (371) (376) (892) (1,159) (1,200) (186) (272)Share-based payments 77 150 159 150 177 12 46Other movements in shareholders' equity 10 2 1 1 2 0 1Shareholders' equity of parent companyend of period 3,243 4,465 4,900 4,915 5,716 4,915 5,716

Deferred tax on security funds (348) (348) (348) (348) (348) (348) (348)Shareholders' equity of Group end of period 2,895 4,117 4,553 4,567 5,368 4,567 5,368

Capital base, parent company*) 3,645 4,868 5,305 5,319 6,122 5,319 6,122

Total assets, parent company 4,819 5,467 5,712 6,408 6,895 6,408 6,895Total assets, Group 52,035 56,554 57,542 61,013 59,435 61,013 59,435Provisions for insurance and investment contracts:Non-life insurance 13,685 14,478 15,139 16,228 16,251 16,228 16,251Life insurance 24,938 28,882 31,166 30,618 32,553 30,618 32,553

Financial ratios (parent company)Post-tax profit / (loss) as a % of shareholders' equity (5.6) 36.6 24.1 21.1 33.9 7.2 8.0Post-tax profit / (loss) per share (DKK) (12.1) 92.2 77.2 74.4 142.1 26.0 36.4Post-tax profit / (loss) per share, diluted (DKK) (12.1) 91.7 77.0 74.4 142.1 26.0 36.4Net asset value per share (DKK) 207.1 288.1 338.6 368.7 461.2 368.7 461.2Share buy-back per share (DKK) 23.4 23.8 58.8 84.3 93.6 13.8 21.8Listed share price end of period 687 703 738 895 1,213 895 1,213

Average number of shares ('000) 15,640 15,688 15,131 13,741 12,828 13,448 12,461Average number of shares, diluted ('000) 15,640 15,769 15,159 13,746 12,828 13,448 12,461

Number of shares end of period ('000) 15,663 15,496 14,472 13,332 12,394 13,332 12,394

Ratios non-life insurance (%)Gross loss ratio 64.6 73.1 75.5 78.2 70.0 72.1 69.7Net reinsurance ratio 3.1 3.1 2.4 (3.6) 2.2 1.6 2.5Claims trend 67.7 76.2 77.9 74.6 72.2 73.7 72.2Gross expense ratio 14.7 14.9 15.4 15.7 15.8 15.9 16.0Combined ratio 82.4 91.1 93.3 90.3 88.0 89.6 88.2

Operating ratio 80.4 90.1 92.7 89.6 87.8 89.3 88.1Combined ratio excl. run-off profits 88.1 93.6 95.7 92.0 90.3 91.5 91.7

*) Shareholders' equity and loan capital



Comparison between actual resultsand profit forecast model results

Actual Actualresults for results for

(DKKm) 2011 2012

Non-life insurance- Technical result 907 950 – 1,000 1,068- Investment return after transfer to technical result etc. 179 820 – 870 1,036Profit on non-life insurance 1,086 1,770 – 1,870 2,103Life insurance 187 170 – 200 210Parent company etc. 76 20 – 30 22Pre-tax profit 1,349 1,960 – 2,100 2,335Taxation (326) (410) – (450) (512)

Profit for the year 1,023 1,550 – 1,650 1,823

Forecast for 2012as in Q1-Q3

interim report

Profit of DKK 1,823m in 2012 Topdanmark’s post-tax profit for 2012 increased 78.2% to DKK 1,823m (2011: DKK 1,023m). Profit per share increased 91.0% to DKK 142.1. This profit of DKK 1,823m was better than the DKK 1,550-1,650m assumed in the most recent profit forecast model

for 2012 in the Q1-Q3 2012 interim report due to a combination of a better investment return and a better than assumed technical result in Q4 2012.

Pre-tax profit increased DKK 986m to DKK 2,335m from 2011 to 2012.

Trend in pre-tax result(DKKm) 2011 2012

Non-life insurance- Technical result 907 1,068- Investment return after transfer to technical result etc. 179 1,036Profit on non-life insurance 1,086 2,103Life insurance 187 210Parent company etc. 76 22Pre-tax profit 1,349 2,335

The technical result increased DKK 161m to DKK 1,068m mostly due to lower weather-related claims and higher run-off profits. On the other hand, the technical result was adversely affected by the declining interest rates. The investment return increased DKK 857m to DKK 1,036m due to the generally positive financial markets for equities and credit products in 2012. Profit on life insurance increased DKK 23m to DKK 210m due to, among other factors, a higher investment return. Profit of the parent company etc. declined DKK 54m to DKK 22m. This decline was due to a DKK 25m write-down of a property and particularly high earnings in Topdanmark Kapitalforvaltning in 2011.

Profit of DKK 453m in Q4 2012 Post-tax profit increased to DKK 453m in Q4 2012 (Q4 2011: DKK 350m) which was somewhat better than assumed in the profit forecast model for 2012 in the Q1-Q3 2012 interim report (Q4 2012: DKK 180-280m). As described above, the improvement was due to a combination of a better investment return and a better than assumed technical result.



Trend in pre-tax result Q4 Q4(DKKm) 2011 2012

Non-life insurance- Technical result 236 263- Investment return after transfer to technical result etc. 138 266Profit on non-life insurance 374 529Life insurance 69 46Parent company etc. 13 18Pre-tax profit 457 593

Pre-tax profit was DKK 593m in Q4 2012 (Q4 2011: DKK 457m). The technical result increased DKK 27m to DKK 263m due to lower weather-related claims and higher run-off profits. The investment return increased DKK 128m to DKK 266m. Profit on life insurance declined DKK 23m to DKK 46m primarily due to a slightly lower risk allowance, lower recognition as income from the shadow account of Life V and a lower return on Topdanmark Link. Profit of the parent company etc. increased DKK 5m to DKK 18m.

Non-life insurance Danish non-life insurance market Key features of the Danish non-life insurance market in 2012: • Positive effect of price increases • 1% growth in premiums • Exceptionally low level of weather-related claims

improved the combined ratio by around 1.5pp • Lower average premium in motor insurance • In spite of declining theft frequency for contents

insurance policies, an increase in the average claim increased the overall claims trend

• Increase in claims level of policies covering loss of earnings potential due to a reform of early retirement pension

• Lower interest rates had a 1-2pp adverse effect on the combined ratio

• Overall, it is believed that the combined ratio for 2012 was around 92% excluding run-off profits

• Run-off profits had a positive effect on the combined ratio of around 3pp.

The general price increases from most of the insurance companies in the Danish market in 2011 were replaced by more selective price increases in 2012. The price increases were mainly effected in house, contents, SME insurance and workers' compensation insurance. In 2012 a new house inspection scheme took effect providing new minimum conditions for change of ownership policies. Due to the new conditions the cover of the policy has been increased, and consequently the price of change of ownership policies has also been increased. Overall, the price increases are estimated to have had a 0.3-0.5% positive effect on gross premiums earned. Automatic price indexation in the personal and SME market was 1.9%, which is estimated to have an overall effect of around 1.4% for the entire market. Also in 2012 prices in the industrial market were under pressure. Including the effect of price increases growth in gross premiums earned is estimated to be around 1%. The level of rainstorm claims was lower than normal. This applies to both storm and rainstorm claims, which are the highest weather-related risks. The lower level of weather-related claims is estimated to have had a favourable effect on the combined ratio of around 1.5pp. Car sales moved towards relatively smaller and more roadworthy cars from 2011 to 2012, which contributed to a decline of around 0.8% in average premium, in spite of automatic indexation of 1.9%. The number of reported incidents of car damage declined 9% from 2011 to 2012. In contents insurance recent years' trend of declining claims frequency but increasing average claims continued into 2012. Efforts by the police to get closer to the public seem to have helped reduce the number of thefts. On the other hand, the size of average claims increased due to, among other factors, more organised burglary behaviour and an increase in the value of theft attracting items. Overall, it is believed that the claims trend in contents insurance has increased in 2012. At the end of 2012, the Danish Parliament adopted a reform of the rules for early retirement pension taking effect on 1 January 2013. As there is a relation between workers' compensation, motor liability, illness / accident insurance claims and the reform, the reform will have financial consequences for the size of the compensation. Generally, the public subsidy to people in flex-jobs will decline, meaning that a larger share of the loss incurred by a claimant in a flex-job needs to be covered by the



insurance policy. Furthermore, the reform provides that temporary annuities in workers' compensation will be paid for a longer period than today which, other things being equal, will have an adverse effect on the claims. The Danish National Board of Industrial Injuries has estimated that Danish workers' compensation insurance companies alone will incur a retrospective loss of about DKK 250m on the private companies, while in the future the annual claims will increase around DKK 90m, representing about 2% of premiums earned on workers' compensation insurance policies. Additionally, there will be an increase in expenses on other policies covering loss of earnings potential. As provisions for outstanding claims are discounted to present value, lower interest rates will increase the payments on claims. Interest rates were lower in 2012 than in 2011 which, depending on the composition of the portfolio, increased the combined ratio by 1-2pp. It is estimated that the overall combined ratio, excluding any run-off profits / losses, was around 92% for the entire market in 2012. However, there are significant differences between the combined ratios of the individual companies. The run-off profits are estimated to have had a favourable effect of around 3pp on the combined ratio. The run-off profits, which are estimated to be slightly higher than normally, are typically in long-tail lines such as workers' compensation, accident and motor liability. Result of non-life insurance in Topdanmark Premiums earned Premiums earned increased 1.1% to DKK 8,759m in 2012, which was slightly lower than the assumed premium growth of 1-2% (as in the Q1-Q3 2011 interim report). The growth in premiums was affected by a run-off profit in a captive, administered by Topdanmark, releasing a premium bonus of DKK 19m. Premium bonuses are deducted from premiums earned. Premiums earned benefitted from automatic price indexation of 1.9pp with an effect of around 1.4pp on total premiums. On the other hand, premiums earned were only marginally impacted by extraordinary price increases.

In 2012 Topdanmark increased market pressure on the personal segment, the SME segment and farms which improved its competitive situation. For example, the customer exchange ratio in the personal segment gradually improved during the year due to, among other factors, an increase in the retention percentage. The improved customer exchange ratio was not reflected in premiums earned in 2012 but is expected to have a favourable effect on premium growth in 2013. Typically, profitability for major businesses does not meet Topdanmark's return requirements, leading to a loss of some major unprofitable customers in 2012. Claims trend The claims trend improved to 72.2% in 2012 (2011: 74.6%) This 2.4pp improvement was mostly due to a decline in weather-related claims to DKK 48m net of reinsurance (2011: DKK 285m net of reinsurance), representing a 2.7pp improvement of the claims trend at group level. Topdanmark assumes DKK 170m net of reinsurance as a normal level of weather-related claims. Weather-related claims were DKK 122m lower than this level in 2012, corresponding to a 1.4pp effect on the claims trend. Run-off profits net of reinsurance were DKK 201m in 2012 (2011: DKK 148m). As compared to 2011 run-off profits had a 0.6pp positive effect on the claims trend. Run-off profits in workers' compensation insurance represented DKK 148m of run-off profits in 2012. Fire claims net of reinsurance declined DKK 32m, corresponding to a 0.4pp improvement of the claims trend. The improvement was mainly due to a favourable claims trend in the personal segment. The interest rate curve used to discount the provisions for outstanding claims was lower in 2012 than the previous year, which impacted the claims trend adversely by 1.6pp. The reform on the rules on early retirement pension increased the claims level for those policies covering loss of earnings potential, with a 0.4pp adverse effect on the claims trend.



Expense ratio The expense ratio increased marginally to 15.8% (2011: 15.7%). Combined ratio Overall expenses on claims, reinsurance, sales and administration as a percentage of gross premiums earned (combined ratio) improved to 88.0% (2011: 90.3%).

Excluding run-off profits the combined ratio improved to 90.3% (2011: 92.0%). Weather-related claims of the year had an effect on the combined ratio, which was 1.4pp lower than the normal effect. Accordingly, the underlying combined ratio was 91.7% (2011: 90.7%) excluding run-off profits.



Financial highlights – Non-life insurance Q4 Q4(DKKm) 2011 2012 2011 2012

Gross premiums earned 2,201 2,209 8,668 8,759Technical interest 7 2 65 20Claims incurred (1,587) (1,541) (6,773) (6,131) Expenses (351) (353) (1,365) (1,388) Net reinsurance (35) (54) 312 (193) Technical profit 236 263 907 1,068

Investment return after transfer to technical result 130 260 123 1,015Other items 8 6 55 20Profit on non-life insurance 374 529 1,086 2,103

Run-off profits, net of reinsurance 41 77 148 201

Gross loss ratio (%) 72.1 69.7 78.2 70.0Net reinsurance ratio (%) 1.6 2.5 (3.6) 2.2Claims trend (%) 73.7 72.2 74.6 72.2Gross expense ratio (%) 15.9 16.0 15.7 15.8Combined ratio (%) 89.6 88.2 90.3 88.0

Operating ratio (%) 89.3 88.1 89.6 87.8

Combined ratio excl. run-off profits (%) 91.5 91.7 92.0 90.3

Developments in Q4 Premiums earned in Q4 2012 increased 0.3% to DKK 2,209m. This moderate premium growth was due to the DKK 19m payment of bonus in a captive, referred to previously, corresponding to an adverse effect of 0.8pp on premium growth. The claims trend improved 1.5pp to 72.2% in Q4 2012 (Q4 2011: 73.7%) due to a lower level of weather-related claims (2.9pp) and higher run-off profits (1.6pp). On the other hand, the lower interest rates had a 1.1pp adverse effect on the claims trend. Furthermore, a worse claims trend in fire had a 0.9pp adverse effect on Topdanmark's

claims trend. Finally, the reform referred to in The Danish non-life insurance market increased payments on claims. The size of these extra costs is very uncertain, but it has been decided to recognise extra claims of DKK 35m, which had a 1.6pp adverse effect on the claims trend in Q4 2012. The expense ratio increased to 16.0% in Q4 2012 (Q4 2011: 15.9%). The combined ratio improved to 88.2% in Q4 2012 (Q4 2011: 89.6%). Excluding run-off profits it was 91.7% (Q4 2011: 91.5%).



Segment reporting Personal The Personal segment sells policies for individual households in Denmark. Premiums earned increased 0.2% to DKK 4,767m in 2012 reflecting growth in house and contents insurance while there was a decline in motor insurance. Furthermore, premiums were affected by a decline in premiums earned in illness / accident insurance (I/A). The growth in premiums was 0.3% negative in Q4. Adjusted for I/A, premium growth was 0.5% in 2012 and 0.8% in Q4. Topdanmark's competitive situation improved gradually in 2012. Sales through Topdanmark's own sales channels increased 6.4%. Topdanmark has changed its decentralised sales organisation from insurance outlets to larger sales centres and has expanded its sales team. The new sales organisation was in place at the end of 2012.

Premiums earned on motor insurance declined 2.4% in 2012 due to, among other things, a lower average premium because increasingly smaller and more roadworthy cars are sold. The claims trend improved 1.2pp to 73.2% primarily due to an improved claims trend for weather-related claims. Run-off profits were DKK 31m in 2012 (2011: DKK 23m) which had a 0.2pp positive effect on the claims trend as compared to 2011. The run-off result in 2012 was a combination of a loss on I/A and profits on, among others, accident and motor liability insurance. The expense ratio increased to 16.2% from 15.8% due to the strengthening of distribution efficiency in the personal segment, see Distribution power. The combined ratio improved to 89.4% from 90.2%. Excluding run-off it improved to 90.1% from 90.7%.



Personal Q4 Q4(DKKm) 2011 2012 2011 2012

Gross premiums earned 1,210 1,206 4,756 4,767Technical interest 5 1 33 10Claims incurred (903) (855) (3,762) (3,464)Expenses (197) (201) (753) (774)Net reinsurance 0 (40) 226 (24)Technical result 114 111 501 514

Run-off profits / (losses), net of reinsurance 14 (5) 23 31

Gross loss ratio (%) 74.6 70.9 79.1 72.7Net reinsurance ratio (%) (0.0) 3.3 (4.7) 0.5Claims trend (%) 74.6 74.2 74.4 73.2Gross expense ratio (%) 16.3 16.6 15.8 16.2Combined ratio (%) 90.9 90.9 90.2 89.4

Operating ratio (%) 90.6 90.8 89.5 89.2

Combined ratio excl. run-off (%) 92.1 90.5 90.7 90.1

SME and Industrial The SME and Industrial segment offers policies for Danish-based SME, agricultural and industrial businesses. Premiums earned increased 2.0% to DKK 4,011m in 2012 and in Q4 they increased 0.9%. The growth in premiums was impacted by severe competition in workers' compensation insurance and a premium bonus of DKK 19m on a captive scheme − a premium bonus which was deducted from premiums earned. Generally, the loss of customers was lower − except for workers' compensation insurance − due to, among other factors, a new servicing concept. SME and Industrial saw a 2.6% increase in motor insurance customers which more than offset the decline in these customers in the personal segment.

The claims trend improved 3.7pp to 71.2% primarily due to a favourable agricultural claims trend caused by, among other factors, a low level of weather-related claims. In Q4 fire claims net of reinsurance were DKK 21m higher than the level of Q4 2011, which had a 0.5pp adverse effect on the claims trend. Run-off profits increased to DKK 170m in 2012 (2011: DKK 125m) giving a 1.1pp positive impact on the claims trend. This run-off profit related mainly to workers' compensation insurance. The expense ratio declined 0.3pp to 15.3%. The combined ratio improved to 86.5% in 2012 (2011: 90.5%). Excluding run-off profits it declined to 90.8% (2011: 93.7%).



SME and Industrial Q4 Q4(DKKm) 2011 2012 2011 2012

Gross premiums earned 997 1,006 3,934 4,011Technical interest 2 1 31 11Claims incurred (689) (688) (3,034) (2,686)Expenses (155) (152) (614) (615)Net reinsurance (35) (14) 86 (169)Technical result 120 152 403 552

Run-off profits, net of reinsurance 27 82 125 170

Gross loss ratio (%) 69.2 68.4 77.1 67.0Net reinsurance ratio (%) 3.5 1.4 (2.2) 4.2Claims trend (%) 72.7 69.8 74.9 71.2Gross expense ratio (%) 15.5 15.1 15.6 15.3Combined ratio (%) 88.2 85.0 90.5 86.5

Operating ratio (%) 88.0 84.9 89.8 86.3

Combined ratio excl. run-off (%) 90.9 93.1 93.7 90.8

Life insurance Danish life and pension market In 2012 the Danish life and pension market was characterised as follows: • Reduction in deductibility of term life premiums • Pension return tax increased from 15.0% to 15.3% • It is believed that the level of overall payments into

regular premiums was relatively unchanged. The deductibility of payments into term life premiums and terminable annuities was reduced from an annual DKK 100,000 to DKK 50,000 with effect from 1 January 2012. This lowering of the deductibility ceiling reduced the savings of term life insurance. On the other hand, there was an increased demand for annuities for which there is full deductibility. With effect from 1 January 2012 the tax rate for pension returns was increased from 15.0% to 15.3%.

It is believed that overall pension payments into regular premiums were relatively unchanged in 2012. Result of life insurance in Topdanmark The result from life insurance was a profit of DKK 210m in 2012 (2011: DKK 187m) mainly due to an improved investment return. Profit on life insurance activities comprises the sum of the profits generated by Life I and Life V plus the investment return of Life Holding. These profits were calculated in accordance with the stated policy on the calculation of profit for the life insurance companies: see www.topdanmark.com → Investor →Business → Life insurance → Policy for the calculation of profit in life insurance.

Result of life insurance2011 2012

(DKKm) Life I Life V Group Life I Life V Group

Investment return 63 41 105 73 56 129Risk allowance 117 61 178 105 60 165Transferred, shadow account (112) (2) (114) (116) (2) (117)Other 18 34Profit on life insurance 187 210

Shadow account end of period 112 2 114 233 4 236

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Most of the customers are spread across Life I, Life V and Topdanmark Link. Policies written since 1 July 1994 with guaranteed pension benefits of 2.5%, 1.5% and 0.5% are placed in Life I which is also the company for new customers with guaranteed benefits. Schemes written before 1 July 1994 with guaranteed pension benefits of 4.5% are placed in Life V. Unit-linked schemes are written by Topdanmark Link. The return on funds owned by customers, before pension return tax, was 6.0% in Life I and 12.0% in Life V. The investment return on shareholders' equity increased from DKK 105m in 2011 to DKK 129m in 2012 representing 5.2% in Life I and 5.8% in Life V. The investment return on shareholders' equity is different from that on customers' funds due to different investment strategies and separate portfolios for each; for example, at present shareholders' equity does not invest in equities nor does it use instruments to hedge the guaranteed benefits. The risk allowance was DKK 165m in 2012 (2011: DKK 178m). The “insurance technical result before bonus” of Life I and Life V was not sufficient to fully include in income a risk allowance in all the contribution groups. Therefore DKK 117m was transferred to the shadow account which totalled DKK 236m at the end of 2012.

The amount in the shadow account will be recognised as income in line with profits being generated in those contribution groups which have made transfers to the shadow account. "Other" comprises primarily the investment return of Life Holding of DKK 14m and the result from Topdanmark Link of DKK 11m. The improvement of DKK 16m to DKK 34m was mainly due to a DKK 16m improvement in Topdanmark Link. Trend in premiums Gross premiums declined 4.3% to DKK 3,161m in 2012 (2011: DKK 3,303m). Regular premiums declined 6.7% to DKK 2,157m in 2012 as per the forecast set out in the Q1-Q3 2012 interim report. Single premiums increased 1.4% to DKK 1,004m in 2012 (2011: DKK 991m). There was an overall increase of 5.8% in premiums in unit-linked pension schemes. Regular premiums increased 9.9% to DKK 572m and single premiums 2.7% to DKK 685m. The share of new business written by unit-linked savings increased to DKK 60.6% in 2012 (2011: 52.6%).

Sources of gross premiumsQ4 Q4

(DKKm) 2011 2012 2011 2012

Individual schemes 141 132 348 330Corporate schemes 245 201 1,035 855Group life 36 37 409 399Unit-linked schemes 140 169 520 572Regular premiums 562 539 2,312 2,157

Individual schemes 15 8 55 57Corporate schemes 93 68 268 262Unit-linked schemes 297 143 667 685Single premiums 406 218 991 1,004

Gross premiums 968 757 3,303 3,161



Result of life insurance Q4 Q42011 2012

(DKKm) Life I Life V Group Life I Life V Group

Investment return 17 11 28 11 13 25Risk allowance 27 14 42 22 15 37Transferred, shadow account (27) 7 (19) (27) (0) (28)Other 19 12Profit on life insurance 69 46

Developments in Q4 2012 The decline in profit to DKK 46m in Q4 2012 (Q4 2011: DKK 69m) was primarily due to a slightly lower risk allowance, lower recognition as income from the shadow account of Life V and a lower return on Topdanmark Link.

Overall premiums declined 21.7% to DKK 757m in Q4 due to a 46.2% decline in single premiums to DKK 218m while regular premiums declined 4.1% to DKK 539m.

Rate of interest on policyholders’ savings in 2012 and 2013 On 1 July 2012 the rate of interest on policyholders' savings was reduced in Life I and Life V. In Life I it was reduced from 2.25% to 1.8% before pension return tax and in Life V from 4.35% to 2.0% before pension return tax. Due to the improvement in the investment return the rate of interest on policyholders' savings has been increased with effect from 1 January 2013. In the interest rate group writing new business in Life I, the rate of interest on policyholders' savings was increased from 1.8% to 2.0% before pension return tax and in all of the interest rate groups of Life V from 2.0% to 4.35% before pension return tax. These rates may be subject to change if the development in the financial markets is different from expectations. Loss participation scheme Loss participation is a temporary measure introduced in periods where the market value of the customers' assets is lower than the sum of their savings and only serves a purpose when customers who want to leave the scheme prematurely need to have their surrender value calculated correctly. Should customers choose to leave their schemes prematurely, the loss participation is taken into account in the calculation of the surrender value of their policies in order to ensure that those customers who leave do not take with them funds owned by those who stay. Loss participation only applies to with-profits

products and it is not deductible in the event of retirement, death and disability. Due to the development in the financial markets with a decline in equity prices and declining interest rates, Life I had to introduce loss participation in 2012. The loss participation scheme is calculated and adjusted once a month and was 0.8% on 5 March 2013 in interest rate group 2 in Life I. There are no loss participation schemes in the other interest rate groups of Life I. As long as the loss participation scheme is in force, the risk allowance will be transferred from the interest rate group concerned to the shadow account from where it will be brought into income when the scheme has been removed. Loss participation has at no time been introduced in Life V. Investment activities Topdanmark Group excluding life insurance The investment return in the Topdanmark Group excluding life insurance was DKK 1,336m in 2012 including a revaluation of provisions and income from associated companies but before the transfer to the technical result (2011: DKK 652m). It is Topdanmark's policy to accept a certain level of financial risk, given its strong liquid position and stable, high earnings from insurance operations. Topdanmark has invested in, among others, equities, properties and CDOs in order to improve the average investment return. The return in Q4 2012 and in 2012 on the most significant classes of assets is disclosed in the following table:



Investment return Portfolio 31 Dec2011 2012

(DKKm) % (DKKm) % (DKKm) % (DKKm) %

Danish equities 0.3 0.4 8 1.5 (13) (3.6) (55) (14.1) 44 12.9Foreign equities 0.8 0.7 31 3.7 28 3.3 (56) (6.8) 112 15.1Government and mortgage bonds 12.7 11.4 48 0.4 140 1.2 277 2.2 525 4.4Credit bonds 0.5 0.6 (7) (0.8) 28 5.2 6 1.0 98 21.2CDOs 0.7 0.8 58 8.5 85 11.8 173 26.0 305 51.6Properties 1.4 1.4 33 2.5 (7) (0.5) 100 7.7 33 2.4Assets related to I/A 1.8 2.1 58 3.3 56 2.8 143 8.5 192 10.1Money market etc. 2.9 2.3 (1) (0.1) (12) (0.3) 26 0.9 7 0.2Subordinated loan capital (1.2) (1.2) (17) (1.4) (15) (1.4) (52) (5.3) (63) (5.4)Interest-bearing debt (2.7) (0.4) (8) (0.2) (2) (0.2) (27) (1.0) (11) (0.6)

17.2 18.2 204 1.2 289 1.6 534 3.1 1,241 6.9Asset management 29 54 118 95Total investment return 233 343 652 1,336

Transferred return technical provisionsDiscounting (65) (49) (323) (217)Technical interest (7) (2) (65) (20)

The exposure in foreign equities and credit bonds have been adjusted by the use of derivatives. The return percentages are calculated as the ratio

between the return on financial instruments and the size of the exposure of the underlying asset. The return on government and mortgage bonds

and assets related to I/A (illness/accident) includes revaluations of claims provisions. From 2012 the return related to I/A has been calculated before

pension return tax whereas in 2011 it was calculated after pension return tax. The comparatives for 2011 have been restated.

(DKKbn)Return 2012Return Q4 2011 Return Q4 2012 Return 2011

The investment return after the transfer to the technical result was DKK 1,099m, which generated an exceptionally large deviation from the expected return given Topdanmark's current risk profile. This high deviation should be viewed in the light of the highly positive investment year 2012 when the returns on both equities and bonds were high. Furthermore, Topdanmark's relatively high exposure in credit products, including CLOs, contributed to a significant excess return. Danish mortgage bonds, in which Topdanmark's exposure is high, performed well in 2012. Also a fortunate positioning in European government bonds, primarily from the core countries, contributed to the excess return. Finally, a change in the discount curve used by Danish insurance companies to value liabilities (see below) generated a gain of DKK 76m. Generally, the difference between the interest rate exposure of assets and liabilities has been relatively small. Therefore, given the expected development in general interest rates, the positioning has only contributed modestly to the excess return. The post-tax equity exposure was DKK 682m (pre-tax: DKK 909m) excluding associated companies but including the impact of derivatives.

The equity portfolios are well diversified with no large individual positions. The composition of the portfolios is based on OMXCCAP for Danish equities (representing around 30% of the portfolio at 31 December 2012) and MSCI World in the original currency for foreign equities. The Group's investments have no significant concentration of credit risk except for AAA-rated Danish mortgage bonds which are considered to be particularly safe assets according to the Danish Financial Business Act. Since 31 October 2008, Danish insurance companies and pension funds have calculated the value of provisions by using a discount rate representing the combined weighting of the swap rate and the option-adjusted Danish mortgage credit rate. With effect from June 2012, the curve has been adjusted as convergence towards a fixed forward interest rate of 4.2% has been incorporated from the 20-year point. Therefore, the revaluation of long-tail provisions is less sensitive to changes in the market rate for long-term assets.



Most of the portfolio comprises high-quality mortgage bonds, which ensures consistency between the investment return and the discount rate. The class of government and mortgage bonds comprises primarily Danish mortgage bonds and revaluation of technical provisions. In addition, there are government bonds mainly from European core countries, covered bonds and derivatives. Covered bonds are AAA-rated mortgage bonds where the size of the loan may not exceed 70% of the value of the security. If the value of the security declines so much that the requirement is not fulfilled, the issuer will provide further security. Credit bonds with a rating lower than BBB (DKK 209m) comprise senior secured bank loans and high yield bonds, part of which are convertible, and subordinated bank capital issued by EU banks. Credit bonds with a rating of BBB and A (DKK 344m) are ordinary and convertible corporate bonds, annuity policies and subordinated bank capital issued by EU banks. Credit bonds with a rating higher than A (DKK 11m) are corporate bonds. The underlying assets of CDOs are mostly senior secured bank loans while the remainder are primarily CDOs with investment grade investments as the underlying assets. The maturity of the CDO investments is dependent on any changes in the payments made by the underlying assets which in turn are dependent on changes in the general economy and, therefore, it is not possible to outline the maturity distribution for the portfolio.

CDOs – Returns and portfolios

(DKKm) Q4 11 Q4 12 2011 2012

ReturnAAA and AA 2 6 5 13Lower than AA 57 79 168 292Total return 59 85 173 305

Interest 37 26 119 134Revaluations 22 59 54 171Total return 59 85 173 305

Book value 31 DecemberAAA and AA 100 99Lower than AA 592 719Total book value 692 818

Group excl. life insurance

The property portfolio comprises mainly owner-occupied property (DKK 861m), rental property (DKK 367m), rental office property (DKK 68m) and property rented for hotel use (DKK 96m). The tenancies for the residential and hotel properties are subject to a short termination notice. Re-letting of the residential properties is not considered to be a problem, but any re-letting of the hotels could be affected by the state of the market and local conditions. In this connection Topdanmark has chosen to write down a property by DKK 25m. The office property is rented under contracts with no option to terminate prior to 2015. Over 99% of the property portfolio is currently let. The properties are valued in accordance with the rules of the DFSA i.e. at market value taking into account the level of rent and the terms of the tenancy agreements. The class of "Assets related to IA" (illness / accident) comprises the investments in Topdanmark Livsforsikring corresponding to the size of the illness / accident provisions. "Money market etc." comprises primarily money market deposits and intra-group balances but also the result of currency positions. "Subordinated loan capital" comprises hybrid capital issued by the parent company and subordinated loans issued by Topdanmark Forsikring. "Interest-bearing debt" comprises other debt.



Financing It is expected that Solvency II will require a minimum level of solvency capital in insurance holding companies corresponding to the solvency requirements of the underlying group companies. When Solvency II has taken effect, the capital base of the parent company will be sufficient to finance the investments in the group companies. In accordance with the relevant rules Topdanmark is only allowed to use, for solvency cover, a small portion of the tier 2 capital issued as solvency resources in relation to Solvency II. As a consequence, some of the planned distribution of dividend from the insurance group to the holding company needs to be postponed until the rules are changed. In the meantime, the parent company Topdanmark continues to have some loan financing via intergroup accounts with the insurance group or in the money market. Parent company etc. The parent company Topdanmark A/S does not perform any independent activities. The result of the parent company etc. includes the results of subsidiaries excluding insurance business (primarily Topdanmark Kapitalforvaltning, the asset management company) and financing costs. Profit declined to DKK 22m in 2012 (2011: DKK 76m) due to the DKK 25m write-down of a property and particularly high earnings in Topdanmark Kapitalforvaltning in 2011. Topdanmark Kapitalforvaltning manages the Group's financial assets and liabilities and its result is dependent on the investment performance. Taxation The tax charge was DKK 512m on a pre-tax profit of DKK 2,335m corresponding to an effective tax rate of 21.9% (2011: 24.2%). The deviation from the nominal tax rate of 25% was primarily due to Topdanmark's utilisation of an uncapitalised equity loss carried forward and adjustment of previous years. Mostly all of the tax charge is paid in Denmark: www.topdanmark.com → About Topdanmark → CSR → Society → Social accounting.

Prospects for 2013 Expected trend in Danish non-life insurance market It is expected that in 2013 the Danish non-life insurance market will be characterised as follows: • Continued low economic growth • Most of the insurance companies have completed

their general price increases • 1-2% growth in premiums • Increase in claims level of policies covering loss of

earnings potential due to a reform of the early retirement pension

• Continued disciplined market • The level of weather-related claims was exceptionally

low in 2012. If the level of weather-related claims is normal in 2013, the combined ratio will deteriorate around 1.5pp from the 2012 level

• Overall, excluding any run-off profits / losses, the combined ratio is expected to be around 95%

• Run-off profits for 2013 are expected to be lower than in 2012.

2013 is expected to be affected by continued low economic growth. It is expected that BNP growth in the Danish economy will be around 1%. It is believed that most of the insurance companies in the Danish market have completed their general price increases. A number of those companies with a high combined ratio are expected to continue to implement selective price increases. In the personal and SME markets automatic price indexation, allowing for claims inflation, is 1.8% (though 5.6% for workers' compensation insurance) which, in turn, is estimated to have an effect of around 1.3% on the overall market. As in 2012, the average premium in motor insurance is expected to decline in 2013, primarily due to the sale of new cars, to a greater extent than previously, being smaller and cheaper cars, i.e. cars with a lower average insurance premium than bigger and more expensive cars. In addition, generally the claims trend in motor insurance has declined in recent years. Prices in the industrial market are expected to be under pressure also in 2013 due to competition from, among others, foreign insurance companies. Overall growth in gross premiums earned is estimated to be 1-2%. The reform of the rules for early retirement pension, see Danish non-life insurance market, will also in the future

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increase claims paid on policies covering loss of earnings potential. A continued disciplined market is expected in Denmark. All of the six largest insurance companies, representing a market share of 71%, are quoted on the stock exchange or owned by a quoted company. Additionally, the low interest rates will continue to influence the companies to ensure profitability of their primary operations. The claims trend was affected by low storm and rainstorm claims in 2012. If the level of weather-related claims is normal in 2013, the claims trend will deteriorate around 1.5pp from the 2012 level. Assuming a normal level of large-scale claims, it is expected that the combined ratio for the market, excluding any run-off profits / losses, will be around 95% in 2013. Run-off profits improved the combined ratio by around 3pp in 2012 which is estimated to be higher than the normal level. A more normal level of run-off profits is expected in 2013. Expected trend in Danish life and pension market It is expected that in 2013 the life and pension market will be characterised by: • Tax reform • Increased need for pension saving • Movement from with-profits to unit-linked schemes • Decline in regular premiums • New rules for calculation of individual solvency. Due to the tax reform, which took effect on 1 January 2013, the deductibility of payments into capital pension schemes has been removed. Furthermore, the opportunity has been given to prepay the tax on capital pension schemes which otherwise should be paid when the capital pension is paid out. The tax will be 37.3% in 2013 and 2014 while normally 40%. It is believed that most of the payments previously made into capital pension schemes will be paid into annuity schemes with full deductibility in the future. Due to the increase in life expectancy and expected lower investment returns pension customers will need larger savings.

The trend towards customers moving their pension savings from with-profits to unit-linked schemes is expected to continue. For example, more pension fund companies are offering their customers a grant or a share of unallocated resources if they choose to move their pension schemes from with-profits to unit-linked schemes. Due to the tax reform overall payments into regular premiums are expected to decline in 2013. The growth in premiums is expected to follow wage increases in the future. The DFSA has announced that in 2013 it will prepare new rules for the calculation of individual solvency: Individual solvency requirement. Topdanmark's profit forecast model for 2013 Traditionally Topdanmark does not publish actual profit forecasts but instead the expected level of results if a number of assumptions of the return in the financial markets are met. As the return in the financial markets changes on a daily basis, Topdanmark's profit forecast model will already deviate from actual expectations by the time it is published. Therefore set out in Risk scenarios is additional information on how changes in the assumptions underlying the profit forecast model will affect the results. As can be seen, the investment return forecast model is not based on a specific estimate of the expected investment return for the rest of the year but solely on a long-term standard assumption of the return. Non-life insurance In the interim report for Q1-Q3 2012 Topdanmark expected, for 2013, premium growth of 1-2% and a combined ratio of 91%, excluding any run-off profits / losses, based on the following assumptions: • Premium growth in personal lines is expected to be

higher than the assumed 1-2% overall premium growth for Topdanmark. Correspondingly, premium growth in the SME and industrial segment is expected to be lower than 1-2%

• Topdanmark has increased market pressure in the personal segment, SME businesses and farms. This helped to gradually improve the customer exchange ratio in the personal segment during 2012 and is assumed to have a favourable effect on premiums earned in 2013



• Topdanmark has no wish to participate in unprofitable competition, which is mostly seen in the market of major industrial businesses. Topdanmark's return requirements are expected to generate some loss of large businesses

• In order to improve the quality of its customer portfolio Topdanmark is implementing profitability promoting initiatives for less profitable customers, which is also expected to generate some loss of customers: Activities associated with pricing.

• A normal year for weather-related claims of DKK 170m, broken down by quarter: • Q1: DKK 50m • Q2: DKK 25m • Q3: DKK 45m • Q4: DKK 50m

• A level of interest rates corresponding to the interest rate curve on 2 November 2012

• An expense ratio of 16%. Since the most recent profit forecast model was published in the interim report for Q1-Q3 2012, the reform of early retirement pension, referred to above, has increased payments on claims by around 0.4pp. Therefore the assumed combined ratio, excluding run-off profits / losses, has been increased from around 91% to 91-92%. The assumed growth in premiums continues to be 1-2%. Overall the pre-tax result of non-life insurance is assumed to be DKK 960-1,060m. Life insurance Due to the tax reform limiting deductibility of term life premiums and the opportunity to prepay the tax on capital pension schemes, Topdanmark assumes a decline in regular premiums of around 5% in 2013. In the profit forecast model for 2013 it is assumed that the investment return will be sufficiently high to include in income an allowance for risk of DKK 160-170m and around DKK 140m from the shadow account. Consequently, the balance of the shadow account including interest will be around DKK 105m at the end of 2013. Assuming that interest rates do not change and the total return for 2013 exceeds 4.1% and 6.3% respectively, the shadow account relating to interest rate group 1 (shadow

account: DKK 150m) and interest rate group 2 (shadow account: DKK 53m) will be recognised as income in 2013. The DFSA has announced that the rules for calculation of individual solvency requirement will be changed with effect from 1 January 2014 and that concept of shadow account will be removed at the same time. It is not clear how the shadow account will be removed. One possibility is that the amount of the shadow account balance that could reasonably be expected to be recognised as income in keeping with the relevant rules will be posted to shareholders' equity on 1 January 2014. In such a scenario it is assessed that Topdanmark will have to write down DKK 30-40m of the remainder of the shadow account at 31 December 2013, after which the balance of the shadow account will be DKK 65-75m. The results are highly sensitive to fluctuations in the investment return. The risk allowance and shadow account are not finally calculated until the preparation of the 2013 Annual Report. Overall, pre-tax profit on life insurance is assumed to be DKK 390-420m. Parent company The profit forecast model for the parent company including subsidiaries outside of the insurance group shows a pre-tax profit of DKK 30-40m. Taxation Given a corporation tax rate of 25%, the tax charge is expected to be DKK 330-370m. The Danish Government has introduced a bill for reducing corporation tax, probably from 25% to 22%. It has also introduced a bill for increasing the payroll tax (tax on payroll costs in the financial sector) offsetting the reduction in corporation tax. Total Group profit The overall post-tax profit forecast model is assumed to be DKK 1,050-1,150m in 2013 representing a profit per share of DKK 95. This profit forecast model is subject to an annual 7.0% return on equities and unchanged foreign exchange rates from the level on 22 February 2013. Furthermore it is assumed that the return on interest-bearing assets hedging the discounted provisions is just sufficient to cover discounting and revaluation of the provisions, while the return on the remaining interest-bearing assets will be 2.48% (risk-free interest rate plus 2.0pp).



Profit forecast 2013

(DKKm) 2012

Non-life insurance- Technical result 1,068 740 – 790- Investment return after transfer to technical result etc. 1,036 220 – 270Profit on non-life insurance 2,103 960 – 1,060Life insurance 210 390 – 420Parent company etc. 22 30 – 40Pre-tax profit 2,335 1,380 – 1,520Taxation (512) (330) – (370)

Profit for the year 1,823 1,050 – 1,150

Forecastfor 2013

22 February 2013

Share buy-back In the interim report for Q1-Q3 2012 Topdanmark said that it had increased the share buy-back programme for 2012 by DKK 250m to DKK 1,700m, of which DKK 500m would be postponed to 2013. The actual buy-back for 2012 was DKK 1,200m representing a buy-back yield of 9.4%. The reduction in shareholders' equity of DKK 1,200m was partly offset by a DKK 177m strengthening of shareholders' equity through the issue of share options, exercise of share options and issue of employee shares. The postponement of the buy-back of DKK 500m was due to a general notification from the DFSA to the industry which provided that the model which Topdanmark, among other companies, used to calculate solvency requirements in life insurance cannot be used until Solvency II has taken effect. At the time of the presentation of the interim report it was not clear whether Topdanmark had time to prepare an alternative solvency calculation by the end of the year. Therefore, assuming that it would not be the case Topdanmark chose to allocate capital. This issue is now in place and the DKK 500m can be used for share buy-back. In 2013 the intention is to buy back own shares of a total of DKK 2,000m including the buy-back of DKK 500m transferred from 2012. The buy-back of DKK 2,000m assumes a profit in line with the profit forecast model of DKK 1,050-1,150m for 2013.

The share buy-back programme for 2013 represents a buy-back yield of 12.4% (calculated on the basis of the price of Topdanmark's shares on 22 February 2013). To date in 2013 Topdanmark has bought back own shares of DKK 294m which leaves a balance of DKK 1,706m of the 2013 programme. If Topdanmark buys back own shares for less than DKK 2,000m in 2013, the balance will be transferred to the ordinary buy-back for 2014. On 22 February 2013 Topdanmark's share capital comprised 13,750,000 shares, of which Topdanmark held 1,595,000 own shares. If before the AGM on 17 April 2013, contrary to expectation no further shares are bought back, the number of voting shares will be 12,155,000 shares. Since 1998 when Topdanmark started buying back own shares, it has made decisions to cancel DKK 10.4bn of own shares representing a 66.6% write-down of the share capital, with an average price of DKK 378 per cancelled share. In the years 2000-2012 the annual average buy-back yield has been 9.3%. Topdanmark does not buy back own shares in those periods where the Company would be considered an insider and during the three weeks immediately preceding the announcement of interim and annual reports. Furthermore it does not buy back own shares during the period of five banking days after the announcement of a quarterly report as this is the period in which the executives may exercise their share options. Below is a table of the periods when Topdanmark is allowed to buy back own shares.



Share buy-back allowable13 Mar 2013 – 29 Apr 201329 May 2013 – 29 Jul 201328 Aug 2013 – 28 Oct 201327 Nov 2013 – 10 Feb 2014

Share buy-back not allowable12 Feb 2013 – 12 Mar 201330 Apr 2013 – 28 May 201330 Jul 2013 – 27 Aug 201329 Oct 2013 – 26 Nov 2013

11 Feb 2014 – 11 Mar 2014

Share split In order to increase the liquidity of its shares Topdanmark intends to reduce the denomination from DKK 10 per share to DKK 1 per share with effect from 13 March 2013. This is the second time Topdanmark has effected a share split. The previous time was on 20 October 1999 when the share was split from DKK 100 per share to DKK 10 per share. On 20 October 1999 the price of the new 10 kroner share was DKK 138.5. Value creation in Topdanmark

Topdanmark's value creation efforts are intended to increase the cash flow it can pay out to investors while at the same time reduce the discount rate used by the market to discount the future cash flow to net present value. Topdanmark's systematic value creation efforts have built a strong business model which, with relatively limited financial risk, substantially ensures that a profit is made even in years with extremely poor financial markets. Cash flow Topdanmark believes that success in the Danish

insurance market is best achieved by combining distribution power with risk-appropriate prices, an efficient organisation and satisfied customers. Distribution power Topdanmark has a multi-distribution strategy in which its own sales channels (certified insurance sales representatives, sales centres, telephone sales etc.) are supplemented by sales or referral of leads through its distribution partners such as banks, car dealers and insurance brokers. Activities associated with distribution power • Topdanmark has renewed its distribution agreement for

non-life insurance with Danske Bank with effect from September 2011. Non-life insurance continues to be a strategically important product for Danske Bank. Topdanmark is now responsible for sale and advice while Danske Bank refers leads to Topdanmark's sales



organisation. This new distribution agreement is expected to improve growth from 2013

• Topdanmark has concentrated sales through its own sales channels in the personal market. It closed down 26 small insurance outlets in 2012. Instead it increased the number of large sales centres from four to seven. This is intended to increase market pressure including the creation of more efficient outbound sales environments in the sales centres. It is expected that premium growth will benefit from the change in the sales organisation from 2013

• Topdanmark has increased market pressure in the personal market, SMEs and farms. Market pressure was improved by outbound telephone sales and the employment of more certified insurance sales representatives

• Typically, profitability for major industrial businesses does not meet Topdanmark's return requirements. Therefore Topdanmark has chosen to let other insurance companies win some major unprofitable schemes.

Pricing Topdanmark works with differentiated pricing based on risk-appropriate prices, i.e. micro rating. This makes Topdanmark an attractive insurance company to customers with relatively favourable claims trends while customers with less favourable claims trends are incentivised to change to other insurance companies with a less risk-dependent pricing structure. Activities associated with pricing • Topdanmark continues its work with more finely

meshed and risk-based prices • Topdanmark has no current plans to make general

price increases. Instead it is implementing measures for less profitable customers (e.g. loss prevention, lower sums insured, increased retention and selective price increases)

• The rejection of general price increases improved competitive strength in profitable customer segments in 2012

• In 2012 Topdanmark introduced a new policy and pricing system in the SME market

• Change of ownership insurance policies covering hidden defects and deficiencies in houses being sold have been loss-making since this type of policy was introduced in 1996. In 2012 the Danish Parliament adopted a new set of minimum requirements on the cover provided by a change of ownership policy. When introducing this new change of ownership product

Topdanmark increased prices, in line with the other players in this market segment, to ensure better consistency between price and risk

• Workers' compensation insurance policies for the industrial segments have been unprofitable for a number of years. As Topdanmark's risk-based prices have not been competitive, its workers' compensation portfolio has declined one-third since 2008. Topdanmark maintains its risk-based prices which, among other things, take into account the lower interest rates, the increase in retirement age up to 70 years and the new reform of early retirement.

Efficiency Topdanmark wishes to operate its insurance business as efficiently as possible in order to combine value creation for customers by providing good service and offering competitive prices with value creation for shareholders by generating a significant return. A number of activities have been implemented which impact upon both the expense ratio and the claims trend. Activities associated with efficiency • With payments of just over DKK 6bn on claims

Topdanmark is a significant buyer of work time and materials. Therefore it is focusing on utilising the Company's purchasing power

• Focus on digital communication with customers. Topdanmark continuously works to reduce paper-intensive mailings to customers including both policies and insurance details. The number of customers using e-Boks increased to more than 440,000 in 2012. All insurance conditions have been published on the website making it easy for customers to find their conditions

• Topdanmark has an internal Lean concept (TRIM) which regularly reviews relevant departments in the Company in order to increase efficiency in customer-oriented processes.

Customer satisfaction Topdanmark's ambition is for its customers to feel "well-helped" in all communication between them and the Company. Therefore all customer contacts are regularly evaluated: telephone, email, letters or personal contact showing the customers' opinion of their contact with Topdanmark. Around 60,000 customer interviews are conducted each year and if a customer's answer indicates that Topdanmark's services were not satisfactory, they will be contacted within 24 hours. Besides the internal monitoring, Topdanmark also participates in the annual



EPSI survey across most major insurance companies. For the last two years Topdanmark has been the insurance company that has achieved the highest growth in customer satisfaction in this survey. Activities associated with customer satisfaction • Topdanmark continues to work to improve customers'

experience which is an important factor in increasing a customer's relationship with Topdanmark. In 2012 Topdanmark held an internal competition to ensure that the entire organisation would give priority to customers' experience as the most important goal for our customer services. In 2013 the improvement of customers' experience will be integrated into the success criteria of the customer-oriented departments

• During 2012 and at the beginning of 2013, it has been the subject of executive meetings and after-hours meetings with the Executive Board to make the entire organisation work to create the best customer experience

• Topdanmark has set up retention teams to ensure that the number of customers leaving Topdanmark continues to decline

• Topdanmark wishes to achieve increasing customer loyalty as a basis for profitable growth. Generally, profitability is better for existing customers than for new customers. Therefore Topdanmark has implemented a number of initiatives in order to increase its retention percentage which is estimated to have increased in both the personal and SME segments in 2012.

Risk management Topdanmark's policy is to hedge against risks arising from the Company's activities or to limit such risks to a level that allows the Company to maintain normal operations and implement its planned measures even in the case of highly unfavourable events in the outside world. As a consequence of this policy the Company has for a number of years identified and reduced or eliminated those risks which could potentially cause losses exceeding what Topdanmark considers to be acceptable. For example, major strategic shareholdings have been sold, the catastrophe cover for storm or terror has been increased significantly and the financial risk reduced. In this light it is Topdanmark's opinion that the Company's future annual results would, with a very high probability, be a profit even in the event of, for example, another collapse in the financial markets as in 2008.

In order to ensure strict control of the overall risk, the exposures are calculated as often as deemed necessary, i.e. daily, monthly or in a few cases more rarely according to the nature of the exposure. The Board of Directors determines the overall risk policies and limits. The internal auditors refer to the Board of Directors and report on, among other things, the observance of the risk policies and limits set within them. Topdanmark's Risk management function identifies, assesses and quantifies risks. It refers to the Risk Committee which is responsible for risk policies, risk limits, solvency calculation, capital plans, Topdanmark's own risk and solvency assessment (ORSA) and Topdanmark's partial, internal model for non-life insurance risks. The members of the Risk Committee are the CFO of the Group, the CEO of Topdanmark Livsforsikring and the heads of the primary risk areas: Asset Management, Statistical Services, Reinsurance, Finance, Life Actuarial Services and Life Finance. The Risk Committee reports and recommends to the Board of Directors via the Executive Board. The Risk Committee has set up the Model Committee, which is responsible for developing and operating Topdanmark's internal model for calculation of the risk of the non-life insurance portfolio based on random simulation. In 2012 the internal model was replaced by a new version in which the greatest improvement is the calculation of correlations between premium and provisioning risk and between the lines of insurance business. The model is used for, among other things, optimising the reinsurance programme and calculating capital requirements. Review Topdanmark believes that the Group's most important risks relate to the following main areas: • Non-life insurance risks • Life insurance risks • Market risks • Credit and counterparty risks • Operational risks • Strategic risks. The most important risks are described in the following survey. A more detailed description is available in note 1.



Risk survey Topdanmark Group Non-life insurance risks Personal, liability and property insurance for the personal, SME, industrial and agricultural markets Most important risks Risk preferences Risk reducing activities Underwriting risk • Acceptance policy • Follow-up policy Provisioning risk Disaster risks • Storm and rainstorm • Fire • Terror • Cumulative risk • Workers' comp

Profit on both product and customer level Spread of risk on different types of insurance / customer groups Limited effect on results from individual damage by using reinsurance

Risk-based price models allowing for market situation Clear rules for new business Risk equalisation through extensive reinsurance programme Systematic follow-up on profitability High data quality Use of statistical models for pricing and calculation of provisions

Life insurance risks Life insurance contracts entitled to a bonus, unit-linked contracts with no investment guarantees and group life Most important risks Risk preferences Risk reducing activities Limited loss-absorbing buffers in the event of low interest rates Disability Lifetime

For agreements entitled to a bonus we aim at balancing return and risk so that ordinary risks are covered by the related bonus potential The calculation of profit is viewed as a risk return on shareholders' equity where fluctuations are adjusted via bonus potential and shadow account

All policies are classified by the guaranteed benefit, and the investment policy is intended to ensure the ability to meet the benefits guaranteed The market risk is freely adjustable in relation to each customer group's risk capacity Normal fluctuations in investment return and risk results are provided for by the bonus potential per contribution group Bonus potential on paid-up benefits is protected by loss participation schemes Reinsurance Interest rate risk is hedged in Life V. In Life I movements in interest rates are followed and risk reducing actions are performed as required

Market risks Most important risks Risk preferences Risk reducing activities Interest rate risk Equity risk Property risk Currency risk Inflation risk Liquidity risk

Topdanmark's policy is to accept a certain level of market risk in order to profit from the Group's strong liquid position and its high, stable earnings from insurance operations In order to improve the average investment return and limit the overall market risk Topdanmark invests in a wide range of asset categories

Topdanmark's Board of Directors has set limits on the acceptance of market risks in the form of risk limits and scenario based requirements on the overall maximum loss Compliance with these limits is regularly controlled



Credit and counterparty risks Most important risks Risk preferences Risk reducing activities Reinsurance Investment

To obtain efficient and secure reinsurance cover which is price competitive, a certain level of counterparty concentration is required A certain level of credit risk is accepted as an element of the creation of return. Counterparty risk is due to the use of derivatives which are primarily used to control and reduce market risk

Counterparty risk is limited by mainly buying hedging from reinsurance companies which as a minimum has a rating of A- Credit risk is limited by diversification both geographically and in terms of type of debtor Counterparty risk on financial contracts is limited by the required security when overall risk on any given counterparty reaches a relatively low threshold value

Operational risks Most important risks Risk preferences Risk reducing activities IT Errors in internal processes, human errors insurance fraud and deceit

Generally, operational risks are to be reduced to a low level

IT security policy, guidelines and controls based on ISO27001 IT security function Policy for routines, process descriptions, controls and division of duties

Strategic risks Most important risks Risk preferences Risk reducing activities Generally, strategic risks are related to the Company's business model, political conditions, reputation, alliance partners' and competitors' behaviour as well as macroeconomic conditions

Low strategic risk due to strong business model

Topdanmark's business model stands strong against strategic risks. The results of the Company will, with a very high probability, be a profit even in the event of another collapse in the financial markets as in 2008. The results of the Company will also be a profit if it is hit by a storm like the 1999-hurricane, which was the largest storm event in the Company's history In a situation when Topdanmark's solvency might come under pressure, the share buy-back will be stopped. Additionally, the cancellation of own shares bought under the buy-back programme will be effected with a certain delay giving Topdanmark the opportunity to increase its solvency capital by selling own shares



Risk scenarios The Group's risk factors are illustrated in the following table on the most significant risk factors. The given assumptions do not reflect Topdanmark's expected risks, but are shown only as examples which could be used as a basis for assessing the Company's exposure to the risks mentioned. In the calculation of the effect on the results it is assumed that the bonus reserves and the individual bonus potential in the life insurance group could offset adverse fluctuations at the levels described as the overall collective bonus potential was DKK 768m at 31 December 2012 (2011: DKK 540m) and the bonus potential on paid-up benefits DKK 1,849m (2011: 2,306m).

Risk factors in the event of different scenarios

(DKKm) after taxation and pension return tax 2011 2012

Non-life insuranceUnderwriting riskCombined ratio − 1pp increase (65) (66)

Provisioning riskProvisions on own account − 1% increase (93) (96)

Storm claims up to DKK 5,100m (75) (75)(Plus reinstatement premium)

Life insuranceDisability intensity - 10% increase 0 0Mortality intensity - 10% decline (6) (8)

Market riskInterest-bearing assets 1 pp increase (493) (509)Provisions for claims in effectiveand benefits etc. interest rate 473 498

Index-linked bonds 5% loss (30) (30)Equities 10% loss (62) (73)CDOs < AA 10% loss (61) (72)Properties 10% loss (172) (179)Annual currency loss with an up to 2.5% probability (15) (19)

Solvency Danish insurance companies are subject to European and Danish solvency rules ensuring that the companies hold sufficient capital relative to the risks they accept. The most important rules are: • Solvency I – the current European solvency rules • Individual solvency requirement • Traffic light rules.

Those rules imposing the greatest requirements on the Group's capital are the rules on individual solvency requirement, and in reality Topdanmark's capital planning is based on these rules. It is uncertain when the Solvency II rules will take effect but following several postponements, the beginning of 2016 is currently considered to be the earliest possible effective date. Individual solvency requirement Individual solvency requirement is a set of Danish rules in force until the Solvency II rules take effect. Each insurance company is to calculate a solvency requirement representing their minimum required capital based on the risks they accept. Additionally, the companies are required to provide documentation for how they identify, manage, limit and calculate risks. The DFSA has announced that the rules of individual solvency requirement will be changed during 2013. From 2014, individual solvency requirement is to be calculated on the basis of the QIS5 test calculation from the EU with later updates from EIOPA and the coming results of the LTGA assessment of long-term guarantees. The companies' internal models are intended to continue to be used for calculating the solvency requirement. The individual solvency requirement is to be in line with the expected requirements of Solvency II. Topdanmark already bases its calculation of individual solvency requirement on the expectations for the future rules on solvency calculation under Solvency II. Therefore, it is not expected that the changes of the rules will increase Topdanmark's individual solvency requirements. On the contrary, Topdanmark is looking forward to the new rules which are assumed to mitigate or eliminate some of the inappropriateness caused by the simultaneous use of several different sets of rules. In recent years Topdanmark has calculated the solvency requirement of life insurance using a method based on the QIS5 test calculations with adjustments towards the expected final Solvency II model. However, at the end of 2012 the DFSA informed the industry that the inclusion of the life insurance provisions in individual solvency requirement must be in accordance with the relevant accounting rules. This implies a mismatch between the handling of assets (Solvency II risk) and liabilities (inclusion of buffers in compliance with Solvency I).



In this light Topdanmark has chosen to use a new method for calculation of the individual solvency requirement in life insurance with effect from 31 December 2012. According to the accounting rules, the accounting life insurance provisions are included in a risk scenario of paid-up benefits in which the total portfolio is converted into paid-up benefits immediately, which means that the bonus potential on future premiums lapses. This risk scenario of paid-up benefits is included in the calculation of the individual solvency requirement, which, incidentally, continues to be based on QIS5. Topdanmark believes that this method gives the most true and fair result taking into account the current accounting rules and the movement towards Solvency II. For the sake of good order it should be noted that the life insurance company has surplus capital over the individual solvency requirement irrespective of the risk scenario of paid-up benefits referred to above being included in the QIS5 calculation or handled separately. Solvency II Solvency II is the future EU regulation for insurance companies setting requirements for solvency calculations, capital base and risk management. In addition there are requirements for detailed reporting on risk management to supervisory authorities and for publication. The completion of the rules is taking time and it is highly uncertain when Solvency II will take effect. At present it is not considered probable that Solvency II will take effect until 2016 at the earliest. Solvency calculation and capital requirements An important goal of Solvency II is to promote good risk management based on market values and actual risk calculations. Solvency II will include a standard model for calculation of solvency requirements which will be common to all insurance companies in the EU. Although the model will provide the opportunity for company-specific values for some variables, the standard model will not provide a fair view of all the risk elements of all companies. Therefore, Solvency II gives the companies the opportunity to fully or partially develop their own risk model (internal model) for the solvency calculation. However, the DFSA must approve the model that is used for the calculation of Solvency II capital requirements. Today Topdanmark uses a risk model it has developed in-house to calculate the non-life risk. The inclusion of non-

life risks in Topdanmark's calculation of the individual solvency requirement has been based on this model. Topdanmark is in constant dialogue with the DFSA on the model. It is expected that the application for the Solvency II approval will be submitted to the DFSA in 2014 and that the model will be approved before Solvency II takes effect. The size of the necessary solvency capital has been calculated to be DKK 4,700m. This amount is the forecast solvency requirement under Solvency II plus an adequate buffer ensuring that usual fluctuations in earnings will not result in insufficient solvency cover. The necessary solvency capital is assumed to comprise shareholders' equity (DKK 4,050m), hybrid capital (DKK 400m) and subordinated loan capital (DKK 250m), see www.topdanmark.com → Investor Relations → Capital Model. If the capital requirement is higher than expected, the difference will be covered by issuing further supplementary loan capital. Additionally, Topdanmark Forsikring has already issued subordinated loan capital of DKK 500m. This amount is not included in the necessary capital but is a safety margin to the DKK 4,700m. Under the Solvency II rules the companies may influence the solvency requirement themselves by adjusting their risk. This means that if the solvency requirement increases, Topdanmark will consider an adjustment of the risk before increasing its capital base. The necessary capital of DKK 4,700m under Solvency II has been based on an expected approval of Topdanmark's internal model for non-life insurance risk. If it is not approved, the necessary capital will increase by DKK 600-700m. This potential increase in the capital requirement can be covered by the safety margin of DKK 500m referred to above supplemented by a marginal adjustment of the financial risk. Topdanmark's Solvency II project Topdanmark is preparing for Solvency II by having employees from claims actuarial services, life actuarial services, asset management, financial and compliance departments, IT, Group Development and others working together on a project reporting to the CFO.



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Holding (%)Shareholder 31 Dec 2012If P&C Insurance Holding Ltd (publ)Barks Väg, Solna10680 StockholmSweden

6.1

If P&C InsuranceCompany LtdBarks Väg, Solna10680 StockholmSweden

16.8

The three most important elements of this project are to prepare new, very detailed external reports to the DFSA and for publication on the website, to adapt data processes and calculation methods in the life insurance business and to adapt Topdanmark's own risk model for non-life insurance risk to be approved as a partial, internal model under Solvency II. The reporting to the DFSA and reporting for publication are the most resource-demanding parts of the Solvency II project. Topdanmark's Solvency II project regularly revises contents, resources and use of time to ensure that Topdanmark will meet the Solvency II rules when they take effect. Capital model Topdanmark pursues a policy of keeping its shareholders' equity at a relatively low level and paying out to shareholders any amounts in excess of the conservatively estimated shareholders' equity sufficient to support the underlying business. In spite of this policy Topdanmark has decided on a capital model that has a relatively high proportion of shareholders' equity. This ensures that any regulatory requirements on solvency capital in excess of expectations could be covered solely by issuing further supplementary capital. Detailed information on, among other subjects, Topdanmark's capital structure model and model for calculation of share buy-back potential is available on www.topdanmark.com → Investor Relations → Capital Model. Capital structure and ownership For the period until the Annual General Meeting in 2015, the Board of Directors is authorised to acquire own shares up to 15% of the share capital for the purpose of ownership or security. The shares can be acquired at a minimum market price of DKK 10.5 per share and a maximum price of current market value plus 10%. It is a standing authorisation which, subject to the approval of the general meeting, is renewed regularly. At 31 December 2012 Topdanmark’s share capital totalled DKK 137,500,000 divided into 13,750,000 shares of DKK 10 each, corresponding to 13,750,000 voting rights. As of 5 March 2013, Topdanmark holds 1,595,000 of own shares representing 11.6% of the share capital, of

which 457,083 shares are earmarked to cover Management's share option scheme. Shareholders At 31 January 2013 Topdanmark had 48,148 shareholders registered by name.

The following shareholders own more than 5% of the share capital:







Board of Directors and Articles of Association Appointment and replacement of members of the Company's Board of Directors The Board of Directors, which is elected at the general meeting and the Topdanmark Group's employees, is the Company's top threshold of management formulating the Company's objectives, goals and strategies and making decisions on matters that are of high importance or unusual in nature to the Company. Topdanmark's Board of Directors comprises nine members, six of them elected by shareholders at the general meeting and three by Topdanmark's employees in accordance with the Danish Companies Act. In accordance with this Act the number of Board members elected by employees should be equivalent to no fewer than half the number of those elected by shareholders in general meeting. The rights, duties and responsibility of the Board members elected by employees are the same as those of the Board members elected by shareholders at the general meeting. Shareholders who are not associated with the Company by their employment or who are not employed by a competing company are eligible for election to the Board of Directors by shareholders at the general meeting. The age limit for Board members is 70 and the term of office for members elected by shareholders at the general meeting is one year, while in accordance with legislation, it is four years for members elected by employees. Board members are elected individually, and no Board member may be appointed by any individual shareholder. Topdanmark has no fixed general selection criteria. It believes that by imposing very specific requirements on the Board of Directors it may prevent the election of an obviously qualified Board candidate who does not fully meet the requirements. Instead an individual decision will be made on each Board candidate based upon an overall consideration of their qualifications, the Company's present needs and the composition of the rest of the Board of Directors. Topdanmark believes that in a company like Topdanmark, between them its Board members ought to possess skills within accounting, finance, financing, insurance operations, reinsurance and marketing and sales in the personal and professional

markets. With its current composition Topdanmark's Board of Directors possesses all these skills. Topdanmark’s current Board of Directors reflects diversity in many areas including professional background and education, sex and age. Its members have experience from the financial, industrial and agricultural sectors, nationally and internationally. The Board of Directors believes that this composition enables it to consider a given problem from many different angles which is confirmed by experience from the day-to-day Board work. Read more about each Board member’s background and competence on www.topdanmark.com → About Topdanmark → Executive Board and Board of Directors and Board of Directors and Executive Board in this Annual Report. Four of the nine Board members are women, one of them elected at the general meeting and three by Topdanmark's employees. The proportion of female Board members elected at the AGM has been stable since 2004. Under AGM the Board of Directors proposes that another female Board member is elected. In 2011 the number of female Board members elected by employees increased from one to three. Topdanmark has joined "Operation Chain Reaction" initiated by the Danish Ministry of Gender Equality. The aim is to increase the diversity of boards of directors of businesses without imposing real quotas for female managers. Correspondingly Topdanmark has signed up to the UN Global Compact intended to ensure, among other things, the prevention of discrimination in businesses. Topdanmark believes that diversity provides business value and that it is important that the greatest management talents, irrespective of gender, nationality, religion or other characteristic achieve the highest executive positions at all levels. Topdanmark has no wish to favour women over men and therefore it has not imposed real quotas. Instead it has defined initiatives and policies for diversity which it aims to meet. Amendments to the Company's Articles of Association The general meeting is Topdanmark's supreme decision-making vehicle. Decisions at general meetings are made by a simple majority of votes unless a special majority or representation is required by the Danish Companies Act or the Articles of Association. The Articles of Association




http://www.topdanmark.com/en/about-topdanmark/management/executive-board-and-board-of-directors/



provide that decisions on the alteration of the Articles of Association are only valid if adopted by an affirmative vote of not less than two thirds of the votes cast as well as of the capital represented at the general meeting. The Articles of Association provide no restrictions on voting rights. Severance pay In order to ensure full loyalty, focus and performance for Topdanmark during the period until a potential take-over is finalised, Topdanmark has agreed with the Executive Board and four other members of the top management team that under certain circumstances they will receive compensation in the form of an extended period of notice and an increased severance pay if they resign or are dismissed, or if their position is made redundant because Topdanmark is taken over by or merges with a company outside of the Group or if one or more owners take control of Topdanmark. The maximum amount of compensation will represent two years' salary. Remuneration structure Topdanmark's remuneration policy is intended to optimise long-term value creation at a group level. In accordance with Section 77(d) of the Danish Financial Business Act and Section 139 of the Danish Companies Act, the AGM has adopted "Remuneration policy of the Topdanmark Group including general guidelines for performance-related pay." Besides salary policy, the remuneration policy also includes Topdanmark's general guidelines for performance-related pay, its pension policy and its guidelines for the granting of severance pay. The remuneration policy covers Topdanmark's Board of Directors, Executive Board, significant risk takers and, as provided by legislation, employees involved in control functions and audit work. If specifically stated, Topdanmark's remuneration policy also covers its executive team, comprising a number of the heads of business sectors and administrative departments ("the Friday Team") and certain other employees at the discretion of the Board of Directors. The remuneration policy etc., as adopted by the AGM, is available on www.topdanmark.com → Investor Relations → Corporate Governance → Remuneration structure. The share price reflects expected value creation potential at group level. This is one of the reasons why

Topdanmark believes that share options rather than the receipt of individual bonuses encourage the executives to be more holistic in their approach to value creation. The remuneration package of the Executive Board, the Friday Team and significant risk takers is based upon a fixed basic salary, 10% of which is paid as share options. Individual bonuses or other types of variable salary are not paid. The determination of the fixed basic salary paid to the Executive Board and the Friday Team is based on a specific assessment of the employee. In its assessment Topdanmark includes, among other factors, their position, characteristics and performance. Besides options, which in accordance with the revolving option scheme are paid to the Executive Board, significant risk takers and the Friday Team as part of their fixed salaries, the Executive Board may grant a total of up to 20,000 options to employees who are expected to make a special effort or otherwise contribute extraordinarily to value creation in the Company in that year of granting. No special pension contribution is paid to the Executive Board, and therefore they are paid a personal allowance of 25% of their cash salary. Consequently Topdanmark has no pension commitments towards the Executive Board and no type of pension compensation on retirement is granted. The Friday Team and significant risk takers receive a pension contribution of up to 25% of their cash salary. The amount is paid to the chosen pension provider and consequently all pension obligations are fully covered by them. Employee shares Topdanmark issued employee shares in 2012. The allocation was effected simultaneously with a reduction in the recipient's cash salary. Due to a change in tax rules it is no longer advantageous to receive employee shares. The Board of Directors has therefore decided not to issue employee shares for 2013. In 2012 Topdanmark allocated 26,203 free employee shares and sold 21,002 employee shares at an advantageous price. The cost of the issue of employee shares was DKK 43m in 2012 compensated for by a corresponding reduction in salaries. The cost has been calculated at fair value according to the IFRS 2 on share-based payments.



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Breakdown of share options / warrants granted since 2009

Executive SeniorYear Board Executives Total

2009 36,676 113,324 150,000Market value of those options granted (DKKm) 4 11 15





Options Besides the revolving scheme above a further 19,850 share options have been granted for 2013 to a number of other executives who are expected to make a special effort or otherwise contribute extraordinarily to value creation in the Company.

For 2013 Topdanmark has granted 34,824 share options to its Executive Board and a number of executives. The strike price of DKK 1,333 was fixed at 110% of the market price of Topdanmark's shares on 28 December 2012 (average of all trades).

Corporate Governance The options granted for 2013 may not be exercised any earlier than subsequent to the publication of the 2015 Annual Report in 2016 and no later than subsequent to the publication of the 2017 Annual Report in 2018. In the intervening period the options can only be exercised up to three banking days subsequent to Topdanmark's publication of annual and interim reports.

Topdanmark's "Statutory Corporate Governance Report, see Section 131 of Executive Order on Financial Reports for insurance Companies and Lateral Pension Funds" (”Accounting Order”) is available on www.topdanmark.com → Investor Relations → Reports and presentations → Statutory Corporate Governance Reports (http://inv.topdanmark.com/governancestatement.cfm).

The market value of the options for 2013 has been calculated to be DKK 9m at the time of granting.

CSR The value was calculated using the Black and Scholes

model based on a share price of DKK 1,211.42, an interest rate corresponding to the zero coupon rate based on the swap curve on 28 December 2012, future annual volatility of 22%, corporation tax rate of 25% and a pattern of exercise similar to Topdanmark's previous granting of share options, see IFRS 2 on share-based payments.

Topdanmark's "Statutory report on Corporate Social Responsibility, see Section 132 of Executive Order on Financial Reports for insurance Companies and Lateral Pension Funds" is available on www.topdanmark.com → Investor Relations → Reports and presentations → CSR reports (http://inv.topdanmark.com/csr.cfm). At the end of 2012 the exposure of the options held by the

Executive Board represented 0.9% of the number of outstanding shares.

Investor Relations Topdanmark wishes to openly and sufficiently inform investors, analysts and other stakeholders on the Group's matters in order to ensure that as far as possible:

Detailed information on Topdanmark's option scheme is available on www.topdanmark.com → Investor Relations → Corporate Governance → Remuneration structure

• Value creating activities are reflected in a fair price for Topdanmark's shares

• The liquidity of its shares is high enough in order that they are not traded at a discount due to lack of liquidity




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• There is a high level of knowledge of and confidence in Topdanmark's shares

• There is low price volatility in Topdanmark's shares secured through the provision of uniform and consistent information.

Communication to investors and analysts is performed through the following information channels: • Investor meetings • Telephone meetings

• Conference calls • Web casts • Investment and insurance conferences. The regular contact with investors and analysts is supported by Topdanmark's website www.topdanmark.com. Shares Topdanmark's shares are listed on NASDAQ OMX Copenhagen and included in a number of share indices, one of them being the OMX Copenhagen 20 index (OMXC20).

Share price movement

Distribution policy Topdanmark's policy is to pay out to shareholders all surplus capital by way of share buy-backs. Since the buy-back programme was initiated in 1998, Topdanmark has cancelled DKK 10.4bn of own shares representing a 66.6% write-down of the share capital. In the years 2000-2012 the average buy-back yield has been 9.3%.

Trading in Topdanmark's shares Daily share trading on all trading platforms was DKK 39m in 2012 (2011: DKK 49m). NASDAQ OMX Copenhagen continues to be the primary stock exchange for trading in Topdanmark's shares with a market share of 81% in 2012 (2011: 85%). Consequently, the share of the trading was 19% on other trading platforms such as BATS, Chi-x and Turquoise.




Most active brokers at NASDAQOMX Copenhagen in 2012 %

Danske Bank 22

Credit Suisse 9

Morgan Stanley 7

Deutsche Bank 7

Merrill Lynch 6

Nordea 5

Carnegie 4

Citadel 4

SEB Enskilda 4

Nomura 4

Topdanmark is monitored by 20 analysts. Share analysts' recommendations of Topdanmark's shares are available on Topdanmark's investor site www.topdanmark.com → Investor Relations → Share profile → Analysts. Deadline for submitting

items for AGM agenda 05 Mar 2013

AGM 17 Apr 2013Q1 2013 Interim Report 21 May 20132013 Half-year Report 20 Aug 2013Q1-Q3 2013 Interim Report 19 Nov 20132013 Annual Report 04 Mar 2014

Annual General Meeting The AGM will be held on 17 April 2013, 15:00 (CET) at: Tivoli Hotel & Congress Center Arni Magnussons Gade 2-4 1577 Copenhagen V

All of Topdanmark's Board members elected by the AGM are up for election. Anders Knutsen does not offer himself for re-election. The Board of Directors proposes that Birgitte Nielsen is elected as a new member of the Board; all other members of the Board are to be re-elected. The Board of Directors proposes the election of: • Anders Colding Friis • Jens Maaløe • Birgitte Nielsen • Michael Pram Rasmussen • Annette Sadolin • Søren Thorup Sørensen Proposals to be transacted at the AGM must be received by Topdanmark no later than 5 March 2013. F inancial calendar

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List of company announcements and trading reports Company announcements Topdanmark submits announcements to Nasdaq OMX, Copenhagen with information on material and relevant events in the Group which can affect the price of Topdanmark's shares. The announcements are also sent to the press, share analysts, investors and other interested parties. The announcements are available on www.topdanmark.com → Investor Relations → Company announcements. 2013 03 Jan 02/2013: Topdanmark increases its holding of own shares 02 Jan 01/2013: Issue of options

2012 26 Nov 12/2012: Result of sale of employee shares 13 Nov 11/2012: Topdanmark Interim Report Q1-Q3 2012 27 Aug 10/2012: Reduction in ATP's shareholding in Topdanmark 21 Aug 09/2012: Topdanmark 2012 Half Year Report 29 Jun 08/2012: Share capital and voting rights in Topdanmark 25 Jun 07/2012: Topdanmark's holding of own shares under 10% 25 Jun 06/2012: Write-down of share capital 22 May 05/2012: Topdanmark Interim Report for Q1 2012 19 Apr 04/2012: Annual General Meeting of Topdanmark − 19 April 2012 23 Mar 03/2012: Notice convening AGM of Topdanmark 06 Mar 02/2012: Topdanmark's Annual Report 2011 02 Jan 01/2012: Issue of options Trading reports 2013 02 Jan 01/2013: Trading in Topdanmark's shares by insiders 2012 26 Nov 05/2012: Trading in Topdanmark's shares by insiders 21 Nov 04/2012: Trading in Topdanmark's shares by insiders 29 Aug 03/2012: Trading in Topdanmark's shares by insiders 14 Mar 02/2012: Trading in Topdanmark's shares by insiders 02 Jan 01/2012: Trading in Topdanmark's shares by insiders



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Boards of Directors and Executive Board Board of Directors Michael Pram Rasmussen, Chairman*, ***, **** DOB: 14 January 1955 Joined Topdanmark’s Board of Directors: 2006 Current position held: Chairman Previous positions held: 1979-1982: Nye Danske Lloyd A/S

1982-1984: Baltica Forsikring A/S 1984-1986: Deputy General Manager, Baltica Forsikring A/S 1986-1988: General Manager, Baltica Forsikring A/S 1988-1995: Group Managing Director, Baltica Forsikring A/S 1995-1996: Group Managing Director, Tryg-Baltica Forsikring A/S 1996-2006: CEO of Topdanmark A/S and Topdanmark Forsikring A/S

Education: Law degree, University of Copenhagen Offices held: Member of the Boards of Directors of:

• A.P. Møller-Mærsk A/S (Chairman) – and one subsidiary

• Coloplast A/S (Chairman) • Semler Holding A/S (Chairman)

– and one subsidiary • Louisiana Museum of Modern Art

Independence: Michael Pram Rasmussen meets the definition of independence set out by the Committee on Corporate Governance

Anders Knutsen, Deputy Chairman*, **** DOB: 4 May 1947 Joined Topdanmark’s Board of Directors: 1999 Current position held: Chairman Previous positions held: 1977-1983: Factory Manager, Bang & Olufsen A/S

1983-1986: Production Manager, Alcatel Danmark A/S 1986-1991: Technical Manager, Bang & Olufsen A/S 1991-2001: CEO, Bang & Olufsen Holding A/S

Education: MSc (Economics) Offices held: Member of the Boards of Directors of:

• Rossini Caviar A/S (Chairman) • Rossi Organics ApS (Chairman) • Hersild & Heggov A/S (Chairman) • kaluna Nordic AS (Chairman) • kaluna Norge AS (Chairman) • Purix ApS • Fritz Hansen A/S • Augustinus Fabrikker A/S • kk-group A/S

Independence: As Anders Knutsen has been member of the Board of Directors for more than 12 years, he does not meet the definition of independence set by the Committee on Corporate Governance



Anders Colding Friis* DOB: 25 August 1963 Joined Topdanmark's Board of Directors: 2012 Current position held: Group CEO of Scandinavian Tobacco Group A/S Previous positions held: 1987-1989: Marketing trainee, Mölnlycke Kemtekniske Produkter

1989-1991: Product Manager, Mölnlycke Kemtekniske Produkter Göteborg 1991-1992: Product Group Manager, Mölnlycke Kemtekniske Produkter Allerød 1992-1994: Market Manager, Estrella A/S 1994-1996: Sales and Marketing Manager, Schulstad Brød A/S 1996-1998: Sales and Marketing Manager, Schulstad Gruppen A/S 1998-1999: Group Managing Director, Schulstad Gruppen A/S and CEO, Schulstad Brød A/S 1999-2006: Group Managing Director, Skandinavisk Tobakskompagni A/S and CEO, House of Prince A/S

Education: MSc Offices held: Member of the Boards of Directors of:

• Monberg & Thorsen A/S (Chairman) • Dagrofa (Chairman)

− and two subsidiaries • Industral Employers in Copenhagen (Deputy Chairman) • The Foundation of Ejnar and Meta Thorsen • IC Companys A/S • Executive Committee and Governing Body of DI

(The Confederation of Danish Industry) Independence: Anders Colding Friis meets the definition of independence set out by the

Committee on Corporate Governance Charlotte Hougaard** DOB: 1 October 1964 Joined Topdanmark’s Board of Directors: 2007 Current position held: Chairman of Topdanmark's staff association Jens Maaløe* DOB: 10 January 1955 Joined Topdanmark’s Board of Directors: 2003 Current position held: CEO of TERMA A/S Previous positions held: 1983-1990: Development / Sales Manager, NKT Elektronik A/S

1991-1993: CEO, NKT Dedicom A/S 1994-1995: Managing Director, DSC Communications A/S 1995-1997: Regional Manager, Tele Danmark A/S 1997-2002: CEO, NetTest Danmark A/S

Education: MSc (Engineering), DTU Licentiate (Tech.), thesis: radar technology and optical communication

Offices held: Member of the Boards of Directors of: • The Research and Education Committee of DI (The Confederation

of Danish Industry) (Chairman) • Grundfos Holding A/S • The Poul Due Jensen Foundation • NKT A/S • Governing Body of DI (The Confederation of Danish Industry) • FAD (Danish Defence and Aerospace Industry) • PA (Federation of Employers in the Provincial Industry)

Independence: Jens Maaløe meets the definition of independence set out by the Committee on Corporate Governance



Annette Sadolin*,*** DOB: 4 January 1947 Joined Topdanmark’s Board of Directors: 2004 Current position held: Since 2003 solely directorships Previous positions held: 1980-1986: Assistant to management and subsequently Divisional

Manager, Baltica Re / Baltica-Nordisk Re 1986-1989: Ass. General Manager, Baltica-Nordisk Re 1989-1993: Deputy General Manager, Employers Reinsurance International, Copenhagen 1993-1996: CEO, Employers Reinsurance International, Copenhagen 1996-2003: Member of Executive Board, GE Frankona Rückversicherungs-Aktiengesellschaft, Munich

Education: Law degree, University of Copenhagen Special law programme, Columbia University, NY, USA GE training programmes incl. Six Sigma GB Certificate

Offices held: Member of the Boards of Directors of: • DSB • DSV A/S • Ratos AB • Blue Square Re • Skodsborg Kurhotel & Spa A/S

Independence: Annette Sadolin meets the definition of independence set out by the Committee on Corporate Governance

Desirée Schultz** DOB: 11 May 1952 Joined Topdanmark’s Board of Directors: 2011 Current position held: Head of department Offices held: Chairman of Topdanmark's Senior Officers' Association Søren Thorup Sørensen*, *** DOB: 29 September 1965 Joined Topdanmark’s Board of Directors: 2010 Current position held: CEO of KIRKBI A/S Previous positions held: 1987-2006: KPMG Denmark and UK

2006-2009: Group CFO and member of Group Executive Board, A.P. Møller-Mærsk A/S

Education: MSc (Business Administration and Auditing), Copenhagen Business School, Denmark State-authorised public accountant Advanced Management Programme, Harvard Business School, USA

Offices held: Member of the Boards of Directors of: • TDC A/S • Lego A/S • 3 subsidiaries of KIRKBI A/S • Koldingvej 2, Billund A/S • KIRKBI AG • Merlin Entertainments Ltd. • Falck Holding A/S − and two subsidiaries • Boston Holding A/S

Independence: Søren Thorup Sørensen meets the definition of independence set out by the Committee on Corporate Governance



Trine Zappe** DOB: 5 April 1977 Joined Topdanmark’s Board of Directors: 2011 Current position held: Claims handler * Elected by shareholders in general meeting ** Elected by employees *** Member of Topdanmark’s Audit Committee **** Member of Topdanmark's Remuneration Committee



Executive Board Christian Sagild CEO of Topdanmark A/S DOB 1959, joined Topdanmark in 1996, joined Topdanmark's Executive Board on 1 January 2006 Managerial responsibilities: • Life insurance • HR • IT • Group Development • Communications, IR, CSR • Group Secretariat, Corporate Legal Matters Member of the Boards of Directors of: • The Danish Insurance Association • The Danish Employers’ Association for the Financial Sector • Ambu A/S • Bruhn Holding ApS Kim Bruhn-Petersen Group Managing Director of Topdanmark A/S DOB 1956, joined Topdanmark in 1989, joined Topdanmark's Executive Board on 1 January 2006 Managerial responsibilities: • Personal • SME and Industrial • Marketing • Claims Administration Member of the Boards of Directors of: • Forsikringsakademiet A/S (Danish Insurance Academy) • Bornholms Brandforsikring A/S Lars Thykier CFO of Topdanmark A/S DOB 1955, joined Topdanmark in 1986, joined Topdanmark's Executive Board on 1 June 2009 Managerial responsibilities: • Asset Management • Finance • Accounting • Statistical Services • Reinsurance • Tax • Credits Information on the Executive Board's responsibilities, as required by Article 80 of the Danish Financial Business Act, is shown in the Annual Report for Topdanmark Forsikring A/S.

Topdanmark’s Annual Report 2012


(DKKm) 2008 2009 2010 2011 2012

Five-year summary • Group

NON-LIFE INSURANCEGross premiums earned* 9,029 8,707 8,622 8,709 8,823Technical interest 222 102 58 65 20Gross claims incurred (5,770) (6,324) (6,444) (6,759) (6,122)Bonuses and rebates (77) (42) (74) (41) (64)Total operating expenses (1,308) (1,272) (1,298) (1,340) (1,372)Net reinsurance (272) (266) (204) 312 (193)TECHNICAL PROFIT ON NON-LIFE INSURANCE 1,824 905 660 945 1,092LIFE INSURANCEGross premiums written 3,980 3,208 3,395 3,303 3,161Allocated investment return, net of reinsurance (2,143) 2,443 2,233 579 2,364Claims and benefits (2,038) (1,423) (2,875) (3,691) (3,251)Change in the life insurance provisions (1,223) (2,829) (900) 435 (684)Bonus 1,766 (118) (369) 14 (228)Change in the provisions for unit-linked contracts (61) (851) (968) (294) (1,032)Total operating expenses (320) (305) (302) (308) (324)Net reinsurance (2) (2) 0 1 3TECHNICAL PROFIT / (LOSS) ON LIFE INSURANCE (41) 123 214 38 7Profit / (loss) on investment activitiesafter transfer to technical results (1,765) 878 668 359 1,263

Other income 6 5 11 47 12Other expenses (48) (48) (47) (40) (40)PRE-TAX PROFIT / (LOSS) (24) 1,863 1,506 1,349 2,335Taxation (165) (417) (338) (326) (512)PROFIT / (LOSS) FOR THE YEAR (189) 1,446 1,168 1,023 1,823

Run-off profits, net of reinsurance 506 214 204 148 201

Provisions for insurance and investment contracts:Non-life insurance 13,685 14,478 15,139 16,228 16,251Life insurance 24,938 28,882 31,166 30,618 32,553

Total insurance assets 651 656 768 1,184 797Total shareholders' equity 2,895 4,117 4,553 4,567 5,368Total assets 52,035 56,554 57,542 61,013 59,435

Gross loss ratio (%) 64.6 73.1 75.5 78.2 70.0Net reinsurance ratio (%) 3.1 3.1 2.4 (3.6) 2.2Claims trend (%) 67.7 76.2 77.9 74.6 72.2Gross expense ratio (%) 14.7 14.9 15.4 15.7 15.8Combined ratio (%) 82.4 91.1 93.3 90.3 88.0

Operating ratio (%) 80.4 90.1 92.7 89.6 87.8

Relative run-off profits, net of reinsurance (%) 5.0 2.1 1.8 1.3 1.6

Return on shareholders' equity (%) (6.3) 40.1 26.0 22.7 36.3Solvency ratio (%) 32.7 71.0 75.1 60.7 72.6

* Before deducting bonuses and rebates



(DKKm) Note 2011 2012

20

Income statement • Group

NON-LIFE INSURANCE

Gross premiums written 4 8,734 8,851Reinsurance ceded (703) (660)Change in the provisions for unearned premiums, gross 4 (26) (29)Change in the reinsurers' share of the provisions for unearned premiums 2 8Premiums earned, net of reinsurance 8,008 8,170

Technical interest, net of reinsurance 5 65

Gross claims paid (6,750) (6,682)Reinsurance cover received 555 791Change in the provisions for claims, gross (9) 560Change in the reinsurers' share of the provisions for claims 390 (407)Claims incurred, net of reinsurance 6 (5,814) (5,738)

Bonuses and rebates (41) (64)

Acquisition costs (797) (853)Administrative expenses (543) (519)Reinsurance commission and share of profits 67 76Total operating expenses, net of reinsurance (1,273) (1,297)TECHNICAL PROFIT ON NON-LIFE INSURANCE 7 945 1,092

LIFE INSURANCE

Gross premiums written 8 3,303 3,161Reinsurance ceded (5) (4)Premiums, net of reinsurance 3,298 3,156

Allocated investment return, net of reinsurance 579 2,364

Claims and benefits paid 9 (3,702) (3,248)Reinsurance cover received 5 7Change in the provisions for claims and benefits 11 (3)Claims and benefits paid, net of reinsurance (3,686) (3,244)

Change in the life insurance provisions 10 435 (684)Change in the reinsurers' share 2 1Change in the life insurance provisions, net of reinsurance 437 (683)

Bonus 14 (228)

Change in provisions for unit-linked contracts (294) (1,032)

Acquisition costs (108) (108)Administrative expenses (201) (217)Reinsurance commission and share of profits (1) (0)Total operating expenses, net of reinsurance (309) (325)TECHNICAL PROFIT ON LIFE INSURANCE 38 7



(DKKm) Note 2011 2012

Income statement • Group

NON-TECHNICAL ACTIVITIES

Technical profit on non-life insurance 945 1,092Technical profit on life insurance 38 7

Income from associated companies 29 26Income from investment properties 11 209 200Interest income and dividends etc. 1,970 1,877Revaluations 12 (595) 2,291Interest charges (113) (89)Expenses on investment business (35) (43)Total investment return 1,463 4,261

Technical interest transferred to non-life insurance business (388) (238)Pension return tax 13 (138) (396)Investment return transferred to life insurance business (579) (2,364)Other income 14 47 12Other expenses 15 (40) (40)PRE-TAX PROFIT 1,349 2,335

Taxation 16 (326) (512)PROFIT FOR THE YEAR 1,023 1,823

Profit per share, DKK 17 74.4 142.1Profit per share, diluted DKK 17 74.4 142.1

Statement of comprehensive income ● Group

Profit for the year 1,023 1,823Exchange rate adjustment of foreign business 0 1Revaluation of owner-occupied properties 1 1Taxation (0) (1)Other comprehensive income 1 2TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,024 1,825



Assets • Group (DKKm) Note 2011 2012

INTANGIBLE ASSETS 18 703 652

Machinery and equipment 126 146Owner-occupied properties 818 861TOTAL TANGIBLE ASSETS 19 943 1,007

Investment properties 20 4,104 3,983

Shares in associated companies 21 385 928Loans to associated companies 22 707 173Total investment in associated companies 1,091 1,101

Shares 5,593 5,805Bonds 39,070 36,882Loans guaranteed by mortgages 9 8Other loans 1 1Deposits with credit institutions 2,025 1,657Derivatives 1,342 1,450Total other financial investment assets 48,039 45,803TOTAL INVESTMENT ASSETS 53,235 50,887INVESTMENT ASSETS RELATED TO UNIT-LINKED CONTRACTS 23 3,283 4,313

Reinsurers' share of the provisions for unearned premiums 24 68 75Reinsurers' share of the life insurance provisions 38 38Reinsurers' share of the provisions for claims and benefits 25 1,079 683Total reinsurers' share of provisions 1,184 797

Amounts due from policyholders 379 390Amounts due from insurance companies 79 157Amounts due from associated companies 4 22Other debtors 128 193TOTAL DEBTORS 1,774 1,559

Assets held temporarily 0 1Deferred tax assets 26 12 20Liquid funds 241 368Other 166 101TOTAL OTHER ASSETS 419 491

Accrued interest and rent 494 376Other prepayments and accrued income 161 151TOTAL PREPAYMENTS AND ACCRUED INCOME 655 527TOTAL ASSETS 61,013 59,435



Shareholders’ equity and liabilities • Group (DKKm) Note 2011 2012

Share capital 148 138Revaluation reserve 17 18Security fund 1,104 1,104Other reserves 22 29Total reserves 1,126 1,133Profit carried forward 3,275 4,079TOTAL SHAREHOLDERS' EQUITY 4,567 5,368SUBORDINATED LOAN CAPITAL 27 1,150 1,153

Provisions for unearned premiums 28 2,678 2,713

Guaranteed pension benefits 20,233 21,402Bonus potential on future premiums 3,718 3,689Bonus potential on paid-up benefits 2,306 1,849Total life insurance provisions 29 26,257 26,941

Provisions for claims and benefits 30 13,545 13,521

Collective bonus potential 31 540 768Provisions for bonuses and rebates 89 105Provisions for unit-linked contracts 32 3,737 4,757TOTAL PROVISIONS FOR INSURANCE AND INVESTMENT CONTRACTS 46,846 48,804

Pensions and similar commitments 33 39 33Deferred tax liabilities 26 121 109Deferred tax on security funds 348 348TOTAL LIABILITIES PROVIDED 508 489 DEPOSITS RECEIVED FROM REINSURERS 116 141

Creditors arising out of direct insurance operations 89 95Creditors arising out of reinsurance operations 61 35Bond loans 72 74Amounts due to credit institutions 5,997 2,007Amounts due to associated companies 0 7Current tax liabilities 30 54Derivatives 537 22Other creditors 952 1,097TOTAL CREDITORS 7,738 3,390ACCRUALS AND DEFERRED INCOME 87 89TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 61,013 59,435



Cash flow from operations Gross premiums written 8,648 8,827Claims paid (6,641) (6,596)Expenses paid (1,239) (1,248)Reinsurance ceded 1 99Cash flow from non-life insurance 770 1,082

Gross premiums written 3,374 3,151Claims and benefits (3,704) (3,251)Expenses paid (315) (318)Reinsurance ceded 19 33Cash flow from life insurance (626) (384)

Total cash flow from insurance business 144 698

Payments made and received on investment contracts (382) (12)Dividends from associated companies 28 65Interest income and dividends etc. 2,201 2,181Interest charges etc. (124) (131)Pension return tax (325) (227)Corporation tax (207) (506)Other items 2 (28)Total cash flow from operations 1,336 2,040

InvestmentsIntangible assets, machinery and equipment (73) (105)Properties (88) (58)Shares in associated companies 4 (86)Shares 38 481Bonds (1,721) 3,696Loans 2 1Derivatives 396 (560)Investment assets related to unit-linked contracts (385) (582)Balances with associated companies 58 21

Total investments (1,769) 2,809

FinancingShares bought back (1,159) (1,200)Share-based payments 94 123Subordinated loan capital 398 (0)Amounts due to credit institutions 2,157 (3,990)

Total financing 1,490 (5,067)

Change in cash and cash equivalents 1,058 (218)

Cash and cash equivalents at 1 January 1,205 2,266Revaluation of cash and cash equivalents 3 (22)Cash and cash equivalents at 31 December 2,266 2,025

Cash and cash equivalents comprise:Liquid funds 241 368Deposits with credit institutions 2,025 1,657

2,266 2,025

The majority of the Group's companies are subject to the relevant legislation on insurance business.Consequently, there are certain restrictions on lending and placement of money.

Cash flow statement • Group (DKKm) 2011 2012



(DKKm)

Statement of changes in equity • Group

Revalu- ProfitShare ation Security Other carriedcapital reserve fund reserves forward Total

2011

Shareholders' equity at 31 December prior year 171 16 1,104 20 3,241 4,553

Profit for the year 2 1,021 1,023Other comprehensive income 1 0 0 (0) 1Total comprehensive income for the year 1 0 2 1,021 1,024

Cancellation of own shares (24) 24 0Share buy-back (1,159) (1,159)Sale of employee shares 46 46Issue of share options 7 7Exercise of share options / warrants 1 93 94Taxation 3 3Other transactions (23) (987) (1,009)Shareholders' equity at 31 December 2011 148 17 1,104 22 3,275 4,567

2012

Shareholders' equity at 31 December prior year 148 17 1,104 22 3,275 4,567

Profit for the year 7 1,816 1,823Other comprehensive income 1 0 0 0 2Total comprehensive income for the year 1 0 7 1,817 1,825

Cancellation of own shares (11) 11 0Share buy-back (1,200) (1,200)Sale of employee shares 43 43Issue of share options 7 7Exercise of share options 123 123Taxation 3 3Other transactions (11) (1,013) (1,024)Shareholders' equity at 31 December 2012 138 18 1,104 29 4,079 5,368



Segment information income statement 2Segment information balance sheet 3Gross premiums earned - non-life insurance 4Technical interest, net of reinsurance - non-life insurance 5Claims incurred, net of reinsurance - non-life insurance 6Technical result - non-life insurance 7Gross premiums written - life insurance 8Claims and benefits paid - life insurance 9Change in life insurance provisions 10Income from investment properties 11Revaluations 12Pension return tax 13Other income 14Other expenses 15Taxation 16Profit per share 17Intangible assets 18Tangible assets 19Investment properties 20Shares in associated companies 21Loans to associated companies 22Investment assets related to unit-linked contracts 23Reinsurers' share of the provisions for unearned premiums 24Reinsurers' share of the provisions for claims 25Deferred ta

Notes to the financial statements • Group Risk factors 1

x 26Subordinated loan capital 27Provisions for unearned premiums 28Life insurance provisions 29Provisions for claims 30Collective bonus potential 31Provisions for unit-linked contracts 32Pensions and similar commitments 33Profit on life insurance 34Expenses 35Auditors' fee 36Staff costs 37Related parties 38Financial assets 39Financial liabilities 40Settlement of assets and liabilities 41Analysis of assets and their return - life insurance 42Exposure information 43Shares analysed by industry and region (%) - life insurance 44Leasing 45Core capital and capital base 46Number of shares 47Own shares 48Provision of security 49Contingent liabilities 50Comparatives 51Companies 52Other disclosures 53Accountin

olicies 54g p



Notes to the financial statements • Group Note 1. Risk factors

% 2011 2012Short-tail 14 14Annuity provisions in workers' compensation 24 24Other claims provisions in workers' compensation 23 22Accident 23 24Motor personal liability 12 12Commercial liability 4 4

The following description of risks in the Topdanmark Group elaborates on Risk management in Management's review. Non-life insurance Underwriting risk Acceptance policy Topdanmark's acceptance policy is based on the desire to make a profit from both products and customer segments. Topdanmark varies the pricing of its products depending on the relevant risk criteria and the costs of administering those products. Topdanmark's pricing is aligned with the individual markets and types of customers. In the personal and commercial markets prices are mostly based on standardised rates while major SME and industrial customers are offered more individualised charges. Danish insurance companies do not cover damage arising from floods or the cost of replanting forests following storms, industrial diseases, war or warlike acts, earthquake or other natural disasters and with certain exceptions damage due to nuclear energy or radioactivity. Follow-up policy In order that both products and customers are profitable, Topdanmark systematically acts upon changes in its customer portfolios.

The historical profitability of major industrial and SME customers with individual insurance schemes is monitored using customer assessment systems. General insurance rates are re-calculated at least every three years and motor and workers' compensation rates are reviewed annually. Provisions are generally calculated on a monthly basis across all lines of business. The claims trend is assessed monthly, followed up by any necessary price changes. Topdanmark continues to improve its administration systems to achieve more finely meshed data capture which in turn enables it to identify the claims trends at an earlier point in time and compile information on the constituent parts of the various types of claims. Provisioning risk Provisions for outstanding claims Traditionally, the insurance classes are divided into short-tail (i.e. those lines where the period from notification until settlement is short) and long-tail (those lines where the period from notification until settlement is long). Examples of short-tail lines are building, personal property and comprehensive motor insurance. Long-tail lines relate to personal injury and liability such as workers' compensation, accident, third party insurance and commercial liability.

The following table shows a breakdown of Topdanmark's total provisions for outstanding claims:



The much higher provisioning risk in long-tail than in short-tail lines is due to the longer period of claims settlement. It is not unusual that claims in long-tail lines are settled three to five years after notification and in rare cases up to 10-15 years. During such a long period of settlement the levels of compensation could be significantly affected by changes in legislation, case-law or practice in the award of damages adopted by, for example, the Danish National Board of Industrial Injuries which awards compensation for injury and loss of earnings potential in all cases of serious industrial injuries. The practice adopted by the Danish National Board of Industrial Injuries also has some impact on the levels of compensation for accident and personal injury within motor, liability and commercial liability insurance. The provisioning risk represents mostly the ordinary uncertainty of calculation and claims inflation, i.e. an increase in the level of compensation due to the annual increase in compensation per policy being higher than the level of general indexation or due to a change in judicial practice / legislation. The sufficiency of the provisions is tested in key lines by calculating the provisions using alternative models as well and then comparing the compensation with information from external sources, primarily statistical material from the National Board of Industrial Injuries and the Danish Road Sector / Road Directorate. The actuarial team is in constant dialogue with the claims departments on any changes in the practices stemming from new legislation, case law or compensation awards as well as the impact of such changes on the routines used to calculate individual provisions. Provisions for unearned premiums The risk on provisions for unearned premiums is relevant particularly within change of ownership insurance where typically the policy covers a period of ten years and the full ten-year payment is made up front. Topdanmark's level of provisions for change of ownership policies is based on statistical analyses of

the pattern of claims notifications as compared to the remaining period of the policies. Disaster risks Topdanmark limits its insurance risk on significant events through a comprehensive reinsurance programme. Storm and rainstorms Reinsurance covers storm claims of up to DKK 5.1bn with a retention of DKK 100m. Snow loading, snow thawing and rainstorms are also covered. When using its reinsurance cover, Topdanmark will have to pay a reinstatement premium. In the event of another storm within the same year there is cover of up to a further DKK 5.1bn with a retention of DKK 100m. In the event of a third or fourth storm there is cover of DKK 670m with a retention of DKK 20m. The cover of a third or fourth storm is dependent on the storm programme not having been hit previously by two individual storms each exceeding DKK 3.6bn. The storm programme is renewed on 1 July. Specific reinsurance cover of DKK 100m for rainstorms takes effect if accumulated annual rainstorm claims exceed DKK 50m. For a claim to be accumulated, the event must exceed DKK 10m. The maximum retention in the event of an extreme rainstorm is DKK 75m plus reinstatement premiums. Fire Topdanmark has a proportional reinsurance programme for fire with a maximum retention of DKK 25m per claim on any one business. Terror With certain restrictions terror is covered by the reinsurance contracts. A national guarantee scheme of DKK 15bn covering terror claims including an element of NBCR (nuclear, biological, chemical, radiological) has been established. The national guarantee scheme covers any market retention in excess of DKK 5bn. The Danish non-life insurance companies have established a terror pool to protect the market retention. Industrial injuries caused by any form of terror is covered by the Government with a few exceptions.



Cumulative risk Known cumulative risk is where it has been recognised prior to the event that several policyholders could be affected by the same event. In personal lines Topdanmark's retention is DKK 15m for the first claim, DKK 5m for the second and DKK 15m for any third or subsequent risk. The retention is a maximum of DKK 25m in SME and industrial lines. Unknown cumulative risk is where several policyholders could be affected by the same individual event without the common risk being recognised prior to the event occurring. The retention is a maximum of DKK 50m. Workers' compensation In workers' compensation up to DKK 1bn is covered with a retention of DKK 50m. Life insurance Limited loss absorbing buffers in the event of low interest rates Bonus potential on paid-up benefits and collective bonus potential are the loss absorbing buffers in life insurance against any losses incurred by customers on investment activities. Low interest rates mean that the market value of the guarantees granted is high and that the related bonus potential is low. The lower bonus potential, the higher risk of any losses being wholly or partially born by shareholder's equity. If interest rates are high, the same losses could to a larger degree be absorbed by the bonus potential. Declines in the collective bonus potential are most frequently due to the investment return being lower than the addition of interest to deposits. Declines in collective bonus potential are also possible if interest rates are relatively high. In order to protect shareholders' equity it will be relevant to reduce market risks in the event of low interest rates. All policies have been split into contribution groups according to the guaranteed benefit scheme. In each contribution group the investment policy is intended to ensure the ability to meet the guaranteed benefits, and the market risk is adjusted in accordance with the risk capacity of the contribution groups.

In Life V, in which company policies with 4.5% guaranteed benefits are placed, the interest rate risk in interest groups with such schemes has been counted by EURO CMS floors with a strike rate of 5%. In Life I, where the portfolio comprises policies with guaranteed benefits of 2.5%, 1.5% and 0.5%, the movements in interest rates are monitored and risk reducing actions are taken as needed. Disability Disability risk is the risk of increasing disability intensity or declines in the rates of resumption of work, in that the benefits have been guaranteed until expiry. Losses may be incurred due to a general increase in disability frequency or due to inadequate health evaluation when the policy is written. Extra costs due to a permanent change in disability risk will be partially covered by collective bonus potential and bonus potential on paid-up benefits. The remainder affects profit / loss for the year and consequently shareholders' equity. Lifetime Lifetime risk is the risk customers with life dependent policies, primarily annuities, live longer than expected, which will increase provisions for lifetime products. Extra costs due to longer lifetimes will be partially covered by collective bonus potential and bonus potential on paid-up benefits. The remainder affects profit / loss for the year and consequently shareholders' equity. Market risk Market risk represents the risk of losses due to changes in the market value of the Group's assets, liabilities and off-balance items as a result of changes in market conditions. Market risk includes interest rate, equity, property, currency, inflation and liquidity risk. The limits for these financial risks are fixed by Topdanmark's Board of Directors. In practice, Topdanmark Kapitalforvaltning (asset management) handles the investment, finance and risk alignment processes. Compliance with the limits set by the Board of Directors is regularly controlled. The result of this is reported to the Board of Directors.



Market risks Risk reducing activities Interest rate risk Topdanmark is exposed to interest rate risk due to provisions for outstanding claims in non-life insurance and guaranteed benefits in life insurance

Generally, the interest rate risk is limited and controlled by investing in interest-bearing assets in order to reduce the overall interest rate exposure of the assets and liabilities to the desired level In life V the interest rate risk on guaranteed benefits are hedged by interest rate options − by EURO CMS floors with a strike rate of 5%

Equity risk Topdanmark is exposed to equity risk from direct investments as well as those investments made via derivatives

Since 2007 the equity exposure in the Topdanmark group excluding life insurance has been halved

Property risk Topdanmark is exposed to property risk from investments in properties rented out for business or private residence

The risk on the property portfolio is limited by a strategy focusing on the four largest cities in Denmark, where Topdanmark invests in well situated properties within the segments of housing and flexible office properties

Currency risk Topdanmark's currency risk relates in practice only to investments

The currency risk is alleviated by derivatives

Inflation risk Future inflation is implicitly included in a number of the models Topdanmark uses to calculate its provisions Workers' compensation and illness / accident insurance differ from the general principles regarding the inclusion of an allowance for inflation. The provisions in workers' compensation insurance are directly linked to the expected future indexation of wages and salaries and those in illness / accident insurance are directly linked to the net price index

An expected higher future inflation rate would generally be included in the provisions with a certain time delay while at the same time the result would be impacted by higher future indexation of premiums In order to reduce the risk of inflation within workers' compensation and illness / accident insurance Topdanmark has written inflation swap contracts and bought index-linked bonds hedging a significant proportion of the expected cash flows

Liquidity risk In insurance companies the liquidity risk is very limited as premiums are paid prior to the beginning of the risk period Topdanmark's liquidity risk is therefore primarily related to the parent company

Topdanmark finances its activities and share buy-back programme by using its subsidiaries' surplus liquidity via inter-group accounts, which are reduced by paying dividends Further financing requirements are covered by short-term money market loans, typically with a maturity of one month or less



Book 1 2-6 7-16 17-26 27-36 >36(DKKm) value year years years years years years2011Provisions for claims 13,545 4,094 6,087 3,331 1,427 631 118Life insurance provisions 26,257 653 104 5,427 11,785 11,196 5,151

2012Provisions for claims 13,521 3,919 6,363 3,262 1,096 333 30Life insurance provisions 26,941 765 816 6,082 10,950 9,431 4,499Future cash flows for life insurance will deviate from those expected due to observed insurance events, surrenders etc.

The liabilities of the Group's insurance companies are primarily technical provisions on which the

payment obligation is met by means of the cash flow generated from operations.

Undiscounted expected cash flows for the Group's most significant liabilities:

The Group uses derivatives to hedge investment risks. The hedging of currency risk in particular often results in significant positive or negative changes to balance sheet values. Topdanmark pays or receives cash security for any changes in value. The extent of these daily changes is limited such that there is no challenge to liquidity. Generally, there are no maturity concentrations on derivative contracts. All of the Group's insurance companies may raise money market loans as part of the day-to-day liquidity management. Typically the maturity of such loans is less than a month. Both the subordinated loans raised by Topdanmark Forsikring and any outstanding money market loans will be repaid from the cash generated from operations. Furthermore, the Group has a significant liquidity base of high-quality liquid bonds. % 2011 2012

A 4 3BBB 1 4<BBB 7 7AAA+AA 79 77Money market deposits 9 9

Credit and counterparty risk Credit risk is the risk of losses caused by one or more counterparties' full or partial breach of their payment obligations. Topdanmark is exposed to credit risk in both its insurance and investment business. Reinsurance Within insurance the reinsurance companies' ability to pay is the most important risk factor. Topdanmark minimises this risk by spreading and primarily buying

reinsurance cover from reinsurance companies with a minimum rating of A-. Accordingly almost all of its storm cover has been placed with such reinsurance companies. Investment Topdanmark's investment risk is the inability of bond, loan or financial contract counterparties to meet their obligations. Most of Topdanmark's interest-bearing assets comprise Danish mortgage bonds and debt issued or guaranteed by top-rated European states. The risk of losses is considered to be very small due to the high quality of the issuers and a desired spread on both issuers and issues. To limit the risk on other bond and loan debtors the portfolio is well diversified both geographically and with regard to type of debtor - and therefore the exposure to the concentration of risks is insignificant. Interest-bearing assets by rating:

To limit the counterparty risk of financial contracts the choice of counterparties is restrictive and security is required when the value of the financial contracts exceeds the predetermined limits. The size of the limits depends on the counterparty's credit rating and the term of the contract.



At the end of 2012 Topdanmark received cash margin payments of DKK 1,234m securing unrealised gains on derivatives (2011: DKK 937m). Operational risk Operational risk includes errors in internal processes, human errors, system errors, breakdowns of IT systems and losses incurred due to external events. Topdanmark regularly develops and improves IT systems, routines and procedures. The responsible business units are also responsible for the risk management of this development. Projects are to carry out a risk assessment with a description of the risks, possible consequences and measures to limit these risks. IT Group IT Security is responsible for IT security reporting to the IT manager. Risk assessments of each operational IT risk are made regularly. Group IT Security reports quarterly on risks and events to the Executive Board. Topdanmark's IT security policy and IT emergency strategy (both based on IS027001) are revised each year by the Executive Board to be accepted by the Board of Directors. The actual IT emergency plan includes plans for re-establishing the IT environment if the systems suffer breakdowns. The IT emergency plan is tested regularly. Topdanmark's business critical systems can be inaccessible for 24 hours without causing

significant business problems. In order to reduce the probability of breakdowns of the IT systems and limit their duration, Topdanmark has invested in, for example, emergency power plants with a diesel generator, disk mirroring, alarms and automatic fire fighting equipment. Critical IT equipment is in duplicate and placed in two physically separated machine rooms. Periodically Topdanmark’s critical IT systems are tested to see if they can be compromised from outside and whether the IT systems have vulnerabilities to be repaired. These tests are made by an external company with special expertise in this area. Topdanmark’s IT security committee discusses and prioritizes the performance and results of the tests. It is Topdanmark's goal that the accessibility of its main systems is no less than 99.5%. In 2012 it was 99.9%. For many years the accessibility for the central applications has exceeded this goal. The implementation of new IT systems is only effected after extensive testing procedures. Errors in internal processes, human errors, insurance fraud and deceit Topdanmark's well-documented routines, procedures and efficient control environment minimise these risks. It has made emergency plans for the most significant areas. The routines and procedures in all critical areas are regularly checked by the auditors in order to assess the risks and recommend measures to limit each individual risk.



(DKKm)

Note 2. Segment information income statement

Notes to the financial statements • Group

SME and Eli- Eli-Per- Indus- min- Parent min-

sonal trial ated Non-life Life etc. ated Group

2011Non-life insuranceGross premiums earned 4,756 3,934 (22) 8,668 8,668Technical interest* 33 31 0 65 65Claims incurred (3,762) (3,034) 23 (6,773) 14 (6,759)Expenses (753) (614) 2 (1,365) 24 (1,340)Net reinsurance 226 86 (0) 312 312Technical profit on non-life insurance 501 403 4 907 38 945

Life insuranceGross premiums written 3,303 3,303Allocated investment return 579 579Benefits and change in provisions (3,536) (3,536)Expenses (314) 5 (308)Net reinsurance 1 1Technical profit on life insurance 33 5 38

Total investment return 542 795 111 16 1,463Pension return tax (30) (108) (138)Transferred to technical result (388) (579) (966)Investment return 123 109 111 16 359Other items 55 46 (34) (60) 7Pre-tax profit 1,086 187 76 0 1,349Taxation (326)Profit for the year 1,023

2012Non-life insurance

Gross premiums earned 4,767 4,011 (19) 8,759 8,759Technical interest* 10 11 0 20 20Claims incurred (3,464) (2,686) 19 (6,131) 9 (6,122)Expenses (774) (615) 1 (1,388) 16 (1,372)Net reinsurance (24) (169) (0) (193) (193)Technical profit on non-life insurance 514 552 1 1,068 25 1,092

Life insuranceGross premiums written 3,161 3,161Allocated investment return 2,364 2,364Benefits and change in provisions (5,195) (5,195)Expenses (328) 4 (324)Net reinsurance 3 3Technical profit on life insurance 4 4 7

Total investment return 1,281 2,889 56 36 4,261Pension return tax (28) (368) (396)Transferred to technical result (238) (2,364) (2,601)Investment return 1,015 157 56 36 1,263

Other items 20 50 (34) (64) (28)Pre-tax profit 2,103 210 22 0 2,335Taxation (512)Profit for the year 1,823Amortisations:2011 88 71 160 0 0 1602012 79 65 145 0 0 145

* After discounting DKK 217m (2011: DKK 323m)



Note 3. Segment information balance sheet

Parent Elimin-Non-life Life etc. ated Group

2011Intangible assets 703 0 0 703Tangible assets 930 9 4 943Investment properties 428 3,522 155 4,104Loans to affiliated companies 300 0 0 (300) 0Shares in associated companies 53 332 0 385Loans to associated companies 0 707 0 707Other financial investment assets 18,050 29,988 1 48,039Investment assets related to unit-linked contracts 0 3,283 0 3,283Reinsurers' share of provisions 1,146 38 0 1,184Amounts due from affiliated companies 3,073 455 18 (3,546) 0Other assets 955 703 7 1,665Total assets 25,639 39,035 185 (3,846) 61,013Subordinated loan capital 746 300 404 (300) 1,150Total provisions for insurance and investment contracts 16,228 30,618 0 46,846Amounts due to affiliated companies 461 2,374 711 (3,546) 0Other liabilities 4,429 3,901 119 8,449Total liabilities 21,864 37,193 1,234 (3,846) 56,446

Purchase of tangible and intangible assets 141 6 0 148Results from associated companies 4 25 0 29

2012Intangible assets 646 5 0 652Tangible assets 995 8 3 1,007Investment properties 429 3,425 129 3,983Loans to affiliated companies 300 0 0 (300) 0Shares in associated companies 60 868 0 928Loans to associated companies 0 173 0 173Other financial investment assets 16,766 29,036 1 45,803Investment assets related to unit-linked contracts 0 4,313 0 4,313Reinsurers' share of provisions 758 38 0 797Amounts due from affiliated companies 1,718 103 12 (1,833) 0Other assets 984 782 14 1,779Total assets 22,656 38,752 160 (2,133) 59,435Subordinated loan capital 747 300 406 (300) 1,153Total provisions for insurance and investment contracts 16,251 32,553 0 48,804Amounts due to affiliated companies 157 1,368 308 (1,833) 0Other liabilities 1,529 2,423 156 4,109Total liabilities 18,685 36,644 871 (2,133) 54,067

Purchase of tangible and intangible assets 159 6 0 165Results from associated companies 7 19 0 26

Technical provisions, net of reinsurance, relating to illness / accident insurance administered by life insurance, and assets and other liabilities allocated to this portfolio are included in non-life insurance.

Notes to the financial statements • Group (DKKm)



Gross premiums earned, direct business, by location of the risk:Denmark 8,703 8,818Other EU-countries 4 4Other countries 1 1

8,709 8,823

Note 5. Technical interest, net of reinsurance - non-life insurance

Calculated interest 388 238Discounting (annual amortisation) of technical provisions and reinsurers' share (323) (217)Technical interest, net of reinsurance 65 20

Note 6. Claims incurred, net of reinsurance - non-life insurance

Run-off profit:Gross business 221 201Reinsurance ceded (73) 1Run-off profit, net of reinsurance 148 201

Specification of run-off profit in Note 7.

Claims incurred include revaluation of inflation swaps hedging the inflation risk in workers' compensation and illness / accident insurance 103 (32)

Note 7. Technical result - non-life insurance

Gross premiums written 8,734 8,851Gross premiums earned 8,709 8,823Gross claims incurred (6,759) (6,122)Bonuses and rebates (41) (64)Gross operating expenses (1,340) (1,372)Net reinsurance 312 (193)Technical interest, net of reinsurance 65 20Technical profit 945 1,092Gross loss ratio (%) 78.2 70.0Combined ratio (%) 90.3 88.0Run-off profits, net of reinsurance 148 201Claims provisions, net of reinsurance 12,382 12,750Number of claims incurred ('000) 434 393Average value of claim (DKK '000) 16 16Annual frequency of claims 120 108The loss ratio and the combined ratio have been calculated before elimination of internal rent.The annual frequency of claims has been calculated as a per thousand value.

Technical profit / (loss) analysed by industry is disclosed on the next page.

Notes to the financial statements • Group (DKKm) 2011 2012

Note 4. Gross premiums earned - non-life insurance

Gross premiums written 8,734 8,851Change in gross provisions for unearned premiums (26) (29)Gross premiums earned 8,709 8,823



Gross premiums written 1,142 1,157 146 126 741 729Gross premiums earned 1,137 1,144 139 126 758 766Gross claims incurred (785) (828) (92) (92) (515) (533)Bonuses and rebates (4) (5) (6) (3) 0 (5)Gross operating expenses (152) (161) (11) (9) (96) (95)Net reinsurance 2 9 0 0 (10) (16)Technical interest, net of reinsurance 8 3 0 0 7 2Technical profit 207 162 30 22 145 119Gross loss ratio (%) 69.4 72.7 69.1 74.4 68.1 70.2Combined ratio (%) 82.8 86.2 77.2 81.7 82.2 84.9Run-off profits / (losses), net of reinsurance 10 34 4 (1) 130 148Claims provisions, net of reinsurance 2,752 3,002 48 48 5,845 5,882Number of claims incurred ('000) 21 22 15 15 11 11Average value of claim (DKK '000) 38 39 7 7 60 63Annual frequency of claims 23 23 644 464 208 216

Motor Fire and propertyown damage Personal

Gross premiums written 819 799 1,474 1,478 1,837 1,877Gross premiums earned 828 807 1,483 1,465 1,809 1,853Gross claims incurred (736) (726) (852) (773) (1,758) (1,361)Bonuses and rebates (2) (3) (3) (5) (3) (5)Gross operating expenses (148) (151) (202) (202) (267) (279)Net reinsurance (4) (11) (8) (4) 246 (15)Technical interest, net of reinsurance 6 2 11 4 14 5Technical profit / (loss) (56) (82) 428 484 41 197Gross loss ratio (%) 89.3 90.5 57.7 53.0 97.6 73.7Combined ratio (%) 108.0 110.8 72.2 67.3 99.0 89.9Run-off profits / (losses), net of reinsurance (49) 30 2 (4) 8 24Claims provisions, net of reinsurance 1,697 1,690 155 157 597 608Number of claims incurred ('000) 26 27 89 85 132 107Average value of claim (DKK '000) 26 28 10 9 14 13Annual frequency of claims 46 47 188 177 195 160

Fire and propertySME Liability Other insurance

Gross premiums written 1,712 1,765 338 368 524 551Gross premiums earned 1,694 1,761 336 370 526 531Gross claims incurred (1,423) (1,136) (262) (242) (336) (431)Bonuses and rebates (7) (29) (1) (2) (15) (8)Gross operating expenses (314) (315) (59) (61) (93) (99)Net reinsurance 90 (109) 6 (29) (10) (17)Technical interest, net of reinsurance 9 3 2 1 7 1Technical profit / (loss) 49 176 22 37 79 (23)Gross loss ratio (%) 84.5 65.7 78.5 65.9 65.6 82.5Combined ratio (%) 98.2 90.3 94.6 90.6 85.8 104.7Run-off profits / (losses), net of reinsurance 45 28 (18) (11) 16 (47)Claims provisions, net of reinsurance 574 574 517 533 197 256Number of claims incurred ('000) 39 26 8 7 92 92Average value of claim (DKK '000) 39 45 30 33 4 4Annual frequency of claims 225 149 94 89 146 147

liability

Illness and accident Health insurance compensation

Motor third-party


Note 7. Technical result - non-life - continued2011 2012 2011 2012 2011 2012

Workers'



Proportion of gross premiums represented by premiums related to unit-linked contracts not eligible for bonus 1,188 1,257Investment risk is taken by the policyholder.All other gross premiums relate to bonus eligible insurance contracts.

Number of policyholders at 31 December ('000):Individual policies 56 53Policies which are part of a tenure 86 85Group life 182 171

Note 9. Claims and benefits paid - life insurance

Claims payable on death 135 138Claims payable on maturity 256 174Pension and annuity payments 560 576Surrenders 2,543 2,082Bonuses paid in cash 208 279Claims and benefits paid 3,702 3,248

Note 10. Change in life insurance provisions

Guaranteed benefits (3,632) (1,169)Bonus potential on future premiums 2,113 29Bonus potential on paid-up benefits 1,954 456Change in life insurance provisions 435 (684)

Note 11. Income from investment properties

Rental income 264 262Operating expenses from properties rented out (40) (50)Operating expenses from properties not rented out (5) (4)Gross profit 219 207Administrative expenses (11) (8)Income from investment properties 209 200


Note 8. Gross premiums written - life insurance

Individual policies 377 365Policies which are part of a tenure 1,526 1,392Group life 409 399Regular premiums 2,312 2,157

Individual policies 148 144Policies which are part of a tenure 843 860Single premiums 991 1,004Gross premiums 3,303 3,161Gross premiums written, direct business, by the policyholders' location:Denmark 3,272 3,134Other EU-countries 25 24Other countries 5 3

3,303 3,161



Note 12. Revaluations

Held for trading:Shares (678) 694Bonds 516 1,508Derivatives 650 28Total held for trading 488 2,230

Designated at fair value:Deposits with credit institutions 2 1Investment assets related to unit-linked contracts:Shares (261) 206Unit trusts (59) 78Bonds (39) 130Derivatives (6) 34Total designated at fair value (363) 449Revaluations of financial assets and liabilities at fair value throughincome statement 125 2,679Of which revaluation of inflation swaps transferred to claims incurred (103) 32Investment properties 31 (52)Provisions for unearned premiums (2) (4)Provisions for claims and benefits (654) (343)Reinsurers' share 12 6Liquid funds 1 (23)Other (3) (4)Revaluations (595) 2,291

Note 13. Pension return tax

Percentage of return exempt from ta


x 2.3 2.4

Note 14. Other incomeGain on sale of workers' compensation portfolio 32 0Other 15 12Other income 47 12

Note 15. Other expensesHolding expenses 32 33Other 8 7Other expenses 40 40

Note 16. Taxation

Current tax 288 577Change in deferred tax 33 (20)Prior year adjustment (4) (49)Tax in foreign companies 5 2Tax for the year 323 509Current tax taken to shareholders' equity 3 3Taxation 326 512




Note 16. Taxation - continued

Calculated tax on profit for the year (25%) 337 584Adjusted for the tax effect of:Returns on shares etc. not liable to tax (3) (22)Non-deductible expenses / income not liable to tax (5) (9)Prior year adjustment (4) (40)

326 512

Effective rate of taxation 24.2 21.9

Note 17. Profit per share

Profit for the year 1,023 1,823

Average number of shares ('000) 13,741 12,828Diluting impact of options ('000) 5 0

Average number of shares, diluted ('000) 13,746 12,828

Profit per share, DKK 74.4 142.1

Profit per share, diluted DKK 74.4 142.1

Note 18. Intangible assetsDevelopm't

Completed projectsIT developm't under con-

2011 Goodwill software projects struction Total

Cost / valuation at 1 January 453 156 311 116 1,037Purchased 0 12 0 21 3Transferred 0 0 105 (105) 0Sold (12) 0 0 0 (12)

3

Cost / valuation at 31 December 441 168 416 32 1,057

Impairment and amortisation at 1 January (12) (117) (140) 0 (269)Amortisation for the year 0 (20) (78) 0 (98)Sold during the year 12 0 0 0 12Impairment and amortisation at 31 December 0 (136) (218) 0 (355)Intangible assets 2011 441 31 198 32 703

2012Cost / valuation at 1 January 441 168 416 32 1,057Purchased 0 24 0 9 33Transferred 0 0 34 (34) 0Sold 0 (6) 0 0 (6)Cost / valuation at 31 December 441 186 450 8 1,085Impairment and amortisation at 1 January 0 (136) (218) 0 (355)Amortisation for the year 0 (20) (64) 0 (84)Sold during the year 0 6 0 0 6Impairment and amortisation at 31 December 0 (151) (282) 0 (433)Intangible assets 2012 441 35 168 8 652

Completed development projects included primarily the Group's new claims system. Amortisation ofintangible assets is mainly included in claims incurred and operating expenses.Goodwill and development projects under construction are subjected to an impairment test at the end of thefinancial year. The discounted value of future cash flows is compared with its carrying value.The future cash flows are based on three years' expected technical result and a terminal value of the segments to which goodwill and development projects under constructions relate. The pre-tax discount rateused is 12% (2011: 12%) corresponding to 9% (2011: 9%) post-tax. Goodwill relates to the personal segment.



(DKKm)


Note 19. Tangible assetsMachinery Owner-

& equip- occupied2011 ment properties Total

Cost / revaluation at 1 January 557 757 1,314Additions, including improvements 54 61 115Disposals (24) 0 (24)Revaluations taken to shareholders' equity 0 1 1Revaluations recorded in the income statement 0 (1) (1)Cost / revaluation at 31 December 587 818 1,404

Impairment and amortisation at 1 January (409) 0 (409)Amortisation for the year (60) (1) (61)Transferred on revaluation 0 1 1Reversal of total impairment and amortisation of assetssold or withdrawn from operations during the year 8 0 8Impairment and amortisation at 31 December (461) 0 (461)Tangible assets 2011 126 818 943

2012Cost / revaluation at 1 January 587 818 1,404Additions, including improvements 89 43 132Disposals (197) 0 (197)Revaluations taken to shareholders' equity 0 1 1Revaluations recorded in the income statement 0 (1) (1)Cost / revaluation at 31 December 479 861 1,340

Impairment and amortisation at 1 January (461) 0 (461)Amortisation for the year (60) (1) (61)Transferred on revaluation 0 1 1Reversal of total impairment and amortisation of assetssold or withdrawn from operations during the year 187 0 187Impairment and amortisation at 31 December (333) 0 (333)Tangible assets 2012 146 861 1,007

2011 2012

The valuation of the owner-occupied properties has been based on a requiredaverage return of: 5.3% 5.3%

Cost of revalued owner-occupied properties 696 739Machinery and equipment includes assets under finance leases of 7 15

Note 20. Investment propertiesFair value at 1 January 4,046 4,104Additions - acquistions 10 0Additions - improvements 19 15Disposals (1) (87)Revaluation to fair value 31 (49)Investment properties 4,104 3,983

Non-residential 3,195 3,160Residential and part residential 909 823

4,104 3,983

The valuation of the properties has been based on a required average return of:Non-residential 6.0% 6.0%Residential and part residential 4.6% 4.7%



Share-holders' Liabi-

2011 share equity Assets lities Income Result

Bornholms Brandforsikring A/S, Rønne 27 108 208 100 98 18Captives, Luxembourg 10-68 86 404 318 165 11EjendomsSelskabet af Januar 2002 A/S,Copenhagen 25 525 716 191 27 (6)Dantop Ejendomme ApS, Copenhagen 50 233 238 6 8 (8)Det Tyske Ejendomsselskab P/S, Ballerup 50 168 1,494 1,326 - 61

1,120 3,061 1,941 298 76

2012Bornholms Brandforsikring A/S, Rønne 27 119 223 104 101 11Captives, Luxembourg 10-40 81 439 359 157 (1)EjendomsSelskabet af Januar 2002 A/S,Copenhagen 25 402 479 77 24 (27)Dantop Ejendomme ApS, Copenhagen 50 157 195 37 7 7Det Tyske Ejendomsselskab P/S, Ballerup 50 1,206 1,489 284 - 45Margretheholm P/S, Hellerup 50 172 172 0 0 0

2,137 2,997 861 289 35

Bornholms Brandforsikring A/S has been recognised on the basis of the most recent financial informationat 30 September. The accounting information is according to the companies' most recent annual reports.

Note 22. Loans to associated companiesAverage effective interest rate 1.1% 1.7%

Note 23. Investment assets related to unit-linked contractsShares 1,515 1,741Unit trusts 691 905Bonds 1,077 1,642Deposits with credit institutions 0 8Derivatives 1 18Investment assets related to unit-linked contracts 3,283 4,313

The return on the above assets and derivatives is allocated to customers.

Note 24. Reinsurers' share of the provisions for unearned premiumsReinsurers' share at 1 January 65 68Reinsurance ceded 703 660Reinsurance earned (700) (652)Reinsurers' share of the provisions for unearned premiums at 31 Decembe


Note 21. Shares in associated companies

Book value at 1 January 388 385Additions 0 582Disposals (4) (0)Share of profit 29 26Share of other comprehensive income 0 1Dividends received (28) (65)Shares in associated companies 385 928

r 68 75

Percentage



Note 25. Reinsurers' share of the provisions for claimsNon-life insuranceReinsurers' share at 1 January 667 1,079

Reimbursement of claims relating to previous years (246) (683)


Change in expected income relating to previous years (73) 1

Reimbursement of claims relating to this year (309) (108)Expected income relating to this year 1,018 383

Discounting effect (annual amortisation) 10 6Revaluation 12 6Reinsurers' share of the provisions for claims at 31 December 1,079 683

Note 26. Deferred tax 2010 2011 2012

Properties (62) (63) (65)Machinery and equipment (35) (41) (35)Provisions 0 (17) (9)Liabilities provided 11 10 8Restriction on deductability 11 0 0Other 1 3 13Deferred tax (75) (109) (88)

Recognised as:Deferred tax assets 19 12 20Deferred tax liabilities (94) (121) (109)

(75) (109) (88)

Changes relating to the year (33) 20

Non-capitalised balance of equity losses that can be carried forward 411 317

Note 27. Subordinated loan capital

Hybrid Subordinated Subordinatedcore capital loan capital loan capital

Borrower Topdanmark A/S

Principal EUR 55m DKK 350m DKK 400m

Date of issue July 2007 June 2010 June 2011Maturity Bullet 18 June 2018 24 June 2019If permitted by the DFSA, the borrower can give notice oftermination from 15 Sep 2017 18 June 2015 24 June 2016Interest rate EURIBOR 3 months+1.90% to 2017 7.150% to 2015 6.633% to 2016Subsequently EURIBOR 3 months+2.90% Cibor 3 months+625bp Cibor 3 months+525bp

2011 2012

Interest charges 52 63Costs of raising the loan 2 0

Hybrid core capital has been fully included in the parent company's capital base 404 406

Subordinated loan capital of Topdanmark Forsikring A/S has been included in the Company's capital base at up to 25% of the solvency margin 252 252

Topdanmark Forsikring A/S



Note 28. Provisions for unearned premiumsProvisions for unearned premiums at 1 January 2,646 2,678Gross premiums written 8,734 8,851Premiums earned (8,709) (8,823)Discounting 4 2Revaluation 2 4Provisions for unearned premiums at 31 December 2,678 2,713

Note 29. Life insurance provisionsLife insurance provisions at 1 January 26,692 26,257Accumulated revaluation at 1 January (870) (897)Retrospective provisions at 1 January 25,821 25,360Gross premiums written 2,115 1,903Accrued interest 775 555Claims and benefits (3,110) (2,555)Expense loading inclusive of expense bonus (184) (165)Risk gain after allocating policyholders' risk bonus (48) (28)Other (8) 68Retrospective provisions at 31 December 25,360 25,138Accumulated revaluation at 31 December 897 1,803Life insurance provisions at 31 December 26,257 26,941

Guaranteed benefits 20,233 21,402Bonus potential on future premiums 3,718 3,689Bonus potential on paid-up benefits 2,306 1,849Life insurance provisions 26,257 26,941

Reduction in bonus potential on paid-up benefits when allocating "the insurancetechnical result before bonus contribution" in Topdanmark Livsforsikring A/S 398 89

Increase in guaranteed benefits as life insurance provisions must not be lowerthan the guaranteed surrender value 3 5

The increases have been calculated excluding surrender probabilities.

Portfolios analysed by capitalisation rates Guaran-tee


d future paid-up2011 benefits premiums benefitsTopdanmark Livsforsikring A/S:Interest rate group 1 7,079 3,253 1,836Interest rate group 2 3,518 304 380Outside of contribution 102 1 13

10,698 3,558 2,228

Topdanmark Livsforsikring V A/S:Interest rate group 3 625 3 17Interest rate group 4 473 10 19Interest rate group 5 1,171 33 14Interest rate group 6 6,175 112 26Interest rate group 7 253 2 2Interest rate group 8 41 0 0

8,737 160 78

Group Life 277 0 0U74-life annuities 465 0 0Other 56 0 0Total 2011 20,233 3,718 2,306

]3%-4%]

2%3%

[1%-2%]]2%-3%]

Bonus potential onCapitalisation

rate

]4%-5%[5%

above 5%



(DKKm)


Note 29. Life insurance provisions - continuedPortfolios analysed by capitalisation rates Guaran-

teed future paid-up2012 benefits premiums benefitsTopdanmark Livsforsikring A/S:Interest rate group 9 (164) 809 116Interest rate group 1 7,915 2,468 1,482Interest rate group 2 3,728 268 182Outside of contribution 105 0 15

11,584 3,544 1,795

2%3%

Bonus potential onCapitalisation

rate

1%

Topdanmark Livsforsikring V A/S:Interest rate group 10 377 0 3Interest rate group 3 420 5 12Interest rate group 4 491 11 8Interest rate group 5 1,294 26 8Interest rate group 6 6,202 101 22Interest rate group 7 237 2 2Interest rate group 8 40 0 0

9,060 145 54Group Life 245 0 0U74-life annuities 444 0 0Other 69 0 0Total 2012 21,402 3,689 1,849The provisions include an allowance for risk corresponding to the percentage which would be demandedby an arms-length purchaser of the company's portfolio of life insurance policies to compensate for the riskof fluctuations in the expected payments. The overall allowance for risk is an estimate calculated as the interest rate used less 5%.

]1%-2%]

]3%-4%]]4%-5%[

1%

5%above 5%

]2%-3%]

Note 30. Provisions for claims 2011 2012Non-life insurance:GrossProvisions at 1 January 12,364 13,461Claims paid relating to previous years (3,306) (3,642)Change in expected claims payments relating to previous years (221) (201)Claims paid relating to this year (3,444) (3,040)Expected claims payments relating to this year 6,980 6,323Inflation swaps 103 (32)Discounting (annual amortisation) 329 221

Revaluation 654 343Gross provisions at 31 December 13,461 13,434

Net of reinsuranceProvisions at 1 January 11,697 12,382Claims paid relating to previous years (3,060) (2,958)Change in expected claims payments relating to previous years (148) (201)Claims paid relating to this year (3,135) (2,932)Expected claims payments relating to this year 5,962 5,939Inflation swaps 103 (32)Discounting (annual amortisation) 320 215Revaluation 643 338Non-life insurance, net of reinsurance, at 31 December 12,382 12,750Life insurance 84 87Provisions for claims, net of reinsurance 12,467 12,837

Provisions for workers' compensation insurance, net of reinsurance 5,845 5,882Average period of settlement 7 years 7 yearsIllness / accident insurance, net of reinsurance, administered bythe life insurance business 1,791 2,020Average period of settlement 14 years 14 years



2 years later 6,564 6,286 6,467 6,148 5,505 5,321 4,936 4,5613 years later 6,295 6,594 6,168 5,407 5,252 4,949 4,6344 years later 6,556 6,249 5,451 5,192 4,983 4,6385 years later 6,247 5,470 5,226 4,962 4,6436 years later 5,456 5,213 4,981 4,5847 years later 5,224 4,986 4,6358 years later 4,983 4,6749 years later 4,666 58,286Less paid incl. inflation swaps 2,933 4,440 5,106 5,212 5,352 5,285 4,876 4,779 4,599 4,390 46,973Provisions before discountingat 31 December 3,095 1,828 1,459 1,083 1,204 961 580 445 384 276 11,314Discounting (25) (14) (8) (5) (2) (1) (1) (0) (0) (0) (57)

3,070 1,813 1,451 1,078 1,202 960 579 445 383 276 11,257Provisions relating to previous years at 31 December 1,494Provisions, net of reinsurance, at 31 December 2012 - non-life insurance 12,750

Reconciliation:Provisions for claims 13,521Less amount relating to life insurance (87)Less reinsurers' share of provisions (683)Provisions, net of reinsurance, at 31 December 2012 - non-life insurance 12,750Composition of expected payments, net of reinsurance:Original payment 5,991 6,062 6,379 6,361 6,148 6,068 5,807 5,714 5,264 4,496 58,291Loss / (gain) on settlement 53 45 (287) 25 (193) (621) (693) (535) (131) (2,336)Claims handling etc. at 1 January 2004 127 127Discounting / revaluationworkers' compensationinsurance and illness / accident 37 152 140 220 383 372 270 204 253 175 2,205

6,028 6,268 6,564 6,295 6,556 6,247 5,456 5,224 4,983 4,666 58,286

The table shows the historical development in the estimated final liability (the sum of claims payments and provisions) for eachclaims year from 2003. Significant proportions of the liabilities shown have been calculated without discounting which to a greatextent eliminates changes in discounting rates and methods after the change to IFRS. However, workers' compensation andillness / accident administered by the life insurance business are included at discounted values.


Note 30. Provisions for claims - continuedClaims liabilities analysed by claims year

Gross 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Total

End of year 6,414 7,203 6,814 6,730 6,559 6,400 6,122 7,079 5,888 4,8311 year later 7,347 6,834 6,526 6,753 6,426 5,934 6,776 5,677 4,9462 years later 6,952 6,585 6,769 6,473 5,778 6,612 5,574 4,9063 years later 6,583 6,887 6,492 5,682 6,538 5,611 4,9824 years later 6,851 6,576 5,718 6,465 5,652 4,9875 years later 6,576 5,737 6,499 5,638 4,9946 years later 5,721 6,476 5,656 4,9337 years later 6,482 5,661 4,9868 years later 5,651 5,0299 years later 5,022 63,599

Less paid incl. inflation swaps 3,041 5,342 5,420 5,452 5,607 5,597 5,135 6,028 5,244 4,742 51,607Provisions before discountingat 31 December 3,374 2,006 1,531 1,131 1,243 979 587 454 407 280 11,991Discounting (27) (16) (9) (5) (3) (1) (1) (0) (0) (0) (62)

3,347 1,990 1,522 1,126 1,241 977 586 453 407 280 11,929Provisions relating to previous years at 31 December 1,504Gross provisions at 31 December 2012 - non-life insurance 13,434

Net of reinsuranceEnd of year 6,028 6,164 6,385 6,389 6,227 6,073 5,813 5,733 5,316 4,508

1 year later 6,268 6,433 6,191 6,429 6,096 5,651 5,455 5,057 4,611



2

2011 2012Number of customers with investment contracts 2,810 2,728The contracts written do not have guarantees.


(DKKm)

Note 31. Collective bonus potential

Topdanmark Livsforsikring A/S: 2011 2012 2011 2012Interest rate group 9 0.0% 3.3% 0 26Interest rate group 1 0.0% 0.0% 0 0Interest rate group 2 0.0% 0.0% 0 0Risk groups 24 23Cost groups 0 0

24 49

Capitalisationrate

2%3%

1%

Bonus ratio

Topdanmark Livsforsikring V A/S:Interest rate group 10 0.0% 5.0% 0 19Interest rate group 3 4.9% 6.9% 32 29Interest rate group 4 4.3% 5.5% 21 26Interest rate group 5 6.8% 7.2% 76 82Interest rate group 6 6.1% 9.2% 307 438Interest rate group 7 12.6% 22.9% 25 40Interest rate group 8 0.0% 0.0% 0 0Risk groups 49 79Cost groups 6 6

516 719Collective bonus potential 540 768

]3%-4%]]4%-5%[

5%above 5%

]1%-2%]]2%-3%]

1%

Note 32. Provisions for unit-linked contracts

Insurance Investment2011 contracts contracts TotalGross provisions at 1 January 2,997 829 3,826Retrospective provisions at 1 January 2,997 829 3,826Gross premiums 1,188 59 1,247Return (221) (38) (259)Claims and benefits (581) (442) (1,022)Expense loading inclusive of expense bonus (35) (7) (42)Risk gain after addition of risk bonus 5 0 5Premiums waived transferred to life insurance provisions (14) 0 (14)Other (3) 0 (3)Retrospective provisions at 31 December 3,335 402 3,737Provisions for unit-linked contracts 2011 3,335 402 3,737

2012Gross provisions at 1 January 3,335 402 3,737Retrospective provisions at 1 January 3,335 402 3,737Gross premiums 1,257 72 1,329Return 466 52 518Claims and benefits (696) (84) (780)Expense loading inclusive of expense bonus (36) (5) (40)Risk gain after addition of risk bonus 3 0 3Premiums waived transferred to life insurance provisions (12) 0 (12)Other 2 (0)Retrospective provisions at 31 December 4,320 437 4,757Provisions for unit-linked contracts 2012 4,320 437 4,757




Note 33. Pensions and similar commitmentsRetirement benefits 13 9Anniversaries 23 23Other pension commitments 3 0Pensions and similar commitments 39 33

Other pension commitments cover former senior executives and their widows.

Note 34. Profit on life insurance

2011 2012

Life I Life V Total Life I Life V TotalTotal insurance technical result 53 297 350 947 413 1,360Customers' share of insurance technical result (245) 217 (28) 595 313 907Illness / accident (investment return) 264 264 303 303Share of insurance technical resultallocated to shareholders' equity 33 81 114 49 100 150

Profit on life insurance:Share of insurance technical resultallocated to shareholders' equity 33 81 114 49 100 150Tax etc. in subsidiaries included in insurancetechnical result but included in tax in the Group 28 20 48 22 13 35Policies outside of contribution etc. 6 11 17 6 4 10Life Holding and Group eliminations 8 15

187 210

Specification of profit on life insurance:Investment return 63 41 105 73 56 129Risk allowance 117 61 178 105 60 165Transferred to shadow account (112) (2) (114) (116) (2) (117)Pre-tax profit / (loss) Topdanmark Link (5) (5) 11 11Pre-tax profit Nykredit Livsforsikring 2 2 2 2Acquisitions cost result (4) 0 (4) (4) 0 (4)Profit on policies outside of contribution etc. 6 11 17 6 4 10Investment return Life Holding 6 14Group eliminations 2 1Profit on life insurance 187 210

2011 2012Life I Life V Total Life I Life V Total

Shadow account at 1 January 0 0 0 112 2 114Return 0 0 0 5 0 5Transferred 112 2 114 116 2 117Shadow account at 31 December 112 2 114 233 4 236

Shadow account by interest rate, risk and cost groups:

Interest rate group 1 76 - 76 150 - 150Interest rate group 2 26 - 26 53 - 53Risk groups 5 2 7 14 4 17Cost groups 4 0 4 16 0 16Total shadow account 112 2 114 233 4 236The allocation of the insurance technical result before bonus to policyholders is in accordance with the order oncontribution principle.

Capitalisationrate

3%2%



Note 35. Expenses

Expenses by their nature:

Commission - non-life insurance 226 228Commission - life insurance 54 45Staff costs (excl. commission) 1,622 1,672Other staff costs 111 107Premises costs etc. 164 172IT operations and maintenance 139 156Impairment and amortisation 160 145Other expenses 111 110Total expenses 2,587 2,634

These expenses have been disclosed in:Non-life insurance:Acquisition costs 797 853Administrative expenses 543 519Claims paid (claims handling and assessment) 807 793

2,148 2,165Life insurance:Acquisition costs 108 108Administrative expenses 201 217

308 324

Income from investment properties (administration and operation) 55 62Expenses on investment business 35 43Other expenses 40 40Total expenses 2,587 2,634

Note 36. Auditors' feeFee to the auditors elected by the Annual General MeetingDeloitte:Fee for statutory audit of the annual accounts 4 4Fee for other assurance engagements 0 0Fee for tax advice 0 0Fee for services, other than audit work* 1 10

6 14*Primarily fee for one-off services related to the acquisition of an IT system in the life insurancegroup in 2012.The Group has an internal audit department which carries out most of the audit work.

Note 37. Staff costsSalaries 1,309 1,387Pensions 222 227Social security costs 40 39Payroll tax 165 171Share options 6 6Employee shares 44 42

1,786 1,871

Average number of full-time employees 2,533 2,572




Employee sharesIn 2012 Topdanmark issued 47,205 (2011: 68,501) employee shares offset by a reduction in their respectivecash salaries. The costs have been calculated to be DKK 43m (2011: DKK 46m) in accordance with IFRS 2.

Severance pa


Note 37. Staff costs - continuedShare optionsTopdanmark's share option scheme is for its Executive Board and senior executives. The strike price has beenfixed at 110% of the market price on the last trading date in the prior financial year (average of all trades).The options can be exercised 3-5 years subsequent to the granting. The scheme is settled by shares(equity instruments).The table below is categorised by the option holders' current standing:

SeniorStrike Executive execu-

Total number of options ('000) price Board tives Resigned Total2011Outstanding at 1 January 155 429 152 737Granted 808 13 50 0 63Transferred 0 (4) 4 0Exercised (31) (66) (54) (151)Forfeited 0 0 (3) (3)Outstanding at 31 December 2011 137 409 100 646

Average strike price at 31 December 2011 830 832 888

2012Outstanding at 1 January 137 409 100 646Granted 988 13 47 0 60Expired (26) (80) (42) (148)Exercised (18) (103) (35) (155)Outstanding at 31 December 2012 106 273 23 402

Average strike price at 31 December 2012 803 817 766

Per granting:2008 802 10 11 1 212009 762 33 60 17 1102010 776 37 107 5 1492011 808 13 49 0 622012 988 13 47 0 60Outstanding at 31 December 2012 106 273 23 402Average strike price exercised options 2011 608 641 608 622Average strike price exercised options 2012 802 788 800 792Fair value of granting 2011 1 6 7Fair value of granting 2012 2 6 7Fair value at 31 December 2011 18 54 9 81Fair value at 31 December 2012 43 107 10 160

The fair value of the granting for the year has been calculated using the Black and Scholes model assuminga price of DKK 897.78 (2011: DKK 734.73) per share, an interest rate corresponding to the zero coupon ratebased on the swap curve on 31 December the previous year, future volatility of 22% (2011: 22%) p.a.,corporate tax rate of 25% (2011: 25%) and a pattern of exercise similar to Topdanmark's previous granting of share options. The volatility has been calculated on the basis of previous years' volatility, which continuesto be Management's best estimate of future volatility.

March 2014 - March 2016 March 2015 - March 2017

Exercise period

March 2012 - March 2014- March 2013

March 2013 - March 2015

2011 2012

Number of options which could be exercised on 31 December ('000) 286 131

ySeverance pay has been described in "Severance pay" in "Management's review".



Related parties with significant influence comprise the Board of Directors,the Executive Board and their families.

Remuneration of the Board of DirectorsDirectors' fees were DKK 4,631,000 (2011: DKK 4,275,000) of whichDKK 244,000 (2011: 225,000) related to Topdanmark Forsikring A/S.Fee (DKK '000):Michael Pram Rasmussen 1,200 1,300Anders Knutsen 725 731Anders Colding Friis - 217Charlotte Hougaard 300 325Jens Maaløe 300 325Annette Sadolin 450 488Desiree Schultz 217 325Søren Thorup Sørensen 400 488Trine Zappe 217 325

Knud J. Vest 300 108Ole Døssing Christensen 83 -Per Krogsgaard Mathiesen 83 -Total fee paid to nine Board members 4,275 4,631The Board of Directors receive only a fixed remuneration.

Remuneration of the Executive BoardSalaries etc. 16 16Employee shares 1 1Share options 1 2Total remuneration to three members of the Executive Board 18 19

Christian Sagild 7.8 8.3Kim Bruhn-Petersen 5.2 5.5Lars Thykier 5.2 5.5

18.2 19.2

10% of the fixed basic salary etc. paid to the Executive Board is paid as share options.The Executive Board receives only a fixed remuneration.The Group has no unhedged pension commitments.

Significant risk takerBesides the Executive Board one employee of the Group has significant influence on its risk profile.In accordance with an exemption clause this remuneration is not disclosed.

Shares, bonds and subordinated notes held by the Board of Directorsand Executive BoardBoard of DirectorsNumber of shares 2,908 3,083Bonds, nominal value DKK '000 128 128Subordinated notes (subordinated loan capital) Topdanmark Forsikring, nominal value DKK '000 19,610 19,610

Executive BoardNumber of shares 35,630 30,635Bonds, nominal value DKK '000 1,364 1,364Subordinated notes (subordinated loan capital) Topdanmark Forsikring, nominal value DKK '000 3,850 0


Note 38. Related partiesThe Group has no related parties with controlling influence.



(DKKm) 2011 2012

Note 38. Related parties - continued


Associated companiesPremiums ceded 146 117Commission received (6) (6)Reimbursed claims (58) (100)Trading takes place under normal market conditions. Shares are disclosed in the balance sheet andspecified in the note on shares in associated companies. Balances are disclosed in the balance sheet.

Note 39. Financial assetsFinancial assets at fair value where the revaluation is taken to the income statementHeld for trading:Shares 5,593 5,805Bonds 39,070 36,882Loans guaranteed by mortgages and other loans 10 9Derivatives 1,342 1,450

46,015 44,146Designated at fair value:Deposits with credit institutions 2,025 1,657Investment assets related to unit-linked contracts 3,283 4,313

5,308 5,970Total financial assets at fair value where the revaluationis taken to the income statement 51,323 50,117

Loans and receivables at amortised costLoans to associated companies 707 173Amounts due from policyholders 379 390Amounts due from insurance companies 79 157Other debtors 128 193Liquid funds 241 368Other 170 123

1,704 1,405Total financial assets 53,027 51,522The book value of loans and receivables at amortised cost approximately corresponds to fair value.

(DKKbn)Inputs based

2011 Quoted on observableFinancial assets recorded at fair value prices market data TotalHeld for trading:Shares 4.5 1.1 5.6Government bonds 2.6 0.2 2.8Mortgage bonds 24.6 6.4 31.0CDOs 2.2 2.2Credits 1.9 1.2 3.1Other 0.0 0.0Bonds 29.1 9.9 39.1Loans guaranteed by mortgages and other loans 0.0 0.0Derivatives 1.3 1.3

Designated at fair value:Deposits with credit institutions 2.0 2.0Shares 1.5 0.0 1.5Unit trusts 0.7 0.0 0.7Bonds 0.6 0.5 1.1Derivatives 0.0 0.0 0.0Investment assets related to unit-linked contracts 2.8 0.5 3.3Total financial assets at fair value 36.4 14.9 51.3



Held for trading:Derivatives 537 22

Designated at fair value:Amounts due to credit institutions 5,997 2,007Total financial liabilities measured at fair value through the income statement 6,534 2,029

Financial liabilities measured at amortised costSubordinated loan capital 1,150 1,153Deposits with ceding undertakings 116 141Creditors arising out of direct insurance operations 89 95Creditors arising out of reinsurance operations 61 35Bond loans 72 74Amounts due to associated companies 0 7Current tax liabilities 30 54Other creditors 952 1,097Total financial liabilities measured at amortised cost 2,471 2,655Total financial liabilities 9,005 4,684

Book value of financial liabilities at amortised cost approximately corresponds to fair value,except for hybrid core capital (DKK 406m) with an assumed value lower than nominal value.


(DKKbn)

Note 39. Financial assets - continued

5)

Inputs based2012 Quoted on observableFinancial assets recorded at fair value prices market data Total

Held for trading:Shares 4.5 1.3 5.8

Government bonds 4.5 0.2 4.7Mortgage bonds 15.7 11.1 26.8CDOs 2.4 2.4Credits 2.0 1.0 3.0Other 0.0 0.0Bonds 22.2 14.7 36.9

Loans guaranteed by mortgages and other loans 0.0 0.0Derivatives 1.5 1.5

Designated at fair value:Deposits with credit institutions 1.7 1.7

Shares 1.7 (0.0) 1.7Unit trusts 0.9 0.0 0.9Bonds 0.4 1.2 1.6Derivatives 0.0 0.0Investment assets related to unit-linked contracts 3.0 1.2 4.3Total financial assets at fair value 29.8 20.3 50.1The Group has no financial assets recorded at fair value usingvaluation models based on non-observable inputs.

(DKKm) 2011 2012Allowance account (policyholders and insurance companies):1 January 74 81Changes 7 (31 December 81 77

Group companies have agreed to lend equities against security:Book value of equities lent 1,591 1,156Fair value of bonds received as security for the loan 2,881 1,526

Note 40. Financial liabilitiesFinancial liabilities measured at fair value through the income statement



Listed Danish shares 1,208 1,257 (161) 22.4Unlisted Danish shares 68 331 267 (1.0)Listed foreign shares 2,686 2,375 (568) 6.2Unlisted foreign shares 606 762 89 15.2Total other shares 4,568 4,725 (373) 10.8

Government bonds (Zone A) 1,335 2,652 964 14.1Mortgage bonds 18,156 15,043 (3,516) 2.8Index-linked bonds 1,622 1,561 (137) 7.1Credit bonds investment grade 1,841 2,524 801 11.9Credit bonds non-investment grade and emerging market bonds 2,239 2,403 9 37.7Other bonds 8 2 (5) 1.1Total bonds 25,201 24,186 (1,883) 7.1

Other financial investment assets 1,541 1,173 (435) 0.1

Derivatives to hedge againstthe net change in assets and liabilities** 1,218 1,340


(DKKm) 2011 2012

Note 40. Financial liabilities - continued

Financial liabilities payable after five years or more:Subordinated loan capital 404 406Amounts due to credit institutions 5 5

Financial liabilities recorded at fair value Observable inputs

Held for trading:Derivatives 537 22Designated at fair value:Amounts due to credit institutions 5,997 2,007Total financial liabilities recorded at fair value 6,534 2,029

Note 41. Settlement of assets and liabilitiesExcept for tangible and intangible assets, investment properties, investments in associatedcompanies and CDOs most other assets are expected to be settled within a year.

It is expected that the following significant liabilities will be settled 12 months or more afterthe balance sheet date:

Subordinated loan capital 1,150 1,153Provisions for unearned premiums 174 187Guaranteed benefits 18,121 19,410Bonus potential on future premiums 3,345 3,338Bonus potential on paid-up benefits 2,033 1,673Provisions for claims and benefits 9,564 10,121Collective bonus potential 513 716Provisions for unit-linked contracts 3,162 4,121Deferred tax on security funds 348 348

38,410 41,067

Note 42. Analysis of assets and their return - life insurance

Net ReturnBook value1 January 31 December investment (%)*

Land and buildings, directly owned 3,522 3,425 (70) 4.1Limited property companies 1,038 1,041 (23) 2.0Total land and buildings 4,560 4,466 (93) 3.6



** Life V has invested in interest rate options - Euro-CMS-floors with a strike rate of 5% - to hedge the guaranteed benefits.

The return percentages are calculated as the return on derivatives as a percentage of the size of theexposure in the underlying asset.

The exposure in foreign shares is adjusted by means of derivatives.After including derivatives the exposure in foreign shares on 31 December 2012 was DKK 4,130m(2011: DKK 3,703m).

Note 43. Exposure information 2011 2012

Non-life insurance

Event Effect on shareholders' equit


Note 42. Analysis of assets and their return - life insurance - continued* Annual return as a percentage before pension return and corporation tax.

y

0.7-1.0 pp increase in interest rates (35) (157)0.7-1.0 pp decline in interest rates (3) 17312% decline in equity prices (122) (137)8% decline in property prices (100) (103)Exchange rate exposure (VaR 99.0%) (11) (10)Loss on counterparties of 8% (180) (186)

Life insurance

Max. effect onbonus potential

on benefits onpaid-up policies Max. effect on

Max. effect on before change bonus potential collective in bonus poten- used for

2011 Min. effect on bonus tial used for benefits onEvent capital base potential such benefits paid-up policies

0.7-1.0 pp increase in interest rates (127) (48) 718 (26)0.7-1.0 pp decline in interest rates 125 40 (910) (95)12% decline in equity prices (7) (96) 0 (366)8% decline in property prices (61) (77) 0 (157)Exchange rate exposure (VaR 99.0%) (3) (4) 0 (3)Loss on counterparties of 8% (86) (108) 0 (185)10% decline in mortality intensity (6) (83) (10) (22)10% increase in mortality intensity 5 75 11 1210% increase in disability intensity 0 (16) (6) (4)

2012Event

0.7-1.0 pp increase in interest rates (148) (106) 1,045 160.7-1.0 pp decline in interest rates 84 114 (1,008) (130)12% decline in equity prices (12) (131) 0 (368)8% decline in property prices (59) (92) 0 (146)Exchange rate exposure (VaR 99.0%) (3) (2) 0 (3)Loss on counterparties of 8% (74) (115) 0 (182)10% decline in mortality intensity (8) (86) (9) (24)10% increase in mortality intensity 7 83 9 1610% increase in disability intensity 0 (19) (4) (5)




Note 44. Shares analysed by industry and region (%) - life insuranceOther North South Other Other Not

2012 Denmark Europe America America Japan Far East countries analysed Total

Energy 0 2 2 0 0 0 0 0 4Materials 1 2 0 0 0 0 0 0 4Industrial 6 2 2 0 1 0 0 0 11Consumer durables 1 2 2 0 1 0 0 0 6Consumer goods 2 2 3 0 0 0 0 0 7Health care 5 3 2 0 0 0 0 0 10Financial 7 3 3 0 1 1 0 0 14IT 0 1 4 0 0 1 0 0 7Tele-communication 1 1 1 0 0 0 0 0 3Supply 0 1 0 0 0 0 0 0 1Not analysed 13 1 0 0 0 0 2 15 31Total 36 19 20 1 3 3 3 15 100A list of the shares held by the companies can be ordered from the company.

Note 45. LeasingFinance lease for mainframe CPU: Minimum

lease Present Book2011 payment Interest value liabilities0-1 years 4 0 41-5 years 3 0 3

7 0 7

20120-1 years 6 0 61-5 years 8 0 8

14 0 14 15

Operational finance leases:20110-1 years 58 0 581-5 years 10 0 10

69 0 68

7

20120-1 years 60 0 601-5 years 12 0 12

73 0 73

Note 46. Core capital and capital base 2011 2012

Shareholders' equity according to Danish rules * 4,915 5,716Deferred tax assets (0) (1)Hybrid core capital 404 406Capital adequacy requirements for insurance companies – 50% (1,540) (1,521)Core capital 3,779 4,600Capital adequacy requirements for insurance companies – 50% (1,540) (1,521)Capital base 2,240 3,078Weighted items 3,689 4,238Core capital as a percentage of weighted items 102.4 108.5Solvency ratio 60.7 72.6Solvency requirement (%) 8.0 8.0* Before provisioning for deferred tax on security funds.Solvency has been calculated according to the rules for financial services holding companies. See "Solvency" in Management's Review.



Shares issued at 1 January 17,087 14,826Own shares at 1 January (2,615) (1,494)Number of shares at 1 January 14,472 13,332

Shares bought back (1,360) (1,141)Shares issued 140 0Shares sold 80 203

Shares issued at 31 December 14,826 13,750Own shares at 31 December (1,494) (1,356)Number of shares at 31 December 13,332 12,394

Note 48. Own sharesNumber of Nominal Percentage Bought

shares value of share


Note 47. Number of sharesReconciliation of the number of shares ('000)

/sold'000 DKKm capital DKKm

Held at 1 January 2011 2,615 26 15.3Bought back in 2011 1,360 14 9.2 1,159Sold (80) (1) 0.5 (69)Written down (2,401) (24) -Held at 31 December 2011 1,494 15 10.1

Bought back in 2012 1,141 11 8.3 1,200Sold (203) (2) 1.5 (179)Written down (1,076) (11) -Held at 31 December 2012 1,356 14 9.9

Number of shares held to cover the granting of options: 402,000 (2011: 498,000)

Note 49. Provision of security

The Group's insurance companies have registered the followingassets as security for technical provisions:Shares in associated companies 200 681Loans to associated companies 707 158Shares 4,390 4,516Bonds 32,406 33,479Deposits with credit institutions 1,641 1,560Investment assets related to unit-linked contracts 3,282 4,278Liquid funds 62 123Accrued interest 408 348Shares in and amounts due from affiliated companieseliminated in the consolidated accounts 7,767 7,464

50,862 52,608

Bonds provided as security for loans in accordance with standardrepo-contracts for Danish mortgage and government bonds 5,020 739Other provision of security 18 18



(DKKm) 2011 2012

Note 50. Contingent liabilities

Adjustments to VAT liabilities 37 33Other liabilities 9 10Capital commitments made to loan funds and private equity funds 215 136


Share of associated companies' liabilities:Contract liabilities - 452The Group companies participate in technical insurance collaboration where they arejointly liable for the insurance liabilities.The companies are also jointly liable for A-tax and payroll tax etc. and VAT chargeableto the jointly registered companies.

Note 51. Comparatives

The Group has made a change in the presentation of interest rate options, see accounting polices.The change has effect on a few items in the income statement and the cash flow statement.

Annual Com-report Adjust- paratives

Adjustment of comparatives for 2011: 2011 ment in 2012

Income statementInterest income and dividends etc. 2,058 (88) 1,970Revaluations (683) 88 (595)

Cash flow statmentInterest income and dividends etc. 2,289 (88) 2,201Total cash flow from operations 1,424 (88) 1,336Derivatives 308 88 396Total investments (1,856) 88 (1,769)

Note 52. Companies

Name Registered office ActivityTopdanmark A/S Ballerup HoldingNon-life:

Topdanmark Forsikring A/S Ballerup InsuranceDanske Forsikring A/S Ballerup InsuranceTDP.0007 A/S Ballerup PropertyTopdanmark EDB A/S Ballerup Internal IT servicesE. & G. Business Holding A/S Ballerup HoldingTopdanmark Holding S.A. Luxembourg HoldingRisk & Insurance Services S.A. Luxembourg AdministrationTDLII.0087 A/S Ballerup InvestmentLife:Topdanmark Liv Holding A/S Ballerup HoldingTopdanmark Livsforsikring A/S Ballerup InsuranceTopdanmark Livsforsikring V A/S Ballerup InsuranceTopdanmark Link Livsforsikring A/S Ballerup InsuranceTopdanmark Livsforsikring II A/S Ballerup InsuranceTopdanmark Livsforsikring III A/S Ballerup InsuranceNykredit Livsforsikring A/S Ballerup InsuranceTopdanmark EDB II ApS Ballerup IT servicesTDLII.0018 ApS Ballerup HoldingTopdanmark Ejendom A/S Ballerup PropertyTDE.200 ApS Ballerup PropertyTDE.201 ApS Ballerup Property



Note 52. Companies - continued

Name Registered office Activity


Other companies:Topdanmark Kapitalforvaltning A/S Ballerup Asset managementTopdanmark Invest A/S Ballerup InvestmentHotel Kongens Ege ApS Ballerup PropertyTopdanmark Ejendomsadministration A/S Ballerup Property

All of the companies are 100% owned.

In the financial year TDE.700 A/S merged with Topdanmark Ejendom A/S.

TDF.0141 ApS and TD.0151 ApS were liquidated by submitting a statement to the authorities.

Note 53. Other disclosuresThe five-year summary in accordance with Section 91(a) of the Danish executive order on financial reportsfor insurance companies and lateral pension funds is the last page of Management's review. For furtherdetails see "Risk management", "Risk scenarios" and "Capital model" in "Management's review".



Notes to the financial statements • Group Note 54. Accounting policies Topdanmark Group's 2012 Annual Report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and the additional Danish disclosure requirements of NASDAQ OMX, Copenhagen and the Danish Financial Business Act on annual reports prepared by listed financial services companies. For the financial year 2012, Topdanmark implemented a number of new standards and interpretations and revised others; the impact of this on the recognition and measurement was nil but there were minor clarifications to the notes. In 2013 the DFSA has updated its Executive Order on financial reporting for insurance companies and lateral pension funds. The Group has implemented part of this revision already for 2012. The changes relate to disclosure requirements having no impact on recognition and measurement. Change in accounting policies Topdanmark has made a change in the presentation of interest rate options in the income statement and consequently also in the cash flow statement. Principally derivatives are included in the income statement under equity gains. However, so far and most recently in Q3 2012, settled interest rate options to hedge guaranteed benefits calculated as the difference between the interest rate agreed and the market rate, have been presented under interest income and dividends etc. From Q4 2012 this accounting policy has been amended to comply with the principal rule. Due to the change DKK 181m (2011: DKK 88m), which were included in interest income and dividends etc. in Q3, were transferred to equity gains. The change has no effect on the profit for the year, earnings per share or other principal statements of the consolidated financial statements, except for the consequent effect on the cash flow statement. The comparatives have been restated: see note on comparatives. There have been no other changes in accounting policies from those adopted in the 2011 Annual Report.

Change in accounting estimates Inflation and interest rates Up to and including 2011, in workers' compensation insurance the calculation of the discounted value of expected future payouts was based on the assumption that the wage and salary indexation and the interest on mortgage bonds could be forecast as the forward inflation and the forward swap rate, respectively, with fixed allowances. With effect from 2012, this model has been changed to now using a specific estimate for development in each year. On the date of change the change in model had no effect on the size of overall provisions in workers' compensation. In illness / accident insurance the inflation assumptions used to calculate the value of the expected future payouts have changed from forward inflation to a specific estimate. On the date of change, 30 September 2012, the change had no effect on the size of overall provisions in illness / accident. Discount curve Technical provisions and other provisions have been calculated using the DFSA's changed discount curve which, for cash flows with maturity exceeding 20 years, was extrapolated using a fixed forward interest rate of 4.2%. On the date of change, 30 June 2012, this change in the discount curve reduced the provisions for outstanding claims by DKK 76m and life insurance provisions by DKK 102m. Acquisition costs and administrative expenses In 2011 and 2012 the decentralised sales organisation was converted from insurance outlets to larger sales centres. Subsequently the estimates and methods applied to allocate expenses between acquisition and administration were reconsidered. Thus the decline in administrative expenses and the increase in acquisition costs from 2011 to 2012 reflect partly the change in the use of resources, and partly the change in estimates. It has not been possible to calculate the value effect of the changed estimates, seen in isolation.



Future accounting regulation The IASB has issued a number of new and revised standards and interpretations which have not yet taken effect. Future changes to the rules are not expected to materially change Topdanmark Group’s accounting policies. Accounting estimates and judgements In the preparation of Topdanmark's financial statements, estimates and judgements have been made which affect the size of assets and liabilities and consequently the results in this and subsequent financial years. The most significant estimates and judgements are made ín the calculation of the provisions for outstanding claims. Provisions for outstanding claims have been calculated as the best possible estimate at the end of any given year. As, at this time of the year, all necessary information is not available, there will be deviations between the actual claims paid and the provisions made in the form of either run-off losses (too low provisions) or run-off profits (too high provisions). The provision risk is significant, in particular in lines with a long period of claims settlement such as workers' compensation, accident, commercial and motor liability. The levels of compensation could be significantly affected by any changes in legislation, case-law or the practice in the award of damages adopted by, for example, the Danish National Board of Industrial Injuries. The five-year summary discloses the most recent financial years' run-off profits/losses. The movement in the provisions for outstanding claims and run-off profits/losses analysed by claims year is shown in the note on "Provisions for outstanding claims". The note on "Technical result − non-life" specifies run-off profits/losses for the year analysed by line of business. For further details see Management's review. General Consolidated financial statements The consolidated financial statements include the parent company Topdanmark A/S and all of the companies that are controlled by the parent company. The parent company is considered to control the companies through direct or indirect ownership of more than 50% of the voting rights or when it can have or has an otherwise controlling influence.

The income statement and balance sheet are presented in accordance with the DFSA's IFRS-compatible accounting order for insurance companies and lateral pension funds. Consolidation The consolidated financial statements have been prepared by aggregating items within the financial statements of the parent company and the subsidiaries on a line-by-line basis. The same accounting policies are applied by the subsidiaries as by the parent company. Properties owned by the subsidiaries and used by the Group have been re-classified from investment properties to owner-occupied properties. Intra-group income and expenses, shareholdings, balances and dividends as well as gains and losses on intra-group transactions have all been eliminated. Companies acquired during the year have been included in the consolidation from the date of assumption of control and those companies sold during the year, until the date of relinquishment of control. Recognition and measurement Assets are recognised in the balance sheet when it is probable that future economic benefits will flow to the Group and where the asset has a value that can be measured reliably. Liabilities are recognised in the balance sheet when the Group has a legal or constructive obligation due to a previous event, when it is probable that future economic benefits will flow from the Group and where the value of the liability can be measured reliably. The recognition and measurement take into consideration predictable losses and risks which have occurred prior to the presentation of the Annual Report and which provide evidence of conditions that existed at the balance sheet date. Income is recognised in the income statement when earned. Similarly, all expenses are recognised which relate to the financial year, including amortisation and impairment. The initial recognition of financial instruments is made at fair value on the date of settlement. Any changes in the value between the trade and settlement dates are included in the balance sheet under the heading of derivatives. Direct expenses on the acquisition or issue of financial instruments which are measured at fair value



with any revaluation of the fair value taken to the income statement are included in expenses on investment activities when incurred. However, financial instruments which, subsequent to the initial recognition, have been measured at amortised cost are recognised at fair value adjusted for direct expenses on the acquisition or issue of the financial instrument. True sale and repurchase transactions and true purchase and resale transactions (repo / reverse transactions) are recognised and measured as secured loans. Insurance and investment contracts – classification The Topdanmark Group writes contracts which transfer insurance risk, investment risk or both. An insurance contract is a contract under which the insurer accepts significant insurance risk from the policyholder by agreeing to compensation if a specified uncertain future event adversely affects the policyholder. Insurance risk is always considered to be material in non-life insurance. In life insurance it is considered to be material when it covers the effect of disability (including the effect of premiums waived) and mortality (where the benefit exceeds the total savings of the policy). An investment contract is one where the amount of insurance risk is not sufficient for it to be classified as an insurance contract. However, if the investment contract entitles the policyholder to receive a bonus, it is treated as an insurance contract. Payments received and made on investment contracts where the policyholder is not entitled to a bonus have been taken directly to the balance sheet. Currencies As the predominant rule, DKK is the Group companies' functional currency and the presentation currency of the Annual Report. The initial recognition of transactions in currencies other than DKK is made at the exchange rates prevailing at the date of the transactions. Debtors, creditors and other monetary items which have not been settled on 31 December are translated at the closing exchange rates on 31 December. Translation differences are disclosed in Revaluations in the Income Statement. Income and expenses of foreign companies which prepare their financial statements in functional currencies other than DKK are translated at average exchange rates

for the year while balance sheet items are translated at the closing exchange rates on 31 December. Any translation differences are included in Other comprehensive income. Exchange rate differences on the translation of foreign associated companies are included in Other comprehensive income. Expenses Expenses are recognised in the Group’s income statement and disclosed classified by function: Claims incurred (claims handling), acquisition and administrative expenses, investment return and other expenses. Expenses which do not directly relate to a function are allocated proportionally on the basis of the size of the direct expenses. Share-based payments Share options The Executive Board and Senior Executives participate in a share option scheme. The fair value, on the date the option is granted less the subscription proceeds, is included in staff costs in the income statement, with the relevant credit shown as a change in equity. The fair value is calculated using the Black & Scholes model and in accordance with IFRS 2 on share-based payments. The options are settled with own shares. Any strike amount received on the exercise of the options is taken to shareholders’ equity. Employee shares The fair value, on the date the share is granted, is included as staff costs in the income statement, with the relevant credit shown as a change in equity. The fair value is measured in accordance with IFRS 2 taking into account the specific conditions for the issue of employee shares. Calculation of profit in life insurance The calculation of profit for those life insurance companies with portfolios of bonus-participating policies (Topdanmark Livsforsikring and Topdanmark Livsforsikring V) is regulated by the Danish Financial Business Act. The definition of Topdanmark's policy on the calculation of the profit for the year has been reported to the DFSA.



The result of life insurance comprises unconditional and conditional profit elements. The unconditional profit elements comprise the return on assets allocated to shareholders' equity including subsidiaries with unit-linked activities, acquisition cost result and the profit on policies outside of contribution. The conditional profit elements comprise the risk return which is calculated for each contribution group. The risk return for each contribution group (cost, risk and interest rate groups) has been based on their estimated risk on shareholders' equity. The risk return is only transferred to shareholders' equity where it can be covered by a sufficient "insurance technical profit before bonus contribution" for each contribution group. Any surplus risk return is transferred to a shadow account which will be included as income when the group returns to being in profit. If there is an "insurance technical loss before bonus contribution", which exceeds the collective bonus potential and the individual bonus potential, the excess will be debited to shareholders' equity. The result of life insurance and how the "insurance technical result before bonus contribution" is allocated is disclosed in a note. Segment information Topdanmark has divided its non-life insurance business into the following two business segments: Personal includes policies for individual households sold by Topdanmark's own sales channels and its distribution partners. SME and Industrial includes policies for agricultural, SME and industrial businesses, sold by Topdanmark's sales organisation and its distribution partners, as well as captive-based policies. Management reporting at this segment level comprises only reporting on the technical result but no reporting on assets and liabilities. Life insurance is considered to be a separate business segment.

The recognition and measurement of the information reported by each segment follow the same accounting policies as those applied by the Group. Topdanmark conducts insurance business only in Denmark and therefore no specific geographical segmental information is provided. Ratios The financial ratios have been calculated in accordance with the definitions of ratios issued by the Danish Society of Investment Professionals in 2010, except for profit per share and diluted profit per share which have been calculated in accordance with IAS 33 Earnings per share. These calculations, which have been made before elimination of intra-group rent, are disclosed in segment information. Topdanmark has not calculated consolidated ratios for life insurance, as it does not believe that a true and fair view would be achieved by presenting ratios based on an accumulation of completely different portfolios. Recognising that the interests of different portfolios are different, Topdanmark has established a portfolio-based structure of life insurance companies offering, among other services, different investment strategies to different groups of customers. Each company presents its ratios in its own annual report where further details are available. Cash flow statement The cash flow statement for the Group has been prepared in accordance with the direct method disclosing cash flow from operations, investments and financing as well as the changes in the Group’s liquid funds between the beginning and the end of the financial year. Investment activities also include amounts received and paid on the purchase and sale of investment, intangible and tangible assets. Cash flows from financing comprise changes in capital, including the purchase and sale of own shares. Furthermore it includes the raising of loans and repayments on interest-bearing debt. Cash and cash equivalents comprise liquid funds as well as deposits with credit institutions. Income statement Premiums earned Gross premiums in non-life insurance comprise those premiums receivable during the year and an estimate of premiums on insurance contracts written, either directly or indirectly, for which the period of risk has commenced before the end of the financial year. They do not include own risks. Premiums earned net of reinsurance comprise



gross premiums for the year adjusted for changes in the provisions for unearned premiums and net of reinsurance. Effectively, this means the premiums are being recognised in line with the distribution of risk over the period of cover. In life insurance, premiums net of reinsurance comprise those premiums, including single premiums, which are receivable within the year, net of reinsurance, for all insurance contracts and bonus eligible investment contracts. Technical interest net of reinsurance in non-life insurance The technical result on non-life insurance includes a return on the technical provisions net of reinsurance. The interest on the provisions is calculated using the relevant interest rate corresponding to the expected date of settlement. The discount expense of the regular revaluation of the present value of the provisions until the expected time of settlement is offset against the interest income. The interest and discount expense on discounted provisions, primarily provisions for outstanding claims net of reinsurance, are calculated on the same basis. Accordingly the interest and discount expense on discounted provisions are exactly netted off each other. For non-discounted provisions, primarily provisions for unearned premiums net of reinsurance, the interest on the average value of the provisions is calculated using the relevant interest rate corresponding to the weighted average date of settlement. Allocated investment return net of reinsurance in life insurance The investment return is calculated as the overall investment return in the life insurance group net of the proportion of the investment return relating to illness and accident insurance and the proportion transferred to shareholders' equity in accordance with the definition of profit reported to the DFSA. Claims incurred and benefits paid In non-life insurance, claims incurred net of reinsurance comprise claims paid during the year adjusted for changes in the provisions for outstanding claims and net of the reinsurers' share. Accordingly, claims incurred comprise known and expected claims relating to the year as well as any adjustments to the provisions made in previous years. Furthermore they comprise direct and indirect expenses on claims handling. However, the proportion of the change in provisions for outstanding

claims relating to changes in discounting and revaluation is included in technical interest net of reinsurance and revaluations respectively. Topdanmark has entered into swaps partially hedging the provisions for workers’ compensation and annuities in illness and accident insurance against changes in future wage and price indexation. The revaluation of these swaps is included in Claims incurred. In life insurance, claims and benefits paid net of reinsurance comprise payments relating to claims, surrenders and cash bonuses. Bonuses and rebates Bonuses and rebates include those premium amounts that have been or will be paid back to policyholders, on the basis that the amount of the repayment is calculated with reference to the claims trend of the financial year for each insurance contract or a portfolio of insurance contracts using criteria determined prior to the beginning of the financial year or when the insurance contracts were written. Operating expenses Technical operating expenses which relate, either directly or indirectly, to the acquisition and renewal of the portfolios are included in acquisition costs. New business commission is generally recorded in the income statement on the date the insurance takes effect. Administrative expenses comprise other costs incurred in the administration of the portfolios which relate to the financial year and which have been accounted for on an accruals basis. Commission received from reinsurers has been accounted for on an accruals basis over the policies’ period of cover. Investment activities Income from associated companies comprises a share of the post-tax results of the associated companies calculated in accordance with the Group's accounting policies. Income from investment properties comprises the operating results excluding interest charges and revaluations that have been disclosed separately in the financial statements. Interest, dividends etc. comprise all interest, dividends etc. earned in the financial year. Realised and unrealised gains and losses on investment assets and changes in the provisions for outstanding claims net of reinsurance due to changes in the interest rate structure are included in revaluations, which also includes exchange rate adjustments and realised gains and losses on owner-occupied properties. Administrative



expenses on investment activities comprise the cost of asset management including transaction costs. Pension return tax Pension return tax includes the return tax that arises from the return in life insurance included in the income statement, whether the tax is current or to be paid in subsequent periods. Other income and expenses Other income and expenses that do not relate to the administration of insurance portfolios or investment assets are included in Other income and expenses. Taxation The tax charge for the year comprises the current corporation tax for the year and any changes in deferred tax. The share of the tax charge that relates to the profit for the year is included in the income statement, the share that relates to other comprehensive income items is included in other comprehensive income and the share that relates to shareholders' equity items is taken to shareholders' equity. The current tax for the year is calculated using the tax rates and rules applicable on 31 December. Topdanmark A/S is jointly taxed with all the Danish companies of the Group. As the management company of the joint taxation Topdanmark A/S settles all corporation tax payments with the tax authorities. The jointly taxed companies' joint tax contributions are settled by dividing the current Danish corporation tax between them in proportion to their taxable income. Furthermore those companies with tax losses receive joint tax contributions from those companies which have been able to use this loss to reduce their own tax gain. Assets Intangible assets Goodwill relates to the acquisition of companies prior to 2004 and is included at the book value on the change to IFRS. Goodwill is not amortised but subjected to an impairment test at the end of the financial year and written down to its recoverable amount, as required. Acquired software licences are measured at cost and amortised on a straight-line basis over the expected useful life of a maximum of three years. Development projects which are clearly defined and definable are measured at cost at the amount of external costs incurred

and written off over the expected useful life of a maximum of five years. If there is an indication of impairment, the book value is written down to its recoverable amount. Intangible assets under construction are subjected to an impairment test at the end of the financial year and written down to their recoverable amount, as required. Tangible assets Machinery and equipment Machinery and equipment is measured at cost less depreciation on a straight-line basis and net of any impairment. Depreciation on a straight-line basis is calculated on the basis of the expected useful life and the residual value, which is annually revalued. If there is an indication of impairment, the book value is written down to its recoverable amount. Finance leases for machinery and equipment are those leases where the Company substantially bears all the risks and benefits of ownership: the relevant assets are shown in the balance sheet at the lower value of their fair value and the present value of future lease payments. Once recognised as a finance lease, the assets are treated as any other type of machinery and equipment. IT equipment, other equipment and cars as well as improvements of rental properties are depreciated over their expected useful life of up to five years. Solar cell plants are depreciated over their expected useful life of 25 years. Owner-occupied properties Owner-occupied properties are those properties used for the Group's own operations. The properties are measured at a revalued amount being the fair value on the date of revaluation less accumulated depreciation. The properties are reviewed and assessed annually by the Group's own valuation experts. The buildings are depreciated on a straight-line basis over their expected life of 50 years, although land is not depreciated. The fair value of the revaluation of owner-occupied properties is assessed on the same basis as investment properties. Any revaluation surplus is included in other comprehensive income unless the revaluation is a reversal of a previous impairment. Impairments are included in the income statement unless the impairment is a reversal of previous revaluation included in other comprehensive income.



Investment properties The initial recognition of investment properties is made at cost and subsequent recognitions are made at fair value with revaluations in the income statement. A value has been calculated for each property on the basis of an expected future return on its operations and a rate of return (required yield). This value is adjusted for any special conditions having a temporary effect on the earning capacity of the property as well as the level of maintenance required on each property. The yield has been fixed taking into account the relevant market conditions for each type of property, its position, use, tenure of lease etc. and sales efforts within a reasonable time frame. The properties are reviewed and assessed annually by the Group's own valuation experts. Associated companies Shares held in associated companies are measured at their net asset value, in accordance with the Group's accounting policies. Associated companies are companies which are not subsidiaries although the Group has substantial influence through a significant shareholding and representation on the board of the company. Financial assets Financial assets are classified at the time of their initial recognition as:

• Financial assets which are measured at fair value with any value adjustment taken to the income statement or

• Loans and receivables which are measured at amortised cost.

Financial assets at fair value with any value adjustment taken to the income statement are financial assets which either are included in a trading portfolio, are derivatives or at the time of their first recognition are included in this classification because the assets are managed and measured on a fair value basis or because this eliminates or significantly reduces accounting inconsistency. All financial assets included in "other financial investments assets" and "investment assets related to unit-linked contracts" are measured at fair value with any value adjustment taken to the income statement. Measurement of fair value The calculation at fair value is based on the listed prices of transactions in active markets. If there is an active market for listed shares, bonds, derivatives etc., the measuring is generally based on the closing price on 31

December. If there is no closing price, another public price is used which is believed to be the most appropriate. Valuation methods or other publicly available information are used to value listed securities where the closing price does not reflect the fair value. Valuation methods are based on publicly available market data. If there is no active market for the financial instrument, depending on the nature of the asset or liability, the calculation is based on underlying parameters such as interest and foreign exchange rates, volatility or comparison with the market prices of corresponding instruments. Receivables that are measured at amortised cost The initial recognition of receivables is made at fair value and subsequent recognitions are made at amortised cost. Amounts due from finance leases are included at the net investment in the lease contract. The receivables are regularly assessed for impairment and written down to their recoverable amount, as required. Such impairments are generally made collectively on the basis of the receivable ageing analysis. When an individual receivable is considered irrevocable, the value of the impairment is transferred out of the account for collective allowances. Reinsurers' share Reinsurers' share of the provisions for unearned premiums represents the proportion of reinsurance premiums paid which, net of commission received and based on the spread of risk during the period of cover, relate to the period after the end of the financial year. Reinsurers' share of the provisions for outstanding claims has been calculated as the amounts expected to be received from reinsurance companies according to the reinsurance contracts concluded. Expected future payments are discounted using a structure of interest rates. The reinsurers' share is regularly assessed for impairment and written down to its recoverable amount, as required. Liabilities Shareholders' equity Revaluation reserves Gains on the revaluation of owner-occupied properties are transferred to the revaluation reserves net of pension return tax, corporation tax and bonus. The reserve will be dissolved if the revaluation is reversed or if the property is sold.



Remaining 60 year old 60 year oldlife expectancy man woman

Life I 25.0 26.9Life V 25.7 28.1DFSA'sbenchmark 24.3 26.9

Security fund reserves The security funds are special funds under shareholders' equity. Prior to 1989 they were transferred to shareholders' equity for capital adequacy and were tax-deductible. The security funds can only be used for strengthening the technical provisions or otherwise for the benefit of policyholders and only if permitted by the DFSA. Other reserves Other reserves comprise a reserve at net asset value relating to non-life insurance. Subordinated loan capital The initial recognition of subordinated loan capital is made at fair value less transaction costs and subsequently measured at amortised cost. Provisions for insurance and investment contracts Provisions for unearned premiums These provisions represent the proportion of premiums collected which, based on the spread of risk during the period of cover, relates to the period after the end of the financial year. The provisions for unearned premiums cover future payments of claims not yet incurred in the remaining period of risk as well as administration costs of the insurance contracts written. Therefore they are calculated per line of business at the present value of these amounts, as a minimum. The sufficiency of the provisions is regularly tested on the basis of the current expectations of future cash flow. Life insurance provisions Life insurance provisions are measured at fair value. Accordingly, the liabilities are calculated on the basis of the market value independent of the original technical base. The fair value of the life insurance provisions is based on the realistically expected future premiums to be received, benefit payments to be made and administrative expenses incurred on the contracts written. The future payments to be received and made have been based on the assumed incidents of death, disability and resumption of work. The risk of death and disability is dependent on the age, sex and health of the policyholder and is based on the company's experience. This rate is calculated by considering the DFSA's population mortality rate, Topdanmark's own observed mortality rate and the DFSA's assessed improvement in future life expectancy.

Remaining life expectancy for a 60 year old man and a 60 year old woman is as follows:

Provisions for claims incurred are calculated using an in-house statistical model that is based on the relationship between the possibility of resumption of work and the period passed since the occurrence of the claim. The provisions include amounts to cover the expected expenses on the future administration of the insurance contracts written. These expenses have been calculated using an annual indexation of 2%. The present value of the expected future payments has been calculated using an interest rate structure, which is calculated by the DFSA and published on its website. For policies subject to pension return tax each interest rate used is reduced by the tax rate of 15.3%. The provisions include an allowance for risk corresponding to the percentage which would be demanded by an arms-length purchaser of the company's portfolio of life insurance policies to compensate for the risk of fluctuations in the expected payments. The overall allowance for risk is an estimate calculated as the interest rate used less 5%. Guaranteed benefits have been calculated without taking into account the conversion of insurance contracts into paid-up policies and surrenders. The liabilities are disclosed in the balance sheet as follows:

Guaranteed pension benefits are measured as the present value of current guaranteed benefits plus future administrative expenses less the present value of the agreed premiums. Guaranteed benefits also include provisions for group life policies and provisions for claims incurred but not reported (IBNR).



Bonus potential on future premiums comprises the present value of the agreed future premiums less the present value of the guaranteed benefits originating from these premiums. Bonus potential on paid-up benefits comprises the difference between on the one hand a policy's savings (retrospective provision) less the present value of the expected future expense result and on the other hand the present value of the guaranteed future benefits originating from already paid premiums.

Provisions for claims and benefits Provisions for claims and benefits cover future payments of claims incurred and their administration. Provisions for claims and benefits are assessed for each line of business either on a claim by claim basis (individual provisions) or by using statistical methods (collective as well as incurred but not reported (IBNR) and incurred but not enough reported (IBNER) provisions). Claims exceeding a fixed amount, dependent on the line of business, are assessed individually and provisions for smaller claims are assessed collectively. IBNR provisions cover expenses on post-notified large claims. IBNER provisions cover extra expenses on already reported claims for which the individually assessed provisions are not sufficient due to, for example, inadequate information at the time of assessment. The collective provisions are calculated using de Vylder's credibility model adjusted for each line of business. The IBNR and IBNER provisions are calculated using in-house developed models. In agricultural and commercial lines claims are assessed individually. IBNR and IBNER provisions are also included in the total provision. In personal lines claims not exceeding DKK 100,000 are assessed collectively while larger claims and all claims on change of ownership policies are assessed individually. IBNR and IBNER provisions are also included in the total provision. In motor and accident lines total provisions comprise the sum of the collective and individual provisions. Individual provisions are the result of an assessment where the claims handler has assessed the total claim payment to exceed DKK 1.5m and the case is estimated to exceed the amount paid out. Large claims and claims relating to previous years are individually assessed within personal liability in motor insurance. Inflation is taken into account when calculating the value of the provisions as future inflation is implicitly included in

a number of the statistical models used. Therefore, an expected higher future inflation rate would generally be included in the provisions with a specific time delay. Provisions for claims and benefits in workers' compensation insurance comprise provisions for annuities and other provisions for claims and benefits. The assessment of the future annuities is based on the present annuities including the expected wage and salary indexation and a rate of mortality corresponding to G82 with monthly age write-downs. Workers’ compensation claims are often paid as the capitalised value of an annuity. The capitalisation rate at the time of capitalisation is to be calculated as a moving average of the most recent five years’ interest rate on leading mortgage bonds less tax. The capitalisation rate is calculated as the forward swap rates plus 0.85% p.a. and less a deduction for tax corresponding to the base tax rate. The assessment of other provisions for claims and benefits relating to injuries, loss of provider and expenses is based on traditional actuarial triangulation models. Due to the special conditions surrounding payments on disability claims it is not possible to use traditional actuarial triangulation models for this type of provisions. Topdanmark therefore uses an in-house developed model, which, among other things, takes into account the stage each claim has reached. The calculation includes an allowance for the expected wage and salary indexation. Topdanmark has entered into swaps partially hedging the provisions for workers’ compensation and annuities in illness and accident insurance against changes in future wage and price indexation. The revaluation of these swaps is included in claims incurred. The provisions for claims and benefits include the amounts that are expected to be included to cover direct and indirect expenses on settlement of the liabilities. All provisions have been measured at present value by discounting the expected future payments using DFSA's interest rate structure. In illness and accident insurance, which is administered by the life insurance companies, each interest rate used of the interest rate structure is reduced by the tax rate of 15.3%.



The sufficiency of the provisions is regularly tested on the basis of the current expectations of future cash flow. Provisions for claims and benefits in life insurance comprise insurance benefits due but not yet paid. Provisions for bonuses and rebates Provisions for bonuses and rebates are the amounts payable to policyholders as the result of a favourable claims trend. Collective bonus potential The collective bonus potential is used to equalise the individual years' payments of bonus. Amounts will be provided for the collective bonus potential in years where the investment and technical results exceed the bonus promised, while amounts will be transferred from the reserve in years where the result is not sufficient to finance the bonus promised. The collective bonus potential can only be reduced by a transfer to another item under technical provisions or as a result of "insurance technical losses before bonus contribution" relating to bonus eligible insurance contracts. Provisions for unit-linked contracts Provisions for unit-linked schemes are measured at fair value in accordance with the value of the assets linked to the schemes: see the fair value option in IAS 39 on elimination or significant reduction of accounting inconsistency. Other liabilities Provisions for pensions and similar liabilities Provisions for anniversary bonuses and retirement benefits are built up on an on-going basis over the period of employment. The liability is calculated taking into account the expected level of staff reduction based on the Company's experience. The liability is measured at present value by discounting the expected future payments using DFSA's interest rate structure. Corporation tax and deferred tax Current tax liabilities and tax receivable, including joint tax contributions, are included in the balance sheet as calculated tax on taxable income for the year adjusted for tax on previous years' taxable income and prepaid tax on account. Deferred tax on temporary differences between

the accounting and tax value of assets and liabilities is charged in accordance with the balance sheet liability method. Deferred tax on shares in subsidiaries and associated companies is not included where the Group controls the timing of the reversal of the temporary difference and where it is probable that the temporary difference will not be reversed within the foreseeable future. The calculation of deferred tax is based on the planned use of each asset and the settlement of each liability using the tax rates expected to be in force when the deferred tax is expected to crystallise as current tax, based on the tax rates and rules in force on 31 December. Deferred tax on security funds comprises deferred tax on untaxed amounts transferred to the security funds under shareholders' equity. The security funds will be taxed in the proportion of 10% for every 10pp decline in technical provisions net of reinsurance from the level at 31 December 1994. A decline of 10% from the 1994 level is considered improbable as long as Topdanmark Forsikring, in which the transfers were made, continues its current operations. Therefore the security funds will only be taxed if the insurance portfolio is transferred or the company ceases to conduct insurance business. Deposits received from reinsurers Deposits received from reinsurers represent amounts deposited to cover reinsurers' liabilities to the Company. Creditors Amounts due to credit institutions and derivatives are measured at fair value, see the fair value option in IAS 39 on elimination or significant reduction of accounting inconsistency. The fair value of amounts due to credit institutions usually corresponds to their nominal value. The fair value of derivatives is calculated on the same basis as financial assets. Other loans, including employee bonds, are measured at their amortised cost. Other Generally all the amounts in the report are disclosed in whole numbers of DKKm. The amounts have been rounded and consequently the sum of the rounded amounts and totals may differ slightly.



(DKKm) Note 2011 2012

Income from affiliated companies 1 1,068 1,825Revaluations 2 1 (1)Interest charges (27) (20)Total investment return 1,042 1,804

Other expenses 3 (33) (34)PRE-TAX PROFIT 1,009 1,770

Taxation 4 14 53PROFIT FOR THE YEAR 1,023 1,823

Income statement • Parent company

Proposed appropriation of profit for the year:Transfer to net revaluation reserve at net asset value 1,068 1,825Transfer to profit carried forward (45) (2)

1,023 1,823

Statement of comprehensive income ● Parent company

Profit for the year 1,023 1,823Other comprehensive income in affiliated companies 1 2Other comprehensive income 1 2TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,024 1,825



(DKKm) Note 2011 2012

Balance sheet • Parent company

Assets

Machinery and equipment 5 4 3TOTAL TANGIBLE ASSETS 4 3

Shares in affiliated companies 6 6,285 6,714Total investment in affiliated companies 6,285 6,714

Bonds 1 1Total other financial investment assets 1 1TOTAL INVESTMENT ASSETS 6,286 6,715

Amounts due from affiliated companies 114 172TOTAL DEBTORS 114 172

Deferred tax assets 7 0 1Liquid funds 4 3TOTAL OTHER ASSETS 4 4TOTAL ASSETS 6,408 6,895

Shareholders' equity and liabilities

Share capital 8 148 138Other reserves 2,563 2,991Total reserves 2,563 2,991Profit carried forward 2,204 2,587TOTAL SHAREHOLDERS' EQUITY 4,915 5,716SUBORDINATED LOAN CAPITAL 9 404 4

Bond loans 72 74Amounts due to affiliated companies 985 630Current tax liabilities 17 53Other creditors 14 15TOTAL CREDITORS 1,089 773TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 6,408 6,895

Related parties 10Core capital and capital base 11Own shares 12Contingent liabilities 13Other note disclosures 14Accountin

06

g policies 15



(DKKm)

Statement of changes in equity • Parent company

Share Other Profit carriedcapital reserves forward Total

2011

Shareholders' equity at 31 December prior year 171 1,845 2,884 4,901

Profit / (loss) for the year 1,068 (45) 1,023Other comprehensive income in affiliated companies 1 0 1Total comprehensive income for the year 1,069 (45) 1,024

Dividends received from subsidiaries (341) 341 0Other movements in capital of subsidiaries (10) 14 4Cancellation of own shares (24) 24 0Share buy-back (1,159) (1,159)Sale of employee shares 46 46Issue of share options 7 7Exercise of share options / warrants 1 93 94Other transactions (23) (351) (635) (1,009)Shareholders' equity at 31 December 2011 148 2,563 2,204 4,915

2012

Shareholders' equity at 31 December prior year 148 2,563 2,204 4,915

Profit / (loss) for the year 1,825 (2) 1,823Other comprehensive income in affiliated companies 2 0 2Total comprehensive income for the year 1,826 (2) 1,825

Dividends received from subsidiaries (1,388) 1,388 0Other movements in capital of subsidiaries (9) 13 4Taxation (1) (1)Cancellation of own shares (11) 11 0Share buy-back (1,200) (1,200)Sale of employee shares 43 43Issue of share options 7 7Exercise of share options 123 123Other transactions (11) (1,398) 385 (1,024)Shareholders' equity at 31 December 2012 138 2,991 2,587 5,716



Note 1. Income from affiliated companies

Topdanmark Forsikring A/S 955 1,761Adjustment 10 9Topdanmark Invest A/S 15 (17)Topdanmark Kapitalforvaltning A/S 89 71Other (1) 0Income from affiliated companies 1,068 1,825

Note 2. Revaluations

Subordinated loan capital 1 (1)Revaluations 1 (1)

Note 3. Other expenses

Holding expenses 33 34Other expenses 33 34

Note 4. Taxation

Current tax 14 13Change in deferred tax (1) 1Prior year adjustment 1 39Taxation 14 53

Pre-tax profit excl. income from affiliated companies 59 55

Calculated tax (25%) 15 14Adjusted for the tax effect of:Non-deductible expenses / income not liable to ta

Notes to the financial statements • Parent company (DKKm) 2011 2012

x (1) (1)Prior year adjustment 0 40

14 53

Effective rate of taxation 23.7 96.8

Note 5. Machinery and equipmentCost at 1 January 5 4Disposals (1) 0Cost at 31 December 4 4Impairment and amortisation at 1 January (1) (0)Impairment and amortisation at 31 December (0) (1)Machinery and equipment 4 3

Note 6. Shares in affiliated companies

Topdanmark Forsikring A/S 5,964 6,427Topdanmark Invest A/S (investment) 190 31Topdanmark Kapitalforvaltning A/S 99 173TD.0151 ApS (Investment) 31 82Other 0 1Shares in affiliated companies 6,285 6,714The affiliated companies are domiciled in Ballerup.



12

Note 8. Share capital

DKKShare capital at 1 January 170,869,530 148,258,960Reduction in capital (24,008,570) (10,758,960)Increase in capital 1,398,000 0Share capital 148,258,960 137,500,000Each of Topdanmark's 13,750,000 (2011: 14,825,896) shares has a nominal value of DKK 10.No share enjoys any special rights. The shares are freely tradeable. Each share has one vote.

Note 9. Subordinated loan capital

In 2007 Topdanmark A/S issued EUR 55m of hybrid core capital.This bullet loan has no final maturity date but if permitted by the DFSA, the debtor can give notice of terminationas from 15 September 2017 at par. The loan carries a floating interest rate determined as EURIBOR 3 months+ 1.90%. From 15 September 2017 increased to EURIBOR 3 months + 2.90%.

Share of loan included in capital base 404 406Interest charges 13 11

Note 10. Related parties

Topdanmark A/S has no related parties with controlling influence.Related parties with significant influence comprise the Board of Directors,the Executive Board and their families.

Remuneration of the Board of DirectorsDirectors' fees were DKK 4,631,000 (2011: DKK 4,275,000) of whichDKK 244,000 (2011: 225,000) related to Topdanmark Forsikring A/S.Fee (DKK '000):Michael Pram Rasmussen 1,200 1,300Anders Knutsen 725 731Anders Colding Friis - 217Charlotte Hougaard 300 325Jens Maaløe 300 325Annette Sadolin 450 488Desiree Schultz 217 325Søren Thorup Sørensen 400 488Trine Zappe 217 325

Knud J. Vest 300 108Ole Døssing Christensen 83 -Per Krogsgaard Mathiesen 83 -Total fee paid to nine Board members 4,275 4,631The Board of Directors receive only a fixed remuneration.

Notes to the financial statements • Parent company (DKKm) 2010 2011 20

Note 7. Deferred tax assetsOther 1 0 1Deferred tax assets 1 0 1Changes relating to the year (1) 1



The Company has paid no remuneration to the Executive Board but an adminstration agreementprovides that it pays a share of the overall remuneration paid to the Executive Board

Salaries etc. 16 16Employee shares 1 1Share options 1 2Total remuneration to three members of the Executive Board 18 19Christian Sagild 7.8 8.3Kim Bruhn-Petersen 5.2 5.5Lars Thykier 5.2 5.5

18.2 19.2

10% of the fixed salary etc. paid to the Executive Board is paid as share options.The Executive Board receives only a fixed remuneration.The Group has no unhedged pension commitments.

Significant risk takerBesides the Executive Board one employee of the Group has significant influence on its risk profile.In accordance with an exemption clause this remuneration is not disclosed.

Shares, bonds and subordinated notes held by the Board of Directorsand Executive BoardBoard of DirectorsNumber of shares 2,908 3,083Bonds, nominal value DKK '000 128 128Subordinated notes (subordinated loan capital) Topdanmark Forsikring,nominal value DKK '000 19,610 19,610

Executive BoardNumber of shares 35,630 30,635Bonds, nominal value DKK '000 1,364 1,364Subordinated notes (subordinated loan capital) Topdanmark Forsikring,nominal value DKK '000 3,850 0

Share optionsTopdanmark's share option scheme is for its Executive Board and senior executives. The strike price has beenfixed at 110% of the market price on the last trading date in the prior financial year (average of all trades).The options can be exercised 3-5 years subsequent to the granting.The scheme is settled by shares (equity instruments).The Group's overall option scheme is disclosed in the Group note on staff costs.

Affiliated companiesExpenses charged 25 26Dividends received 341 1,388Interest charged 6 1

Expenses on investment business are settled on market conditions.Other expenses are charged to cover costs incurred.Average effective interest rate on balances is 0.13% (2011: 0.90%).Shares are disclosed in the balance sheet and specified in the note on Shares in affiliated companies.Balances are disclosed in the balance sheet.


Note 10. Related parties - continuedRemuneration of the Executive Board




Note 11. Core capital and capital baseShareholders' equity 4,915 5,716Deferred tax assets (0) (1)Hybrid core capital 404 406Capital adequacy requirements for insurance companies – 50% (1,540) (1,521)Core capital 3,779 4,600Capital adequacy requirements for insurance companies – 50% (1,540) (1,521)Capital base 2,240 3,079

Weighted items 3,846 4,390Core capital as a percentage of weighted items 98.0 104.8Solvency ratio 58.2 70.1Solvency requirement (%) 8.0 8.0

Solvency has been calculated according to the rules for financial services holding companies.

Note 12. Own shares

Number of Nominal Percentage Boughtshares value of share /sold

Parent company '000 DKKm capital DKKm

Held at 1 January 2011 2,615 26 15.3Bought back in 2011 1,360 14 9.2 1,159Sold (80) (1) 0.5 (69)Written down (2,401) (24) -Held at 31 December 2011 1,494 15 10.1

Bought back in 2012 1,141 11 8.3 1,200Sold (203) (2) 1.5 (179)Written down (1,076) (11) -Held at 31 December 2012 1,356 14 9.9

Note 13. Contingent liabilities 2011 2012

Other liabilities 0 1A number of subsidiaries have been liquidated by submitting a statement to the authorities. The Company guarantees that debt in these companies has been paid.

Note 14. Other disclosuresThe five-year summary in accordance with Section 91(a) of the Danish executive order on financial reportsfor insurance companies and lateral pension funds is included in financial highlights on page 3. Risk disclosures in accordance with Section 91(b) are included in Management's review for the Groupin Risk management and Risk scenarios and in Note 1 of the consolidated financial statements.



Notes to the financial statements • Parent company Note 15. Accounting policies The annual financial statements for the parent company Topdanmark A/S have been prepared in accordance with the Danish Financial Business Act, including the executive order issued by the Danish Financial Supervisory Authority (DFSA) on financial reports for insurance companies and lateral pension funds (nationwide, occupational pension funds specific to Denmark). There have been no other changes in accounting policies from those adopted in the 2011 Annual Report. Differences from the Group's accounting policies The company's accounting policies for recognition and measurement are in accordance with the Group's accounting policies with the following exceptions: Shares held in affiliated companies are recognised and measured at their net asset value. If the net asset value

exceeds the recoverable amount, the investment is written down to this lower amount. The share of the post-tax results of affiliated companies is included in the income statement under income from affiliated companies less any write-downs. Where investments in affiliated companies are revalued to net asset value, the net revaluation reserve is included in shareholders' equity. The share of the changes in equity of affiliated companies is included directly in the shareholders' equity. The net asset value of affiliated companies is calculated without providing for deferred tax on security funds unless it is probable that a situation creating such a tax liability will arise within the foreseeable future. Other Generally all the amounts in the report are disclosed in whole numbers of DKKm. The amounts have been rounded and consequently the sum of the rounded amounts and totals may differ slightly.



Disclaimer This Annual 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 and assumptions set out in the Annual Report. Such factors could be, for example, cyclical movements, changes in the financial markets, the financial effect of non-anticipated events like acts of terror or exceptional weather conditions, changes in Danish and EU rules, competitive factors in the insurance industry and the trend in reinsurance market. Also see Risk management. 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 Annual Report. This publication is a translation. In case of any divergence, the original Danish text shall prevail.



Statement by Management on the Annual Report We have today considered and approved the Annual Report of Topdanmark A/S for 2012. The consolidated financial statements are presented in accordance with International Financial Reporting Standards as adopted by the EU, and the annual financial statements for the Company are presented in accordance with the Danish Financial Business Act. Further, the Annual Report is presented in accordance with additional Danish disclosure requirements for listed financial services companies. In our opinion, the consolidated financial statements and annual financial statements give a true and fair view of the Group’s and the Company's assets, liabilities and financial position at 31 December 2012 as well as of the Group’s and the Company’s financial performance and the Group’s cash flow for the financial year 1 January to 31 December 2012. We believe that the management review contains a fair review of the development of the Group’s and Company’s activities and financial position, together with a description of the most material risks and uncertainties by which the Group and the Company can be affected. We recommend the Annual Report for adoption at the Annual General Meeting. Ballerup, 5 March 2013 Executive Board: Christian Sagild Kim Bruhn-Petersen Lars Thykier (CEO) Board of Directors: Michael Pram Rasmussen Anders Knutsen Anders Colding Friis (Chairman) (Deputy Chairman) Charlotte Hougaard Jens Maaløe Annette Sadolin Desirée Schultz Søren Thorup Sørensen Trine Zappe



Statements by the auditors Internal audit’s reports Report on the consolidated financial statements and annual financial statements We have audited the consolidated financial statements and annual financial statements of Topdanmark A/S for the financial year 1 January to 31 December 2012, which comprise the income statement, statement of comprehensive income, balance sheet, statement of changes in equity and notes, including the accounting policies, for the Group as well as the Company, and including cash flow statement for the Group. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial services companies. The annual financial statements have been prepared in accordance with the Danish Financial Business Act. Management is responsible for the consolidated financial statements and annual financial statements. Our responsibility is to express an opinion on the consolidated financial statements and annual financial statements. Audit for the year We conducted our audit on the basis of the Danish Financial Supervisory Authority’s regulation on the preparation of the audit in financial services companies etc. and financial services groups and in accordance with International Standards on Auditing. This requires that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements and annual financial statements are free from material misstatement. We have participated in the audit of the material and risky areas. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and annual financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatements of the consolidated financial statements and annual financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements and annual financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as the overall presentation of the consolidated financial statements and annual financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Our audit has not resulted in any qualification. Opinion In our opinion, the consolidated financial statements give a true and fair view of the Group’s assets, liabilities and financial position at 31 December 2012, and of the results of its activities and cash flows for the financial year 1 January to 31 December 2012 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial services companies. Further, in our opinion, the annual financial statements give a true and fair view of the Company's assets, liabilities and financial position at 31 December 2012, and of the results of its activities for the financial year 1 January to 31 December 2012 in accordance with the Danish Financial Business Act. Statement on the management review Pursuant to the Danish Financial Business Act, we have read the management review. We have not performed any further procedures in addition to the audit of the consolidated financial statements and annual financial statements. On this basis, it is our opinion that the information provided in the management review is consistent with the consolidated financial statements and annual financial statements. Ballerup, 5 March 2013 Leif Zilmer Head of Internal Audit



Independent auditor’s reports To the shareholders of Topdanmark A/S Report on the consolidated financial statements and annual financial statements We have audited the consolidated financial statements and annual financial statements of Topdanmark A/S for the financial year 1 January to 31 December 2012, which comprise the income statement, statement of comprehensive income, balance sheet, statement of changes in equity and notes, including the accounting policies, for the Group as well as the Company, and including cash flow statement for the Group. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial services companies. The annual financial statements have been prepared in accordance with the Danish Financial Business Act. Management’s responsibility for the consolidated financial statements and annual financial statements Management is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial services companies as well as the preparation of annual financial statements that give a true and fair view in accordance with the Danish Financial Business Act. Management is also responsible for such internal control as it determines is necessary to enable the preparation of consolidated financial statements and annual financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on the consolidated financial statements and annual financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements and annual financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and annual financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatements of the consolidated financial statements and annual financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements and annual financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as the overall presentation of the consolidated financial statements and annual financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Our audit has not resulted in any qualification. Opinion In our opinion, the consolidated financial statements give a true and fair view of the Group’s assets, liabilities and financial position at 31 December 2012, and of the results of its activities and cash flows for the financial year 1 January to 31 December 2012 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial services companies. Further, in our opinion, the annual financial statements give a true and fair view of the Company's assets, liabilities and financial position at 31 December 2012, and of the results of its activities for the financial year 1 January to 31 December 2012 in accordance with the Danish Financial Business Act. Statement on the management review Pursuant to the Danish Financial Business Act, we have read the management review. We have not performed any further procedures in addition to the audit of the consolidated financial statements and annual financial statements. On this basis, it is our opinion that the information provided in the management review is consistent with the consolidated financial statements and annual financial statements. Copenhagen, 5 March 2013 Deloitte Statsautoriseret Revisionspartnerselskab Erik Holst Jørgensen Martin Faarborg State Authorised Public Accountant State Authorised Public Accountant



Topdan

mark A

/S - A

nn

ual R

eport 2

01

2

541 TRYKSAG

473

83

00

UK

20

12

TopdanmarK a/S

BorUpvang 4

dK-2750 BallerUp

Tel +45 44 68 33 11

reg.no. 78040017

e-mail: [email protected]

weB: www.TopdanmarK.com

Documents

Topdanmark's Annual Report for 2012ar2012.sampo.com/.../Topdanmark_annual_report_2012.pdf · Topdanmark's Annual Report 2012 Announcement No. 03/2013 from Topdanmark A/S Page 5 of