Source: Customer satisfaction survey, self-initiated custumer analysis, conducted by Norsk Kundebarometer/BI.
agents and white labels As a supplement to Gjensidige’s own channels, products are distributed through agents, including banks, a large number of car dealers, estate agents and via agencies.
Gjensidige also offers comprehensive solutions that meet the customers’ needs for pension and saving products. hjelp24 was sold in the third quarter, but Gjensidige continous to offer selected health services in collaboration with the company.
corporate cUstoMers/brokers (kkM) KMM is a nationwide customer relations channel targeting brokers and Norway’s largest enterprises. KMM has a high level of marketing and professional expertise and a strong focus on risk assessment and risk management. The service and servicing concept is based on relations with customers and brokers, and customised solutions to meet customers’ needs.
Focus on customer-orientation: • The customer experience is top priority in all development projects • Increased service quality at all points of contact with the customer • Market leader in customer service and customer satisfaction oUtlook Gjensidige’s sound finances, long-term perspective and focus on customer orientation are competitive advantages in the Commercial segment.
There is generally strong competition in both the private and commercial markets. Gjensidige maintains a focus on profitability in the Nordic segment, as in the to general insurance segmenst in Norway.
* losses in excess of NOK 10 million ** Run-off gain/loss = estimate deviations from earlier periods
Gjensidige’s policy is for all savings products to be as transparent and understandable as possible. This is in line with the Markets in Financial Instruments Directive (MIFID) regulations that have been implemented throughout the organisation. Emphasis has also been placed on the advisers’ remuneration system being neutral in relation to choice of products.
Management income 31.3 22.4 11.2 Net financial income 18.7 14.5 48.2 Other income 22.0 14.1 17.0 Other expenses (47.3) (47.1) (76.3) profit/(loss) before tax expense 15.1 (27.9) (107.8)
resUlts Net interest and credit commission income amounted to NOK 430.8 million in 2011, compared with NOK 407.0 million in 2010. The increase was largely due to the reclassification of loan charges from net financial income and other income to net interest and credit commission income at the end of 2010. Net interest in relation to average assets under management amounted to 2.71 per cent in 2011, compared with 2.88 per cent the year before. The reduction was mainly due to increased interest expenses and a greater proportion of loans being secured by a residential mortgage.
Impairment losses and losses on loans amounted to NOK 94.2 million in 2011, compared with NOK 109.4 million in 2010. Total losses and impairment loss figures are mainly related to group impairment losses intended to cover potential future bad debts. loss expenses amounted to 0.65 per cent of gross lendings in 2011, compared with 0.84 per cent the year before. The reduction was due both to a positive development in the underlying loan portfolio and to a higher proportion of loans secured by mortgage. The loss situation was in line with expectations.
capital adeqUacy Capital adequacy was 15.0 per cent at the end of 2011, compared with 16.1 per cent the year before. The bank’s target is to have capital adequacy of at least 12.0 per cent.
FraMework For asset ManageMent Once a year, the Board stipulates the upper and lower limits per asset class, as well as limits for interest, liquidity, credit and currency risk. The Group’s credit risk relating to investment portfolios and liquidity portfolios is managed through the credit committee’s stipulation of limits, based on the Group’s credit policy. Allocation of assets and individual investments must be kept within these limits at all times. The Board also stipulates a minimum return that must be achieved with a given degree of probability. Within the stipulated limits, the actual allocation of assets will vary throughout the year in order to exploit market opportunities and actively manage different classes of assets.
Free portFolio The return of the free portfolio was 3.8 per cent in 2011.
fixed income instruments The return on the fixed-income portfolio in the free portfolio was 2.4 per cent in 2011. While the interest rate for terms to maturity of between zero and two years was virtually unchanged during the period, the interest rate for longer terms to maturity fell. The return was negatively affected by a widening of credit spreads.
The working environment in Gjensidige shall promote health. The goal for sickness absence is less than four per cent. There is a good gender balance in the Company as a whole, with 54 per cent men and 46 per cent women. The proportion of women in the Company’s management is lower, but increasing.
Gjensidige exists for its customers’ sake. Customer satisfaction, measured on the Norwegian Customer Barometer Survey, ended at 71.5.
’how do you ensure that the school is up-to-date as regards the content and organisation of the courses?’
In 2011, the school completed 4500 course days, and 370 passed examinations were given. Friom the startup in 2009 and to year-end 2011, a total of 909 managers and employees passed their examinations at the school.
The Board approves Group Auditing’s resources and annual plans. The Group Auditing Manager is appointed and dismissed by the Board.
At the end of the year, Gjensidige owned 60,755 own shares.
aUthorisations Pursuant to the resolution of the general meeting on 27 April 2011, the Company’s Board of Directors is authorised to purchase own shares in the market. The authorisation is twofold.
Average trading volume, daily at Oslo Børs 54,937,932 Profit per share 5.50
hellerud (1968) took up the post of CFO in December 2011 following a period as acting CFO. She joined Gjensidige in 2007 as IR director and was appointed Group Controller at the beginning of 2011. hellerud was previously employed at Oslo Børs, where she worked on following up listed companies. She has also worked as an accountant in Ernst & Young. In addition to a number of internal directorships in the Gjensidige Group, hellerud is a board member of SpareBank 1 SR-Bank. hellerud is a state authorised public accountant from the Norwegian School of Economics (Nhh) and a business economics graduate (siviløkonom) from BI Norwegian Business School.
solvency Margin capital The capital that can be counted, pursuant to the regulations, as coverage of the solvency margin requirement is called solvency margin capital.
kjetil kristensen board member Kristensen has been an employee representative on Gjensidige’s Board since 2008. he is the main employee representative for the Private segment. Kristensen is a graduate of Finnmark University College with a degree in IT and business economics. Kristensen has attended nine board meetings.
Over the last few years, considerable premium increases have been imple­ mented and new tariff models introduced, combined with the introduction of a base price per policy holder from the second half­year 2010. An ef­ ficiency programme was also introduced in 2008 to reduce claims incurred by NOK 400 to 500 million (from the 2007 level, adjusted for inflation) and operating expenses by NOK 300 to 400 million (from the 2007 level, adjus­ ted for inflation), implemented with full effect from and including 2011.
Denmark’s largest financial services groups. It has an extensive distribution network consisting of 55 advisory services offices and two estate agency chains (Nybolig/Estate) with approximately 300 branch offices, in addition to a phone­based customer centre. Nykredit provides general insurance on behalf of Gjensidige to both the private and the commercial market.
The fixed income instruments in the free portfolio consisted of money market instruments, current bonds, investment grade bonds, high yield bonds and convertible bonds. The portfolio yielded a return of 2.4 per cent in 2011.
In the two Norwegian segments, Private and Commercial, the nominal operating expenses increased by NOK 63.9 million and NOK 41.1 million, respectively, in 2011. Increased nominal expenses are partly due to non­ recurring effects related to the reorganisation of distribution in the Private segment (NOK 40.0 million) and reorganisation in the commercial segment. The reclassification of indirect claims settlement costs from the fourth quar­ ter 2011 reduced the operating expenses by a total of NOK 43.5 million.
The Board considers the Group’s capital situation and financial strength to be good.
Claims incurred amounted to NOK 438.0 million in 2011 and NOK 258.1 million in 2010.
Share of other comprehensive income and expenses of associates (48.2) (48.2) Actuarial gains and losses on pension (339.8) (339.8) Tax on other comprehensive income 89.8 89.8 total components of other comprehensive income (7.0) (338.8) 41.5 (304.2)
Basis oF measurement The consolidated financial statements have been prepared based on the historical cost principle with the following exceptions • derivatives are measured at fair value • financial instruments at fair value through profit or loss are measured at fair value • financial assets available for sale are measured at fair value • investment properties are measured at fair value
Development expenditures (both internally and externally generated) is capitalized only if the development expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete the development and to use or sell the asset.
diVidend Proposed and approved dividend noK million 2011 2010 As at 31 desember NOK 4.55 per ordinary share (4.70) 2,275.0 2,350.0 1 Proposed dividend for 2011 is not recognised at the reporting time, and it does not have any tax consequences.
General insurance FrequencY and seVeritY oF claims The frequency and severity of claims can be affected by several factors. The different factors will depend on the products, or lines of business (LOB) considered.
Fire and other damage to property 6,834.5 34.0 % 6,027.7 30.5 %
Other concentration risk is mainly aggregation of fire risks and within Workers’ Compensation. These risks are assessed by analyzing historical events, studying the insurance values exposed, and managed through reinsurance programmes.
results 85 Gjensidige Annual Report 2011 meet regularly as a part of keeping a high professional level, and they all have access to a common actuarial software system for calculating claims provisions.
table 4 – sensitivity analysis insurance noK million 2011 2010 change in cR (1 %-percentage point) Private Norway 80.8 72.5 Commercial Norway 54.1 54.4
Free portfolio 1 The item includes the discounting effects of insurance obligations in Denmark and mismatch between interest rate adjustments on the liability side in Denmark versus the interest rate hedge.
Gjensidige’s investment strategy is determined annually by the Board of Directors. Here the Board of Directors sets upper and lower limits per asset class, the overall risk tolerance related to the financial results and specific limits for interest rate, liquidity, ALM, market risk of credit and foreignexchange risk. The asset allocation shall be within these limits at all times. The starting point of the investment strategy is the insurance operations’ need to balance expected future outflows against inflows from investments, while other funds in the insurance operations are invested to optimize return on equity in a well-diversified manner given the approved risk appetite.
table 9 – tVaR utilization of risk limits in the liquid part of the free portfolio noK million Risk limit
table 10a – stress test financial assets 2011 noK million scenario decrease in value assets/risk
In addition to the invested amounts, Gjensidige had committed capital, not invested, amounting to NOK 699.9 million as at 31 December 2011.
The table below shows the maturity profile of the Group’s fixed-income portfolio. It does not include the above-mentioned swap agreements, which have a limited carrying amount, but instead the actual fixed-income portfolio in Gjensidiges Arbejdsskadeforsikring.
Winton Futures Fund - Lead Series 180.0 Sector Polaris 144.2 The Winton Evolution Fund 112.9 Sector EuroPower Fund Class A EUR 81.0 Sector Healthcare - A USD 79.3 total five largest 597.4 total hedgefunds 756.6
credit risk Gjensidige is exposed to credit risk, i.e. the risk that a counterparty is not able or willing to settle its liability at due date or the risk that the credit spreads will increase (credit risk premium). The Group is primarily exposed to credit risk in the investments in the insurance companies, and through receivables from the insurance customers and reinsurers. Credit risk in Gjensidige Bank will be covered in a separate section.
Installments not due 3,148.6 0.5 <35 days 284.7 96.4 35-90 days 96.5 4.4 > 90 days 96.4 63.6 total 3,626.2 164.9
The following table provides an overview of the breakdown of reinsurance receivables and the reinsurers’ share of outstanding claims per rating category. The exposure in the not-rated category primarily relates to run-off business and is broken down among a large number of counterparties. The companies in run-off do not have a rating anymore.
The table below shows the portfolio and provisions as of 31 December 2011 and 31 December 2010 segmented by the risk classes. The 2010 numbers are restated to make the numbers comparable to 2011 numbers. The restatement includes group impairments for non-secured consumer loans that are not defined as impaired.
concentration risk Concentration risk is the risk of losses due to the bank having large parts of its lending tied to single actors or to limited geographic or business areas. The concentration risk is managed using the bank’s risk frameworks, and is measured and evaluated through annual stress tests/scenario analyses in the credit area.
Storebrand ASA Oslo 24.3 % 4,604.4 3,454.2 4,604.4 3,287.8 SpareBank1 SR-Bank Stavanger 10.3 % 866.4 992.5 866.4 958.9 Bilskadeinstituttet AS Oslo 29.5 % 0.4 1.4 0.3 1.4 Vervet AS including subordinated loan 1 Tromsø 25.0 % 32.3 2.2 30.3 0.8 Botrygt Prinsegården AS (liquidated in 2011) Fetsund 0.3 0.4 FDC A/S Ballerup, Danmark 33.3 % 5.2 28.0 5.3 26.4 total shares in associates 5,508.7 4,478.2 5,506.9 4,275.5 additional infoRmation Profit/(loss) share of noK million assets equity liabilities Revenues Profit/(loss) recognised 2 stock value for the whole company 2011 Storebrand ASA 401,442.0 18,777.0 382,665.0 38,225.0 681.0 307.2 3,404.2 SpareBank1 SR-Bank 131,142.0 9,757.0 121,385.0 3,267.0 1,081.0 118.4 843.0 Bilskadeinstituttet AS 5.0 4.7 0.3 1.3 0.1 (0.1) N/A Vervet AS 115.6 18.0 96.1 0.1 0.1 N/A Botrygt Prinsegården AS (liquidated in 2011) N/A N/A N/A N/A N/A N/A N/A FDC A/S 108.9 53.9 55.0 315.8 14.6 5.9 N/A total shares in associates 532,813.5 28,610.6 504,201.4 41,809.2 1,776.7 431.6 additional infoRmation Profit/(loss) share of noK million assets equity liabilities Revenues Profit/(loss) recognised 2 stock value for the whole company 2010 Storebrand ASA 390,414.0 18,417.0 371,997.0 48,241.0 1,480.0 342.2 4,777.9 Sparebank1 SR-bank 134,778.0 9,402.0 125,376.0 3,414.0 1,317.0 142.1 1,180.6 Bilskadeinstituttet AS 5.3 4.8 0.5 1.6 0.2 N/A Forsikring og Finans Sandnes AS (sold in 2010) N/A N/A N/A N/A N/A (0.2) N/A Forsikringskontoret Johansen og Torkelsen AS (sold in 2010) N/A N/A N/A N/A N/A (0.3) N/A Fossmark Assuranse AS (sold in 2010) N/A N/A N/A N/A N/A (0.1) N/A Vervet AS 109.2 13.1 96.1 0.5 (0.4) N/A Botrygt Prinsegården AS 0.8 0.8 N/A FDC A/S 111.2 53.8 57.4 334.0 12.8 5.0 N/A total shares in associates 525,418.5 27,891.5 497,527.0 51,991.2 2,809.6 488.7
carrying amount As at 1 January 2011 318.5 345.1 663.6 as at 31 december 2011 270.7 238.4 509.1
sensitiVitY Financial assets leVel three The sensitivity analysis for financial assets valued based on non-observable market data show the gain/loss of realistic and plausible market scenarios. A decrease in value of ten per cent is considered a realistic and plausible market scenario for both shares and similar interests and for bonds and other fixed income securities that are included in level three in the valuation hierarchy.
Financial assets at fair value through profit or loss, initial recognition Shares and similar interests 252.1 2,258.0 1,772.8 4,282.9 Bonds and other fixed income securities 12,148.4 6,233.0 8.5 18,389.9 financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 155.3 155.3
Mortgage loans 12,459.6 11,016.4 Other loans 401.2 773.3 Provision for impairment losses (193.7) (121.8) Impairment to fair value (16.3) (31.2) Subordinated loans 8.5 8.3 Loans for consumer goods 2,561.4 2,729.6 Bonds classified as loans and receivables 9,235.9 5,163.1 total loans and other receivables 24,456.5 19,537.8
Claims paid, prior year claims (7,005.8) 445.6 (6,560.2) (6,258.8) 118.7 (6,140.1)
increase in liabilities Arising from current year claims 14,928.4 (1,681.6) 13,246.7 14,284.9 (455.2) 13,829.6 - of this paid (6,204.1) 688.3 (5,515.8) (6,033.0) 135.7 (5,897.3) Arising from prior year claims (run-off) (364.9) (1.4) (366.3) (314.0) 12.8 (301.1) Other changes, including effects from discounting 288.9 288.9 (20.4) (20.4)
Average number of employees 3,479 4,008 the Board oF directors’ statement on the stipulation oF paY and other remuneration GjensidiGe’s remuneration policY The Group has established a remuneration system that applies to all employees.
remuneration oF eXecutiVe personnel With superVisorY tasks The remuneration of executive personnel with supervisory tasks shall be independent of the performance of the business area they are in charge of.
Per Andersen (1.1.11-31.5.11) 9.0 Per Engebreth Askilsrud (1.1.11-31.5.11) 9.0 Laila S. Dahlen (1.1.11-31.5.11) 9.0 Knud Peder Daugaard (1.1.11-31.5.11) 14.0 Ingun M. Leikvoll (1.1.11-31.5.11) 9.0 Sissel Johanne Monsvold (1.1.11-31.5.11) 9.0 Wenche Teigland (1.1.11-31.5.11) 21.8 Per Gunnar Skorge (1.1.11-31.5.11)
Per Gunnar Skorge (24.3.10-31.12.10) 1 3.0 staff representative Marianne Brinch van Meenen (28.6.10-31.12.10) 1, 10, staff representative 505
Bonds and other fixed-income securities Net interest income/(expenses) from bonds and other fixed-income-securities 425.7 432.0 Unrealised gain/(loss) from bonds and other fixed-income securities 257.5 78.6 Realised gain/(loss) from bonds and other fixed-income securities 79.3 271.1 total net income from bonds and other fixed-income securities 762.5 781.6 total net income and gains/(losses) from financial assets at fair value through profit or loss, designated 1,186.7 1,217.3 net gain/(loss) from bonds held to maturity Net interest income from bonds held to maturity 684.3 773.1
Weighted average number of shares 1 499,966,392 499,996,261 Weighted average number of diluted shares share-based payment programme 1,531 Weighted average number of shares, diluted 1 499,967,923 499,996,261 earnings per share (noK) 5.50 5.90 earnings per share (noK), diluted 5.50 5.90 1 Holdings of own shares are not included in calculations of the number of shares.
INSuRANcE-RElATEd OPERATING EXPENSES Insurance-related operating expenses consist of insurance-related administration expenses including commissions for received reinsurance and sales expenses, less received commissions for ceded reinsurance and profit share.
OThER INTANGIBlE ASSETS Other intangible assets which consist of customer relationships, trademarks, internally developed software and other intangible assets that are acquired separately or as a group are recognised at historical cost less accumulated amortisation and accumulated impairment losses. New intangible assets are capitalized only if future economic benefits associated with the asset are probable and the cost of the asset can be measured reliably.
AmORTISATION Intangible assets, other than goodwill is amortised on a straight-line basis over the estimated useful life, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows • customer relationships 10 years • trademarks 10 years • internally developed software 5–8 years • other intangible assets 5–10 years
ImPAIRmENT OF FINANcIAl ASSETS lOANS, REcEIVABlES ANd INVESTmENTS hEld TO mATuRITY For financial assets that are not measured at fair value, an assessment of whether there is objective evidence that there has been a reduction in the value of a financial asset or group of assets is made on each reporting date. Objective evidence might be information about credit report alerts, defaults, issuer or borrower suffering significant financial difficulties, bankruptcy or observable data indicating that there is a measurable reduction in future cash flows from a group of financial assets, even though the reduction cannot yet be linked to an individual asset.
RElATEd PARTY TRANSAcTIONS Intra-group balances and transactions are eliminated in preparing the consolidated financial statements.
144 results nOtes 1 – eQUity ShARE cAPITAl At the end of the year the share capital consisted of 500 million ordinary shares with a nominal value of NOK 2, according to the statutes. All issued shares are fully paid in.
OWN ShARES In the column for own shares in the statement of changes in equity the nominal value of the company’s holdings of own shares is presented. Amounts paid in that exceeds the nominal value is charged to other equity so that the cost of own shares reduces the Group’s equity.
Carrying amount As at 1 January 2010 152.0 14.1 221.1 387.1 as at 31 December 2010 1,035.6 306.8 44.4 262.6 45.3 1,694.7
Carrying amount As at 1 January 2011 112.0 289.8 401.8 as at 31 December 2011 94.5 229.6 324.2
nOk yield average market rent average contractual rent average value per sqm nOk million Market rent reduced by 10 % Market rent as at
FAIR VAluE Financial assets and liabilities measured at fair value are carried at the amount each asset/liability can be settled to in a transaction carried out at arm’s length distance. All financial assets and liabilities are recognised initially at fair value. In the normal course of business, fair value of a financial instrument on initial recognition is the transaction price.
VAluATION BASEd ON OBSERVABlE mARkET dATA When quoted prices in active markets are not available, the fair value of financial assets/ liabilities is preferably estimated on the basis of valuation techniques based on observable market data.
Currency-related contracts - hedging instrument 888.7 10.9 (1.1) Hedging object 897.4 per cent 1q 2q 3q 4q hEdGE AccOuNTING Gjensidige Forsikring utilizes hedge accounting of currency of the net investment in the foreign operation.
Gjensidige Forsikring ASA with subsidiaries has changed the agreement with regard to the defined benefit plan with Gjensidige Pensjonskasse to a defined benefit plan with investment options. According to this plan the return, not sufficient to cover the pension plans guaranteed interest rate, should be covered from the premium fund or through contribution from Gjensidige Forsikring ASA with subsidiaries.
Fair value of plan assets As at 1 January 2,040.8 1,953.3 Expected return on plan assets 95.8 113.4 Actuarial gains and losses (52.7) 0.7 Contributions by the employer 124.7 111.2 Benefits paid (142.8) (137.7) Business combinations 10.1 as at 31 December 2,075.9 2,040.8 expense recognised in profit or loss Current service cost 55.3 62.3 Interest cost 93.4 99.6 Expected return on plan assets (95.8) (113.4) Past service cost (87.7) Employers' national insurance contributions 7.5 (5.5) total defined benefit pension cost 60.3 (44.7)
1 The stated remuneration applies to the period the individual in question has held the position/office. 2 Age 62, 100 per cent salary reducing gradually to 70 per cent at age 67 according to time of earning, then Gjensidige Forsikring’s ordinary pension terms will take effect. 3 Age 62, 70 per cent salary until age 67 according to time of earning, then Gjensidige Forsikring’s ordinary pension terms will take effect. 4 Annual fee of NOK ten thousand. There have been three ordinary meetings during 2011. 5 The fee includes fee for subsidiaries. 6 The interest rate is 3.98 nominal in average, unless other is stated.
174 results nOk million 2011 2010 net income and gains/( losses) from buildings and other real estate Investment properties Income from investment properties, excl. unrealised gain/(loss) 76.6 80.0 Net revaluation investment properties 57.0 (15.5) Net gain/(loss) from sale of investment properties 1.3 9.2 Administration expenses related to investment properties (12.7) (13.1) total net income and gains/(losses) from investment properties 122.3 60.5
Primary capital in other financial institutions (108.5) (108.6) net primary capital (a) 13,462.9 13,952.5
1 The figures for 2010 have been restated due to reclassification of the administration provision.