23.3.2020 20:52:16 CET | Topdanmark A/S | Inside information
23 March 2020
Announcement no. 05/2020
Suspension of the profit forecast, and proposal that half of the dividend payout for 2019 is postponed
As at 20 March, the solvency cover was about the same level as at the end of 2019 where the solvency cover was 177. The solvency cover is negatively impacted by a lower than expected post-tax result in Q1 2020, however, the solvency cover is also positively impacted by a higher discounting rate.
The global outbreak of coronavirus is impacting the underwriting result for non-life insurance, the result for life insurance as well as the investment return in the Topdanmark Group excl. life insurance.
For all of 2020, the underwriting result is only expected to be impacted by the corona outbreak to a minor extent.
In Q1 2020 and for some time ahead, Topdanmarks underwriting result will be impacted by an increased claims trend on travel insurance. But also health insurance, income protection insurance, business interruption insurance, loss of earnings capacity, and workers compensation will to some extent be impacted by the coronavirus. On the other hand, the underwriting result is expected to be positively impacted by the reduction in social activities which is expected to cause a decreasing claims trend on motor and contents insurance due to lower levels of traffic intensity and burglaries. Furthermore, the underwriting result will be positively impacted by the higher interest rates. Topdanmark uses the Solvency II discount curve with volatility adjustment (VA) for assessing the insurance provisions, and this curve is higher today than at the end of 2019, impacted by an increase in the VA component from 19bps to approx. 70 bps.
The situation regarding the outbreak of the coronavirus causes increased risk exposure, however, with Topdanmarks robust business model, Topdanmarks underwriting result for all of 2020 is only expected to be impacted by the corona outbreak to a minor extent.
The negative financial markets in continuation of the corona outbreak are also impacting the result of the life insurance activities as Topdanmark in Q1 2020 will not be able to book Risk return on shareholders equity, because the return is not sufficient to cover the guaranteed return. Furthermore, the investment return on shareholders equity is expected to be negative in Q1 2020. For all of 2020, the risk of Topdanmark not being able to book the risk return has increased.
By the end of 2019, the Topdanmark Group excl. life insurance had an exposure to equities (DKK 1.1 bn) and CDOs (DKK 0.6 bn) of DKK 1.7 bn. Due to the outbreak of coronavirus, equity markets YTD are down approx. 25 % impacting the market value of Topdanmarks portfolio of equities and CDOs by roughly the same effect.
Given the current volatile situation, Topdanmark has suspended the profit forecast for 2020 until the market situation is again sufficiently stable to assess the impact of this unusual situation. The development in the year to date is expected to have a negative impact on the result for all of 2020. Hence the post-tax result excluding run-offs is likely to be lower than the profit forecast for 2020 which was announced in the Q4 report (Announcement No. 03/2020). In the Q4 report, Topdanmarks post-tax profit forecast for 2020 was DKK 950-1,050m, excluding run-off.
It is still Topdanmarks dividend policy that capital not necessary to maintain operations will be distributed to the shareholders, and that accumulation of unnecessary excess capital will be avoided. But at the same time, it is Topdanmarks policy to behave prudently and avoid unnecessary risk.
As a consequence of the volatile situation and the lower assumed result for 2020, the Board of Directors will propose to the Annual General Meeting on 2 April 2020 a dividend payout of DKK 8.5 per share. When the situation is back to normal, the Board of Directors has the option of distributing the remaining DKK 8.5 of the announced dividend of DKK 17 per share as extraordinary dividend. If so, this would be later in 2020 or at the ordinary general meeting in 2021
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And there goes Sampo’s dividend. Lets see what kind of damage this does to Topdanmarks share and if possible this was the reason Nalle decided that he needed a little pocket change to buy Topdanmark shares (highly doubt that, but one will never know).
If Topdanmark share takes a big hit, I will accumulate a lot of TopDanmark shares.
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