Dec 2010 July 2011 Dec 2011 July 2012 Dec 2012 July 2013 July 2014Dec 2013 Dec 2014 July 2015 Dec 2015 8.40..
During the year, we took important steps to strengthen our foundation for further growth in the Nordic region and the Baltic states. After the acquisitions of the companies Mondux in Denmark and PZU in Lithuania, almost 30 per cent of our earned premiums come from markets outside Norway. We further consolidated our position in the Danish market, where growth and profitability have shown positive development for several years. In Sweden, we have implemented measures to transfer best practice and improve profitability going forward. Under the new management in the Baltics, we started the work of integrating PZU in autumn 2015, and Gjensidige will be a key player in the further development of the Baltic insurance market in the time ahead.
Pension and Savings Pension and Savings shall contribute to sales of a wide range of products to general insurance customers in Norway by offering pension and savings products, mainly to the Norwegian commercial market. The products are distribu­ ted directly by Gjensidige and via selected cooperation partners. Gjensidige is the fourth largest player in the market for defined contribution unit linked products.
Share capital Issued shares at the end of the period Number 500,000,000 500,000,000 500,000,000 Earnings per share in the period, basis and diluted 6 NOK 7.57 8.38 7.34
Retail Bank Gross lending, addition in the period NOK million 9,189.0 3,352.6 6,869.7 Deposits, addition in the period NOK million 2,653.9 1,765.1 3,357.8 Gross lending, at the end of the period NOK million 36,735.5 27,546.5 24,193.9 Deposits at the end of the period NOK million 19,357.2 16,703.4 14,938.3 Deposit-to-loan ratio at the end of the period 15 % 52.7 60.6 61.7 Net interest margin 16 % 2.12 2.17 2.42 Write-downs and losses 17 % 0.20 0.20 0.32 Cost/income ratio 18 % 49.5 54.0 56.9 Customers with insurance agreement at the end of the period % 45.2 45.7 44.6 Capital adequacy 19 % 16.1 15.9 14.6 Core capital adequacy 20 % 14.2 14.1 14.6 Return on equity before tax % 13.8 13.2 12.0 Return on equity after tax 2 % 10.3 9.6 8.6 1 Return on financial assets = net financial income in per cent of average financial assets including property, excluding Pension and Savings and Retail Bank 2 Return on equity before/after tax expense = profit before/after tax expense for the period/average equity for the period 3 Capital adequacy ratio = net subordinated capital/risk-weighted calculation basis, calculated on the basis of NGAAP for the Group. This year’s capital adequacy ratio is adjusted for the Board’s proposed dividend for the financial year 2015.
We shall ensure as little negative impact on the environment and climate as possible.
The Board and the management have adopted policies, guidelines and instructions that detail and specify the framework our employees must adhere to in different situations. Relevant documents are listed in the table on page 34.
They get a discount on their insurance in Norway if they have practised driving with an accompanying driver for a sufficient number of kilometres.
Dialogue with interest groups Every year, Gjensidige is represented on a number of councils, committees and boards, both in Norway and abroad, that work on fire prevention, prevention of water damage and other initiatives for the benefit of society.
In 2015, 63 per cent of the Company’s employees in Norway were covered by collective agreements.
Sickness absence was 4.1 per cent in Norway, Denmark and Sweden in 2015. Our goal was to reduce the absence to 4 per cent. A new goal has now been defined of 3 per cent by 2019.
Zero tolerance for corruption Denmark, Sweden and Norway are all among the six countries in the world with the lowest perceived levels of corruption, according to Transparency International.
Giving and receiving bribes is prohibited. The same applies to gifts that can be regarded as improper. The rules apply to managers and employees at all levels of the Company, also in countries that are not covered by Norwegian law. Special rules have been stipulated for employees with responsibility for relations with customers and suppliers.
If money laundering or financing of terrorism can be substantiated, the Company will refrain from taking out insurance or settling claims, to the extent that such sanctions are permitted by law.
The work to combat money laundering is prioritised at corporate management level. Internal regulations and risk analyses are managed by an executive vice president. Risk analyses are presented to the Senior Group Management once a year. The importance of combating money laundering is clearly communicated at all levels.
Of the cases reported to the Financial Services Complaints Board, the Board found in favour of the customer in whole or in part in 25 per cent of the cases. A high percentage would indicate that the threshold for succeeding with a complaint internally in Gjensidige was high.
• how to reduce the generation of waste, and how to recycle as much as possible
The assets we insure, such as cars, buildings and companies, will cause pollution to a varying extent. Sensible risk-pricing will usually have a favourable environmental profile, in the sense that large objects that are demanding in terms of resources have a higher insurance premium than less demanding objects.
Traffic and fire are especially important areas in which the Company’s expertise in loss prevention can help to save lives and assets. Other important areas are awareness-raising campaigns aimed at combating fraud and other crime, and efforts to promote physical and mental health in the population. The company’s efforts in the area of social responsibility will therefore be concen trated on loss prevention in the broadest sense.
Deviations from the Code of Practice: None 14. Information and communication Gjensidige shall maintain an open dialogue with all stakeholders. All financial market participants shall have simultaneous access to correct, clear, relevant and detailed information about the Group’s historical results, operations, strategy and outlook. The information shall be consistent over time. The Board has adopted guidelines for the reporting of financial information and other information in the form of an IR policy. The guidelines are available at gjensidige.no/group/investor-relations.
The Board shall not attempt to prevent bids being made, and, as a rule, it shall seek to facilitate the implementation of bids that may be in the interests of the shareholders. The Board shall not take action as described in the Securities Trading Act Section 6-17 without obtaining instruc tions from the general meeting. The Company shall not use authorisations to issue shares to prevent a bid.
Market position Gjensidige was the leading player in Norwegian non-marine general insurance in 2015 as well, with a market share of 25.3 per cent of a total market of NOK 55.7 billion. The market share was stable from 2014 despite strong competition, and the market position relative to the biggest competitors was further strengthened in 2015 (source: Finance Norway). The Company prioritises profitability ahead of growth, and the development of the market share therefore confirms Gjensidige’s good competitiveness.
Profit performance The underwriting result was NOK 509.1 million (384.3) in 2015. The improvement was mainly due to a lower proportion of large losses. The combined ratio was 90.3 (91.9).
Operating expenses amounted to NOK 819.0 million (788.9). NOK 50.3 million of the increase was due to currency effects. The cost ratio was 15.6 (16.6).
Marchand is up for election to the Board in 2016. Marchand holds 1,481 shares in Gjensidige Forsikring ASA, including any shares held by closely related parties (last change 10 December 2012).
and maintains adequate models and methods for estimating losses that have occurred, but that have not yet been reported to the Group. There is a considerable inherent risk that the provisions will be insufficient, but continuous efforts are made to improve the actuarial methods. External actuaries are used from time to time to conduct independent reviews of the provisions.
• Firstly, organic growth is expected to be in line with nominal GDP growth in Gjensidige’s market areas in the Nordic countries and the Baltic states over time. In addition, profitable growth will be achieved by pursuing a disciplined acquisition strategy, as has been done successfully over the past ten years.
Oslo, 9 March 2016 – The Board of Gjensidige Forsikring ASA
Tax on items that are not reclassified to profit or loss 110.8 110.8 Total items that are not reclassified subsequently to profit or loss (299.4) (50.9) (350.3)
Specification of cash and cash equivalents Deposits with central banks 548.7 79.7 Cash and deposits with credit institutions 2,603.2 2,324.1 Total cash and cash equivalents 3,151.9 2,403.8
Provisions Provisions are recognised when the Group has a legal or constructive obligation as a result of a past event, it is probable that this will entail the payment or transfer of other assets to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The internal risk based capital requirement is determined as part of the Group’s capital management policy, which is approved by the Board. It is defined as the capital that is necessary in order to have a probability of 99.5 per cent of not using up all capital measured over one year, including all of the general insurance group’s assets and liabilities and not counting the expected profit performance during the period as available capital. The Board has adopted an additional buffer of 20 per cent on top of this requirement. In this context both profit/loss and available capital are measured according to Solvency II principles that deviate from the accounting principles. The most significant differences are that intangibles assets are not recognised, bonds are measured at fair value (instead of amortised cost) and technical provisions are assessed at their discounted value corrected for a risk margin. The premium provision is corrected for future profit.
Over several years, Gjensidige has been developing an internal stochastic simulation model for its insurance operations, based on state-of-the-art modelling technology. The model is customised to fit Gjensidige’s risk profile and it provides fully stochastic simulations of both insurance and investment operations. This model is a key tool for aggregated risk measurement and capital management since it provides an overview of the aggregated risk profile. The internal model’s main areas of use are
Total 25,053.6 100.0% 23,875.6 100.0% Total Gjensidige Forsikring ASA 21,251.1 84.8% 20,458.1 85.7%
Other concentration risk is mainly related to aggregation of fire risks and Workers’ Compensation. These risks are assessed by analysing historical events and studying the insurance values exposed. They are managed through reinsurance programmes.
In estimating the liability for the cost of reported claims not yet paid, Gjensidige considers any information available from claims reports, loss adjusters, medical certificates and information about the costs of settling claims with similar characteristics in previous periods. All claims are assessed on a case-by-case basis by a claims handler. Claims with potential for distortive effects of their development are handled separately and projected to their ultimate by an additional provision (e.g. bodily injury claims in Motor insurance). Where possible, Gjensidige applies multiple techniques to estimate the required level of provision. This provides a greater understanding of the trends inherent in the experience being projected. The projections resulting from the various methodologies also assist in estimating the range of possible outcomes. The most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the development of each accident year. The development of the estimate of ultimate claim cost for claims incurred in a given year is presented in Tables 6a and b. This gives an indication of the accuracy of Gjensidige’s estimation techniques for claims payments.
1 K2013 is based on predictions about life expectancy performed by Statistisk Sentralbyrå (Statistics Norway, SSB). Three different life expectancy alternatives were made, “High”, “Medium” and “Low”. K2013 uses the medium alternative. FSA required insurance companies to add safety margins to account for higher life expectancy in insured population and their deviating dynamic development in mortality (compared to uninsured). 2 A waiver of premium for disability states that the insurance company will not charge the usual defined contribution premium in case of disability.
1 The item includes the market value of the interest rate hedge in Denmark. 2 The item consists of total investment grade, high yield and current bonds. Investment grade and high yield are investments in international diversified funds externally managed. 3 Investments in international diversified funds externally managed. 4 The item includes the investment in SpareBank 1 SR-Bank ASA. 5 Gjensidige Forsikring ASA halved its property exposure through the sale of 50 per cent of Oslo Areal AS during the last quarter. In addition, there is a forward contract on the IPD index further increasing the property exposure by NOK 1.6 billion throughout 2016, and total return swaps with Gjensidige Pensjonskasse and Gjensidige Pensjonsforsikring AS reducing the property exposure in total by NOK 900.0 million. 6 The item includes currency hedging related to Gjensidige Sverige and Gjensidige Denmark, and loans, paid-in capital in Gjensidige Pensjonskasse and hedge funds.
The table below shows the maturity profile of the Group’s fixed- -income portfolio.
Figure 9b – Potential credit exposure reinsurance per rating category 2014
The bank’s market risk is substantially related to currency risk, interest-rate risk and spread risk (credit risk).
Retail Bank Gjensidige Bank is an online bank that mainly targets the Norwegian private market. The bank offers day-to-day banking services, mortgages, savings products and car and consumer financing.
Segment result/profit/(loss) before tax expense 2,208.1 1,624.0 1,440.8 1,285.4 509.1 384.3 (98.9) 0.6 84.2 43.9 303.6 253.5 602.8 1,807.9 5,049.7 5,399.6 1 Eliminations etc. consist of internal eliminations and other income and expenses not directly attributable to one single segment and large losses of NOK 382.5 million (207.2).
Exchange differences (9.2) (43.3) (1.8) (11.2) (11.8) (77.3) As at 31 December 2014 (265.4) (615.7) (37.7) (673.5) (149.4) (1,741.7)
Gouda Portfolio Nordic 85.8 73.2 Mondux Portfolio Nordic 173.1 Gjensidige Baltic Baltics 67.1 76.9 PZU Baltics 358.7 Oslo Areal Other 245.1 Gjensidige Bank Retail Bank 1.5 1.5 Gjensidige Forsikring, White label Private 128.7 128.7
Disposals (16.7) (108.7) (125.4) Exchange differences 0.2 7.1 7.4 As at 31 December 2014 326.5 609.1 935.6 Uncompleted projects 98.7 98.7 As at 31 December 2014, including uncompleted projects 326.5 707.8 1,034.3
Financial assets Financial derivatives Financial derivatives at fair value through profit or loss 470.2 470.2
Shares and similar interests 2,305.4 68.7 279.2 (521.9) 2,131.6 (85.7) Bonds and other fixed income securities 1.2 (5.4) 410.3 406.1 Total 2,306.6 63.4 689.6 (521.9) 2,537.6 (85.7)
Fair value hedging has in 2015 been carried out to hedge the currency in fixed agreements of acquisition of the operations Mondux and PZU. Gains and losses on the hedging instrument are recognised in profit or loss, together with the change in fair value of the fixed agreement. The change in fair value of the fixed agreement is recognised in goodwill when the acquired operation is accounted for.
Gjensidige considers the credit and liquidity risk associated with receivables to policyholders to be small, since the outstanding amount per policyholder is relatively small. Provisions for potentially irrecoverable amounts have been made.
Provisions for unearned premiums in general insurance As at 1 January 8,536.3 (28.7) 8,507.6 7,984.6 (16.0) 7,968.6 Additions through acquisitions 88.0 88.0 Increase in the period 22,255.4 (464.8) 21,790.7 21,192.5 (493.7) 20,698.8 Release in the period (21,724.8) 452.8 (21,272.0) (20,867.8) 481.0 (20,386.8) Exchange differences 163.0 163.0 139.0 139.0 Total as at 31 December 9,230.0 (40.7) 9,189.3 8,536.3 (28.7) 8,507.6 1 For own account.
The minimum level of the pension assets is also affected by capital adequacy requirements and solvency margin requirements. The regulations relating to pension funds (IORP) are currently under development in the EU, but Norway has decided that life insurance companies and pension funds shall be subject to the same capital requirements to protect future pensions through Solvency II regulations or an adjusted version.
Interest cost 57.3 13.0 70.3 81.1 18.1 99.1 Actuarial gains and losses (63.0) (11.8) (74.8) 283.8 127.9 411.6 Benefits paid (90.2) (41.7) (131.9) (85.3) (46.4) (131.7) Employers' national insurance contributions of benefits paid (5.9) (5.9) (6.5) (6.6)
Accrued expenses and deferred income Liabilities to public authorities 28.3 25.5 Accrued personnel cost 276.3 249.6 Other accrued expenses and deferred income 180.7 149.7 Total accrued expenses and deferred income 485.3 424.9
Net deferred tax liabilities/(deferred tax assets) 822.9 1,284.1 Of this non-assessed deferred tax assets 12.9 5.0 Gross deferred tax liabilities 835.8 1,289.1
Rights earned in the financial year according to defined benefit pension plan 6
Kaare Østgaard, Executive Vice President 2,625.2 302.7 169.0 921.0 364.8 2,792 4,556 7,052 8,926 3
Other non-weighted assets Goodwill 3,224.5 2,819.0 Deferred tax assets 12.9 5.0 Other intangible assets 1,343.6 1,123.5 Derivatives 486.5 470.2
Restricted bank deposits Source-deductible tax accounts 85.6 79.9 Total restricted bank deposits 85.6 79.9
Weighted average fair value of shares granted 2 131.40 119.30 Weighted average share price of shares released during the period 126.87 120.03 Fair value of shares granted that are to be settled in cash 142.10 122.00 2 The fair value is calculated based on the market value of the share at the time of allocation.
Excess value is identified for customer relationships and databases for claims history. Provisions were made for deferred tax liability for excess value with the exception of goodwill. Goodwill consists of expected synergies from the merging of the Private and Commercial business areas and optimization of the reinsurance cover for the Group as a whole.
Net defined assets and liabilities 20.3 45.7 66.0 Transaction price 66.0
New standards and interpretations not yet adopted A number of new standards, changes to standards and interpretations have been issued for financial years beginning after 1 January 2015. They have not been applied when preparing these financial statements. Those that may be relevant to Gjensidige are mentioned below. Gjensidige does not plan early implementation of these standards.
Claims provisions are not normally discounted. For contracts in Denmark with annuity payments over a long horizon, discounting is performed. IFRS 4 permits the use of different policies within the Company in this area.
Gross premiums earned 2,510.3 5,080.4 2,338.7 2,741.8 219.2 529.6 903.4 327.8 9,570.8 Gross claims incurred (1,844.8) (2,870.5) (1,100.1) (1,770.5) (153.2) (275.4) (654.2) (283.2) (6,081.2) Operating expenses gross (335.5) (816.3) (380.4) (435.9) (34.4) (72.9) (136.3) (53.8) (1,449.1) Underwriting result 330.0 1,393.6 858.2 535.4 31.7 181.4 112.9 (9.1) 2,040.4
Gross premiums earned 2,368.1 1,517.8 1,589.0 631.7 957.4 603.2 620.1 277.1 116.1 52.5 62.8 435.9 107.4 2,032.2 9,782.2 Gross claims incurred (1,585.8) (1,082.2) (1,270.9) (501.2) (769.7) (348.7) (303.7) (219.1) (103.0) (98.3) (14.0) (221.6) (80.9) (1,335.1) (6,663.3) Operating expenses gross (298.0) (205.9) (282.9) (106.6) (176.2) (86.1) (65.6) (29.3) (14.6) (7.5) (9.0) (63.9) (16.7) (307.4) (1,386.8) Underwriting result 484.3 229.7 35.2 23.8 11.4 168.4 250.8 28.8 (1.4) (53.4) 39.8 150.3 9.9 389.6 1,732.1
Claims provision, gross 8.4 160.1 11.1 179.6 691.3 691.3 387.7 31,652.5 Gross loss liability 8.4 140.7 10.8 159.9 665.9 665.9 387.7 27,501.9
Amortisation and impairment losses As at 1 January 2014 (100.0) (217.5) (20.2) (231.1) (11.8) (580.5) Amortisations (56.7) (9.5) (111.2) (2.6) (180.0) Disposals/reclassifications (72.1) 11.4 (60.7) Exchange differences (17.1) (1.6) (11.1) (0.2) (30.1) As at 31 December 2014 (100.0) (291.3) (31.3) (425.5) (3.1) (851.3)
Financial liabilities at amortised cost Subordinated debt 21 1,197.4 1,135.7 1,197.1 1,198.6 Other liabilities 15 970.4 970.4 883.2 883.2 Liabilities related to direct insurance and reinsurance 474.8 474.8 467.2 467.2 Accrued expenses and deferred income 15 297.2 297.2 275.6 275.6 Liabilities within the group 22 22.2 22.2 57.4 57.4
Provision for impairment losses Provision for impairment losses as at 1 January 2.8 3.6 Change in provision for impairment losses for the period (1.0) (0.8) Provision for impairment losses as at 31 December 1.8 2.8
Insurance-related liabilities, net of reinsurance Provision for unearned premiums 8,206.4 7,808.0
Average credit mark-up (versus ten years’ swap) has been 0.57 per cent since 2010. As at 31 December 2015 the mark-up was 0.79 per cent.
Gjensidige manages employees’ wage growth based on collective agreements and individual agreements. From year to year shifts in wage levels may occur.
The Board Inge K. Hansen, Chairman 538.5 4.8 12,253 Trond V. Andersen 282.5 9.3 1,805 Hans-Erik Andersson 8 416.5 1.5 1,778 Gisele Marchand 9 369.5 1.5 1,481 Gunnhild H. Andersen, staff representative (1.1.15-28.5.15) 1, 5 230.8 Kjetil Kristensen, staff representative 5, 9 369.5 578 Gunnar Mjåtvedt, staff representative 5, 9 369.5 1,907 Per Arne Bjørge 9 369.5 3.1 10,542 Mette Rostad 275.5 6.8 1,550 Tine Wollebekk 268.5 1.5 Lotte Kronholm Sjøberg, staff representative (28.5.15-31.12.15) 1, 5 88.3 283.0
Supervisory board 4 Bjørn Iversen, Chairman 194.7 4.0 890 Hilde Myrberg, Deputy Chairman (1.1.14-24.4.14) 1 16.8 Christina Stray, Deputy Chairman (24.4.14-31.12.14) 1 34.6
Bonds and other fixed-income securities Net interest income/(expenses) from bonds and other fixed-income-securities 265.1 437.1 Unrealised gains/(losses) from bonds and other fixed-income securities (415.6) 169.6 Realised gains/(losses) from bonds and other fixed-income securities 96.5 187.5 Total net income and gains/(losses) from bonds and other fixed-income securities (54.0) 794.3
Net income and gains/(losses) from bonds held to maturity Net interest income from bonds held to maturity 128.2 162.0 Unrealised gains/(losses) from bonds held to maturity 0.3 0.8 Net gains/(losses) from changes in exchange rates on bonds held to maturity 376.7 (72.8) Total net income and gains/(losses) from bonds held to maturity 505.2 90.0
Gains and losses in connection with sale and liquidation Bilskadeinstituttet AS (liquidated in 2014) 2.0 Byggeriet Forsikringsservice A/S (0.8) Nordisk Forsikrings Service AS (2.3) Oslo Areal AS 718.6 Storebrand ASA 1,108.7
Other non-weighted assets Goodwill 1,676.7 1,568.6 Deferred tax assets 31.2 Other intangible assets 846.9 795.5 Derivatives 327.8 324.4