Europæiske ERV Half yearly report. For the period 1 / 1-30 / - PDF

Europæiske ERV Half yearly report For the period 1 / 1-30 / Table of contents Management Report... 3 Signatures of the Board of Management and the Board of Directors Half yearly Report: Profit

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Europæiske ERV Half yearly report For the period 1 / 1-30 / Table of contents Management Report... 3 Signatures of the Board of Management and the Board of Directors Half yearly Report: Profit and Loss Balance sheet as of 30 June Equity specification Notes Company name Europæiske ERV A/S 3, Frederiksberg Allé DK 1790 Copenhagen V Tel.: Registered in: Copenhagen Company Reg. No. CVR Board of directors and audit committee Richard Bader (Chairman) Oliver Wild Gabriele Bayer Jørn Sønderup * Christian Søndergaard * Peter Fobian Audit KPMG Statsautoriseret Revisonspartnerselskab Company Reg. No. CVR: Anja Bjørnholt Lüthcke, State Authorised Public Accountant Mark Palmberg, State Authorised Public Accountant * Elected by the staff Board of management Johann-Dietrich von Hülsen, Managing Director 2 Management report for the period 1/1-30/ Main activities of the company Europæiske Rejseforsikring A/S primary business areas are sale of travel insurance to the leisure market as well as the corporate market together with health insurance for companies employees stationed abroad. The majority of travel insurance policies are sold either as tripby-trip insurance or as annual travel insurance in connection with our customers holiday trips, business trips or expatriation. Main distribution channels for all travel insurance policies and health insurance policies are either direct business or brokers in the relevant markets. As the market leader within sale of travel insurance in the Danish market, it is essential we offer our customers 24 hour assistance, coverage of claims and related local services everywhere in the world. Europæiske Rejseforsikring A/S uses the brand name Europæiske ERV. This is part of the strategic efforts to take advantage of the synergy and the brand value by being a part of the German based ERV Group. Europæiske ERV s Values Europæiske s vision is to supply its customers with Denmark s best quality at a competitive price. Therefore, our target is to have an efficient organization with professional employees focusing on the customers need for security and safety. This vision is also reflected in the ERV Groups 8 values, which are Customer Focus, Excellence, Courage, Passion, Teamwork, Forward Looking & Sustainable, Openness & Trust and Leadership & Responsibility. Organisisation Chart Board of Directors Internal audit CEO Business Development HR and Internal Communication Product Management CSO COO CFO Marketing and Communication Business Management Assistance The Customer Embassy Finance Compliance officer Sales Online Management Claims and Customer Service Corporate Support Risk Management Actuarial Function IT 3 Product Development The core of our business is safety. In its role as market leader, one of Europæiske s main tasks is to aim at being ahead of the development and at all times provide new and improved services with relevance to our customers and which secure them the best possible way while travelling. As a consequence of the discontinuation of the public health travel insurance cover through the yellow health card as of 1st August 2014, Europæiske was the first insurer to develop new flexible annual travel insurance and trip-by-trip insurance adjusted to the new requirements. The new products have been designed as a Basic or a Plus travel insurance. For both types of insurance additional covers can be taken out for ski sport, cancellation, baggage, liability and accident. If the customer only wants a cover like the previous public health travel insurance cover under the yellow health card the customer can take out a Yellow Cover. All the insurance products can be bought with or without deductible. We have during the first half of 2016 kept a close eye on the development of our new products and on this basis we have as in 2015 noticed an increase in claims compared to the situation before the discontinuation of the yellow health card cover. This increase has however not been more than we had anticipated when we launched the new products back in This development had originally been taken into consideration and we have therefore not taken any corrective measures on pricing during The Corporate Market On the Corporate Market Europæiske has continued focus on creating profitable business in Europæiske has maintained focus on communicating the news about our coverage and products to existing as well as to new customers. One of the topics we have communicated to our corporate customers is compliance, namely the fact that we and our customers have to act in accordance with international agreements and local legislation when issuing insurance. Business Travel Insurance across borders is in itself not yet subject to very many rules or any joint control. But especially the western countries are working closer and closer together to regulate all parties in the transaction between the insured and the employers who insure them. The problem is twosided: These requirements must not only be achieved where a company has its head office (e.g. in Denmark) but also where the company has interests and employees located abroad for shorter or longer periods. Europæiske has decided to take timely action on these challenges and to have a conservative attitude to compliance, to minimize the expected future risk for our customers and ourselves. With our compliance guidelines, which are based on ongoing analyses of the legal requirements internationally and locally, our aim is to make sure that our insurance solutions are in conformity with international and local rules and regulations. The Leisure Market For the Leisure travel market Europæiske has during the first half of 2016 introduced a new and updated website. To have an updated and modern website is a necessity nowadays and a prerequisite for being able to increase sales and customer self-service online. One important element of web usability is ensuring that the content works on various devices and browsers. With the new website it s now significantly easier for our visitors to buy insurances and / or find information online, regardless of whether they re using a computer, an ipad or smartphone. Besides the implementation of a responsive website layout also a more user-friendly design and functionality has been implemented. This new modern and simplified design is based on customer needs and behaviour. And significantly improves flows both for booking and claims. 4 Nordic Health Care International health insurance is no longer a part of Europæiske s strategy. It was therefore decided to withdraw Nordic Health Care Europæiske s international health insurance brand from the international health insurance market with effect from August The above-mentioned decision means that our premium income from this line of business has had a declining trend since It will continue to decrease substantially, as Europæiske expects that the majority of customers will change to another insurance company within the next years. Unemployment Insurance Unemployment insurance is no longer a part of Europæiske s future strategy and during 2015 we decided to transfer this business portfolio to our current reinsurance partner. Thus AmTrust International Underwriters Limited based in Ireland was planned to take over these customers from us during Europæiske informed the customers and received the Danish FSA s authorization. But as we afterwards have encountered complications in receiving an approval by the Irish Financial Supervisory Authorities we have current- ly been forced to temporary stop the transfer of this business portfolio. Europæiske s Claim handling For more than 90 years, a well-developed international network has been our principal foundation, a foundation which is adjusted continuously and expanded concurrently with the development on the travel market and in accordance with the travellers needs and wishes. Our strength is that Europæiske own and / or control all significant elements in the network enabling us directly to ensure the quality of our assistance. Europæiske s Assistance Network handles emergency assistance cases that occur in all parts of the world from small cases such as outpatient cases to bigger and more complex cases involving air-ambulances. Approximately 20% of the cases are complex medical cases, which are handled in close cooperation with our specialised sister assistance company Euro-Center. During 2015 we succeeded in establishing an enhanced cooperation, which meant that it in the first half of 2016 has been the Euro-Center Assistance office in Madrid that has handled all Europæiske assistance service. The enhanced cooperation has ensured Europæiske assistance services a significant quality boost. Euro-Center offices are the entry to the regional areas and thus the local help and assistance for our customers. With service offices on six continents Europæiske s customers have one of the world s largest medical networks of experienced professionals with them on the journey. It involves, among other Danish-speaking staff 24 / 7, specialist doctors, psychologists and nurses. 5 The development in the company s activities and financial matters The half yearly result amounts to a profit of DKK 14.0m compared to DKK 17.9m in first half year of The decline in the profit at DKK 3.9m compared to first half of 2015 can primarily be attributed to the reduced sales and the reduced income from affiliated companies. Compared to first half of 2015 the Gross premium written has in the first half of 2016 been reduced with DKK 15.1m. And the income from affiliated companies has been reduced with DKK 3.8 m due to a decreased result of ERV Pojistovna a.s in the Czech Republic. The underwriting result amounts to a profit of DKK 10.9m compared to a profit of DKK 9.2m in first half of 2015, corresponding to an increase of 1.7m. Gross premiums written has in the first half of 2016 decreased to DKK 146.5m compared to DKK 161.6m in first half of This is due to reduced premiums from the downsized Nordic Health Care products and the Unemployment product, as well as sales decreases on both the Leisure and Corporate segments. On the Corporate segment this is partly explained by discounted premiums due to the good 2015 claims result as well as non-renewal of a few individual major deals. Gross claims incurred amounts to DKK 69.4m against DKK 80.0m in first half of 2015 which is a decrease of DKK 10.6m. The claims record for first half of 2016 has been satisfactory and better than planned. The gross claims ratio amounts to 51.6% against 54.2% in first half of The claim ratio is as last year positively affected by run off gains. The claim ratio gross excl. run off gains lies at 52.5% in the first half of the year 2016 against 55.7% for the same period last year. The decreased gross claim ratio is primarily due to decreased claim ratios at Europæiske s Leisure products as well as on the remaining portfolio of International health insurance. The result of business ceded shows an expense for Europæiske of DKK 5.7m in first half of 2016 against a loss of DKK 10.8m in first half of A decrease of DKK 5.1m compared to first half of The decreased reinsurance expenses are primarily due to the lowered volume of especially the Unemployment product. The claims costs net of reinsurance amount to DKK 63.7m against DKK 69.3m in first half of 2015 which is a decrease of DKK 5.6m. The claims ratio net of reinsurance is 51.0% against 56.4% in first half of 2015, a decrease of 5.4% points mainly caused by the before mentioned improved claims results of the Leisure products and on the remaining portfolio of International health insurance. Acquisition costs amount to DKK 29.0m against DKK 27.2m in first half of The increase is driven by increased sales of specific products and sales through certain sales channels with relative high commission costs. The cost ratio, including acquisition costs and commission of ceded business amount to 36.4% compared to 32.9% in first half of The acquisition cost ratio alone is 21.5% against 18.4% in first half of Total combined ratio net of reinsurance (total costs measured in relation to earned premiums) is 92.2% against 94.3% in first half of The administrative expenses amount to DKK 19.2m against DKK 20.3m in first half of 2015, a decrease of DKK 1.1m. This cost reduction is primarily due to lower cost for personal and lowered office costs. Europæiske has like last year adjusted the organisation and the spending in correspondence to the development of the premium income. Commissions and profit commissions from reinsurance amount to an income of DKK 2.6m against an income of 3.4m in first half of The decreased reinsurance commissions correspond to the lowered sales of especially our Unemployment product. 6 The result from affiliated companies shows a profit of DKK 2.8m against a profit of DKK 6.6m in first half of This result is created by ERV Pojistovna a.s in the Czech Republic. The main reason for the reduced result by ERV Pojistovna a.s is increased claims costs compared to last year. Associated companies delivers no profit in the first half of 2016 compared to DKK 0.6m in first half of The result last year was created by Euro-Center Holding SE of which Europæiske owns 16.67%. Income from land and buildings amounts to DKK 0.6m against DKK 1.1m in first half of The reduced income is partly due to the costs of signing two new rental agreements. Interest income and dividends for the period amounts to DKK 4.3m compared to DKK 4.5m in first half of Europæiske has had a net loss in connection with realised and unrealised gains & losses of bonds, bond-based unit trusts and exchange rates of a total of DKK 1.5m. The loss is due to both losses on bonds and exchange rates. In the same period last year we had a comparable loss of DKK 1.0m, but last year it was primarily due to loss in connection with price adjustments on bonds. The result of investment activities before transfer of technical interest amounts to a profit of DKK 5.8m against a profit of DKK 11.4m in first half of The tax of the first half of the year amounts to an expense of DKK 3.5m which is the same as last year. At 30th June 2016, the company s total capital and reserves amount to DKK 243.6m and total assets amount to DKK 457.7m. The result of the period compared to earlier statements The company expected earlier the following for 2016: We expect continued decrease in premium income for international health insurance. It is however difficult to continue the adjustment of the organisation and the fixed costs to the full extent of the expected premium decrease in At the same time Europæiske does not expect runoff gains in 2016 to the same extent as for This means that the expectations to the result for 2016 are substantially lower than for The result for the first half of 2016 has despite less than anticipated sales been better than originally expected. The good result is caused by lower than expected claims costs on especially the Leisure and International health insurance products and the fact that we despite our expectations have had a run-off gain of DKK 3.9m net of reinsurance. Ownership Europæiske Rejseforsikring A/S is a 100% owned subsidiary of ERV AG, Munich, Germany ERV AG, Munich is a 100% owned subsidiary of ERGO Group AG, Düsseldorf, Germany. ERGO Group AG, Düsseldorf is a 100% owned subsidiary of Münchener Rückversicherungs- Gesellschaft, Munich, Germany. 7 Group Ownership Europæiske Rejseforsikring A/S is associated with the following companies: Amount in DKK 000 Registered office Activity Shareholding Capital & Reserves Result Subsidiary ERV Pojistovna a.s. Associated company Euro-Center Holding SE Czech Republic Insurance 75.00% 66,364 2,754 Copenhagen Assistance 16.67% 42,229 0 Events after June 30th 2016 No events have occurred subsequent to the balance sheet date, which would have a material influence on the financial position of the company. Outlook for the second half of 2016 We expect continued decrease in premium income for international health insurance and unemployment insurance and we expect to see an increase in the claims ratio during the second half of This means that outlooks for the second half of 2016 is not at the level of the result realised in the first half of the year. We however still believe in positive results in the last two quarters of the year and that we will further improve the overall result of 2016 throughout the second half of Uncertainty in respect of recognition and measurement The statement of the accounted value of certain assets and liabilities is conditioned by applying the accounting estimate. The estimates made are based on assumptions which the management finds justifiable but uncertain. The statement of the insurance provisions is in particular connected to estimates. Risk Report Europæiske overall risk profile originates from the risks connected with the running of the core business together with the corresponding financial and capital requirements. Europæiske s aim is to monitor and control the contribution of each individual risks to the overall risk, in such a way that the possibilities to make the right decisions are optimised. Europæiske has implemented the necessary and relevant procedures and control functions with a view to minimize the risks in all business areas. The overall risk management guidelines and the framework are stipulated by the board of directors. The responsibility to followup on the individual risks and their risk factors is placed with Finance and it is reported to the management and the board of directors. We have further fostered our collaboration with the Integrated Risk Management Department of ERGO Group AG in Düsseldorf, Germany throughout 2016 to improve our risk management capabilities. Each business area works in a structured way with risk management and reports the efforts to the risk management. Outline The most important risks in Europæiske: Insurance Risks Market Risks Operational Risks 8 Insurance risks Europæiske carries with regard to the insurance part various forms of risks. There are risks in provisions, premium and pricing. It is important to have an overview of the individual risks but it is also an important factor that the identification and monitoring of risks can be used in connection with strategic decisions. It is Europæiske s policy that the risks originating from the company s activities shall be covered or limited to such a level that the company will be able to maintain a normal operation and carry out planned initiatives even in case of a very unfavourable development. One of the measures is our excess of loss reinsurance agreements. To cover the risks in connection with disasters, the company has made reinsurance contracts limiting Europæiske s risks to about DKK 5.0m per claim event. The company has estimated the effect of a widespread pandemic at DKK 16m at own account. The size of this risk is due to the fact that a pandemic is not seen as one claim. Europæiske s risk is, therefore, not limited to the above mentioned DKK 5m. Market Risks It is Europæiske s aim to control the market risks in such a way that the company obtains a return corresponding to risks taken. The most important risks are: Currency Risk Real Estate Risk Equity Risk Interest Rate Risk Spread Risk In terms of the result, the company is sensitive towards the development in currency rates and the prices of bonds, shares and participations. The standard model calculation has been used to assess the risks and the necessary capital for this type of risks. This model demands a capital of DKK 49.5m in order to be able to cover the risk sufficient with a confidence level at 99.5%, which means that Europæiske can meet the policyholders claims for 199 years out of 200 years. Credit and Counterpart Risk Europæiske has a limited credit and counterpart risk mainly from reinsurance r
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