Årsregnskabsmeddelelse 2023 Topdanmark A/S (1 MB)

2023 was another eventful year for Topdanmark. In March, we announced the acquisition of Oona Health A/S, including the market-leading Danish health insurance provider Dansk Sundhedssikring. The timing of the acquisition was favourable, as we had completed the divestment of our life insurance operations just a few months earlier. After the divestment, Topdanmark had no market share or significant capabilities within health insurance and solutions - all of which Oona Health has in abundance. We see a strong strategic fit between Topdanmark and Oona Health as we see personal health solutions as

a strategic focus area for any insurance company for many years to come, not least in terms of customer loyalty and market growth. Oona Health will continue to operate as a standalone company to best allow it to continue the innovative and high-growth journey that has characterised the company for many years. However, we will seek to reap all possible synergies between the two companies, including selling Oona Health's products to Topdanmark's existing customers and vice versa.

From a macroeconomic perspective, 2023 also turned out to be quite eventful. Geopolitical tensions remain elevated with continued Russian aggressions in Ukraine and the war between Israel and Hamas. In addition, rising inflation has been followed by rising wage growth, supporting higher interest rates which seem to remain for a prolonged period. However, interest rates fell sharply during the last months

of the year. All of this has affected individuals, enterprises, and equity markets on a global scale. This macroeconomic uncertainty also affects Topdanmark, and consequently we have decided to de-risk our investment portfolio further through reducing our equity exposure by more than 40% during the year in addition to reducing our CLO exposure to zero.

In addition to this, 2023 was marked by a high level of weather-related and large-scale claims as well as a rising claims frequency within motor insurance.

Further, reinsurance markets were hard, affecting both 2023 and future years. As a result, we reported a net profit of DKK 1,051m or DKK 898m before run-off, below our original expectation of DKK 1,050-1,310m before run-off at the beginning of 2023, fully explained by the higher amount of weather-related claims. Consequently, the Board of Directors will propose a dividend payment of DKK 11.5 per share for 2023. The combined ratio was 87.6 before run-off, above our original expectation of 83-86 before run-off. The adverse developments during the year call for actions across our entire organisation, and we will continue our efforts to improve profitability e.g. by way of efficiencies, procurement initiatives, and pricing actions. This way, we seek to consolidate our market-leading profitability within Danish P&C insurance.

As a fundamental part of our strategy, we seek to create long-term shareholder value through committed and motivated employees, who ensure first-class customer experiences, which in tucreate satisfaction and loyalty to the benefit of our shareholders. Therefore, we are very pleased that we maintain our historically high employee satisfaction level of 81. Likewise, we continue to see a stable, high transactional net promoter score (tNPS). We actively work to strengthen our customer offerings in close collaboration with partners, and we have recently launched embedded cyber insurance with internet provided by Norlys.

Insurance companies have long played an important role in supporting the Danish labour market, and Topdanmark continues to strengthen its position as one of the leading companies within this field.

Prevention of injuries and illnesses is an important element of our business, and we continue to invest in the concept Topdanmark Recovery and Work Rehabilitation ensuring SME customers that they can retain their employees after an injury. A good example is the investment in exoskeletons as a part of the concept. In the past year, we have seen a 5% increase of severe injuries in workers' compensation. To address and counteract the negative development, we have been working with exoskeletons more intensively during 2023, as they are helpful for both customers having suffered an injury, and an effective means of prevention, as it can lessen the physical load on the body.

Topdanmark also continues to support the unique mobility in the Danish labour market. We are the first company to develop and launch insurance providing security for those who change jobs. This is an excellent example of a product that creates security for the employee while at the same time making it easier for an employer to attract candidates.

Climate change and increasingly extreme weather continued to affect our private, agricultural and commercial customers. In fact, 2023 became the wettest year ever in Denmark, and we have helped 94% more customers who have been affected by damage related to precipitation and cloudbursts compared to the average over the past five years. In this light, we continue to invest in and popularise several preventive measures to the benefit of our customers, society and us as a company. For example, we sent out warnings and advice specifically targeted at customers living in high-risk areas giving them the opportunity to prepare for the events.

2023 was yet another year of progress with our strategic agenda by preparing our new core IT system, Guidewire. The first implementation wave - agricultural customers - is now finalised, and we have already gone live with the first private customers as part of the second wave. Our overarching ambition is still to be able to solve 80% of all customer inquiries within 20 seconds. But our investments are also starting to affect the customer-facing processes

as we launched our new app in December and are redesigning digital interfaces to provide even simpler and seamless customer experiences.

We have also seen continued good traction on our efficiency programme, which aims to improve our profitability by leveraging automation and digitalisation across the value chain, a best-in-class procurement setup, and a stringent focus on risk and pricing. In 2023, we delivered gross savings of

DKK 430m in line with expectations, and we remain on track to reach DKK 650m of gross savings by 2025.

Lastly, the Board of Directors and the Group Executive Management would like to express their gratitude

to all employees for their outstanding contributions throughout the year. In a year marked by our acquisition of Oona Health as well as continued efforts to hand over the life insurance company to Nordea, we sincerely appreciate your unwavering commitment to providing best-in-class experiences for our customers.

Highlights

2023

• Profit after tax, continuing operations of DKK 1,051m (2022: DKK 1,078m)
• EPS, continuing operations was DKK 11.9 (2022: DKK 12.2)
• Combined ratio: 85.6 (2022: 82.4)
• Combined ratio excluding run-off: 87.6 (2022: 83.9)
• Insurance revenue increased by 2.7% including Oona Health (2.1% excluding Oona)
• Net investment result was DKK 97m (2022: DKK -244m).

Q4 2023

• Profit after tax, continuing operations of DKK 157m (Q4 2022: DKK 497m)
• EPS, continuing operations was DKK 1.8 (Q4 2022: DKK 5.6)
• Combined ratio: 91.8 (Q4 2022: 81.2)
• Combined ratio excluding run-off: 93.9 (Q4 2022: 84.0)
• Insurance revenue increased by 5.1% including Oona Health (2.5% excluding Oona)
• Net investment result was DKK 110m (Q4 2022: DKK 193m).

Dividend distribution for 2023

• The Board of Directors will recommend to the AGM the distribution of a dividend of DKK 1,035m, representing DKK 11.5 per share, a pay-out ratio of 98.4 and a dividend yield of 3.6.
• Subject to the approval from the AGM, the distribution of dividend will take place immediately after the AGM on 23 April 2024.

Profit forecast model for 2024

• Organic growth in insurance revenue is assumed to be above 4.5%. Reported growth in insurance revenue will be above 11.5% due to the acquisition of Oona Health as of 1 December 2023.
• Combined ratio is assumed in the range of 82-85 including run-off. Please note that this represents a change in practice compared to previous years, where the profit forecast excluded run-off. The rapid decline in interest rates observed in December 2023 impacts our forecast negatively by approx. 70bps compared to the level at Q3 2023. As expected, the expense ratio will increase and reach its peak in 2024. Compared to 2023, the expense ratio is also negatively impacted by approx. 20bps from

the inclusion of Oona Health. Apart from the above, the assumptions are unchanged compared to the beginning of 2023 despite the observed headwinds from reinsurance (Catastrophe and Fire programmes) and higher loss frequencies. For these reasons, the profit forecast for 2024 amounts to DKK 1,150-1,425m after tax and including run-off.

Acquisition of Oona Health A/S

• On 27 October 2023, we received the final regulatory approval from the Danish Competition and Consumer Authority, and the acquisition was completed on 1 December 2023.
• As a result, Oona Health is included in Group results from 1 December 2023. The Q4 2023 result includes one-off costs of DKK 35m related to the transaction and booked on the new line item "special costs".

Efficiency programme

• In 2023, we continued the solid progress in our efforts to become more efficient.
• We realised gross efficiency gains of DKK 430m in 2023, in line with the expectations at the start of the year.
• The programme continues to target gross efficiency gains of DKK 650m in 2025, of which DKK 540m in 2024.

Conference call

A conference call will be held today at 11:00 (CET) in which Peter Hermann, CEO, and Lars Kufall Beck, CFO, will be available for questions based on the results. The call will be conducted in English.

To participate in the conference call, please call: DK dial-in number: +45 32 74 07 10

SE dial-in number: +46 8 505 246 90

UK dial-in number: +44 20 3481 4247

US dial-in number: +1 (646) 307 1963 (Conference ID 4725344)

10-15 minutes before the conference call - or listen to the live transmissionof the call.

Please direct any queries to:

7 / 40

Results for 2023

Topdanmark's profit on continuing operations for 2023 was DKK 1,051m (2022: DKK 1,078m).

The insurance service result decreased by

DKK 267m to DKK 1,507m. 2023 was impacted by a high frequency of weather-related events including storms, cloudbursts, heavy rainfall, and a hail event in NortheItaly. In fact, 2023 became the wettest year in Denmark, and thus weather-related claims exceeded budget by a clear margin. For context, weather-related claims have not exceeded budgeted levels since

2015. Underlying, claims frequencies in 2023 were higher due to a normalisation after COVID-19, and higher motor claims frequencies in general as well as stochastic claims especially in Q2 and Q4 2023. Offsetting this, we delivered continued progress on our efforts to become more efficient, including pricing initiatives.

The net investment result increased by DKK 341m to DKK 97m. This development should be seen in the light of the volatility in the financial markets during 2022 caused in part by the war in Ukraine. 2023 was impacted by rising equity markets, and a higher running yield on short-term liquidity offset by a loss on the "matching" portfolio due to wage indexation of workers' compensation provisions. Wage expectations are set out by the Danish central bank and the Danish Economic Councils, and they are updated twice a year, after which our provisions are updated accordingly. It is important to note that normally there is a time lag between changes in inflation and wage expectations, and overall, we believe that we have an appropriate hedge in place.

Other items, which includes education and development costs, rose by DKK 16m to DKK 106m. In Q1 2022, other items included a DKK 25m provision for a potential extraordinary contribution to the Danish Guarantee Fund for Non-life Insurers related to the bankruptcy of Gefion Insurance A/S, and in Q4 2023, this provision was increased by a further DKK 25m.

In addition, the line includes one-off costs related to redundancies carried out in Q4 2023.

The P&L line "special costs" covers costs related to the acquisition of Oona Health, including amortisation of customer relations and brand rights as well as one-off costs related to the transaction and integration. In Q4 2023, special costs amounted to DKK 39m.

The net profit of DKK 1,051m is lower than assumed in the latest profit forecast model published in the

interim report for Q1-Q3 2023, showing a post-tax profit of DKK 1,100-1,210m. In continuation of our company announcement no. 15, one-off costs of DKK 35m related to the acquisition of Oona Health were booked in Q4. Moreover, a further DKK 25m related to the bankruptcy of Gefion Insurance A/S as well as one-off costs related to redundancies are included in the Q4 result. In addition to these one-offs, the result included more weather-related and large-scale claims than assumed, offset by a higher investment retuand run-off profits.

Results for Q4 2023

The profit on continuing operations for Q4 2023 was DKK 157m (Q4 2022: DKK 497m).

The insurance service result decreased by DKK 249m to DKK 227m. The main driver of the lower insurance service result was a significantly higher level of weather-related claims in Q4 2023 compared with much more benign weather conditions in Q4 2022. In addition, large-scale claims and motor claims frequencies were higher.

The net investment result decreased by DKK 83m to DKK 110m, significantly above expectations. The decrease should be seen in light of the very strong result in Q4 2022 due to positive market developments. Q4 2023 saw positive contributions from equities, positive running yields and falling inflation expectations.

Insurance service result for 2023

Insurance revenue

Insurance revenue increased by 2.7% to DKK 10,168m, corresponding to an organic growth of 2.1% when adjusting for the acquisition of Oona Health. The private segment accounted for a 3.6% increase with the inclusion of Oona Health (and 2.2% excluding Oona), and the SME segment accounted for a 1.9% increase. Growth was slightly lower than last year, but this was as expected and primarily caused by lower indexation on workers' compensation, and the loss of

1. distribution agreement for credit card-based travel insurance. In addition, competition remains at a high level in Denmark.

The gross claims ratio rose to 66.7 from 63.7 in 2022. The claims ratio, net of reinsurance, rose to 68.9 from 66.5 in 2022.

The run-off profit, net of reinsurance, was DKK 204m (2022: DKK 152m), largely in line with the level observed in recent years.

Weather-related claims amounted to DKK 517m (2022: DKK 276m), representing a 2.3pp deterioration of the claims ratio. Thus, the level of weather-related claims was DKK 217m above the normalised modelled level of DKK 300m. This was a result of a very eventful year with multiple storms and cloudbursts, severe rainfall throughout the year and a hail event in NortheItaly during the summer. By comparison, frequencies were materially lower in 2022 when adjusting for the two storms Malik and Nora in Q1 2022. For context, please note that 2023 was the first year since 2015 to experience weather-related claims above the normalised level. Furthermore, the specific nature of the weather-related claims experienced in 2023 implied that, despite total claims significantly exceeding the normalised level, only a very small proportion was reclaimable through our reinsurance programme.

Large-scale claims (claims exceeding DKK 5m by event after refund of reinsurance) amounted to DKK 179m, significantly higher than the level in 2022 (DKK 96m) and the normalised modelled level of DKK 100m. 2023 saw a high frequency of large fire-related claims as well as a single claim related to hail.

The claims ratio was positively impacted by the higher interest rates despite the sharp decline in interest rates experienced in Q4 2023. The discounting effect was 0.7pp higher compared with 2022.

The underlying claims ratio increased by 0.2pp to 66.8. As expected, 2023 saw, a higher claims frequency within motor after several years with pandemic and post-pandemic frequency reductions. Frequencies in 2023 were further fuelled by snow-related claims in both March and December, and such claims are not included in our weather-related claims. Combined ratio on the motor product amounted to approx. 87 in 2023. In addition, especially Q2 and Q4 saw higher frequencies within private house insurance (fires) and agriculture (fires and drought). In comparison, 2022 was impacted by lower claims frequencies due to COVID-19 lockdowns at the start of the year, while frequencies normalised during the year. In addition, inflated energy and petrol prices caused lower mobility in society especially in Q2-Q3 2022. Partly offsetting these negative effects, our efforts to become more efficient and pricing initiatives continue to yield positive results.

Expense ratio

The expense ratio was 16.7, up from 15.9 in 2022. The increase in the expense ratio was largely as expected and caused by dissynergies related to the sale of Topdanmark Liv Holding A/S.

Combined ratio

The combined ratio was 85.6 (2022: 82.4). Excluding

run-off, the combined ratio was 87.6 (2022: 83.9).