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Total premiums rose 17% over the level in the first quarter of 2007 to DKr5.6bn. Premiums for market-based products rose 25%.
Net income from insurance business fell from DKr311m in the first quarter of 2007 to a negative DKr565m in 2008. The decline was due mainly to a negative return on investments as a result of falling equity prices. The return on customer funds was also negative, and it was not possible to book the risk allowance in the first quarter. The risk allowance of DKr270m can be booked at a later date – with no time restrictions.
In Sweden, premiums doubled. The launch of the new Depåförsäkring product was successful, with premiums of DKr320m in the first quarter. In Norway, premiums were unchanged at DKr139m.
In the first quarter of 2008, Danica was granted concession to sell life insurance policies in the Republic of Ireland. Sales are expected to begin at the end of the second quarter.
The return on customer funds invested in Danica Traditionel, which was 0.2% in the first quarter of 2007, was affected by the fall in equity prices and was a negative 1.3% in the first quarter of 2008. The return on bonds, including financial derivatives, was 1.8%. The fall in interest rates led to a rise in Danica’s obligations. Including a change in additional provisions, the return on customer funds in the first quarter of 2008 was a negative 1.6%, against a positive 1.1% in the first quarter of 2007.
The collective bonus potential amounted to DKr9.0bn, down DKr4.5bn since the end of 2007. An additional 30% fall in equity prices would have reduced the collective bonus potential by DKr8.5bn and shareholders’ equity by DKr1.0bn at March 31, 2008. A 1.0 percentage point rise in interest rates would have reduced the collective bonus potential by DKr2.8bn and shareholders’ equity by DKr0.1bn.
With unchanged interest rates, equity prices would have to rise around 13% above the level at the end of March to enable the Group to book the risk allowance in full for 2008.
To illustrate the value creation of the unit-linked business, Danica Pension has calculated the value of the unit-linked transactions in Denmark according to the Market-Consistent Embedded Value (MCEV) principles. The calculations serve as a supplement to its annual report for 2007. The embedded value calculated shows an additional value of around DKr1.6bn compared with the carrying amount at the end of 2007. The calculations were made in accordance with the principles and guidelines issued by the CFO Forum and are described in detail in the White Paper, April 2008 (www.danskebank.com/ir). |