Capital model

Normally, Topdanmark generates a return which significantly exceeds the capital required to allow for the growth in the business. If it is not possible to find value creating investment opportunities, such surplus returns will be paid out to the shareholders.

The size of the payout is determined by the ratio of shareholders' equity to the business' current requirements of capital.

Normally, Topdanmark generates a return which significantly exceeds the capital required to allow for the growth in the business. If it is not possible to find value creating investment opportunities, such surplus returns will be paid out to the shareholders.

The size of the payout is determined by the ratio of shareholders' equity to the business' current requirements of capital.

Shareholders' equity alternatives

The objective of shareholders' equity exceeding the statutory minimum is to protect the business against situations when major disasters could threaten future operations. However, such protection is often available by other means, for example reinsurance or financial instruments.




Supplements to capital adequacy

As supplement to capital adequacy, Topdanmark has raised subordinated loan capital and bought significant reinsurance cover of disaster risks. Disaster meaning both isolated events and combinations of isolated events that would threaten Topdanmark's ability to continue operating at its chosen level of shareholders' equity.




How large should shareholders' equity be in order to be considered sufficient?

In setting a reasonable level of capital adequacy, Topdanmark takes into account the factors that would have a material adverse impact on shareholders' equity. At the same time, it allows for the effect of protection in the form of reinsurance and financial instruments.

Furthermore, other factors including current observations on the risk on insurance portfolios, asset portfolios and the financial markets are taken into account. Finally, our opinion of what is a reasonable level of capital adequacy is compared with the regulatory requirements.

Our objective for the capital structure is that the capital base in the form of shareholders’ equity and supplements are just sufficient to cover the regulatory requirements plus an appropriate management buffer to ensure day-to-day operations and the ability to withstand fluctuations – but not exceeding that. An example of a conservative level of solvency cover could be 170-190%. Excess capital is sought to be paid to the shareholders as dividends. 

Topdanmark has an outstanding subordinated tier 1 loan (restricted tier 1 capital notes). This loan is perpetual, but includes an option enabling Topdanmark to redeem the loan as at 22 December 2027.

Topdanmark Forsikring has outstanding subordinated tier 2 notes in one tranche:
•    DKK 700m, with first call date in 2026 and maturity in 2031.




Distribution of dividend

We have a disciplined approach to capital. Capital that is not necessary to maintain operations will be distributed to the shareholders and to avoid accumulation of unnecessary excess capital.




Potential for distribution of dividend

The distribution potential can be assessed by comparing the capital base (including i.a. the expected profit as well as the development in intangible assets) with the solvency requirement. The solvency cover must be viewed in the light of a conservative level (e.g. 170-190%) which includes an appropriate management buffer to ensure day-to-day operations and the ability to withstand fluctuations, as illustrated below:




Contact

INVESTORS
Robin Løfgren
Head of Investor Relations
email
PRIVATE SHAREHOLDERS
Shareholder Administration
email