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The change in the method for calculation of the volatility adjustment affects Topdanmark’s investment return negatively

2 April 2019
Announcement no. 07/2019

The change in the method for calculation of the volatility adjustment affects Topdanmark’s investment return negatively

As stated in the announcement of the 2018 annual results (Announcement No. 02/2019) Topdanmark’s result will be affected by the change in the calculation of the volatility adjustment (VA).

The volatility adjustment (VA) is a component in the national interest rate curve that EU based insurance companies use for the discounting of technical provisions. EIOPA has previously indicated that the method for calculation of the VA for the Danish discounting curve would be changed from Q1 2019.

Futhermore it was stated (Announcement No. 02/2019) that the change in the method for calculation of the VA-component for Q1 2019 would take place at the end of Q1 2019. Finally it was stated that by every basis point the VA-component is reduced, Topdanmark’s post-tax profit for 2019 will be reduced by around DKK 5m.

The calculation of the VA-component for Q1 2019 shows that the VA-component has fallen from 45bp at the end of 2018, calculated after the previous method, to 15bp at the end of Q1 2019, calculated after the new calculation method.

The effect of the VA-adjustment in Q1 2019 will be a one-off negative investment return of around DKK 200m pre-tax corresponding to app. DKK 160 m post-tax.

Compared to the investment return assumed in the profit forecast model for 2019 (Announcement No. 02/2019) the investment return on other investment assets has performed positively. Overall the investment return for Q1 2019 is marginally below the assumed level in the profit forecast model for 2019.

Additionally, it can be stated that if the calculation method for the calculation of the VA-component had not been changed the VA-adjustment would only have had a marginal impact on the investment return in Q1 2019.

Finally, it can be noted that the future investment income will be positively affected by the lower discounting rate on the group’s liabilities.

Please direct any queries to:

Steffen Heegaard, Group Communications and IR Director
Direct phone no.: +45 4474 4017
Mobile phone no.: +45 4025 3524

Topdanmark A/S
Reg. no. 78040017
Borupvang 4
DK-2750 Ballerup