Topdanmark A/S

Small/Mid-Cap: Insurance

A high price, even for excellence

Downgrade to Sell: Following a rally in Topdanmark shares of over

20% this year, we downgrade our rating on the stock to Sell. The company now trades at 13.9x 2013E earnings that include material positive one-offs. The share price seems to reflect the markets high expectations regarding Topdanmarks ambitious 2013 buy-back programme, of which we would not necessarily assume full delivery. A full valuation: After eliminating the DKK140m of non-recurring life PBT we expect Topdanmark to enjoy in 2013, the stock trades on 15.2x 2013E earnings. We struggle to justify this multiple as the company faces headwinds to earnings from: i) declining investment yields; and ii) normalising non-life margins, which have been exceptionally high in 2013. We and consensus (Bloomberg) expect net income to fall by 8% and 4% in 2013-15 respectively. Delivery of 2013 buy-backs no certainty: Topdanmark aims to buy back DKK2,000m of shares during 2013. This seems very ambitious, particularly as the company has missed much smaller targets in each year since 2009. We note the following areas of uncertainty. o The narrow (10%) capital buffer targeted by Topdanmark could pose a risk to 2013 buy-backs. Our forecast suggests a full 36% of the programme will be funded from excess capital, leaving only a 4% buffer above the capital requirement at year-end 2013. o Topdanmarks non-life business provides very stable results, but risks to earnings exist from: i) an increase in Danish bond yields, which would affect earnings negatively as the mark-to-market impact is partly taken through P&L; and ii) lower-than-expected repatriation of funds from the life insurance shadow account. A falling yield: It may be argued that the 11.2% 2013E buy-back yield on which Topdanmark trades justifies its valuation. However, the yield is expected to fall to around 6% in 2014-15, which appears less attractive considering the company pays out nearly all of its earnings and that these are expected to fall in 2014-15. Weakening operating trends: Although a strong headline beat, Q4 2012 earnings highlighted two negative operating trends. In non-life, regulatory changes mean Danish insurers will need to pay out higher compensation to people in flex-jobs (page 5). Meanwhile, a possible change to solvency rules could lead to DKK30m-40m of Topdanmarks life shadow account being written off in 2014. Numbers: We change our 2013-14 net income estimates by 5.3% and -0.5% respectively, mainly to reflect re-modelling of the non-life investment result. Our RoNAV/SOTP-based valuation increases by DKK15 as we roll this forward to year-end 2013.
2011 1,023 7.44 8.43 29.0 28.8 17.5 6.5 462 2012 1,823 14.2 9.35 38.1 48.6 9.8 6.7 379 2013E 1,287 10.8 16.8 38.5 28.6 13.9 11.2 424 2014E 1,224 11.0 9.9 44.3 30.5 14.6 6.2 392 2015E 1,178 11.4 10.2 50.5 27.3 15.2 5.9 366

Sell
Rating system Current price Relative Price target

DKK 144.10

DKK 125.00

12/03/2013 Copenhagen Close Market cap DKK 17,860 m Reuters TOP.CO Bloomberg TOP DC Changes made in this note Rating Sell (Hold) Price target DKK 125.00 (110.00) Chg
2013e 2014e old % old % Net inc. 1,222 5.3 1,230 -0.5 102 5.7 109 1.2 EPS 114 47.1 127 -21.9 DPS Source: Berenberg Bank estimates 2015e Old % na na na na na na

Share data

Shares outstanding (m) Daily trading volume

124 29,819 144 91 SXIP 22.7% 17.7% 26.3%

Performance data
High 52 weeks (DKK) Low 52 weeks (DKK) Relative performance to SXXP 1 month 24.6% 3 months 19.1% 12 months 40.2%

Business activities:
Insurer focused on the Danish market. Predominantly non-life, with a small life operation.

Non-institutional shareholders:
Sampo 23%

13 March 2013 Sami Taipalus

Analyst +44 20 3207 7866 sami.taipalus@berenberg.com

Y/E 31.12., DKK m Net income EPS Buy-back per share Net asset value per share RoNAV (%) P/E Buy-back yield (%) Price / net asset value (%) Source: Company data, Berenberg Bank

Trevor Moss
Specialist Sales +44 20 3207 7893 trevor.moss@berenberg.com

Topdanmark A/S
Small/Mid-Cap: Insurance

Topdanmark key topics

Headwinds to earnings
Topdanmark faces, in our view, significant headwinds to its earnings in the medium term, most notably from the following. The fall in bond yields over recent years is likely to continue to depress investment income for some time. Non-life margins appear unlikely to improve from current levels, as planned price increases are only in line with inflation. We note that the Scandinavian non-life insurance sector enjoyed highly beneficial claims trends in 2012. 2013-15 life insurance PBT is expected to benefit by up to DKK236m (2013E: DKK140m) from a recovery of payments made to the shadow account in 2011-12. These earnings are one-off in nature. We illustrate in Figure 1 our forecasts for Topdanmarks pre-tax earnings. Our estimates do not differ by more than 3% from Bloomberg consensus. Figure 1: Topdanmark: pre-tax earnings estimates (2011-15E) Topdanmarks earnings are expected to fall in 2013-15E
2.5

2.0

1.5

1.0

0.5

0.0 2011 2012 Underwriting 2013E Investment income 2014E Life insurance 2015E Other

Source: Company data, Berenberg Bank estimates

Ambitious buy-back programme

Topdanmark has announced an ambitious buy-back target of DKK2,000m for 2013, considerably above both our and consensus expectations (DKK1,350m and DKK1,500m respectively). This includes the DKK500m postponed from the 2012 buy-back at Q3 2012, as the issues relating to the companys life insurance capital model have now been solved. While we like the companys disciplined approach to capital distribution, we note that Topdanmark has in each year since 2009 failed to reach its buy-back target resulting in an overspill into the next year, which we illustrate in Figure 2. The

Topdanmark A/S
Small/Mid-Cap: Insurance

reasons for the overspill have varied, but the consistency of its presence highlights, in our view, that investors should not automatically assume that Topdanmark can deliver its 2013 buy-back target. Furthermore, we note that buyback programmes have been considerably less ambitious in previous years. Figure 2: Topdanmark: buy-back postponed to the following year (DKKm) Topdanmark has missed its buy-back target in each year since 2009
600
500 400 300 200 100 0

2009

2010

2011

2012

Source: Company data, Berenberg Bank estimates

Limited capital buffers

We show in Figure 3 the development in Topdanmarks capital position in 201115E. It is clear that the company operates with a very narrow margin above the capital requirement. We do not consider this to be a problem in itself as the companys underlying business is very stable, and the policy is indeed one of the key attractions of the stock. However, it does mean distributions are sensitive to small changes in required or allowable capital, which matters as we expect excess capital to account for 36% of financing for the 2013 buy-back programme. We highlight, in particular, regulatory uncertainty at Topdanmark. 1. It relies heavily on hybrid and subordinated debt for capital purposes any changes in the rules associated with these could cause concerns. 2. It would face increased capital requirements of DKK600m-700m in the event of having to use the Solvency II standard model instead of its internal model. 3. The company has material sensitivity to the issues relating to guaranteed life insurance, which have been the most controversial area of solvency regulation lately. We know from other insurers disclosures that solvency ratios can be very sensitive to changes in, for example, the assumed discount rate. 4. Topdanmark is currently allowed to take credit for life company excess Solvency I capital in its non-life operating unit. A change in stance from the DFSA regarding this could cause complications.

Topdanmark A/S
Small/Mid-Cap: Insurance

Figure 3: Topdanmark: internal model capitalisation (DKKbn) Topdanmark operates with thin capital buffers
5.5 Internal model 5.0 Equity Debt

4.5

4.0

3.5

3.0 Required cap'l Excess Available Required cap'l cap'l 2011 Excess Available Required cap'l cap'l 2012 Excess Available cap'l 2013E

Source: Company data, Berenberg Bank estimates

While we do not see an immediate threat from any of the above-mentioned issues, we would warn investors against being to complacent regarding Topdanmarks limited capital buffers.

Possible earnings volatility

In addition to thin capital buffers, we note that, despite the stability of its non-life operation, Topdanmark is also exposed to some earnings volatility. As net income accounts for 64% of financing of the 2013 buy-back programme, this could affect its ability to complete this. We note the following in particular. An increase in Danish bond yields would cause a substantial near-term drag on earnings due to Topdanmarks policy of taking mark-to-market movements on investments in the non-life business through its P&L, although this would partly be offset by a fall in liabilities. Fixed-income instruments account for roughly three-quarters of investments (excluding cash). We assume that DKK140m (pre-tax) will be released from the life shadow account during 2013. However, a failure to meet guaranteed returns could lead to a substantial reduction in released funds. Notably, Topdanmark has been required to top-up the shadow account in recent years due to weak investment markets in recent years. Furthermore, regulatory changes due to be introduced on 1 January 2014 may lead to some of the funds in the shadow account, which the company has previously considered fully recoverable, being lost. Topdanmark estimates a potential initial loss of DKK30m-40m, followed be a low double-digit DKKm amount each year, which would represent c.5-10% of life earnings. We do not see substantial risks to earnings from bad weather due to Topdanmarks extensive reinsurance programme. It showed, for example, remarkable resilience in 2010 (an adverse weather year), when it reported a net combined ratio of 93.3%.

Topdanmark A/S
Small/Mid-Cap: Insurance

Q4 2012 regulatory reforms

Topdanmark announced with the Q4 2012 results regulatory reforms that take its expected 2013 combined ratio from around 91% to 91-92%, gross of reserve releases. The changes will have an ongoing negative impact on the companys profitability, although it can, of course, counteract this with price increases. The government reforms relate to the early retirement pension, and came into force at the end of 2012. In essence, the public subsidy to people in flex-job will be reduced, meaning insurers will need to provide a greater share of the compensation these are entitled to. Flex-jobs are a form of employment undertaken by Danes that have suffered an accident causing a loss in physical ability. As these cover all types of accidents, including those related to motoring, the reform does not only affect the workers compensation (WC) line, but also the motor third-party liability and accident and illness classes. In addition to increased compensation from insurers, the reform also means these will need to provide temporary annuities to people injured at work for longer, which will have an adverse impact on claims in the WC class. The Danish National Board of Industrial Injuries estimates that this will lead to DKK250m of reserve increases for the insurance industry in 2012, and higher future annual claims of DKK90m (c.2% of market premiums). Topdanmark increased reserves by DKK35m in Q4 2012 to reflect this, while 2% of annual earned premiums equates to c.DKK15m, or 13% of 2012 technical profit in the WC class.

Topdanmark A/S
Small/Mid-Cap: Insurance

Topdanmark: changes to estimates

New DKKm Non-life Gross earned premiums - yoy growth (%) Claims ratio (%) Expense ratio (%) Combined ratio (%) Techincal profit Investment return Other Non-life PBT Life Investment return Risk allowance Shadow account Portfolio profit Other items Life insurance PBT Other Parent company etc. Group Group PBT Tax Group net income Share buy-back
Source: Berenberg Bank estimates

Old 2013e 2014e Comment

2013e

2014e

8,894 1.5 74.0 16.0 90.0 929 281 20 1,230

9,032 1.5 74.5 16.0 90.4 895 271 20 1,186

8,886 1.5 74.5 16.0 90.5 904 285 20 1,209

9,020 1.5 74.5 15.8 90.3 935 288 20 1,243

Minimal changes; guidance continues to be for 1-2% premium growth per annum, which is in line with the wider market LR: Adjust for Danish government reforms, but expect good 2013 as benign 2012 loss trends should drive higher than normal reserve releases. ER: factor in longer period of investment in distribution See changes to combined ratio Re-modelling to better reflect current yield environment No changes We make 1.7% and -4.6% changes to out 2013-14 forecast

74 161 140 374 30 404

86 161 90 337 30 367

83 150 90 323 30 353

85 150 60 295 30 325

Lower ret'n on s/h equity from 4.5% to 4.0% on company guidance Small changes Re-phasing of re-payment from shadow account We make 15.9% and 14.3% changes to out 2013-14 forecast No changes We make 14.5% and 12.9% changes to out 2013-14 forecast

35

35

25

30

Align result with guidance

1,671 -384 1,287 2,000

1,589 -366 1,224 1,101

1,587 -365 1,222 1,350

1,597 -367 1,230 1,357

We make 5.3% and -0.5% changes to out 2013-14 forecast Assumed tax rate unchanged at 23% We make 5.3% and -0.5% changes to out 2013-14 forecast Re-phasing of DKK500m postponed 2012 buy-back

Topdanmark A/S
Small/Mid-Cap: Insurance

Financials
Topdanmark: sum-of-the-parts estimate
DKKm Non-life Life NAV + debt Debt NAV 2013e 2,922 2,446 5,369 -1,153 4,216 14e E 977 296 1,272 -49 1,224 14e ret'n 33.4% 12.1% 23.7% 4.2% 29.0% Comment 4.4x cap'l; 13.1x 14e earnings 1.6x cap'l; 13.0x 14e earings 3.1x cap'l; 13.1x 14e earnings 1.0x capital 3.7x cap'l; 12.6x 14e earnings SotP 12,785 3,844 16,630 -1,153 15,477 P/S 103 31 134 (9) 125

Source: Company data, Berenberg Bank estimates Note: Topdanmark undertook a 1:10 share split on 13 March 2013. We have restated all historical figures on the basis of the new share count

Topdanmark: net asset value estimate

DKKm Net income Other comprehensive income Share buy-back Sale of employee shares Issue of share options Exercise of option/warrants Taxation Other Shareholders' equity Shareholders' equity p/s Intangibles Net asset value Net asset value p/s Buy-back per share Buy-back yield (%) 2011 1,023 1 -1,159 46 7 94 3 -3 4,567 34.3 -703 3,864 29.0 8.43 6.5 2012 1,823 2 -1,200 43 7 123 3 0 5,368 43.3 -652 4,716 38.1 9.35 6.7 2013e 1,287 0 -2,000 45 10 95 3 0 4,808 43.9 -592 4,216 38.5 16.8 11.2 2014e 1,224 0 -1,101 45 10 95 3 0 5,083 49.5 -532 4,551 44.3 9.9 6.2 2015e 1,178 0 -1,060 45 10 95 3 0 5,354 55.4 -472 4,882 50.5 10.2 5.9

Source: Company data, Berenberg Bank estimates Note: Topdanmark undertook a 1:10 share split on 13 March 2013. We have restated all historical figures on the basis of the new share count

Topdanmark A/S
Small/Mid-Cap: Insurance

Topdanmark: profit and loss estimate

DKKm Non-life Gross earned premiums Technical interest Gross claims Gross expenses Net reinsurance Underwriting profit Investment income Other items Non-life PBT Life Investment return Risk allowance Transferred, shadow account Life profit Other items Life insurance PBT Group Parent company etc. Group PBT Tax Net income EPS Buy-back p/s Non-life segment Net claims ratio (%) Expense ratio (%) Combined ratio (%) Net run-off result (%) Net weather losses (%) Underlying loss ratio (%) Private (non-life) Net claims ratio (%) Expense ratio (%) Combined ratio (%) SME & Industrial (non-life) Net claims ratio (%) Expense ratio (%) Combined ratio (%) 74.9 15.6 90.5 71.2 15.3 86.5 73.0 15.4 88.4 72.8 15.4 88.2 72.5 15.4 87.9 74.3 15.8 90.2 73.2 16.2 89.4 75.0 16.4 91.4 76.0 16.4 92.4 76.0 16.4 92.4 74.5 15.7 90.3 1.7 3.3 73.0 72.2 15.8 88.0 2.3 0.5 73.9 74.0 16.0 90.0 2.0 2.0 74.0 74.5 16.0 90.4 1.6 2.0 74.1 74.4 16.0 90.3 1.6 2.0 74.0 2011 8,668 65 -6,773 -1,365 312 907 123 55 1,085 2012 8,759 20 -6,131 -1,388 -193 1,068 1,015 20 2,103 2013e 8,894 40 -6,374 -1,420 -211 929 281 20 1,230 2014e 9,032 32 -6,514 -1,442 -213 895 271 20 1,186 2015e 9,172 24 -6,606 -1,465 -216 910 266 20 1,196

104 178 -114 168 18 186

129 165 -118 176 34 210

74 161 140 374 30 404

86 161 90 337 30 367

97 161 9 267 30 297

76 1,347 -326 1,023 7.44 8.43

22 2,335 -512 1,823 14.2 9.35

35 1,669 -384 1,287 10.8 16.8

35 1,587 -366 1,224 11.0 9.9

35 1,527 -352 1,178 11.4 10.2

Source: Company data, Berenberg Bank estimates Note: Topdanmark undertook a 1:10 share split on 13 March 2013. We have restated all historical figures on the basis of the new share count

Topdanmark A/S
Small/Mid-Cap: Insurance

Contacts: Investment Banking

Equity Research
BANKS Nick Anderson James Chappell Andrew Lowe Eleni Papoula BEVERAGES Philip Morrisey Josh Puddle BUSINESS SERVICES William Foggon Simon Mezzanotte Arash Roshan Zamir Konrad Zomer CAPITAL GOODS Frederik Bitter Benjamin Glaeser William Mackie Margaret Paxton Alexander Virgo Felix Wienen CHEMICALS Jade Barkett Asad Farid John Philipp Klein Jaideep Pandya CONSTRUCTION Chris Moore Robert Muir Michael Watts DIVERSIFIED FINANCIALS Pras Jeyanandhan Richard Perrott +44 (0) 20 3207 7838 +44 (0) 20 3207 7844 +44 (0) 20 3465 2743 +44 (0) 20 3465 2741 ECONOMICS Dr. Holger Schmieding Dr. Christian Schulz Robert Wood FOOD MANUFACTURING Fintan Ryan James Targett +44 (0) 20 3207 7889 +44 (0) 20 3207 7878 +44 (0) 20 3207 7822 E-mail: firstname.lastname@berenberg.com; Internet www.berenberg.de MID-CAP GENERAL Gunnar Cohrs Bjoern Lippe Anna Patrice Alexandra Schlegel Stanislaus von Thurn und Taxis +44 (0) 20 3465 2748 +44 (0) 20 3207 7873 REAL ESTATE Kai Klose Estelle Weingrod TECHNOLOGY Adnaan Ahmad Sebastian Grabert Daud Khan Ali Khwaja Tammy Qiu TELECOMMUNICATIONS Wassil El Hebil Usman Ghazi Stuart Gordon Laura Janssens Paul Marsch Barry Zeitoune TOBACCO Erik Bloomquist Kate Kalashnikova UTILITIES Robert Chantry Andrew Fisher Oliver Salvesen Lawson Steele +44 (0) 20 3207 7894 +44 (0) 20 3207 7845 +44 (0) 20 3207 7863 +44 (0) 20 3207 7896 +44 (0) 20 3207 2631

+44 (0) 20 3207 7892 +44 (0) 20 3207 7881

+44 (0) 20 3207 7882 +44 (0) 20 3207 7917 +44 (0) 20 3465 2636 +44 (0) 20 3207 7920

GENERAL RETAIL & LUXURY GOODS Bassel Choughari +44 (0) 20 3465 2675 John Guy +44 (0) 20 3465 2674 HEALTHCARE Scott Bardo Alistair Campbell Charles Cooper Louise Hinds Adrian Howd Tom Jones

+44 (0) 20 3207 7888 +44 (0) 20 3207 7931

+44 (0) 20 3207 7916 +44 (0) 20 3207 7918 +44 (0) 20 3207 7837 +44 (0) 20 3207 7934 +44 (0) 20 3207 7856 +44 (0) 20 3207 7915

+44 (0) 20 3207 7869 +44 (0) 20 3207 7876 +44 (0) 20 3465 2637 +44 (0) 20 3465 2747 +44 (0) 20 3207 7874 +44 (0) 20 3207 7877

+44 (0) 20 3207 7851 +44 (0) 20 3207 7834 +44 (0) 20 3465 2638 +44 (0) 20 3207 7852 +44 (0) 20 3465 2673

HOUSEHOLD & PERSONAL CARE Seth Peterson +44 (0) 20 3207 7891 Andrew Steele +44 (0) 20 3207 7926 INSURANCE Tom Carstairs Peter Eliot Matthew Preston Sami Taipalus MEDIA Emma Coulby Laura Janssens Sarah Simon

+44 (0) 20 3207 7862 +44 (0) 20 3207 7824 +44 (0) 20 3207 7858 +44 (0) 20 3465 2639 +44 (0) 20 3207 7857 +44 (0) 20 3207 7859

+44 (0) 20 3207 7937 +44 (0) 20 3207 7932 +44 (0) 20 3207 7930 +44 (0) 20 3207 7890

+44 (0) 20 3207 7823 +44 (0) 20 3207 7880 +44 (0) 20 3207 7913 +44 (0) 20 3207 7866

+44 (0) 20 3207 7870 +44 (0) 20 3465 2665

+44 (0) 20 3465 2737 +44 (0) 20 3207 7860 +44 (0) 20 3207 7928

+44 (0) 20 3207 7821 +44 (0) 20 3465 2639 +44 (0) 20 3207 7830

+44 (0) 20 3207 7861 +44 (0) 20 3207 7937 +44 (0) 20 3207 7818 +44 (0) 20 3207 7887

+44 (0) 20 3207 7899 +44 (0) 20 3207 7925

Sales
Specialist Sales CONSUMER Rupert Trotter INSURANCE Trevor Moss LONDON Miel Bakker John von Berenberg-Consbruch Ronald Bernette Matt Chawner Toby Flaux Sean Heath David Hogg Ben Hutton James Matthews David Mortlock Peter Nichols George Smibert Max von Doetinchem Paul Walker E-mail: firstname.lastname@berenberg.com; Internet www.berenberg.de +44 (0) 20 3207 7815 HEALTHCARE Frazer Hall TECHNOLOGY Jean Beaubois HAMBURG Susette Mantzel Marco Weiss PARIS Christophe Choquart Dalila Farigoule Clmence La Clavire-Peyraud Olivier Thibert ZURICH Stephan Hofer Carsten Kinder Gianni Lavigna Benjamin Stillfried CRM LONDON Greg Swallow Laura Cooper CORPORATE ACCESS LONDON Patricia Nehring +44 (0) 20 3207 7875 UTILITIES Benita Barretto INDUSTRIALS Chris Armstrong Kaj Alftan Sales Trading HAMBURG Paul Dontenwill Christian Endras Gregor Labahn Chris McKeand Fin Schaffer Lars Schwartau Marvin Schweden Tim Storm Philipp Wiechmann LONDON Stewart Cook Simon Messman Stephen O'Donohoe PARIS Sylvain Granjoux EVENTS LONDON Natalie Meech Charlotte Kilby Hannah Whitehead +44 (0) 20 3207 7829

+44 (0) 20 3207 7893

+44 (0) 20 3207 7835

+44 (0) 20 3207 7809 +44 (0) 20 3207 7879

+44 (0) 20 3207 7808 +44 (0) 20 3207 7805 +44 (0) 20 3207 7828 +44 (0) 20 3207 7847 +44 (0) 20 3465 2745 +44 (0) 20 3465 2742 +44 (0) 20 3465 2628 +44 (0) 20 3207 7804 +44 (0) 20 3207 7807 +44 (0) 20 3207 7850 +44 (0) 20 3207 7810 +44 (0) 20 3207 7911 +44 (0) 20 3207 7826 +44 (0) 20 3465 2632

+49 (0) 40 350 60 694 +49 (0) 40 350 60 719

+33 (0) 1 5844 9508 +33 (0) 1 5844 9510 +33 (0) 1 5844 9521 +33 (0) 1 5844 9512

+49 (0) 40 350 60 563 +49 (0) 40 350 60 359 +49 (0) 40 350 60 571 +49 (0) 40 350 60 798 +49 (0) 40 350 60 596 +49 (0) 40 350 60 450 +49 (0) 40 350 60 576 +49 (0) 40 350 60 415 +49 (0) 40 350 60 346

+41 (0) 44 283 2029 +41 (0) 44 283 2024 +41 (0) 44 283 2038 +41 (0) 44 283 2033

+44 (0) 20 3465 2752 +44 (0) 20 3465 2754 +44 (0) 20 3465 2753

FRANKFURT Michael Brauburger Nina Buechs Andr Grosskurth Boris Koegel Joachim Kopp

+49 (0) 69 91 30 90 741 +49 (0) 69 91 30 90 735 +49 (0) 69 91 30 90 734 +49 (0) 69 91 30 90 740 +49 (0) 69 91 30 90 742

+44 (0) 20 3207 7833 +44 (0) 20 3207 7806

+33 (0) 1 5844 9509

+44 (0) 20 3207 7811

+44 (0) 20 3207 7831 +44 (0) 20 3207 7832 +44 (0) 20 3207 7922

US Sales
BERENBERG CAPITAL MARKETS LLC Member FINRA & SIPC Andrew Holder Colin Andrade Cathal Carroll Burr Clark Julie Doherty +1 (617) 292 8222 +1 (617) 292 8230 +1 (646) 445 7206 +1 (617) 292 8282 +1 (617) 292 8228

E-mail: firstname.lastname@berenberg-us.com Kelleigh Faldi Kieran O'Sullivan Emily Mouret Jonathan Saxon +1 (617) 292 8288 +1 (617) 292 8292 +1 (646) 445 7204 +1 (646) 445 7202

Topdanmark A/S
Small/Mid-Cap: Insurance

Please note that the use of this research report is subject to the conditions and restrictions set forth in the General investment-related disclosures and the Legal disclaimer at the end of this document. For analyst certification and remarks regarding foreign investors and country-specific disclosures, please refer to the respective paragraph at the end of this document.

Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz WpHG)
Company Topdanmark A/S (1) (2) (3) (4) (5) (6) Disclosures no disclosures

Berenberg Bank or its affiliate(s) was Lead Manager or Co-Lead Manager over the previous 12 months of a public offering of this company. Berenberg Bank acts as Designated Sponsor for this company. Over the previous 12 months, Berenberg Bank and/or its affiliate(s) has effected an agreement with this company for investment banking services or received compensation or a promise to pay from this company for investment banking services. Berenberg Bank and/or its affiliate(s) holds 5% or more of the share capital of this company. Berenberg Bank holds a trading position in shares of this company. Berenberg Bank and/or its affiliate(s) holds a net short position of 1% or more of the share capital of this company, calculated by methods required by German law as of the last trading day of the past month.

Historical price target and rating changes for Topdanmark A/S in the last 12 months (full coverage) Date 24 May 12 23 August 12 14 November 12 13 March 13 Price target - DKK 990.00 980.00 1096.00 125.00 Rating Hold Hold Hold Sell Initiation of coverage 05 July 10

Berenberg distribution of ratings and in proportion to investment banking services Buy Sell Hold 44.85 % 17.17 % 37.98 % 66.67 % 7.41 % 25.93 %

Valuation basis/rating key

The recommendations for companies analysed by Berenberg Banks equity research department are either made on an absolute basis (absolute rating system) or relative to the sector (relative rating system), which is clearly stated in the financial analysis. For both absolute and relative rating system, the three-step rating key Buy, Hold and Sell is applied. For a detailed explanation of our rating system, please refer to our website at http://www.berenberg.de/research.html?&L=1 NB: During periods of high market, sector or stock volatility, or in special situations, the rating system criteria as described on our website may be breached temporarily.

Competent supervisory authority

Bundesanstalt fr Finanzdienstleistungsaufsicht -BaFin- (Federal Financial Supervisory Authority), Graurheindorfer Strae 108, 53117 Bonn and Lurgiallee 12, 60439 Frankfurt am Main

10

Topdanmark A/S
Small/Mid-Cap: Insurance

General investment-related disclosures

Joh. Berenberg, Gossler & Co. KG (Berenberg Bank) has made every effort to carefully research all information contained in this financial analysis. The information on which the financial analysis is based has been obtained from sources which we believe to be reliable such as, for example, Thomson Reuters, Bloomberg and the relevant specialised press as well as the company which is the subject of this financial analysis. Only that part of the research note is made available to the issuer (who is the subject of this analysis) which is necessary to properly reconcile with the facts. Should this result in considerable changes a reference is made in the research note. Opinions expressed in this financial analysis are our current opinions as of the issuing date indicated on this document. The companies analysed by Berenberg Bank are divided into two groups: those under full coverage (regular updates provided); and those under screening coverage (updates provided as and when required at irregular intervals). The functional job title of the person/s responsible for the recommendations contained in this report is Equity Research Analyst unless otherwise stated on the cover. The following internet link provides further remarks on our financial analyses: http://www.berenberg.de/research.html?&L=1&no_cache=1

Legal disclaimer
This document has been prepared by Berenberg Bank. This document does not claim completeness regarding all the information on the stocks, stock markets or developments referred to in it. On no account should the document be regarded as a substitute for the recipient procuring information for himself/herself or exercising his/her own judgements. The document has been produced for information purposes for institutional clients or market professionals. Private customers, into whose possession this document comes, should discuss possible investment decisions with their customer service officer as differing views and opinions may exist with regard to the stocks referred to in this document. This document is not a solicitation or an offer to buy or sell the mentioned stock. The document may include certain descriptions, statements, estimates, and conclusions underlining potential market and company development. These reflect assumptions, which may turn out to be incorrect. Berenberg Bank and/or its employees accept no liability whatsoever for any direct or consequential loss or damages of any kind arising out of the use of this document or any part of its content. Berenberg Bank and/or its employees may hold, buy or sell positions in any securities mentioned in this document, derivatives thereon or related financial products. Berenberg Bank and/or its employees may underwrite issues for any securities mentioned in this document, derivatives thereon or related financial products or seek to perform capital market or underwriting services.

Analyst certification

I, Sami Taipalus, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by Berenberg Bank or its affiliates.

Remarks regarding foreign investors

The preparation of this document is subject to regulation by German law. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions.

United Kingdom

This document is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers.

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Topdanmark A/S
Small/Mid-Cap: Insurance

United States of America

This document has been prepared exclusively by Berenberg Bank. Although Berenberg Capital Markets LLC, an affiliate of Berenberg Bank and registered US broker-dealer, distributes this document to certain customers, Berenberg Capital Markets LLC does not provide input into its contents, nor does this document constitute research of Berenberg Capital Markets LLC. In addition, this document is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers. This document is classified as objective for the purposes of FINRA rules. Please contact Berenberg Capital Markets LLC (+1 617.292.8200), if you require additional information.

Third-party research disclosures Company

Topdanmark A/S (1) (2) (3) (4) (5)

Disclosures
no disclosures

Berenberg Capital Markets LLC owned 1% or more of the outstanding shares of any class of the subject company by the end of the prior month.* Over the previous 12 months, Berenberg Capital Markets LLC has managed or co-managed any public offering for the subject company.* Berenberg Capital Markets LLC is making a market in the subject securities at the time of the report. Berenberg Capital Markets LLC received compensation for investment banking services in the past 12 months, or expects to receive such compensation in the next 3 months.* There is another potential conflict of interest of the analyst or Berenberg Capital Markets LLC, of which the analyst knows or has reason to know at the time of publication of this research report.

* For disclosures regarding affiliates of Berenberg Capital Markets LLC please refer to the Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz WpHG) section above.

Copyright

Berenberg Bank reserves all the rights in this document. No part of the document or its content may be rewritten, copied, photocopied or duplicated in any form by any means or redistributed without Berenberg Banks prior written consent. June 2012 Berenberg Bank

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