a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 3
5-year summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2003 – A good year for PFA and our customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PFA's vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PFA's value creation model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results in the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The customers and the market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New product – CustomerCapitalTM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New product – PFA Unit Linked . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distinctively enhanced customer service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New model for broker-operated schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Considerably lower transfer charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PFA Customer Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Satisfied employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expectations for 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increased growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PFA DitValg® (PFA YourChoice) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Moderately higher ratio of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PFA Pension – based on understanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2003 – External factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Focus on capital and risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating and financial review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The PFA Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Key figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements and reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield on investments and breakdown of shareholding by sector and region . . . . . . . . . . . . . . . . .
Supervisory Board, Executive Board and process owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Please note that this is a translation of the Danish edition of the Annual Report 2003
Contents
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a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n4
PFA Group
Key figures (DKKm) 1999 2000 2001 2002 2003
Income statement
Premiums, net of reinsurance 9,429 10,432 11,307 11,757 12,345
Insurance benefits, net of reinsurance (5,468) (5,857) (6,220) (7,189) (8,554)
Change in life insurance provisions 1) (10,923) (4,156) (12,896) (12,169) (9,092)
Net operating expenses, net of reinsurance (505) (554) (705) (728) (860)
Balance on the technical account, life insurance 1) 460 460 (4,185) (198) 129
Balance on the technical account, non-life insurance (41) (59) (96) 47 (35)
Net profit/(loss) for the year 820 408 (3,649) 1,047 277
Balance sheet
Total assets 143,770 154,348 153,083 167,459 178,311
Shareholders' equity 6,128 6,577 2,976 4,002 4,279
Insurance provisions, net of reinsurance 1) 2) 131,591 140,909 145,140 156,346 168,214
PFA Pension
Key figures (DKKm) 1999 2000 2001 2002 2003
Income statement
Premiums, net of reinsurance 8,319 9,138 9,741 9,998 10,295
Insurance benefits, net of reinsurance (5,427) (5,795) (6,156) (7,095) (8,354)
Change in life insurance provisions 1) (9,746) (2,750) (11,308) (10,443) (7,133)
Change in life insurance provisions 1) (472) (518) (662) (681) (771)
Balance on the technical account, life insurance 1) (1,127) (128) (4,236) (240) 179
Balance on the technical account, non-life insurance (41) (59) (96) 47 (37)
Net profit/(loss) for the year 820 408 (3,649) 1,047 277
Balance sheet
Total assets 135,191 144,086 142,008 154,391 162,971
Shareholders' equity 5,938 6,346 2,697 3,723 4,000
Insurance provisions, net of reinsurance 1) 2) 126,090 134,096 136,894 146,356 155,612
Deposit interest rate in PFA Pension
after pension yield tax (p.a.) 4.5% 6.0% 8.5% 4.5% 4.5%
1)The figures for 1999-2001 have not been restated in accordance with the policy changes made in 2002.
2) Incl. provisions for unit-linked insurance policies.
5-year summary
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 5
• 2003 was a good year for PFA with many posi-
tive results for the customers.
• The PFA Group yielded a return on investments
of 6.5 per cent before pension yield tax – a
satisfactory yield relative to the market trend.
• The customers’ reserves were increased, and
the Group’s total reserves – the excess capital
base and the customers’ revenue reserves –
rose from DKK 7.2 billion to DKK 8.8 billion.
• The new product CustomerCapital™, which
gives the customers a greater share of the in-
crease in value, was widely accepted. Cus-
tomerCapital™ is already part of more than
110,000 savers’ pension schemes.
• In the Group, the customers’ savings, includ-
ing CustomerCapital™, yielded 6.2 per cent.
• Distinctively enhanced customer service – and
during the year, the level of customer satis-
faction and PFA's image improved considerably.
2003 – A good year for PFA and our customers
PFA PensionLuxembourg
PFA Pension
Share capital: DKK 100 million Dividend: DKK 350,000
PFAEjendomme
PFA Holding
Share capital: DKK 1 millionDividend: DKK 50,000
PFASoraarneq
PFA InvestInternational
G R O U P S T R U C T U R E
p e n s i o n i n s u r a n c e p r o p e r t y c o m p a n i e s
PFAIT Service
LærernesPension(51%)
The PFA Fund (PFA-
Fonden) holds 49 per
cent of the shares in PFA
Holding. PFA Holding
holds all of the shares in
PFA Pension. PFA Pension
holds all shares in other
companies, except for
Lærernes Pension in
which PFA Pension holds
a 51 per cent interest.
The group enterprises are
domiciled in Copenhagen,
except for PFA Pension
Luxembourg, which is
domiciled in Luxembourg,
and PFA Soraarneq, which
is domiciled in Nuuk,
Greenland.
PFA Holding prepares a
separate annual report
and is not comprised by
this annual report of PFA
Pension and the PFA
Group.
a d m i n i s t r a t i o n c o m p a ny
»It is not because things are difficult
that we do not dare, it is because we
do not dare that they are difficult«
Lucius Seneca (4 B.C. – 65 A.D.), Roman philosopher, poet and politician
It is our vision to be the customers’ preferred
provider of pension services:
We want to be the pension company which
most companies, organisations, employees and
members consider the best provider of life in-
surance and pension services.
To meet this end we need to be the pension
company that creates as much economic value
for our customers as possible.
Being owned by our customers places us in a
unique position compared to other commercial
enterprises. Because the value we create first
and foremost accrues to the customers – rather
than to the shareholders.
However, economic value is not enough.
We also want to be the company that best
understands and meets our customers’ pension
requirements.
Therefore, PFA puts focus on the develop-
ment of new products. In 2003, we introduced
CustomerCapital™ (KundeKapital®) and a new
Unit Linked product. In 2004, we are going to
put our new product platform, ‘PFA YourChoice’
(PFA DitValg®), on the market.
We are also determined to make our products
more intelligible. At the same time, our solu-
tions must match our customers’ situation and
meet their needs so that they get the pension
scheme most suited to them – whatever their
present life situation. This requires that we can
provide the most competent advisory services
and the most intelligible communication in the
market.
And we must offer the best services in the
market. We want PFA’s customers to feel they
get quick and efficient high-quality services.
Irrespective of whether they prefer to be serv-
iced personally or whether they would rather
serve themselves via the Internet.
PFA’s value creation model
As the guiding principle in our effort to fulfil
PFA’s vision, we are focusing on three funda-
mental, interacting elements.
The three elements are customer satisfaction,
economic value and employee satisfaction.
Only by optimising the interaction between
the three elements can PFA create maximum
value for our customers.
Satisfied customers create the basis for eco-
nomic growth – partly by their own efforts, and
partly by contributing to attracting new cus-
tomers.
Sound economic growth strengthens the ba-
sis for taking greater investment risks, thus pro-
viding the customers with a higher yield.
And a solid financial basis is a prerequisite if
management is to establish the framework suit-
ed to ensure a high degree of employee satis-
faction. Satisfaction which – for every single
employee – should be based on the possibility
of participating in and contributing to an inter-
esting operation and development of PFA to the
benefit of the customers.
Through their effort and commitment, com-
petent and satisfied employees create value for
PFA’s customers. That goes for all employees –
whether or not they have direct customer con-
tact, manage investments or work on projects
that are important to PFA’s development.
In this way the value-creating cycle is made
which is essential in order for us to fulfil our vi-
sion.
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 7
Customer satisfaction
Em
plo
yee
satisfactionEc
onom
icva
lue
Creation of
value to our
customersThe interaction of these
three fundamental ele-
ments makes the very
value-creating cycle that
is essential in order for
us to fulfil our vision.
PFA's vision
In 2003, PFA achieved many important results,
all of which are important steps on the road to
making our vision come through.
The customers and the market
The pension market is still growing. At the same
time, the market is characterised by still keener
competition and frequent tender rounds.
Premiums in the PFA Group rose in 2003 by
8.5 per cent excl. group life. PFA Pension saw a
rise of 7 per cent. The increase is due to growth
on the part of our existing customers and, to a
lesser extent, an influx of new customers.
In relation to the tender rounds initiated by
our customers in 2003, we are delighted that by
far the majority of these customers chose to
stay in PFA.
This trend was in complete agreement with
the expectations as a consequence of our focus
in 2003 on retaining and servicing our existing
customers as best we can.
Due to the fine results of our process im-
provement efforts, we were able in the second
half of the year to reduce the deadline for mak-
ing changes in existing pension schemes and for
establishing new schemes. Consequently, we
could increase our new sale activities, and the
results began to show at the end of the year.
We thus won several new schemes, which will
be launched in 2004.
Premiums on group life insurance fell in 2003
on the year before. Largely the entire decrease
relates to the fact that, effective 1 January
2003, Pen-Sam had its group life arrangement
transferred back. Previously, the group life in-
surance schemes for some of the pension
schemes in Pen-Sam would be taken out
through a scheme in PFA, but Pen-Sam wanted
to keep all the schemes under its own auspices.
The interest in improving the pension scheme
so as to make it include health insurance is still
on the increase. The number of policies which
include PFA Health Insurance, allowing quick
treatment in a private clinic or hospital, rose in
2003 from 35,000 to 40,000. The number of
policies which include Coverage at Critical Ill-
ness, under which a lump sum is disbursed in
relation to certain diseases, rose from 170,000
to almost 200,000.
New product – CustomerCapital™
(KundeKapital®)
Through CustomerCapital™ we make sure that
the customers get the maximum share of the
economic value we create. The product has
been very favourably received by our corporate
and organisational customers, and already in
the first quarter of 2004 will this new product
be part of the pension schemes of more than
110,000 employees in approx. 100 companies
and organisations.
Under a pension scheme that includes Cus-
tomerCapital™, an amount corresponding to 5
per cent of the pension contribution goes to In-
dividual CustomerCapital™. As this capital is
part of PFA's capital base, the customers’ return
on these funds will be very attractive.
The yield on CustomerCapital™ is the same as
the yield on PFA's shareholders’ equity. How-
ever, at present, the customers’ minimum yield
on Individual CustomerCapital™ is 9 per cent
p.a. after pension yield tax.
This yield is secured by an amount transferred
by PFA from shareholders’ equity to Collective
CustomerCapital™. Collective CustomerCapital™,
which is now DKK 6.3 billion, provides security
for the attractive yield on Individual Customer-
Capital™, which is expected for many years
ahead, and also covers any losses in relation to
Individual CustomerCapital™. In that way, Col-
lective CustomerCapital™ will, over the years, be
allocated to the customers having taken out a
policy that includes Individual CustomerCapi-
tal™.
It is up to PFA's business customers to decide
whether they wish their pension scheme to in-
clude CustomerCapital™. At the same time, the
enterprise may choose to allow their employees
to decline CustomerCapital™ individually.
In the Group, Lærernes Pension also makes
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n8
Results in the year
use of the special bonus provisions, as Customer-
Capital™ is denoted in terms of Danish law.
New product – ‘PFA Unit Linked’
‘PFA Unit Linked’ is a new, flexible savings prod-
uct, which we developed during 2003 and intro-
duced at the end of the year. The product allows
the customers to invest all or some of their pen-
sion savings in a number of different funds,
which include bonds and shares. The savings
yield the market rate of interest and there is no
guarantee. ‘PFA Unit Linked’ is a web-based pro-
duct, where the individual savers can, via the In-
ternet, get access to a number of tools helping
them pick the fund they would like to invest in.
Among the advantages of ‘PFA Unit Linked’
are the day-to-day trade, the possibility of mix-
ing the funds oneself or letting PFA mix the
funds according to various criteria, an independ-
ent advisory tool from Morningstar and very
competitive charges.
Distinctively enhanced customer service
In 2003, we improved our customer services
distinctively. As a result, the time needed for
administrative case handling has been signifi-
cantly reduced and the quality of our customer
services has increased.
To be able to follow up upon the deliveries
and the services to the customers, PFA has de-
veloped a Service Scorecard, which is a simple
means with which to document the actual prod-
uct and service process towards the company or
the organisation. The customers are allowed to
keep track of ongoing and completed assign-
ments, the targets set for the case handling
time and the extent to which such targets have
been met.
The enhanced service is the result of the ex-
tensive process improvements we have achieved
by using principles that are known in the manu-
facturing industry, but which have not so far
been used consistently in the finance sector.
We will continue our effort to improve our
processes to the benefit of our customers. As
our next move, we have initiated a quality proj-
ect which is to place PFA at the frontline as a
provider of quality services – again based on
principles and methods so far only applied in
the manufacturing industry. The results of these
efforts will benefit our customers in the course
of 2004.
New model for broker-operated
schemes
PFA wishes to create as high a degree of trans-
parency for our customers as possible. This is
the reason why we took the initiative in 2003
Individual Customer-
Capital™ is part of PFA’s
capital base and the
customers’ return will
thus be very attractive.
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 9
Capital base
The customers’
money
Company without CustomerCapital™
The customers’
money
Capital base
Company with CustomerCapital™
Please note that the proportion of the columns does not reflect the real breakdown.
Shareholders’ equity
Collective CustomerCapital™
The customers’ deposits
Individuel CustomerCapital™
Model of CustomerCapital™
for designing a new model for broker-operated
pension schemes, where the broker’s remunera-
tion reflects the actual distribution of tasks –
over time – between the pension company and
the broker.
As the first pension company, PFA is going,
effective 1 January 2004, to introduce the new
model for broker-operated pension schemes.
The model meets our desire to establish a more
balanced pay system. We have agreed on the
new model will all of the brokers with whom we
cooperate.
Under the new model, the brokers are paid
on a current basis, and their pay is calculated as
a share of the administrative contribution paid
by the customers. The brokers do not, as previ-
ously, get an initial commission, which is con-
siderably higher than the administrative contri-
bution, and which resulted in several loss-mak-
ing years for broker-operated pension schemes.
Considerably lower transfer charges
The charges payable on a transfer or surrender
of a pension scheme have been reduced con-
siderably. In doing so, we have done away with
the payment for non-depreciated acquisition
costs, which used to account for most of the
transfer charges in this sector. Low transfer
charges will increase competition in the sector –
to be benefit of both savers and companies. In
lowering the charges, we have furthermore
acted on one of the recommendations in the
Bremer report, ‘More freedom of choice for pen-
sion savers’, which was published in the spring
of 2003.
‘PFA Customer Board’
It was resolved at the Annual General Meeting
of shareholders in 2003 to set up a customer
board, and the new ‘PFA Customer Board’ held
its first meeting in June. The customer board
consists of nearly 50 members appointed by the
Supervisory Board. The customer board reflects
PFA's customer mix and consists of corporate
customers and customers affiliated with em-
ployers’ or employees’ organisations.
The customer board is an important link be-
tween the customers and PFA. The board is a
forum for dialogue and discussion about pen-
sion-political topics and about how PFA can cre-
ate value for the customers in the best possible
way. A concrete example of the customer
board’s value is PFA's new product, Customer-
Capital™, which took shape through a dialogue
with the customer board.
Satisfied employees
Employee satisfaction is an important element
in PFA. Without motivated, committed and satis-
fied employees, we cannot create the highest
possible value for our customers. In PFA, man-
agement is therefore about placing focus on
shared efforts, about being results-oriented and
about providing the individual employee with a
fine potential for development. A staff survey
carried through in June 2003 drew a very posi-
tive picture of PFA as a working place. The main
conclusion was that PFA's employees have a
positive approach to change and that they are
generally loyal and like their jobs.
In 2003, PFA introduced performance pay
(Kompetenceløn), which supports the manage-
ment principles and the business objectives. It is
a visible way to reward the individual employee
for his or her performance and competencies as
well as the job requirements. Kompetenceløn
has been introduced in relation to specialists,
team leaders and consultants. A similar arrange-
ment aimed at the rest of the employees is ex-
pected to be put to the vote in the first half of
2004.
In 2003, the average number of employees in
the Group was 1,020 or – converted on a full-
time basis – 977. At year-end, the number was
989. The number of employees is not expected
to rise in 2004.
The Customer Board is an
important link between
the customers and PFA
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n10
Increased growth
PFA expects the Group’s gross premiums to in-
crease by 8-10 per cent in 2004, primarily de-
riving from existing customers and, to some ex-
tent, from an inflow of new customers.
We expect CustomerCapital™ to continue to
be a success as the product will gradually be in-
troduced to companies and organisations. We
also expect that many customers will choose our
new products ‘PFA Unit Linked’ and ‘PFA Your-
Choice’, which are outlined in more detail below.
PFA Pension has maintained the deposit in-
terest rate at 4.5 per cent after pension yield
tax from 1 January 2004.
PFA DitValg® (‘PFA YourChoice’)
In 2004, PFA is going to present an altogether
new product platform, integrating our products
in a simpler and more coherent model. We call
the new product platform ‘PFA YourChoice’.
People making pension savings aim to get as
high a return as possible. An aim that should be
balanced against the investment risk the cus-
tomer is willing to run. Many pension savers re-
frain from investing a large part of their savings
in shares, because they are not willing to run the
risk or invest the time and resources needed to
make specific investment choices themselves.
‘PFA YourChoice’ minimises the expenses and
the effort it takes to maximise one’s yield. It is
a concept which – in a simple and comprehen-
sible manner – helps the pension savers find a
solution that matches their wish to get the
highest possible yield while, at the same time,
ensuring that they feel secure and consider the
price reasonable. In ‘PFA YourChoice’, we develop
special web portals for the individual saver and
for the company’s pension administrator.
It is the company that sets the limits for the
employees’ options as regards ‘PFA YourChoice’
in accordance with the company’s pension pol-
icy. Those companies that would like to allow
their employees to choose a higher ratio of
shares than the one offered by PFA in the aver-
age interest environment may exploit the possi-
bilities that are built into ‘PFA YourChoice’. It is
possible, up to a certain ratio, to continue to
have a financial guarantee. If savers prefer a
higher ratio, the scheme must be placed in ‘PFA
Unit Linked’ at the market rate. Choices within
given limits also contribute to keeping down the
expenses to the benefit of the customers’ sav-
ings.
Moderately higher ratio of shares
The purpose of PFA’s investment strategy is to
yield the highest possible return on investments
while, at the same time, making allowance for
any restatements of liabilities due to changes in
the interest rate. This also goes for 2004. We
evaluate our strategy on a current basis in re-
sponse to the market trends and changes in the
reserves.
The ratio of shares has basically seen a mod-
erate increase on 2003. As for foreign shares,
we use a new benchmark – MSCI World All
Countries – which, as opposed to the previous
benchmark, also includes emerging markets.
Our aim is to spread the risk more and yield an
attractive return in these markets. We will con-
tinue to increase our alternative investments as
part of a long-term expansion of this asset
class.
As far as bonds are concerned, we are going
to increase the ratio of foreign bonds, including
high-coupon bonds.
‘PFA YourChoice’ helps the
customers find a solution
that matches their wish to
get the highest possible
yield while, at the same
time, ensuring that they
feel secure and consider
the price reasonable.
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 11
Expectations for 2004
Starting from our vision to be the pension sav-
ers’ preferred provider, we chose understanding
as the centre of rotation for our strategic and
operational efforts in 2003. We do not believe
that it is enough for a pension company to cre-
ate maximum economic value for the customers.
We must also make our customers familiar with
how they can save up and what the coverage is.
And we must do so in an intelligible way.
PFA’s choice of understanding as a central
element in the relationship with our customers
is an attempt to do away with a year-long tradi-
tion in the pension sector to communicate with
the customers in a formal way – using many le-
gal terms and piles and piles of paper. As this
tradition has been an obstacle between compa-
ny and customer, many pension savers today do
not know even the most elementary facts about
their own pension scheme. Nor do they have
the strength to study it.
Simplicity in product development
PFA focuses on understanding at all levels. For
instance, when developing the new ‘PFA Unit
Linked’, it was essential for PFA that the new
product would set a new standard for how intel-
ligible the investment universe can be repre-
sented. It is not just a question of being able to
write simple texts, but also to make the product
and procure tools making it as simple as possi-
ble for the customer to use.
When developing CustomerCapitalTM, we had
it as a success criterion to involve the customers
in the development phase, asking their opinion
on product facilities and the unrolling strategy.
What resulted was a product in keeping with the
requirements in the market.
Clear speech – and writing
We have carried through an extensive language
programme thoroughly addressing the way we
communicate in every respect. We have rewrit-
ten thousands of standard letters, gone care-
fully over annual surveys and other mass publi-
cations and drafted more than 50 new product
brochures and fact sheets. The programme also
addresses benefit proposal texts and pension
guides and – in the longer term – policy texts
and insurance terms. The entire text universe on
www.pfa.dk has been rewritten based on our
declaration of intent to make pension more
comprehensible to the individual policyholder.
And in 2004 we will once again go carefully
through our entire website as part of our new
product platform ‘PFA YourChoice’.
All employees with direct customer contact
attend ‘comprehensible communication’ courses,
and a web-based writing guide creates a corre-
lation, internally in PFA, between the grammati-
cal rules for good communication and the rules
for PFA’s written communication.
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n12
PFA Pension – based on understanding
What is the difference between an
instalment pension and an endowment
pension?
Without all these in-house activities and the
product development activities that start from
the customers’ requirements, it would not have
been possible to implement PFA’s branding
process with so positive results.
In 2003, we took a different route in our ex-
ternal communication, and in May we presented
a new corporate concept, which included a new
logo and a new communications platform. Mass
communication was, among other features,
supported by a number of television spots, in
which PFA’s own employees related what they
are doing to make pension intelligible.
Enhanced image
During 2003, our market communication had
made the general knowledge of PFA so wide-
spread that PFA was the pension company
which by far the most people could recal.
Our customers welcomed the enhanced serv-
ice level. The level of customer satisfaction and
PFA's image improved significantly during 2003.
The development is reflected in two analyses
made by an external market research agency in
May and December.
The image has been
analysed on a scale from
1-5, where 5 is ‘I com-
pletely agree’ that the
pension company lives up
to the statement con-
cerned. The figures
concern directly serviced
customers with more
than 20 employees.
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 13
Development of the image profile among own customers
Visibility in the media- advertisement and
press coverage
Innovation in thehealth area
Leading position withinconsultancy services
High yield comparedto the competitors
Leading position withinproduct development
Fine reputation
Clear differentiation in relation to others
0 2.5 3.0 3.5 4.0 4.5 5.0
PFA Pension December 2003PFA Pension May 2003
Neither nor
I mainly agree
I completely agree
Sourc
e: A
alund B
usi
ness
Rese
arch
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n14
»Man's main task in life is to
give birth to himself, to
become what he potentially is«Eric Fromm (1900-1980), German philosopher
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n16
Beginning recovery
At the beginning of 2003, the global
economy was affected by recession. To
stimulate the economy, a number of
benchmark countries relaxed their fiscal
policy, and the central banks lowered the
leading interest rates. As a result, par-
ticularly USA saw a beginning recovery.
The recovery in USA spread to Europe in
the second half of 2003. However, the
growth in Europe was still considerably
lower than in USA at year-end. In recent
years, the Euro has gained significant
strength in relation to the dollar, which has
put a damper on the European growth.
China plays a still more important part
in the global economy. The high Chinese
growth rate has also stimulated growth
in the rest of the region, including Japan.
The global economic slowdown at the
beginning of 2003 also affected the
Danish economy in 2003. The economic
growth was negative relatively to the
year before, both in Q2 and Q3, and the
unemployment rate rose on 2002. How-
ever, the Danish economy is still among
the strongest in Europe, and higher
growth figures are expected for 2004.
The international recovery is expected
to continue into 2004. However, it is un-
certain whether the recovery will gradu-
ally become sustainable in the second
half of 2004, or if it will gradually get
winded as the effect of the fiscal relax-
ation abates during the year.
Higher share prices
The share prices in the international mar-
kets rose in 2003 after three years of
continuing decline. Measured in Danish
kroner, global shares rose by more than
10 per cent. Danish shares went up by
33 per cent, outperforming the global
shares once again.
In the bond markets, the 10-year in-
terest rates increased by approx. 0.25
percentage points in both USA and Eu-
rope. Due to the almost 16 per cent
weakening of the dollar relative to Dan-
ish kroner, the global treasury bonds
yielded a negative return measured in
Danish kroner.
Pension sector trends
The report ‘More freedom of choice for
pension savers’ was on the agenda in
much of the pension-political debate in
the past year. The challenges currently
facing the pension sector are analysed in
the report, which has been drawn up by
a committee of officials – the so-called
Bremer committee. At the same time,
the committee recommended a number
of changes in the pension system, which
now form the basis of a dialogue with
the sector and the two sides of industry.
PFA backs a number of the recommen-
dations, including the recommendation
that there should be greater freedom of
choice in the area of labour market pen-
sions and company pensions. However,
such freedom of choice should be based
on reflection – the benefits should bear
comparison with the expenses. Econo-
mies of scale in company pension
schemes, for instance, imply that the in-
dividual employee cannot move to an-
other pension company.
The committee recommends that the
expenses incurred to move from one pen-
sion company to another should be lower.
As already mentioned, we have introduced
a substantially lower transfer charge.
The committee’s recommendation that
the special bonus provisions, type B,
which we call CustomerCapital™ in PFA,
may be part of ’particularly good capital
elements’ in line with shareholders’ eq-
uity has been adopted. It allows PFA and
other customer-owned companies the
possibility of continued growth without
accumulating substantial net assets. In-
stead, the customers can get a greater
share of the companies’ profit – in com-
plete keeping with our intentions.
Detailed analysis of transfers and
guarantees
Following up on the Bremer report, the
Danish government is going to set up
two working groups, which will include
pension sector representatives. One of
the working groups is to evaluate better
transfer possibilities and an individuali-
sation of the collective bonus reserves,
whereas the other group is to look at fu-
ture pension guarantees.
2003 – External factors
Movements in share prices 2002-2003
150
175
250
225
200
275
300
1,500
2,000
2,500
3,000
KAX MSCI World
Jan 2002 Jan 2003 Dec 2003
DKK
USD
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 17
PFA makes a point of maintaining precise
statements of our obligations to the cus-
tomers and of the changes in the re-
serves. The more we can optimise the
way we employ capital, the more we can
optimise the value creation to the bene-
fit of our customers.
To ensure precise statements of our
commitments, we use the current yield
curve to make up the life insurance provi-
sions, instead of a fixed-term interest rate.
In the spring of 2003, we adjusted our
risk hedging to ensure a better match
between assets and liabilities.
PFA currently compares the hedging
with existing alternatives, as too much
hedging may be costly as a result of lost
returns. The challenge for us is to aim at
’suitably’ strong reserves, while at the
same time ensuring that the customers
get the best possible yield.
We have improved our forecast model
for the long-term assessment of, e.g.,
our capital strength. In 2003, we carried
through an extensive risk analysis of
assets and liabilities – a so-called ALM
study – including considerations of impli-
cations over a long span of years for
1,000 different financial scenarios. The
study is a supplement to the static analy-
ses. One of the aims is for us to be able
to plan the long-term investment strat-
egy in order to obtain the best possible
capital strength.
Increasing excess solvency
As the figure below shows, PFA's relative
excess solvency in the Danish Financial
Supervisory Authority’s stress scenarios
has increased.
The innermost column illustrates the
size of the capital base, whereas the
surrounding colours show the solvency
requirement in the initial situation, ad-
justed for the changes which the red, re-
spectively the yellow, risk scenario im-
plies for the excess capital base. The
computation method corresponds to the
Danish Financial Supervisory Authority’s
guidelines for the computation of the
risk-adjusted solvency requirement.
It is a requirement that the excess ca-
pital base must always be positive. A
pension company will be ‘in the red light’
if the innermost column (the capital
base in the initial situation) ends in the
red area. The same principle applies to
yellow and green.
The capital base in PFA Pension and
the customers’ savings are invested to-
gether. As for the total reserves, the in-
crease in the excess solvency of the
capital base may be related to the fa-
vourable trend in share prices. At the end
of 2003, PFA Pension's excess solvency
relative to the risk-adjusted solvency re-
quirement was more than three times
the red risk scenario.
Strong reserves
PFA Pension’s reserves and investment
mix were so strong at the end of 2003
that shares may drop by 100 per cent
without giving us any problem meeting
the solvency requirement. Similarly, the
interest rate may, seen in isolation, drop
by more than 2 percentage points. If an
interest level that low continues for a
long time, the entire sector will, how-
ever, be in trouble.
PFA uses a model for the use of bonus
potentials, which ensures that we do not
redistribute them among our customers.
However, this makes the model more
cumbersome for the capital base. Losses,
if any, concerning the customers must
first be covered out of the collective
bonus potential – the customers’ reve-
nue reserves. Losses may then be covered
using the bonus potential related to ben-
efits on paid-up policies. This is the
expected future profit for the premiums
Focus on capital and risk
Excess solvency in the Danish Financial Supervisory Authority’s stress scenarios
0
50
100
150
200
250
300
31/03/03 30/09/03 31/12/03
350
Index
100 =
ris
k-ad
just
ed s
olv
ency
req
uirem
ent
for
red li
ght
31/12/02 30/06/03
Red: A company is in the red light if it cannot stand a 12 per cent drop in the share price, a0.7 per cent change in the interest rate, an 8 per cent decrease in property values as well ascertain other risks.
Yellow: A company is in the yellow light if it cannot stand a 30 per cent drop in the shareprice, a 1 per cent change in the interest rate, a 12 per cent decrease in property values aswell as certain other risks.
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n18
that have already been paid on the poli-
cies. As for the policies that cannot cov-
er their share of a loss, the capital base
will cover the loss. If an individual cus-
tomer has an excess bonus potential re-
lated to benefits on a paid-up policy, this
cannot be applied to cover losses for
other customers. This means that only
part of the customers’ total bonus po-
tential related to benefits on paid-up
policies may be used in stress scenarios
such as the Danish Financial Supervisory
Authority’s so-called ‘traffic lights’.
Individual risks
Our sensitivity to various, individual
changes is shown in the figure. The sensi-
tivities cannot be summed up so as to
show the total risk in the traffic light state-
ments, because the impact on reserves is
dependent on whether the changes take
place together or individually.
As the figure shows, these individual
changes impact the capital base to a very
limited extent. The impact is primarily de-
termined by the capital base’s share of
the investment income, as the capital
base is invested together with the cus-
tomers’ savings.
The impact on the reserves that are
not part of the capital base is the change
in the collective bonus potential and the
change in the total bonus potential re-
lated to benefits on paid-up policies. The
size and the use of the bonus potential
related to benefits on paid-up policies
depend on the interest rate level and the
size of the loss. Therefore, the figures do
not, basically, say anything about the
change in the total reserves. Conse-
quently, the impact on interest rate
changes of well over DKK 4 billion pri-
marily derives from changes in the total
bonus potential related to benefits on
paid-up policies.
The effect of changes in the mortality
and disability rates, as shown at the bot-
tom of the figure, will affect the total life
insurance provisions. The change will al-
so affect the distribution between guar-
anteed benefits, the bonus potential on
future premiums and the bonus potential
related to benefits on paid-up policies.
PFA's central compliance function
monitors the management of the
Group’s other risks, including business
and operational risks.
Sensitivity information for PFA Pension
Risk (DKKbn) Maximum impact on Minimum impact
collective bonus potential on the capital
and bonus potential related base
to benefits on paid-up policies
0.7 percentage point increase in the interest rate 4.1 (0.5)
0.7 percentage point decrease in the interest rate (4.5) 0.5
12 per cent drop in the share price (1.5) (0.1)
8 per cent decrease of property values (0.7) (0.1)
Change in the rate of exchange with a
0.5 per cent probability in ten days (0.1) 0.0
8 per cent loss of credits and counterparties (0.9) 0.1
10 per cent decrease in the mortality rate (2.1) 0.0
10 per cent increase in the mortality rate 1.9 0.0
10 per cent increase in the disability rate (0.3) 0.0
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 19
In 2003, PFA Pension realised a satisfac-
tory return on investments, i.e. 6.3 per
cent before pension yield tax.
The yield, which is higher than we ex-
pected at the beginning of the year, ex-
ceeded the benchmark fixed for PFA's in-
vestments in 2003.
It is in particular the overweight of
Danish shares that has produced an ad-
ditional yield relative to the strategic
benchmark. At the same time, PFA’s yield
on both Danish and foreign shares and
bonds exceeded benchmark.
The PFA Group realised an investment
yield of 6.5 per cent.
Changes in the portfolio
In 2003, we gradually increased our ratio
of shares from a little over 6 per cent to
almost 10 per cent by purchasing foreign
shares for slightly over DKK 3 billion, im-
proving the ratio between Danish and
foreign shares. At the same time, the in-
creases in share prices contributed to a
gradual increase in the ratio of shares.
In addition, we mainly invested in Dan-
ish bonds, primarily mortgage credit
bonds, which produced an additional
yield relative to foreign bonds. In the
portfolio of foreign bonds, we increased
the ratio of investment grade bonds and
high-yield corporate bonds and emerging
markets bonds.
We further invested in unlisted Danish
and foreign shares, which are to account
for a larger share of total investments in
the years to come.
DKK 14.1 billion in shares
Our yield on listed shares contributed
significantly to the total yield in spite of
the relatively low ratio of shares. The
reason is partly an overweight of listed
Danish shares, which yielded a consider-
ably higher return than listed foreign
Investment income
Investment trends
0 10 20 30 40 50 60 70 80
End of 2003End of 2002
Land and buildings
Listed Danish shares
Foreign shares
Nominal Danish bonds
Danish index-linked bonds
Foreign bonds
Market value (DKKbn)
Ten largest Danish shareholdings at the end of 2003
0
10
20
30
40
50
60
70
80
90
Acc. %
DKKbnAcc. %
(DKKbn)
0
0.5
1.0
1.5
2.0
2.5
A.P
. M
ølle
r – M
ærs
k
Dan
ske
Ban
k
Novo
Nord
isk
TDC
Jysk
e Ban
k
DSV
Sydban
k
Dan
isco ISS
Ves
tas
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n20
shares, and partly the fact that our
choice of shares resulted in a higher
yield than the market in general.
Listed shares overperforming
Due to the 34.5 per cent yield on listed
Danish shares, we overperformed by 1.4
percentage points relative to benchmark.
One of the reasons is an overweight in
Jyske Bank, Sydbank, A. P. Møller-Mærsk,
DSV and EAC.
Our listed foreign shares yielded a re-
turn of 31.1 per cent, including the in-
come from currency hedging. The yield
without currency hedging is 15.5 per
cent, corresponding to an overperfor-
mance of 3.5 per cent relative to bench-
mark. The additional yield is due to our
investment in Chinese and Eastern Euro-
pean shares and our sector breakdown.
The geographical breakdown and the
sector breakdown are shown in the table
on p. 54.
Alternative investments for
DKK 1.7 billion
PFA Pension decided in 2003 to invest
DKK 0.9 billion in unlisted shares, includ-
ing commitments not yet utilised. At the
end of 2003, alternative investments ac-
counted for DKK 1.7 billion, including the
market value of unlisted shares, DKK 0.8
billion, and not yet utilised commitments
in respect of future investments, DKK 0.8
billion.
The negative yield on unlisted shares
is due to previous investments in venture
funds within, among other sectors,
biotechnology and IT, areas that are still
connected with considerable uncertainty.
DKK 128 billion in bonds
PFA yielded a 5.3 per cent return on
bonds including currency hedging. With-
out currency hedging the return on
bonds was 4.9 per cent, or 0.2 percent-
age points above benchmark.
Danish bonds performed well, primari-
ly due to the overweight of mortgage
credit bonds.
In the portfolio of foreign bonds, we
increased the ratio of corporate bonds.
Corporate bonds have a higher risk pro-
file, just as emerging markets bonds.
Corporate bonds yielded handsome ab-
solute returns in 2003.
Index-linked bonds yielded a higher re-
turn than nominal bonds in 2003, particu-
larly in the short end of the market. Our
overweight of this bond type yielded a
return slightly above benchmark.
Derivative financial
instruments, etc.
Derivative financial instruments held to
hedge the sensitivity to exchange-rate
fluctuations related to provisions yielded
a negative return of DKK 681 million in
2003, recognised in the item ‘Other fi-
nancial investments’.
Unit Linked offering 30 funds
PFA Pension offers a broad range of sav-
ings funds on market terms. The funds
are administered either by PFA or by ex-
ternal fund managers. The funds are de-
scribed in more detail on our website,
where investors may also keep track of
the yield on these funds.
In 2003, the bond funds administered
by PFA yielded a return at benchmark
level. Viewed over a long span of years,
the yield on the funds is very satisfac-
tory. The share funds administered by
PFA performed below benchmark in
2003. Seen from a long perspective, the
share funds have performed satisfactorily
compared to comparable investment
funds and unit trusts.
In 2004, our customers will get access
to PFA's new Unit Link. First we are going
to offer 11 internal funds and 19 exter-
nally administered funds. As something
new we will be offering – under the ex-
ternally administered funds – funds ad-
ministered outside Denmark both in rela-
tion to shares and bonds. Our range of
internally administered funds has not
changed. In addition, we offer three mixed
funds, where PFA will be in charge of the
investment mix – due regard being had
to the customers’ venture spirit, retire-
ment age, etc. We will evaluate and sup-
plement the range of funds on an on-
going basis.
Properties
In 2003, PFA completed two domicile
projects: One for Struers in Ballerup and
one for Danske Bank in Vejle. We have
furthermore invested in a new domicile
for Københavns Energi in the Orestad,
which we expect to complete at the end
of 2004.
Contract work in progress ran into DKK
300 million at year-end. The relatively
modest project portfolio reflects the fact
that the number of domicile projects has
been reduced as a result of the economic
slowdown.
The occupancy rate for Danish and for-
eign properties was 97 per cent at year-
end, representing a decline of 2 percent-
age points on the year before. One of
the reasons is the sluggishness in the
market for commercial property letting.
As almost all land and buildings are
held by subsidiaries of PFA Pension, they
are included in the table at the compa-
nies’ net asset value, which is lower than
the market value of the properties. The
PFA Group holds land and buildings at a
market value of DKK 11.5 billion. With
the exception of the properties in PFA
Pension’s subsidiaries, only properties in
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 21
Lærernes Pension are included, totalling
DKK 0.2 billion. The PFA Group’s return
on land and buildings was 6.2 per cent in
2003.
As a result of a strategic analysis of
the property area we took over the ad-
ministration and operation of housing
properties counting well over 2,400
leases to Dan-Ejendomme A/S. As previ-
ously, PFA administers commercial prop-
erties and foreign properties.
Ethical considerations in relation
to investment policy
As a supplement to our overall invest-
ment policy, PFA Pension has adopted a
Code of Ethics. We find it important to
contribute to the promotion of a peace-
ful and democratic development of soci-
ety, observe fundamental human rights
and show a responsible conduct in rela-
tion to natural resources and the envi-
ronment. Ethical considerations are an
integral part of the individual company’s
investment strategy with regard to the
affairs of the company. We do not make
public such considerations; nor all share-
holdings.
Return on investments
PFA Pension 2002 2003
Market value Ratio Yield Bench- Market value Ratio Yield Bench-
Closing, DKKbn mark Closing, DKKbn mark
Listed Danish shares 7.9 5.3% (22.6%) (20.2%) 9.4 6.0% 34.5% 33.1%
Unlisted shares 0.5 0.3% (12.8%) – 0.8 0.5% (10.5%) –
Foreign listed shares 0.9 0.6% (35.9%) (32.5%) 4.0 2.5% 31.1%* 12.0%
Total shares 9.3 6.3% (25.9%) (25.1%) 14.1 9.1% 31.2% 19.1%
Nominal Danish bonds 72.9 49.5% 11.4% 11.7% 79.1 50.8% 5.0% 4.7%
Foreign bonds 31.1 21.1% 8.2% 7.0% 27.9 17.9% 5.2% 3.4%
Index-linked bonds 20.3 13.8% 10.1% 11.1% 21.0 13.5% 6.8% 6.5%
Total bonds 124.3 84.3% 10.4% 10.5% 128.0 82.1% 5.3%** 4.7%
Other financial investments 5.6 3.8% 20.6% – 5.1 3.3% (10.6%) –
Land and buildings 8.3 5.6% 7.9% – 8.6 5.5% 6.6% –
Total investments 147.4 100.0% 6.1% – 155.9 100.0% 6.3% 5.7%
Reference is otherwise made to ‘Specification of assets and their yield at market value’ on page 54* Yield on foreign listed shares, excl. profit from currency hedging: 15.5%** Total yield on bonds excl. profit from currency hedging: 4.9%
Benchmark
Nominal Danish bonds: A basket of long-term bonds.Nominal foreign bonds: In 2003, a basket of JP Morgan Global Government Index, excl. Japanese bonds, long-term Euro bonds, a basket of investment gradebonds, JP Morgan Emerging Markets Bond Index and JP Morgan Global High Yield Bond Index. In 2002, almost the same basket, however excl. Danish bonds in JP Morgan Global Government Index and without a basket of investment grade bonds. Index-linked bonds: A basket of bonds.Total bonds: 60% Danish bonds, 15% index-linked bonds and 25% foreign bonds.Listed Danish shares: KAX total index on the Copenhagen Stock Exchange. Foreign listed shares: MSCI World Index, capital-weighted for developed markets. Total shares: In 2003 a mix of 66% Danish shares, 12% unlisted Danish shares and 22% foreign shares (average). In 2002 a mix of 56% Danish shares, 3% unlisted Danish shares and 41% foreign shares.
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n22
»Obstacles are those frightful things you see
when you take your eyes off your goal« Henry Ford (1863-1947), founder of the Ford Motor Company
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n24
Due to the satisfactory investment in-
come in 2003, the PFA Group’s reserves
were increased in the year. Total reserves
– the excess capital base and collective
bonus potential – came at DKK 8.8 bil-
lion in 2003, against DKK 7.2 billion the
year before. Measured by reference to
the Group’s life insurance provisions, the
total reserves rose from 5.1 per cent to
5.8 per cent. In PFA Pension, total re-
serves are DKK 8.2 billion – an increase
of DKK 1.3 billion.
Maximum added value to the
customers
Being a customer-owned enterprise, PFA
– besides yielding a high return – makes
an effort to ensure that as large a share
of the added value as possible accrues
to the customers. In PFA Pension, the
customers’ savings – the insurance pro-
visions including CustomerCapital™ –
yielded a return of 6.1 per cent before
expense loading in 2003. The figure is
net of the yield transferred to sharehold-
ers’ equity and may be compared with a
total book investment income of 6.2 per
cent.
We make an effort to balance three
main areas in the financial statements,
cf. the figure. CustomerCapital™ contri-
butes to increasing the customers’ share
of the yield. While making savings, the
customers build up CustomerCapital™
and receive the money together with the
pension benefits. As a result, we are
able to remain financially strong, match-
ing the savings trends.
DKK 2.4 billion in balance on the
interest account and restate-
ments at market value
In PFA Pension, the customers’ share of
the investment income and the year’s
restatements at market value totalled
DKK 9.3 billion in 2003.
The amount is to cover the year’s ac-
cumulated deposit interest, yield to Cus-
tomerCapital™ and entrepreneurial profit
to be added to shareholders’ equity,
totalling DKK 6.9 billion.
This leaves a profit of DKK 2.4 billion
before pension yield tax, which is trans-
ferred to the collective bonus potential –
Operating and financial review
CustomerCapital™ strengthens
our capital base, and the value
hereof is given back to
customers having chosen
CustomerCapital™ through
a higher proportion of
the yield.
CustomerCapital™
Investment income
Risk premiums
Administrative contributions
Deposit interest rate
To shareholders’equity
To
CustomerCapital™
Claims, etc.
Net operating expenses
Capital strength
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 25
the customers’ revenue reserves. These
reserves have an equalising function, as
in some years there may be a loss to be
covered out of the collective bonus po-
tential. PFA aims at a balance in the long
term.
The entrepreneurial profit to be added
to shareholders’ equity, DKK 158 million,
is the only part of the customers’ invest-
ment income that does not accrue to the
customers. It accounts for approx. 0.1
percentage points of the total invest-
ment income of 6.2 per cent. Our use of
CustomerCapital™ contributes signifi-
cantly to increasing the customers’ share
of the income. Otherwise, the DKK 607
million accruing to CustomerCapital™
would, all things being equal, have been
transferred to shareholders’ equity. The
yield on CustomerCapital™ before pen-
sion yield tax was 10.5 per cent in 2003.
The large share allocated to the cus-
tomers is also due to the fact that we
have fixed a low entrepreneurial profit.
As from 2003, we reduced it from 0.5
per cent to 0.3 per cent of the life insur-
ance provisions. The entrepreneurial pro-
fit is distributed proportionately between
shareholders’ equity and Customer-
Capital™, and almost two-thirds went to
CustomerCapital™ in 2003, and only a
little over one-third went to sharehold-
ers’ equity.
The new entrepreneurial profit rate re-
flects what we consider a fair considera-
tion for the risk of making capital avail-
able for the capital base.
Balance on the claims experience
account, DKK 0.2 billion
The balance on the claims experience ac-
count, net of provisions for extra dividend
in respect of experience rating, to be dis-
tributed in 2004 is a surplus of DKK 0.2
billion, which will be transferred to the
collective bonus potential. The balance
on the claims experience account in 2002
was a deficit of DKK 27 million.
The claims ratio for 2003 corresponds
to 0.15 per cent of the life insurance pro-
visions.
In the claims area, it is important to
the customers that we can offer competi-
tive prices regarding insurance coverage
based on a favourable claims experience.
We aim at balancing the balance on the
claims experience account. A surplus on
the claims experience account is not an
end in itself, and any surplus will be given
back to the customers in the form of
bonuses directly or by way of a collective
bonus potential.
Balance on the cost account,
DKK -0.2 billion
In 2003, the actual net operating ex-
penses relative to the administrative
Balance on the interest account and restatement at market value (DKKbn)
Investment income 8.9
Restatement at market value 0.4
Total 9.3
Deposit interest rate 6.2To CustomerCapital™ 0.6Entrepreneurial profit to shareholders’ equity 0.2
Total 7.0
To the customers’ revenue reserves 2.4
Balance on the claims experience account (DKKbn)
Insurance premiums 0.7 Claims, etc. 0.3
Claims experience rating 0.2
Total 0.5
To the customers’ revenue reserves 0.2
Balance on the cost account (DKKbn)
Administrative expenses 0.5 Net operating expenses 0.7
From the customers’ revenue reserves (0.2)
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n26
contributions resulted in a negative bal-
ance on the cost account, DKK 0.2 bil-
lion, which will be covered out of the col-
lective bonus potential. We aim at bal-
ancing the balance on the cost account
in the long term.
The expense ratio regarding premiums
rose from 6.7 per cent in 2002 to 7.3 per
cent in 2003. The expense ratio regard-
ing provisions – corresponding to an in-
terest differential – is 0.6 per cent. The
rise in expenses is especially due to in-
creasing development activities, also re-
sulting in increased payroll costs. The de-
velopment activities and the investments
made in IT innovation are also invest-
ments in improved efficiency of the ad-
ministration. After some time, this im-
proved efficiency may result in a decrease
in the expense ratio.
Capital base with a considerable
excess solvency
PFA Pension’s capital base is largely un-
changed, DKK 11.9 billion, or 8.4 per
cent of the life insurance provisions. The
Group’s capital base is DKK 12.5 billion.
Shareholders’ equity is DKK 4.0 billion,
representing an increase of DKK 277 mil-
lion on the year before, corresponding to
the net profit for the year. The profit al-
so includes entrepreneurial profit, yield,
other items and income taxes. The equi-
ty ratio, which reflects shareholders’ eq-
uity and the subordinate loan capital
relative to the life insurance provisions,
is still 4.2 per cent. The consolidated
shareholders’ equity is DKK 4.3 billion.
CustomerCapital™ increased to DKK
6.3 billion, making up more than half the
capital base. The rise is DKK 516 million,
as pension yield tax, DKK 91 million,
must be paid on the yield of DKK 607
million. The customer capital ratio, which
is CustomerCapital™ relative to the life
insurance provisions, is 4.5 per cent,
against 4.4 per cent the year before. The
PFA Group’s CustomerCapital™ rose by
DKK 0.7 billion to DKK 6.6 billion.
Tax assets, etc. which are part of the
capital base decrease concurrently with
capital gains are realised on shares and
the value of properties goes up. The
year’s positive share price trends have
therefore implied a decrease of DKK 0.8
billion in tax assets, etc., largely corre-
sponding to the increase in sharehold-
ers’ equity and CustomerCapital™.
The solvency ratio requirement goes
up by DKK 0.2 billion. The excess capital
base goes down similarly, representing
Capital base PFA Group PFA Pension
2002 2003 2002 2003
DKKbn Ratio of life DKKbn Ratio of life DKKbn Ratio of life DKKbn Ratio of life
insurance insurance insurance lnsurance
provisions provisions provisions provisions
Shareholders’ equity 4.0 2.8% 4.3 2.8% 3.7 2.8% 4.0 2.9%
CustomerCapital™ 5.9 4.2% 6.6 4.4% 5.8 4.4% 6.3 4.5%
Subordinate loan capital 1.6 1.2% 1.7 1.1% 1.7 1.2% 1.7 1.2%
Tax assets, etc. 0.9 0.6% (0.1) (0.1%) 0.6 0.5% (0.1) (0.1%)
Capital base 12.4 8.8% 12.5 8.3% 11.8 8.9% 11.9 8.5%
Solvency requirement 7.1 5.1% 7.4 4.9% 6.6 5.0% 6.8 4.9%
Excess capital base 5.3 3.7% 5.1 3.3% 5.2 3.9% 5.1 3.7%
The ratios are calculated by reference to the retrospective provisions, corresponding to the definitions of the consolidated financial ratios. The same applies elsewhere in
the report where reserve ratios are shown.
Total reserves
End of 2002 End of 2003DKKbn
Excess capital base
Collective bonus potential
0 2 4 6 8 10
PFA Group
PFA Pension
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 27
DKK 5.1 billion. This is a considerable ex-
cess solvency, and the ratio is 175 per
cent. The excess solvency ratio, which is
the excess capital base relative to the life
insurance provisions, was 3.7 per cent
against 3.9 per cent in 2002. The excess
capital base in the Group is DKK 5.1 bil-
lion as well.
Collective bonus potential, DKK
3.1 billion
In PFA Pension, the customers’ revenue
reserves – the collective bonus potential –
rose by DKK 1.4 billion to DKK 3.1 billion.
The rise derives from three main areas:
• DKK 2.4 billion from the balance on the
interest account and restatements at
market value
• DKK 0.2 billion from the balance on the
claims experience account
• DKK -0.2 billion from the balance on
the cost account.
The increase of DKK 1.4 billion is net of
pension yield tax, DKK 1.0 billion.
The financial ratio ‘bonus ratio’, which
is the collective bonus potential relative
to the life insurance provisions, is 2.2 per
cent – up from 1.3 per cent at the end of
2002. In the Group, the collective bonus
potential is DKK 3.7 billion.
Strengthened reserves
The PFA Group’s total reserves made up
as the excess capital base plus collective
bonus potential increased in the year
from DKK 7.2 billion to DKK 8.8 billion.
The current interest yield and the ex-
penses for deposit interest balanced by
and large in 2003. The yield curve be-
came slightly steeper during the year, re-
sulting in a loss on the interest hedging
which exceeded the market value re-
statement of the life insurance provi-
sions. In total, the increase in reserves
therefore mainly stems from the increases
in share prices.
Premiums PFA Group PFA Pension
DKKbn 2002 2003 Ændring 2002 2003 Ændring
Current premiums 10.1 10.8 6.8% 8.4 8.8 5.0%
Single premiums 0.8 1.1 29.7% 0.7 1.0 30.3%
Total 10.9 11.8 8.5% 9.2 9.8 7.0%
Group life 1.0 0.7 (33.1%) 1.0 0.7 (33.1%)
Total 11.9 12.5 5.0% 10.2 10.5 3.0%
Non-life insurance 0.4 0.4 2.2% 0.4 0.4 2.2%
Total revenue 12.3 12.9 4.9% 10.6 10.9 3.0%
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
0 5 10 15 20 25 30 35
years
31/12 2002
31/12 2003
%
Yield curves
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n28
Net profit for the year,
DKK 277 million
The pre-tax profit of PFA Pension came at
DKK 375 million in 2003. The amount in-
cludes an entrepreneurial profit of DKK
158 million, return on equity, DKK 231 mil-
lion, profit from non-life insurance busi-
ness, Unit Linked, as well as other ordinary
and extraordinary items totalling DKK -14
million. The tax charge for the year is DKK
98 million, and the net profit for the year
is DKK 277 million as in the Group.
The Supervisory Board recommends
that the general meeting of shareholders
resolve to distribute dividend of DKK
350,000 to PFA Holding and that the re-
maining profit be retained and transferred
to shareholders’ equity.
PFA Pension has no receivables in any
shadow account.
Premiums, DKK 12.9 billion
The PFA Group’s premiums rose in 2003
by 8.5 per cent excl. group life. Both cur-
rent premiums and single premiums in-
creased. Premiums on group life schemes
fell by about one third, which is largely
due to the fact that the group life
schemes which PFA used to write on be-
half of Pen-Sam’s customers were trans-
ferred back to Pen-Sam.
Total premiums in the Group are DKK
12.9 billion incl. non-life insurance. PFA
Pension’s premiums total DKK 10.9 billion.
Non-life insurance
Non-life insurance activities generated a
loss of DKK 37 million in 2003, against a
profit of DKK 47 million in 2002. The
poor performance is mainly due to the
losses realised on accident insurance
taken out through financial institutions,
where PFA has had, in a number of in-
stances, to recognise loss of occupational
capacity as a claim eligible for coverage.
Also policies providing coverage at criti-
call illness contributed to the poorer per-
formance in this segment.
Life insurance provisions, DKK
142.2 billion
Life insurance provisions in PFA Pension
went up DKK 6.8 billion to DKK 142.2 bil-
lion. The insurance benefits totalled DKK
8.4 billion in 2003, against DKK 7.1 bil-
lion in 2002.
When stating the life insurance provi-
sions at market value, we use a yield
curve, cf. the figure on p. 27. Consequent-
ly, future cash flows are discounted at the
going rate of interest for the maturities
that correspond to the payment dates.
The development of the yield curve
over the year reduced the need to
strengthen the life insurance provisions,
resulting in a positive market value re-
statement of DKK 0.4 billion. An increased
provision for disability pension due to a
new claims experience basis is included
as well.
The bonus potential related to bene-
fits on paid-up policies accounts for DKK
15.1 billion of the total life insurance
provisions. This bonus potential is the
expected future profits on the pension
agreements for the premiums already
paid. Part of this bonus potential may be
used as a buffer to cover the portion of
a loss, if any, which the customers must
bear.
PFA's prudent bonus practice, which
used to apply to policies with a basic in-
terest rate of 5 per cent, was introduced
in 2003 also as regards to policies with a
basic interest rate of 3 per cent. Due to
the prudent practice, bonus is added to
the deposit without the agreed benefits
being raised.
New financial ratios
A number of new financial ratios have
been introduced in accordance with the
Danish Financial Supervisory Authority’s
new executive order on the financial
presentation of life insurance compa-
nies. The new ratios are shown in the 5-
year summaries on p. 38.
One of the new ratios is ‘Return on in-
surance provisions excl. CustomerCapi-
tal™ before tax’, reflecting the return be-
fore administrative contributions on the
customers’ savings. The ratio is 5.9 per
cent for PFA Pension and 6.0 per cent for
the Group.
The ratio does not include Customer-
Capital™, which also belongs to the cus-
tomers, for which reason it is not fully
adequate for companies such as PFA
which makes use of CustomerCapital™.
We have therefore chosen also to show
the financial ratio ‘Return on insurance
provisions incl. CustomerCapital™ before
tax’. This ratio is 6.1 per cent for PFA
Pension and 6.2 per cent for the Group.
The difference between the two ratios
reflects the excess yield which the cus-
tomers get under the CustomerCapital™
arrangement.
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 29
The corporate structure in the Group ap-
pears from the figure on p. 5. The results
of operations and shareholders’ equity
of group enterprises are included in the
parent company’s income statement and
balance sheet according to the equity
method. More details are given in note
18 on p. 47.
Lærernes Pension
Lærernes Pension is still a growth busi-
ness. Premiums rose in 2003 by 19 per
cent to DKK 2.0 billion, and total assets
rose to DKK 12.8 billion at the end of the
year, against DKK 10.1 billion the year
before.
The increase in premiums is, among
other reasons, due to a net inflow of
13,000 new policyholders. Furthermore,
the contribution rates were increased in
several areas according to the collective
agreements in 2002. Consequently, most
policyholders’ pension contributions
were increased to 17 per cent or more of
their pay from August 2003.
The return on investments was 8.4 per
cent before pension yield tax. At the end
of 2003, the Company’s capital base was
DKK 0.9 billion, whereas the solvency
margin requirement was DKK 0.6 billion.
PFA Soraarneq
Premiums in the Greenland company are
DKK 22 million, and the number of poli-
cyholders is 2,000.
In 2003, the company entered into
several agreements with private compa-
nies. Also, agreements were made to ac-
cede the public sector employers’ pen-
sion agreement. These agreements are
going to increase premiums in 2004, and
so will tax-exempt transfers of pension
schemes, totalling DKK 17 million, from
PFA.
PFA Pension Luxembourg
The subsidiary in Luxembourg is working
on a transfer of pension schemes to PFA
Pension, as the company does not have
enough schemes to generate a profit.
PFA Ejendomme
With the exception of properties in Lær-
ernes Pension, the Group’s portfolio of
Danish commercial and residential prop-
erties is managed under the auspices of
PFA Ejendomme. More details on proper-
ty investments are given on p. 20.
PFA Invest International
The company, which coordinates the
Group’s property investments outside
Denmark, is the parent company of eight
property companies, each of which rep-
resents a property investment.
PFA IT Service
The company’s objective is to make IT in-
vestments and investments in operating
equipment on behalf of the PFA Group in
connection with the innovation of PFA's
IT systems. The first part deliveries were
made in 2003 as planned. Most of the
development effort concerned the devel-
opment of PFA's new Unit Linked system.
PFA Group
å r s r a p p o r t 2 0 0 3 31
»Hope is the most significant fact of
life. It provides human beings with a
sense of destination and the energy
to get started«Norman Cousins (1915-1990), American author
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n32
General
Accounting policies
The Annual Report of PFA Pension and
the Group is presented in accordance
with the provisions of the Act on Insur-
ance Business and related executive or-
ders and standards concerning the finan-
cial reporting of life insurance companies
and insurance groups.
The Group’s accounting policies are
consistent with those applied in 2002.
As a result of amendments to the Dan-
ish Financial Supervisory Authority’s execu-
tive order on the financial presentation of
life insurance companies, the key figures
and financial ratios have been changed and
extended both in the Group’s and in PFA
Pension’s 5-year summary. Comparative
figures have been restated accordingly.
Net profit for the year
The Act on Insurance Business and the
rules laid down by the Danish Financial
Supervisory Authority by virtue of the Act
provide that realised profits must be split
on a fair basis between, on the one side,
the insurance portfolio eligible for bonus
and, on the other side, shareholders’ eq-
uity and customer capital, which cover
the Company’s risks pari passu with
shareholders’ equity.
Independently of the realised results of
operations in the year, shareholders’ eq-
uity and the customer capital and any en-
trepreneurial profit receivable (see below)
will carry the interest of the investment
income before pension yield tax. For this
purpose, the investment income is made
up exclusive of income from the portfolio
of unit-linked insurance policies.
Furthermore, income from non-life in-
surance activities and income from the
portfolio of unit-linked insurance policies
is transferred to shareholders’ equity.
Within the limits of a positive realised
profit for the customers, an entrepre-
neurial profit is transferred to sharehold-
ers’ equity and the customer capital. The
entrepreneurial profit represents a share
of the life insurance provisions relating
to policies under which the policyholders
are entitled to bonus. The entrepreneu-
rial profit is part of the technical basis.
If the customers’ share of the realised
profit is not sufficient for the desired en-
trepreneurial profit to be added to share-
holders’ equity and the customer capital,
the deficit is recorded as a receivable
outside the financial statements. Any
entrepreneurial profit receivable is dis-
closed in the note to shareholders’ equi-
ty and in the note to CustomerCapital™.
The breakdown of the realised results
of operations in the year concerned is
detailed in the note to the net profit for
the year and in the ‘Operating and fi-
nancial review’.
Group structure
All subsidiaries are wholly owned with the
exception of Lærernes Pension in which
PFA Pension holds 51 per cent of both the
share capital and the voting rights.
The group enterprises have entered in-
to administration agreements with PFA
Pension, according to which PFA Pension
handles, wholly or in part, the adminis-
tration of the subsidiaries on a cost re-
imbursement basis.
Intra-group transactions falling within
the companies’ natural area of business
are conducted on the basis of written
agreements and on an arm’s-length basis.
Interest on intra-group transactions is
charged on an arm’s-length basis.
Consolidation
The consolidated financial statements in-
clude enterprises in which the parent
company or group enterprises, directly or
indirectly, hold(s) more than 50 per cent
of the voting shares or otherwise has/
have a controlling interest.
The group structure appears from p. 5.
The activities of the Group include al-
most exclusively life and pension insur-
ance and related health and accident in-
surance. Therefore, the consolidated fi-
nancial statements are presented ac-
cording to the provisions which apply to
life insurance companies.
The consolidated financial statements
are prepared on the basis of the audited
financial statements of all those sub-
sidiaries whose financial year-end coin-
cides with that of the parent company.
The financial statements included in the
consolidation are presented in accordance
with PFA Pension’s accounting policies.
For consolidation purposes, the indi-
vidual items in the income statements
and balance sheets of subsidiaries are
added up on a line-by-line basis, less in-
tra-group transactions, balances and
shareholdings.
Associates managed by the Group to-
gether with one or more other enter-
prises are included in the individual items
of the consolidated financial statements
on a pro rata basis in proportion to the
percentage interest held.
Intra-group transactions conducted on
an arm's-length basis are not eliminated.
Gains or losses arising on intra-group
trading in securities, which could just as
well have taken place in the market, are
thus not eliminated.
Income statement
Income and expenses are cut off at the
balance sheet date in accordance with
generally accepted accounting principles.
Accounting policies
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 33
Booked gains and losses as well as re-
statements are recognised in the income
statement, whether realised or not.
Premiums
Premiums and single premiums are
recognised in the income statement at
the recorded due date. The accrual of
premiums is adjusted in the life insurance
provisions. Labour market contributions
are not part of premiums.
Reinsurance
Ceded premiums and ceded claims are
set off in the respective items in the in-
come statement. The total profit or loss
on reinsurance is shown in a note to the
income statement.
Income from investments
Income from group enterprises includes
PFA Pension’s share of the profit or loss
of subsidiaries, including restatements.
Income from land and buildings in-
cludes the profit from property opera-
tions, less property management expen-
ses. The item includes market rent for
the use of the Group’s own properties.
The rent is recognised as an expense un-
der net operating expenses.
Interest, dividends, etc. include inter-
est on securities, loans and cash as well
as current income from derivative finan-
cial instruments. For the parent compa-
ny, the item also includes interest on re-
ceivables from group enterprises. Fur-
thermore, the item includes dividends on
shares and indexation of bonds. Finally,
gains on repayment and redemption of
bonds and loans are included.
Realised and unrealised capital gains
and losses on investments are calculated
by reference to the opening balance plus
the cost in the year.
Insurance
Benefits paid and changes in provisions
for claims represent the expenses ac-
crued in the year.
Net operating expenses
Net operating expenses are the expenses
incurred in the year on acquisition, renew-
al and administration of the insurance
portfolio, including expenses related to the
disbursement of insurance benefits.
Investment management charges are
the portion of the administrative expenses
that relates to trading in and management
of investments on the basis of direct and
estimated resource requirements.
Expenses related to activities other than
life insurance business, which are primarily
expenses related to property operation
and expenses related to non-life insurance
business, are transferred to other items in
the income statement in accordance with
the executive order on the financial pres-
entation of life insurance companies and
the Group’s consolidation policy.
Other income statement items
Changes in life insurance provisions are
specified in the note to the balance
sheet item.
The change in the collective bonus po-
tential is the portion of the realised prof-
it accruing to the insurance portfolio be-
sides the bonus already allocated. In
years where the insurance portfolio’s re-
alised result is negative, net of bonus al-
ready allocated, the item includes the use
of collective bonus potential for which a
provision has been made in prior years.
Changes in CustomerCapital™ partly
include interest on provisions made in
prior years and partly the net amount
contributed by the customers during the
year. To this should be added amounts
which the Company may decide to allo-
cate for this purpose instead of transfer-
ring them to shareholders’ equity.
Exchange rate adjustments are a net
item, which includes those value adjust-
ments and gains/losses on sales that result
from exchange rate differences arising on
currency retranslation into Danish kroner.
Income and expenses in foreign cur-
rency are translated into Danish kroner
at the exchange rate ruling at the date of
the transaction. Balance sheet items in
foreign currency are translated at the ex-
change rates at the balance sheet date.
Pension yield tax includes tax on in-
vestment income and changes in the
provision for deferred pension yield tax.
Investment income transferred is de-
ducted from the balance on the technical
account to reflect the portion of the in-
vestment income that relates to sharehold-
ers’ equity and non-life insurance business.
The transferred amount is calculated
on the basis of the opening and closing
balance sheets, allowance being made
for atypical circumstances.
The balance on the technical account,
non-life insurance, is recorded in the fi-
nancial statements on one line. The bal-
ance is made up in accordance with the
rules applicable to non-life insurance
business and includes the above-men-
tioned portion of the investment income
transferred. The balance is specified in
the note to the income statement.
Other ordinary income includes reve-
nue and expenses related to accessory
business in accordance with the Act on
Insurance Business.
Tax
PFA Pension is taxed on a consolidated
basis with the Group’s wholly owned
Danish subsidiaries and PFA Holding. The
tax charge for the year is recognised in
the income statement regardless of
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n34
whether part of the profit for the year is
not taxed until in subsequent financial
reporting periods.
The taxable income in the Group’s prop-
erty companies is taxed in PFA Pension in
years in which at least 90 per cent of the
individual company’s assets and liabilities
consist of real property. In that case, a
provision is made for both the current and
the deferred tax charge in PFA Pension. If
the 90 per cent requirement is not met in
some years, the property company con-
cerned will be subject to tax on its income.
In that case, a provision is made for both
the current and the deferred tax charge in
the property company.
The current tax charge is allocated be-
tween the tax-consolidated companies
in proportion to their taxable income
(proportional allocation).
Assets
Land and buildings
Land and buildings are measured at mar-
ket value.
The market value is fixed in accordance
with the relevant principles laid down by
the Danish Financial Supervisory Author-
ity, based on the operating income of
the individual property and a yield re-
quirement related to the property.
The operating income is based on the
yield expected for the coming year, ad-
justed for atypical circumstances.
The note to the balance sheet item
discloses the weighted average of the
yield requirements used for measure-
ment purposes. Furthermore, the note
discloses the highest and the lowest of
the yield requirements used for meas-
urement purposes.
Undeveloped land and properties un-
der construction and forests are meas-
ured at their estimated market value.
Shares in group enterprises and
associates
Shares in group enterprises are meas-
ured at the parent company's propor-
tionate interest in the enterprises (net
asset value), calculated in accordance
with the accounting policies applied by
PFA Pension.
Shares in associates owned through
subsidiaries are measured at their net
asset value in accordance with the most
recent financial statements.
Securities
Listed securities are measured at market
value. The market value is calculated on
the basis of the most recently quoted
official price at the balance sheet date.
The most recently quoted daily average
price is applied to Danish listed securities.
Unlisted shares are measured at their
estimated market value based on the
most recently published financial state-
ments. The estimate is also based on the
most recently published quarterly finan-
cial statements or report.
Loans are measured at market value
on the basis of conservatively fixed in-
terest rates depending on the remaining
terms of the loans.
Unit trust certificates are measured at
market value of the assets and are
recognised in the balance sheet, corre-
sponding to the underlying assets.
Forward contracts, call-and-put op-
tions and other derivatives are measured
at the market value of the contracts at
the balance sheet date. Unlisted deriva-
tive financial instruments are measured
at their estimated market value.
Investments related to unit-linked in-
surance policies are the assets which
correspond to the insurance policies
where the policyholders determine the
investment mix and bear the related risk,
wholly or in part. The assets are meas-
ured at market value.
Other asset items
Intangible assets, which include acquired
and self-generated software and pro-
cesses having a positive value for the fu-
ture operations, are amortised on a
straight-line basis over the expected
useful life, however maximum eight
years. Self-generated assets consist of
direct internal project development costs.
Project development costs not exceeding
DKK 1,000,000 are written off imme-
diately.
Receivables are measured at nominal
value less provisions for bad debts.
Operating equipment is measured at
cost less amortisation made. Amortisa-
tion is provided according to the
straight-line method over the expected
useful life of the assets. Total acquisi-
tions at a cost not exceeding DKK
50,000 are written off immediately.
Liabilities
Insurance provisions
Life insurance provisions are calculated by
the actuaries appointed by the compa-
nies by reference to the technical basis
reported to the Danish Financial Supervi-
sory Authority. The provisions consist of
guaranteed insurance benefits, the
bonus potential related to future premi-
ums and the bonus potential related to
benefits on paid-up policies.
Guaranteed benefits represent the net
present value of the benefits guaranteed
under the policy as well as the net pres-
ent value of the expected future expenses
related to the administration of the in-
surance policy, less the net present value
of the agreed future premiums.
Guaranteed benefits include an esti-
mated amount to cover future insurance
benefits pertaining to insurance events
that have occurred during the financial
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 35
year, but which had not been reported at
the end of the financial year.
Bonus potential related to future pre-
miums includes the net present value of
commitments to pay bonus on agreed,
not yet overdue, premiums.
Bonus potential related to benefits on
paid-up policies includes the net present
value of commitments to pay bonus con-
cerning premiums, etc. already paid.
The net present value of the three ele-
ments of life insurance provisions is cal-
culated by reference to an interest rate
applicable to each time of payment, using
a zero coupon interest rate structure in
the Euro, as the difference in relation to
the similar Danish interest rate structure
represents the necessary safety margin.
As regards policy elements not exempt
from pension yield tax, the interest rate
thus calculated is reduced by 15 per cent
in pension yield tax. When making up the
time of payment for life insurance provi-
sions, no allowance is made for future
surrender cases.
When calculating the size of the provi-
sions, it is presumed that the expenses
incurred to administer the Company’s in-
surance portfolio will be covered by the
expense loading on the policies.
Provisions for claims comprise unpaid
insurance benefits due for payment. The
amount includes an estimate of insur-
ance benefits due for payment, which
pertain to insurance events that have oc-
curred during the financial year, but
which had not been reported at the end
of the financial year.
Collective bonus potential is the policy-
holders' share of the realised results of
operations, for which collective provisions
have been made for insurance policies
eligible for bonus, besides life insurance
provisions and provisions for claims.
CustomerCapital™ is part of the capital
base on equal terms with shareholders’
equity, but since it accrues, in due course,
to the policyholders, it is part of the in-
surance provisions.
Provisions for unit-linked insurance poli-
cies basically represent the market value
of the corresponding assets. If the poli-
cies concerned comprise a commitment
to the effect that, at the time of maturi-
ty, the benefits will be calculated on the
basis of a value that is higher than the
current market value of the assets, then
the provisions will be measured with due
regard to the probability that the loss
may be recovered before maturity.
The actuarial methods used to calcu-
late insurance provisions are based on a
number of assumptions which are fixed
as the best possible estimates of, among
other factors, mortality, disability and
other insurance risks. The most recent
claims experience is taken into consider-
ation for purposes of such estimates.
Other liability items
Deferred pension yield tax is calculated
by discounting the anticipated future
pension yield tax on prior gains that are
subject to pension yield tax. If the de-
ferred net tax assets exceed the calculat-
ed amount, the deferred pension yield
tax is set off against the deferred tax
assets.
Deferred tax is measured according
to the balance sheet-oriented liability
method of all temporary differences be-
tween the carrying amount and the tax
value of assets and liabilities at the bal-
ance sheet date.
Deferred tax assets, including the tax-
able value of tax loss carry-forwards, are
recognised in the balance sheet at the
value at which the tax assets are ex-
pected to be realised – either through
offsetting against deferred tax liabilities
or as net tax assets.
Deferred taxes and deferred tax assets
are discounted in consideration of the
expected realisation pattern. The dis-
count rate is set at a conservatively esti-
mated reinvestment rate.
Other provisions cover losses, commit-
ments or expenses which are probable,
but uncertain as regards their size or the
time of payment. Other provisions are
measured at nominal value.
Payables are measured at nominal value.
Capital base
PFA Pension and the Group’s capital base
is calculated in accordance with the Dan-
ish Financial Supervisory Authority’s ex-
ecutive order concerning insurance com-
panies’ capital base. It appears from the
executive order that the capital base
must be reduced by booked tax assets.
Tax assets that can be disbursed in an
administration situation are added.
Tax assets that can be disbursed in an
administration situation are calculated by
way of a full statement of liquidation of
the Group’s tax situation at the balance
sheet date.
Key figures and financial ratios
PFA Pension prepares key figures and fi-
nancial ratios in accordance with the
provisions of the executive order on the
financial presentation of life insurance
companies.
The key figures and financial ratios re-
flected in the 5-year summary are com-
puted on the basis of the items in the fi-
nancial statements, adjusted for the ef-
fect from the portfolio of unit-linked in-
surance policies.
The yield ratios in the 5-year summary
are computed for all assets and liabilities
according to a money-weighted method,
whereas the yield broken down by asset
type in the yield form is computed for in-
vestments (i.e. excl. payables and various
assets) according to a time-weighted
balancing. Hedging of currency risk is
broken down by nature of investments in
the yield form.
»Power is the faculty or capacity to act, the
strength and potency to accomplish something.
It is the vital energy to make choices and
decisions. It also includes the capacity to
overcome deeply embedded habits and to
cultivate higher, more effective ones«Dr. Stephen R. Covey (b. 1932- ), American author
Key figures
Financial ratios – PFA Group 2003 2002 2001 2000 1999
Yield ratios
Yield before pension yield tax 6.4% 5.8% (4.7%) 5.5% 10.7%
Yield after pension yield tax 5.6% 5.1% (4.0%) 4.7% 9.8%
Cost ratios
Expense ratio on premiums 6.8% 6.1% 6.2% 5.3% 5.3%
Expense ratio on provisions 0.6% 0.5% 0.5% 0.5% 0.4%
Expenses per policyholder DKK 1,265 DKK 1,094 DKK 1,116 DKK 938 DKK 913
Balance on the cost account (0.14%) (0.09%) (0.10%) (0.03%) (0.03%)
Claims experience ratio 0.17% 0.09% 0.40% 0.04% 0.14%
Consolidation ratios
Bonus ratio 2.5% 1.4% 2.5% 15.0% 10.3%
Customer capital ratio 4.4% 4.2% 3.6% 0.0% 0.0%
Equity ratio 4.0% 4.1% 2.2% 5.4% 5.2%
Excess solvency ratio 3.4% 3.7% 2.3% 0.4% 0.3%
Solvency ratio 168% 174% 148% 109% 107%
Return ratios
Return on equity before tax 8.8% 0.5% (93.0%) 10.0% 19.7%
Return on equity after tax 6.7% 30.0% (76.4%) 6.4% 14.4%
Return on insurance provisions excl. CustomerCapital™ before tax 6.0% 5.0% (2.5%) 4.6% 13.5%
Return on subordinated capital contribution before tax 6.8% 7.9% 4.9% 8.1% _
Return on CustomerCapital™ before tax 11.7% 23.6% _ _ _
Return on insurance provisions incl. CustomerCapital™ before tax 6.2% 5.6% 0.8% 4.6% 13.5%
Ratios relating to non-life insurance
Claims ratio 89.5% 73.0% 85.4% 107.8% 119.6%
Expense ratio 15.3% 15.7% 18.1% 17.4% 18.4%
Financial ratios – PFA Pension
Yield ratios
Yield before pension yield tax 6.2% 6.0% (4.9%) 5.5% 10.7%
Yield after pension yield tax 5.4% 5.4% (4.1%) 4.7% 9.8%
Cost ratios
Expense ratio on premiums 7.3% 6.7% 6.7% 5.6% 5.6%
Expense ratio on provisions 0.6% 0.5% 0.5% 0.4% 0.4%
Expenses per policyholder DKK 1,319 DKK 1,156 DKK 1,157 DKK 959 DKK 926
Balance on the cost account (0.14%) (0.11%) (0.13%) (0.06%) (0.05%)
Claims experience ratio 0.15% 0.01% 0.35% (0.01%) 0.08%
Consolidation ratios
Bonus ratio 2.2% 1.3% 2.4% 15.3% 10.3%
Customer capital ratio 4.5% 4.4% 3.8% 0.0% 0.0%
Equity ratio 4.2% 4.2% 2.1% 5.5% 5.2%
Excess solvency ratio 3.7% 3.9% 2.4% 0.6% 0.5%
Solvency ratio 175% 179% 150% 113% 110%
Return ratios
Return on equity before tax 9.7% (1.0%) (99.1%) 9.9% 16.2%
Return on equity after tax 7.2% 32.7% (80.7%) 6.6% 14.8%
Return on insurance provisions excl. CustomerCapital™ before tax 5.9% 5.5% (2.5%) 5.0% 10.3%
Return on subordinated capital contribution before tax 6.8% 7.9% – – –
Return on CustomerCapital™ before tax 10.5% 22.9% – – –
Return on insurance provisions incl. CustomerCapital™ before tax 6.1% 6.1% (2.5%) 5.0% 10.3%
Ratios relating to non-life insurance
Claims ratio 89.5% 73.0% 85.4% 107.8% 119.6%
Expense ratio 15.3% 15.7% 18.1% 17.4% 18.4%
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n38
(DKKm) Group Parent company
Note 2003 2002 2003 2002
Premiums
1 Gross premiums 12,551 11,954 10,496 10,190
2 Ceded premiums (206) (197) (201) (192)
Premiums, net of reinsurance 12,345 11,757 10,295 9,998
Investment income
Income from group enterprises – – 507 -37
3 Income from land and buildings 690 630 0 402
4 Interest, dividends, etc. 7,605 6,670 7,173 6,287
5 Realised gains on investments 125 0 145 0
Total investment income 8,420 7,300 7,825 6,652
5 Unrealised gains on investments 2,767 3,799 2,199 3,992
Insurance benefits
6 Benefits disbursed (8,612) (7,377) (8,415) (7,286)
2 Reinsurers' share 201 150 200 150
Change in provisions for claims (143) 38 (139) 41
Insurance benefits, net of reinsurance (8,554) (7,189) (8,354) (7,095)
Change in life insurance provisions
30 Change in gross life insurance provisions (8,780) (12,113) (6,782) (10,390)
Change in life insurance provisions, net of reinsurance (8,780) (12,113) (6,782) (10,390)
Bonus
32 Change in collective bonus potential (1,831) 2,111 (1,355) 2,007
33 Change in CustomerCapital™ (693) (1,111) (516) (997)
Total bonus (2,524) 1,000 (1,871) 1,010
Change in provisions for unit linked insurance policies (312) (56) (351) (53)
Net operating expenses
7 Acquisition costs (397) (326) (395) (324)
7 Administrative expenses (463) (402) (376) (357)
Net operating expenses, net of reinsurance (860) (728) (771) (681)
Investment charges
8 Investment management charges (148) (114) (132) (97)
Interest expenses (282) (288) (162) (143)
5 Realised investment losses 0 (1,187) 0 (1,231)
Total investment charges (430) (1,589) (294) (1,471)
Exchange rate adjustment (374) (1,257) (311) (1,091)
9 Pension yield tax (1,281) (915) (1,155) (911)
10 Investment income transferred ( - ) (288) (207) (251) (200)
Balance on the technical account, life insurance 129 (198) 179 (240)
11 Balance on the technical account, non-life insurance (35) 47 (37) 47
10 Investment income transferred ( + ) 240 166 204 159
12 Other ordinary income 0 1 0 1
Pre-tax profit/(loss) from ordinary activities 334 16 346 (33)
13 Extraordinary income 29 0 29 0
14 Pre-tax profit/(loss) 363 16 375 (33)
15 Tax (86) 1,033 (98) 1,080
Net profit/(loss) before minority interests 277 1,049 277 1,047
Minority interests 0 (2) – –
Net profit/(loss) for the year 277 1,047 277 1,047
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 39
Income statement
(DKKm) Group Parent company
Note 2003 2002 2003 2002
Assets
16 Intangible assets 178 75 39 75
Investments
17 Land and buildings 11,520 11,575 24 7,621
18 Shares in group enterprises - - 9,017 1,017
Other financial investments
19 Shares 16,494 11,040 14,145 9,299
20 Bonds 137,717 132,209 128,010 124,274
21 Loans 530 586 530 586
Other 2,634 3,117 2,634 3,091
Total other financial investments 157,375 146,952 145,319 137,250
22 Total investments 168,895 158,527 154,360 145,888
23 Investments related to unit-linked insurance policies 2,989 2,679 2,645 2,294
Receivables
Receivables from policyholders 529 1,072 277 963
Receivables from insurance companies 2 1 2 1
Receivables from group enterprises - - 452 440
24 Other receivables 2,010 1,613 1,864 1,532
Total receivables 2,541 2,686 2,595 2,936
Other assets
Operating equipment 110 104 99 103
Cash and demand deposits 1,307 1,245 1,098 1,082
Total other assets 1,417 1,349 1,197 1,185
Prepayments
Interest receivable 2,028 1,875 1,879 1,747
Other prepayments 263 268 256 266
Total prepayments 2,291 2,143 2,135 2,013
Total assets 178,311 167,459 162,971 154,391
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n40
Balance sheet
(DKKm) Group Parent company
Note 2003 2002 2003 2002
Equity and liabilities
Shareholders' equity
25 Share capital 100 100 100 100
26 Contingency fund 1,245 1,245 1,245 1,245
27 Reserve fund 2,655 2,378 2,655 2,378
PFA Pension's share 4,000 3,723 4,000 3,723
Minority interests 279 279 - -
28 Total shareholders' equity 4,279 4,002 4,000 3,723
29 Subordinate loan capital 1,805 1,805 1,800 1,800
Insurance provisions
Provision for unearned premiums, non-life insurance
Gross provisions 2 2 2 2
Provision for unearned premiums, net of reinsurance 2 2 2 2
Life insurance provisions
Guaranteed benefits 75,278 78,078 85,230 85,943
Bonus potential related to future premiums 58,199 51,653 41,798 38,341
Bonus potential related to benefits on paid-up policies 19,906 14,847 15,133 11,095
Gross provisions 93 118 0 -
30 Total life insurance provisions, net of reinsurance 153,476 144,696 142,161 135,379
Provision for claims
Gross provisions 1,350 1,110 1,340 1,102
Reinsurers' share (3) (4) (3) (4)
31 Provision for claims, net of reinsurance 1,347 1,106 1,337 1,098
32 Collective bonus potential 3,739 1,908 3,097 1,742
33 CustomerCapital™ 6,606 5,913 6,315 5,799
Provision for bonuses and rebates, non-life insurance 39 26 39 26
Other insurance provisions, net of reinsurance, non-life insurance
Provision for rising age 16 16 16 16
Other insurance provision, net of reinsurance 16 16 16 16
Total insurance provisions, net of reinsurance 165,225 153,667 152,967 144,062
Provision for unit-linked insurance policies
34 Provision for unit-linked insurance policies 2,989 2,679 2,645 2,294
Provision for unit-linked insurance policies, net of reinsurance 2,989 2,679 2,645 2,294
Provisions for other risks and charges
Other provisions 0 29 0 29
Total provisions for other risks and charges 0 29 0 29
Liabilities other than provisions
Payables, direct insurance operations 82 32 53 32
Payables to insurance companies 10 62 10 62
29 Payables to credit institutions 2,433 2,703 393 474
Payables to group enterprises 0 0 14 0
Income taxes 6 20 0 0
Other creditors 899 1,008 553 571
Total liabilities other than provisions 3,430 3,825 1,023 1,139
Deferred income 583 1,452 536 1,344
Total equity and liabilities 178,311 167,459 162,971 154,391
35 Contingent liabilities
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 41
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n42
Statements and reports
Statement by the Supervisory and Executive Boards on the Annual Report
We have presented the Annual Report of the Group and the parent company, PFA Pension forsikringsaktieselskab, on the date written below.
The Annual Report has been presented in accordance with the provisions of the Danish Act on Insurance Business and the related executive orders and stan-
dards. We consider the accounting policies applied adequate. Against this background, it is our opinion that the Annual Report gives a true and fair view of
the Group’s and the Company's assets and liabilities, financial position and results of operations for the financial year ended 31 December 2003.
We recommend that the Annual Report be adopted by the Annual General Meeting of shareholders.
Copenhagen, 4 March 2004
Executive Board:Henrik Heideby Nina Christensen Niels Søbjerg Nielsen
Supervisory Board:Svend Askær, Chairman Jørn Neergaard Larsen, Deputy Chairman
Klavs Andreassen Carsten Bach Anker Christoffersen Lars Christoffersen Irene Damgaard Leif DollerisErik G. Hansen Torben Dalby Larsen Svend-Aage Nielsen Ole Skals Pedersen Poul Erik Pedersen Nina SmithOve Thuen
Report of the internal auditor
I have audited the Annual Report of PFA Pension, forsikringsaktieselskab, for the financial year.
The Annual Report is the responsibility of the Company's Supervisory and Executive Boards. My responsibility is to express an opinion on the Annual Report
based on my audit.
Basis of opinion
I conducted my audit in accordance with the Danish Financial Supervisory Authority’s executive order on the performance of audits in financial enterprises and
financial groups and generally accepted Danish Standards on Auditing. An audit includes assessing, on the basis of materiality and risk, the business procedures
established, the accounting policies used and the estimates made, as well as testing the evidence supporting the amounts and other disclosures in the Annual
Report. I believe that my audit provides a reasonable basis for my opinion.
My audit has not resulted in any qualification.
Opinion
In my opinion, the Annual Report gives a true and fair view of the Group's and the Company's financial position at 31 December 2003 and of the results of their
operations for the financial year in accordance with the accounting provisions of Danish legislation.
Copenhagen, 4 March 2004
Jørgen Madsen
Audit Manager
Report of independent auditors
To the Shareholder of PFA Pension, forsikringsaktieselskab:
We have audited the Annual Report of PFA Pension, forsikringsaktieselskab, for the financial year 1 January to 31 December 2003.
The Annual Report is the responsibility of the Company's Supervisory and Executive Boards. Our responsibility is to express an opinion on the Annual
Report based on our audit.
Basis of opinion
We conducted our audit in accordance with Danish Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable
assurance that the Annual Report is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclo-
sures in the Annual Report. An audit also includes assessing the accounting policies used and significant estimates made by the Supervisory and Executive
Boards, as well as evaluating the overall annual report presentation. We believe that our audit provides a reasonable basis for our opinion.
Our audit has not resulted in any qualification.
Opinion
In our opinion, the Annual Report gives a true and fair view of the Group's and the Company's financial position at 31 December 2003 and of the results of
their operations for the financial period 1 January to 31 December 2003 in accordance with the accounting provisions of Danish legislation.
Copenhagen, 4 March 2004
KPMG C. Jespersen, Statsautoriseret Revisionsinteressentskab Deloitte, Statsautoriseret Revisionsaktieselskab
J.P. Bærentsen, Jesper Dan Jespersen Erik Holst Jørgensen, Birger Berg Nielsen
State Authorised Public Accountants State Authorised Public Accountants
(DKKm) Group Parent company
Note 2003 2002 2003 2002
1 Gross premiums
Total indirect insurance 81 38 81 37
Premiums, direct 10,704 10,062 8,767 8,393
Group life premiums, direct 680 1,017 680 1,017
Single premiums, direct 983 727 896 655
Pension fund transfers, direct 103 110 72 88
Total direct insurance 12,470 11,916 10,415 10,153
Total gross premiums 12,551 11,954 10,496 10,190
Analysis of direct insurance premiums:
Insurance taken out by private individuals 1,039 1,158 994 1,096
Insurance taken out through an employer 10,751 9,741 8,741 8,040
Group life insurance 680 1,017 680 1,017
Total 12,470 11,916 10,415 10,153
Policyholders resident in:
Denmark 12,280 11,718 10,269 10,016
Other EU countries 104 96 93 82
Other countries 86 102 53 55
Total 12,470 11,916 10,415 10,153
Premiums on bonus schemes 12,053 11,387 10,025 9,663
Premiums on non-bonus schemes 12 11 12 10
Unit-linked insurance policies 405 518 378 480
Total 12,470 11,916 10,415 10,153
Number of policyholders:
Insurance taken out by private individuals 58,547 57,988 55,471 55,257
Insurance taken out through an employer 577,416 561,068 478,168 476,348
Group life insurance 436,665 605,805 436,369 605,804
2 Reinsurance balance
Ceded premiums (206) (197) (201) (192)
Ceded claims 201 150 200 150
Total reinsurance balance (5) (47) (1) (42)
3 Income from land and buildings
Income from land and buildings includes profit on the operation
of properties net of property administration expenses.
4 Interest, dividends, etc.
Interest on securities, loans and borrowings 6,656 6,012 6,235 5,655
Interest on intra-group balances - - 15 18
Gain/(loss) on repayment and redemption (244) 38 (204) 38
Indexation 587 77 560 73
Dividends from shares 606 543 567 503
Total interest, dividends, etc. 7,605 6,670 7,173 6,287
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 43
Notes
(DKKm) Group Parent company
Note 2003 2002 2003 2002
5 Capital gains and losses
Land and buildings 48 208 1 236
Shares 3,345 (5,510) 2,891 (4,948)
Bonds 562 7,098 415 6,737
Loans (13) (13) (12) (13)
Other (1,050) 829 (951) 749
Total capital gains and losses 2,892 2,612 2,344 2,761
broken down in the income statement as follows:
Realised gains on investments 125 0 145 0
Unrealised gains on investments 2,767 3,799 2,199 3,992
Realised losses on investments 0 (1,187) 0 (1,231)
Total capital gains and losses 2,892 2,612 2,344 2,761
6 Benefits disbursed
Death benefits (493) (614) (484) (613)
Disability benefits (68) (128) (67) (128)
Benefits at maturity (337) (541) (327) (538)
Retirement and annuity benefits (3,824) (3,689) (3,793) (3,670)
Payment at surrender (3,290) (1,753) (3,143) (1,685)
Bonuses disbursed in cash (515) (582) (516) (583)
Expenses related to indirect insurance (85) (70) (85) (69)
Total benefits disbursed (8,612) (7,377) (8,415) (7,286)
7 Administrative expenses
Payroll costs (430) (342) (406) (337)
Pension contributions (72) (61) (68) (60)
Payroll tax, etc. (45) (38) (44) (38)
Commissions to brokers (104) (106) (104) (106)
Depreciation (87) (80) (85) (80)
Other expenses (375) (293) (350) (278)
Charges on insurance operations (4) (4) (3) (4)
Expenses before reimbursements and transfers (1,117) (924) (1,060) (903)
Expenses related to other activities 120 109 116 103
Reimbursements from group enterprises
– concerning life insurance - - 43 36
– concerning other activities - - 4 7
Transfer to investment activities 137 87 126 76
Expenses related to insurance operations (860) (728) (771) (681)
Hereof acquisition costs 397 326 395 324
Total administrative expenses (463) (402) (376) (357)
Analysis of administrative expenses and acquisition costs:
Salary and remuneration, incl. pension contributions, Executive Board 10 7 10 7
Salary and remuneration, Supervisory Board 2 2 2 2
Fees to auditors appointed by the general meeting of shareholders:
Audit fee, KPMG C. Jespersen 1 1 1 1
Consultancy fee, KPMG C. Jespersen 1 2 1 2
Audit fee, Deloitte 1 1 1 1
Consultancy fee, Deloitte 1 1 1 1
Average number of employees (full-time)
– life insurance 906 790 897 781
– PFA IT Service A/S 28 0 0 0
– operation of properties 43 75 43 75
Total average number of employees (full-time) 977 865 940 856
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n44
Notes
(DKKm) Group Parent company
Note 2003 2002 2003 2002
8 Investment management charges
Trade charges and safe custody fees (6) (23) (6) (21)
Allocated expenses, cf. note 7 (137) (87) (126) (76)
Expenses in PFA Invest International (5) (4) - -
Total investment management charges (148) (114) (132) (97)
9 Pension yield tax
Change in provision for deferred pension yield tax 93 75 90 72
Change in pension yield tax asset (161) (984) (136) (977)
Pension yield tax in the year (1,209) (6) (1,105) (6)
Prior year adjustment of pension yield tax (4) 0 (4) 0
Total pension yield tax (1,281) (915) (1,155) (911)
10 Investment income transferred
Transferred investment income concerning shareholders' equity (240) (166) (204) (159)
Technical interest concerning non-life insurance (48) (41) (47) (41)
Total investment income transferred (288) (207) (251) (200)
11 Balance on the technical account, non-life insurance
Gross premiums 372 364 372 364
Ceded premiums (2) (8) (2) (8)
Change in the provisions for gross unearned premiums 0 11 0 11
Change in reinsurers' share of provisions for claims 0 (1) 0 (1)
Earned premiums, net of reinsurance 370 366 370 366
Technical interest, net of reinsurance 25 22 24 22
Gross claims disbursed (256) (221) (256) (221)
Reinsurers' share 1 0 1 0
Change in provisions for gross claims (99) (68) (99) (68)
Change in reinsurers' share of provisions for claims (1) 3 (1) 3
Change in provisions for claims due to discounting 24 19 24 19
Claims incurred, net of reinsurance (331) (267) (331) (267)
Change in other insurance provisions, net of reinsurance 0 (2) 0 (2)
Bonuses and rebates (42) (14) (43) (14)
Acquisition costs (29) (29) (29) (29)
Administrative expenses (28) (29) (28) (29)
Total net operating expenses, net of reinsurance (57) (58) (57) (58)
Total balance on the technical account, non-life insurance (35) 47 (37) 47
Gross run-off profit/(loss) 35 13 35 13
Ceded run-off 1 6 1 6
Run-off profit/(loss), net of reinsurance 36 19 36 19
The run-off profit/(loss) reflects the profit/(loss) on the
provisions for claims made in prior years.
12 Other ordinary income
Revenue 3 5 3 5
Overheads (3) (4) (3) (4)
Total other ordinary income 0 1 0 1
13 Extraordinary income
The amount concerns a reversal of the provisions made in the directors’ report for 1998.
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 45
(DKKm) Group Parent company
Note 2003 2002 2003 2002
14 Pre-tax profit/(loss)
Realised profit/(loss)
Balance on the interest account before bonus 4,799 3,818 4,103 3,824
Balance on the cost account before bonus 479 493 301 322
Balance on the claims experience account before bonus 1,120 987 981 763
Changes in restatements at market value, note 30 431 (2,434) 431 (2,438)
Realised profit/(loss) 6,829 2,864 5,816 2,471
Distribution to the customers
Preferential bonus 2,684 2,863 2,442 2,533
Transfer to the customers' reserves 2,965 (1,250) 2,378 (1,144)
Total distribution to the customers 5,649 1,613 4,820 1,389
Transfers to CustomerCapital™
Transfer to CustomerCapital™ before pension yield tax 98 80 0 0
Extraordinary transfer from shareholders' equity 76 444 0 406
Yield before pension yield tax 374 294 360 293
Entrepreneurial profit before pension yield tax 255 403 247 402
Total transfers to CustomerCapital™, note 33 803 1,221 607 1,101
Customers' share, total 6,452 2,834 5,426 2,490
Transfers to shareholders' equity
Yield before pension yield tax 266 222 231 163
Entrepreneurial profit before pension yield tax 187 252 158 224
Extraordinary transfer to CustomerCapital™ (76) (444) 0 (406)
Equity's share of the realised profit/(loss) 377 30 389 (19)
Non-life insurance, unit-linked insurance policies
and other ordinary and extraordinary income (14) (14) (14) (14)
Total pre-tax profit/(loss) 363 16 375 (33)
15 Tax
Tax for the year (10) (38) 0 0
Dividend tax paid (1) 0 0 0
Prior year adjustment of income taxes (6) 5 (13) 7
Change in the provision for deferred tax (69) 1,066 (85) 1,073
Total tax (86) 1,033 (98) 1,080
16 Intangible assets
Cost, opening 140 127 140 127
Additions in the year 149 13 9 13
Cost, closing 289 140 149 140
Amortisation and write-downs, opening (65) (32) (65) (32)
Amortisation and write-downs in the year (46) (33) (45) (33)
Amortisation and write-downs, closing (111) (65) (110) (65)
Intangible assets, closing 178 75 39 75
17 Land and buildings
Cost, opening 11,210 10,510 7,551 7,085
Additions in the year 141 896 0 478
Disposals in the year (69) (196) (7,514) (12)
Cost, closing 11,282 11,210 37 7,551
Revaluations, opening 902 822 633 456
Revaluations in the year 156 221 0 201
Reversed revaluations (99) (60) 0 (24)
Adjusted revaluations on disposals 0 (81) (633) 0
Revaluations, closing 959 902 0 633
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n46
Notes
(DKKm) Group Parent company
Note 2003 2002 2003 2002
17 Write-downs, opening (682) (723) (563) (621)
Write-downs in the year (125) (112) 0 (69)
Reversed write-downs 114 145 1 127
Adjusted write-downs on disposals 29 8 549 0
Write-downs, closing (664) (682) (13) (563)
Exchange rate adjustments, opening 145 346 0 0
Adjustments in the year (203) (201) 0 0
Exchange rate adjustments on disposals 1 0 0 0
Exchange rate adjustments, closing (57) 145 0 0
Land and buildings, closing 11,520 11,575 24 7,621
Property value according to the latest public land valuation 6,594 6,466 - 6,133
Non-valued properties 3,180 3,577 24 166
Properties used by group enterprises 311 286 - 286
For purposes of the valuation, the following yield requirements have been used:
Average weighted yield requirement 6.6% 6.4% - 6.1%
Highest yield requirement 11.0% 11.0% - 11.0%
Lowest yield requirement 1.0% 0.5% - 0.5%
The parent company has issued a letter of indemnity regarding the following
loans to lenders in relation to the Groups's property companies
with properties in other jurisdictions: - - 2,040 2,229
18 Shares in group enterprises
Investments, opening - - 285 255
Investments in the year - - 7,492 30
Investments, closing - - 7,777 285
Revaluations, opening - - 749 774
Revaluations in the year - - 530 (25)
Revaluations, closing - - 1,279 749
Write-downs, opening - - (17) (5)
Write-downs in the year - - (24) (12)
Write-downs reversed in the year - - 2 0
Write-downs, closing - - (39) (17)
Shares in group enterprises, closing - - 9,017 1,017
Shares in group enterprises Domicile Holding Profit/(loss) Equity
PFA Pension Luxembourg S.A. 1) Luxembourg 100% 2 45
PFA Invest International A/S 1) Copenhagen 100% (72) 524
Danske Hus Hamburg A/S 1) Copenhagen 100% (14) 12
125 Wood Street London A/S 1) Copenhagen 100% (30) 19
King's Pool York A/S 1) Copenhagen 100% 11 80
Aliffe House London A/S 1) Copenhagen 100% (20) 100
Abbey Gardens Reading A/S 1) Copenhagen 100% 8 147
Watling Court Estate London A/S 1) Copenhagen 100% (6) 33
31-47 Victoria Street London A/S 1) Copenhagen 100% 1 172
Great Minster East London A/S 1) Copenhagen 100% (18) 17
Irish Forestry Investments Holding A/S *) Copenhagen 33% 3 57
PFA Soraarneq, forsikringsaktieselskab 2) Nuuk, Greenland 100% 1 10
Lærernes Pension, forsikringsaktieselskab 3) Copenhagen 51% 0 569
PFA Ejendomme A/S 1) Copenhagen 100% 601 8,082
PFA IT Service A/S 1), 4) Copenhagen 100% (24) 65
*) The company is consolidated on a pro-rata basis. PFA Pension appoints one member to the Supervisory Board. 1) Henrik Heideby is Chairman of the Supervisory Board. 2) Henrik Hei-
deby is Deputy Chairman of the Supervisory Board, and Nina Christensen is a member of the Supervisory Board. 3) Henrik Heideby and Nina Christensen are members of the Supervisory
Board. 4) Niels Søbjerg Nielsen is Deputy Chairman of the Supervisory Board, and Nina Christensen is a member of the Supervisory Board.
The Executive Board of PFA Pension also constitutes the Executive Board of PFA Holding. In 2003, the members of the Executive Board of PFA Pension held the following executive offices
outside the Group: Henrik Heideby is Chairman of the Supervisory Board of Dansk Standard. Henrik Heideby is a member of the Supervisory Board of Dansk Kapitalanlæg A/S, Unomedical
A/S and investeringsfonden Hamton. Niels Søbjerg Nielsen is a member of the Supervisory Board of Forsikringsakademiet A/S and Pensionsinfo.
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 47
(continued)
(DKKm) Group Parent company
Note 2003 2002 2003 2002
19 Shares
Listed Danish shares 10,401 8,603 9,352 7,872
Unlisted Danish shares 476 452 476 452
Foreign listed shares 5,131 1,837 3,972 928
Foreign unlisted shares 486 148 345 47
Total shares 16,494 11,040 14,145 9,299
Cost, closing:
Listed Danish shares 7,250 7,776 6,376 6,984
Unlisted Danish shares 625 541 625 541
Foreign listed shares 5,651 2,634 4,345 1,396
Foreign unlisted shares 512 176 340 50
Total cost 14,038 11,127 11,686 8,971
At year-end, commitments not yet exercised to purchase unlisted shares totalled 990 360 830 214
Shares
PFA Pension and the Group hold more than 5% of the share capital or the voting rights
in the following companies, whose shareholders' equity has been made up in accordance
with the most recent statutory financial statements.
Group Parent company
Equity Holding Equity Holding
Amagerbanken Copenhagen 998 5.7% 998 5.7%
DSV Skibby 2,281 5.8% 2,281 5.4%
Danware Birkerød 285 5.2% 285 5.2%
Dansk Kapitalanlæg Copenhagen 1,397 10.4% 1,397 10.4%
Jyske Bank Silkeborg 7,537 5.1% 7,537 5.0%
BankInvest Biomedicinsk Venture II A/S Copenhagen 226 17.4% 226 17.4%
DOOR Partners Invest A/S Løgstør 180 29.0% 180 29.0%
Forsikringshøjskolen Rungstedgaard Rungsted 31 7.8% 31 7.8%
Internet Ventures Scandinavia A/S Hørsholm 141 9.3% 141 9.3%
KW Invest Investor ApS Copenhagen 163 35.7% 163 35.7%
Majorgården A/S Copenhagen 0 25.0% 0 25.0%
Polaris Management A/S Copenhagen 23 9.5% 23 9.5%
Privathospitalet Hamlet af 1994 A/S Frederiksberg 16 13.6% 16 13.6%
P/S BankInvest Biomedicinsk Venture III Copenhagen 865 14.8% 865 14.8%
P/S BankInvest IT Venture Copenhagen 107 13.9% 107 13.9%
P-LP 1999 A/S Copenhagen 352 13,5% 352 13.5%
P-LR 1999 A/S Copenhagen 20 13.5% 20 13.5%
P-M 2000 A/S Copenhagen 197 13.4% 197 13.4%
P-N 2000 A/S Copenhagen 47 13.3% 47 13.3%
P-N 2001 A/S Copenhagen 261 13.4% 261 13.4%
P-DD 2002 A/S Copenhagen 168 13.0% 168 13.0%
Refshaleøens Ejendomsselskab A/S Copenhagen 187 10.0% 187 10.0%
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n48
Notes
(DKKm) Group Parent company
Note 2003 2002 2003 2002
20 Bonds
Danish bonds 85,059 78,020 79,137 72,945
Foreign bonds 16,112 13,952 14,340 12,582
Foreign EUR bonds 14,362 19,091 13,553 18,472
Index-linked bonds 22,184 21,146 20,980 20,275
Total bonds 137,717 132,209 128,010 124,274
Cost:
Danish bonds 83,503 74,204 77,646 69,309
Foreign bonds 16,419 13,960 14,640 12,529
Foreign EUR bonds 13,865 18,069 13,091 17,482
Index-linked bonds 20,058 19,177 18,950 18,377
Total cost 133,845 125,410 124,327 117,697
21 Loans
Secured loans 66 82 66 82
Other loans 464 504 464 504
Total loans 530 586 530 586
Cost:
Secured loans 54 66 54 66
Other loans 456 494 456 494
Total cost 510 560 510 560
Loans to members of the Supervisory Board of PFA Pension
total DKK 22 thousand. The loans have been granted on usual
business terms and market terms at interest rates of 8.50% - 9.00%.
In 2003, the loans were reduced by DKK 108 thousand.
22 Investments
Exemption percentage 8% 9%
23 Investments related to unit-linked insurance policies
Breakdown, investment fund customers without guarantee
Listed Danish shares 114 74 114 74
Foreign shares 434 472 434 472
Danish bonds 77 41 77 41
Foreign bonds 20 11 20 11
Index-linked bonds 9 6 9 6
Breakdown, investment fund customers without guarantee, total 654 604 654 604
Breakdown, investment fund customers with guarantee
Listed Danish shares 326 233 302 211
Foreign shares 892 407 847 363
Danish bonds 743 987 541 751
Foreign bonds 198 207 149 141
Foreign EUR bonds 5 0 0 0
Index-linked bonds 152 225 152 224
Other 19 16 0 0
Breakdown, investment fund customers with guarantee, total 2,335 2,075 1,991 1,690
Total investments related to unit-linked insurance policies 2,989 2,679 2,645 2,294
Cost:
Listed Danish shares 307 403 284 367
Foreign shares 1,463 1,472 1,403 1,394
Danish bonds 804 976 605 752
Foreign bonds 223 222 173 155
Foreign EUR bonds 5 0 0 0
Index-linked bonds 145 215 145 215
Total cost 2,947 3,288 2,610 2,883
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 49
(DKKm) Group Parent company
Note 2003 2002 2003 2002
24 Other receivables
Deferred tax assets, net 1,379 1,508 1,370 1,502
Other receivables 631 105 494 30
Total other receivables 2,010 1,613 1,864 1,532
25 Share capital
The Company's share capital consists of a share certificate of DKK 100 million,
held by PFA Holding A/S, Sundkrogsgade 4, DK 2100 Copenhagen O.
26 Contingency fund
The contingency fund may be applied only to cover losses on the settlement
of insurance-related obligations or in ways otherwise benefiting the policyholders.
The entire contingency fund has been set aside out of taxed funds.
27 Reserve fund
Reserve fund, opening 2,378 1,331 2,378 1,331
Transfer from the income statement 277 1,047 277 1,047
Reserve fund, closing 2,655 2,378 2,655 2,378
28 Shareholders' equity
Shareholders' equity, opening 3,723 2,676 3,723 2,676
Net profit/(loss) for the year 277 1,047 277 1,047
PFA Pension's share, total 4,000 3,723 4,000 3,723
Minority interests
Transfer from prior years 279 277 - -
Net profit/(loss) for the year 0 2 - -
Minority interests, total 279 279 - -
Shareholders' equity, closing 4,279 4,002 4,000 3,723
Capital base and solvency margin requirement:
Shareholders' equity 4,279 4,002 4,000 3,723
Intangible assets (178) (75) (39) (75)
Subordinate loan capital (25% of solvency margin requirement) 1,695 1,646 1,694 1,645
Booked tax and pension yield tax assets, closing (1,379) (1,508) (1,370) (1,502)
Capital base in group enterprises - - 496 404
Equity holding in group enterprises - - (346) (343)
Solvency margin requirement, subsidiaries - - (352) (300)
CustomerCapital™ 6,606 5,913 6,315 5,799
Tax assets that can be disbursed in an administration situation 1,473 2,441 1,473 2,434
Capital base 12,496 12,419 11,871 11,785
Solvency margin requirement (7,442) (7,141) (6,775) (6,579)
Excess capital base 5,054 5,278 5,096 5,206
Entrepreneurial profit receivable 0 0 0 0
29 Liabilities falling due after more than 5 years after the balance sheet date
Subordinate loan capital 1,805 1,805 1,800 1,800
Liabilities to credit institutions 1,121 1,709 0 86
Total liabilities falling due after more than 5 years after the balance sheet date 2,926 3,514 1,800 1,886
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n50
Notes
(DKKm) Group Parent company
Note 2003 2002 2003 2002
30 Life insurance provisions, net of reinsurance
Life insurance provisions, opening 144,696 132,582 135,379 124,990
Accumulated restatement, opening (3,424) (990) (3,439) (1,001)
Retrospective provisions, opening 141,272 131,592 131,940 123,989
Change in the year due to:
Gross premiums 12,146 11,436 10,146 9,710
Addition of interest 6,469 6,220 6,162 5,887
Insurance benefits (8,450) (7,189) (8,354) (7,120)
Expense loading after cost bonus (631) (582) (550) (511)
Balance on the claims experience account after risk bonus (230) (125) (192) (15)
Transfer to CustomerCapital™ (93) (80) 0 0
Retrospective provisions, closing 150,483 141,272 139,152 131,940
Accumulated restatement, closing 2,993 3,424 3,009 3,439
Life insurance provisions, net of reinsurance, closing 153,476 144,696 142,161 135,379
Guaranteed benefits 75,278 78,078 85,230 85,943
Bonus potential related to future premiums 58,199 51,653 41,798 38,341
Bonus potential related to benefits on paid-up policies 19,906 14,847 15,133 11,095
Gross provisions 93 118 - -
Life insurance provisions, net of reinsurance, closing 153,476 144,696 142,161 135,379
Since the bonus potential related to future premiums and the bonus
potential related to benefits on paid-up policies cannot be negative
per policy, the provisions have been increased by:
Bonus potential related to future premiums 2 7 2 7
Bonus potential related to benefits on paid-up policies 3,502 4,176 3,502 4,176
Gross life insurance provisions, indirect insurance, opening 776 730 776 730
Change in the year 28 46 28 46
Gross life insurance provisions, indirect insurance, closing 804 776 804 776
31 Provisions for claims
Provisions for claims, life insurance, closing 483 342 473 335
Provisions for claims, non-life insurance, closing 867 768 867 767
Reinsurers' share (3) (4) (3) (4)
Provisions for claims, net of reinsurance, closing 1,347 1,106 1,337 1,098
32 Collective bonus potential
Collective bonus potential, opening 1,908 3,375 1,742 3,095
Restatement of liabilities at market value, opening 0 644 0 654
Transfer from/to the income statement, cf. note 14 2,965 (1,250) 2,378 (1,144)
Pension yield tax (1,134) (861) (1,023) (863)
Collective bonus potential, closing 3,739 1,908 3,097 1,742
33 CustomerCapital™
CustomerCapital™, opening 5,913 4,802 5,799 4,802
Additions, CustomerCapital™, cf. note 14 803 1,221 607 1,101
Disbursement of CustomerCapital™ (5) 0 0 0
Pension yield tax (105) (110) (91) (104)
Total transfer from the income statement 693 1,111 516 997
CustomerCapital™, closing 6,606 5,913 6,315 5,799
Entrepreneurial profit receivable 0 0 0 0
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 51
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n52
(DKKm) Group Parent company
Note 2003 2002 2003 2002
34 Provisions for unit-linked insurance policies
Provisions for unit-linked insurance policies, opening 2,679 2,623 2,294 2,241
Accumulated restatement, opening 0 34 0 34
Retrospective provisions, opening 2,679 2,657 2,294 2,275
Changes in the year due to:
Gross premiums 405 518 350 480
Addition of interest 258 (315) 237 (314)
Insurance benefits (305) (149) (199) (126)
Expense loading after cost bonus (26) (25) (24) (22)
Balance on the claims experience account after risk bonus (22) (7) (13) 1
Retrospective provisions, closing 2,989 2,679 2,645 2,294
Accumulated restatement, closing 0 0 0 0
Provisions for unit-linked insurance policies, closing 2,989 2,679 2,645 2,294
Provision for investment fund customers without guarantee 654 604 654 604
Provision for investment fund customers with guarantee
Guaranteed benefits (1,057) (1,512) (1,057) (1,512)
Bonus potential related to future premiums 1,980 2,376 1,980 2,376
Bonus potential related to benefits on paid-up policies 1,068 826 1,068 826
Investment fund customers in Luxembourg 344 385 - -
Provision for investment fund customers with guarantee 2,335 2,075 1,991 1,690
Provisions for unit-linked insurance policies, closing 2,989 2,679 2,645 2,294
Since the bonus potential related to future premiums and the bonus
potential related to benefits on paid-up policies cannot be negative
per policy, the provisions have been increased by:
Bonus potential related to future premiums 0 0 0 0
Bonus potential related to benefits on paid-up policies 0 0 0 6
Unit-linked insurance policies comprise all policies related to investment
funds where the policyholder bear the investment risk wholly or in part.
35 Contingent liabilities
To cover the insurance provisions and as security for contingent
liabilities, assets were registered at year-end at a total carrying
amount of 169,285 158,333 157,107 148,181
Registered assets cover both insurance provisions, net of
reinsurance, and insurance provisions for unit-linked insurance policies.
Unsettled purchase and sales agreements concerning
trading in securities and foreign currency total 14,923 2,102 12,519 89
Rent, lease and operating commitments do not exceed 35 35 35 35
The Company is jointly and severally liable for the total tax charge
together with the other tax-consolidated group enterprises and for
VAT commitments with the jointly registered companies.
Notes
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n 53
Specification of assets and their yield at market value 2003
Yield in % p.a.
Net before pension
(DKKm) Opening Closing investment yield tax and
income taxes
Land and buildings, directly owned 11,575 11,520 101 6.2%
Total land and buildings 11,575 11,520 101 6.2%
Listed Danish shares 8,603 10,401 (902) 34.1%
Unlisted Danish shares 452 476 93 (13.7%)
Foreign listed shares 1,837 5,131 3,347 28.0%
Unlisted foreign shares 148 486 345 (6.8%)
Total other shares 11,040 16,494 2,883 30.1%
Nominal bonds in DKK 78,020 85,059 7,125 5.0%
Bonds in another foreign currency than EUR 13,952 16,112 2,929 5.7%
Bonds in EUR 19,091 14,362 (4,602) 4.4%
Index-linked bonds in DKK 21,146 22,184 95 6.7%
Total bonds 132,209 137,717 5,547 5.4%
Secured loans 82 66 (11) 5.1%
Other financial investments 4,866 4,404 586 (12.3%)
Total investments 159,772 170,201 9,106 6.5%
Assets related to unit-linked insurance policies 2,679 2,989 81 11.1%
Percentage breakdown of shareholding by sector and region in 2003
Denmark Other North Japan Other Other Total
Europe America Far East countries
Energy 0.0% 1.1% 0.9% 0.0% 0.0% 0.0% 2.0%
Materials 0.9% 0.6% 1.1% 0.2% 0.0% 0.3% 3.1%
Industry 21.7% 0.8% 1.8% 0.5% 0.0% 0.0% 24.8%
Durables 0.3% 0.7% 2.0% 0.6% 0.0% 0.1% 3.7%
Consumer goods 3.9% 0.7% 1.5% 0.1% 0.0% 0.0% 6.2%
Health 10.6% 0.9% 2.0% 0.1% 0.0% 0.0% 13.6%
Finance 16.8% 4.8% 4.3% 0.4% 0,0% 0.2% 26.5%
IT 0.1% 0.5% 2.8% 0.6% 0.0% 0.1% 4.1%
Telecommunications 4.1% 0.7% 0.5% 0.1% 0.0% 0.0% 5.4%
Supply 0.7% 0.6% 0.5% 0.0% 0.0% 0.0% 1.8%
Not broken down 2.9% 0.6% 0.2% 0.0% 1.9% 3.1% 8.8%
Total 62.0% 12.1% 17.6% 2.5% 1.9% 3.9% 100.0%
Yield on investmentsand breakdown of shareholding by sector and regionPFA Group
a n n u a l r e p o r t 2 0 0 3 · p f a p e n s i o n54
Specification of assets and their yield at market value 2003
Yield in % p.a.
Net before pension
(DKKm) Opening Closing investment yield tax and
income taxes
Land and buildings, directly owned 7,621 24 (7,598) 3.1%
Property companies 645 8,606 7,432 6.6%
Total land and buildings 8,266 8,630 (166) 6.6%
Other subsidiaries 372 411 60 (7.9%)
Listed Danish shares 7,872 9,352 (1,000) 34.5%
Unlisted Danish shares 452 476 93 (13.7%)
Foreign listed shares 928 3,972 3,224 31.1%
Unlisted foreign shares 47 345 285 1.5%
Total other shares 9,299 14,145 2,602 31.2%
Nominal bonds in DKK 72,945 79,137 6,257 5.0%
Bonds in other foreign currency than EUR 12,582 14,340 2,506 5.1%
Bonds in EUR 18,472 13,553 (4,787) 4.4%
Index-linked bonds in DKK 20,275 20,980 (201) 6.8%
Total bonds 124,274 128,010 3,775 5.3%
Secured loans 82 66 (11) 5.1%
Other financial investments 5,118 4,647 481 (11.2%)
Total investments 147,411 155,909 6,741 6.3%
Assets related to unit-linked insurance policies 2,294 2,645 379 11.9%
Percentage breakdown of shareholding by sector and region in 2003
Denmark Other North Japan Other Other Total
Europe America Far East countries
Energy 0.0% 1.0% 0.8% 0.0% 0.0% 0.1% 1.9%
Materials 0.7% 0.6% 0.4% 0.2% 0.0% 0.2% 2.0%
Industry 22.4% 0.7% 1.9% 0.4% 0.0% 0.0% 25.4%
Durables 0.2% 0.6% 1.9% 0.5% 0.0% 0.1% 3.4%
Consumer goods 4.2% 0.6% 1.5% 0.1% 0.0% 0.0% 6.4%
Health 10.9% 0.9% 2.0% 0.1% 0.0% 0.0% 13.9%
Finance 17.9% 4.3% 4.6% 0.3% 0.0% 0.2% 27.2%
IT 0.1% 0.4% 2.6% 0.5% 0.0% 0.1% 3.9%
Telecommunications 4.2% 0.6% 0.5% 0.1% 0.0% 0.0% 5.5%
Supply 0.8% 0.6% 0.5% 0.0% 0.0% 0.0% 1.9%
Not broken down 3.3% 0.4% 0.0% 0.0% 1.9% 3.0% 8.7%
Total 64.7% 10.8% 16.7% 2.2% 1.9% 3.7% 100.0%
Yield on investmentsand breakdown of shareholding by sector and regionPFA Pension
Executive Board, Supervisory Board and process owners
Supervisory Board:
Svend Askær, Chairman
Jørn Neergaard Larsen, Deputy Chairman
Klavs Andreassen
Carsten Bach
Anker Christoffersen
Lars Christoffersen
Irene Damgaard
Leif Dolleris
Erik G. Hansen
Torben Dalby Larsen
Svend-Aage Nielsen
Ole Skals Pedersen
Poul Erik Pedersen
Nina Smith
Ove Thuen
Retired from the
Supervisory Board in 2003:
Verner Aggerholm
Erik Behn
Karl Hjortnæs
Lida Hulgaard
Karsten Nielsen
Flemming Nordengaard
Jørgen Søndergaard
PFA Pension, forsikringsaktieselskab
Sundkrogsgade 4
DK 2100 Copenhagen O
Telephone +45 39 17 50 00
Fax +45 39 17 59 50
www.pfa.dk
CVR 13 59 43 76
The Annual General Meeting of
shareholders is held on 21 April 2004.
Executive Board:
Henrik Heideby, Managing Director
Nina Christensen
Niels Søbjerg Nielsen
Process owners in PFA:
Anne Broeng, Capital & Risk
Michael Braagaard, Business Development
Anette Damgaard, Legal
Søren P. Espersen, Communication & Marketing
Jan Holst-Pedersen, Compliance
Niels Saaby Johansen, IT Innovation
Hasse Jørgensen, Investments
Dick Magnussen, Sales & Customer Services
Peter Nielsen, Administration
Finn Scheibye, Finance & Accounts
Lasse Solgaard, IT Systems & Services
Torben Vang, Human Resources
Flemming Windfeld, Actuarial Department
Print: Datagraf Auning AS
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